Vivek Kaul
Some two and a half years back I had told an aunt of mine that Baba Ramdev was getting ready to enter politics. My aunt, who recently retired after nearly four decades of teaching in the Kendriya Vidyalaya system of schools, wouldn’t agree with me. “He just wants us to be healthy,” was her reply.
I had been following Baba Ramdev’s early morning yoga classes on television regularly for almost six months in a bid to control my ever expanding waistline. The aasanas that Baba showed over that period remained more or less the same. But the commentary that accompanied those aasanas had gradually become more and more political.
In that context, I am not surprised at Baba’s decision to take the Congress party led United Progressive Alliance (UPA) Government head on and ask his supporters not to vote for the Congress in the coming elections.
Baba Ramdev may not form his own party in the days to come. He may not even contest any elections but by asking people not to vote for the Congress he has more or less signaled his entry into politics.
So the question that arises now is that will he succeed at what he is trying to do or will he just be a flash in the pan and disappear from the limelight in a couple of years?
Babas and religious gurus have always been an essential part of the Indian political system. Dhirendra Bramhachari was known to be close to Indira Gandhi. Chandraswami was known to be close to PV Narsimha Rao.
Long time Gandhi family loyalist Arjun Singh was known to be close to the Mauni Baba of Ujjain. Mauni Baba even took credit for Arjun Singh surviving a massive heart attack in 1989.
As Rashid Kidwai writes in 24 Akbar Road – A Short History Behind the Fall and the Rise of the Congress “The doctors at Hamidia Hospital in Bhopal had almost given up on him( Arjun Singh) when a call from Rajiv Gandhi ensured a timely airlift to Delhi’s Escort Heart Institute. His spiritual guru, Mauni Baba of Ujjain, took credit for the miracle. The guru, who had taken a vow of silence, reached Delhi and shut himself off to conduct various yagnas for his health. As Union Communications Minister, Singh had given the guru two telephone connections. The act promoted a Hindi daily to run the headline, ‘Jab Baba bolte nahin, to do telephone kyun?’
Like Singh, the various politicians took care of their respective gurus. Indira Gandhi ensured that Dhirendra Bramhachari had a weekly show on Doordarshan to promote the benefits of yoga. Several politicians were known to be close to the Satya Sai Baba as well. His trust being a publically charitable trust did not pay any income tax.
So babas and religious gurus have always been close to Indian politicians and politics. They have been the backroom boys who have rarely come out in the open to take on the government of the day head on.
But there are always exceptions that prove the rule. One such person who did this rather successfully for a brief period was Sadhvi Rithambara. Her fiery speeches in the early 1990s were very fairly popular across the length and breadth of North India and Bihar. I remember listening to one of her banned tapes before the demolition of the Babri Masjid. It was full of expletives and exhorted the cause of a Ram Mandir being built at the site of the Babri Masjid in Ayodhya.
As Haima Deshpande writes in the latest edition of the Open “By the early 1990s, the Sadhvi was scandalising secular India with her rabble-rousing along a campaign trail to replace Ayodhya’s Babri Masjid with a Ram Mandir. At first, her anti-Muslim tirades were full of expletives, exhorting Hindus to reclaim what she said was rightfully theirs. After a brush with the law, she toned herself down, but her message was roughly the same. While the entry of Parsis to India was like sugar sweetening milk, she would say, that of Muslims was like lemon curdling the country (delivered with a certain inflexion in Hindi, that verb could sound rather crude).” The Sadhvi is now known as Didi Maa and runs a home for destitute women and abandoned children which was set up in 2002, Deshpande points out.
What these examples tell us is that Babas and religious gurus have never operated in the openly in the open sesame of Indian politics. And when they have they have not survived for a very long period of time.
At a broader level people who have been successful in other walks of life have rarely been able to transform themselves into career politicians. When these people have tried to enter politics they have either been unsuccessful or have retreated back very quickly.
Let’s take the case of Russi Modi, the man who once played the piano along with Albert Einstein, when the great physicist was playing the violin. Modi was the Chairman and Managing Director of the Jamshedpur based Tata Iron and Steel Company (TISCO, now known as Tata Steel). After retiring from TISCO, Modi fought the Lok Sabha elections from Jamshedpur and lost.
Amitabh Bachchan won the Lok Sabha elections from Allahabad in 1984 defeating H N Bahuguna. He resigned three years later. Dev Anand unsuccessfully tried to form a political party in the late 1980s. Rajesh Khanna and Dharmendra were also a one term Lok Sabha members. Hema Malini has achieved some success in politics but she is used more by the BJP to attract crowds rather than practice serious politics. The same stands true for Smriti Irani of the Kyunki Saas Bhi Kabhi Bahu Thi fame.
Deepika Chikalia, the actress who played the role of Sita in Ramanand Sagar’s Ramayana, was a one time member of Lok Sabha from Baroda. So was Nitish Bhardwaj who played Krishna in BR Chopra’s Mahabharat, from Jamshedpur.
The only state where film celebrities have successfully made it into politics and remained there is Tamil Nadu. Andhra Pradesh has the isolated example of NT Rama Rao who was successful at politics as well as being the biggest superstar of Telgu cinema. But more recently when the reigning superstar of Telgu cinema, Chiranjeevi, tried to follow NTR, he was unsuccessful. He had to finally merge his Praja Rajyam party rather ironically with the Congress.
Imran Khan Niazi, the biggest sports icon that our next door neighbour Pakistan ever produced formed the Tehreek-e-Insaf party in 1996. When Imran Khan started making speeches before the 1997 elections, his rallies got huge crowds. But the party failed to win a single seat in the election, despite the fact that Imran Khan contested from nine different seats. He lost in each one of them. But to Khan’s credit he still hasn’t given up.In India cricketers like Manoj Prabhakar and Chetan Sharma have unsuccessfully tried to contest elections.
The broader point is that people from other walks of life haven’t been able to successfully enter politics if we leave out the odd filmstar. There are several reasons for the same. Their expertise does not lie in politics and lies somewhere else, something Amitabh Bachchan found out very quickly. Politics also requires a lot of patience and money. This is something that everybody doesn’t have.
Also some of these successful people come with stories attached with them. Ramdev’s story was “practicing yoga can cure any disease”. Those who have seen his yoga DVDs will recall the line “Karte raho, cancer ka rog bhi theek hoga“. This story helped him build a huge yoga empire with an annual turnover of over Rs 1000 crore. The story was working well, until Ramdev decided to diversify, and enter politics.
As marketing guru Seth Godin writes in All Marketers Are Liars: “Great stories happen fast. They engage the consumer the moment the story clicks into place. First impressions are more powerful than we give them credit for.”
So Ramdev’s success now clearly depends on the perception that he is able to form in the minds of the people of this country. Will they continue to look at him as a yoga guru who is just dabbling in some politics? Or will they look at him as a serious politician whose views deserve to be heard and acted on? Also will Baba Ramdev want to continue investing time and energy in the hurly-burly world of politics? That time will tell.
But what about the all the people that Baba Ramdev has been able to attract, you might ask me? Crowds as Imran Khan found out are not always a reflection of whether an individual will be successful in politics. And history clearly is not on Ramdev’s side.
(The article originally appeared on www.firstpost.com on August 15,2012. http://www.firstpost.com/india/will-ramdev-succeed-in-politics-history-isnt-on-his-side-418952.html)
(Vivek Kaul is a writer and can be reached at [email protected] )
Baba Ramdev
“Indians will vote for Anna Hazare or the candidates he supports”
Ravi Batra is an Indian American economist and a professor at the Southern Methodist University, in Dallas, Texas. Over the years Batra has made many predictions which have turned out right. He correctly predicted the fall of communism in USSR and at the same time said it would continue in China. He also predicted an enormous rise in wealth concentration in the United States that would generate poverty among its masses. These predictions were made way back in 1978 in his book The Downfall of Capitalism and Communism. These along with many of his political and economic predictions have come to be true over the years (for a complete list click here). Batra uses the Law of Social Cycle to make these predictions. On the basis of this law he now predicts the rise of the Team Anna political party. “Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports,” says Batra. Batra is the author of many bestselling books like The Crash of the Millennium, The Downfall of Capitalism and Communism, Greenspan’s Fraud and most recently The New Golden Age. In this interview he speaks to Vivek Kaul.
Excerpts:
What is the law of social cycle?
The law of social cycle was pioneered by my late teacher and mentor, Shri Prabhata Ranjan Sarkar. It can be explained in a variety of ways. Let’s start with a simple observation. A careful examination of every society reveals that there are three possible sources of political power –the army, popular ideas, or money.
Could you explain that through an example?
For instance, if we carefully explore the political landscape of our world, we find that in places like the United States, Western Europe, Canada, India, Australia and Japan, money rules society and super-materialism prevails. In places like Iran, the priesthood is dominant with control over religious ideas, whereas in Russia former intelligence officers such as the ex-KGB chief, Vladimir Putin among others, hold the reigns. In China, the communist party is supreme but the ultimate source of political power is the military, which established the party’s rule in a Marxist revolution in 1949. The Tiananmen Square massacre of 1989 clearly illustrates this point. When the Chinese government faced a serious challenge to its authority, it is the army that restored order in the country and crushed the opposition to the communist rule?
So what does this suggest?
This suggests that there are three main sources of political power—the military, human intellect, and, of course, money or wealth. Religion may also bring power, but priests dominate society by mastering scriptures and rituals. In other words, they also utilise their intellect to control and influence people. Thus, ultimately political power or societal dominance stems from three sources—physical strength or skills, human intellect or intellectual skills, and the hoarding of wealth. As a result, through the pages of history, we find that a society is sometimes dominated by warriors, sometimes by intellectuals (including priests), and sometimes by acquisitors who are experts in making money. However, the law of social cycle goes a lot further than merely describing the three classes of people.
Could you explain that?
It analyses the evolution of civilizations and states that a society evolves in terms of a cycle wherein a nation is first dominated by a group of warriors, then by a group of intellectuals, and finally by a group of wealthy acquisitors. Then towards the end of the age of the wealthy, there is so much corruption and crime that people get fed up and revolt against the elite or the rulers, who are overthrown in a social revolution. Since it takes a lot of courage to revolt against the authorities, the successful revolutionaries are the true warriors, who start another warrior age and bring an end to the corrupt rule of money. This way the social cycle begins anew and moves along in the same succession of warriors to intellectuals to acquisitors and then to the social revolution.
That’s very interesting…
Historically, the warrior era has been represented by the rule of the army, and the intellectual era by the supremacy of the priesthood or prime ministers. By contrast, the eras of acquisitors have occurred when feudal landlords or wealthy bankers and merchants were dominant. Thus warriors come to power with the help of physical might, intellectual with the help of ideas, and acquisitors with the help of money.
Since when has this cycle existed?
The social cycle has existed since the birth of human society and its validity can be proved by written history and the logic of social evolution. For instance, in India, around the times of Mahabharata, warriors dominated society; then came the rule of brahmans or intellectuals, followed by the Buddhist period, when capitalism and acquisitors were predominant; this era ended in the flames of a social revolution, when a great warrior named Chandragupta Maurya, put an end to the reign of a king named Dhananand, and started another age of warriors. What is interesting is that India’s overwhelmingly powerful caste system, wherein the brahman is placed atop the social hierarchy followed by kshyatriyas, vaishyas and shudras, was not able to thwart the law of social cycle. There were times when in practice, though not in theory, the brahman accepted the supremacy of people belonging to other castes. During the Buddhist period, for instance, the vaishyas were treated with great respect. They were called shreshthis, meaning “superiors.” In today’s acquisitive age, of course, we clearly see the priest eagerly and humbly accepting money from the rich regardless of their caste.
What happened after Chandragupta Maurya?
Reverting to the cycle, the Mauryan age of warriors was followed by another age of intellectuals in which the kings themselves claimed to be brahmans. The latter period was followed by feudalism, representing the age of acquisitors. Later, the feudal landlords, sometimes called rajas, were overthrown by an illustrious warrior, named Samudra Gupta, who thus organised another social revolution against the rule of acquisitors. Some historians have called the Gupta king the Napoleon of India, because he destroyed the armies of a large number of landowners and brought the wealthy under control.
And the age of Samudragupta was followed by?
The Gupta warrior era gave way to another intellectual era in the 9th century, when a renowned ascetic named Shankracharya revived brahmanism and uprooted Buddhism from the land of its birth. Priests and prime ministers dominated again, but their influence waned in a few hundred years and gave way to another round of feudalism, which was followed by yet another age of warriors, this time under the rule of Muslim invaders. Thus began the Muslim warrior era during the 14th century and continued as the Mughal empire in the 15th. Akbar the Great was the most illustrious emperor of this age, which lasted for a while and then gave way to another intellectual era, this time under the dominance of Muslim priests or Ulemas, who held sway over the Mughal king Aurangzeb. Around these times the great warrior Shivaji founded the Maratha Empire, which, after his death, came under the influence of brahmans known as Peshwas. At the same time, the northern Mughal Empire came under the sway of its wazirs or prime ministers. Thus this Mughal-Maratha period was the latest era of intellectuals, which was followed by yet another era of acquisitors, when the British took over around 1800. India has been in this age ever since. Indians will indeed vote for him or the candidates he supports
So what is the point that you are trying to make?
The main point is that no class remains in power forever, and that the acquisitive age always ends in a revolution. Such was the case in all civilizations. In fact new revolutions are already taking place in the world. Muslim society, where Saudi oil wealth is the main source of power, is also in the age of acquisitors, as is much of the planet. Rebellions have already occurred in the Islamic nations of Tunisia, Egypt, Libya and Yemen, and now Syria is facing the same fate. The Syrians have shown admirable resolve, and even though unarmed or heavily outgunned they are revolting against their ruler, President Assad.
What about the current state of affairs in India?
Courage is contagious and gradually inspires the masses to fight tyranny. The wave of courage that has dethroned many Muslim rulers is now budding in India under the guidance of Shri Anna Hazare and Baba Ram Dev. The movements they have started are still in the early stage but such movements are likely to grow and ultimately succeed in their mission to rid the nation of political corruption, because the age of acquisitors is about to end around the globe. Who could have imagined just a few years ago that Egypt’s Hosni Mubarak and Libya’s Colonel Kaddafi would be overthrown by their people?
Yes you are right…
A revolution doesn’t occur overnight, but when it starts it engulfs the nation in a mighty wave that crushes the ruler. It is initiated by small groups that have been opposing corruption for a long time, and for a while it faces public apathy and even opposition, but when the right moment comes it ignites the people to decimate the elite. The current decade is likely to be the decade of revolutions that will consume the ruling classes around the planet. The revolutionary wave began in the Muslim world and it is bound to spread in all areas where the acquisitors are dominant, because remember that courage is contagious. India gained independence in 1947 and so did many other countries within a few years. The point is that when a revolutionary wave begins in one area, it unleashes a flood that engulfs the neighbours. The moment has arrived to dethrone the corrupt acquisitors, and someone has to seize the moment to feed this flame. Anna Hazare and Ram Dev are doing it and they deserve the support of moralists around the world.
But how do you see the current rule of wealth being overthrown in India?
The rule of wealth in India will end through the electoral process, because people will vote for those who vow to end corruption. Through long and painful fasting Anna Hazare has captured the attention of people, and finally decided to form a political party. Indians will indeed vote for him or the candidates he supports. Although, some of his followers will be unhappy with his decision to enter the political fray, this is the right thing to do. As Mahatma Gandhi demonstrated, fasting alone is not enough to achieve a desired goal. You also have to offer a concrete and credible alternative. The social revolution against the acquisitors has started in Muslim society and is slowly gathering steam in India and the United States. By the end of this decade, if not sooner, the age of acquisitors will be a thing of the past, and those with courage to oppose the elite will start a new age of warriors, because courage is the chief hallmark of a person of warrior mentality. Today, an acquisitor’s democracy prevails in most nations; in the near future it will give way to a warrior’s democracy, where money will not be needed to win an election.
So how do you see this new age that you are predicting?
During the Buddhist period preceding Chandragupta’s ascension kings were elected in some areas of north India. That was an example of warrior’s democracy wherein a person’s martial skills, not wealth, brought him the high office. Similarly, in the future a candidate’s military background could be important in his rise to power. Whoever brings about the new warrior age will also give birth to a new golden age.
(The interview originally appeared on www.firstpost.com on August 7,2012. http://www.firstpost.com/economy/raghuram-rajans-advice-isnt-what-upa-may-want-to-hear-410694.html)
(Vivek Kaul is a writer and can be reached at [email protected])
Why Aamir Khan and Satyamev Jayate are made for each other
Vivek Kaul
Some eleven years back I happened to be at an event where Sri Sri Ravi Shankar was the main guest. Since he was in a hurry he came in dancing into the hall and immediately asked the audience to ask him some questions.
After a few questions came this gem “Swami ji, jeevan ka matlab kya hai?“. To which he replied “jisne jeevan ka matlab bataya usne samjha nahi, aur jisne samjha usne bataya nahi.”
This philosophical gobbledygook or to use a simpler term mumbo-jumbo, left the audience impressed, and they kept talking about for some days to come. Ravi Shankar was an upcoming guru back then who was trying to find his audience and we all know he has done rather well since then.
Over the years I have thought a lot about the statement that he made on that given day. Why did he say what he did? I guess those were the days when he was trying to build a story around what he stood for. He was trying to create an image of himself in the minds of people, which was significantly different from the gurus already present and doing roaring business in the market for ‘spirituality’. And his story had to be different from them.
The story that Ravi Shankar perfected and spread over years is that of spreading happiness and peace, targeted at the upper middle class segment of the society with a dash of yoga and music thrown in for good measure. He supports this story with a bit of philosophical gobbledygook at times. The fact that his rise coincided with the so called India growth story is no coincidence. People worked longer hours under a whole lot more stress. They also made a lot of money, something which they could use to be spiritual on weekends and seek peace, a few times a year.
Ravi Shankar is not a mass market guru like Sai Baba of Puttparthi was or Baba Ramdev is, these days. He does not hold his sessions in open grounds like Baba Ramdev does. He holds them in air-conditioned halls. And he makes sure that he stays true to the story he stands for. Recently when Baba Ramdev went on a fast against corruption in the country, Ravi Shankar was asked, why doesn’t he go on a fast like Ramdev had? To which his reply was “I have so many followers outside the country. If I go on a fast, it will become an international issue. This is our problem and it should remain in India.”
So even though Sri Sri thinly associated himself with Ramdev’s campaign against corruption, he didn’t go all the way with it. Associating himself with a mass market guru on a mass market issue would have spoilt his story of being an international guru promoting peace and happiness through yoga, music and mumbo-jumbo, to the upper middle class. He had modeled himself along the lines of Osho Rajneesh (though Ravi Shankar is nowhere as radical as Rajneesh was), who was also a rich man’s international guru and he stayed that way till his death.
Spiritual gurus in India are big brands and big brands over a period time build stories around them. These are stories that help the mass market to relate to them. And when it comes to big brands, they don’t make bigger brands than film stars.
Dilip Kumar was the brooding lover. Raj Kapoor was the Indian Charlie Chaplin who got lost in the big bad city. Dev Anand was the gunda with a noble heart. Rajesh Khanna was the boy next door who got the girl in the end with some hiccups thrown in between for good measure.
As times changed, people forgot Khanna rather quickly, and Amitabh Bachchan became the angry young man. Bachchan tried to do something different now and then, but was unsuccessful at it during his hey days. Chupke Chupke and Alaap, two of his best performances during his hey days didn’t set the box office on fire. In the late 1980s he played the man with no name in the superb Main Azad Hoon (inspired by the great Hollywood flick Meet John Doe) directed by Tinnu Anand, who had also directed the Bachchan comeback movie Shahenshah. Main Azad Hoon tanked at the box office.
In the next generation, Salman Khan became the bhai next door. Shahrukh Khan became the new Rajesh Khanna, the sophisticated guy next door, who gets the girl in the end, after singing a few songs in between. This story became attached to Shahrukh Khan since Dilwale Dulhaniya Le Jayenge(DDLJ) released in October 1995. His anti hero movies of Darr, Anjam and Ram Jaane all came before DDLJ.
Almost all of his biggest hits after DDLJ have had Shahrukh playing the sophisticated guy next door, who usually gets the girl in the end. Be it Kuch Kuch Hota Hai, Kabhi Khushi Kabhi Gum, Dil to Pagal Hai, Chalte Chalte, Main Hoon Na, Veer Zaara etc
Whenever he is tried to go against this, be it Swades, Paheli, Kabhi Alvida Na Kahna or for that matter My Name is Khan it hasn’t worked for him. And most recently that assault on the senses called Ra.One.
In the recent past Chak De India has been the only Shahrukh movie that has worked where Shahrukh did not play the guy next door. The reason the movie worked was that it had a strong story line, which isn’t a characteristic of most Shahrukh movies, and had a fairly limited budget.
So that leaves us with Aamir Khan the other big star of the generation. What is his story? His story can be expressed in that old Maggi Tomato Ketchup line “It’s Different”. Aamir Khan over the last ten to twelve years has been associated with movies which do not fall under the ambit of conventional Bollywood cinema. Be it as an actor or even as a producer.
As an actor he has done movies like Lagaan, Dil Chahta Hai, Mangal Pande, Rang De Basanti, Taare Zameen Par, 3 Idiots and Dhobi Ghat – Mumbai Diaries. These are movies which would be categorized as “different” in the scheme of Hindi cinema. Almost all of these movies come with an overt social message as well, something that Bollywood isn’t really known for. His next release Talaash, looks like what crime writers call a “police-procedural”. It is a sub-genre of detective novels where a murder or murders for that matter, are investigated painstakingly by normal police detectives, who are not as smart as Arthur Conan Doyle’s Sherlock Holmes or Agatha Christie’s Hercule Poirot.
Getting back to the point, during this period Aamir has also done an out an out masala flick like Ghajini, where his role required him to shave off his hair, something that no other Hindi film super start would have agreed to do. The only normal masala film that he has done in the last few years is Fanaa. And that is the exception that proves the rule. Aamir Khan likes to do movies that are different from the usual and have an overt social message.
Even his films as a producer, Lagaan, Taare Zameen Par, Peepli Live, Dhobi Ghat and Delhi Belly, fall into the “it’s different” category. And other than Delhi Belly which was an out and out zany adult comedy, the other movies had an overt social message.
So that brings us to Satyamev Jayate, Aamir Khan’s latest big hit. As Aamir has repeated in many interviews around four years back he was approached by Uday Shankar, CEO of Star India, with an idea of doing a game show. This Aamir rejected, as the Open magazine reports, saying “I don’t want to do a game show. I want to do something dynamically different”.
There you have it from the star’s mouth himself. He wanted to do something that was “different”. Aamir Khan probably understood much better than the people who wanted him to do a game show that the image he had built over the years wouldn’t allow him to do a game show. A game show required a star who didn’t really have a “serious-thinking” sort of an image that Aamir has. A Salman Khan could pull off a Dus Ka Dum. But an Aamir couldn’t. A Shahrukh could do Zor Ka Jhatka in his informal sort of way. But couldn’t pull off a Kaun Banega Crorepati which required the gravitas of an Amitabh Bachchan.
Media reports suggest that Aamir Khan and Star TV’s CEO Uday Shankar did not leave it at that. As Business Standard reports “It started some sort of engagement between the two to leverage the power of television. After over one-and-a-half years Khan, who undertook extensive research with his creative team, hit upon the idea of Satyamev Jayate.”
So convinced was Aamir about the idea that other than hosting the show he even decided to produce it under his banner Aamir Khan Productions, which will get paid a whopping Rs 45 crore for the 13episodes planned.
The entire concept of the show jelled with Aamir Khan’s image of being associated with work that is “different” and has an overt social message to it, though the social message in Satyamev Jayate is much more than any of his movies.
Aamir Khan went looking for an idea like Satyamev Jayate and found it. But it can also be safely said that an idea like Satyamev Jayate needed a presenter like Aamir Khan. They are “made for each other”, as the old Wills cigarette ad went.
(The article originally appeared on www.firstpost.com on June 23,2012. http://www.firstpost.com/living/why-aamir-khan-and-sj-were-made-for-each-other-354892.html)
(Vivek Kaul is a writer and can be reached at [email protected])
Petrol bomb is a dud: If only Dr Singh had listened…
Vivek Kaul
The Congress led United Progressive Alliance (UPA) government finally acted hoping to halt the fall of the falling rupee, by raising petrol prices by Rs 6.28 per litre, before taxes. Let us try and understand what will be the implications of this move.
Some relief for oil companies:
The oil companies like Indian Oil Company (IOC), Bharat Petroleum (BP) and Hindustan Petroleum(HP) had been selling oil at a loss of Rs 6.28 per litre since the last hike in December. That loss will now be eliminated with this increase in prices. The oil companies have lost $830million on selling petrol at below its cost since the prices were last hiked in December last year. If the increase in price stays and is not withdrawn the oil companies will not face any further losses on selling petrol, unless the price of oil goes up and the increase is not passed on to the consumers.
No impact on fiscal deficit:
The government compensates the oil marketing companies like Indian Oil, BP and HP, for selling diesel, LPG gas and kerosene at a loss. Petrol losses are not reimbursed by the government. Hence the move will have no impact on the projected fiscal deficit of Rs 5,13,590 crore. The losses on selling diesel, LPG and kerosene at below cost are much higher at Rs 512 crore a day. For this the companies are compensated for by the government. The companies had lost Rs 138,541 crore during the last financial year i.e.2011-2012 (Between April 1,2011 and March 31,2012).
Of this the government had borne around Rs 83,000 crore and the remaining Rs 55,000 crore came from government owned oil and gas producing companies like ONGC, Oil India Ltd and GAIL.
When the finance minister Pranab Mukherjee presented the budget in March, the oil subsidies for the year 2011-2012 had been expected to be at Rs Rs 68,481 crore. The final bill has turned out to be at around Rs 83,000 crore, this after the oil producing companies owned by the government, were forced to pick up around 40% of the bill.
For the current year the expected losses of the oil companies on selling kerosene, LPG and diesel at below cost is expected to be around Rs 190,000 crore. In the budget, the oil subsidy for the year 2012-2013, has been assumed to be at Rs 43,580 crore. If the government picks up 60% of this bill like it did in the last financial year, it works out to around Rs 114,000 crore. This is around Rs 70,000 crore more than the oil subsidy that the government has budgeted for.
Interest rates will continue to remain high
The difference between what the government earns and what it spends is referred to as the fiscal deficit. The government finances this difference by borrowing. As stated above, the fiscal deficit for the year 2012-2013 is expected to be at Rs 5,13,590 crore. This, when we assume Rs 43,580crore as oil subsidy. But the way things currently are, the government might end up paying Rs 70,000 crore more for oil subsidy, unless the oil prices crash. The amount of Rs 70,000 crore will have to be borrowed from financial markets. This extra borrowing will “crowd-out” the private borrowers in the market even further leading to higher interest rates. At the retail level, this means two things. One EMIs will keep going up. And two, with interest rates being high, investors will prefer to invest in fixed income instruments like fixed deposits, corporate bonds and fixed maturity plans from mutual funds. This in other terms will mean that the money will stay away from the stock market.
The trade deficit
One dollar is worth around Rs 56 now, the reason being that India imports more than it exports. When the difference between exports and imports is negative, the situation is referred to as a trade deficit. This trade deficit is largely on two accounts. We import 80% of our oil requirements and at the same time we have a great fascination for gold. During the last financial year India imported $150billion worth of oil and $60billion worth of gold. This meant that India ran up a huge trade deficit of $185billion during the course of the last financial year. The trend has continued in this financial year. The imports for the month of April 2012 were at $37.9billion, nearly 54.7% more than the exports which stood at $24.5billion.
These imports have to be paid for in dollars. When payments are to be made importers buy dollars and sell rupees. When this happens, the foreign exchange market has an excess supply of rupees and a short fall of dollars. This leads to the rupee losing value against the dollar. In case our exports matched our imports, then exporters who brought in dollars would be converting them into rupees, and thus there would be a balance in the market. Importers would be buying dollars and selling rupees. And exporters would be selling dollars and buying rupees. But that isn’t happening in a balanced way.
What has also not helped is the fact that foreign institutional investors(FIIs) have been selling out of the stock as well as the bond market. Since April 1, the FIIs have sold around $758 million worth of stocks and bonds. When the FIIs repatriate this money they sell rupees and buy dollars, this puts further pressure on the rupee. The impact from this is marginal because $758 million over a period of more than 50 days is not a huge amount.
When it comes to foreign investors, a falling rupee feeds on itself. Lets us try and understand this through an example. When the dollar was worth Rs 50, a foreign investor wanting to repatriate Rs 50 crore would have got $10million. If he wants to repatriate the same amount now he would get only $8.33million. So the fear of the rupee falling further gets foreign investors to sell out, which in turn pushes the rupee down even further.
What could have helped is dollars coming into India through the foreign direct investment route, where multinational companies bring money into India to establish businesses here. But for that the government will have to open up sectors like retail, print media and insurance (from the current 26% cap) more. That hasn’t happened and the way the government is operating currently, it is unlikely to happen.
The Reserve Bank of India does intervene at times to stem the fall of the rupee. This it does by selling dollars and buying rupee to ensure that there is adequate supply of dollars in the market and the excess supply of rupee is sucked out. But the RBI does not have an unlimited supply of dollars and hence cannot keep intervening indefinitely.
What about the trade deficit?
The trade deficit might come down a little if the increase in price of petrol leads to people consuming less petrol. This in turn would mean lesser import of oil and hence a slightly lower trade deficit. A lower trade deficit would mean lesser pressure on the rupee. But the fact of the matter is that even if the consumption of petrol comes down, its overall impact on the import of oil would not be that much. For the trade deficit to come down the government has to increase prices of kerosene, LPG and diesel. That would have a major impact on the oil imports and thus would push down the demand for the dollar. It would also mean a lower fiscal deficit, which in turn will lead to lower interest rates. Lower interest rates might lead to businesses looking to expand and people borrowing and spending that money, leading to a better economic growth rate. It might also motivate Multi National Companies (MNCs) to increase their investments in India, bringing in more dollars and thus lightening the pressure on the rupee. In the short run an increase in the prices of diesel particularly will lead higher inflation because transportation costs will increase.
Freeing the price
The government had last increased the price of petrol in December before this. For nearly five months it did not do anything and now has gone ahead and increased the price by Rs 6.28 per litre, which after taxes works out to around Rs 7.54 per litre. It need not be said that such a stupendous increase at one go makes it very difficult for the consumers to handle. If a normal market (like it is with vegetables where prices change everyday) was allowed to operate, the price of oil would have risen gradually from December to May and the consumers would have adjusted their consumption of petrol at the same pace. By raising the price suddenly the last person on the mind of the government is the aam aadmi, a term which the UPAwallahs do not stop using time and again.
The other option of course is to continue subsidize diesel, LPG and kerosene. As a known stock bull said on television show a couple of months back, even Saudi Arabia doesn’t sell kerosene at the price at which we do. And that is why a lot of kerosene gets smuggled into neighbouring countries and is used to adulterate diesel and petrol.
If the subsidies continue it is likely that the consumption of the various oil products will not fall. And that in turn would mean oil imports would remain at their current level, meaning that the trade deficit will continue to remain high. It will also mean a higher fiscal deficit and hence high interest rates. The economic growth will remain stagnant, keeping foreign businesses looking to invest in India away.
Manmohan Singh as the finance minister started India’s reform process. On July 24, 1991, he backed his “then” revolutionary proposals of opening up India’s economy by paraphrasing Victor Hugo: “No power on Earth can stop an idea whose time has come.”
Good economics is also good politics. That is an idea whose time has come. Now only if Mr Singh were listening. Or should we say be allowed to listen..
(The article originally appeared at www.firstpost.com on May 24,2012. http://www.firstpost.com/economy/petrol-bomb-is-a-dud-if-only-dr-singh-had-listened-319594.html)
(Vivek Kaul is a writer and can be reached at [email protected])
What Ramdev, Biyani, Mallya and Govt can learn from Buffet
Vivek Kaul
So what is common to Baba Ramdev, Kishore Biyani, Vijay Mallya and the government of India, other than the fact that they have all been in the news lately? To put it simply, they all like operate in areas where they lack expertise and in the process make a mess of it.
Let us start Baba Ramdev who became a household name by selling the benefits of Yoga to the masses. He claimed that even diseases like cancer could be cured through yoga. Those who have seen his yoga DVDs will recall the line “karte raho, cancer ka rog bhi theek hoga”.
So far so good. Then he decided that he had enough of preaching yoga and wanted to get into politics and vowed to get all of India’s black money hoarded abroad, back to India. The politicians in the government clearly did not like this (for obvious reasons) and went hammer and tongs after him. Stories were leaked to the media about the wealth he had accumulated over the years and that damaged his credibility as a yoga guru as well. Ramdev has continued in his attempts to establish himself as a politician but with very little success.
Kishore Biyani brought the retail revolution to India, having been inspired by Sam Walton who started Wal-Mart. His retail businesses were doing decently well till he decided to get into a wide variety of businesses from launching an insurance company to even selling mobile phone connections. When times were good he accumulated a lot of debt in trying to grow fast. Now he is in trouble in trying to service the debt and rumors are flying thick and fast that he is planning to sell Big Bazaar, his equivalent of Wal-Mart. This after he sold controlling stake in the cloths retailer, Pantaloons.
Vijay Mallya started Kingfisher Airlines in 2005, going beyond his core business of alcohol. Kingfisher now has accumulated losses of over Rs 6000 crore, and has never made money since its launch. The lack of focus has hurt Mallya’s core alcohol business and United Spirits is no longer India’s most profitable alcohol company. That tag now belongs to the Indian division of the French giant Pernod Ricard.
And finally the government of India, which has been bailing out the troubled airline Air India over and over again. The pilots of the airline keeps going on strike and the government keeps putting a few thousand crores every few months, to keep running the airline.
So the question that crops up here is what is Baba Ramdev doing in politics? Why is Kishore Biyani trying to sell insurance and mobile phone connections to you? And why are Vijay Mallaya and the government of India trying to run an airline?
They would be better off concentrating on things they are good at. These are things they shouldn’t be doing. It is not their area of expertise or what they are good at. The days when individuals, businesses and even governments could be an expert at many things at the same time are long gone.
In the last 100 years there have been only two individuals who have won the Noble prize twice for two different subjects. Marie Curie won the physics prize in 1903 and the Chemistry prize in 1911. Linus Pauling won it twice, the Chemistry Prize in 1954 and Peace Prize in 1962.
So in the strictest sense of the term, Marie Curie is the only person ever to have won a Noble prize in two different subjects and that happened almost 100 years back. This is primarily because as more and more things have been invented and discovered, subjects have become more complex requiring full time attention and expertise.
What is true about individuals is also true about businesses. The expertise and the attention required to run a business has increased over the year. Hence, the moment a businessman tries to go outside its area of expertise, he loses focus, and the chances of the new business doing well are remote.
Let’s take the case of DLF, the biggest real estate company in the country. It tried getting into the insurance and mutual fund business. It had to sell its stake in the mutual fund business and if news reports are to be believed it is trying to lower its stake in the insurance venture by selling its stake to HCL. Now why is a computer major trying to buy into an insurance business which is losing money, is beyond me?
Satyam was in good shape till it remained an IT company. The moments its owner developed aspirations beyond IT and got the company into real estate and infrastructure space, trouble cropped up. Real estate companies have tried unsuccessfully to get into the luxury hotel business and hotels have tried unsuccessfully to get into the luxury apartment business.
Reliance Industries attempts in the retail business haven’t gone anywhere. Anil Ambani who had build a good business in Reliance Capital is struggling with Reliance Communications and Reliance Power. Subrata Roy’s attempts to diversify into the film and television business have come a cropper, with the film business of Sahara, more or less being shutdown. NDTV, a premier English news channel, tried getting into the entertainment channel business with NDTV Imagine. It had to sell out. Cigarette major ITC has been trying to establish itself in the FMCG business for years now. Though it has had some success at it, the business hardly throws up any money in comparison to its cigarette business. All kinds of entrepreneurs have gone into the insurance business in India and are now struggling. This includes Kishore Biyani. At the same time the Tatas have been struggling with their telecom business for years.
There is a thing or two all these guys can learn from internationally renowned investor Warren Buffett. During the period of 1994-2000, the United States saw a whole lot of dotcom companies coming up with their initial public offerings. Some of these shares achieved astonishing highs. The shares of Netscape Communications Corporation, an internet browser company which controlled 75% of the browser market, were sold to investors at $28 per share. When the stock was listed on August 9,1995, it went to $74.75 during the course of the day and finally closed at $58.25, doubling in a single day. Another stock booksamillion.com went up by 973% to $47 in the course of just three days in November 1998. theGlobe.com which listed on November 13,1998, gained 606% during the course of the day and closed at a price of $63.50.
Despite these humungous gains Warren Buffett did not invest a single penny in these stocks. He did not understand the business models of these stocks and remain focused on his investment philosophy of “value investing”. Not surprisingly he had the last laugh as dotcom and technology stocks started crashing after they had peaked in March 2000.
Buffett did not abandon his core philosophy of value investing just because there was “easy money” to be made somewhere else. And he came out on top, for the simple reason that he chose to remain focused on what he knew.
But this is rarely the case. When times are good and there is a lot of easy money floating around every entrepreneur likes to “expand” his business and get into other things. But in this day and age, when things are as complicated and competitive as they are, diversification into different businesses rarely works.
Businesses these days need full time attention from entrepreneurs. Let’s take a look at the airline business. As Warren Buffett put it in a letter he wrote to the shareholders of Berkshire Hathaway “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down…The airline industry’s demand for capital ever since that first flight has been insatiable. Investors have poured money into a bottomless pit, attracted by growth when they should have been repelled by it.”
The reason airline businesses burn capital endlessly is for the simple reason that airlines have very little control over their cost. The major expense in running an airline is oil (the company can lease the aircraft it doesn’t have to always buy them). And oil prices have been over $100 per barrel for a while now. Airline companies have no control over this price, though they can hedge themselves by buying derivatives. But that can be a risky business as well.
So higher the oil price, higher is the cost of running an airline and given the lure of owning an airline, the sector remains a very competitive one, all over the world. Hence companies cannot always pass on an increase in their costs to the end customers though higher ticket prices. Given these reasons airlines are a specialised business, which require full time attention. It is definitely not a business which Vijay Mallya can look to successfully manage, busy as he is running his diverse businesses of alcohol and real estate, indulging in expensive hobbies like IPL and Formula 1, and cheaper ones like commenting regularly on Twitter.
The government of India falls in the same category. Its primary area of activity is governing the nation(which it is anyway making a mess of) and not running an airline. It simply doesn’t have the expertise to run one. Southwest Airlines is successful because it has remained focused on the airlines business. It did not suddenly decide to launch a new beer just because their airline business was constantly throwing up cash over the years.
Kishore Biyani should learn from his inspiration Wal-Mart. The company did not get into the insurance business. They did not say “now that we have so many people coming to our stores, let’s try and sell insurance to them along with fast moving consumer goods”. Or as Warren Buffett puts it ” If you buy things you don’t need, you’ll soon sell things you need.”
That leaves Baba Ramdev. He can learn from his more famous predecessor the Sai Baba of Puttaparthi. Given the following he had he could have easily gotten into politics. But that would have put him at the same pedestal as the politicians who looked up to him as their guru. And thus rightly he did not.
Marketing guru Al Ries has said in the past “Focus is the essence of marketing and branding.” I guess it’s time to rephrase that phrase. “Focus is the essence of marketing, branding and business”. And its time Ramdev, Biyani, Mallya, the government and many others learnt that lesson.
(The article originally appeared on May 10,2012 at http://www.firstpost.com/business/what-ramdev-biyani-mallya-and-govt-can-learn-from-buffett-304770.html).
(Vivek Kaul is a writer and can be reached at [email protected])