Vivek Kaul
A major reason for announcing the so called economic reforms that the Manmohan Singh UPA government did over the last weekend was to get India’s burgeoning oil subsidy bill which was expected to cross Rs 1,90,000 crore during the course of the year, under some control.
One move was the increase in diesel price by Rs 5 per litre and limiting the number of cooking gas cylinders that one could get at the subsidisedprice to six per year. This was a direct step to reduce the loss that the oil marketing companies (OMCs) face every time they sell diesel and cooking gas to the end consumer.
The other part of the reform game was about expectations management. The announcement of reforms like allowing foreign direct investment in multi-brand foreign retailing or the airline sector was not expected to have any direct impact anytime soon. But what it was expected to do was shore up the image of the government and tell the world at large that this government is committed to economic reform.
Now how does that help in controlling the burgeoning oil bill?
Oil is sold internationally in dollars. The price of the Indian basket of crude oil is currently quoting at around $115.3 per barrel of oil (one barrel equals around 159litres).
Before the reforms were announced one dollar was worth around Rs 55.4(on September 13, 2012 i.e.). So if an Indian OMC wanted to buy one barrel of oil it had to convert Rs 6387.2 into $115.3 dollars, and pay for the oil.
After the reforms were announced the rupee started increasing in value against the dollar. By September 17, one dollar was worth around Rs 53.7. Now if an Indian OMC wanted to buy one barrel of oil it had to convert Rs 6191.6 into $115.3 to pay for the oil.
Hence, as the rupee increases in value against the dollar, the Indian OMCs pay less for the oil the buy internationally. A major reason for the increase in value of the rupee was that on September 14 and September 17, the foreign institutional investors poured money into the stock market. They bought stocks worth Rs 5086 crore over the two day period. This meant dollars had to be sold and rupee had to be bought, thus increasing the demand for rupee and helping it gain in value against the dollar.
But this rupee rally was short lived and the dollar has gained some value against the rupee and is currently worth around Rs 54.
The question is why did this happen? Initially the market and the foreign investors bought the idea that the government was committed at ending the policy logjam and initiating various economic reforms. Hence the foreign investors invested money into the stock market, the stock market rallied and so did the rupee against the dollar.
But now the realisation is setting in that the reform process might be derailed even before it has been earnestly started. This was reflected in the amount of money the foreign investors brought into the stock market on September 18. The number was down to around Rs 1049.2 crore. In comparison they had invested more than Rs 5080 crore over the last two trading sessions.
Mamata Banerjee’s Trinamool Congress, a key constituent of the UPA government, has decided to withdraw support to the government. At the same time it has asked the government to withdraw a major part of the reforms it has already initiated by Friday. If the government does that the Trinamool Congress will reconsider its decision.
How the political scenario plays out remains to be seen. But if the government does bow to Mamata’s diktats then the economic repercussions of that decision will be huge. The government had hoped that the losses on account of selling, diesel, kerosene and cooking gas, could have been brought down to Rs 1,67,000 crore, from the earlier Rs 1,92,000 crore by increasing the price of diesel and limiting the consumption of subsidised cooking gas.
If the government goes back on these moves, the oil subsidy bill will go back to attaining a monstrous size. Also, what the calculation of Rs 1,67,000 crore did not take into account was the fact that rupee would gain in value against the dollar. And that would have further brought down the oil subsidy bill. In fact HSBC which had earlier forecast Rs 57 to a dollar by December 2012, revised its forecast to Rs 52 to a dollar on Monday. But by then the Mamata factor hadn’t come into play.
If the government bows to Mamata, the rupee will definitely start losing value against the dollar again. This will happen because the foreign investors will stay away from both the stock market as well as direct investment. In fact, the foreign direct investment during the period of April to June 2012 has been disastrous. It has fallen by 67% to $4.41billion in comparison to $13.44billion, during the same period in 2011. If the government goes back on the few reforms that it unleashed over the last weekend, foreign direct investment is likely to remain low.
One factor that can change things for India is the if the price of crude oil were to fall. But that looks unlikely. The immediate reason is the tension in the Middle East and the threat of war between Iran and Israel. Hillary Clinton, the US Secretary of State, recently said that the United States would not set any deadline for the ongoing negotiations with Iran. This hasn’t gone down terribly well with Israel. Reacting to this Benjamin Netanyahu, the Prime Minister of Israel said “the world tells Israel, wait, there’s still time, and I say, ‘Wait for what, wait until when? Those in the international community who refuse to put a red line before Iran don’t have the moral right to place a red light before Israel.” (Source: www.oilprice.com)
Iran does not recognise Israel as a nation. This has led to countries buying up more oil than they need and building stocks to take care of this geopolitical risk. “In the recent period, since the start of 2012, the increase in stocks has been substantial, i.e. 2 to 3 million barrels per day. These are probably precautionary stocks linked to geopolitical risks,” writes Patrick Artus of Flash Economics in a recent report titled Why is the oil price not falling?
At the same time the United States is pushing nations across the world to not source their oil from Iran, which is the second largest producer of oil within the Organisation of Petroleum Exporting Countries (Opec). This includes India as well.
With the rupee losing value against the dollar and the oil price remaining high the oil subsidy bill is likely to continue to remain high. And this means the trade deficit (the difference between exports and imports) is likely to remain high. The exports for the period between April and July 2012, stood at $97.64billion. The imports on the other hand were at $153.2billion. Of this, $53.81billion was spent on oil imports. If we take oil imports out of the equation the difference between India’s exports and imports is very low.
Now what does this impact the value of the rupee against the dollar? An exporter gets paid in dollars. When he brings those dollars back into the country he has to convert them into rupees. This means he has to buy rupees and sell dollars. This helps shore up the value of the rupee as the demand for rupee goes up.
In case of an importer the things work exactly the opposite way. An importer has to pay for the imports in terms of dollars. To do this, he has to buy dollars by paying in rupees. This increases the demand for the dollar and pushes up its value against the rupee.
As we see the difference between imports and exports for the first four months of the year has been around $55billion. This means that the demand for the dollar has been greater than the demand for the rupee.
One way to fill this gap would be if foreign investors would bring in money into the stock market as well as for direct investment. They would have had to convert the dollars they want to invest into rupees and that would have increased the demand for the rupee.
The foreign institutional investors have brought in around $3.86billion (at the current rate of $1 equals Rs 54) since the beginning of the year. The foreign direct investment for the first three months of the year has been at $4.41 billion.
So what this tells us that there is a huge gap between the demand for dollars and the supply of dollars. And precisely because of this the dollar has gained in value against the rupee. On April 2, 2012, at the beginning of the financial year, one dollar was worth around Rs 50.8. Now it’s worth Rs 54.
This situation is likely to continue. And I wouldn’t be surprised if rupee goes back to its earlier levels of Rs 56 to a dollar in the days to come. It might even cross those levels, if the government does bow to the diktats of Mamata.
This would mean that India would have to pay more for the oil that it buys in dollars. This in turn will push up the demand for dollars leading to a further fall in the value of the rupee against the dollar.
Since the government forces the OMCs to sell diesel, kerosene and cooking gas much below their cost to consumers, the losses will continue to mount. The current losses have been projected to be at Rs 1,67,000 crore. I won’t be surprised if they cross Rs 2,00,000 crore. The government has to compensate the OMCs for these losses in order to ensure that they don’t go bankrupt.
This also means that the government will cross its fiscal deficit target of Rs 5,13,590 crore. The fiscal deficit, which is the difference between what the government earns and what it spends, might well be on its way to touch Rs 7,00,000 crore or 7% of GDP. (For a detailed exposition of this argument click here). And that will be a disastrous situation to be in. Interest rates will continue to remain high. And so will inflation. To conclude, the traffic in Mumbai before the Ganesh Chaturthi festival gets really bad. Any five people can get together while taking the Ganesh statue to their homes, put on a loudspeaker, start dancing on the road and thus delay the entire traffic on the road for hours. Indian politics is getting more and more like that.
Reforms, like the traffic, may have to wait. Mamata’s revolt is single-handedly worsening the oil bill, thanks, in part, to the rupee’s worsening fortunes. By not raising prices now, the subsidy bill bloat further, and in due course we will be truly in the soup.
The article originally appeared on www.firstpost.com on September 20, 2012. http://www.firstpost.com/economy/how-mamata-is-denting-the-rupee-and-bloating-the-oil-bill-461919.html
Vivek Kaul is a writer and can be reached at [email protected]
Mamata Banerjee
Ek Thi Tigress: Why Mamata tilts at every windmill
Vivek Kaul
“Mamata Banerjee ko gussa kyon aata?” is an intriguing question.
Why does she brand people who tend to disagree with her as Communists and Maoists? Very recently Shiladitya Chowdhury was arrested under non-bailable sections when he questioned the West Bengal government’s policy farmers during a rally being addressed by Banerjee. As The Hindu reported “Eyewitnesses said that Ms Banerjee was heard giving directions to isolate him from the crowd, referring to him as a “Maoist.””
A few months back she had called some students “Maoists” after they had asked her uncomfortable questions during a television interaction organised by CNN IBN. “I must tell you that you are CPI(M) cadres, Maoist cadres … I cannot reply to CPI(M) questions,” Banerjee had said on that occasion before she walked out of programme. This happened in May.
A little earlier in April Ambikesh Mohapatra, a professor at Jadhavpur University had been arrested for posting cartoons of Mamata Banerjee on the internet. “They don’t do any work but think of ways to frame me,” Banerjee had said justifying the arrest and alluding to the CPI(M) being behind the cartoons.
And now she has taken on the judicial system in this country. On the occasion of the platinum jubilee celebrations of the West Bengal assembly she recently said “at times favourable verdicts are given in return for money. There are instances when judgments have been purchased. There is corruption among a section of the judiciary. I know there can be a case against me for saying this. But this must be said and I am ready to go to jail for saying so.”
Now why does the Chief Minister whose alliance has 227 out of the 294 seats in the state assembly want to go to jail? Even if we were to leave out 43 seats which belong to the other alliance partners, her party, the All India Trinamool Congress has 184 seats in the assembly.
Why does the Chief Minister of a state whose party has absolute majority in the assembly, bother about small dissent so much so that it forces her to label the dissenters as Communists and Maoists?
The answers to all these questions lie in the 42 years that she has spent in politics.
Mamata Banerjee entered politics in 1970. As Monobina Gupta writes in Didi – A Political Biography “As an undergraduate in Kolkata’s Jogmaya Devi College, she became active in Chhatra Parishad, the Congress’s student wing. The college union was then controlled by the Democratic Socialist Organisation(DSO), students wing of the Socialist Unity Centre of India (SUCI)…Her dogged fight against the DSO drew the attention of some Congress leaders, even though she did not known them personally then.”
By the late 1970s Mamata was at the forefront of the protests happening in Kolkata (then Calcutta). “Mamata was out on Kolkata’s streets defending Indira Gandhi after the latter lost the parliamentary elections…From waving black flags at the then prime minister Moraji Desai on his visit to Kolkata to getting into a bloody fight with the Left student activists in Ashutosh College, she was gaining a reputation for being a strong combatant of the CPI-M,” writes Gupta.
Mamatas big stroke of luck came before the 1984 Lok Sabha elections. Indira Gandhi had asked Mamata’s then mentor and Congress legislator Subrata Mukherjee to find a suitable woman candidate. As Mukherjee tells Gupta in her book Didi– A Political Biography “The elections were approaching. Indira ji suddenly asked me to find a woman candidate. The Congress was in a bad shape. Finding a woman candidate was a tough job. I suggested Mamata’s name, and she got her nomination from the Jadhavpur constituency.”
Indira Gandhi was killed by her bodyguards Beant Singh and Satwant Singh on October 31, 1984. In the sympathy wave that followed, Mamata Banerjee won, becoming a Lok Sabha member at a young age of 29. She defeated CPI(M) stalwart Somnath Chatterjee. The Congress party won 16 out of the 42 Lok Sabha seats in West Bengal.
This was enough to rattle the CPI(M) led ruling Left Front government . It unleashed violence across the state and attacked Congress workers. “This was the scene Mamata entered flush with the success of her maiden electoral victory…She had courted danger right from her days as a student activist. The first in a series of trips Mamata made in this period as to Magrahat in South 24 Parganas, where a Congress worker was brutally murdered and his wife gang-raped by alleged antisocials backed by the CPI-M. Media reports spoke of the horror of the incident – the assailants ‘playing football’ with the murdered worker’s severed head. Mamata’s visit and her meeting with the family of the deceased made front page news,” writes Gupta.
Her confrontation with CPI-M continued in the years to come. In August 1990, the Kolkata police was following her 24×7 relaying her activities to the higher ups. On August 16,1990, Mamata Banerjee stepped out of her Kalighat residence and walked towards Hazra junction to be a part of the procession she had called for. The atmosphere was tense and Mamata was attacked. As Gupta writes “The attackers had come prepared. Swinging his stick, Laloo Alam, a CPI-M worker, hit Mamata hard on her head, she (i.e. Mamata) writes in her memoirs. ‘The right side of my head (just a hairline away from where the brain is) had cracked open and I was bleeding profusely. I was still undeterred…When I saw them getting ready to hit me on the head with an iron rod, strangely in that grave circumstance, I covered my head with my hand,’ Mamata narrates.”
Covering her head with hand nullified the impact of the blow on her head, and broke her wrist. Over the next few days Mamata was at a nursing home fighting for her life. She survived and thus started the second phase of her political career. It took her 21years more to beat the Left Front and form her government in West Bengal. Along the way she quit the Congress party and formed her own party, the Trinamool Congress.
Mamata Banerjee was a leader of agitations who became the Chief Minister of West Bengal on May 20,2011. All the agitations over the years ensured that confrontation became an integral part of Mamata Banerjee’s career and her nature. As Nilanjan Mukhopadhyay writes at www.asiancorrespondent.com “The bottom line is that as a leader of agitations you require to be spontaneous and have the ability to cock a snook at your adversary.” (you can read the complete column here)
This is a trait that has become in-built in her and explains to a large extent why she has been spontaneously branding her dissenters as communists and Maoists. The aggression that came out in all the protests, dharnas and bands she called for against the CPI-M, still needs to come keep coming out, but in other ways. That explains to a large extent why she is hell bent on shooting herself in the foot and is needlessly taking on the judicial system by calling it corrupt.
What also does not help is the fact that she sees herself as having been betrayed time and again. “Much of the excess of Mamata’s emotional rhetoric stems from a lifelong sense of betrayal. The hurt and anger run through most of her writings. In school, the classmates she helped stabbed her in the back; the party she grew up ruined her chances of routing the CPI-M by striking undercover electoral quid pro quo deals with the communists,” writes Gupta. She concludes that all this has led to a situation where Mamata Banerjee is “haunted by a constant apprehension of persecution and conspiracy.”
Hence, this is a major reason where even a hint of dissent gets labeled as a communist or a Maoist conspiracy.
The traits that Mamata had developed over the years held her in good stead as she fought the CPI-M rule in West Bengal. And those are the traits that she can’t seem to get rid off now. As Mukhopadhyay puts it “I have long maintained among friends that she is the Uma Bharti of West Bengal. Meaning, both – and they are inherently well-meaning leaders – can lead an agitation to its logical culmination but cannot govern in their wildest dreams. In politics you require the chutzpah to ensure that the government – or people in authority – of the day bend before your agitation. But in governance you are required to listen, think, put one against another and act.”
“In governance you need to be routine (diligent if you prefer this word), ensure that the horse comes before the cart (meaning systems are followed) and above all grant the others, the right to disagree with you and agitate if they wish to exercise their democratic right,” Mukhopadhyay adds.
But this is easier said than done because for this to happen Mamata Banerjee will have to stop being Mamata Banerjee.
To conclude, let me put it this way. Salman Khan has been labeled a tiger only in reel life. Mamata Banerjee has been a tigress in real life. But its time she stopped being one because it’s hurting her more now, than ever before.
(The article originally appeared on www.firstpost.com on August 17,2012. http://www.firstpost.com/politics/ek-thi-tigress-why-mamata-tilts-at-every-windmill-420914.html)
(Vivek Kaul is a writer and can be reached at [email protected])
Pawar is no Mamata di! He is giving the Congress batting practice
Vivek Kaul
“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])
Sonia Gandhi and the art of mystery branding
Vivek Kaul
Who is Sonia Gandhi?
Do we the citizens of this country really know her?
What are her views on various things?
What does she think about the current state of the Indian economy?
What does she think of the government which she runs on “remote control”, like Balasaheb Thackeray once did?
When she went abroad recently for medical treatment, what is it that she is suffering from? Does it bother her that her only son Rahul is in his forties now and is still unmarried?
Does she find time to be with her two grandsons?
Are her Hindi speeches written in Roman script?
Pardon me for being rhetorical, but I am just trying to make a broader point. The citizens of India don’t have answers for any of the questions asked above. They need not have answers for every question. But they definitely need to know her views on the Indian economy, the government she runs on remote control and the medical illness that plagues her.
The other questions are personal and answering them would just satisfy some curiosity and nothing else.
The fundamental question that arises here is why is there so much mystery surrounding Sonia Gandhi? Nobody currently influences the economics and politics of India more than she does. But when was the last time you read an interview with her and heard her interacting with the media?
The answer behind all her mystery might very well lie in the art of branding a product. As brand guru Martin Lindstrom writes in Buyology – Truth and Lies About Why We Buy “Mystery is a fascinating component as many brands leverage this in order to make us pay more for a brand.”
And so many big brands make mystery their selling point.
“Ye PSPO nahi jaanta,” went the catch line of an advertisement of Orient Fans. Towards the end of the advertisement it was revealed that PSPO stands for “Peak Speed Performance Output.” Now what does that mean?
Or take the case of “ZPTO yukt naya clinic All Clear.” What does ZPTO stand for?
Or take the case of Tata Xenon XT, the new car from Tata Motors. What does XT stand for?
Or Johnson’s natural baby oil with aloe vera? What is aloe vera?
Or products like Ariel Oxyblue and Opti-ThickTM Harpic?
All these abbreviations and terms stand for something. PSPO is a technology that uses lesser electricity to deliver more air, over a larger area. ZPTO is a microbiocide, which is supposed to kill microbes which cause dandruff. But dandruff can happen for a lot of other reasons as well.
The XT in Xenon XT stands for Cross Terrain. Aloe Vera is a plant with supposed medicinal qualities and has been often cited as being used in herbal medicines. It is even mentioned in the New Testament ((John 19:39–40))
Do most consumers understand what do these terms mean? The answer in most cases would be no. But do these terms matter to consumers when they make a buying a decision? Yes, they do. The mystery associated with such terms, makes the product more appealing to consumers. “Take the Sony Trintron TV for example. What is Trintron? No idea. It’s some technical mystery, which claims that the TV is better – it sounds technical and fancy and seduces us to believe this is something very special. This is mystery in action,” says Lindstrom
The case with Sonia Gandhi is very similar. The “mystery” associated with her along with her foreign origin makes her very appealing to the Indian voter.
And she goes out of her way to maintain the mystery. The recent “circus” in the run up to the Presidential election is a good case in point. Mamata Banerjee, the Chief Minister of West Bengal, went to meet her to discuss who would be the Presidential candidate of the United Progressive Alliance (UPA). Banerjee came out and told the waiting press that the finance minister, Pranab Mukherjee, and the vice president Hamid Ansari, were the two candidates on Sonia’s mind. No one officially knew till then what was Sonia Gandhi’s take on the issue. The cat was suddenly out of the bag.
Banerjee then went to meet Mulayam Singh Yadav and put out three candidates of her own, the former President, APJ Abdul Kalam, the current Prime Minister, and suspended CPI(M) member and former speaker of the Lok Sabha, Somnath Chatterjee.
But pretty soon Yadav had backed out of the so called deal he had struck with Mamata. It is said that Sonia Gandhi had secret meetings with Mulayam Singh Yadav, and soon he was ready to support the UPA’s candidate for the President.
There are couple of interesting points that come out here. One is of course that you don’t play games with the President of the Congress party, who comes from the Nehru-Gandhi family. But more importantly it was a lesson to everyone about what happens when you talk to the press about what Sonia Gandhi is thinking on a particularly important issue. The “mystery” is important to her being and it must be maintained.
Maintaining the mystery behind a good brand goes a long way in maintain their selling point. Lindstrom provides a very good example of a shampoo launch to explain what happens when the mystery associated with a brand goes.
“When Unilever was getting to launch a shampoo in Asia, a mischievous employee with time on his hands wrote on the label, just for the hell of it, Contains the X9 Factor. This last minute addition went undetected by Unilever, and soon millions and millions of bottles of the shampoo were shipped to stores with those four words inscribed on the label. It would have cost too much to recall all the shampoo, so Unilever simply let it be. Six months later, when the shampoo had sold out, the company reprinted the label, this time leaving out the reference to the nonexistent “X9 Factor.””
The company was in for a surprise. “None of the customers had any idea of what the X9 Factor was, but were indignant that Unilever had dared to get rid of it. In fact, many people claimed that their shampoo wasn’t working anymore, and that their hair had lost its luster, all because the company had dropped the elusive X9 Factor,” writes Lindstrom.
With the mystery gone consumers thought that the brand wasn’t simply good enough as its earlier version. Sonia Gandhi seems to be working on the same principle in keeping her mystery going and keeping her publicity to the minimum.
She is rarely seen speaking unless it’s an election meeting, where her speeches are largely prepared in advance, unlike Atal Behari Vajpayee who spoke impromptu on a lot of occasions. I don’t remember ever reading and interview of hers. Even the few biographies written on her are largely about the days when she first came to India and was put up at the house of Teji and Harivansh Rai Bachchan. Her initial struggle to adjust to Indians ways. Her strong relationship with her mother-in-law Indira Gandhi. Her reluctance at Rajiv Gandhi entering politics, after the death of his brother Sanjay. And so on. None of them get into the political side of Sonia Gandhi.
And so the mystery continues. That’s what great brands are all about. If that means that Indian democracy is run out of a ‘backroom’ with a ‘remote-control’, then so be it.
(The article originally appeared on www.firstpost.com on June 21,2012. http://www.firstpost.com/politics/sonia-gandhi-and-the-art-of-mystery-branding-352184.html)
(Vivek Kaul is a writer and can be reached at [email protected])
What the BJP can learn from Coca Cola?
Vivek Kaul
It was October 1990. I was thirteen. In a pre cable TV, multiplexes and mall era, just about the only thing that got a teenager in a small town excited, was the twice a week Chitrahar on Wednesdays and Fridays, broadcast by Delhi Doordarshan.
Unless of course there was a cricket match on! But cricket was not played as often as it is today. And not everything was broadcast on the state owned Doordarshan.
Hence it was very exciting when Lal Krishna Advani arrived late one night to stay “overnight” in the guest house in the colony I lived in. Advani, during those days, was going around the country as a part of what he and the Bhartiya Janata Party (BJP) called the rath yatra.
Early next morning, before he was supposed to leave, a small crowd which included me had gathered in front of the guest house. He came out and was requested to speak a few words. I don’t remember anything of what he said except the last line, which was “saugandh Ram ki khaate hain, mandir wohin banayenge”.
He was out of the place in five minutes. But the crowd that had gathered continued to mingle around. Some were happy at having seen him. Some were amazed to know that his rath wasn’t actually one. Some women spoke about the glow Advani ji had on his face. And some others were worried. “Mandir banega ki nahi?” they asked.
I pretty much had the same feeling as everyone else, but what I was most happy about was the fact that I would be a minor celebrity in the school next day, having seen Advani when none of my classmates had.
Advani was arrested a few days later before the rath yatra could enter Uttar Pradesh. As he writes in his autobiography My Country My Life “My yatra was scheduled to enter Deoria in Uttar Pradesh on 24 October. However, as I had anticipated, it was stopped at Samastipur in Bihar on 23 October and I was arrested by the Janata Dal government in the state then headed by Laloo Prasad Yadav (sic). I was taken to an inspection bungalow of the irrigation department at a place called Massanjore near Dumka on the Bihar-Bengal border (Dumka now comes under the state of Jharkhand).”
We all know what happened in the aftermath of the rath yatra. But as I grew older, I kept asking myself, why did Advani say what he did? Why was it so important to build a temple there? Didn’t the country have bigger issues which needed to be sorted out first? And so on.
Political party as a brand
All my questions were answered the day I realised that every political party is a brand and a brand needs to stand for something. It needs a story that can be told to people, so that people can go buy the brand by supporting it and by voting for it.
In the aftermath of Indira Gandhi’s assassination in 1984, the Congress Party had swept the Lok Sabha elections, with the BJP winning only two seats. Given the sorry performance the party needed to stand for something in the minds of the Indian voter.
Brand BJP was built on the war cry of “saugandh Ram ki khaate hain mandir wohin banayenge”. This ensured that the party was able to increase the number of seats in the Lok Sabha from 2 in 1984, to 88 in 1989 and 118 in 1991.
The party espoused for causes like making temples in Ayodhya, Kashi and Mathura. It talked about banning cow slaughter, having a uniform civil code, and doing away with the Article 370, that gives special status to the state of Jammu and Kashmir. All this was music to the ears of voters across Northern and Western India and the party catapulted from being a political front of the Rashtriya Swayamsevak Sangh (RSS) to having an identity of its own.
BJP’s story was that it stood for the cause of Hindus and Hindutva. And it was not the only political party that came with a story attached to it. Almost every political party that has risen in India in the last three to four decades has had a story attached to it.
The Kanshi Ram story
Kanshi Ram launched the Dalit Soshit Samaj Sangharsh Samiti or DS4 as it was more popularly called, with the war cry “Thakur, Brahmin, Bania Chhod, Baki Sab Hain DS4.” This left no doubt in anybody’s mind that Kanshi Ram and DS4 stood for everyone who wasn’t an upper caste.
Kanshi Ram probably realised the power of the slogan he had hit upon. He came up with another slogan along similar lines when he launched the Bahujan Samaj Party(BSP). “Tilak Tarazu aur Talwaar, inko maaro joote chaar” was the rallying cry of the BSP (with Tilak, Tarazu and Talwar being the representation of the Brahman, Bania and Thakur castes, the upper castes).
Or let’s take the case of Left Front in West Bengal. The front which comprised of various communist parties stood for what the Sonia Gandhi led UPA calls the aam aadmi. It positioned itself as being pro-poor and anti big business. When the Left Front first came to power, share croppers where handed over land after taking it over from wealthy landlords. Teak trees were planted in front of homes by Left Front members where a girl child was born, so that the tree could be cut when she was of marriageable age and money for the wedding expenses could be raised.
In the late seventies and early eighties the Left brand also stood for “trade unions” which bargained hard in the interest of the workers. This over the years ensured that most industrialists shut shop and left for other parts of the country. But this didn’t really have any impact on the voter base of the Left Front which remained committed because what the Front was doing was in line with the story it had sold to the voters.
Why the story is important
The story that a political party sells to its voters is very important and it should hold for a very long period of time. Take the case of Janata Dal which was formed by the merger of the various factions of the erstwhile Janata Party, which were the Lok Dal, Congress (S) and the VP Singh led Jan Morcha.
The story that the party successfully sold to the voters was that it would introduced 27.5% reservation for other backward classes (OBCs) in government jobs, as had been proposed by the Mandal Commission.
The story was lapped by the votes and the party won 142 seats in the 1989 Lok Sabha elections.
Despite student protests erupting all across the country, starting with Rajiv Goswami burning himself in front of Deshbandu College in New Delhi, reservations were introduced. No political party could be seen going against this legislation.
The trouble was once Mandal Commission became a reality what did the Janata Dal stand for in the mind of the voter? Nothing. This soon led to the regional satraps forming their own parties like the Mulayam Singh Yadav led Samajwadi Party in Uttar Pradesh, Lalu Prasad Yadav led Rashtriya Janata Dal in Bihar and the Nitish Kumar-George Fernandes led Samta Party also in Bihar.
The end of Janata Dal led to the coining of one of the most memorable though underrated slogans in Indian politics: “Thakur buddhi, Yadav bal, jhandu ho gaya Janta Dal.” (where thakur was in reference to VP Singh who was a rajput).
Hence a political party needs to stand for something in the mind of the voter. If it doesn’t it meets the fate of a party like Janata Dal.
If it ain’t broke don’t fix it
Buddhadeb Bhattacharya became the Chief Minister of West Bengal in 2000, taking over after Jyoti Basu had been the Chief Minister for 23years. Bhattacharya tried to get big business to come back to Kolkata, so that jobs could be created.
But the trouble was Bengal was not a state used to the ways of professional business. If BPOs had to set shop then they had to work every day their foreign clients were working. So was the case with IT companies. But in a state where bandhs were way of life, how would that be possible?
Buddha Babu asked his party carder not to disturb BPO employees on their way to work on “bandh” days. This was the first dint to the Left brand. Then the heavy industry companies wanted to set shop, given that labour in Bengal was cheaper than other parts of the country and the government was ready to welcome them.
This was where all the trouble started. Almost all land in Bengal is agriculture land. And every time an industrialist wants to set shop it leads to some farmers being put out of job. Things escalated when the party carder in Nandigram resorted to violence against farmers who were protesting. The same was the case with Singur, where the Tata Nano plant was supposed to come up.
When a communist party (or rather parties) start beating up farmers, it need not be said that it does do any good to the identity and brand and the story they have carefully cultivated over the years.
This in no way means that industrialization is not important or should not have been pursued by the Left Front government, but it was definitely not done in the way it was. This of course went totally against the anti industry image that the Left Front carried in the minds of people. The same Left Front whose trade unions went cholbe na cholbe na against industries and industrialists was now catering to their demands, felt people of the state. Communists had become capitalists. The practitioners of all that Karl Marx had espoused for were now vouching for the principles of Adam Smith.
There was clearly a branding problem. The gap was filled by Mamata Banerjee who now stands for everything that the Left Front had stood for, warts and all.
India shining
The year was 2004 and I was travelling in a local bus in Hyderabad, excited about the new mobile phone I had bought. The phone suddenly buzzed and it was a Delhi number, the first call on my new mobile. I picked up the call and heard the voice on the other end say “main Atal Bihari Vajpayee bol raha hoon”.
It took me a few seconds to realize that it was an automated call in the voice of the Prime Minister of the country asking the voters to vote for the BJP led National Democratic Alliance (NDA) in the upcoming Lok Sabha elections.
The party had decided to abandon its soft-Hindutva branding and decided to go in for what it thought was a more mass market campaign of “India shining”.
The party lost the elections and has been in opposition ever since.
What BJP can learn from Coca Cola
Donald R Keough, a former president of the Coca-Cola Company, in his book The Ten Commandments for Business Failure elaborates on what happens when the story associated with a brand is changed.
A slew of research and consultants told the top brass at Coca-Cola that people were looking for more sweetness in the product. This led to the launch the ‘New Coke’.
What followed was a disaster that went totally against what the consultants had predicted. People did not like the tinkering. And some of them started to hoard old coke, before the stocks ran out..
One day an old woman called a Coke call centre. Here is how Keough recounts this touching story.
. “It was an eighty-five year woman who convinced me we had to do something more than stay course. She had called the company in tears from a retirement home in Covina, California. I happened to be visiting the call centre and took the call. “You’ve taken away my Coke,” she sobbed. “When was the last time you had Coke?” I asked. “Oh, I don’t know. About twenty, twenty-five years ago.” “Then why are you so upset?” I asked. “Young man, you are playing around with my youth and you should stop it right now. Don’t you have any idea what Coke means to me?”
This made the top brass at Coke realise that they are not dealing with a taste or a marketing issue, but the idea or the story behind Coca-Cola. It was the “real-thing” and the consumers did not want any fiddling around with it. Immediately a decision was made to bring back the old Coke as “Coca-Cola Classic”.
To conclude
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.”
Given this getting rid of first impressions in the minds of the voter is very difficult. This does not apply for the Congress Party, which has been around for so long that it doesn’t really stand for anything and hence can change forms like a chameleon.
So if the BJP has to pose any sort of challenge to the Congress led United Progressive Alliance (UPA) in the next Lok Sabha elections it needs to go back to what it has always stood for in the mind of the voter: Hindutva. Like Coca Cola, it has to go back to stand for what it used to in the mind of the voter.
What it needs to decide on is the degree of Hindutva? Does it want to follow the hard line approach that it did in the late 1980s and the early 1990s with slogans like “ye to kewal jhaanki hai, kaashi mathura baaki hai” or does it want to follow the soft Hindutva strategy that it did when Atal Bihari Vajpayee was at his peak.
Given this, there is no one better than leader than Narendra Modi who can project the attributes of the pro Hindutva line. The trouble of course with Modi is that he comes across as a hardliner. Hence it’s important for Modi and the BJP that the spin-doctors of the party get to work immediately trying to soften up his image, so that his acceptability goes up across sections he is not currently popular with.
(The article originally appeared at www.firstpost.com on June 6,2012. http://www.firstpost.com/politics/political-brands-what-the-bjp-can-learn-from-coca-cola-333964.html)
(Vivek Kaul is a writer and can be reached at [email protected])