UPA show on for some more time

Thanks to the help from Samajwadi Party and many cross-voters and abstainers, the UPA government has survived the no-trust vote and managed to get rid of the Left at the same time, never mind the usual democratic processes of horse trading. The BJP and Mayawati are sulking, BJP has expelled most of its cross-voters, and as for the Left, well, lets hope they just disappear into nothingness. The past four years have been nothing but a spectacle of blackmail, browbeating and holding the economy to ransom.

The markets have taken this win very positively, the Sensex has touched the 15,000 mark, and for all the gloom and doom of the previous months, there is hope that finally the UPA government will start doing what it said it would do on the economic front. I doubt that though, that a few more months left in office will be enough to the blunders they have committed in the past four years. I have already said that while the sun was shining, the government failed to make hay, be in terms of oil security or bringing down the subsidy bill. In fact, they added many more billions to it.

PC has said that he will push forward with the financial sector reforms, and everybody, I am sure, is just hoping that this will maybe, just maybe, sooth the fragile nerves of our fickle market. Lets not forget that the crude prices have been declining, and even though the markets still ended in the red today, the more than 5% rally in 5 days seems like a good sign because even this break was due to profit selling.

Coming back to the topic, can the UPA really deliver in its last leg? Can it make up for the lost opportunities and mistakes of the past years? Of course, the headline of their tenure, the Nuclear deal with the US, is going full steam ahead. I just found this article on what the Con'gress is upto in New Delhi!

Cong floats 'nuclear balloon' as panacea for aam aadmi woes

What chocolate is to love, balloon is to joy. Kilos of air trapped inside sheer, colourful rubber, the floating toy can easily evoke a squeal of joy from a fretful child, even enthuse a grandfather.

But the giant balloon posted below the tamarind tree outside the Congress party headquarters on Akbar Road, is less an expression of joyfulness, more a statement of intent, a peepshow into the party's electoral mindscape.

Almost as tall as a giraffe, the synthetic balloon is dressed in the Congress colours of saffron, white and green, the same as the national flag minus the Ashok Chakra. But interestingly, another balloon, in the shape of an atom is wrapped over the original inflated object.

On one side is written in bold letters: Sasti bijli, sabko bijli, parmanu bijli karar (Cheap electricity, electricity for all, nuclear electricity deal). Obviously, the N-deal will be packaged as the key to cheap electricity in the Lok Sabha polls whenever they are held.

This seriously takes away a lot of my enthusiasm for the UPA victory, because if they really believe that nuclear power will take care of most of the 'aam aadmi's' need for power, I don't know how many nuke plants they will have to put up in all parts of the country in such a short period of time that it brings back political gains. The power policy has never taken off, and till they take care of that, nothing can happen. If they are expecting to sell very cheap electricity because it is nuclear energy, I think they will again be adding crores to our already loss-making energy production setup.

Also, I came across this particle about two Wall Street biggies doubting the government's ability to deliver. I will have to be critical of my own choice here because I doubt the ability of Goldman Sachs and Citigroup to advise on economic issues after the ruckus that's been on at Wall Street. Anyways, since they are still big, still American, so still prone to advising the world, so i'll post it

Govt's ability to push reforms under cloud

Amid an euphoria that government would now push ahead economic reforms after winning the trust vote in Parliament and parting ways with Left parties, two of the most influential global financial majors, Goldman Sachs and Citigroup have expressed their doubts on this front.

In a report published after Prime Minister Manmohan Singh-led government won the trust vote earlier this week, Goldman Sachs noted that India would now have an opportunity to pursue stalled reforms, but the administration would have to deal with several difficulties in carrying out the process.

In a separate report, global financial services major Citigroup said that it remains to be seen whether UPA would be able to put reforms on the fast track or not.

"But whether it will be able to put reforms on the fast track and clear all the pending legislation is not a given as especially in politics, there is no free lunch," Citigroup economist Rohini Malkani said.

Outlining five factors that could "impede its ability to enact reforms successfully," Goldman Sachs said that the little time available for the government to complete its full term and need to placate and meet demand of allies who supported the regime in the next General Elections and the populism that may entail.

Fourth, the acrimonious discussions that took place between UPA and the opposition, especially the Bharatiya Janata Party, could lead to difficulties in passage of important bills.

no left? Do right.

Now that the UPA government has no excess communist baggage to hold it down, it apparently wants to get a lot of things done while it is still in office. Apparently, I am hearing the disinvestment word after 4 entire years! Hopefully some policy decisions will help prop up the fast deteriorating economy as well. Like I have said before, simply playing with the rates and twiddling with the monetary policy will not achieve much when the basic structure remains the same.

The UPA is betting big on coming through in the trust vote on July 22nd. Samajwadi party is of course demanding its pound of flesh, and as an image tool, as apparently asked for the sacking of several key people including the Indian Ambassador to the US and the Finance Minister himself! And a communist leader made a comment during a rally that each horse that is being wooed is being paid Rs. 25 crores to vote for the government. Who said democracy came cheap?

North Block to fast-track reform

Soon after the trust vote in Parliament on July 22, the finance ministry hopes to push through a series of non-legislative reforms, chief among them disinvestment of minority stakes in around 10 central public sector undertakings by listing them on the stock market.

The ministry may also separately consider a further relaxation in external commercial borrowing norms for the current financial year, senior officials told Business Standard today.

Finance Minister P Chidambaram has asked officials in his ministry to draw up a reform agenda that can be pushed through in the days after the trust vote is cast in Parliament, the sources added.

The government is expected to take advantage of the exit of the Left to push through various legislative reforms in insurance, telecom and pensions.

But given that these will take time to pass through Parliament, the government is betting on several non-legislative reforms that can be pushed earlier.

A meeting to discuss the disinvestment through public issues was held earlier this week and the details like the number of companies, the issue size and the timing will be finalised soon, added officials.

Earlier reports had suggested that the government may divest 5-10 per cent of its equity in around 24 companies such as Rashtriya Ispat Nigam Ltd and Manganese Ore (India) Ltd, Nuclear Power Corporation, Railtel and TCIL, among others.

Officials said the earliest date for the issues to hit the market is September, by which time stock market sentiment is expected to improve. Capital inflows could also improve by then as global crude oil prices stabilise and the domestic price situation eases.

"A few good state-owned companies hitting the market will improve sentiment. In any case, the macro-economic fundamentals of the India story remain strong. We believe foreign institutional investors will see this and reverse the recent trend of exiting the Indian market. Domestic investors are also increasingly playing an important role in the stock market," the officials added.

Roar no more for the economy

I don't need to repeat again and again what's being said all around about our economy, which again shows deep signs of distress after this week's (July 12, 2008) inflation and industrial growth numbers came out. Business Standard calls it a black friday, because while our inflation rose from 11.63% to 11.89%, now inching close to the 12% mark as you can see, and our industrial growth, compared year on year, fell from 10.6% to 3.8%. Already the RBI has raised the CRR and Repo rate to 8.75% and 8.5% respectively, and that will definitely put more pressures on our industries.

Also, India's sovereign ratings might be lowered from the current investment grade of BBB. So all in all, the government is fully prepared, and in the process of implementing its full monetary policies to reign in inflation by taking money out of the economy. Also, the lowering of investment grade rating will take away a lot of foreign money from the markets as well. Already, the market cap of BSE has lots a few billion USD over the past months, and it fell below the country's GDP. However, that may also mean that the country's stock market is currently undervalued, which shows its a time to buy, but I think India as a economy is very vulnerable to speculation and market runs. Already a lot of small Indian investor money is going out of the market, and now we may see a flight of FII's as well.

Anyways, I just regurgitated whats on the media, but what I need to again rant about is the lack of a fiscal front in our fight against inflation and other recessionary tendencies. You will notice that the only leverage the RBI gets is to play around with the rates, but there are two fronts on which inflation is fought - the monetary and fiscal fronts. However, in the case of India, the fiscal measures are totally absent, and rightly so, because to implement fiscal measures here would mean a government will have to be headstrong and committed to reforms, but thats too much to ask. Even for a government which once boasted of being led by Manmohan Singh, Chidambaram and assisted by MS Ahluwalia, I think they have been utter failures on the economic front.

I don't remember any major fiscal/economic measure coming out of Chidambaram's budgets. He has only been following the Sonia Gandhi line of thought - more sops for minorities and all the vote banks that matter, put money in projects like the NREGS, which by the way is now a pan-India scheme, which has been reporting of intense corruption and incompetence in many parts of the country, including Bihar and Orissa. I think the government pushed it as a vote bank generator rather than an actual well-planned, well-thought and well-executed project. Its suffering from corruption, and lack of funding and lack of administrative capacity.

Then there is the Chidambaram whammy in the fourth year of the Con'gress, or the UPA government, a loan waiver of Rs. 60,000 crores for the rural farmer. The debate is still open on this one, because there have a number of issues raised, including the lack of institutionalized credit system in most rural parts of the country, thus still forcing the farmer to borrow from the local money lending entities. Of course, since they don't have a government loan, they will still be under heavy debt, and I think this number is huge. Then there is the criticism that it is unfair to all the farmers who actually worked hard to pay off these debts, and they will get absolutely nothing to show for it.

I believe even this is a massive exercise in trying to corner the rural vote. Indian agriculture does not need loan waivers, it needs the government to enable the rural agriculturalist to successfully pay their debts and actually make money. Amply wiser after my Indian economic history class, I know that Indian agriculture suffers from deep, and old failures which have existed for decades, and unless they are taken care of, Indian agriculture will never pick up. India never took up land reforms in a planned way, or rather, left open so many loopholes that took away the former's effectiveness effectively (!). Similarly, India never pushed for education in the rural masses, thus the farmers were still at the mercy of the rural rich, who were the traditional owners and lenders.

Indian agriculture does not need loan waivers, and the rural populace does not need massive subsidies and doles. India needs a second green revolution and nothing less to bring our farmer into the growth story. Similarly, education needs to be pushed with a greater gusto in all levels of the population. Its embarrassing to think that we need to get our basics right even after 6 decades of independence, but I believe that India is still not being able to rise to its potential only because a lot of its fundamentals need to be looked at again.

This may be the proverbial downturn in the business cycle and we might get out this economic downturn, but I do hope that this forces the people to take a deeper look at our policies, about how we work, and try to do something about it. With the elections around the corner, the UPA getting rid, or rather dumped by their old girl friends and strutting around with a new one, probably will try to achieve a lot more than they achieved in their past four years, but I believe India has suffered one of the worst four year periods with this circus in power.

Kabul Embassy contd.

I couldn't finish my thoughts in my previous post, so i'll just try to put down the few remaining thoughts that I have on this issue.

Its not that my concerns rise after this tragedy, the fact is that Indians working in Afghanistan have been targetted much more frequently in the recent past than before. Our construction workers and engineers have been kidnapped and a few murdered, but I think that really didn't spur our government to do anything. Heck, if an attack on the Parliament and blasts in Jaipur and Mumbai can't make these politicians grow some spine, then what are the innocent citizens in Afghanistan!

Maybe such a high profile assassination, with a clear intent, according to me, will actually prompt the government to relook at our policy in the country. I don't mean in the way of pulling out or cutting down on any commitment, but the fact that we really can't have only our civilians working there with the constant threat to their lives, and the present level of forces there are very, very inadequate. I read a news report that the US Army is the one that first cordoned off the area and was part of the investigation.

The fact is that maybe this bombing will force this incompetent government to maybe sit down and see where this nation is heading in terms of its ability to protect itself from armed aggression both within and without the country. For too long have our governments been quiet on terrorism and other acts against the state for fear of hurting the sentiments of our minorities and other groups. It is indirectly saying that our Muslims (as is the most common case) support traitors and enemies of the state. I really don't know who the UPA government is trying to impress with its pusillanimity. Maybe its calculated, I don't know, but hopefully the people will realize we need stronger decision makers at the helm before we really lose out on this opportunity to be a strong nation.

suicide attack on the Indian embassy

Earlier this week, suicide bombers in Afghanistan rammed a vehicle laden with explosives into two cars entering the gates of the Indian embassy in Kabul. The two diplomatic vehicles had two of the most high profile diplomats at the embassy - the Defense Attache Brigadier Ravi Datta Mehta and Counsellor V Venkateswara Rao. They both lost their lives.

In addition, two other Indians, both Jawans from the ITBP, and 37 Afghan nationals were killed and 141 other individuals injured. Nobody has claimed responsibility for this dastardly act, but the Afghan interior ministry did not waste time in hinting at the involvement of the perennial pain for world peace, Pakistan. Of course, Pakistan did what Pakistan always does - deny it outright. After all, an unstable Afghanistan is not in Pakistan's interest!

Of course, the UPA government is "shocked" at this act, and condemns it in the strongest of terms. The Defense and Foreign ministers had an emergency meeting with their officials, and they promptly sent a team to Kabul. The usual talk of India not backing down from doing good work in Afghanistan is making the usual rounds, and I am really no expert in diplomacy to point at other factors, but I can try to think of some of them.

Assassinating two high profile officials together tells me that this was probably in planning for a long time, because the execution had to be precise. In addition, I believe that there could be insiders involved in the plan as well. There are long lines at the Indian embassy every day of Afghans seeking a visa to India. They were not the target. There are other important offices on the same road, and they weren't targeted. In fact, I read in a report that the terrorist's vehicle didn't even try to enter the embassy, it was headed straight for the defense attache's vehicle. This tells me that the Pakis have got to be involved in this, and that there was something deeper here. I don't want to go hunting for sensitive information, but it is no secret that India is one of Afghanistan's best allies, and this is not a War on Terror phenomenon. India and Afghanistan have been good friends long before that, and after the Taliban came into power there, India's influence was limited to supporting the Northern Alliance, whose one prominent leader was Ahmad Shah Masood. The NA was recognized by the UN, by the way, and the only country that actually recognized the Taliban were our immediate friends in the West.

Now that India is again making inroads into the country, there will be a lot of consternation in others minds, but India, in its new status as a nation with certain influence and power, needs to do what it needs to do in the country. We have probably done more for the nation without sending our security forces there than all the NATO armies. But this attack makes me think that maybe India should send a few forces there because it seems that the Taliban and ISI want to take it to the next level. Sure, I dont know if our present government have the balls to take any strong military decision, but I think its high time they did something good for the country before they are hopefully thrown out of power.

Rememberances and Movements

Before I begin to say anything, I am really surprised that its been a month since my last post! In some ways it seems longer than that, and in some ways, it feels it was way shorter than that. I will come to that later, but before that, I want to remember one of India's greatest sons - Field Marshal Sam Manekshaw, who passed away at the Wellington Military Hospital in Tamil Nadu.

For those who believe in this nation's armed forces, and those who cherish its traditions and history will know of this man, who, even for me, seemed so immortal that I had hoped he just won't die, or rather, I just kept hoping God will keep pushing his death forward. Similar to my wishes for Lata ji and a few other people.

The General has left us a legacy, left us some of our finest moments in history, and I know that he is gone, but his legend will live. Newspapers and television stations have been running stories from his past, including his childhood, his life during the World Wars, but most particularly, his relations with the Prime Minister of India, Mrs. Indira Gandhi.

The fact is that Sam Bahadur was not just our general during that time. He was a leader during the 1962 war as well, the war we fought with people who Nehru gave up the permanent seat in the UN for.

Nehru's foreign minister was Krishna Menon, and he was no friend of the General. The latter was thus not in the good books of Nehru as well because of Nehru's proximity to Menon. Thus, from being almost axed, he was sent to the frontier when the Chinese drones attacked. Thus the ceasefire was enforced.

Then India's preperations for the '71 war and all that happened before and after it should be essential reading for all of us. The General and Mrs. Gandhi was two of the biggest personalities ruling India at one single time. She even feared he would take over the country during the emergency.

We will mourn his death, but it will cease, but his actions and his life will inspire us forever.

It seems difficult for me to talk about anything else in this post, but the fact is that I have been traveling, moved to a new city, Kolkata, and gone back to college. Things will come my way in heavier and more difficult doses, but nobody said an MBA would be easy. I don't expect it to be. And that is why I said the one month seemed so long. But at the same time, I have also had fun, had some happy moments and some very relaxed moments. Maybe thats why it seems small.

So now I write from the East.