Posted by: John Elliott | June 4, 2012

Britain celebrates the Queen’s 60 years – in the rain

In praise of royalty rather than “fixed” presidents

.LONDON: Surely only the Brits could and would do it – turn out in their hundreds of thousands along the banks of a river in cold wet and windy weather, with the sun never fully breaking through the clouds, to honour their 86-year old monarch, Queen Elizabeth II, as she celebrates her diamond jubilee.

That is what happened yesterday here in London with a pageant of about 1,000 boats – ranging from the a royal barge to pleasure boats and small rowing craft and one-person kayaks. Carrying some 20,000 people, the boats paraded seven miles down river through the centre of the city to Tower Bridge watched by crowds of around a million.

Upstream from Chelsea, with a ceremonial vintage steam engine crossing a railway bridge to mark a stage in the pageant

Partly inspired by a Canaletto painting of a Thames pageant in 1752, it was the largest such event since that time and, an organiser said, may never be repeated because of changes in the river. The strong tidal force of the Thames was reduced for the day by the lowering of the giant Thames Barrier downstream near the river estuary to prevent the small boats being swamped.

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“There’s Boris, there’s Boris!” shouted people near where I was standing next to Battersea Bridge in Chelsea, close to the start of the formal pageant. “How do you know?” asked someone. “Look at his floppy almost white hair – it’s him” came the reply, and everyone cheered “Boris Boris”. But it wasn’t supposed to be his day – Boris Johnson (left) has just been re-elected Mayor of London and was nowhere near the front royal end of the flotilla, yet it became his day too and he was repeatedly cheered along the route.

“Three cheers for the Dunkirk spirit” shouted an elderly guy with a naval-looking white beard a few yards from me as some small boats went past. “Three cheers for the Dunkirk spirit – our finest hour” and everyone joined in with the cheers as he repeated his clarion call three times.

Yet Dunkirk was not Britain’s finest hour. It was a retreat in 1940 from the German forces in France, but it can be seen as a victory because of the hundreds of civilian-owned boats crossed the English Channel and rescued over 300,000 troops marooned on French coast. To mark that achievement, some 40 of the boats were in yesterday’s pageant, and they were cheered.

That  Dunkirk spirit  of grabbing salvation from the jaws of defeat could be seen as a country in denial, just as the current four-day festival and holiday to celebrate Queen Elizabeth II’s diamond jubilee is in a sense a country in denial, given the economic crisis facing the UK and the rest of Europe.  Her reign has also seen society become wealthier though far more unequal – after tax, the richest 1 per cent now have 9 per cent of all income, compared with 3 per cent in 1977 (as the FT points out this morning).

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There was  however no denying the mood of real celebration, partly no doubt because (as one of my sons says in a comment below) people wanted a reason to be happy when there is so much bad news around, and this was a genuine reason.

That was boosted with vague memories of Britain’s past years of glory. “Britain’s rules the waves” and “Land of Hope and Glory” were chanted every now and again in street parties across the country as well as along the Thames, though few people could get beyond the words of the first couple of lines (apart from a brilliant but rain-drenched choir on top of one of the river launches).

People draped themselves in Union Jack flags and waved and cheered for more than two hours from bridges and river banks along the pageant’s route. Military bands and other orchestras played on the boats and large tv screens relayed the events to the crowds. Eventually the crowds started to leave as heavy rain and sharp cold wind replaced mild drizzle, and low cloud even obscured the top of the Shard, a 87-floor 1000-ft office tower that will be Europe’s tallest building when it is completed.

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The security was tight, applied gently by armies of 6,000 police and other officials and volunteers, who appeared more eager to help and chat than to order people around – what a lesson for countries where officials feel on such occasions that they have to prove their status with unhelpful and usually inefficient bullying.

But the bigger lesson is the stability and mood for celebration that an hereditary monarch of Queen Elizabeth’s stature can bring to a country. Some people yesterday honoured Boris and others remembered the small boats of Dunkirk, but no-one forgot that it was the Queen’s day – a monarch who has only got her judgement wrong once in the 60 years, and that was for just three or four days when she was caught off guard by Princess Diana’s death in a car accident in 1997 and didn’t respond personally as quickly as it became clear the nation thought she should.

I am no instinctive royalist, but isn’t such a system better than having a president chosen by politicians, as now happens for example in India where the president is indirectly elected through the states. The party in government there tries (as it is currently doing) to find someone who will be sympathetic to it if a general election produces a hung parliament because, at that point, the president (like the Queen) chooses who to invite to form a government.

The Queen with the Duke of Edinburgh, 91 on June 10

Ten years ago, when Britain’s Queen Mother died, I wrote in a Business Standard column that I’d prefer a royal head of state to a president “fixed” by the then Labour prime minister Tony Blair and his cohorts. The same applies even more to Britain with its Conservative prime minister David Cameron.

The Guardian newspaper however carries a salutary message in its editorial this morning. It praises the pageant for the scale and organisation, and for the reverence shown to the Queen, but warns: “A monarch a barge like a burnished throne, sailing up London’s river from Chelsea, home of oligarchs and plutocrats, to the City, home of the unpunished financial sector for whose misdeeds the rest of us are paying, cannot be a value-free act. Contemporary London offends as well as dazzles. So can the monarchy”.

The challenge for Britain’s royal family is to ensure that the Queen’s successor does not offend, but wins respect so that the monarchy survives and the choice of Britain’s head of state is not left to the equivalent of a Blair or a Cameron.

The Royal Barge

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Posted by: John Elliott | May 16, 2012

Congress loses sense of humour and follows BJP doctoring school books

Indira Gandhi’s pro-cartoon line is not for schools

India’s government and the presiding Nehru-Gandhi dynasty have a problem – not the policy vacuum, sliding economy, weak leadership and bullying by coalition partners that are only too well known, but a new one that has been entirely of its own making in the past week.

The government is banning cartoons in school textbooks provided for teenagers because of uproar in parliament caused by MPs who are anxious to be seen to be protecting the interests of Dalits (“untouchables” in the Indian caste system) and other political icons.

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There are two aspects to this political appeasement that was first announced last week by a terrorised-looking minister for education, Kapil Sibal (below) and then by a terrified-looking Pranab Mukherjee, the government’s leading politician, as they pleaded with screaming MPs to let them speak.

First, the decisions go against the views of former prime minister Indira Gandhi, mother-in law of Sonia Gandhi who now heads the dynasty and governing coalition, as The Indian Express has pointed out this morning…….

“Cartoonists have become an integral part of the intellectual life of a modern society,” wrote India Gandhi in 1983 in an introduction to a book of cartoons by Keshav Shankar Pillai who drew the 1948 cartoon that kicked off the row. “Some draw without intent to draw blood; some remove masks and hold a mirror to the face of society. There cannot be a cartoon without a certain amount of irreverence. But it depends on the cartoonist whether the irreverence aims at malice or irony… Shankar was not afraid to wound if there was a reason to do so,” she added, seemingly approvingly.

But maybe more significantly, Congress ministers are doing much the same as the Bharatiya Janata Party (BJP) did ten years when it was in power and Murli Manohar Joshi, who held Sibal’s post as education minister, hired Hindu-nationalist writers to eradicate Marxism and glorify India’s ancient Hindu past in school textbooks. He ordered, for example, the removal of a sensitive line written by historian Romila Thapar that “beef was served as a mark of honour to special guests” in ancient India, but that “in later centuries, Brahmans were forbidden” from eating it.

Is the way that Joshi was removing words that he didn’t like from textbooks any worse than Mukherjee-Sibal’s removal of cartoons? Joshi of course was insidiously feeding the Sangh Parivar’s nationalist line into children’s minds, hoping to indoctrinate future generations. But isn’t it just as dangerous in an open democracy for Mukherjee and Sibal to remove political cartoon commentary from textbooks as it was for Joshi to remove a reference to beef-eating?

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If Indira Gandhi was content to see cartoons showing her setting fire to Congress leaders (right) when she split the party in 1969, how can Sonia Gandhi, her daughter-in-law, allow ministers to ban it from textbooks and Sibal to describe another one as “shameful”?

It seems that there are two icons that cannot be touched in modern India. One is the Dalit caste, which is an important vote bank, especially in Uttar Pradesh (UP) where Congress and the Gandhis did appallingly in recent state assembly polls. Top of the  untouchable (in modern terms) list is Bhim Rao Ambedkar, a revered Dalit leader at the time of India’s independence, who was glorified by Kumari Mayawati, a modern Dalit politician who was chief minister of UP till the recent elections.

In the cartoon that was withdrawn last week (top), Jawaharlal Nehru, India’s first prime minister, is raising a whip behind a snail on which Ambedkar, who at the time was thought to be drafting India’s constitution too slowly, was sitting. A Dalit MP called the cartoon “insulting to Ambedkar, Nehru and the whole nation.” Others talked of the risk that such cartoons would “poison young minds”.

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“The demand that criminal action be taken against those who permitted the cartoon’s publication is reflective of a larger malaise among many of India’s politicians,” The Hindu newspaper said  two days ago. “Apparently, they think there is more political mileage in creating controversies over irrelevancies than addressing genuine issues facing Dalits such as backwardness and discrimination”.

The other icon is the Nehru-Gandhi dynasty whose current leaders have woven a web of protective untouchability around themselves that makes mocking the family unacceptable.

But the ease with which special interest groups can whip up emotions and political support goes far wider  in a society that seems to lack the capacity for self-deprecating irony and laughter and for accommodating divergent views. Such issues are maybe not surprising in a massive and rapidly changing country where the sense of humour and other attitudes vary widely, especially between urban and rural areas and vastly different levels of education.

That has been shown for several years by the establishment’s tolerance of opposition to the late M.F.Husain, one of India’s leading artists, for his depiction of Hindu goddesses, and its implicit support (courting the Muslim vote bank in the UP elections) for opposition to Salman Rushdie visiting the Jaipur Literature festival in January. In Mumbai, a leading rationalist faces jail for “outraging religious feelings” by pointing out in March that drops of water dripping from the feet of a statue of Jesus was not a miracle but leaks from a blocked drain.

This week’s events are all the sadder because MPs gathered last Sunday for a special session to mark the 60th anniversary of India’s parliament. In speech after speech, they extolled the virtues of an open democratic society that they pledged to defend. That was two days after they had disrupted parliament till the Ambedkar cartoon was withdrawn, and one day before they screamed and shouted again until the other cartoons were banned.

The MPs “showed a total lack of acumen and wisdom by wasting the nation’s time on a complete non-issue,” wrote The Hindu. “Worse, they have ensured that public life in India, already awash with hurt sentiments of one kind or another will now be inundated by a torrent of demands to ban more and more expressions of culture, art and knowledge”.

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Posted in India, India democracy, India education, India politicians, Indira Gandhi, Nehru-Gandhi dynasty, Uttar Pradesh | Tags: , , , , , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | May 8, 2012

Hilary Clinton snubs Mamata Banerjee after retail FDI tantrum

Hilary Clinton has just had first-hand experience of  the problems that the Indian government regularly faces with its unpredictably irascible – and it now appears maybe untruthful – coalition partner, Mamata Banerjee.

The story, which concerns whether or not Clinton raised the subject of foreign investment (FDI) in supermarkets when she met Banerjee yesterday, should evoke some sympathy for prime minister Manmohan Singh and his colleagues, whose policies are constantly upset by Banerjee, leader of the regional Trinamool Congress party and chief minister of West Bengal.

The Clinton experience did not however upset a two-day visit by the US secretary of state to India, nor did it overshadow a well-timed partial climb-down in parliament yesterday by finance minister Pranab Mukherjee over retrospective international tax plans that he announced in his Budget a few weeks ago.

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Clinton has been on her way back from a difficult time in Beijing (dealing with China over the blind dissident Chen Guangcheng) and stopped off on Sunday in Bangladesh.

From there it was logical to have another stop-over yesterday in Kolkata (Calcutta), state capital of West Bengal, on her way to Delhi for what might be her last India visit as secretary of state.

She presumably wanted to meet Banerjee because of the way that the chief minister has used her clout as a key partner in India’s coalition government to block policies ranging from supermarkets’ FDI to national security policy and a river water sharing agreement with Bangladesh.

Before the two women met, Clinton said in a tv interview that she would “certainly raise the United States’ desire to try to open the market to multi-brand retail” with Banerjee.  (Wal-Mart and other US companies are seeking this FDI access). They seemed to get on well for photos (above) before their talks, and they discussed West Bengal’s cultural brand ambassadors, Rabindranath Tagore, the Nobel prize winning poet and artist, and Bollywood star Shah Rukh Khan. The talks lasted nearly an hour and covered development issues such as a deep sea port, the entertainment industry, and twinning arrangements with American cities and states.

After the meeting however, Banerjee stated categorically on television that the FDI issue was not raised. This prompted the US consul general’s office in Kolkata to put out a statement a few hours later equally categorically saying it was one of the subjects covered during “a warm, vibrant and energetic  discussion”. Banerjee reacted by instructing her finance minister, Amit Mitra, to issue a statement asking the US to retract the claim – which it has not done.

Clinton snubs Banerjee

This morning, when Clinton spoke at a  press conference in Delhi, it was significant that she made no mention of meeting Banerjee. Normally she would have thanked the chief minister for the meeting and for her visit to the state, but she snubbed her by not naming her or West Bengal.

So who is telling the truth, and can the two sides obfuscate themselves out of the differing accounts? This is of course a relatively minor issue compared with other subjects discussed in Delhi, where the two countries bridged their differences over Iran’s oil exports to India, which the US opposes, and over India’s demands for the US to be tougher over Pakistan-based terrorist activities. But it is an embarrassing clash, as well as being illustrative of Banerjee’s behaviour

It is of course inconceivable that Clinton would have authorised such an explicit official US statement last night if retail FDI had not been mentioned, so it can only be assumed that Banerjee has some sort of wriggle-room to explain why she says it was not. Basically however, she seems to have been throwing the sort of tantrum that is usually aimed at India’s government.

I imagine that there is now a risk that the disagreement will harden Banerjee’s resolve to block the FDI. Indeed, was she maybe preparing to withdraw her objections but did not want that to appear to be in response to a request from the US? And, if that is so, was last night’s US statement an over-reaction?

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Posted in India, India economic reforms, India FDI, India US relations, Wal-Mart, West Bengal | Tags: , , , , ,

Posted by: John Elliott | April 25, 2012

India’s slide leads to an international down-grade

After 25 years the Bofors gun returns to haunt Congress and the Gandhi’s

It had to happen. India’s slide in the past two or three years from a self-perceived emerging economic super-power to its current crisis of appalling government performance, declining  economic statistics, and almost daily political crises has today led to a damning international verdict with ratings agency Standard & Poor’s deciding to cut India’s outlook to negative from stable.

S&P cites India’s large fiscal deficit and expectations of only modest progress on reforms, given political constraints and falls in both the stock market and the value of the rupee.

This reflects the basic problem of a lack of firm government and the international uncertainty that creates. Some economists however thought S&P’s action was premature, and Moody’s rating agency said it expected growth to be sustained, supported by “strong savings and investment rates”.

The S&P move puts at risk India’s long-term rating of BBB-, which is the lowest investment grade. It could hit the inflow of funds and thus the balance of payments if economic growth slips below current forecasts of around 7%. “The negative outlook signals at least a one-in-three likelihood of the downgrade of India’s sovereign ratings within the next 24 months. A downgrade is likely if the country’s economic growth prospects dim, its external position deteriorates, its political climate worsens, or fiscal reforms slow,” S&P credit analyst Takahira Ogawa said in a statement.

‘No need to be panicky’

Pranab Mukherjee, the finance minister, (below) responded blandly saying, “There is no need for being panicky.” The situation “may be difficult, but we will be surely be able to overcome”. That chimes with the reaction of Manmohan Singh, the prime minister (reported here last week), when he dismissed public warnings on the economy and reforms from some of his closest friends and economic advisers. He said they were “difficulties” that would be “overcome”.

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Duvvuri Subbarao, governor of the Reserve Bank of India and a former economic adviser to the prime minister, warned at that meeting that 1991’s “twin deficits” were back again. The fiscal deficit was 7% in 1991 and is now rising at 5.9%, while the current account deficit at 3.6% is higher than in 1991, and short-term debt at 23.3% of gdp is now far above 1991’s 10.2%.

Mukherjee’s reaction shows that he and his colleagues seem to assume that India is cushioned from outside pressures as it was before the 1991 economic reforms, which of course is wrong now it relies on inward direct and institutional investment. Mukherjee is basing his optimism partly on hope that three bills on pension funds, insurance, and banking will soon be passed by parliament, but it will be a miracle if that happens.

‘Lack of political and intellectual courage’

Business people reacted with horror but not surprise at the S&P news. Kiran Mazumdar-Shaw, founder of Biocon, a bio-tech firm, and a leading entrepreneur tweeted:

“Lack of political and intellectual courage is leading to India’s economic and social decline – it’s time the government acted boldly…. FM’s cajoling statement has no credibility to back it… Time for Govt to wake up and take action not be in denial…The lack of political and intellectual courage is leading to India’s economic and social decline – it’s time the government acted boldly”.

She and others however know that the government is most unlikely to act boldly because it is on the brink of imploding in a mass of major and minor crises that neither the Congress Party, led by its president Sonia Gandhi, who heads the unruly government coalition, nor the government itself headed by the prime minister, seems to know how to stem let alone solve.

Foreign investors looking into India see a government that lacks coherence and leadership in planning and implementing policies and reforms that range from foreign direct investment to land acquisition. Yes at the same time, the government has the gall to snub foreign investors by threatening multi-million/billion dollar retrospective tax demands on major companies such as Vodafone – even the Bharatiya Janata Party would surely not have been so anti-foreign, despite its nationalist swadeshi approach, when it was in power from 1998 to 2004.

When this government was first elected, it was said to have a “dream team” of economic managers – the prime minister, finance minister Palaniappan Chidambaram, and Montek Singh Ahluwalia running the planning commission. None of these men however had either the contacts or string-pulling know-how to make things happen, and they were quickly constrained by the populist reform-wariness of Sonia Gandhi and Rahul, her son and heir apparent, plus their coalition partners.

Now the prime minister, at 79, seems tired of the “difficulties”, Chidambaram is running the home ministry, and Ahluwalia’s impact slips the weaker the prime minister becomes. Chidambaram’s successor at finance, Pranab Mukherjee, a veteran and agile political problem-solver, seems to be losing his touch – never a reformer, he is leading the tax attack on foreign investors and is creating levels of uncertainty and insecurity that no modern economy could survive.

Alongside that, Sonia Gandhi has had long-term health problems, though it is not known how serious they are (or were) and she has recently seemed to be fully back at work. Rahul has lost his credibility with disastrous Uttar Pradesh state assembly election results last month and with little else to show for eight years in politics.

A general slide

Numerous other ministers and party leaders are being felled or weakened by a series of catastrophes. One of the latest is not itself of major importance but is indicative of a general slide. Abhishek  Singhvi, a senior lawyer has resigned as a high profile party spokesman and chairman of the parliamentary standing committee on personnel, law and justice after cd and u-tube clips allegedly show him having sex in his office with a supposedly career-ambitious woman lawyer.

Yesterday came inexplicable reports that four ministers had offered to resign their posts to help rebuild the Congress Party for the next general election due in 2014. Those involved denied they had done so, but the widely reported news surely shows skewed priorities. Isn’t it more important to run ministries well and boost the government’s performance before the election than to move to the party’s offices – or have the ministers decided it is best to jump from a foundering ship and hope their future looks brighter in a party lifeboat?

It is not only the economy and policy making that is in trouble. India’s once proud army is being weakened, not only by corruption scandals that block big defence orders, but by a series of internal rows that range from the army chief going to court over when he should retire and a court case (dismissed this week) against the choice of the next army chief.

Today the government faces more trouble with headlines on a revealing footnote to history. This month is the 25th anniversary of the Bofors gun deal scandal that rocked the Congress government run by Sonia Gandhi’s late husband, Rajiv, and still reverberates through Indian politics and defence ministry decision-making.

Sten Lindstrom, a former Swedish police chief who was heading inquiries into Bofors in 1987, today has identified himself as the source for the Indian end of the story. In a current interview with the journalist who was then the recipient of his leak, he said there was “no evidence” that Rajiv Gandhi received a bribe, but that there was “a political payment”. There was also “conclusive” evidence against Ottavio Quattrocchi, the Delhi-based Italian representative of Snamprogetti who, together with his wife, was a close family friend of Rajiv and Italian-born Sonia.

Rajiv Gandhi ‘watched…and did nothing’

The damning revelation is that Rajiv Gandhi “watched the massive cover-up in India and Sweden and did nothing,” says Lindstrom. “Many Indian institutions were tarred, innocent people were punished, while the guilty got away”.

And so it is today. The guilty have escaped numerous corruption scandals, most recently on the Commonwealth Games, defence deals, and mining licences. Non-performing political leaders and ministers are not replaced. Loyalty to those at the top is what matters.

Now S&P has blown the whistle – but will it have any effect?

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Posted in India, India corruption, India defence industry, India economic reforms, India economy, Manmohan Singh, Nehru-Gandhi dynasty | Tags: , , , , , , , , , , , ,

Posted by: John Elliott | April 19, 2012

Manmohan Singh’s friends meet and warn him ‘your legacy is at risk’

Friends and foes pile in on Government failures 

Two events in the past few days underline a sharp  decline both in the popularity of the Congress Party, which  leads India’s coalition government, and in the success of prime minister Manmohan Singh as an economic reformer.

People ranging from the voters of New Delhi to loyal economists and other policy allies have in effect warned that, unless something changes quickly, the government will be swept from power in 2014 and will go down in history as an administration that failed India just as it was on the brink of becoming an internationally significant economic success story.

The two events are elections for Delhi’s municipal corporations where the Bharatiya Janata Party swept the polls, and the launch of a book on economic reforms. At the book launch, the prime minister sat silently while economists and others did not laud him as he might have expected, but told him, in the words of one of those there, “your legacy is at risk” (texts and video here).

In Delhi, the BJP became the first party for 50 years to win a second consecutive term in office. Congress is trying to dismiss this as a nationally insignificant local election, but it follows a trend set by the party’s humiliating defeat in Uttar Pradesh state elections early last month plus losses in two others states and in Mumbai’s municipal elections.

More surprising, and much sadder, was the book launch where Manmohan Singh was surrounded by economists and policy makers who have worked with him for years since before the 1991 economic reforms that he launched as finance minister. The book is India’s Economic Reforms and Development – Essays for Manmohan Singh, an updated collection of essays (edited by Isher Judge Ahluwalia, I.M.D.Little – OUP – Rs395, $35, £16). It was first written in 1998 as a “festschrift” or celebration of the 1991 reforms. The new book tracks what has and has not happened since 1998.

A friend’s ‘destructive habit’

Unfortunately, I could not be at the launch, but The Economist’s South Asia correspondent has neatly caught the mood, echoing what I have heard from others. “The evening had the mood of an intervention: when friends and relations get together and, without warning, confront a loved one who has some sort of destructive habit that he won’t admit to. In normal life, it might be an addiction to drugs or booze. In India’s political life, and the case of Mr Singh, it is a desperate failure to push on with reform”.

Isher Ahluwalia presents the book to Manmohan Singh

The approach was set by Isher Ahluwalia, head of ICRIER, a leading economic policy institute, who warned that India had been taking strong economic growth rate for granted. She implied that the government has been sitting back and failing to take the steps needed to sustain that growth which was now “under threat from a deteriorating macro-economic environment and a downturn in the investment climate”.

Turning this into a potent social issue, she pointed out that Indians born in 1991 are now 21, and that half the population today is below 25. “This half of our population started life in India with 5.5 per cent growth which accelerated slowly and steadily to 8 per cent as they grew up. They are restive for more, not less”.

Unsustainable policies

Sharpening the criticisms, she pointed to the “unsustainability” of fiscal policies, incomplete financial sector reforms and infrastructure construction and regulatory frameworks, plus “macro-economic management in an uncertain international economic environment” and “challenges of overall governance”.

By this point, the prime minister must have wondered why he had, reluctantly I am told, agreed to attend the event. Ahluwalia is not only a leading economist but is also a family friend along with her husband, Montek Singh Ahluwalia, who runs the Planning Commission.

Raghuram G. Rajan, a leading Chicago academic and the prime minister’s honorary economic adviser, went further. After praising how the 1991 had changed India for the better, he warned of a “paralysis in growth enhancing reforms” that had been papered over by the high growth. This had made India “dependent on short term foreign inflows to a dangerously high extent, at a time that the international investor is increasingly sceptical about the India story”.

‘Coalition of the bad’

By the early 2000’s, he said, India had needed a second generation of reforms in areas that included higher education, public sector industries, and allocation of resources such as land and telecoms spectrum. “But powerful elements of the political class, which had never been fully convinced about giving up rents from the License Raj in the first place, had by then formed an unholy coalition with aggressive business people, whom I will refer to simply as the connected”. That led to “coalition dharma – a coalition of the bad”, which replaced the pre-1991 License Raj with a Resource Raj and led to “massive fortunes generated by the connected and by politicians”.

Duvvuri Subbarao, governor of the Reserve Bank of India and a former economic adviser to the prime minister, gently warned (above) that 1991’s “twin deficits” were back again. The fiscal deficit was 7% in 1991 and was now rising at 5.9% while the current account deficit at 3.6% is higher than 1991 figure and short-term debt at 23.3% of gdp is now far above 1991’s 10.2%.

Congress’s communist-style supremacy

Then T.N.Ninan, veteran editor of the Business Standard, mocked (without naming them) the way that Manmohan Singh has allowed Sonia Gandhi, president of the Congress Party, to dominate policy, saying, “we have copied the Communists, for whom the party is supreme and the government secondary” (a jibe that BJP leader L.K.Advani has also made). The prime minister was also hampered by  “presidential style chief ministers in the states” and coalition cabinet ministers who ran their own policies.

Through all this and much more, the prime minister sat silent for over an hour, speaking at the end only to say that he had agreed to come provided he did not have to speak. Many of those there found this stance not only inexplicable but worrying – had Manmohan Singh, at 79, really lost the wish to debate as well as the will to govern?

The book’s editors and contributors, the prime minister said, had” thrown a new light on old problems” and mentioned many challenges. “There are difficulties. Life will not be worth living if there are no difficulties. I am confident, with great determination, we will overcome.”

But where, one asks, is the “great determination”?

April 20 : No major reforms till after 2014 says chief economic adviser                            Don’t expect much to happen on reforms before the 2014 general election, Kaushik Basu, the government’s chief economic advisor, is reported to have told anxious US businessmen in Washington yesterday. “Relatively less important bills might go through Parliament but major economic reforms would hit the road block…. they are unlikely to happen before the next Parliamentary elections.” They would gather pace in 2015.


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Posted in India, India corruption, India economy, India elections, India politics, Manmohan Singh | Tags: , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | April 4, 2012

Army intrigue and graft hits India’s defences

Unexpected troop movements near Delhi in January cause alarm

Concern about worsening relations between the army and government is graphically illustrated by a story that takes up the entire front page of The Indian Express this morning about two key mechanised military units moving unexpectedly towards Delhi at night in mid-January.

The government did not have the usual notifications about the alleged exercises, which have this morning been described by the government and army as routine training.

There has never been a fear in India of a military coup but, with a weak government and serious tensions with (and within) the army, the story raises issues that have caused serious concern today. Either some sections of the army – maybe the chief of army staff himself – were in a mood to cause alarm in Delhi, or the failure to notify the exercises amounted to a serious lapse of procedures.

There have been strenuous denials from the prime minister, defence minister, and many others that anything untoward or significant took place. The Indian Express is also being criticised for over-playing the story, especially since some of the facts had apparently been reported earlier elsewhere such as here  and there were some factual errors.  Despite that, the furore illustrates the current low point in army-government relations. 

The story raises questions about who in the army or government supplied the facts to the Express, and why. It harms the image of A.K.Antony, the defence minister, who has been facing a series of crises. It is possible that he is the target here, and also the target of other recent leaks concerning the army and the army chief, possibly organised by senior political rivals and defence companies hit by his oppostion to corruption.  Significantly, Shekhar Gupta, the editor, considered it important enough to put his name on the story along with other reporters, and to clear the whole of the paper’s front page.

India’s defence capability problems are getting worse and are often in the news for all the wrong reasons – despite occasional good events such as the launching today of the country’s first nuclear-propelled submarine. Most public sector defence equipment companies have been failing the country for years by not maximising the output of efficiently manufactured equipment. As a result, India’s defence capability has been crippled in many areas by outdated weapons, and the government has generally failed to act.

Now the government faces a bitter chief of army staff who has turned whistleblower on both India’s lack of defence preparedness and a controversial army truck contract, amid complaints from frustrated private sector defence companies that are blocked from obtaining contracts by a self-serving defence establishment.

You may notice that these two paragraphs are copied from the intro to last week’s article on the coal industry, with coal replaced by defence. I could of course repeat this trick many times but won’t. I’ve done it today because of the similarities of an ineffectual government and a deeply embedded public sector establishment resistant to change – the only difference being that many of the private sector players in coal are part of the problem whereas they are trying to be part of the solution in defence.

Top Indian defence companies in the Confederation of Indian Industry have appealed this week to the prime minister to set up a National Defence Manufacturing Commission within his office (PMO) that would do what the Ministry of Defence will not do and end the inefficient and often corrupt public sector domination of the industry. But they know this is unlikely to happen during the lifetime of the current government because of its lack of leadership both in the ministry and more widely.

Surely only a comedy film producer would accept a script where newspapers splash across their front pages complaints from a country’s army chief of staff about his battle tank fleet being “devoid of critical ammunition to defeat enemy tanks” and air defence being “97 per cent obsolete”, just as the president of the country’s most powerful potential enemy arrives in town.

Yet that is just what happened last week when General V.K. Singh, the chief of army staff, (above with Antony) hit the headlines while China’s president Hu Jintao was in Delhi for a BRICS summit along with fellow leaders from Russia (supplier of much of the defunct equipment), Brazil and South Africa – as well as the world’s top defence equipment companies attending Delhi’s big biennial DefExpo show.

A letter that Singh had sent to the prime minister on March 12 was leaked to the media on March 28. It named the tank ammunition and air defence problems and said the infantry had “deficiencies of crew served weapons” and lacked “night fighting” capabilities. Elite special forces were “woefully short” of “essential weapons”, and there were “large-scale voids” in critical surveillance and night fighting capabilities.

Earlier in the week, Singh had dropped another bombshell, claiming he had been offered a $2.8m bribe by another army general to buy what he claimed were faulty Tatra army trucks (Czech made for an Indian-owned UK-based company).

General Singh is a proud and frustrated officer because he has recently lost a long-running and widely publicised battle with the government over his age (60 or 59) and thus over whether he would retire this year or next – he will now go at the end of next month. Critics allege that he made the bribe and defence equipment statements to get revenge, and a gaggle of politicians and commentators called for his immediate dismissal.

But that reaction was unfair and was quite possibly partly encouraged by rival generals and defence companies anxious to devalue his bribe allegations. The battle over his age turned partly on who would succeed him as army chief and this involved, some observers say, rival Hindu-Sikh and caste loyalties. A different general would have taken over if he had stayed another year and that might also have favoured some companies more than others, as well as giving Singh another year to try to tackle corruption.

Some critics have said that Singh over-stated the army’s poor preparedness, but his remarks were not new (and he had nothing to gain by leaking his own letter). Two years ago, at the time of Delhi’s last biennial defence exhibition, I wrote here about exhibition conference papers which said that “most of India’s ground based air defences are obsolete” and that upgrades of basic artillery equipment were “ten years behind schedule”. The then chief of army staff had just said that 80% of India’s armoured tanks were night blind, and the draft of an imminent US report said that India’s arms purchasing “lacked political direction and has suffered from weak prospective planning, individual service-centred doctrines, and a disconnect between strategic objectives and the pursuit of new technology”.

Singh and Antony should be close allies because both are unusually free of corruption – something that cannot be said for a lot of other generals and politicians. But while Singh is a man of action and has tried to clean up some of the army’s corruption (thus antagonising other generals), Antony is a weak politician scared of taking decisions that might sour his clean image.

He had neither the will nor skill to deal with Singh’s age arguments when they started a couple of years ago, nor to speed up defence modernisation – though two days ago, under pressure, he did make some decisions to speed up arms deals. He is in fact believed to be in his current job only because he is trusted as a clean and loyal politician by Sonia Gandhi, head of the Gandhi dynasty and the ruling coalition who is thought to see him as a leading prime ministerial candidate if Manmohan Singh stepped down. In such situations, dynastic loyalty counts for more than ability.

India has an annual defence budget of $40bn, including capital expenditure of $15bn, and is the world’s biggest importer of defence equipment according to a recent report, accounting for 10% of global arms imports between 2007 and 2011. China was the biggest importer but its inward trade had declined in recent years because it has dramatically modernised its defence manufacturing industry, something India has singularly failed to do. India’s defence imports are officially put at 70%, but the actual figure is far higher, maybe around 85%, if imports made quietly by defence public sector corporations (DPSUs) are included.

That takes the story back both to the army chief’s bribe charge (involving Tatra trucks – not to be confused with Tata, India’s biggest conglomerate which also makes army trucks) , and to the Indian private sector’s wish to turn the figures round and make 70% of defence equipment in the country.

Tatra trucks controversy

Critics complain that, while Tatra all-weather all-terrain trucks (above on a Republic Day parade) are widely admired for their flexible-axle agility on rough ground, only 60% of their components have been indigenised in the 26 years that the trucks have been produced for the Indian army by BEML, a public sector company. The left-hand drive has not even been changed, and the trucks are said to be excessively over-priced.

Reports suggest that complaints about the trucks were suppressed by Antony and the defence ministry in 2009, though the army chief’s whistle blowing has led in the past few days to Central Bureau of Investigation inquiries into Tatra and its UK-based owner Ravi Rishi of Vectra (which represented Eurocopter in a bid for 197 army helicopters that was shelved in 2007). The army chief tried to stop the contract when he took over and is saidm to have backed a Russian-Indian joint venture, Ural of West Bengal, whose vehicles would reportedly cost less than half Tatra’s Rs8-10m ($170,000-$200,000) – other Indian companies might also develop rival vehicles.

Allegations of corruption and intrigue stretch beyond Tatra, Singh’s age, and the whistle blowing to other army scandals including Adarsh, a multi-storey block of flats built in Mumbai for top army officers and other public sector officials on land designated for war widows. This is one of many cases arising from the army being India’s biggest landowner with some 1.73m acres. Also linked are allegations that Antony’s office was bugged, and an unauthorised defence contract. These were covered in an unusual press release issued by the ministry that named the general allegedly offering the Tatra bribe to Singh.

Many defence public sector companies like BEML import unnecessarily large amounts of components from abroad and then assemble them into finished equipment, often operating in league with corrupt suppliers, intermediaries and officials who discourage research and development of potentially rival Indian products and components. Ajai Shukla, a defence journalist and former army officer, said on television two nights ago that the DPSUs “take the whole system for a ride” with defence ministry approving their plans without proper vetting or competitive tendering.

This forms a powerful lobby against the Indian private sector being allowed to expand and explains why the CII wants the prime minister’s office to preside above the defence ministry.

Antony is not a reformer. He has even blocked the designation of 12 big companies, including Tata, Larsen & Toubro, HCL and Mahindra, as defence “champions” capable of becoming internationally recognised defence systems integrators. He has apparently been persuaded by small and medium sized companies that they would be left out, whereas they would actually gain as suppliers to the 12. He has also bowed to defence establishment pressure and watered down offset plans that would force foreign suppliers to make up to 40% of their equipment in India. These moves have serious undermined reform initiatives started when Pranab Mukherjee, now finance minister, was in charge of defence till 2006.

So I’ll finish up with the same words that ended last week’s coal article – sadly, the chances of this government making such policy leaps are slim, as has been seen in so many other areas over the past few years. But it needs urgently to address basic issues that are devaluing its once proud army.

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Posted in India, India corruption, India defence, India defence industry | Tags: , , , , , , , , , , , , , , ,

Posted by: John Elliott | March 27, 2012

India’s coal industry under attack at home and abroad

UK hedge fund challenges government on public sector controls

India’s coal problems are getting worse and are in the news for all the wrong reasons. The industry has been failing the country for years by not maximising the output of efficiently mined coal. As a result, power supplies have been crippled because of coal shortages, and the government has failed to act.

Now the government faces legal action for forcing Coal India (CIL), which it controls, to curb price rises and thus breach its fiduciary responsibilities as a public quoted company – CIL floated 10% of its shares on the stock market 18 months ago. The action, which was initiated today by a London hedge fund, effectively challenges the way that the government uses listed public sector companies for social economic purposes such as curbing inflation, and could upset its already weak programme of public sector share divestment.

Alongside that, the government is accused in a report being finalised by its Comptroller and Auditor General (CAG) of losing an astronomic Rs10.6 lakh crores ($210bn) by allocating blocks in the highly corrupt industry to private sector companies without competitive bidding.

These two sets of charges provide yet another example of how India – and in particular the current government – is failing to cope with the ramifications of running a fast-moving globalised but still semi-controlled economy in an increasingly corrupt environment.

Power shortages

The industry is dominated by CIL which produces 80% of supplies. Private sector players, mostly power companies, have entered the business in recent years. Many of them however are less interested in producing coal than in blocking activity at their mines till prices rise. Either way, India has not been getting the coal it needs, and some power generators’ coal stocks have been down to just a few days supplies.

The stock market issue arises from CIL’s highly successful $3.5bn flotation in 2010 of a 10% equity stake, which brought in its first outside shareholders including foreign financial institutions.

Since then, CIL has been seen internationally as a good stock, which contrasts sharply with its reputation in India as a slow and inefficient public sector organisation that fails to meet the country’s needs. Its chairman and top executives have enjoyed being feted abroad in the past 18 months, but the international view is now changing because neither the government nor CIL has faced up to the implications of a public sector company’s responsibilities to maximise profits for its shareholders.

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Children’s Investment Fund Management of the UK, a hedge fund which has a 1%-2%  equity stake and is CIL’s largest shareholder after the government, is accusing the management of failing in its fiduciary duty because it has accepted “unreasonable and unlawful directions” from the Government on pricing. CIL sells its coal at 40-70% below market prices and recently accepted a government directive to cancel a price increase.

The government appears to have brushed the criticisms aside, and Alok Perti (right), the government’s secretary for coal, is reported to have said that the fund could sell its shares if it isn’t happy.

That may be because risk factors mentioned by CIL in its 2010 share prospectus warned that the  government’s interests as the controlling shareholder “may conflict with your interests as a shareholder”, and that the coal price it charged “does not fully reflect market prices of coal in India or in international coal markets”.

CIL has however suddenly become more cautious and has refused, since the fund started its attack, to agree to a request last month from the Prime Minister’s Office (PMO) to sign 20-year fuel supply agreements with power producers. These agreements would bind it to deliver at least 80% of the contracted coal, and make up any shortfall on the 80% with imports that would probably cost up to 50% more than Indian coal. Reports suggest that independent directors on the board recently opposed the move because they knew that the coal delivery target could not be achieved. The board is believed to be reconsidering the demand tomorrow (March 28).

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Chris Hohn (right), chief investment officer of the Children’s hedge fund, which makes large donations to charity, is an internationally known activist shareholder. He has hit headlines for several years with demands for companies in various countries including Japan and Germany to change their practices. In a television interview yesterday, he accused CIL of “an illegal breach of their fiduciary duty”.

This raises important issues for the conduct of partially privatised public corporations, but the problem is not new. Pradip Shah, who runs Mumbai-based IndAsia Fund Advisors wrote four years ago that, “faced with opposition protests on price rise, the central governments have been bottling inflation by asking oil companies to subsidise petroleum products for the consumers”. This meant that public sector oil companies that had 20% to 45% of their equity floated on the stock market were then losing over $120m a day on government orders.

It has taken an international hedge fund to blow the whistle. Significantly, that has been possible because of India’s right to information legislation. Hohn bases his charges on documents exchanged between Perti and the CIL board – documents that in past years would have remained confidential.

What the government now needs to do is obvious. Firstly it should set up an overall energy regulator (not just a coal regulator which government is considering) to preside over supplies in all energy sectors including items such as the allocation of mining licences and pricing. It should also rationalise its subsidy arrangements so that public sector corporations can maximise their profits while the poor are catered for separately.

Sadly, the chances of this government making such policy leaps are slim, as has been seen in so many other areas over the past three years.

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Posted in environment, India, India corruption, India economy, India energy, India infrastructure, India public sector, India UK | Tags: , , , , , , , , , , , , ,

Posted by: John Elliott | March 18, 2012

Rushdie rubbishes ‘dim’ Imran Khan while Pranab Mukherjee plays ‘party pooper’

It’s been quite a weekend. India’s finance minister Pranab Mukherjee presented a desperately ineffectual and unimaginative Budget on Friday, and then failed to turn up at India Today magazine’s annual conclave yesterday (Saturday) morning, where he was billed to be the first speaker.

He withdrew not because he was too busy or had lost his Budget nerve, but because he did not want to attend the same event as Salman Rushdie (below), the famous fatwa’d and Booker prize-winning Indian-born author who withdrew from the Jaipur Literature Festival two months ago because of alleged death threats.

Apparently Mukherjee was worried about being criticised by Mamata Banerjee, chief minister of West Bengal, for being at the same event as an author accused of insulting the prophet Mohammad with his 1988 novel, Satanic Verses.

Banerjee has been using her Trinamool Congress party’s role as a small minority member of the governing coalition to wreak havoc on policies, and Mukherjee did not want to give her a new weapon. She has for the past few days been trying to block very small increases in rail fares and tonight (Sunday) has forced Dinesh Trivedi, the railway minister who belongs to her party, to resign.

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So Mukherjee stayed away, as did Akhilesh Yadav, the new 38-year old chief minister of Uttar Pradesh (UP) fearing, conference sources tell me, criticism from older members of his party who would like to trip him up in his new post. Omar Abdullah, the chief minister of Jammu and Kashmir, also stayed away, though he insisted to me in sms messages that he had a potential problem to deal with in his state. Both chief ministers have big Muslim populations

These withdrawals followed a much more interesting and headline-catching boycott by Imran Khan, the veteran Pakistani cricketer, who hopes his Tehreek-e-Insaf party will win the next Pakistan election with right-wing support from the army and Islamic parties. Imran was billed to be the speaker at the conference’s closing dinner last night, and his absence meant that Rushdie was promoted from a lesser afternoon slot to take his place.

Sir Salman Rushdie (to give him his full title) did little in his 30-minute speech (video here) and 50 minutes of questions and answers to build on his reputation as a serious literary figure, but instead generated world-wide publicity for often cheap remarks that will no doubt help sales of his books..

Im the Dim

Much of his speech, which was generally well received and good entertainment, was a music hall act aimed mainly at insulting Khan. He even asked his audience whether they had “noticed a physical resemblance of Imran Khan and Gadaffi”. He followed that by suggesting the cricketer-turned politician was a “dictator in waiting” and repeated a joke, which has been circulating in Pakistan for years, that he was known in his London socialite days as “Im the Dim”.

Rushdie then turned on the Indian government for keeping him away from the Jaipur festival, which was a gross over-simplification of what happened when his appearance on the festival programme became tied up with the UP election campaign.  He also mocked Rahul Gandhi, heir apparent head of the Gandhi political dynasty, whose leadership of Congress’s UP election campaign was a disaster.

Significantly, the Islamic activists who effectively blocked Rushdie’s visit to the Jaipur festival did nothing to stop him appearing yesterday – just as they did not object when he spoke at the same India Today conference two years ago. This underlines the belief that political parties, including Congress, used the Rushdie controversy in January to woo Muslim votes in UP. That led Rushdie to say that Gandhi had spent “years and years of kneeling down in front of every mullah you could find, and it did not even work”.

“Here in India a combination of religious fanaticism and political opportunism and, I have to say, public apathy, is damaging the freedom on what all freedoms depend: freedom of expression,” said Rushdie in one of his more serious moments.

Party Pooper

A far more thoughtful and reasoned speech was made earlier in the day by Vince Cable, Britain’s commerce minister, on whether “capitalism can be compassionate”. Reflecting battles he has had as a minority coalition member of the UK’s Conservative-led government, he said “financial capitalism is potentially toxic unless regulated”.

A headline in the India Today group’s Mail Today newspaper yesterday morning said “Pranab Plays Party Pooper”. It referred to the Budget, where Mukherjee increased indirect taxes and laid out unrealistically over-optimistic hopes for controlling India’s economy.

But the headline writer must have known that Mukherjee was also dropping out of the conference – an action that showed the government is not its own boss, having ceded that role long ago to its minority coalition partners.

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Posted in British politics, India, India books, India British relations, India Pakistan, Kashmir, Pakistan, Rahul Gandhi, Uttar Pradesh, West Bengal | Tags: , , , , , , , , , , , , ,

Posted by: John Elliott | March 15, 2012

India’s design awakening begins in Delhi

India’s modern and contemporary artists enjoy an international following, and the country’s manufacturing industry is becoming recognised abroad. But India’s design industry is scarcely known or recognised, even in India. There are markets for Indian fashion and traditional handicrafts, but little attention is paid to modern design – except maybe for autos, the high-end of home interiors and corporate logos – and there is scant design education.

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“Companies live on design but don’t see it as an important function,” says Rajshree Pathy (left), an Indian entrepreneur and contemporary-art collector, who ran the first India Design Forum in Delhi last weekend.

“India is one of the largest consumers of design, be it automobile, textile, industrial or product design, so there’s no end to the need for design professionals, but CEOs see it as elitist or something just for handicrafts.”

India is now emerging, 20 years after the economy began to open up, into a new consumer society where the drab products, poor quality, shortages, and inefficiencies of India’s pre-1991 controlled economy are becoming less acceptable.

There is a parallel here with the UK. By the end of the 1950s and early 1960s, people were tiring of the bleak decades after the Second World War and began to break out and recognise the importance of design (for British style of the 1950s, see the vast carpet at Delhi’s new airport!).

By the early-1980s, this led to design being accepted in the UK as an interesting and viable profession and that could now happen in India, whose rich cultural history has yet to have a significant influence on modern designs trends.

“We do not know Indian brands but we should, considering the country has the knowledge, infrastructure, intelligence and rich culture to offer the world. If India does not establish some brands soon it will be too late since all the imports will just take over the country,” says Karim Rashid (below), a US-based designer.

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He says it was a shame that the Delhi hotel he stayed in for the forum had “Italian lighting, Italian furniture, German sinks, German faucets, French products” – he was in the Meridien Hotel, which prides itself on its support for modern design but, like most Indian hotels, shies away from exposing its guests to local products (even breakfast marmalade!).

Inspired by the Dubai Design Forum four years ago, Pathy organised the two-day event (which she plans to repeat next year) through her south India-based Coimbatore Centre for Contemporary Art. Working with her daughter Aishwarya, she brought together some 700 Indian designers, architects and students with some famous international figures, such as Rashid, Paola Antonelli, a leading American curator, an America-based designer (below), and Lidewij Edelkoort, a fashion expert from France for a series of lectures and debates. 

However, when she went “knocking on doors” for sponsors in India, Pathy was regularly rebuffed. She says that most of the people she approached saw design as a subject for fashion and luxury goods, with little relevance to their own work.

The conference’s list of 40 sponsors included only two manufacturing and infrastructure companies – Punj Lloyd, a leading engineering group, and Titan, a watch manufacturer in the Tata group. More mainstream Tata companies, such as Tata Motors and Tata Steel, were not there, nor for example were Mahindra and Hero from the auto industry and Godrej and ITC from consumer goods.

“In the West, design plays an integral role in improving the quality of life,” says Atul Punj, chairman of Punj Lloyd. “In India it must have relevance for the masses.” His company chose to support the forum to “help shape design aspirations” in everyday life, including “sustainable cities in India with contemporary design in public utilities, buildings and infrastructure”. Given the unauthorised and uncontrolled expansion of most Indian cities, frequently with poor quality construction, that is a significant aim coming from the head of a major construction group.

Anand Mahindra, who runs the Mahindra group, says he stayed away partly because the India Design Council, which he heads, has yet to decide how to help such ventures. His interest in design is shown by the evolving styling of his company’s passenger vehicles, culminating in its new curvaceous XUV 500 (below) that is a welcome break from the look-alikes that dominate India’s roads. Tata’s Nano mini-car (below) is also the result of extensive design activity.

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Rashid and other speakers talked at the conference about the need to realise that designing involves reacting to “the needs of society, functions and aesthetics”. That was quite different from the more common “styling” that adapted established ideas, as happens with many car designs for example. There was massive potential, he said, to use Indian ideas in contemporary settings, designing for international markets.

“Global brands use design companies in places like Paris and New York that often involve Indian craftsmen and designs, so why isn’t India doing it itself?” asks Pathy. Her answer is that there is “no design thinking”, and that such an initiative-based concept does come easily in a country where all teaching is by rote and “the education system doesn’t allow you to be a creative thinker”.

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A National Institute of Design in Ahmedabad, Gujarat, produces a few dozen design graduates but that is a tiny pocket of excellence. Anand Mahindra agrees that design is not yet accepted as enough of a mainstream activity in India and that there are not enough design schools – something his council is working on.

India undoubtedly has the brains and the massive human potential to bridge these gaps, as Mike Knowles, a British furniture designer and dean of the Delhi-based Sushant School of Design, has discovered. “One major advantage India has over other nations is the dynamic qualities of students who quickly grasp the fundamentals of great design, with their many-millennia old culture exploding into creative activity,” he says.

So now is maybe the time for a generational change – the forum’s 700 delegates were noticeably younger than at most Delhi conferences and included 100 students. Currently however, says Knowles, a lack of design education is the main problem. “Most young people with design skills would rather call themselves artists because that’s where the money and glory is”.

An earlier version of this piece is on The Economist‘s books art and culture blog, Prospero http://www.economist.com/blogs/prospero/2012/03/india-design-forum .

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Posted in India, India entrepreneurs, India environment, India festivals, India infrastructure, India innovation, Indian modern art, Tata | Tags: , , , , , , , , , , , , , , , , , ,

Posted by: John Elliott | March 6, 2012

Crony capitalists line-up changes in UP as Rahul Gandhi stumbles

As India waited this morning for results of five state assembly elections, the most telling headlines in the day’s newspapers, along with Rahul Gandhi’s dismal failure to galvanise votes in Uttar Pradesh (UP), were on share movements yesterday of leading companies – Jaiprakash (JP) group companies went down while Anil Ambani’s Reliance (ADAG) stocks went up, as did shares of sugar companies.

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Those share movements, which continued today till they were overtaken by heavy falls on the stock market, reflect the ousting in the UP elections of the blisteringly corrupt Bahujan Samaj Party (BSP) government, led by chief minister Mayawati who favoured JP companies with massive land deals and a grand prix circuit, and also persecuted sugar companies with vindictive extortion.

They also welcomed the overwhelming victory of the Samajwadi Party (SP), whose leader Mulayam Singh Yadav (right) has helped Ambani with land for power projects in the past and will be kinder to sugar companies. Another group that will benefit is Sahara, headed by Subrata Roy, which has large real estate interests. 

Such is the condition of crony politics in India’s largest state which has a population of some 200m – roughly the same as Brazil, or France Germany and Italy combined. The question now is whether the SP, led by Mulayam Yadav, 72, who has been chief minister three times before (1989-91, 1993-95 and 2003-07), will abandon the gangland ridden “goonda raj” of his past administrations and let his 38-year old son Akhilesh (below), who has been an MP since 2000, push constructive development policies.

Overall the state assembly election results announced today have been extremely bad for Congress, not only in UP where Gandhi’s dynastic credentials failed to make a mark, but also in Punjab which it unexpectedly lost to the regional Akali Dal party, and in Goa where it was routed by the Bharatiya Janata Party (BJP) after its state government’s involvement in extensive mining corruption. To varying degrees, these results show voters reacting to Congress’s dire performance and weak leadership nationally, with the government’s series of corruption scandals and other policy failures, as well as to price rises and other local issues.

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In UP, once its main political base,   Congress did dismally – even losing heavily in three parliamentary constituencies (Amethi, Rae Barelli and Sultanpur) where Rahul and Sonia Gandhi are the MPs. It won only 27 seats in the 403-seat assembly, up from 22 last time (see table below). That was far far short of the 100-plus it had hoped for, and less even than the figure of around 60 that would have been tolerable. Its vote share was marginally better, rising from 12% to 17%.

Gandhi had seemed to be having a good election campaign in terms of personal image because he developed, during some 200 meetings, into a powerful speaker (as I noted here a month ago). However he appears to have had little impact on many places that he visited where he garnered widespread publicity for chatting and staying with villagers.

He and his family projected their dynastic credentials with aplomb, but the result will inevitably lead to questions about the future of the clan. Despite his protestations of commitment to UP, Gandhi was not identified personally to the future of the state because he was not standing as the potential chief minister (that would have been an extraordinarily difficult  job, which he scarcely needs when the prime minister’s job has – at least till now – been within his grasp). He also spent most of his time telling his massive poor audiences what they did not have, and how awful Mayawati’s government had been, instead of having concrete proposals for boosting their livelihoods.

That was a losing formula that was made worse, according to party spokesmen, by weak constituency-level organisation and ill-advised selection of candidates. The lesson therefore is that the dynasty’s assumed “magic” has limited currency, though Gandhi’s energetic campaigning might well help Congress in the next general election that is due in  2014.

Speaking on Indian tv this afternoon, Gandhi took responsibility for the UP defeat and said he would “continue working for the people” and to improve the country’s political system. “I expect some victories and some defeats along the way, and this is one of the defeats,” he added, indicating some analysts are suggesting that he does not have ambitions to enter the government and become prime minister any time soon.

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Gandhi had an easy target in Mayawati, whose overwhelming corruption and self-aggrandisement has been among the worst ever seen in independent India. Businessmen have told me she extorted an alleged $100m a year from the sugar industry, mainly by using minor breaches of regulations to demand corrupt payments that far exceeded routine bribes. She started court cases against reputable heads of well known companies, who sometimes fled to avoid jail. In futile attempts to clean up her government’s image, she sacked or suspended over 20 ministers in December and dropped contentious candidates, but it was clearly too little too late.

Economic growth in UP over the past five years of around 6%-7% has looked good on paper, but neighbouring states did much better and the growth was focussed to a considerable extent on Mayawati’s pet infrastructure projects, leaving vast areas of the desperately poor state under-developed. She is also credited with improving street-level law and order, which was appalling when Mulayam Yadav was last chief minister, and she always relies on the state’s strong Dalit (bottom of the caste hierarchy) voters for support – but these factors did not save her from defeat.

The Bharatiya Janata Party (BJP) had mixed results. It unexpectedly won control in Goa, but marginally failed to win a clear victory in Uttarakhand (a state adjacent to UP). Its score in UP was worse than predicted and it even lost for the first time ever in Ayodhya, a town seen as a symbol of  BJP power and Hindu nationalism. 

It is too early to interpret all the national implications of the polls. Both Congress and the Gandhi clan have been weakened. All parties, including some in the Congress-led coalition, will feel empowered to step up their attacks. This affects the stability of the government, which has to present the Budget next week and then get it through a probably turbulent parliament. The results also change the balance of power for Rajya Sabha (upper house) indirect elections later this month and the choice of India’s next president in the summer. Much will depend on whether Congress can rely on parliamentary support from  the SP and BSP.

The most constructive hope from the results is that Mulayam Yadav (once a kushti mud wrestler) and his son will lead UP better than the family (which includes several carrying the “goonda” tag) has done in the past – with Akhilesh Yadav maybe showing that dynastic succession can sometimes provide constructive leadership from a younger generation, even as Rahul Gandhi’s born-to-rule image takes a beating.

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Posted in India, India corruption, India general election, India politicians, Manmohan Singh, Nehru-Gandhi dynasty, Rahul Gandhi | Tags: , , , , , , , , , , , , , , , ,

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