Demonetisation in Retrospect

Pic Courtesy +Mint 

This Blog has moved to Right Angle: www.sandipghose.com. To read article Click here

What happens when “post truth” meets statistics?

One enters a new world of counter-factual spins.

So, now that the third-quarter GDP estimates indicate growth at a healthy 7%, tighten your seat belts and get ready for a new wave of economic sophistry on demonetisation.

This writer has neither claim nor pretence of being an economist. However, as a roving marketer he has travelled through several states since demonetisation was announced on 8 November.

Like every other Indian, he, too, had some views on note bandi—based not on erudite economic theory but observations and anecdotal conversations during field trips, which he had penned down from time to time.

After some initial hesitation most political parties, save some notable exceptions like Nitish Kumar’s Janata Dal (United), had jumped on to the bandwagon of demonising demonetisation. A couple of leaders among them, notably Mamata Banerjee and Mayawati, were particularly strident in their protest.

Economists across the spectrum lambasted the move, except a few sarkari ones who were seen to be beholden to the government of the day.

The first signs that demonetisation might have been over-flogged came with the Maharashtra civic polls. Similar, murmurs were probably also emanating from the Uttar Pradesh campaign trail, which saw a subtle shift in the discourse to traditional topics like caste and community with the mandatory Om Ganeshaye Namah mention of development.

Also read: What explains 7% GDP growth despite Modi’s demonetisation drive?

We have already started hearing, the cautionary “don’t count your chickens too soon; wait for the Q4 estimates” kind of counsel that could well turn out to be true. The analogy of a speeding car brought to a screeching halt by firing at its wheels has quickly changed into the explanation of momentum carrying the juggernaut through an extra quarter. There may be some merit in that argument too, but it still does not explain the paradox fully.

So, where is the disconnect between theory and reality?

First, as this writer has argued in the past, it was erroneous to judge demonetisation through the single lens of economics. There were multiple dimensions to the decision of demonetisation, even if some appeared to have been added as afterthoughts. Therefore, one needed to view through a prism of economic, political and governance objectives.

Second, one cannot paint the entire country with a single brushstroke seeing the queues outside ATMs in Delhi. There are not only differences in the economies of states, say between Uttar Pradesh and Maharashtra, but also the attitude of people. For example, the public reaction to dry ATMs in south India was very different from those in Kolkata.

Similarly, one found traders in “rurban” Rajasthan and Madhya Pradesh to early adapters of digital transactions than, understandably, in rural belts of Hindi-heartland.

Finally, the pundits and politicians in their eagerness to trash demonetisation, forgot to factor in the resilience of the average Indian, whose DNA has been engineered to cope with shortages and scarcities. Living with the vagaries of nature and whims of the masters, they are used to long periods of hardship due to natural calamities, such as poor monsoon or floods, or man-made crises created by hoarding or chronically inefficient public distribution system. For them, demonetisation would be only a small speck in memory.

While the government may be guilty of trying to retrofit logic to justify a decision that seemed to be on the verge of backfiring, politicians and analysts critical of the government be can be accused of selectively ignoring or debunking indicators such as statistics of rabi sowing or record car sales in January. There was also little mention of the bumper kharif crops after a good monsoon in most parts of the country.

One read about alleged retrenchment of staff by a certain private bank, but the record profits declared by the same bank in the third quarter did not receive the same attention, just as largescale hiring by one of their foreign peers expanding their operations in India.

As a roving salesman what one observed in the behaviour of the rural consumer was postponement of discretionary purchases that normally follow a good harvest. A sort of Giffen effect kicked in. The credit cycle increased in the villages with delay in realisation of crop sale as well payment for seed purchases. There was also a readjustment in buying patterns with a move towards small unit size packs for many products. But, hardly any peer group competitors in the field talked of more than a 10% shortfall in their sales targets.

What, of course, did not happen is much of the channel stock up that traditionally takes place in December in anticipation of a demand surge post winter. This was more than compensated by a pick up in January, but without the increase in prices that usually accompanies it. Therefore, those looking for speculative gains and stock profit were left disappointed.

Sectors like real estate have indeed suffered. That is because it was the largest playground for cash transactions. In sharp contrast, one did not see much contraction in infrastructure work except in poll-bound states.

It would be disingenuous to say the economy is hunky-dory just as it would be dishonest to make doomsday predictions. At the same time, there may not be a sharp “rebound” as many were expecting in the fourth quarter—simply because there was no major dip in third quarter. The real action will start in FY 2017-18.

An iconic Bengali satirist wrote a story of an astrologer, who predicted to a person who had come to see him that the stars would not be favourable till his age of 38. Excited, the client asked what happens after 38? Pat replied the astrologer, “After that you will get used to bad times”.

Whether people have gotten used to demonetisation or not, it is stale news and it’s time that our politicians and economists start to look ahead. The next two years indeed holds a lot of promise and interesting possibilities for the Indian economy. With goods and services tax on the horizon and a thrust on infrastructure spend in the last lap of Modi government, we must make the most of it instead of being stuck in a chronic desi malady of naysaying.

Twin Blog: Economic Survey and Budget 2017

My twin blogs published in +ABPLIVE on 

Economic Survey : http://www.sandipghose.com/right-angle/2017/2/3/salvation-lies-in-infra-and-welfare-spending

Budget : http://www.sandipghose.com/right-angle/2017/2/3/modi-stays-the-course-pushes-strategic-reforms

Please do read and share.

Once again reminding you  Right Angle now has a new address: www.sandipghose.com

Please note the change and subscribe to the feed.

Also please share with friends and your Contact Circles.

Thanks for support over all these years (16 years of blogging since 2001 January)

Best regards,

Sandip

Aam-aadmi and Demonetisation

Latest Blogpost: 

The aam-aadmi must be rewarded for their travails and support of #DeMonetisation by lower taxes, interest rates and social security schemes:

Read at: Right Angle by Clicking Here:

A Dummy's Guide to GST

GST breakthrough a watershed moment in India's Economic History

Photo courtesy +ABP NEWS 

Article first published in +ABP NEWS  Read here


The introduction of Goods and Services Tax, or GST, is arguably the most ambitious tax reform attempted by India since Independence. It aims at transforming the country into a common market, dissolving artificial economic barriers that create differential tax regimes for similar products and services across States.

It is a destination-based tax system that levies tax at the consumer end rather than at source and various stages of value-addition – which adds  layers of taxation ultimately inflating the cumulative tax impact.

Recognising the importance of Indirect Taxation in a country like India, where the Direct Taxation base is small, GST casts the net at the point of consumption or delivery of service while rationalising the total levy, merging multiple taxes such as Excise Duty, VAT, Service Tax, etc into one composite rate.

GST is designed to give a boost to manufacturing, not only by reducing the incidence of tax (from a current compounded level of 25-26% to 18%) but also increasing the physical and bureaucratic ease of inter-State movement.

At the same time there are concerns about States that are high on manufacturing losing out to States that are essentially consumption centres. This is addressed by guaranteeing States compensation for revenue loss for up to five years.

GST will also radically change the way distribution and transportation of goods happen that should benefit both consumers and manufacturers, ultimately also expanding markets and reach.

Costs of maintaining warehouses in each State and non value-adding transhipment will practically disappear, adding to the profitability of manufacturers while making it worthwhile for organised logistics companies to invest in more efficient vehicles and systems of transportation.

However, in the process of harmonisation, taxes on services may marginally increase from current levels, which would pinch the middle-classes more palpably, as eating out, travel and mobile bills become more expensive.


Similarly, some sectors – like textiles and branded jewellery that enjoy a lower tax rate today will get more expensive. Therefore, whether it will be perceived as “Acche Din” by the common man is doubtful as they are more prone to notice the taxes on service bills (example restaurants) while taxes get easily hidden in the MRP (cost of goods).

However, what the Government is banking upon is the overall boost to the economy. If indeed the expected 1-2% spurt in GDP does materialise, all will be forgiven.

While GST would be a major political victory for the Narendra Modi Government and take away its image about not being able to push through economic reforms, its implementation is not going to be a painless process.

Therefore, putting in place a grievance redress mechanism will be as important as careful chaperoning of the process of implementation. Any setback will be a bigger embarrassment than not being able to pass the Bill.

GST will be one achievement that would vindicate Narendra Modi’s unshakeable trust in Arun Jaitley whose singular contribution it would be for getting the main Opposition to the negotiating table.

But, it will also need all of Jaitley’s legal acumen to overcome the technical minefields that are strewn in the path of the GST’s roll-out.

Interestingly, States have insisted on exemption of alcohol for “human consumption” for understandable reasons. So there is no relief for the wicked.

Despite the negative surround-sound Modi is on track

Why BJP needs to form government in Uttarakhand and Jammu-Kashmir

Article first published in +ABPLIVE  click here to read


Even some avowed Narendra Modi supporters were surprised by BJP’s apparent desperation to form governments in Arunachal, Uttarakhand and, now, Jammu & Kashmir. While in Arunachal and Uttarakhand they seemed to be in an unseemly rush to topple incumbent regimes, in J&K they eschewed pride to put up with months of obdurate posturing by Mehbooba Mufti hoping to reach an understanding. The reason is not far to seek. After decimation in Delhi and Bihar and dim prospects of in West Bengal (Assam is still an open book) – Modi-Shah combine need to pocket as many Rajya Sabha seats as possible to get out of the parliamentary stalemate.

Travelling through Uttar Pradesh last week – though it is early days yet to make any predictions no matter what sundry ‘Mood of the Nation’ polls might have to say – it is absolutely clear that neither Samajwadi Party or Bahujan Samaj Party are going to be a push over in 2017 unlike in 2014 Lok Sabha Polls. While Mayawati and BSP are understandably banking on the anti-incumbency factor, in recent months Akhilesh Yadav has been working hard at not only retaining SP’s core-constituents but also winning back the disenchanted voters by some ‘visible’ efforts at governance and development. Prashant Kishor and Priyanka Gandhi may not work magic with Rahul Gandhi – but in an alliance Congress can fetch some incremental seats, as it had arguably done for MGB in Bihar. But, by present reckoning, Lucknow pundits don’t give BJP more than 80 seats in the Assembly – unless miracles happen between now and 2017.

The interesting phenomenon in all this is - while BJP’s stock is floundering and RSS continues to be ambivalent towards the government – Modi’s own rating remains high. Sure, people don’t rule out the possibility of a compromise choice of PM emerging (for example, Nitish Kumar) if a third “secular” front has the numbers in 2019 – but there is still no single challenger to Narendra Modi at the national level. For all the hype built around Rahul Gandhi V 2.0 – he will be at best a supporting cast if Congress is not the largest party in a coalition. And, much as Arvind Kejriwal may try to position himself as the already anointed ‘PM-in-Waiting” – no seasoned politician – like Lalu, Nitish, Pawar, Mulayam  and even Mamata - will trust him in the PM’s chair.

The silver lining in all this is – BJP is showing a new resolve not to allow the economic agenda to be stalled by Congress’ perverse obstructionism. Modi and Amit Shah know – rhetoric won’t carry them beyond 2016. The cash registers – both for business and the public have to start ringing sooner than later – if Modi is serious about winning a second term in 2019.

Many believe Budget Session 2016 will be the turning point for Modi Sarkar. For the first time it is showing signs of getting the act together in Parliament with a strategy in place. Arun Jaitley presented a non-spectacular budget but with both economics and heart at the right place – which even the opposition found difficult to critique (barring the EPF proposal that in hindsight appears was a red-herring deliberately planted to divert attention from more substantive provisions). Apart from getting the Aadhar Bill passed - arguably by procedural gamesmanship – and with other important legislations like the Real Estate Bill slipped under the radar – BJP’s floor managers are beginning to look almost savvy .

Placing the Mining and Minerals Development and Regulations Act Amendment in Lok Sabha the government has shown the will to bite the bullet on policy bugs that are tripping the economy. The acid test will, of course, be GST – but there too Arun Jaitley is exuding greater confidence than he was even a few weeks ago.

It is clear Modi is proceeding as per a plan. That the scripted “angry-acts” of Rahul Gandhi and the surround sound of ‘tolerance’ and FOS has not rattled the Prime Minister was obvious from his speech at the BJP Conclave – where he asked the members not to get distracted by “opposition propaganda” and carry the message of development (Vikas) to the masses.

Now with greater alignment between the RBI Governor and the Finance Ministry and BJP’s increased strength in Rajya Sabha reforms can go through the economy should finally get rolling, as predicted by many. The Budget signaled a significant course correction towards “Bharat”. As increased spends on MNREGA with focused and leak-proof digital disbursement through Aadhar backed Direct Cash Transfer Schemes start reaching the target population and Social Security Innovations like Jan-Dhan and Fasal Bima Yojnas begin to bear fruit – the “Acche Din” slogan may not sound like “Jumla” anymore and put fresh wind into BJP’s sail.

Can Modi afford to dump Jaitley ?

By attacking Arun Jaitley, Modi opponents trying to isolate him

Article first published in +DailyO India Today (Click here to read)

Delhi was rife with rumours about Arun Jaitley's imminent shift from the finance ministry before Budget making starts. Post the Bihar debacle as talks of a Cabinet reshuffle subsided - the chances of Jaitley's removal also receded. After all, with Amit Shah cut to size he remained the prime minister's strongest ally both in the party and the government. It is, perhaps, for this very same reason - Modi's detractors and Jaitley's foes took it upon themselves to do what Modi himself couldn't afford to at this juncture.

Much is being made of the prime minister's "will come out in flying colours" remark comparing Jaitley with Advani. Whether it was a subtle hint at resignation or not - it is significant that the PM broke his customary reticence on such matters. He has reasons to be worried - because the attackers were coming too close for comfort. After Shah and Jaitley, they could next take on Modi directly - as with these two strong lieutenants politically neutered - he would be quite lonely in Delhi. For all his moral grandstanding, Jaitley himself looked rather rattled - knowing he was directly in the line of fire. This is apparent not just in his filing the defamation suit against Kejriwal, but also in his accusation that Kirti Azad met Sonia Gandhi.

Although the ire of the BJP "old guard" and the "fallen-by-the-wayside" was at the collective entity that Arun Shourie called the "Trimurti" - it was Jaitley who they thought was the illegitimate usurper - even after losing his maiden Lok Sabha bid from Amritsar. It was a view that found support even from Modi supporters who felt Jaitley was the Lutyens' surrogate in NDA coming in the way of bold actions. Now, with Amit Shah having been eliminated by his own self-goal in Bihar, Jaitley was easy for the picking.

It may not be a coincidence that the three major scandals to rock the Modi government - that put Sushma Swaraj, Vasundhara Raje and, now, Jaitley, in the life of fire - had something to do with cricket. Vasundhara and Sushma could have been targeted on many issues, but for Jaitley, cricket is, perhaps, the Achilles Heel that opponents were smart enough to latch onto.

The rivalry between Jaitley and Swaraj is one of Delhi's worst kept secrets and has been well documented by some senior journalists. Many, therefore, believed "Lalit-gate" could have been inspired by the Jaitley camp to put Swaraj and Raje on the mat. Lalit Modi didn't pull his punches even then.

Like many in the BJP today Jaitley owed his rise in BJP to Advani - who had appointed him party spokesperson that gave him a national profile. However, post Advani's Jinnah faux pas, he was quick to jettison him and also one of the early Delhi entrants into the Modi camp. While Advani's protégée - Sushma Swaraj - was dithering to accept Modi as PM candidate, Jaitley had decidedly crossed the Rubicon.

The interesting pattern that is emerging now is the anti-Jaitley axis, which seems to be cutting across party lines in reverse trajectory from AAP to Congress and now finally coming home to Advani's residence. It's easy to dismiss this as transient opportunism, though irony dies when Congress spokespersons and Kejriwal accuse BJP of lacking inner-party democracy and shooting the messenger. The truth could run deeper. The "enemy" may have penetrated the inner ranks of the BJP. By eliminating Jaitley and Shah they are hoping to isolate Modi, forcing him to fend for himself. This may be a high-risk strategy - as one can't predict how Modi will react.

So one is waiting with bated breath to see what Modi does on his return from Russia and Afghanistan - whether he'll choose to cut his losses by jettisoning Jaitley or declare war by consolidating his ranks for a fight to finish.

Life after Bihar for Modi Bhakts

Bhakts flummoxed as BJP leadership goes MIA

Article first published in +ABPLIVE Click here to read

If 2014 was the best of times, undoubtedly this is the worst of times for Modi "Bhakts". I define "Bhakts" - as people who had unconditionally reposed their faith in Narendra Modi to pull the country out of the woods. It's not that the more rational ones among them (an I would like to include myself among them)  - weren't apprehensive of a setback in Bihar. But they hadn't bargained for a total rout. The so called "revolt of the elders" came as an under the  radar missile - which took everyone by surprise - even as the BJP Parliamentary Board was in a huddle trying to find its feet after the drubbing. It was palpable the leadership was flummoxed and didn't know how to react.

At this crucial juncture, Prime Minister Modi hopped onto Air India One for his London and Turkey outing. The 'narrative' was left pretty much for the media to run - with top leaders withdrawing almost into a shell. It wasn't clear who was in-charge in the PM's absence both in the government and party - except for a few feeble interventions by Jaitley and low key public appearances by the now chastised Shah. If there were backroom parleys happening for damage control - there were no signs of it outside.

Opposition as stunned as BJP

Meanwhile, among news on the process of government formation in Bihar and stories about how Nitish with his come-on-the-rebound whizkid Prashant Kishore had pulled off the impossible - one could sense a new surge of energy in Congress - as was visible in Sonia Gandhi's scathing attack on Modi in her Nehru Anniversary speeches. The rest of the opposition seemed to be in an equal state of shock (albeit, a pleasant one) trying to unravel the potential ramification - of both the Bihar Verdict and BJP's internal "mutiny" - on future political configurations. In short, the Bihar outcome had stunned the entire political system of the country.

Throughout "Bhakts" remained steadfastly committed to Modi even as a large section of his core constituency had begun to either show signs of disenchantment or beginning to slide from frustration to anger  (not just those who had bought the dream of "Acche Din" - but also the middle-class and business community that had en-bloc shifted their weight towards BJP in the expectation of economic revival and development). The "believers" continued to bet on Modi - delivering despite odds and possible setbacks in elections. As the writing on the electoral bill-boards began to light-up - they still hoped against hope - it won't be a wash-out for the BJP. But, that was not to be. Till the Bihar results  - many were expediently shifting blame on some of Modi's colleagues - like Jaitley - and a reluctant bureaucracy for the government's inability to match its words with delivery. But, suddenly they find themselves at a loss on who to hold accountable - except the "Supreme Duo".

Mixed Signals

Meanwhile, mixed signals continue to emanate from different echelons of the party and the RSS. It is anybody's guess as to where the RSS stands on the "Old Guard Revolt" - just as one doesn't know if there has been any plain-speaking with Mohan Bhagwat on his ill-timed anti-reservation "bomb-shell" that was undoubtedly the tipping point of the polls. Then there is also this intriguing silence over Shatrughan Sinha and other disgruntled elements, who have been berating the leadership with impunity. One is not sure how the Sangh leadership  is viewing Amit Shah - though Nitin Gadkari - Nagpur's blue-eyed boy - has risen to his defence. The dynamics at play inside the "parivaar" are far too complex for the simple-minded "Bhakt" to fathom.

Hardik and Prashant the new kids on the block 

Reams are being written offering suggestions on how Modi needs to reboot the party and  government - if he wants at least a fighting chance for the remaining 3 and half-year of tenure without dreaming of a second term at this stage. But, for the ordinary Bhakt the calculations have gone awry. If Bihar was a disaster it is unlikely that UP and West Bengal can be any better. Everyone is skeptical about the prospects in Punjab - where BJP has to carry the dead-weight of the Badals. The pessimists are also worried about the outcome of the Gujarat Municipal Polls - with the wild-card entry of Hardik Patel in Big Boss' house.  So, Modi-Shah's plan of reducing dependence on problematic allies like Shiv-Sena will have to wait and they will have to continue to do off-line trade-offs with NDA fence-sitters like NCP and Samajwadi Party. 

Having tasted blood as it were - the Opposition, especially the Congress, will become more strident inside and outside the Parliament. With their disruptive mindset - it is unlikely they will get down to deal making on important legislations even if Modi were to descend from his high horse. If Sonia Gandhi can have her way - she would like to see Modi dislodged much earlier than 2019. We are already seeing the new darling on the block Prashant Kishore doing his own round of "Chai-pe-Charcha" with leaders of non-BJP parties including the Congress and Arun Shourie - the self-appointed representative of BJP's Club of Octogenarians.

An enigma called Modi

The answer to these conundrums can come only from one man - an enigma called Modi. So, far he has been keeping a brave front. He spiritedly campaigned in Bihar till the last day - when he would have surely known from internal  assessments that the party was heading for a defeat. In Britain and the G20 summit - he did not betray any erosion of confidence or frayed nerves in his body language - that was being keenly watched with a telescope by all. Can he turn the tables again on his opponents - the next few months running up to the Budget Session should tell. Till then - the Bhakts will have to make do with far fewer hours of sleep just like their "Dear Leader" - who reportedly sleeps for only 4 hours in a day.

Bihar Verdict - a Business Manager's view of what went wrong in Modi-Shah's game-plan

Never wear a suit more expensive than your boss'

(first published in +ABP NEWS )

Called up my Dad - recently turned 85 - to check his reaction on Bihar results. He quoted from Browning's Patriot "It was Roses, Roses all the way.....18 months ago...........". So, how did Modi and Amit Shah manage to fritter away a historic mandate in such a short time ? In the coming 24 hours and over the next several days there will be saturation analysis of what went wrong for BJP and worked in favour of the Mahagathbandhan - with many "I told you so pieces", as indeed epitaphs for Modi. Therefore, leaving the politics aside for the pundits let us spend a few minutes on the faulty mechanics and management of the BJP campaign.

There is no way Modi and Amit Shah could have underestimated the importance and challenge of Bihar. In fact, it is believed that lot of decisions of the government were taken (or hard calls and aggressive reforms were withheld for that matter) with the Bihar elections in mind - not just the Rs 1.25 lakh crore package declared just before the polls. It was apparent that, the government was banking on the Bihar Polls (followed by UP and Bengal next year) to shore up its strength in the Rajya Sabha for getting many crucial legislation through.

It may be argued that, the media and chattering classes had turned comprehensively against Modi and rooting for it to bite dust - but that was something Modi-Shah duo should have anticipated. They had successfully countered a more hostile media in the run up to the Lok sabha Polls - so where did their act fall apart this time around. It is easy to cook up conspiracy theories (and some of it may not be entirely unfounded) but again that is the job of seasoned campaigners - especially if they are from the ruling establishment - to tackle. How - therefore - did they lose the Midas touch ?

Right from day one - Modi government's handling of the media has been callous. What appeared deliberately calibrated (for reasons inexplicable - except, perhaps, for past grudges and arrogance  of winning the election 'despite them') at the start soon turned out to be plain incompetence. Last year - exactly at this time - one may recall, Modi made a feeble attempt to thaw the ice at BJP's "Diwali Party" - which was a heady selfie "kiss and make-up" moment for journalists - even those who had been critical of him in the past. But, that's where it ended. Somewhere, due to the "We know best" syndrome that afflicts this government - they seem to have dispensed with the professional help, that Modi-Shah were rumoured to have used for the Lok Sabha polls, just like they jettisoned Shah's own discovery - Prashant Kishor, whom Nitish was quick to pick up. Instead, Media Relations were left largely to someone like Arun Jaitley - who may be friendly with certain sections of the media (largely in the English speaking Lutyens' circuit - but an outsider for the vernacular and regional sphere) but isn't exactly a "media manager" - in the way, say an Ahmed Patel, of the Congress is.

In a recent piece in another publication, the author had discussed how "fist mover advantage" is short-lived in a competitive world - where people are quick to "copy with pride". Therefore, what has worked in the past - whether in Gujarat or the Lok Sabha Polls - loses its edge over time unless re-sharpened and re-engineered periodically.

But, the bigger task for any leader or manager is to manage expectations of stakeholders. here, Modi seems to have developed a disconnect between what he considered important for the electorate and what they had expected to see on the ground. Any new leader, need some quick wins to establish his or her credibility. This is where Modi failed miserably - partly due to the opposition tripping him in Parliament (like the Land Acquisition Bill and GST) but mainly due to his own misplaced priorities. Social welfare schemes like Jan Dhan Yojna and Atal Pension Yojna may be good talking points in the ramparts of the Red Fort on Independence Day - but doesn't cut much ice with people who have been spoilt by doles. So no amount of Neem quoting of Urea can take away the sting of Rs 200 /kg Arhar Daal, cut in agricultural subsidies and withholding release of MNREGA payments for fiscal prudence. Today, not only the masses expect immediate gratification - but even the young blue collared workers and business honchos are more concerned about the "here and now" rather than a handsome superannuation scheme.

Finally, as more and more professional Managers start working for Family Owned Enterprises, business schools are teaching how to balance the priorities of owners with that of the external stakeholders. Here Man Mohan Singh's job was easy - as he worked for a sole proprietor. Modi - on the other hand - has to work with a traditional HUF (Hindu United Family). A cardinal rule in business is never to wear a suit more expensive than your boss' and travel first-class when your austere malik flies "Cattle Class". Modi erred on both counts. MMS had no problem with the first - wearing the same blue turban for 10 years. Though it is alright for a Prime Minister to dress well - the blue suit everyone agrees was a little over the top.

Modi's foreign policy forays were no doubt phenomenal. But, not only that was a cause of envy for his opponents at home but also, one suspects, made some other nations wary of his meteoric rise in the international scene from being a pariah just 18 months ago. The bigger issue, however, this was the most visible part of his tenure so far - even if he was working 20 hours a day on all other fronts - which opposition could easily taunt with a rural electorate.

It is a dangerous thing - when the 'Malik - Parivaar' begins to lose confidence in the CEO - feeling he is not acting in their best interest. Since, he can't be sacked immediately - some of the family stalwarts - who want to see him fail start pulling the rug silently from under the feet. That to a large extent explains the reluctance of RSS to reign in their fringe elements or Mohan Bhagwat making irresponsible statements on the eve of crucial phases of the election. Even other members on the team - confused by mixed signals - of which way the wind is blowing begin to get disengaged though may appear to maintain a brave front outside. 

In what was always expected to be a polarised contest - driven by caste arithmetic - BJP's salvation rested on the last mile and last minute booth management by RSS cadres. It is questionable - if RSS was sincere about throwing their full weight behind Modi. Though they may not have wished to see him defeated - but perhaps a little mauled. It's another story - once the grip is loosened - the rope can slip much more than one had bargained for.

Modi and Shah need to seriously revisit their strategy going forward - if they don't want an encore of Browning's Patriot - "Thus I entered and thus I go" - not only to ensure a return in 2019 but, though harsh as it may sound, salvage the remaining 3 and half years of the current term.

For +ABP NEWS Blog please click here

Rising 12 points in the Ease of Doing Business is like Air-India claiming improvement in OTP

India rising 12 places from 142 to 130 in the World bank's Ease of Doing Business Index,  sounds almost like Air-India revising its OTP ('On-time Performance') statistics by 12 points (may be from 70 - 80%). Makes little difference to a business traveler waiting at the airport with no signs of a flight already delayed by over 4 hours and the airline staff equally clueless. It also doesn't help when a co-passenger (obviously used to the vagaries of the national carrier) recalls how it used to be even worse till some years back - when flights would be routinely cancelled without notice and the airline put passengers up at 5 Star hotels at its cost. Some may actually long to go back to those days of free layovers.

Businessmen live in the present. Their points of reference would be current benchmark with other countries. Those who were dealing with India years ago may either gone or dead. When Gujarat scored high on ease of doing business it was in comparison to other Indian states. Modi had achieved this by creating a business friendly environment riding on the enterprising Gujarati spirit - but above all by creating a responsive and efficient bureaucracy.

No matter how many how many Dream-liners Air India buys - the dream of turning around the airline won't fructify till the attitude and work-culture of the staff change. The command structures are different at the state level - where the writ of the Chief Minister runs. Delhi has its own laws of the jungle which can't be managed out of a CCR (Central Control Room) in South Block. Introducing bio-metric attendance systems or curtailing Golf sessions of senior bureaucrats - don't automatically make for an efficient administration (as an aside, in many other Asian countries - it is in fact par for the course - to discuss business over Golf with Ministers and Bureaucrats).

Many foreign business honchos will say - how difficult it is to obtain audience with senior secretaries. Very often they don't get past the PAs or at best the Joint Secretaries. There is a story - perhaps, apocryphal, about the visiting CEO of a large MNC who with great difficulty managed to get an appointment with a senior minister. It seems the Minister - a cricket enthusiast - was busy watching an ODI match on the TV in his office - throughout the meeting - commenting on the game and educating the foreigners (obviously not British) on the nuances of cricket. Finally, said good-bye to them after 10 minutes with a polite "I shall look into it" assurance that really meant nothing.

In contrast, Indian businessmen find access much easier - given their old relationships and the tacit acknowledgement of "The current environment may change and we would need each other again"). This makes many MNCs to look for local partners who will help 'facilitate' entry and many even miss the old 'liaison' experts who helped open doors.

Contrary to popular perception - as revelations of several scams across the world would show - not all investors are lily white. They are willing to do "business" with the powers-that-be of whichever country keeping their own hands clean. But, what they seek is transparent policy and regulatory clarity, fewer window and doors to negotiate and time-bound decisions (like airline OTP, as it were). Above all they require access to people who are in a position to "deliver". On the last, they are quite agnostic about who to deal with - as long as the individual's word counts. That could be the Crown Prince in one country, the ruling Party President's assistant in another. Rest - by and large - they are willing and capable of managing or working-around given their vast experience across the world.

Once that is done - the states, starved for investment, will lap it up - and the best among them, who are able to get their act together, will be the winners. But, in a final analysis - it is the hydra headed monster of Indian bureaucracy which the British left behind and the Congress fed and 'fatted' - that Narendra Modi and his Ministers will have to tame if he is serious about "Make In India".

Article first published in +ABP NEWS Click here to read 

The importance of being Arun Jaitley

Or How Arun Jaitley could be Modi's Pranab Mukherjee

Only those could have doubted Arun Jaitley's emergence as the foremost ally of Modi in the government - despite his own defeat in Amritsar - who thought after leading the party to such a stupendous victory Modi would hand-over the Prime Minister-ship on a platter to Advani or some other leader of RSS' choice. Jaitley is one national BJP leader who stood by Modi unwaveringly even when others had their moments of doubt or difference. He was the only one who had publicly predicted that the groundswell of grass-root workers will force the hand of the RSS leadership to accept Modi as the PM candidate. He was never seen to hedge his bets for a 'what if' (BJP fell short of the magic number and needed support of former NDA allies like JDU) scenario -unlike some others as Rajnath Singh. Therefore, Jaitley's rise to the unofficial No 2 in Modi's cabinet shouldn't have come as a surprise to anyone.

Modi being new to Lutyens' Delhi (and Parliament itself - being a first time MP) - by his own admission - needed someone to chaperone him through the labyrinths of power corridors and bureaucracy. None could have been better suited than Jaitley for that role. A true blue Delhiite - urbane and moderate face of the BJP with friends across parties and media. His credibility quotient was high nationally and integrity untainted to the public eye. Arun Jaitley could easily have been Narendra Modi's Pranab Mukherjee (whom, Arun Shourie had once called the fulcrum of the UPA government) - a man for all seasons, trouble shooter, negotiator and interface with the opposition.

But, the acute talent shortage in Modi's cabinet (some of it self-imposed one may argue) - got Jaitley too embroiled in the running of the government as Modi's principal strategist. This gave rise to the now famous "Trimurti", as they are sometimes called, of Modi, Jaitley and  Amit Shah. While Shah was, understandably, entrusted with all party affairs, Jaitley became Modi's principal sounding board and advisor on policy matters, especially economic issues. (There is, of course, the invisible 4th pillar - the PMO - where the other triumvirate of Doval, Nripen Mishra and Jaishankar rule - focusing on National Security and foreign affairs – though Arun Shourie calls it the ‘weakest ever PMO’).

Even without even going into a critical evaluation of Jaitley's performance as a Minister - essentially Finance, which has been his primary charge - it may be said that being involved too closely both with strategy and implementation has come in the way of his delivery. This is characterized by a number of avoidable confrontations and stand-offs (such as with the RBI Governor), climb-downs or roll backs (MNC Retrospective Taxation) and U-turns (new IT Returns form). The mother of all setbacks was, of course, the Land Acquisition Bill and the GST could be awaiting a similar fate. Being too close to these decisions - and in some cases the owner or author himself - didn't allow him the much required maneuvering space to find a political solution - which, ironically, is supposed to be his forte.

Though not exactly in the league of his bête-noire Kapil Sibal's "zero loss" theories - much of his explanation and defense on the Black Money issue (arguably, the biggest credibility sucker of the Modi government – that earned it the tag of a “Jumla Sarkar’’) was seen to be bordering on sophistry and glib talk.

Though Jaitley is not officially handling the Law Ministry – he is generally known to be the Government’s principal legal advisor. The choice of Mukul Rohatgi – his close friend of many years – as the Attorney General is credited to him.  Between the 2 of them – they have to share the burden of the Governments loss of face in the NJAC issue – which even a lay observer of the court proceeding had seen coming from the hostile stance of the bench right from the beginning of the hearing compounded by the very aggressive stand of the government. Further, Jaitley’s reactions to the order made it appear like a personal defeat – which may not have helped to soothe the raw nerves of the judiciary and given fodder his detractors.  Further, as suggested by one respected commentator, it indicates the judiciary will not fight shy of taking head-on a government elected by a huge popular mandate.

Though they would all be loathe to admit it in public – friends of Jaitley (and, he has many) from the industry have been disappointed with him more than even the PM for the slow pace of reforms – because it was on him they had counted most to kick start the economy. Both, his budgets were underwhelming – but that would easily have been overlooked if reforms took off. Instead – the Prime Minister has had to lean on populist social welfare schemes like Jan Dhan Yojna,  Atal Pension Yojna and Insurance Schemes the results of which will take years to be palpably perceived. Whereas delays in release of MNREGA payments and agricultural subsidies – no doubt necessitated by prudent fiscal management – felt immediately and also exploited by the opposition. The Foreign Black Money amnesty scheme (netting only Rs 3700 crores) was a damp squib. Threats of dire action and reinvigorated ED raids may have lost him a few admirers in the business community.

Holding dual charge of Finance and Defence must have been taxing – taking away focus from both (and, that was also the time, Jaitley was not keeping good health requiring surgery). Delays in some crucial appointments (Chief Economic Advisor, Chairman Niti Aayog) would not have helped Jaitley to fast-forward the government’s economic agenda.  Induction of Jayant Sinha as MOS Finance could – perhaps – have happened earlier to relieve him of some load.

But, perhaps, Jaitley’s toughest challenge has been managing the communication strategy of the government. Though he took on the I&B portfolio and by default the role of the principal spokesperson of the government - presumably to prevent motor-mouth ministers and MPs – he has been less than successful in handling the media. Jaitley enjoys excellent personal rapport with the Lutyen’s media – particularly the English TV channel star anchors. But, this doesn’t extend to the vernacular and regional media. Besides, good media relationship does not always make for effective media management. His junior ministers in I&B are inexperienced. He for one should have insisted that the PM doesn’t keep the Media Advisor’s office vacant and, if necessary, brought in the international agency who had reportedly handled Modi’s election campaign as a consultant.

As someone – whom obviously the Prime Minister not only trusts but also, presumably, listens to _ Jaitley should counsel him to increase both the width and depth of talent by inducting more technocrats and competent but savvy politicians (like Nitin Gadkari, Piyush Goyal) into his team. The latter are necessary not only to manage the external environment but also work with the bureaucratic red-tape – that can otherwise trip the best of Ministers as Suresh Prabhu and Manohar Parrikar are learning at their own cost. This would give Jaitley the time, space and – most importantly – distance to do what he likes best – strategize and back channel management – a la Pranab Babu – preparing himself for the coveted role of being the logical successor of Modi in good time.

Article first published in +ABP NEWS Click here to read

Non-aggression is a "Non-Option" for Modi Government in Parliament

There is a great deal of sadistic joy being derived by politicians, media pundits and social media “liberalati” on the apparent “setback” suffered by the government – after an united opposition forced an amendment to the motion of thanks for the President’s Address. Media reaction ranged from “embarrassment” to “government left red-faced”. The Trinamool Congress rejoiced at their pyrrhic victory – by an unprecedented act of convergence with arch-rival CPI(M) - their Parliamentary party leader, Derek O’Brien, calling it “the Rajya Sabha’s equivalent of a vote of No Confidence”. Many a commentator has already written the epitaph of the Land Acquisition, Insurance and other bills in the parliamentary pipeline saying Modi’s arrogance is going to cost BJP dearly.

It is unlikely that the PM Modi hadn’t bargained for any reaction– after what was by any standards a provocative speech. If he left the House immediately on completion of his speech – without waiting for any questions or rejoinders – it must have been a pre-mediated move and not guided solely by considerations of parliamentary protocol. While the absence of BJP MPs from the house was singularly unpardonable – they being around would not have made much difference as the NDA is hopelessly short of numbers in the Rajya Sabha.

It is debatable if better “floor management” could have saved the day. Some feel the BSP, SP and BJD may have been persuaded not to go against the government at least on this occasion - but expecting the Congress and CPI(M) to have yielded after the vitriol that was poured over them in both houses (in the Rajya Sabha and the Lok Sabha ) was wishful thinking.

Narendra Modi’s combative mood was evident from his swipes as “Zamana badal gaya hain, sunna padega ji” – not to mention, his going for the jugular on MNREGA in the Lok Sabha - which was undoubtedly targeted squarely at Sonia Gandhi sitting across the aisle. And, oh boy – did the message hit home? One had to only watch Madam’s expression on TV to know. Therefore, if he chose to be aggressive it must have been advisedly so. This might hold some clue on what could the government’s strategy in the days ahead is going to be as it braces up to negotiate some vital pieces of legislation on which rests not just BJP’s economic reforms agenda – but also, as the Prime Minister so lucidly explained , many of the welfare and developmental initiatives linked to them.

In an earlier article even this author had argued that Modi should – perhaps – have adopted a more “inclusive” or reconciliatory approach in governance carrying the opposition with him to the extent possible. That he has chosen not to do so - can’t be due to his ego and authoritarian temperament alone. Whether one likes him or not, there is no underestimating Modi’s political acumen – as he himself chided the opposition in Parliament. If he thought – offering the olive branch to the Opposition was the solution, he would have done so long back. It’d be simplistic to suggest he has been blinded by power not to see the obvious.

Erudite political analysts have criticised the “modern day Alexander” streak in Modi – with Amit Shah being his proverbial “Ashwamedh” – suggesting this is creating deep insecurity not only among BJP’s opponents but also its allies. It is also being argued – after Jharkhand, Kashmir and, now, most recently the Delhi rout – this strategy has run its course and can only yield diminishing returns, if not become outright counter-productive, going forward. Therefore – if Modi has decided to play on the front-foot it must only be after careful consideration. Even before the elections – Modi had figured out he had to go it alone all the way. None of the left of centre parties would risk jeopardising their traditional vote-bank (dilute their labels of “secular” or “friends of the poor and farmers’’ – as opposed to industrialists) for the fear of total extinction. Little has changed even after the elections. Those – who had to switch sides, have done so lock, stock and barrel (though one is yet to see any real exodus yet). For others it’s too early to give up their core “positioning”, which they are only trying to consolidate it by strange mating rituals driven by strong Darwinian instincts of self-preservation, as it were. And, to expect the Congress to play a “bi-partisan” role – under their current self-centred leadership – would be dreaming of Ram Rajya indeed.

Another learning for Modi government has been - alliances have been formed through hard-negotiations by subtle show of strength and occasional brinkmanship. They have to be held in place also by exercising the “upper-hand” at all times. Slightest signs of faltering or weakness – and partners like the Shiv Sena immediately start flexing muscles demanding a fresh pound of flesh. Allies will play ball only as long as BJP is in the driver’s seat. For that Modi-Shah’s expansionist forays have to continue relentlessly.

Though the merits of a strategy can only be judged in hindsight – and therein lie the test of a leader – for the moment “non – confrontational” parliamentary politics is not an option for Modi government. If civilised discourses and genteel persuasion were the solution – then Arun Jaitley’s cerebral speeches and dinner diplomacy would have won the day. But, here we are dealing with mauled tigers – which won’t be tamed just by applying poultice on their wounds. Sure, backroom negotiations will happen. But, they will have to be with real carrots and sticks on the table – and not soft cajoling and coaxing - over litti-chokha (in any case Bengali “fish-fry” is a no-no for vegetarian Modi).

But, in the final analysis, Modi is the prime minister today by virtue of an overwhelming popular mandate. Ultimately he will have to carry the message back to the people. In this, he is fighting a lonely battle. It is ironical that Modi’s biggest gift – communication - is also proving to be his Achilles Heel. Modi’s only cheerleaders are his band of hand-picked loyal ministers - mostly the young lot. By choice, he has marginalised the old guard. The RSS and its nominees in Parliament have little stake in Modi’s reformist agenda. There will always be that uneasy tension with the old regional satraps – like Raman Singh and Shivraj Chouhan. Seniors like Rajnath, Sushma and Gadkari – who share a mutual wariness with Modi - would play it safe and won’t stick their necks out for Modi. To that extent, he suffers from the same handicap as the UPA, which was often called a government of “technocrats and bureaucrats”. This leaves only Modi alone to control the narrative – with little help that he can get from Arun Jaitley and Amit Shah. He did it successfully – during his run up to the Lok Sabha - managing his entire campaign out of a war-room in Gandhinagar with a crack team (and, probably, an international Communication Consultant – as many allege). But, he can’t remain the lone crusader when he is the PM, as the position itself puts major constraints on him like we saw during the Delhi elections.

At present Modi has the entire Opposition, NGOs, media left-lib intellectuals and some sections of businessmen rallying to derail him. So far, Modi has managed to successfully neutralise (even if for the time being) the international lobby. He could isolate another vital link in the chain by co-opting the media - who – feeling left out as jilted lovers – would be too willing to queue up and offer their hand – if only Modi whispers “Barkis is willing”. It may not honeymoon on a bed of roses thereafter – but life can certainly be a bit less stressful.

Article first published in @DailyO_ (click here to read)