Divestment of PSUs

Another government and a renewed attempt at divestment in PSUs. The issue has never been addressed with the pragmatism it deserves
Command economies of the socialist variety have held on to state run enterprises. ,far beyond limits of business prudence.Every nation has made efforts to take up privatisation of PSUs and the success thereof has been proportional to political will .Russia bungled and handed over vital units to powerful oligarchs .China did slightly better and yet it's top 100 enterprises are still public owned.Britain under Thatcher went on a ideological spree in the 1980s and sold off major state run businesses .In the process her critics accuse her of wiping out 15% of the British industrial base.We have gone about divestment in fits and starts.Most of our sick units are insolvent but yet liquid.These can still be sold off without much damage to all stakeholders, as they need fresh management and technical upgrade.The political will is all that is needed.As regards PSUs that are doing well, private shareholder participation will give them the requisite edge to be competitive and commercially evolve into business majors.Let us not sell family silver only to pay back debt and recover from deficits.We must do it because it would make business sense.Divestment

Greece

Greece, the weakest link  of the euro economy, has been in a  relentless credit squeeze since 2010.Its travails are increasing with time despite bail outs  and debt  restructuring.Post 2008, the flood of liquidity unleashed by central banks world over, has rendered its economy even more vulnerable. Eurozone  states, borrowed cheap  and squandered it on generous welfare schemes, when they were economically better off. That  fiscal madness loaded on them debts up to 350 / 500 % of national GDP.
        Text book approach to impose austerity on Greece then followed .Instant austerity is never a morale builder. For the individual nation, austerity imposes  prolonged unemployment, destroys current  and potential output by eroding the “human capital asset ” of the unemployed and  hits  at the bottom of the income ladder far more severely. .Sadly though,Germany as the lead economy, had been less than willing to put its shoulders to the problem of its fellow euro nations. 
        Today the exit of Greece from EU appears even more likely than before.Stressed nations as Greece, must achieve the best variant of fiscal stimulus that boosts job creation and this would  need universal support and in particular, from the euro collective. But attitudes are only hardening by the day. The lessons of cyclic depression in world economies are clear- cheap money, excess credit,excess debt and huge deficits.No wonder the RBI governor tends to err on the side of caution ,despite pressures  growing on him to lower key rates.

Maggi

Lead remains in the soil for hundreds of years. Children may be contaminated more during play than food intake .Nature has seen to it that even when lead levels remain high in the soil ,it is not taken up by the plant beyond a limit .High ph level and organic vegetable matter in the soil,will reduce this further.Thus Maggi is no different from any other human intake,cooked or raw,water and air.Such attenuated national concern must focus on lead and other natural contaminants,not on a product.We then miss the wood for the trees.Sadly though In the process ,we have allowed a mere noodle to dethrone overnight ,our long standing Enemy No 1.Our neighbour is not pleased !.

Delhi in a pincer

.Delhi was for long being managed municipally, like any other mega city.Progressing rapidly as the capital,land became a prized asset.As 'the ' power centre, the bureaucracy wanted greater administrative space in a happening city.But none wanted to 'run ' the city with a burgeoning population with the attendant toil and sweat .Babus found the cleverest way.They made it a strange political-administrative animal- half state -half UT !
The ' elected ' Delhi government was evolved as the cart horse to carry the load .Babus kept the police with them ,to imperially ride on Lal batti culture,took away the powers of enacting laws from an elected Assembly that could impinge on their self anointed privileges and of course jurisdiction over capital land valued above gold.
Delhi citizens enjoy but a pseudo democracy wherein they painfully elect 70 MLA s ,an euphemism for work supervisors.The question is why the problem now.The Congress and BJP had tacitly shared the pleasures till the other day when an outsider AAP came in to upset their Apple cart.
The issue has fortuitously come to a boil now.The Apex court has before it the case of the people sending in an elected government on one hand and on the other ,the feudal elite at the capital ruthlessly guarding their fiefdom.The outcome has connotations beyond Delhi.Other states may like to rework the concurrent list.Federalism must go beyond allocating greater share of finances by the centre.It must begin to embrace areas of far greater import.The outcome at the Apex court has less to do with what happens to Kejriwal's government but much more on whether the nation would be gifted with a progressive federalist structure.

Modi ,the year one

An assessment of the first year in office of the BJP can not be a review of the entire canvas that today has a few bold splashes and many hesitant strokes.The loud theme of instant industrialisation it started with,stands faded and now one of empowering lower rungs of the economic ladder ,stroked with brighter hues has come into main frame.External relations that were in a silhouette till now ,got an extravagant Impressionist class. The second year may well see the enthusiasm for inclusiveness die down with a poor monsoon and the industry starved of funds and policy reforms,in continuation.Year three ,the Afghan -Pak muddle could peak and set before us an acid test of our extensive diplomatic bonhomie of year one pitted against raw global realpolitik of pure self interest of the players.The fourth year could see global economic recovery but our domestic industry may not be at the dining table as it would be battling three years of neglect.The fifth one will be the traditional year into elections when except campaigns,nothing moves. Today is the time for the BJP to step back from the canvas and conceive of a composite theme rather than yielding to attractive but transient subjects.BJP from within, must learn to place a sense of of collectiveness much above the present one of unitary command

Gold

Gold is more than a hedge for Indians, it is an attachment.At best the temple trusts that hold huge cache of the metal will count for the scheme ,not households. Even here the proposed scheme needs to be made attractive and yet the government will be the ultimate gainer as it will have greater leverage. On the monetary front,gold was the shield against inflation  and corrective  monetary measures  kept the balance.But when monetary polices are upended,   deflationary recession gets pitted against  inflationary pressures of  the monetary expansion by the world's most important central banks.Global Quantitative Easing (QE) has  injected a huge $10 trillion of  into the global economy.  

   The crisis in Cyprus  saw the spectre of  imminent sale of its gold to meet  debts ,creating a fear that this would spread to other ill placed Eurozone economies  that  together account for 18 percent of all central bank held gold. .Little later  the two largest sources of demand for gold, India and China,  ,a consumption boom that started  with the onset of the financial crisis, was abruptly halted . Gold prices now plunged  

  Gold prices have been  rendered  multifactor-sensitive and the metal has not been able to compete with the dollar or bond market as the spread in gold is far too small to match the capital moving out of any stressed economy, Despite this ,when bullion  prices dip, buyers use the opportunity to buy more at  reduced prices and the spiral resumes.The fourfold increase in bar and coin retail investment from 2002 to 2011,proves that buying physical gold flourishes in blind addiction..In today's global economic maze even the best of schemes as these ,can not match the unpredictability of the yellow devil.

need for trust

There has been mixed reactions to Modi's extensive trips abroad,one that of domestic neglect and the other of enhancing the nation's image at trans national level.The PM has much to thank the UPA that had the policy framework laid out for him,as he had to change very little of it.Modi is a pragmatist to the core .Realising that our economy Is largely predicated on global recovery,he left the domestic chores to his ministers and is using the freedom and time thereof to mould and fine tune our external relations.This would prove handy when the economy recovers and all it would require is the tying up of loose ends,here and there to boost trade and our own exports.Modi must now find a way to anoint a strong No 2in the cabinet to take care of needless ideological diversions from the parivar and monitor progress of reforms.For that he has to learn the great value that trust can bring in.

Pied piper

For years now,the marking in the 10th and 12th standard public exams are getting to be astronomical.Top ranker scores 399 out of a400 ! A reflection more on the current system of rote and excessive practice.The emphasis on grasping basics to lay foundations for creative application,is almost vanishing .The increasingly narrow straits that lead to higher education has been placing an absurd premium over school marks.Boards at the state's and centre,over the years have outdone each other in liberal award of marks ,to showcase admissions of their wards into colleges.At the DU,we had the mathematical puzzle of a cut off in excess of 100% for students changing streams. We had touched this absurdity long back and the pied piper of school marking ,continues to lead us as so much mice into nowhere.The HRD ministry should be fighting this Dragon and not be engaged in tilting at windmills.

Democratic mining

Piyush Goel,coal and power minister , in line with his government's penchant for riding on enthusiasm ahead of reality,has promised 24/7 power to everyone in five years !He ought to be realistic. Even the Apex court had opined that auction is not the only way to allot natural resources.But then retracting into a shell of self doubt and an equal lack of self confidence and will,governments have dared to do it no other way.If the UPA had a flea - market sale of coal blocks,the BJP elevated it to the prim and proper levels of a Sotheby auction,where coal was rendered captive to high end producers who are akin to -art collectors ! If the former was flawed on speculative acquisitions,the later purely on bid values.In either case,coal has become a futures commodity not an urgently needed fuel for growth.No wonder China is dismissive of our democratic approach to material progress

Leadership

The gist of Lee Kuan Yew's philosophy : build up a strong economy first to acquire standing and strength and with the resultant spare resources, ,socio- political equations leveraged.His nation was small and had no natural resources,dependent on external source for most of its drinking water and even sand.It's defence aircraft were being parked in Australia !His only resource were people and he recognised that it's multi ethnicity gave him an unique mix of genes of hard work,innovation,commercial trading acumen.He in turn provided in martinet style ,the glue ,vision and direction.As a trading hub his nation was centric to the economy of most global nations and thus Singapore's well being was everyone's concern.Lee was a leader and humanist far ahead of his times ,steadfast and never doubted his convictions : leadership qualities that has no relevance to the size of a nation.

economy at cross roads

.Dr Desai is right , UPA-II did manage to deliver growth through gradualism in policy ,only to be muted by gross lapses in implementation.In contrast, the growth mantra that blessed political fortunes of  BJP is to yet  propitiate the deities of Economy. BJP's "auction syndrome " ,perhaps more in selective disassociation with actions of UPA,  is being pursued with  speed and elan, to ostensibly  fibrillate and  regain a healthy pulse.But there could be booby traps down the road. 

     First the  existing huge exposure of PSU banks to the infra sector  stands to explode on fresh demand ,post  quick fire big ticket auctions everywhere.Already PSU banks are ailing from high NPAs. Big business houses are yet to figure in the list .Their reports  due next quarter, may add to the woes, since global economic recovery particularly of the US ,is still uncertain .Restructuring the debts then , would invite a protracted  burden on the exchequer and hit  fiscal balancing for far longer.Then again treacherous crude prices could skew the ledger further.

        Second ,high costs of acquisition  of vital resources,touted today as a  bounty,would shoot up input prices to every single industry to  open the floodgates for inflation .Exploitation of sub subterranean resources come with inbuilt and long gestation periods and advantages through economies of scale, would only kick in, far later.

        If  in  the single minded pursuit to control of inflation , the PM ,Ms Thatcher in the  '80s overlooked growth , all but abandoned UK's industrial policy and wiped out more than 15% of Britain's industrial base on bad  monetarism, we today, might well be doing the opposite, singularly pursuing growth,  to re- invite a larger avatar of an  inflation that we are bitterly engaged with, for more than three years now. 

Systemic neglect

Two events highlighted in most media this week, must trouble us all deeper than what it portrays. One,that of the unabashed copying in school exams and the other,the brazen sale of rail tickets by touts. Clearly the education system is in great disrepair as the teaching standards are so poor that students find exams as an ordeal. Perhaps many schools would turn a blind eye to mass  copying so that poor pass results do not betray their lack of teaching standards / ability.   

     Dubious marketing in  Rail tickets was expected to come down drastically on computerisation. It has boomed instead.The government had soft pedalled the issue for too long to have allowed the racket to take deep and professional roots.The best amenity for a rail  passenger is a hassle free confirmed ticket. All else come later.

     It is to be noted that touts,in any description, are a by product of a neglected educational system that blocks avenues of normal employment.Systemic neglect in any area, be it social,educational, economic or in administration sets up  a by product, what has come to be  accepted as , jugaad  that gains legitimacy over time.Repair then becomes extremely difficult .

Govt as the trustee

We culled the best from global socio-political wisdom to painstakingly evolve our Constitution. It stands out as the gleaming tusks of ivory of a magnificent and caparisoned elephant. But then we have the business teeth too inside,in the form of laws, ordinances and fiats that often ruthlessly  trespass the citizen's rights.An idealist younger generation that goes by the ivory  was sanguine over its guaranteed rights.It is to the credit of this  generation that now demands that the Constitution be respected and that there can be no two ways to interpret its basic tenets and postulates.An overworked judiciary has yet again stressed on the need to bestow greater regard and attention to the written undertaking that " We the people' have given unto ourselves.The government must realise that it is as much the custodian of people's trust ,as the courts.

Agro insurance

Our agrarian sector,  vast and fractured into small holdings, ought to have had in place  a well designed farmer friendly scheme for crop insurance . A mai baap  sirkar found  leverage in handing out doles to nurture vote banks and the  ' leakages ' therein ,provided a share of the " political " largesse  to many down the line.
With pragmatically designed insurance schemes in position ,  we could have been richer today in actuarial data ,developed enviable agro- data bank and the agro -intelligence that goes with it , help set a direction to optimize agro-productivity and nodal agro -processing systems as also streamline competitive agro- marketing, as collateral benefits.As for the small and marginal farmers, the government ought to assume onus of the coverage through  comprehensive  insurance .The amount it would defray as premium,would be less than what it could end up paying subsequently as relief / dole.Kautilya (300BC ) had advocated tax exemption for distressed farmers and two millennium is time enough for the government to go in for effective modern remedies .

Make in India and global trade

There are many factors to be reckoned with .US  with its virtual printing of dollars through QE  while debilitating  its economy, strangely strengthens its currency ! .The flood of liquidity from ECB and Japan has added to the problem.  Persistent  imperfections in an international monetary system based on the dollar  skews exchange rates which in normal times should spur trade to reset equilibrium.But Global Trade is in descent, as the US is unable to generate demand , India  unable to step up supply due to poor growth of infra sector. China's economy is deflating,  saddled with idle capacity.The euro zone keeps wrestling with  its  unresolved structural issues carried from birth and  South American nations are  high  inflation levels  with huge fiscal deficits .

    .A new twist now comes from plunging crude prices.Data of past four decades show that elevated oil prices had been co-terminus with surge in global economy. Global trade indexed at 50 in 1990 improved to 100 in 2000, shot up to 250 in 2008 ,prior to the global crisis.Crude was languishing for long prior to 1990 at around $35 . shooting to an unprecedented $145 in end 2007. When global economies suffered post 2008-09 ,Brent crude fell to $90 by end 2010. In such a backdrop, prolonged low price of crude could portend a stasis in world growth and hence trade The  remedy ought to lie in an universal resolve to  re-kindle world trade and place it at  a far higher orbit to enable regain global economic order. Make in India is tied up with an upsurge in global trade.

Facets of acquital

The acquittal of Jayalalithaa has a lot of facets to it..With highly differing verdicts at the subordinate and the High court,perhaps the denouement must lie at the Apex level.Personally ,Jayalalithaa has found legal relief from her long ordeal which she faced with fortitude and a rare political acumen with which she enhanced her image even out of office.Not many are as capable.At the state level she stands supreme and at the national level she is beholden to none as she had waged a lonely battle all along .It would be evident that on centre - state relations , she would be setting her own terms .This has been her forte,more so now with this new aura.

Losing direction

A Sehwag score of 282 was perhaps not so much because of the Modi charisma ,as his promise to a thorough  spring cleaning .The year did see some showcases dusted, but the nation is getting restive over growing bulges under the carpet .The dust is returning.. Systems are becoming bureaucracy -centric and  watch dog  institutions   toned down in an desperate attempt  to induce quick decision making. GoMs are now passe and Secretaries are in.But how effective could this be  in the backdrop of a stymied global economy.

         For a perceived spurt in implementation , the importance of ministers was being  lost sight of. To create a pro-poor image, after Opposition barrage ,these very ministers are now pressed into campaign mode, to counter  spreading public perception !.Inclusiveness remains the vital factor. 

        Major welfare schemes were pruned and an ordinance over Land bill was sought to be pushed through twice  but  an equal gumption is absent in bringing the curtain decisively down on investment sensitive issues like retrospective taxation or even in toning down discordant notes from  right wing of the orchestra. BJP is walking on unsteady socio-political  planks to reach growth.The UPA had done exactly  the reverse, much to their discomfiture.

By hope nor hype

Markets largely mirror the state of an economy.There is an unmistakable deja vu in the on going uncertainty of bourses ,a throw back to the UPA II era.Our economic fundamentals have hardly changed from 2012 /13 to an year into a new government, for the major reason that global economies are yet to recover from the post 2008 upheaval.The growth levels in UPA II were never alarming given the universal scenario.The government fell due to political faux pas and a perceived administrative ennui exploited by an impatient opposition.BJP in its anxiety to leverage the prevailing stasis ,assumed that a political change would usher in an economic revival on its own .It disregarded the basics and worse, engaged in projecting a larger than life image of itself.The complexities of a global economic dispensation are not tackled on hope or hype .BJP's performance  is contingent on major world economies turning round with in it's current term .Meanwhile it has to manage the economy more by its wits and less through its ability to change things.

Louder than thunder

On this fateful Wednesday the capital heard a farmer's voice louder than thunder,post mortem.It has frozen the government's quest for its Land bill,forced the likes of AAP to a serious introspection on the brand of movement politicking, placed a rich repast of issues before a famished Congress that has no idea how to handle them.It has made the visual media go berserk with stories served out like two - minute noodles.In all this the hapless farmer living and dead ,has none to spare deeper thoughts on his plight.But this year's El Nino too could be as cruel to him.

Bravado

There has always been an unmistakable streak of bravado associated with the BJP,imbibed from its right wing roots,which they passionately wielded to reach today's  high  political podium .No wonder despite being caught in a pincer movement over the land bill ordinance by an united opposition, it has gone ahead and re-promulgated it,at the risk of getting estranged from the farmer. Now rattled by the anti -poor tag over land acquisition,it  came up with a higher crop- compensation package ,but it's discomfort over this is not hidden. Faced with ground realities post elections,it could not jettison any of the UPA's inclusive  schemes.But it's natural aversion to foray into any space  left -of -centre ,will not allow it to dwell too long over the type of socio- politics so fervently practised by the Congress.

      The same streak  has them jousting with the judiciary over appointments and yet to  press ahead and take a side swipe at them over " perceptional judgements" .Then, it remains flummoxed by its coalition ally in J&K on a daily basis,over any and every issue that leads us to wonder if its political move was a grand strategy or plain naivete in wading into waters of unknown depth.

But how to explain its lack of will to riposte with its own fringe elements that troubles it with sporadic and fragmented ideological diversions  that  hamper its core agenda of growth 

Auditing the auditor

 .IT firms essentially have huge cash assets generated by the very nature of their business. Channelling spare funds to speculative areas as real estate and the like to cover the transfers invites accounting frauds. The Satyam saga is now seen to have been deviously scripted with pliable auditors.The law has since been amended to put greater onus on the auditor, but its usage will have to wait till after the next fraud. An ' audit forensics ' system could cover audit reports from medium / large firms through a well designed technical scan ,the auditor / audit firms then evaluated and where nEed be ,called to question.The prospect of a regular ,even random audit scan would serve to elevate the quality of the audit and raise the personal stake of the auditor.The surprisingly long delay in the Satyam investigation would only help trigger suspicion on a selective sanitisation of evidence , for whatever reason.