race to the bottom for the economy

That the Congress agenda since coming to power has purely socialism should not be doubted by anyone. Slowly but surely, the Government has been putting in the systems and regulations that take India back to the days before the economic meltdown in 1991. With the Government in control of resources, and being a provider of basic goods and services to a vast majority, India is again moving back to the days when entrepreneurship stifled and government interference rose. 

I feel this time the situation is not so black and white. While there is still a considerable private sector contribution to the economy, the Government seems to have focused less on creating an enabling environment for them to grow, and more on creating an environment in which the poor are even more dependent on the state for subsistence. 

As Sagarika Ghose, of all people, tweeted, it is ironical that the Government is proud of declaring that 66% of the country's population does not have secure access to food grain, on the occasion of our 67th Independence Day. Of course she was referring to the Food Security Bill, which is to be tabled in the Parliament today. 

The basic premise of the Bill is, as quoted from the link above - Under the law, about 81 crore people would be entitled to receive rice at Rs 3 per kg, wheat at Rs 2 a kg and coarse grains at Rs 1 a kilo. 

This Food Security Bill would rest, of course, on the remarkable Public Distribution System of India, which pilfers and steals more than distributes. This same system has now been tasked with the responsibility of distributing food grains to crores of Indian families efficiently, on time, for cheap. All I know is that the middlemen and officials of the Food Corporation of India must be smacking their lips. 

Now coming to the current state of economic affairs, with unclear rules and regulations, lack of a general desire from the Government to govern, and foreign money again going out of the country, and a ballooning fiscal deficit, I think other than Sonia Gandhi's super duper economist and socialist team sitting in the National Advisory Council, nobody believes the economy can afford the grand socialist schemes of the Congress. Her minions parrot the same thing. 

One of the key features of globalization is that it puts all of us more or less on the same boat. Like they say, when America sneezes, the effect is felt around the world. Surrounded by the developed economies, the third world simply does not have the strength to not be affected by a global slowdown. One could argue that India should have grown considerably bigger to be a big boy at the table now - a big boy I said, on a table of men. Unfortunately, that is not so. The BRICS, a term coined by the God's Own - Goldman Sachs, is more or less dead. Brazil is limping, India well, doesn't even seem to want to be in the race anymore, Russia is on its own curve, and China is having its own issues. Popular opinion now seems to opine that the BRICS in itself was nothing but a marketing slogan, and anyways, it was all China. But as late as yesterday, South Africa hosted the first BRICS Business Council meeting. 

I took an entire paragraph on BRICS to explain that the global economy is in a pretty bad shape, and it certainly, certainly does not help matters when India's national government seems to be working on its own tangent and on its own economic agenda. Till now, the Congress was more than adept at dismissing any criticism as being communal. Anybody who was critical of the UPA was a rabid communal. Unfortunately for Sonia Gandhi and her dream of putting Rahul Gandhi into the seat of the Prime Minister of India, they may have created a monster that will be very hard to tame for the next Prime Minister of India. 

Dr. Manmohan Singh has done irreparable damage to the position of the Prime Minister with his inaction, silence, and very Gandhi'esque secrecy. The common man, the one who works hard, consumes goods and services, and relies on the free market as a source of inputs and a market for outputs is surely going to see through this charade soon, one would like to think so! How long will the population continue feeding on the facade of secularism while their economic strength continues to drain under the UPA regime? No doubt, the economy simply does not believe the UPA anymore. 

With the Congress on a clear, undeniable action plan to win the next elections through this systematic recall of socialism, and the BJP in no seeming position to behave like a responsible and credible opposition, with the internal fighting and conflicting ideas, the gainers have undoubtedly been the regional parties. They have been parts of government, parts of the opposition, and had a jolly good time providing outside support to the Congress to pass its bills in the Parliament. Now whether it was under duress, or blackmail, or after receiving lots of money, or just because they really like the Congress, is anybody's guess, but no doubt, politicians like Mulayam Singh Yadav, Mayawati, Jayalalitha, Mamata Bannerjee, and the likes have shown that they are happy to play with the Congress, as long as their demands are met. Of course, the Congress has shown exceptional dexterity and skill in misusing the institutions of India for its political ends and arm twist these regional leaders into submission. Mulayam Singh Yadav, as expected, will support the Food Security Bill. 

Coming back to the end game, Congress has more often than not shown itself to be a master manipulator. They play the media very well, and have great expertise in propaganda. For all we know, they will end up convincing half the country that they are poor and will not survive without the direct cash transfer, the food security bill and other Gandhi named national schemes. Then its onto UPA III. I am certain Sonia Gandhi and her team have discussed the plans if they ride back into power, and surely they would have discussed the pathetic state of the economy they have led India to, and surely it would have involved how Rahul Gandhi can ride in like a knight in shining armour and take us to salvation. Till then, let us keep suffering. 

My initial thoughts on the new Companies Bill

I had sent a letter to a news publication last week on my thoughts on the new Companies Bill, that was recently passed by the Rajya Sabha and is now awaiting final signature from the President. They didn't publish it, but I thought i'd still like to put it in the public domain.

The new Companies Bill should be welcomed for its newness, if for nothing else! The fact that it replaces a piece of legislation that is over 50 years old should itself be an indication of how inadequate our corporate laws have been in dealing with contemporary economic issues.
 Corporate Governance is not a term limited to Board rooms and annual reports anymore. With increasing media scrutiny and demands for greater transparency, corporations can hardly afford to work behind opaque management and ownership structures. Corporate Governance scandals, long scoffed at as a thing to be seen only in Europe and North America, now occur in India with more alacrity than we would like to admit.
 There is no doubt in my mind that the intangible strengths of any organization are closely linked to its financial health. Corporate Governance issues in an organization certainly factor in investors sentiment that drives any company’s share price. Through the new Bill, there is an expectation that now organizations will be forced to be more transparent about their management styles and ownership structures, and greater transparency, in my opinion, is a good thing in itself. Considering that Boards are now tasked with direct responsibility on many issues, it can be expected that organizations will have no choice but to appoint more capable, and independent in the true sense, directors who must be willing to step up and take on the responsibilities.
 Board structures today seem to be driven by a quid pro quo understanding. Many independent directors sitting on the Boards of some of the blue chip companies are there to simply lend their good name to the Board, and not necessarily as an active, and alert, independent director who is willing to go against the popular opinion if need be. In return, they get a good compensation, have to attend only a few Board meetings in an year, and few of them sign on the Company’s annual accounts.
 While it will take more than a Bill to change this way of doing business that is firmly entrenched in our typically promoter driven organizations, I do expect that it will pump in some adrenaline into the nascent shareholder activism in the country.
 Now coming to the second, and perhaps the more discussed and contentious issue in the Bill, the mandatory CSR spend within the parameters stipulated in the Bill. To contend that this requirement is thrust upon companies that do not have the competence to run such activities is misplaced.
 For one, Indian companies are already responding to their social obligations and expectations in a variety of ways. Large organizations, the kind that Clause 135 aims to include, already have flourishing CSR practices that focus on a host of social issues, such as education, healthcare, livelihoods, and infrastructure.
 Secondly, the Bill is not looking to create a new bureaucratic layer to police on companies to ensure they are following the guidelines, but aims to achieve compliance through enhanced reporting, and clearly assigning roles and responsibilities within an organization.
 Through the Business Responsibility  Report and sustainability reporting, organizations are already reporting on their social and environmental activities in and around their areas of operations, and the various ways through which they are engaging with their internal and external stakeholders. SEBI, through the Business Responsibility Report, clearly mandates the top 100 organizations to assign the responsibility of an organization’s CSR activities on a member of the Board or executive, apart from clearly listing the scope and size of their CSR activities.
 Thirdly, I think this Bill will formalize, and make more transparent, the processes and roles within organizations that undertake CSR activities. From a corporate governance point of view, this greater transparency will ensure that the flow of funds is fully accounted for and reported at all points in the value chain. From a corporate governance point of view, this will deter promoters from misusing the existing rules to claim tax benefits on activities that can hardly be seen as CSR.
 In the aftermath of the 2008 economic meltdown, a common refrain was that when organizations make profits, it is theirs, but when they falter, the society has to bear the burden. Expecting organizations to step on their activities that give back to the society should not be seen as an anti-economic measure that will erode their competitiveness. No organization today can function without obtaining its social licence to operate.
 Organizations that have realized this would think that this new Bill does not change much, other than bring the Government at par with the current trends. 

I find it extremely intriguing how this world manages to keep itself busy. There are millions of societies around us, each with their own priorities, nuances, and headlines. What's important to one may not be important to the other. What is pointless to one may make all the difference to the other. 

Yet this world is getting smaller and smaller. Despite living our billions of different lives, we are connected by the same mediums that bring us thousands of pieces of information to us every day. Only one wall separates me from my neighbours and we both could be watching television yet what interests us on tv could be completely completely different. 

In such a state, how do then societies stay together, how do countries keep its people together, and most importantly, how does the media manage to keep us engaged all the time? 

How does media prioritize what piece of information could be most well received by the largest section of the population? Of course, since nothing works in vacuum, this whole story of different people having different priorities is greatly influenced by a lot of different factors. 

We all may think different, but we all are also just as closely bound to each other. Many thousands of individuals will get on a local train to get to work in Mumbai every morning, many hundreds will trudge into shiny gleaming corporate offices in Bangalore, many thousands will open the shutters of their shops in Guwahati. 

Then, we are affected by the same incompetence of the Government, the same thievery of our political leaders, the same unresponsiveness of our governance systems, and the same inequalities of our economies. If I look at it that way, then I find media's success in finding the right nerve to be a lot more believable. 

Tomorrow i'll wake up, get ready and set out on my daily journey to work. I will pass by hundreds of cars. Each person at the wheel will be on the same road, take the same bridge, pay the same toll, but each of us will have something different on our minds. Its amazing.