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Judges under scanner The ugly
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Missed
opportunities
Slowdown in US
The heroine
Attacks on churches Financial crisis to
hit common man No more lucrative job
offers
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The ugly face
With
its economy growing at 8 per cent and an entry into the world’s nuclear club in the offing, it was expected that India, which was ranked the 72nd last year in the Corruption Perception Index, would redeem its position somewhat. But nothing of the sort has happened. In fact, exactly the opposite has taken place. It has now slipped to the 85th place on the index released by Transparency International. That was quite inevitable, considering the way wads of notes were waved during the trust vote of July 22 in the Lok Sabha, which is better remembered as a cash-for-votes ignominy. But that is not the only factor. Politicians have contributed in general too, and so have the babudom, the police and the judiciary. Since many of the recent events have not been taken into account, it would be no surprise if India’s image becomes more smudged, what with money being delivered to the house of even High Court judges. Some may try to take some comfort from the fact that the neighbours are even more deeply sunk into corruption. Sri Lanka (92), the Maldives (115), Nepal (121), Pakistan (134) and Bangladesh (147) are all in worse shape than us. But then Bhutan is several notches better at the 45th position. The 72nd slot that we occupied till last year has now gone to China. In any eventuality, we are very low in the world estimation because of corruption. The most corrupt is Somalia with rank 180. On the other end of the scale are the honest: Denmark, New Zealand and Sweden, which jointly share the first position as the least corrupt. These are followed immediately by Singapore, Finland, Switzerland, Iceland, the Netherlands, Australia and Canada. It is in the latter direction that India has to move. Among many things need to be done to earn better reputation for the country are: The Right to Information Act is put to good use and the long-pending pieces of legislation like the Corrupt Public Servants (Forfeiture of Property) Bill should be passed and MPs, MLAs and judges found corrupt weeded out of the system. India’s tragedy is that coalition era politics and blind rat race have led to greater erosion of values. The rot that is set in must be stopped.
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Missed opportunities
Punjab
has approached Tata Motors to seek the Nano car project after Ratan Tata threatened a pullout from Singur. Two years ago, the then Congress government in Punjab had turned down the Tata project largely because it could not match the concessions which states like Uttarakhand and West Bengal provided. The present Akali government must have considered the incentives the Tatas then had asked for, and were denied, before making the renewed offer. It is a case of missed opportunity. And it was not for the first time that Punjab had lost a major industrial project. The Amarinder Singh government had initially objected to the concessions given even to the Bathinda oil refinery. Much of private investment in the recent past has gone to the western and southern states because they provide reliable infrastructure and a proactive political leadership. Punjab has so much delayed the establishment of an IT park in Mohali that some major software companies have shifted to the Chandigarh IT park, which started late but has developed fast. The grant of tax holiday to industrial units in Himachal Pradesh has benefited the hill state to the disadvantage of Punjab. The successive Punjab governments have not nurtured the existing industry, which is fast losing out to competition. Lack of power is a major problem. Not only is the supply inadequate and erratic, but the cost is also on the high side. The industry partly bears the burden of free power given to farmers and some sections of the poor for political reasons. Corruption and red tape are other deterrents. The extravagant political leadership and a top-heavy administration have almost bankrupted the treasury. Surviving largely by auctioning chunks of urban land and taking loans, the state government is unable to invest in any new industrial or infrastructure project. The state government should first set its own house in order before expecting any industrial house to move in.
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The world is filled with willing people; some willing to work, the rest willing to let them. — Robert Frost
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Slowdown in US
Prime Minister
Manmohan Singh and Finance Minister P. Chidambaram have repeatedly sought to assuage apprehensions that the financial meltdown in the United States would have a significant negative impact on the Indian economy. Dr Singh has, at the same time, stated that the country has to “remain alert” about the impact of the US recession and the crisis that has afflicted some of the biggest names on Wall Street. Since India’s economy in general and financial sector in particular has become increasingly integrated with the rest of the world, it would be unrealistic to expect the slowdown in the US and the world economy to not have any influence whatsoever on this country. The crisis in international capitalism holds a number of important lessons for India. It sends out a warning signal to gung-ho economic liberalisers here — that includes not just the Prime Minister and the Finance Minister but the Deputy Chairman of the Planning Commission Montek Singh Ahluwalia as well — that blind faith in the virtues of market forces correcting economic imbalances may be highly misplaced. The importance of strengthening regulatory institutions for banks and insurance companies has also been underscored by recent developments in the US. Whereas globalisation in the form of greater financial integration may to a certain extent be an inevitable process, much depends on national governments to calibrate this process and insulate economies from the deleterious consequences of volatility in capital markets. In the bastion of free enterprise capitalism, in the closing months of the George W. Bush regime, the Federal Reserve (central bank) and Treasury Department (akin to India’s Ministry of Finance) have had to face the charge that their actions have been tantamount to “privatisation” of profits and “socialisation” of losses. If the American government has had no choice but to bail out a slew of investment banks, New Delhi should hasten cautiously before it decides to open its doors wider and go in for full capital account convertibility as is advocated by some. Mr Chidambaram has acknowledged that only a clutch of private sector banks — led by the second largest bank in the country, ICICI Bank — has had exposure to “innovative” securities or derivatives (or financial instruments that derive their values from other instruments) and would, hence, be directly affected by what has happened in the US. None of the major public sector banks, including the State Bank of India, have the kind of exposure to securities of American investment banks that would be considered worrying. Insurance companies in India — including Tata AIG, the Indian affiliate of the troubled American International Group — too have no reason to fear that they could default on their payment obligations. The Finance Minister has, however, cautioned that there could be a tightening in credit supply due to global financial developments. In other words, there seems little likelihood of a marked easing in interest rates even if inflation shows some signs of decelerating. As for Dr Ahluwalia, he has conceded that “there will be an indirect effect because if the rest of the world gets disturbed and capital flows and liquidity shrinks, there is bound to be spillovers not just on India but all over the world”. The recession in the US, it is now clear, will be wider and deeper than what had been presumed in August 2007, when the so-called “sub-prime crisis” in the housing loans market could no longer be brushed under the carpet. After American financial institutions landed themselves in a major mess because of risky loans given to purchase homes, the infection spread fast from the property mortgage market to the entire financial system. The US government had to bail out Freddie Mac and Fannie Mae, the two companies that accounted for roughly half of the bad loans in the housing market. Then, on Black Monday (September 15), the 158-year-old Lehman Brothers declared that it would be filing for bankruptcy. Bank of America said the same day that it would be bailing out Merrill Lynch with a $ 50 billion buyout. Then, AIG said it was desperately strapped for cash. The virus had spread across Wall Street and the patients had to be immediately hospitalised. That’s when the US government had to move in. Many had seen the writing on the wall, but their voices were ignored. A working paper published in March by Claudio Borio of the Bank for International Settlements, based in Basel, Switzerland, pointed out that the “unfolding financial turmoil in mature economies…regardless of its future evolution…already threatens to become one of the defining economic moments of the 21st century.” He added: “The turmoil is best seen as a natural result of a prolonged period of generalised and aggressive risk-taking, which happened to have the sub-prime market at its epicentre. In other words, it represents the archetypal example of financial instability with potentially serious macroeconomic consequences…” The BIS has estimated that derivatives trade has grown five times between 2002 and 2007 to touch a level in excess of $500 trillion — this “shadow” economy is ten times larger than the “real” economy of the world and five times bigger than the volume of trade in securities that are backed by tangible assets. The International Monetary Fund in April compared the current crisis to the Great Depression of the 1930s — the worldwide economic recession that started in 1929 and lasted till the beginning of the Second World War had been precipitated by a collapse of American stock-markets. This time round, the collapse in the US financial system started from the housing loans market. Prices of American homes have already fallen by a fifth over the last 12 months. Job losses have mounted. The near-term will be rather painful. The US has five per cent of the planet’s population but consumes over a quarter of the world’s resources. Nobel laureate Joseph Stiglitz believes the main reason for the underlying volatility in international capital movements is the deficit of the US, a nation that borrows an incredible amount of $3 billion from the rest of the world every day, two-thirds of it from poor countries. The rest of the world has been saving so that American citizens can splurge beyond their means. What is often not realised is the fact that the US has invested in China and India less than half of what these two countries have invested in the US. The bubbles have burst. If there were some in India who foolishly claimed not very long ago that the country’s economy had become “decoupled” from the rest of the world, they have been proved completely wrong.
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The heroine The
dictionary defines a heroine as “a person of the female sex who is admired for having done something very brave or having achieved something very great.” My perception of a heroine embraces four categories: the war heroines like Joan of Arc and Rani Laxmibai who lead their soldiers into battle; the
social service heroines like Florence Nightingale and Mother Teresa who work selflessly for the welfare of others; the social activist heroines
like Medha Patekar and Shabana Azmi who provide a voice to the voiceless; and
the heroine-heroines like Madhubala and Preity Zinta who bring joy and happiness to millions through their grace, beauty and histrionics. Driving back from Delhi in the immediate aftermath of the Delhi bombings on 14 September, I identified another category of heroine. A girl named
Simran was compering a radio programme of popular music. Between songs she gave details of the bombings in clear, unemotional terms. She kept her voice brisk, almost clinical in its detachment, free from the high pitched hysteria which one was later exposed to in all those gory television reports. She emphasised the need to remain calm and not to panic, because
by so doing we would be playing into the hands of the perpetrators and giving them the very results that they sought. She repeated again and again that the need of the hour for all of us was to remain united and not to give ear to rumours and insinuations. In fact, both in her words and in her choice of songs, she thumbed her nose at the terrorists, as much as to say – “Do what you will, but you cannot defeat us.” She answered phone-ins and highlighted incidents of courage and praised the common bystanders who had so willingly stepped in to offer whatever help they could. In reply to her statement that the bombs were of a low intensity an irate TV reporter phoned in and, with the usual doomsday tone of TV reporters, warned that the explosions should not be
taken lightly. She cut in to say she was not taking them lightly, she had merely said that the explosions were of low intensity. She prayed for the peace of the departed souls and the quick and complete recovery of the injured. But at the same time she had a role to perform in controlling panic, in reassuring people and she could not do this through exaggerated reports about the bombs. I am clear in my mind that Simran was one person who did much to contain panic and a sense of doom amongst the millions of commuters on the Delhi roads at that hour. She gave them, instead, a renewed determination to defeat the nefarious designs of the terrorists, defeat all efforts to give
the incidents a communal colouring. She generated a strong sense of nationalism and patriotism in the hearts of her listeners. Even though she did not fit into any of my perceived categories of a heroine she was a true heroine in every sense of the
term.
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Attacks on churches
The
attack on churches in Mangalore on September 14 woke up the outside world to this problem in Karnataka. However, the fact is that such attacks are a recurring phenomenon, which has got a fillip after the BJP has come to power in the state. For quite a while the State Minority Commission (SMC) in Karnataka has been receiving complaints with regard to attacks on churches. On September 5 pastors of Davangere district alleged attack on them by Hindu fanatics. Church worshippers were badly beaten up by the attackers and photos of people injured in the assault were supplied by the complainants to the SMC. Similar complaints from missionaries had come from Sakleshpura, Hassan, Mysore, Tumkur and other areas as well. Sunday congregations of Christians are usually the targets of these attacks by fanatics who are said to be enraged over the evangelical activities of the missionaries. Karnataka is among five Indian states which are having laws against forcible conversion. But never a complaint has been filed by anyone under this law. Hindu militants believe in using strong-arm tactics to frighten the evangelists. Smashing windowpanes of church, breaking furniture, beating up priests and worshippers are some of the means employed by them to protest against the evangelical activities of the missionaries. The missionaries, on the other hand, argue that a person converted by force or offering him inducement, would not stick for long and would go back to the fold of his original faith. Hinduism could successfully withstand the impact of two organised religions from outside, namely Islam and Christianity, while it simply swallowed Buddhism and Jainism, which were its own offshoots. The real intellectual challenge to the Hindu system of religious worshipping came from the Christian missionaries in the British colonial era. But various reform movements by the Hindus at that time ensured that the major body of their co-religionists stuck to their original faith. However, in independent India, the Sangh parivar variety of Hindus have found terrorising the propagators of organised religions as the most effective way of stopping them from spreading their influence. R B Sreekumar, a retired Gujarat cadre IPS officer, who ran into trouble with Chief Minister Narendra Modi in the wake of the communal riots in the state, had described the activities of the Hindu fanatics as most un-Hindu-like. Addressing a conference here recently, he quoted from Hindu scriptures to say that prayers by any religious group amounted to worshipping the Hindu god Krishna. Some of the Christian speakers at the conference also were of the view that violence and Hinduism did not go hand in hand. Sangh Parivar is attributed the credit of transforming “Hindutva” by shedding its pluralistic character and make it look more and more like a monolithic religion. Hindu bigots, who may have always wanted to perpetrate violence against people of other religions, have got a shot in the arm with the change in the scenario. Narendra Modi got a more vociferous reception than any other BJP Chief Minister from outside Karnataka when he appeared at a public meeting organised by the BJP on the occasion of the party’s national executive meeting in Bangalore recently. Narendra Modi’s popularity among the Hindus in general and the BJP supporters in particular has to do a lot with the alleged diabolic role played by him during the communal riots in Gujarat. This, of course, puts a serious question mark on the so-called tolerance of the Hindus. Chief Minister Yeddyurappa, who cut his teeth in politics through the RSS, has been now put on notice by the Centre in the wake of the attacks on Christians and their religious institutions. Taking place close on heels of the violent attacks on Christians in Orissa, where the BJP is a part of the ruling coalition, the incidents in Karnataka have attracted wide attention. The Chief Minister has now promised to punish the people accused of carrying out the attacks and ensure safety and security of the minorities. The BJP government has been accused of inaction against the perpetrators of the attacks and even complicity with them. These allegations have been denied by the state government. However, the government did threaten to take action against Christian-run schools in the state after these remained closed for a day in protest against the atrocities on Christians in Orissa. Notices were slapped on the schools, which observed the protest in response to an all-India call. This could have encouraged rabid outfits like the Bajrang Dal to launch a concerted attack on churches. Communal outrages are inevitably justified through rumours. In Karnataka, violence against the churches was accompanied by a rumour about a Christian outfit publishing material denigrating Hindu deities. The New Life Fellowship Trust, accused of this act, has categorically denied having done so and has welcomed the judicial probe instituted by the state government to look into the violent incidents. It must be mentioned here that many incidents of throwing stones at churches by miscreants, who fled from scene immediately, are also figuring as “attacks on churches” in media headlines.
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Financial crisis to hit common man Recently
former Reserve Bank of India Governor YV Reddy was complimented by Economic Adviser Arvind Virmani for his conservative approach in opening up the Indian financial sector to various financial products. It is definitely to the credit of Mr YV Reddy that the Indian investor is insulated from the heat of the US financial crisis. However, before Indians believe that the future is bright from here on, it is time to pause and take a look at how this crisis will translate in the immediate future for the economy and the common man. The inflationary situation that is prevailing in the economy is likely to continue and could in some ways get steeper. The reason is the bailout package for financial companies in the US, is likely to range from $ 700 bn to $2-3 trillion. This bailout package means that the US Fed is going to print more notes and pump the money in the US economy leading to excess liquidity in the system translating into higher inflation. This is likely to have some geopolitical cost, as middle eastern producers will keep the cost of crude high because of the ability of Americans to pay more for it. This is where the Indian economy will suffer given that inflation in India is high because of the cost of food and fuel. Even if we produce sufficient quantities of food as has been the case of late, the cost of crude oil will imbalance our economics in the immediate future. Some economists say that the crude oil prices will cool from here given the inability of most western economies to bear the prices. While another section of the economists says that oil geopolitics itself is changing and that oil hawk Iran is dictating terms in OPEC rather than the largest producer Saudi Arabia as was the case till now. If that is the case Iran has been a votary of high oil prices and keeping production under control because it feels that oil is a depleting resource and the world should pay a reasonable price for the same. Another impact of the failing US financial institutions will be on the domestic stock markets as the foreign financial institutions will not look at investing outside their countries given their own uncertain future. Even the world’s best financiers like George Soros are signalling a cautious approach to investing, reasoning that the foundation of the US financial empire is shaking. These cautious words will lead to a further conservative approach by financial companies in the coming months. The domestic bourses may suffer from this as the much-needed liquidity will fail to come to emerging economies like ours resulting in a lacklustre performance of stocks of many companies. So the common man, who was looking at investing in stocks and getting good returns much above the inflationary rate, is now going to a be at a disadvantage. The situation is going to look very gloomy in the months to come due to a fall in demand. There may be a dip in the demand for exported products made in India, especially IT and IT-related products as most of these find their way to the US. On the domestic front consumption is not likely to rise either; in fact, experts say it may shrink because inflation is eating into the spending of the common man. Expensive credit is likely to be the order of the day. Production will suffer if the price of crude oil goes up as has been the case in the last one and a half years. There is also a fear that the high inflationary rate along with high interest rates for a longer period could translate into a sub-prime crisis in future in India. The high interest rates on real estate loans have led to a fall in demand and is resulting in the prices of houses crashing. If interest rates are high and inflation keeps eating into the common man’s income, then there is a potential danger of defaulting on home loans purely because of the inability to service the loan. The high cost of doing business could also mean that there could be a downsizing. White and blue collar workers could lose jobs. Experts say that this could lead to a defaulting of loans on movable property like cars, scooters etc and then on credit cards. The only golden lining for India is that given the size of the economy the default will not lead to a systemic collapse. Besides, informed sources in the Finance Ministry say that loans may not become more expensive from hereon on, but there could be a cautious approach by banks along with more strictures in lending.
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No more lucrative job offers Over
the past week, a panic hierarchy has emerged in the halls of my business school. Classmates who interned over the summer for the relatively unscathed investment banks — Goldman Sachs, Credit Suisse, Bank of America, JP Morgan — wear queasy expressions, as if they’ve just wolfed down the greasy quesadillas in our cafeteria that it’s best to avoid. Those who interned for Merrill Lynch, which was acquired last week by Bank of America, fidget frantically with their BlackBerrys, checking for any news that could cost them their fulltime offers. The Lehman Brothers interns are unnaturally stoic, congregating in corners and whispering to each other, trying to avoid being the focus of everybody’s attention. All this while several professors tell us we are on the verge of a depression to rival the 1930s. Of course, students who don’t get lucrative job offers are in far better shape than folks with variable-rate mortgages and families losing their jobs. But there is still something melancholy about seeing a bright-eyed student on the cusp of graduation, ready to take the markets by storm, only to be released into a world where all the portcullises to the bulge-bracket firms are slammed shut. Uncertain of where we’ll land, we instead ponder why nobody had fully read the writing on the wall. A friend from a rival business school, a summer intern at Lehman, insists that though everybody was well aware of the bank’s troubles, few at the firm could have predicted last week’s plunge. Those at the other beleaguered banks also felt a shift over the summer. The party wasn’t over, exactly, but the keg was close to running dry. “Last year, Morgan took all the summer interns out sailing in Rhode Island,” said a friend who interned at Morgan Stanley. “This year it was another island — Long Island. They took us to the vineyards. I mean, who the hell knew Long Islanders grew grapes?” Even with the downgraded perks, my peers are still keeping their fingers crossed that their fulltime offers will be honored. But I can’t help thinking that a rescinded offer could be a blessing in disguise. A junior-level investment banker’s life is a brutal existence. At least it was for me. I worked as an analyst for an abbreviated tenure and despised it enough to write a novel about the experience. In my partly autobiographical book, a posse of four analysts keep a tenuous grasp on sanity while languishing under tyrannical bosses. The nicknames we gave to our superiors hint at the sparkling personalities involved: the Sycophant, the Ice Queen and the Philandering Managing Director. Of course, in life as in the novel, the rewards are enticing enough at first: zipping around in black Town Cars, ordering dinner on the company dime every evening off SeamlessWeb, slapping down a gold AmEx for bottle service at the exclusive club Marquee (unless you were with your vice president, who would throw down his black card with much pomposity). By arrangement with
LA Times-Washington Post
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