Some twenty eight days before my tenth standard exams I started reading William Shakespeare‘s Julius Caesar, seriously, for the first time. And I am still trying to figure out why the world fusses so much over plays written in a form of English that went out of fashion a long long time ago.
My memory of the play is very hazy now, given that it’s been two decades since. But what I do remember is that in Act 3 scene ii of the play comes a line which I found very relevant to the way world operates. “The evil that men do lives after them; The good is oft interred with their bones,” says the character of Mark Antony in that scene.
The evil that men (and women) do lives after them and in some cases the coming generations have to bear the consequences for it. Take the case of Indira Gandhi who systematically destroyed the institution of democracy. As historian Ramchandra Guha recently told CNN IBN “Nehru nurtured institution of democracy – an independent election commission, an independent judiciary, bureaucracy autonomous of political interference, pluralism, secularism. Indira systematically undermined all of this.”
This included democracy within the Congress party as well. During her heydays she first had Dev Kant Baruah installed as the President of the Congress party. Baruah is best remembered for saying “Indira is India and India is Indira”. Such was the level of the sycophancy that was prevalent when Indira Gandhi was at her peak.
After Baruah, Indira Gandhi took the presidency into her hands and was the president of the Congress party from 1978 to her death in 1984. Her younger son Sanjay more or less ran things within the party as well as the government (when Indira was in power) for a major part of this period.
She was succeeded as the President of the elder party by her son Rajiv who remained the President of the party till his death in 1991. This more or less institutionalized “dynastic” rule within the Congress. As Guha said “Even Nehru’s fiercest critic wrote at that time that the Nehru has no interest in promoting dynastic rule… Indira promoted first Sanjay and then Rajiv.”
With no democracy at the top of the Congress party, it simply wasn’t possible for the party to remain democratic at the state or the district level for that matter. The lack of internal democracy and the centralized nature of the Congress party led to the coining of the legendary phrase “high command”. It was also ironic that the world’s largest democracy was and is governed by a party with very little “internal” democracy.
More recently the party has seen Rahul Gandhi, fifth generation of the Nehru-Gandhi dynasty, at the helm of things, trying to correct the lack of democracy within the party. In October 2008, while addressing girl students at a resort near the Jim Corbett National Park, Rahul referred to “politics” as a closed system in India. “If I had not come from my family, I wouldn’t be here. You can enter the system either through family or friends or money. Without family, friends or money, you cannot enter the system. My father was in politics. My grandmother and great grandfather were in politics. So, it was easy for me to enter politics. This is a problem. I am a symptom of this problem. I want to change it.”
Rahul has tried to change this by trying to introduce some internal democracy within the Congress party by trying to ensure free internal elections. As Rasheed Kidwai writes in 24 Akbar Road – A Short History of the People Behind the Fall and Rise of the Congress, “Rahul Gandhi took it upon himself to bring about inner-party democracy in the Congress. He hired retired election commissioner JM Lyngdoh to design processes and implement policies to ensure that there were free internal elections within the party and that all initiatives and representatives were backed by elected representatives.”
While this is a good move but it is not going to lead to instant rejuvenation of a party that has constantly lost hold over the Indian electorate over the last two decades. Also, any move to initiate democracy within the Congress remains a non-starter given the lack of any democracy at the top.
Rahul’s mother Sonia Gandhi has been the President of the Congress since March 14, 1998, when the Congress Working Committee members led by Pranab Mukherjee invoked the Clause J of the Article 19 of the Congress constitution to throw out the elected President Sitaram Kesri. They then installed Sonia Gandhi as the President. This was unprecedented in the history of the party where an “elected” President of the party was thrown out by invoking a vague clause. The clause did not clearly point whether an elected President could be removed, by invoking it.
As The Hindu wrote after the death of Sitaram Kesri:
“The constitutional coup was hailed widely as restoring the party’s leadership back to the site of its only natural entitlement – the Nehru-Gandhi family. When the historians get to chronicle the import of that eventful day, most of the honorable men of the Congress would be shown to have acted way less than honourably; even those who owned their rehabilitation and place in the CWC to the old man had no qualms in abandoning him. The transition that day cast the Congress (I) once again in the dynastic mold, and the consequences are visible.”
Sonia Gandhi has been the President of the party ever since. Even if the party had presidential elections regularly the chances of anyone else other than Sonia Gandhi (assuming she continued to contest) winning the elections remained low. As Jitendra Prasada found in November 2000, when he ran against Sonia Gandhi, in the hope that she would ask him to withdraw his nomination and reward him with a senior position. Sonia never did and got nearly 99% of the votes polled. As Rashid Kidwai writes in Sonia – A Biography “As the date for the withdrawal of names drew nearer, Jitty Bhai waited in vain for a call from 10 Janpath offering a face saving, last-minute withdrawal. Humiliated and marginalized, Jitty Bhai realised that this gambit had failed. Accompanied by a handful of leaders from Uttar Pradesh, Prasada filed his nomination papers and was humbled in the party polls as Sonia went on to get nearly 99 per cent of the votes. The peacemakers and many of those who had encouraged Prasada to teach Sonia a lesson were nowhere in sight.”
Prasada never recovered from the humiliation he suffered at the hands of Sonia and died of a brain haemorrhage a few months later.
So try as much as Rahul might to revive the democratic process within the Congress party, it doesn’t really matter. To paraphrase what Dev Kant Baruah said about Indira Gandhi: “The Nehru-Gandhi family is the Congress. And the Congress is the Nehru-Gandhi family”.
The only constant in a party which lacks any ideology is the Nehru-Gandhi family. Given this, it doesn’t really matter if the Congress party has internal democracy or not. What matters is whether there is someone around from the Nehru-Gandhi family around to lead it.
It’s time Rahul Gandhi realised this and moved on from a full time party role to a role in the government while continuing with his role in the party as well. This will go in a long way in motivating the party cadre than all the moves to promote democracy within the party. There is nothing more that a Congress party worker likes than being led by a scion of the Nehru Gandhi family. This move also becomes even more important in a scenario where Pranab Mukherjee the principal troubleshooter for the party has decided to retire and move to the biggest house in the country.
It’s been nearly twenty three years since Rajiv Gandhi lost power to Vishwanath Pratap Singh. A Nehru-Gandhi family scion has not been a member of the Indian government since then. It’s time for Rahul and the Congress party to set that anomaly right.
(The article originally appeared on www.firstpost.com on July 30,2012. http://http://www.firstpost.com/politics/rahul-gandhi-is-paying-for-the-mistakes-of-indira-gandhi-396001.html/)
(Vivek Kaul is a writer and can be reached at [email protected])
I remember reading an interview with Shekhar Kapur years back in which he described his experience with Javed Akhtar during the making of Mr India.
When Akhtar first recited the line “Mogambo Khush Hua” to Kapur, he wasn’t impressed. This was the main line of Mogambo, the villain of the movie. As Kapur recounts on his blog “Hmmm, I thought – there must be more to that.”
But Akhtar was convinced about the line. “Shekhar Sahib, when Kapil Dev hits a six over the grounds, people will shout Mogambo Khush Hua, and when people play three card brag (teen patti) and if they get three aces, they will shout “Mogambo Khush Hua.” “You trust me on that,” Javed Akhtar assured me,” writes Kapur on his blog.
Kapur ran with what Akhtar told him and the rest as we all know is history. Mr India was a huge hit. Such was the power of the line that people started to use it during the course of regular conversation, whenever they felt happy about something. As Kapoor writes “And some time later as I was watching Kapail Dev hit a six over the Sharjah grounds I saw a huge banner go up in the Indian supporters. It said : “Mogambo Khush Hua.””
“Mogambo Khush Hua” became one of the most famous one-liners that Hindi cinema had produced. But this wasn’t the best one-liner that Akhtar ever wrote. His best one liner clearly has to be “Mere Paas Ma Hai” from the movie Deewar. The line is simple yet so powerful.
Deewar was released on January 1, 1975. Around six months later on June 25, 1975, Indira Gandhi, the then Prime Minister of India declared a state of emergency. During the 21 month period of emergency Indira’s younger son Sanjay almost ran a parallel government along with his cronies. One of his major areas of concern was overpopulation and the government under his instructions forcefully carried vasectomies all over the country. This phenomenon got Atal Behari Vajpayee all worked up to write a poem titled “aao mardon na mard bano”. Those were the days.
Sanjay Gandhi wouldn’t have been able to force vasectomies on thousands of Indian men without the “love” and the “backing” of his mother Indira Gandhi, who is said to have had a soft corner for her ill-tempered son. “Mere Paas Ma Hai” was a line written for Sanjay Gandhi rather than Ravi, the character played by Shashi Kapoor in Deewar , who speaks the line in the movie. Chances are that if Deewar had been released six months later during the emergency, the line wouldn’t have made it past the censor board.
India is at the same stage again. The love of a mother for her only son is holding the country back. The moves are already being made. Pranab Mukjerhee has been packed off to the Rashtrapati Bhavan. The next decision that is to be made is who will replace him at the Finance Ministry?
Manmohan Singh, the Prime Minister, wants to run the ministry with his team of economists: Montek Singh Ahulwalia, the deputy chairman of the planning commission, C Rangarajan the Chairman of the Prime Minister’s Economic Advisory Council and Kaushik Basu, the Chief Economic Adviser to the government of India. He is also hoping that Raghuham Rajan from the University of Chicago, a former Chief Economist at the IMF, to join the team.
But will this be allowed to happen? The answer is no. Sonia Gandhi needs a politician as the minister of Finance. A politician who can like, P Chidambaram did, come up with schemes like the Rs 71,000 crore of farmers loans being waived off. A politician who can get the right to food act up and running.
A politician who can get onto a helicopter and drop bucket loads of money from it. Okay, not quite that. But a politician who can ensure that voters of this country have been bribed enough in the name of poverty and economic development, so that when Lok Sabha elections happen in 2014, they vote for the United Progressive Alliance (UPA) and the Congress. All this to ensure that Rahul baba takes over the reins of the world’s biggest democracy.
This means that the fiscal deficit of the government of India will continue to go up. The government will continue to borrow more and more. And interest rates are likely to remain high. Economic sense be dammed.
And in the next few months you might hear of an A K Antony or a Digvijay Singh or a Jairam Ramesh or a Kamal Nath or a Sushil Kumar Shinde or even the all guns blazing all the time, Kapil Sibbal, taking over as the finance minister of this country. The name doesn’t really matter because none of them have voices or ideas of their own. Even if they did they have long been put on the backburner because all that matters now is that “Rahul Gandhi has to be made the PM”.
Manmohan Singh is the only person who can stop a seasoned Congress politician from taking over as the finance minister of India and limiting the serious damage to the Indian economy that would come with it. The good “doctor” has got more and “much” more, than he would have ever bargained for. He can resist moves to appoint a politician as a finance minister by threatening to resign. That is one thing that the Congress won’t be able to handle. It would set the cat among the pigeons.
It’s time for Singh to payback to the country for all that the country has given to him. But the question is will he be as docile as he has been and allow a mother’s love for her son to takeover? Will Rahul Gandhi say “Mere Paas Ma Hai”? Or will Manmohan Singh by resisting a full time politician taking over the ministry of finance, give us, you, me and everybody else, an opportunity to say “Mogambo Khush Hua”.
(The article originally appeared on www.firstpost.com on July 2,2012. http://www.firstpost.com/politics/babalog-prophecy-why-akhilesh-wont-ever-transcend-mulayam-368232.html)
(Vivek Kaul is a writer and can be reached at [email protected])
“We’re slowly learning that fact. And we’re very, very pissed off.”
—Lines from the movie Fight Club
The government’s piggybank is in trouble. Well not major trouble. But yes some trouble.
The global credit rating agency Moody’s on Monday downgraded the Life Insurance Corporation (LIC) of India from a Baa2 rating to Baa3 rating. This is the lowest investment grade rating given by Moody’s. The top 10 ratings given by Moody’s fall in the investment grade category.
Moody’s has downgraded LIC due to three reasons: a) for picking up stake in the divestment of stocks like ONGC, when no one else was willing, to help the government reduce its fiscal deficit. b) for picking up stakes in a lot of public sector banks. c) having excessive exposure to bonds issued by the government of India to finance its fiscal deficit.
While the downgrade will have no impact on the way India’s largest insurer operates within India, it does raise a few basic issues which need to be discussed threadbare.
From Africa with Love
The wives of certain African dictators before going on a shopping trip to Europe used to visit the central bank of their country in order to stuff their wallets with dollars. The African dictators and their extended families used the money lying with the central banks of their countries as their personal piggybank. Whenever they required money they used to simply dip into the reserves at the central bank.
While the government of India has not fallen to a similar level there is no doubt that it treats LIC like a piggybank, rushing to it whenever it needs the money.
So why does the government use LIC as its piggybank? The answer is very simple. It spends more than what it earns. The difference between what the government earns and what it spends is referred to as the fiscal deficit.
In the year 2007-2008 (i.e. between April 1, 2007 and March 31,2008) the fiscal deficit of the government of India stood at Rs 1,26,912 crore. Fiscal deficit is the difference between what the government earns and what it spends. For the year 2011-2012 (i.e. between April 1, 2011 and March 31, 2012) the fiscal deficit is expected to be Rs 5,21,980 crore.
Hence the fiscal deficit has increased by a whopping 312% between 2007 and 2012. During the same period the income earned by the government has gone up by only 36% to Rs 7,96,740 crore. The expenses of the government have risen more than eight and half times faster than its revenues.
What is interesting is that the fiscal deficit numbers would have been much higher had the government not got LIC to buy shares of public sector companies it was selling to bring down the fiscal deficit.
Estimates made by the Business Standard Research Bureau in early March showed that LIC had invested around Rs 12,400 crore out of the total Rs 45,000 crore that the government had collected through the divestment of shares in seven public sector units since 2009. The value of these shares in March was around Rs 9,379 crore. Since early March the BSE Sensex has fallen 7.4%, which means that the LIC investment would have lost further value.
Over and above this the government also forced LIC to pick up 90% of the 5% follow-on offer from the ONGC in early March this year. This after the stock market did not show any interest in buying the shares of the oil major. The money raised through this divestment of shares went towards lowering the fiscal deficit of the government of India.
News reports also suggest that LIC was buying shares of ONGC in the months before the public issue of the insurance major hit the stock market, in an effort to bid up its price. Between December and March before the public offer, the government first got LIC to buy shares of ONGC and bid up the price of the stock from around Rs 260 in late December to Rs 293 by the end of February. After LIC had bid up the price of ONGC, the government then asked it to buy 90% of the shares on sale in the follow on public offer.
This is a unique investment philosophy where institutional investor managing money for the small retail investor, first bid up the price of the stock by buying small chunks of it, and then bought a large chunk at a higher price. Stock market gurus keep repeating the investment philosophy of “buy low-sell high” to make money in the stock market. The government likes LIC to follow precisely the opposite investment philosophy of “buying high”.
Estimates made by Business Standard suggest that LIC in total bought ONGC shares worth Rs 15,000 crore. The stock is since down more than 10%.
The bank bang
LIC again came to the rescue of the cash starved government during the first three months of this year, when it was force to buy shares of several government owned banks which needed more capital. It is now sitting on losses from these investments.
Take the case of Viajya Bank. It issued shares to LIC at a price of Rs 64.27 per share. Since then the price of the stock has fallen nearly 19%.
The same is case with Dena Bank. The stock price is down by almost 10% since allocation of shares to LIC. The share price of Indian Overseas Bank is down by almost 19.7% since it sold shares to LIC to boost its equity capital. While the broader stock market has also fallen during the period it hasn’t fallen as much as the stock prices of these shares have.
There are more than a few issues that crop up here. This special allotment of shares to LIC to raise capital has pushed up the ownership of LIC in many banks beyond the 10% mandated by the Insurance Regulatory and Development Authority of India, the insurance regulator. As any investment professional will tell you that having excessive exposure one particular company or sector isn’t a good strategy, especially when managing money for the retail investor, which is what LIC primarily does. What is interesting is that the government is breaking its own laws and thus not setting a great precedent for the private sector.
If LIC hadn’t picked up the shares of these banks, the fiscal deficit of the government would have gone up further. The third issue here is why should the government run so many banks? The government of India runs twenty six banks (20 public sector banks + State Bank of India and its five subsidiaries).
While given that banking is a sensitive sector and some government presence is required, but that doesn’t mean that the government has to run 26 banks. It is time to privatise some of these banks.
Gentlemen prefer bonds
As of December 31, 2011, the ratio of government securities to adjusted shareholders’ equity in LIC was 764%. This is understandable given that the subsidy heavy budget of the Congress led UPA government has seen its fiscal deficit balloon by 312% over the last five years. Again basic investment philosophy tells us that having a large exposure to one investment isn’t really a great idea, even if it’s a government.
The Rahul factor
But the most basic issue here is the fact that the government is using the small savings of the average Indian who buys LIC policies to make loss making investments. This is simply not done.
LIC has turned into the behemoth that it has over the years by offering high commissions to its agents over the years. It sells very little of “term insurance”, the real insurance. What it basically sells are investment policies with very high expenses which are used to pay high commissions to it’s the agents. The high commissions in turn ensure that these agents continue to hard-sell LIC’s extremely high cost investment policies to normal gullible Indians. The premium keeps coming in and the government keeps using LIC as a piggybank.
The high front-loading of commissions is allowed by The Insurance Act, 1938. The commission for the first can be a maximum of 40 per cent of the premium. In years two and three, the caps are 7.5 per cent, and 5 per cent thereafter. These are the maximum caps and serve as a ceiling rather than a floor.
The Committee on Investor Protection and Awareness led by D Swarup, the then Chairman of Pension Fund Regulatory and Development Authority, had proposed in September 2009 to do away with commissions across financial products. “All retail financial products should go no-load by April 2011,” the committee had proposed in its reports.
The National Pension Scheme(NPS) was already on a no commission structure. And so were mutual funds since August 1, 2009. But LIC and the other insurance companies were allowed to pay high commissions to their agents. “Because there are almost three million small agents who will have to adjust to a new way of earning money, it is suggested that immediately the upfront commissions embedded in the premium paid be cut to no more than 15 per cent of the premium. This should fall to 7 per cent in 2010 and become nil by April 2011,” the committee had further proposed.
Not surprisingly the government quietly buried this groundbreaking report.
While insurance commissions have come down on unit linked insurance plans, the traditional insurance policies in which LIC remains a market leader continue to pay high commissions to their agents. These traditional insurance policies typically invest in debt (read government bonds which are issued to finance the fiscal deficit).
This is primarily because the Congress led UPA government needs the premium collected by LIC to run LIC like a piggybank. The piggybank money can and is being used to run subsidies in the hope that the beneficiaries vote for Rahul Gandhi in 2014.
Is the objective of LIC to generate returns and ensure the safety of the hard earned money of crores of it’s investors? Or is it to let the UPA government run it like a piggybank in the hope that Rahul baba becomes the Prime Minister?
The country is waiting for an answer.
(This post originally appeared on Firstpost.com on May 15,2012. http://www.firstpost.com/politics/lic-money-is-it-for-investors-benefit-or-rahul-election-309545.html)
(Vivek Kaul is a writer and can be reached at [email protected])