Sunday 30 September 2012

What next – the dirty picture

‘If you can’t get rid of the skeleton in your closet, you’d best teach it to dance,’ said George Bernand Shaw many years ago. The Congress is embroiled in scams and the focus is off it now. But after receiving  a lot of flak and wild accusations, Prime Minister Manmohan Singh and his team has embarked on the introduction of reforms. The main opposition BJP whose, claim to fame over the years, has been a party with a difference, is no paragon of virtue. They have been playing obstructive politics.

The opposition led by BJP is constantly talking about early polls, making pronouncements that the UPA II will not last its full term till 2014. They are talking as if they will win and form the next government. But actually what is the alternative; again a fractured verdict with the two main parties, Congress and BJP getting bulk of the seats and the others like SP, Mayawati, Trinamool Congress, DMK, AIDMK, CPI, CPM, BJD, Ajit Singh, etc garnering some seats; and all trying to be king-makers and aligning with either Congress or BJP.

While the Congress, if it wins may not have a problem of throwing up a name for PM and getting the allies to back them. But with BJP winning, there will be a mad rush for the post of PM. The BJP has 3-4 aspirants and the NDA many more serious and not so serious aspirants. The power struggle would then turn into politics of appeasement and balancing the negative forces of the allies. Ultimately governance and reforms will take a back seat.

LK Advani is still hopeful of fulfilling his dream of being the PM as he feels he is the natural successor and automatic choice after the retirement of Atal Bihari Vajpayee. Narendra Modi already feels he is the only qualified candidate in BJP for PM, though many in his own party would like to see him stick to Gujarat. Just as Mamta sees red in everything, Modi sees Sonia’s hand everywhere. Possibly this is the way of remaining in the limelight and a strong BJP’s PM aspirant. Other the other side ex-Karnataka CM BS Yeddyurappa has praised Sonia Gandhi for fulfilling promises made to party members. At the press conference, he added, ‘She (Sonia) can be trusted more than Nitin Gadkari when it comes to keeping promises.’

While the Congress might be able to push in economic reforms, the BJP and NDA will be working towards populist policies to appease and retain support of the allies at the cost of the nation. No foreign investor would like to come and invest in this environment. Development in India will slow down.

The general perception across the educated and young masses is, if the nation has to progress with hard decisions for long term benefits, reforms and economic policies, Congress and UPA is a better bet than BJP and NDA. The foreign investor too my like it to happen. But does the aam admi think so?

Friday 28 September 2012

Politics above nation

Till now the government was accused of policy paralysis. Now that it’s pushing reforms, India’s main opposition party has virtually indicated to foreign retailers to come here at their own risk. Evidently, the BJP places no premium on policy continuity which is expected from a democratic and mature nation, in urgent need of private investment-led growth. What signal are they sending outside? Internal strife compels them to oppose the policies of the present government, and no guarantee of continuity of those policies if they come to power.

Inflation-hit aam admi will be harmed, not helped by BJP’s anti-retail reform stand. They are for the sake of opposition, blindly over-looking some of the benefits spelt out by the Chief economic advisor Raghuram Rajan – This includes promoting investment and capacity-building in key areas. High food prices are a serious headache, surely we need modern, technology-aided agriculture to overcome inflationary effects. Farmers shouldn’t just produce crops encouraged by minimum support prices but also fruits, vegetables and other perishables and diversifying into different kinds of agri-business.

Retail reforms will aid this process, boosting logistics and infrastructure. It’ll also give farmers easy access to buyers, lowering transaction costs. Rural incomes will rise, consumer will pay lower prices and more jobs will be created. BJP’s thinking and pronouncements give a feeling that they are happy to shield and would like to strengthen the middle-men who have exploited the illiterate farmers over the years. It also suggests it’s willing to sacrifice the nation’s economic interests by political brinkmanship. Ultimately the aam admi, whose interests they proclaim will suffer.

Tuesday 25 September 2012

Good economics & bad politics

Reforms and progressive economic policies are mostly unpopular but necessary. To implement it, parties have to move away from populism and face criticism. Opposition parties use it as a tool to attack the government in power.

While Yashwant Sinha, LK Advani and others are critical of the Congress government, there is a glimmer of clarity from BJP stalwarts and former minister Arun Shourie and BC Kanduri praising Prime Minister Manmohan Singh’s recent economic reforms and policies. Sometimes exhibition of statesmanship and keeping the good of the country as utmost and above petty politics provide an impetus to growth. But good economics is not necessarily good politics!

Monday 24 September 2012

Reforms – good or bad

Recently we have been hearing a lot of arguments for and against reforms. Whatever the opposition might accuse the Congress of, including the scams, one has to accept and give due credit to Congress for the economic reforms. They took the initiative and put India on the fast track towards economic growth.

BJP on the other hand has a ‘double-faced’ approach towards reform and FDI. Though BJP which is opposing the reforms, had itself proposed it while in power in 2002. It’s a know fact across Asia, including China, foreign retailers have proved a boon providing consumers with cheaper products and upgrading the technology of local producers to make them globally competitive. Only in India, do opposition parties want to protect the banias against the aam admi.

The existing Wal-Mart-Bharti retail chain imports only 3% of its goods, sourcing 97% indigenously. Import duties and shipment costs makes imports uneconomical, except for a fraction of goods, such as plastic toys. Indian shopkeepers can already import Chinese items freely. Yet they import only a small fraction, not because they are patriotic or for their love of locally manufactured Indian products, but being profit-minded, don’t find enough profit in most low priced Chinese goods.

Hence the argument against foreign retailers, that they will flood India with cheap Chinese goods, ousting domestic producers causing mass unemployment holds no water. On the contrary it will create lakhs of jobs, including provide an impetus to other connected businesses. Look at the auto industry, was mainly dominated by Ambassador and Premier car till 1991. These have been replaced by a wide range of new brands, some Indian, but mostly international. By freely allowing foreign investment and reducing import duties, we have created a world-class auto industry that exports in great number. Interaction with big brands, have helped create hundreds of globally competitive auto parts producers. Big retail brands – Wal-Mart, Carrefour, Ikea and others will do the same. Don’t underestimate the Indian manufacturer or entrepreneur. Given a chance and atmosphere, he can compete with the best in the world.

Developing countries like China, Malaysia, Thailand and others have allowed multi-brand retail without experiencing any domestic economical upheavals. It appears the opposition leaders, some of whom have their own interests want to continue with the scenario of farmers being exploited by middlemen and don’t want them to interact with big retailers and upgrade their methods. They want aam admi dependent on the age-old unorganized kirana stores with ungraded food grains and products. Let’s have the self-confidence that kirana shops will reform too, to take on new competition.

The opposition has done well to bring out various scams and keep pressure on the government. However, to oppose everything for the sake of obstruction is not right either. The fear of foreign retailers is an outdated view. Today India needs to open up and learn how to compete with world-class competition. Activists of BJP in hush tones accept in private that Congress has stolen the thunder from BJP. Some even whisper that Congress is coming back in 2014.

Friday 21 September 2012

Bharat bandh & aam aadmi

The opposition-sponsored bandh may have been successful, but where was the aam aadmi in it? He was inconvenienced and many lost a day’s earning. The countrywide bandh against the centre’s decision to hike diesel prices and allow foreign direct investment in multi-brand retail got a partial response, but that too only in some parts of the country. In their excitement to make a statement against ‘liberal economic policies’ of the UPA government, the opposition parties led by BJP and others forgot or did not care about the court’s ruling against strikes and bandhs.

According to the Confederation of Indian industries, this bandh’s economic loss is almost Rs 12,500 crore in terms of production and trade activities. The political parties may shout that such general strikes and bandhs are our democratic right and is supposed to be voluntary. The truth is the public is forced to sit at home and the main actors of such activities are not aam aadmi but those anti-social elements for whom, strikes are a lucrative business. What about the loss and damage to public property. Who will bear this loss?

And what did the bandh achieve? A daily wage earner lost his day’s livelihood and was left starving for the day; people could not travel to their destinations. The sick could not get treatment in hospitals. The political parties should do a re-think on these out-dated methods; it worked during post-independence years. Now things have changed, political parties too should make note of the sentiments of the aam aadmi and assure that he is not inconvenienced in any way.

Tuesday 18 September 2012

Mamata’s worry – to be or not to be!

Mamata even after heading the West Bengal government for months is acting like a leader of the opposition, and no different from the previous communist government. Bengal has not experienced any major change.

Mamata won’t serve India’s or Bengal’s interest by walking out of UPA. India needs reforms not populism. Since the UPA has shown no sign of getting cowed down, there’s speculation whether the Trinamool will decide to definitely exit the coalition or lend outside support. While Mamata is entitled to take a call either way, she should consider the political consequences. BJP and some other small parties are taunting her to quit for their own benefit. The last time she played tough on Prez polls, it backfired and she had to quietly backtrack. This time too, she will end up the loser. With 19 Trinamool Lok Sabha MPs, a cushion she provides for the UPA government; she is trying to use that to play ball. Both economic policy and Indo-Bangladesh ties have been affected by Mamta’s tantrums.

Allies can express dissent, but it’s the government’s prerogative to push ahead with a decision. She should be mature and understand subsidies can’t be perpetual, and don’t help push fiscal consolidation.  Industrialisation cannot be fast-tracked for the country or especially Bengal without revamped land acquisition rules that reassure project planners – Tata’s Nano project shifted to Gujarat providing impetus to that state. And what did Bengal get?

Since UPA leave it up to states to decide whether they want FDI, Mamata’s opposition make little sense. Some states are progressive and smart enough to realize the gains – better farm incomes, cheaper prices, job creation. Why lose out because others like Mamata, Akilesh, etc aren’t smart enough or still believe in populism? And with 19 MPs support to the UPA, Mamata can’t think it gives her a veto power on the reform process. She should know she has a big state to run which was under communist rule for long. But hopes raised by Mamata’s rise to power, have been followed by disenchantment. The UPA may survive with or without Mamata, but can she afford to miss out on her clout in Delhi, which will help her in bargaining for an economic package for Bengal. Will her ministers easily agree to quit? Power makes one go against their master too!

Opposition in a fix as UPA stands up

The UPA has unleashed a wave of reforms, including opening up the multi-brand retail sector. But the reform push and diesel hike has hit a wall of protest. BJP is opposed to FDI in retail given its trader constituency, but has to offset that with middle-class appeal for more FDI.

While BJP activists in the states were busy protesting the reforms and diesel price hike, Goa’s BJP government slapped 2% more VAT on diesel; the result, diesel in Goa is now approximately Rs 49.70 per litre, a combination of Rs 5 hike of the centre, the Rs 1.37 hike by the state’s VAT increase.

The opposition’s view that FDI in retail will lead to the closure of small shops is a lie. This has not happened anywhere in the world. To say that this will happen in India is undermining the enterprising character of Indians, whenever given a chance, reveals an inferiority complex. Why should BJP, Mamta or Akilesh decide what is bad or good for say Maharastra, Goa, Karnataka or J&K, etc. If they don’t agree, they are free not to implement, but they can’t stop others from implementing it. Government is determined to stick to its gun as far as FDI goes. Opposition to FDI is a big mistake in today’s global economy.

Those who are opposing FDI in retail on the grounds that lakhs of small traders will lose out are making a big mistake. They are forgetting that the loss for these traders will more than be compensated by the gains to hundreds of millions of consumers and farmers who will benefit from cutting out these middlemen. The big retailers that will result from letting FDI in should hugely improve efficiencies in the retail trade and the economy can only benefit from that. Political parties may have reasons to focus on only on half of the picture, but the common man should not be misled by this. The gainers should vastly outnumber the losers.

Normally anything new introduced, like a reform or a new policy is bound to face opposition either through ignorance or the fear of the unknown.

Wednesday 12 September 2012

Goa ban on mining?

In reality the ban on mining by the  government in Goa is a sham, as the state allows the trade in illegally mined Iron ore.

In his order, the state has said, 'The suspension of mining operation shall not effect trade and transportation of ore already mined and existing in the lease hold area, in short transit or stored or stocked in jetties.'

The government's order seems rather strange. If mining has been halted because it was illegal, it does not make sense to allow what has been dug out to be sold. No doubt it cannot be put back in the mines. It belongs to the state.

Why must those who have illegally been plundering the state's mineral riches be allowed to continue to benefit from it.

It would make more sense for the state to confiscate the ores already mined and sell it so that the proceeds of the sale accrue to the state, not to those who have bypassed or broken the law? The true meaning of the mining ban will then make sense.