RBI keeps repo rate at 8%: Lower interest rates are not a solution to slow economic growth


Ramachandra Guha in a wonderful essay titled An Anthropologist Among Marxists writes about what he calls a “possibly, apocryphal anecdote.” As he writes “When Indira Gandhi was assassinated, her ashes were sent to different cities to allow public homage. When her ashes lay lay in Calcutta’s Government House they were visited one evening by the state’s finance minister. In the previous year this man had delivered no less than two hundred and sixty-two speeches on the discrimination against West Bengal in the release of funds from the central treasury. As the minister came out of the Government House, he was asked how he felt when confronting the mortal remains of his most resolute political opponent. He replied in character: Centre Kom Diye Che (the centre has again given us less than our rightful share).”
In another essay titled
Political Leadership Guha writes “Jyoti Basu’s government, it was said, began every discussion on federalism with the words, “Centre kom diye che.
The communists who ruled West Bengal for more than three decades liked to blame all the problems of the state on the central government, which they felt did not give the state a fair share of the funds.
Dear Reader, if you are wondering why am I talking about West Bengal and its politics in a piece which has the term “interest-rates” in the headline, allow me to explain. Over the last few years, everyone from politicians to businessmen to bankers have called for interest rates to be cut as a solution for reviving economic growth in India. The assumption is that at lower interest rates people will borrow and spend more and that will lead to economic growth.
In that sense, these individuals are not very different from the communist politicians of West Bengal for whom “
Centre kom diye che” was an explanation for all the problems of the state. Along similar lines, individuals calling for a cut in interest rates seem to believe that higher interest rates are a major reason for the slowdown in economic growth, and a cut can really get people borrowing and spending all over again.
The former finance minister P Chidambaram was a major propagator of this belief. His successor Arun Jaitley has carried of where Chidambaram left. Other than the politicians, bankers have also regularly asked the Reserve Bank of India (RBI) to cut interest rates.
Today with the RBI deciding to keep the repo rate unchanged at 8% in the fourth bi-monthly monetary policy, the interest-rate-
wallahs will be at it again. Repo rate is the rate at which the RBI lends to banks.
The RBI had its reasons for not changing the repo rate. As it pointed out in a statement “Since June, headline inflation has ebbed…The most heartening feature has been the steady decline in inflation excluding food and fuel…to a new low. With international crude prices softening and relative stability in the foreign exchange market, some upside risks to inflation are receding. Yet, there are risks from food price shocks as the full effects of the monsoon’s passage unfold, and from geo-political developments that could materialise rapidly.”
Nevertheless, over the next few days you will see bankers, real estate company owners, industry lobbies and possibly even the finance minister Jaitley, wondering why the RBI did not cut the repo rate, to get lending going again.
The most recent occasion when the interest-rate-wallahs came out in the open was when the bankers asked the RBI to cut the repo rate, after the growth in bank loans fell to a five year. As on September 5, 2014, the one year growth in bank loans stood at 9.7%. During the same time last year the number was at a significantly higher 17.9%.
The belief as explained earlier is that at lower interest rates people will borrow more. But as the American baseball coach Yogi Berra once famously said “In theory there is no difference between theory and practice. In practice there is.”
Lower interest rates do not always lead to more borrowing and revival of economic growth. An excellent example of this is what has happened in the aftermath of the financial crisis that broke out in September 2008. Western central banks brought down interest rates to very low levels in the hope that people will borrow and spend more, and help revive economic growth. But that did not happen. All it did was lead to many stock market bubbles all over the world.
Closer to home let’s take a look at car sales. The sales have revived from May 2014, after having continuously fallen for nine months. In August 2014, car sales grew by 15.16%, in comparison to the same period last year. This has happened without much change in interest rates. Why is that the case? Let’s try and understand this through a simple example. Let’s assume that an individual takes a car loan of Rs 4 lakh to be repaid over a period of five years at an interest rate of 10.5%. The EMI on this loan works out to around Rs 8,598.
Let’s say that interest rates were to come down by a massive 100 basis points (one basis point is one hundredth of a percentage)to 9.5%, all at once. At this interest rate, the EMI would work out to around Rs 8,401 or around Rs 200 lower than the earlier EMI. Now how many people will go and buy a car just because the EMI is now lower by Rs 200?
Anyone who has the ability to repay an EMI of Rs 8,401 can also repay an EMI of Rs 8,598. Hence, what people look at while taking on a loan is their ability to service the EMI. This involves at looking at factors like job prospects, the prospects of the company the individual works for and some idea of how he expects the broader economy to do. A major reason for the revival in car sales has been the election of Narendra Modi as the prime minister of India.
People have bought his election slogan “
acche din aane waale hain” and hence, have taken on car loans and bought cars because for now they believe that their future will be better than their past. Interest rates have had no role to play in the revival of car sales.
Let’s consider real estate next. Here again the belief is that if interest rates are cut people will borrow and buy homes. This logic again doesn’t really hold. Home prices are now way beyond what an average Indian can afford. Let’s consider the city of Mumbai.  
A July 2014 report in The Times of India quotes Pankaj Kapoor of property research firm Liases Foras as saying “In Mumbai, the average cost of a flat is Rs 1.2 crore.”
An estimate made by Forbes puts the average income of a Mumbaikar at $5900 or around Rs 3.54 lakh (assuming $1 = Rs 60) per year. This means it would need nearly 34 years of annual income (Rs 1.2 crore divided Rs 3.54 lakh) for an average Mumbaikar to buy a home in this city currently. What this tells us very broadly that homes in Mumbai are very expensive. Similar calculations done for other parts of the country are most likely to show similar results.
Hence, the point is that homes in most parts of the country are now much more expensive than what most Indians can afford. Given this, lower EMIs because of lower interest rates aren’t going to help much. The real estate market has priced itself out.
This was the demand side of things. Now let’s look at what the economists call the supply side. Investments made by corporates have fallen rapidly over the last few years. As Sanjeev Sanyal of Deutsche Bank Market Research writes in a research report titled
India 2020: The Road to East Asia and dated September 2014, “Gross Fixed Investment by the private corporate sector dropped from a peak of 14.3% of GDP in 2007-08 to 8.5% of GDP in 2012-13 (and likely even lower in 2013-14) with investments in machinery and equipment being particularly hit.”
The interest-rate-
wallahs would like us to believe that this fall in investment has primarily been because of the high interest rates that have prevailed over the last few years. Nevertheless is that really the case? As Rahul Anand and Volodymyr Tulin write in an IMF Working Paper dated March 2014 and titled Disentangling India’s Investment Slowdown “Our results suggest that real interest rates account for only one quarter of the explained investment downturn. However, we find that standard macro-financial variables (interest rates, external demand, relative prices, global financial market volatility and others) do not fully explain the recent investment slump. Finally, using the new measure of economic policy uncertainty, the results suggest that heightened uncertainty and deteriorating business confidence have played a key role in the recent investment slowdown.”
Hence, if the current government really wants to get corporate investment going it needs to bring in a lot of much delayed structural reform. Also, it is worth remembering here that a some of the major business groups in India have already borrowed a lot of money and are having tough time paying interest on the debt they already have. Hence, where is the question of borrowing more?
Further, it also needs to be remembered that financial savings in India have fallen dramatically over the last few years. The latest RBI annual report points out that “the household financial saving rate remained low during 2013-14, increasing only marginally to 7.2 per cent of GDP in 2013-14 from 7.1 per cent of GDP in 2012-13 and 7.0 per cent of GDP in 2011-12…the household financial saving rate [has] dipped sharply from 12 per cent in 2009-10.”
Household financial savings is essentially the money invested by individuals in fixed deposits, small savings scheme, mutual funds, shares, insurance etc. The household financial savings were at 12% of the GDP in 2009-10. Since then, they have fallen dramatically to 7.2% in 2013-14. A major reason for the fall has been the high inflation that has prevailed since 2008.
The rate of return on offer on fixed income investments(like fixed deposits, post office savings schemes and various government run provident funds) has been lower than the rate of inflation. This has led to people moving their money into investments like gold and real estate, where they expected to earn more. If the household financial savings number has to go up the rate of interest on offer on fixed income investments needs to be higher than the rate of inflation. Only recently has the consumer price inflation fallen to levels below the rate of return available on fixed income investments. This situation has to be allowed to persist if the financial savings of India are to increase.
To conclude, calling for lower interest rates on almost every occasion is not a solution to anything. It is time the interest-rate-
wallahs understand this.

(Vivek Kaul is the author of Easy Money trilogy. He tweets @kaul_vivek)

100 days of Modi govt: It’s been ekdum thanda on the economic front

narendra_modiVivek Kaul

In an essay titled Political Leadership (The Oxford Companion to Politics in India edited by Niraja Gopal Jayal and Pratap Bhanu Mehta) historian Ramachandra Guha writes about the various styles of political rhetoric: “The modern idiom is often expressed through a rhetoric of hope—the offer of a better and fuller life, whether expressed in material terms or otherwise. The traditional idiom, on the other hand, privileges a rhetoric of fear—warning the members of a caste, or religion, or region, that they would be swamped by their enemies if they do not bind together.”
Indian politics, over the last seven decades since independence, has largely been fought on what Guha calls the traditional idiom of fear. Given this, Narendra Modi’s campaign in the run up to and during the 16th Lok Sabha elections came as a breath of fresh air. Modi campaigned around the idiom of hope. “
Acche din aane waale hain,” was the line that he tried to sell to the voters of this country. And voters bought it lock, stock and barrel, giving an absolute majority to the Modi led Bhartiya Janata Party(BJP). This was the first time that a single party other than the Congress got an absolute majority in the Lok Sabha.
Once the majority was in place, the hope among analysts, economists and everybody who had some sort of an opinion on Modi and his politics, was that he would push big bang economic reforms, like the kind that had happened in 1991, when the Indian economy was thrown open to the world. Nevertheless, nearly 100 days since the Modi government assumed power on May 26, 2014, nothing of that sort seems to have happened. This is not to say that no economic reform has happened. The government allowed 100% foreign direct investment(FDI) in several areas in the railways sector. It notified that the FDI limit in the defence sector would be increased to 49% from the current 26%, through the approval route. At the same time it has cleared the FDI limit in the insurance sector to be increased to 49% from the current 26%. Further, land acquisition laws put in place by the Congress led UPA government are set to undergo a transformation.
But other than the “proposed” change in land acquisition laws these are not big bang reforms exactly. This is minor tinkering at best. The union budget presented by Arun Jaitley lacked a vision of what the Modi government plans on the economic and the financial front over the next five years. Also, it continued with the unrealistic estimates of both revenues and expenditure made by the previous finance minister P Chidambaram.
Given this, it is highly unlikely that the fiscal deficit number projected by Arun Jaitley and his team is a realistic one. In that sense Jaitley has continued the process of projecting lower expenditure and higher revenue, started by Chidambaram.
Also, like Chidambaram, Jaitley has started to suggest that the Reserve Bank of India (RBI) should start to cut interest rates.
But as I explain here, there is very little that the RBI can do to cut interest rates. Interest rates will only come down once the government starts to manage its fiscal defict, borrower lesser and leave more money on the table for everyone else to borrow. Fiscal deficit is the difference between what a government earns and what it spends. The government spends it through borrowing money.
Over and above this, there has been almost no talk about what the government plans to do on the Goods and Services Tax(GST) and the Direct Taxes Code (DTC) front. These are two big bang economic whose implementation has been pending over the last few years.
In his independence day speech Modi announced that his government was doing away with the Planning Commission. There is no doubt that it was an institution that had outlived its utility, nevertheless, with what and how does the government plan to replace it. More than two weeks after the independence day speech, there is almost no clarity on this front. As economist Bibek Debroy,
wrote a recent column in The Economic Times “We are in end-August. In 2014-15, what happens to the (central assistance) money disbursed to states through the Planning Commission? Will that be released in December 2014 to be spent by March 2015?”
Oil prices have been falling for a while now. Given this, it was widely expected that the government would use this lucky streak to move towards market determined price for diesel and do away with some of the “under-recoveries” that the Oil Marketing Companies have to face everytime they sell diesel, cooking gas and kerosene. It was also expected that the cooking price would be raised by an equal amount every month and the “under-recoveries” on it would be done away with over a period of time. But nothing of that sort has happened.
Also, no moves have been made to sort out the food subsidy mess that the country finds itself in.
A recent new report pointed out “Food corporation of India has informed the food ministry that dues on the food subsidy have piled up to Rs 50,000 crore at the end of 2013-14 over the last three-to-four years as it has not been allocated enough funds.” This is something that needs to be sorted out immediately.
A possible explanation for economic reforms being put on the back-burner being bandied around by Modi sympathizers has been that economic reforms will start streaming in after the Maharashtra elections are done with. The government does not want to make any publicly unpopular decisions before the Maharashtra elections are over. The thing is that state assembly elections will keep happening all the time. After there Maharashtra there is Bihar in 2015. And by the time the state assembly elections are over, the next Lok Sabha elections will be upon us. The government, like most other governments in the past, is likely to get into the election mode by 2017, two years before the next Lok Sabha elections are due. So, when will it actually get around to implementing any big-bang economic reforms is a question worth asking? Given this, the explanation does not really make much sense.
If the government is serious about economic reforms, the best time to do it is now. These are the early days for the government and it still has a lot of leeway to push through these reforms. An excuse offered here is that the Modi government does not have a majority in the Rajya Sabha and hence, legislation required to push through these reforms can get stuck there. This is indeed true, but then the government also has the option to call a joint session of Parliament and pushing through these reforms.
To conclude, it is worth pointing out what Guha writes about being the bane of almost all the governments in India over the last 25 years, before the Modi government came to power: “[The] deepening of Indian democracy has come at a cost, namely that there is now no political leader who can really think of or act for the country as a whole. When a single party was dominant at the Centre, it was possible to design long range policies; now, when the government is constituted by a coalition of a dozen or more parties, each representing a specific sectarian interest—these based variously on caste, language, region, or religion—its policies are determinedly short-term, aimed at placating or satisfying one or other of those interests.”
Modi doesn’t have to go through all this. His government has absolute majority on its own and it can use this opportunity to push through economic reforms, which will be beneficial for India in the days and years to come.
The article originally appeared on www.FirstBiz.com on September 1, 2014
(Vivek Kaul is the author of the
Easy Money trilogy. He tweets @kaul_vivek)

Ramachandra Guha: The Nehru-Gandhi dynasty is clearly on its last legs

Ramachandra GuhaVivek Kaul  
Ramachandra Guha is one of the foremost Indian historians of this era. In his latest book Gandhi Before India (Allen Lane, Rs 899) he chronicles the early life of Mahatma Gandhi. The book focusses on the years Gandhi spent in London and South Africa and how they shaped his ideology and philosophy. Indians who have grown up watching Richard Attenborough’s Gandhi are largely unaware about this part of his life. Hence, the book is a must read for every Indian who wants to know what turned a lawyer called Mohandas Karamchand Gandhi into Mahatma Gandhi.
Guha feels none of the political parties of today follow the principles of Gandhi, even though they claim so. “Various politicians and political parties claim to speak in the name of Gandhi: the Congress because he was in that party for a very long time, Narendra Modi because he was also a Gujarati, the Aam Admi Party(AAP) because its main leaders were, like Gandhi, professionals who became social activists. All these claims are dubious. The cronyism and corruption of the Congress is worlds removed from Gandhi or Gandhism; as is the megalomania and sectarianism of Mr Modi. As for the AAP, their claims to be Gandhian in inspiration are nullified by the negative nature of their politics, which is based so completely on carping attacks on other parties,” he told Firstpost in an interview. 

Intellectually who are the people who had the foremost impact on Gandhi in the years that he spent in South Africa?
Gandhi’s main mentors were a Gujarati poet and thinker, Raychandbhai; the pioneering Indian nationalist and social reformer, Gopal Krishna Gokhale; and the great Russian writer, Leo Tolstoy. He had an extensive correspondence with all three. Gandhi also spent a great deal of time with Raychand in Bombay in 1891-2, and with Gokhale in Calcutta in 1902 and again in South Africa in 1912. Tolstoy he never met, but perhaps it was the Russian who had the greatest influence on his moral and social philosophy. The idea of religious pluralism was common to all three of Gandhi’s mentors; the idea of ending caste and gender discrimination he got from Gokhale; the practice of abstinence and a simple life from Raychand and Tolstoy. Non-violence was in part an adaptation and refinement of Tolstoy’s pacifist ideals.
You also point out that Rabindranath Tagore was not the first man to call Gandhi a Mahatma. It was his doctor turned jeweller friend Pranjivan Mehta. Can you tell us a little bit about that as well as the kind of relationship Gandhi shared with Mehta?
This remarkable associate of Gandhi has been treated most casually in earlier biographies. But, as I show, their relationship was absolutely fundamental to the making of the Mahatma. Gandhi and Mehta spent time together in London, Rangoon, Durban; and wrote to one another at least once a week all through the period he was in South Africa. Mehta was the Engels to Gandhi’s Marx: that is to say, his closest friend, his most steadfast and consistent patron, and the first man to recognize and proclaim his greatness.
One of the most moving parts of the book is the relationship that Gandhi shared with his sons particularly Harilal, his eldest son . Do you think he failed as a father?
Gandhi had excessively high expectations of both Harilal and his second son Manilal. He wanted them to be perfect satyagrahis, perfect brahmacharis. He can certainly be said to have failed as a father. This is not uncommon—writers, artists, activists obsessed with their calling often their spouses and children very badly indeed.
You write in great detail about the family of Gandhi being a very close part of his struggle in South Africa. Even his wife went to jail for the cause. What intrigues me is that none of his sons or nephews played an active part in Indian politics once Gandhi returned to India. Why did that happen?
Yes, in the context of Indian politics today, Gandhi’s refusal to promote his family to positions of power and authority is remarkable. He even willed all his writings to a Trust of which none of his sons were members, thereby denying them any financial benefits from what he knew could be a very profitable legacy.
Would it be fair to say that Gandhi wasn’t born great, but became great through a series of events and experiences?
Gandhi certainly had great physical and moral courage. He had a tremendous capacity for hard work. He had an unusual ability to cultivate friendships across social boundaries. He was curious about other ways of living and thinking. Even so, had he succeeded as a lawyer in Bombay he would never have become a major political figure. Had he not lived in the diaspora he would not have appreciated the religious and linguistic heterogeneity of India. So, in this sense, it was a series of accidental encounters that helped grow Gandhi as a leader, thinker, and social activist.
Has Gandhi’s concept of satyagraha been abused in independent India (particularly politicians deciding to go on a fast for anything and everything)? How relevant is the philosophy of Gandhi in India of today?
Yes, of course, politicians have made a mockery of Gandhian techniques of protest by their one-day fasts and their dharnas and rasta rokos. However, Gandhi’s ideas do in many ways remain relevant to India and the world. His principled opposition to violence, his promotion of inter-faith harmony, his precocious environmentalism, and his practice of an open and transparent politics are all worth studying, and perhaps emulating in some part, today.
Do you see any political party in India being close to the principles that Gandhi had espoused? Various politicians and political parties claim to speak in the name of Gandhi: the Congress because he was in that party for a very long time, Narendra Modi because he was also a Gujarati, the Aam Admi Party because its main leaders were, like Gandhi, professionals who became social activists. All these claims are dubious. The cronyism and corruption of the Congress is worlds removed from Gandhi or Gandhism; as is the megalomania and sectarianism of Mr Modi. As for the AAP, their claims to be Gandhian in inspiration are nullified by the negative nature of their politics, which is based so completely on carping attacks on other parties.
But there must be some people who still follow Gandhian principles?
The spirit of Gandhi animates many non-party social movements and groups. Remarkable Indians such as Chandi Prasad Bhatt, founder of the Chipko movement, and Ela Bhatt, founder of SEWA, are outstanding exemplars of Gandhian practice. Other activists working away from the media gaze in the spheres of rural health, primary education and similar spheres are also deeply inspired by Gandhi. A flavour of how Gandhi lives on in civil society movements in India is captured in Rajni Bakshi’s excellent book Bapu Kuti.
In a recent interview you said “My fantasy is BJP without the RSS and the Congress without the Gandhis.” Do you see the country getting anywhere close to that fantasy?
Not immediately, but there are some slight signs and indications that my fantasy is perhaps a few small steps closer to being realized. The Nehru-Gandhi dynasty is clearly on its last legs. The charisma of the family is fading: fewer and fewer voters remember Indira or even Rajiv. Rahul Gandhi lacks ideas as well as energy. Many people in the Congress are exasperated with his lack of initiative and his penchant for making howlers. If the Congress does very badly in the next elections, then it will be hard for the family to assert its leadership in the manner it has been accustomed to in the past.
What about the BJP?
In organizational and ideological terms, the BJP remains closely tied to the RSS. But again, young voters have no time for the medievalist mind set of the RSS. Many of them are flocking to the BJP because of their disgust at the corruption of the Congress, not because of any attraction for the idea of a Hindu Rashtra. In my lifetime (I am now 55) I may not see my fantasy being fulfilled. But I hope the Indian experiment with democracy and pluralism extends into the lifetimes of my children, grandchildren, and beyond. So I am not so despairing!
In the first chapter of your book you write that “of all modern politicians and statesmen, only Gandhi is an authentically global figure.” Could you please elaborate on that?
Gandhi’s name is still invoked, often positively and sometimes negatively, all across the world, sixty-five years after his death. His ideas on non-violence, religious harmony, and environmental prudence are actively debated in countries he never even visited. No other 20th century leader, not Churchill, not Roosevelt, not Stalin or Lenin, has had anywhere this kind of salience or influence. That is why I maintain that Gandhi is the most interesting and important political figure of the modern world.
The interview originally appeared on www.firstpost.com on November 6, 2013

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

The history lesson Rahul Gandhi needs to take from Shashi Tharoor

Rahul Gandhi is turning out to be a fan of trashy Hindi films of the 70s and 80s. A few days back he spoke about ma ke aansoo(tears of his mother) and yesterday it was the turn of khandan ka balidan (the sacrifices of his family). “My grandmother was killed. My father was assassinated and perhaps I may also be killed one day. I am not bothered. I had to tell you what I felt from the heart,” he said yesterday.
While, Rahul Gandhi might have been talking from his heart, it is important to understand here that his grandmother and his father were killed because of monsters they managed to create.
Indira Gandhi did not like non Congress governments being elected to power in states. Either she dismissed them or created problems for them. She ultimately had to pay a price for this. In 1977, the Akali Dal party had been elected to power in Punjab. The Akali Dal was an ally of the Janata Party which had won the 1977 Lok Sabha elections and managed to throw Indira Gandhi out of power. She came back to power in 1980 and started to create problems for the Akalis.
Shashi Tharoor, the current minister of state for human resources development, documents this rather well in 
India – From Midnight to the Millennium. As he writes “In 1977, the Congress Party had been ousted in Punjab by the Sikh Akali Dal Party, an ally of Janata; Mrs Gandhi typically decided to undermine them from the quarter they least expected, by opponents even more Sikh than the Akalis. So she encouraged (and reportedly even initially financed) the extremist fanaticism of a Sikh fundamentalist leader Jarnail Singh Bhindarwale. Bhindarwale soon tired of assassinating clean shaven Sikhs for their apostasy and instead took up the cause of an independent Sikh state, Khalistan,” writes Tharoor.
Ramachandra Guha alludes to the link between Indira Gandhi and Bhindarwale in 
India After Gandhi. As he writes “By some accounts, Bhindarwale was built by Sanjay Gandhi and the union home minister Zail Singh (himself a former chief minister of Punjab) as a counter to the Akalis. Writing in September 1982 the journalist Ayesha Kagal remarked that the preacher(i.e. Bhindarwale) ‘was originally a product nurtured and marketed by the Centre to cut into the Akali Dal’s ‘sphere of influence’. The key word here is ‘originally’. For whoever it was who first promoted him, Bhindarwale quickly demonstrated his own independent charisma and influence. To him were attracted many Jats of a peasant background who had seen the gains of the Green Revolution being cornered by the landowners. Other followers came from the lower Sikh castes of artisans and labourers.”
Bhindarwale soon started operating out of the Golden Temple. As Guha writes “He(i.e. Bhindarwale) had acquired a group of devoted gun-totting followers who acted as his acolytes and bodyguards and, on occasion, as willing and unpaid killers.”
The situation soon got out of hand and Indira Gandhi had to send the army into the Golden temple where terrorists led by Bhindarwale were holed in. In fact, Bhindarwale had moved into the Akal Takht(the throne of the timeless one), from where the Sikh gurus had issued their 
hukumnamas, which the Sikhs were supposed to follow.
“Mrs Gandhi had little choice but to destroy the monster she had herself spawned, and she finally violated a basic tenet of the Indian state by sending armed troops into a place of worship, the historic Golden Temple in Amritsar, to flush out terrorists holed up there,” writes Tharoor.
Bhindarwale was killed in the fighting that followed the Indian army entering the Golden Temple. Tavleen Singh recounts a conversation she had with General K.S. ‘Bulbul’ Brar who was directly incharge of what came to be known as Operation Bluestar, in her book 
Here is how the conversation went:

‘Is the Sant (i.e. Bhindarwale) dead?’
‘How did he die?’ ‘Crossfire. Early in the morning on the second day he walked out of the Akal Takht with General Shabeg and Amrik Singh, and they fell.’
‘Did the fighting stop immediately after that?’
‘It did. But we lost a lot of men…and the Akal Takht is badly damaged. We had to use tanks and heavy artillery. It was a mess.’
‘In the villages they say Sant is still alive. Where is the rumour coming from?’
General Brar frowned and looked wearily at his officers. ‘This is a problem,’ he said, ‘we’re not sure how to deal with it. He’s dead.’

The attack on the Golden Temple proved to be a disastrous move. As Tharoor points out “The assault on the Golden Temple deeply alienated many Sikhs whose patriotism was unquestionable; the Gandhi family’s staunchest ally in the independent press, the Sikh editor Khushwant Singh, returned his national honours to the government, and a battalion of Sikhs, the backbone of the army, mutinied.”
The attack on the Golden Temple ultimately led to the assassination of Indira Gandhi on October 31, 1984. “Mrs Gandhi never understood the extent to which so many Sikhs saw Bluestar as a betrayal. She refused to draw the conclusions her security advisers did, and to her credit turned down their recommendations to remove Sikhs from her personal guard detail. Two of them, men sworn to protect her with their lives turned their guns upon her instead…but her real fault lay in having created the problem in the first place and in letting it mount to the point where the destructive force of “Operation Bluestar” seemed the only solution,” writes Tharoor.
Operation Bluestar also ended up exacerbating the Punjab problem. As Singh points out “It soon became clear that the operation to save the Golden Temple had been a disaster. It was clear to the army, to journalists and to most political analysts….Far from ending the Punjab problem Operation Blue Star served served to dangerously exacerbate it and to deepen the divisions between Hindus and Sikhs.”
Like Bhindarwale in Punjab, the Liberation Tigers of Tamil Eelam(LTTE) was also a monster helped to flourish by the Indian state. Guha deals with this in detail in India After Gandhi. “Of the several Tamil resistance organizations, the most influential and powerful were the Liberation Tigers of Tamil Eelam(LTTE). Led by a brutal fighter named Velupillai Prabhakaran, the LTTE had as its aim a separate nation, to be constituted from the north and east of the island, where the Tamils were in a majority…LTTE fighters had long used the Indian state of Tamil Nadu as a safe haven. Their activities were actively helped by the state government with New Delhi turning an indulgent eye.”
As we all know New Delhi was first run by Indira Gandhi and then her son Rajiv, grandmother and father of current vice president of the Congress party, Rahul Gandhi.
In 1987, Rajiv Gandhi made the disastrous decision of sending the Indian Peace Keeping Force to end the conflict in Sri Lanka. And this finally led to his assassination on May 21, 1991.
The point here is that the father and the grandmother of Rahul Gandhi were not martyrs, as he tried to project them as. They ended up paying for the huge mistakes that they made.
Rahul Gandhi also said in reference to the BJP “
ye rajneetik laabh ke liye chot pahunchate hain.(they hurt people for political gains.)” It is worth reminding Rahul about what his father Rajiv said in reference to the riots that happened after the assassination of Indira Gandhi. “When a big tree falls, the earth shakes.”
Trying to create fear and sympathy in the minds of people is a time tested political strategy, which politicians resort to, when they run out of ideas. Rahul Gandhi is just trying to do that.

The article originally appeared on www.firstpost.com on October 24, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

What media missed out on in Rahul Gandhi's “escape-velocity” speech

rahul gandhi

Vivek Kaul 
Nitpicking is not a good habit I am told.
But there are times when the opportunity is too good to resist.
Rahul Gandhi in a recent speech which has become famous as the “escape velocity” speech said “
To Jupiter ki escape velocity kya hoti hai? Agar koi Jupiter pe khada hai aur Jupiter ki kheech se nikalna ho to use 60 km/sec ki acceleration chahiye. (So what is the escape velocity of Jupiter? If you are standing on Jupiter you need to go at 60 km/sec).”
Rahul had defined escape velocity a little earlier in his speech. “
Escape velocity matlab agar aap ne dharti se space mein jana hai… agar aap hamari dharti pe hai to 11.2 km per second aap ki velocity honi padegi. (There is a concept of escape velocity if you want to go into space from Earth… your velocity has to be 11.2 km/sec).”
There is a very basic flaw in this small lecture on escape velocity. Acceleration and velocity are two different concepts. As Rahul said “
Agar koi Jupiter pe khada hai aur Jupiter ki kheech se nikalna ho to use 60 km/sec ki acceleration chahiye.”
The word to be used here was velocity and not acceleration. Acceleration, as anyone who has studied basic eight standard physics will tell you, is the rate of change of velocity per unit of time. Lets consider the following table which shows the velocity of a moving object:
As we can see clearly from the above table, the velocity is constantly going up at the rate of 5 metre per second, in each second of time. Hence, the object has an acceleration of 5 metre per second squared (m/s
So that is the difference between velocity and acceleration. They are two different words, with two different meanings, which cannot be used interchangeably.
So that was the nitpicking bit.
The “escape velocity” comment has been a subject of lot of ridicule since it was first made. But there was a bigger joke in Rahul Gandhi’s speech, which people haven’t latched onto. He recounted a story that his late grandmother Indira Gandhi had told him about how s
he had cheered a team playing an ice hockey match against Germany, which was then ruled by Adolf Hitler. As Rahul said “It was a match between Germany and some other team. The other team was being thrashed and the crowds were cheering….My grandmother (Indira Gandhi) felt very bad and got up to cheer the weak team, but was shouted at. She sat down out of fear.” (As reported in The Time of India)
“The whole stadium (full of Germans) shouted against her. She sat down in fear but decided that never again in her life she will ever sit down in fear… If somebody is doing anything wrong never sit down,” Rahul said (
As reported in The Telegraph). This it seems had an impact on Indira Gandhi and she resolved never again to be cowed down, while doing what she thought was right.
This is the bigger joke in the speech. Indira Gandhi only did those things that ensured that she continued to be in power. She destroyed the democratic institutions in this country. The lack of governance today in India is because of all that she did when she was the Prime Minister. 
As Gurucharan Das told me in an interview last year “The damage that Indira Gandhi did was far greater. Her license raj combined with the mai baap sarkar, this double whammy gave the illusion to the people that the state would do everything…The second was the damage she did to our political institutions…During the period she was the Prime Minister, I think she dismissed fifty nine elected governments in states…She tried to change India’s culture and change our political system. A lot has been written about the emergency and so on. But the enduring damage we don’t realise. Before her, Chief Ministers were a little afraid when a secretary said no sir you can’t do this. And if you tried to do it, the secretary wouldn’t bend very often. Now they just transfer…Also after Indira Gandhi the police became a handmaiden of the executive. The police lost its independence.  Even the judiciary was damaged. She wanted committed judges.”
Other than destroying the democratic institutions of this country she turned the Congress party, into a party which thrives on 
chamchas and chamchagiri. Historian and writer  Ramachandra Guha explains this in an essay titled A Short History of Congress Chamchagiri which is a part of his book Patriots and Partisans.“Most Indians are too young to know this, but the truth is that until about 1969 the Congress was more or less a democratic party,” writes Guha.
Indira Gandhi had been planning to settle in Great Britain. After Nehru died in May 1964, she was invited to join the cabinet as the minister of information and broadcasting by Lal Bahadur Shastri who took over as the next prime minister.
“When Shastri died in January 1966, Mrs Gandhi was, to her own surprise, catapulted into the post of the prime minister. There were other and better candidates for the job, but the Congress bosses (notably K Kamraj) thought that they could more easily control a lady they thought to be a 
gungi gudiya (dumb doll),“ writes Guha.
But she was not a 
gungi gudia and made all the right moves to consolidate her power and finally split the Congress party in 1969 and what was a essentially a decentralised and democratic party till that point of time became an extension of the whims, fancies and insecurities of a single individual.
Thus started an era of 
chamchas and chamchagiri in the Congress. Dev Kant Baruah who was the President of the Congress Party between 1975 and 1977 went to the extent of saying “Indira is India and India is Indira”. What was loyalty to the party earlier became loyalty to the individual and the family.
Also, Indira Gandhi took total control over the system effectively overriding democracy and imposing emergency on June 26, 1975. During this period she also formed a mini government within the government. This effort was led by her PN Haksar, her civil service secretary.
As veteran journalist Kuldip Nayar recounts in 
Emergency Retold “Haksar…organised the system in such a way that everything would revolve around the prime minister’s secretariat. Not even a deputy secretary was appointed without its concurrence. He set up a mini government…Haksar’s main contribution was that he politicized the setup, in the sense that for the first time in the country’s post independence history, government machinery came to be used for political purposes, if need be for Congress party purposes.”
The prime minister’s office is currently run by Pulok Chatterjee, who was earlier the officer on special duty to Sonia Gandhi.
Getting back to the emergency, Indira’s mini government had total control over how the system worked. A 
famous cartoon made by Abu showed President Fakhruddin Ali Ahmed in his bath during the emergency signing ordinances and saying “if there are any more ordinances just ask them to wait.”
Indira Gandhi also ensured that the Congress party effectively became a family run concern. As Guha writes in the essay 
Verdicts on Nehru “Mrs Gandhi converted the Indian National Congress into a family business. She first bought in her son Sanjay, and after his death, his brother Rajiv. In each case, it was made clear that the son would succeed Mrs Gandhi as head of Congress and head of government.”
Once the model was established firmly in the Congress party, it spread to most other political parties. “Indira Gandhi’s embrace of the dynastic principle for the Congress served as a ready model for other parties to emulate…The DMK was once the proud party of Dravidian nationalism and social reform; it is now the private property of M Karunanidhi and his children…Likewise, for all his professed commitment to Maharashtrian pride and Hindu nationalism Shiv Sena leader, Bal Thackeray could look no further than his son. The Samajwadi Party and Rashtriya Janta Dal claimed to stand for ‘social justice’, but the leadership of Mulayam’s party passed onto his son and in Lalu’s party to his wife,” writes Guha.
In doing what she did Indira Gandhi basically destroyed Indian democracy. Indeed, if she had not done what she did, Rahul Gandhi would not be the vice-president of the Congress party. He would at best be a middle level manager of a private sector company (as Guha puts it). Rahul Gandhi is honest enough to realise this. In October 2008, while addressing girl students at a resort near Jim Corbett National Park, Rahul Gandhi 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.”
Hence, it is not surprising Rahul is inspired by what his grandmother, Indira Gandhi, told him. If it was not for her, he would be largely irrelevant today. He would pop up in the media once in a while, as a subject of stories on what are the descendants of Indira Gandhi doing today. Meanwhile, Rahul’s “bigger” joke, I talked about initially, is really on us, the citizens of this country.

(Vivek Kaul is the author of Easy Money. He tweets @kaul_vivek)