How Modi’s Opponents Gave us Narendra Modi the PM

There is a scene  in The Lion King, where Scar tells little Simba where not to go. You bet little Simba went there and the consequences were almost fatal. Here is a little test for you. For the next one minute, try not to think of a pink hippopotamus. You can bet that you will not only think of a pink hippo but, if your imagination is active, you will probably see more than one pink hippo.

There are a lot of people who have managed the difficult feat of screwing up things in India after 2004, when the NDA left an economy bursting with activity and boasting of healthy indicators. To not only manage to damage the economy and the country but to virtually handover the Govt. on a platter to the NDA took some doing. There are several Match ke Mujrim or those who are guilty of having facilitated the ascent of Modi to the Prime Ministership. The media (no doubt funded by the Government directly or indirectly), various persona involved in scamming the country belonging to  the Congress party and its allies, various NGOs, scribes, TV talking heads and so on.

My experiences have made me believe that negative affirmations result in bringing the opposite of what one desires. The negativity that has been spewing out of TV channels, the Press and assorted NGOs has helped drive Modi home to the head of Government in New Delhi. A caveat though, is that Modi could never have ridden to power without the backing of his performance, something which the talking heads of TV and the scribes tried very hard to deride and deny. Precisely though, all this only made NaMo stronger.

In my last post I tried to fathom what the rivals of Modi had to offer and found that it was virtually nothing.  Modi’s rivals kept beating the drum of secularism, talked of Modi’s ‘divisive’ politics (unproved as Muslims in Gujarat have done very well economically in his state, Gujarat!). Their message in effect was ‘Don’t vote for Modi’. But negativity can only take you so far. What negativity does is to almost drive the idea of Modi in the minds of the voters. One of the principles I learnt in the course of my life is “What you resist persists.” The human mind, especially the subconscious mind is a literal minded creature. It does not register the negative part of any sentence. For instance, you tell a small child, “Don’t climb on the table!” What the child hears is “Climb on the table!” The consequences could be harmful for the child but communication occurs at two levels. The conscious level is “Don’t do this, don’t do that”. At a subconscious level the message that reaches is Do this and Do that.

I have a healthy respect for the people of my beautiful country, India. They have an abundance of brains and this is evidenced by the numerous discussions that occur at tea shops and street corner, village squares and drawing rooms. However, they are also influenced by the communication coming to them subconsciously. In the past twelve or so years, the media and the Press have been relentlessly painting Modi as a bogeyman. What they did was to provide mindspace to Modi in the collective consciousness. Modi himself has acknowledged this many times in the interviews he has given in the recent past to TV channels. He said that if the TV channels had ignored him, he would no doubt have been like any other Chief Minister of a state, working in anonymity. He is a smart man and has figured out what I say here!

Would just negative communication have sufficed to push Modi into collective consciousness? No! What Modi realized was that the entire media and the Congress was ranged against him and there was no way he could fight their negative perceptions. What he did therefore was to create a positive perception in the minds of the people of Gujarat, which he has served for the past 13 years.  He is in any case a workaholic and a scrupulously honest man. So he set about providing good and clean governance to the people he served. During the past 13 years, Gujarat has seen enormous development. Some of the things that are conspicuous by their absence in the rest of India are good roads, perennial and quality electricity supply, good infrastructure, clean water available on tap, good public transport, personal security, and safety for women. Modi has ensured that the people have all this and also piped cooking gas for homes, easy processes for accessing Government services and a very good grievance redressal system. Gujarat is one state that has used Information Technology in many innovative ways to make life easier for people. This has spanned the entire economic spectrum, whether it is the farmer looking for the best price for his produce, the middle class person who needs to pay his taxes and prefers to do this online, public wifi for all, and broadband in almost the entire state. Modi has ensured that growth has created opportunities for employment and the growth of industry, agriculture etc. has been impressive.

Best communication, experts will tell you, is through word of mouth. Gujarat employs people from all over the country and these people are the ones who have spread the word far and wide. That Modi was like a rockstar when he campaigned across the country was because the people believed that he would transform their lives for the better, and they flocked to his rallies in great numbers. Modi’s communication was direct and to the point. He merely pointed out what people were missing and he mentioned what he had provided to Gujarat. This resonated in the minds of voters and they gave a massive mandate to the alliance led by his party, the Bharatiya Janata Party. Leading by example, putting in punishing hours of work during the elections, and sometimes addressing five rallies a day across the country was one more highlight of Modi’s campaign. This was Modi.

On the other hand Modi’s main rival, the Congress Party, led by a hapless mother and son team, were hamstrung by a series of scams and swindles that had resulted in a large flow of illegal money out of India. Fearing no doubt that an impartial investigation would not spare members of their party involved in the scam, the campaigners had only one main message to the electorate, Don’t vote for Modi as he will  create a cleavage of religious groups. The riots of 2002, horrific as they were, did not recur due to excellent law and order in Gujarat. Further, attempts to link Modi directly with the riots have failed, with the Supreme Court of India having exonerated him after extensive and thorough investigation. As mentioned earlier, the effort expended in demonising Modi only helped to entrench him firmly in the public mind. The people also sense fear and lies. What the campaigners of the Congress party managed to convey to the people was that they were scared of Modi coming to power and they had something to hide. This is what negativity does. It creates a positive impression of the one you wish to negate.

One other rival of Modi was Arvind Kejriwal. His Aam Aadmi party (AAP), which was an offshoot of a movement called India Against Corruption or IAC, started off with the laudable idea of fighting endemic corruption in the body politic of India. This party won a large number of seats in the election for the Delhi assembly. Their premise was that the Congress and BJP were both corrupt and that their party was the only honest one. However, the party failed to cobble up a majority and ended up in second place to the BJP in Delhi. Nonetheless, Kejriwal managed to get the support of Congress party members and ran the State Government for a total period of seven weeks. It would appear that Kejriwal’s heart and mind were not in it, as he was perhaps eyeing greener pastures. This lead to him resigning on some specious grounds and pursuing the Parliamentary dream. He also chose to fight the Parliamentary election against Narendra Modi, the PM candidate himself. If Kejriwal had offered a clean alternative and a track record, he could have hoped to put up a bit of a fight. But his effort was in pandering to the lowest form of communalism and virtually begging for the Muslim vote. But Kejriwal’s efforts were ab initio to show Modi in bad light and to claim that there was no development in Gujarat. Never mind that one of his able lieutenants, Ms Meera Sanyal had been on a visit to Gujarat a year back and had been quite fulsome in her praise for the development in the state.

Kejriwal also tweeted that there was no development in Gujarat, using free wifi provided by the Gujarat Govt.

What happened with all the negative propaganda unleashed against Modi was cognitive dissonance in the minds of the voters. On the one hand they could see very positive signs of development in Gujarat, bolstered by the stories told by their relatives and friends based there, and on the other they were told that there was no development or that the development had not trickled down to the poorest. The message of the Congress and other opponents of Modi, who ganged up against him, was ‘Don’t vote for Modi’. If everyone else gangs up and tries to deride one person, it creates a credibility gap. This is precisely what happened and the people were convinced that Modi was being derided wrongly.

Modi knew that to counter these opponents, he had to use positive messages. Communicating across India with its varied terrain, different languages, culture etc. is a very difficult process. The strategies employed by Modi involved nonstop rallies taking him from one corner of India to another during a single day, addressing five rallies per day on most days. In addition he used a 3D hologram of himself to reach where he was unable to be physically present. He also communicated through Chai pe Charcha, a virtual teashop where people gathered around teashops across India and actively interacted with him. Brilliant though the communication methods were, only someone who had complete credibility could pull it off. People had total belief in Modi’s ability to take India forward. Conviction was evident in the fact that Modi spoke spontaneously without referring to notes.

In conclusion, one has to accept that there was strong performance behind Modi’s victory but the negativity of his opponents brought him a larger majority. 

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NaMo Namaha!

One of the articles I read on the Modi effect is by Chetan Bhagat . It is a reasonably well argued piece but falls short of pinpointing reasons for a Modi wave, a phenomenon that only the blind, or those pretending to be so, cannot see.

Ahem Ahem, let me say I saw it coming at least two years back! Here are my pieces where I more than broadly hinted that the Modi effect was coming: –

September 2013  (NaMo is a concept whose time has come.)

July 2013 (Last Para… We have one hope and he will come in on the back of huge expectations.)

June 2012 (…..Yet there is hope in the form of Narendra Modi and it looks like his time is well nigh. Pray and hope my countrymen, for that is all you have!)

September 2011  (One of my Indian friends here in Bahrain told me that he would like to vote for the BJP only if they make NaMo PM. Precisely my view too!)

Some of my predictions have gone wildly wrong and that goes with the territory. However, this is one that will not go wrong unless the heavens conspire against India.  If that is so however, I feel that India can never recover in a thousand years.

Let us now see what the rivals of Modi are cooking up. The one, who thinks he is a rival, and is actually one in Varanasi where Modi is contesting for Parliament, is part of what I call the Anti Industrial lobby. The most vile and rotten persons are involved in furthering the agenda of some anti Indian forces, the Ford Foundation and other anti Indian lobbies are a case in point. Arvind Kejriwal is pure evil and it really surprises me when I see how many well meaning and apparently intelligent people are taken in by him. The reason I think he is evil is that he is a Communist, his mindset well camouflaged by concepts such as Swaraj, anti corruption etc. His career has been built on betrayal. Each time he kicks the ladder that he uses to climb up one level. Do not be surprised if he tries to merge his party with the BJP and try sabotage from within.

Each time the media has been playing nursemaid to this evil entity Kejriwal by publicising his Dharnas, mindless statements and all the venom that he spews on Modi.  But Kejriwal has unfortunately managed to sweet talk his way into the hearts of a number of well meaning educated morons. This is another dangerous set, reminding me of the saying of Saint Bernard of Clairvaux  “L’enfer est plein de bonnes volontés et désirs” (hell is full of good wishes and desires). The more ‘contemporary’equivalent is “The way to Hell is paved with good intentions”. In the case of Kejriwal, good intentions are patently absent. He bores me pallid and I am not interested in detailing the litany of his sins of deliberate omission and commission.

Let us see what the Congress has to offer. Nothing much I am afraid. They took charge of a growing and mostly prosperous economy and managed to run it to the ground. I have detailed the entire modus operandi in this piece. How did the people of India hand over the country to such a bunch of twits, led by a half literate Italian who, after 46 years in India, can barely speak passable English or Hindi? This was after they got a Govt that brought the country up from atrocious fiscal management and high inflation to a stage where low inflation and growth was expected. After scamming the country at a scale unheard of, these nitwits had the gall to talk of the ‘rights’ they gave the great unwashed. As if the country idiot was not enough, we had his sister talking of the ‘sacrifices’ made by her mother, her grandmother, her father, her grandfather etc. So what if the deaths of her father and grandmother were in the line of duty? So what if the deaths of her grandmother and her father were a result of their gross errors of judgement? Did the lady’s heart ever bleed for the soldiers of Kargil? Did not the congress refuse to participate in Kargil Vijay Divas  to commemorate the martyrs of the 1999 Kargil war? Enough said of these morons.

In a democracy we almost always end up, at least most of the time, with the lowest common denominator. It is just serendipitous that we sometimes find that the majority make the best available choice.

My theme in this article touches on two aspects, one about the choices offered to the Indian electorate and another on how choices are created according to the collective mental construct of the voters.

Let me outline briefly what NaMo offered to India on behalf of the BJP.

  • Development is the need of the hour
  • Through development we will create jobs and thereby grow your prosperity
  • The rest of India deserves the development model of Gujarat, with assured quality of life such as clean water, 24×7 electricity, good roads, proper infrastructure etc. We will ensure that these are created pan India
  • There will always be rewards for hard work but in the case of those who are unable to fulfil their basic needs of food, housing and so on due to adverse circumstances, we will help them through social intervention

The exit polls tell us that the message found resonance in the minds and hearts of a large number of the Indians who vote. One of the reasons why NaMo was so successful was that his polling agents were not just those in the polling booths but a number of men from UP and Bihar(including splinter states Uttaranchal and Jharkand) who were forced to migrate to Gujarat in search of employment and waxed eloquent on the quality of life there. Tall claims by political parties are one thing but word of mouth advertisement by impartial members of the public is any day more powerful.

The Indian public somehow found India Shining a little difficult to comprehend in 2004 and fell for Congress’s lure of easy money and subsidies. It is moot whether they are now ready for working hard and becoming rich through their own efforts. The expectations created by Modi and the BJP are very high and their delivery will be a challenge. Still one is sanguine that they will strain every sinew to ensure clean and competent governance to lift the economy and the country out of the morass of despondency and hopelessness. Writing this one day before the results are declared, I am waiting with bated breath. Intuition tells me that the vote is for Modi as PM and yet there is a feeling of unease about the dirty tricks department of the congress. Finally however, truth has to prevail and Modi has to become PM for people to have faith in the electoral process. Modi is an idea whose time has come and congress also knows that match fixing will rebound very badly on them.

Finally, the reasons for why there has been a vote for Modi is the corruption and scams that the Congress had done and the consequence thereof leading to no jobs and no hope. The BJP govt in the early part of the century had tried to inculcate a feeling of prosperity but the people veered to the idea of mooching and suckling themselves on the state. Fact is that there is a limit to such mooching as sooner or later, everyone has to pay for themselves. Hopefully, the people have learnt the lesson about free lunches and are now eager to work. Modi has managed to ignite a spark in the people and hopefully the fire of hope will drive the country forward to prosperity for all. 

Fiberals and False Fables of Modi

One Mr T.C.A.Srinivasa Raghavan wrote an article calling Narendra Modi, India’s Nixon. You can read the article here .

I am not surprised at the kind of article that comes out of the pens of such people who think that approval seeking of India’s so called ‘liberals’ is the be all and end all of life.  To sample the kind of stuff that he writes, here is just one para: –

“Mainly, I wanted to find out why he was shying away from cultivating the liberals of Delhi. It seemed to me that exactly like Nixon, Modi too seemed to have an inferiority complex and that this was preventing him from engaging with the liberals. “

It never occurred to TCASR that Modi may not be interested in cultivating the liberals who in his opinion and in that of several others are important only in the past tense. NaMo has never, but never, said anything about having Prime Ministerial ambitions, even when he had all but been named as the PM candidate for the NDA. For instance in his speech given after the elections, some of his supporters started chanting “Delhi Delhi” to which he said that he was going to Delhi on some day in the future for a day. Hardly an indication of a person aspiring to be PM! Since then, he has been elevated to campaign head of the BJP and PM candidate, leaving more of this liberal crowd in a tizzy. Imagine their frustration of not finding success at the end of 11 years of continuous and concerted calumny.

In my opinion and I am sure I speak for a lot of people who belong to the silent majority, NaMo is a concept whose time has come. The constant pillorying by the ‘liberals’ notwithstanding, here is a person who rose from very humble beginnings, stuck to his agenda of doing good for the people of Gujarat and triumphed over odds. For these idiots who call themselves liberals, the social media has screwed up the equations very badly. Resultantly, for Modi, the social media has acted as a vehicle for conveying the good work done in Gujarat to the public at large. And that work has been commented on far and wide in India and abroad only because, unlike the Blocka Dutts of the world, the scribes in other countries have embraced the social media such as Facebook and Twitter as a means of obtaining honest feedback and not hagiographic tweets from drooling hangers on. The power of Twitter was demonstrated to me, quite dramatically, a couple of years back. I tweeted about how the CRTs (Congress Rat Tweeples for the uninitiated) were hounding one of the forthright ladies on Twitter by threatening to find her address and make trouble for her. This lady happened to be in the USA. My tweet reached an American tweep who took full particulars from me and informed the FBI. The result was that the lady had no further trouble from the people who were trying to stalk her in the US.

And this is precisely what Modi has managed. He has let the social media speak for his campaigns with, unlike what is slyly being insinuated as a hired crowd by the #Paidmedia, a volunteer army that conveys in 140 characters what reams of paper and volumes of works by the completely compromised media try their best to hide and obfuscate.  This has left the ‘fiberals’, a coinage by Ravinar or @mediacrooks in a fix. This also has the ruling dispensation that is, in my view at least, pouring good money down the drain trying to ‘influence’ opinions of the excrescences posing as impartial journalists, by dispensing largesse such as Bharat Nirman and the like.

Another aspect of Modi is his complete disdain for anything churned out by the media whom he treats with a barely hidden, and well deserved, contempt. Once he even told Rajdeep and others that the media depends on Narendra Modi for their daily bread. This has a lot of truth in it. The moment the media covers  Narendra Modi  the TRP shoots up. The media is now in a fix. Should it be Bharat Nirman or Narendra Modi? Short term gain and Long Term Pain, if, horror of horrors, NM becomes the PM? Or desert the sinking Congress ship right now and praise Modi, which would result in short term pain (no Bharat Nirman) and no guarantee of long term gain.

That is fine, but what is the reason for Media’s hatred of Modi. The ostensible reason is the Gujarat Riots of 2002 and the killing of Muslims in the riots. But is that the real reason? After all there have been worse riots like the Meerut Riots where Muslims were the victims or the Nelli riots in Assam where again Muslims bore the brunt. Closer to the present, we have the Muzzaffarnagar riots that have not been particularly savoury. Riots are never a good thing and while the Gujarat riots deserve to be condemned, blaming Modi is hardly fair. The truth of the Gujarat riots is available in this site that deals with the facts and not the hyperbole that the media has created.

So what irks the media so much, as also the Press? The simple truth was provided to me by a journalist friend of mine. He told me that it was the practice in Gujarat for the Govt. to provide bus transport from Ahmedabad to Gandhinagar, as well as to provide lunch, snacks and tea to journalists, prior to Modi becoming CM. All this stopped once Modi came into power. He also slashed the rates for ad spend and applied DAVP rates as against commercial rates that were applied earlier. It may be a good idea to check whether Bharat Nirman ads are being aired at DAVP rates or at commercial rates.

For now it would appear that NaMo’s best friends are the members of the Congress party, led by a ‘literate’ Italian origin lady and her son with solid achievements to his name, all of which are listed here . If you were lead to a blank page, please remember that the page is being updated daily and we are yet to see any achievement on the Crown Prince’s part.

Let me now provide a taste of what India can expect under NaMo and it will be evident why there is a great fear of this unknown quantity in the illiberal circles that considers itself as ‘liberal’: –

  1. Revamping of the structures of Govt. funded institutions such as Sahitya Academy, faculties of History, various institutions that have become a sinecure and a pinjrapole for leftists of various denominations
  2. Possible prosecution of the perpetrators of various scams. NaMo does not have any Prithviraj Chauhan complex, like the ‘statesman’ Vajpayee did. There are rumours that Vajpayee used his clout as the Prime Minister through Brijesh Mishra to get a son of a certain powerful Congresswoman freed after the sire had apparently been caught with a large sum of money at Boston airport in 1998. Expect a no mercy approach from NaMo for such transgressions.
  3. Setting an example of corruption free and transparent governance, and ensuring that corruption is punished in an exemplary manner. This will automatically bring down the level of corruption and also allow people to receive services like any client of a company paying for services
  4. Transparency in governance through automation of essential Govt. services providing a new experience of being able to track progress of  and fix accountability for Govt. employees
  5. Stoppage of all these idiotic caste and religious equations. (As a matter of fact, with so many ‘claimants’ for the Muslim vote, the BJP actually will stand out by refusing to appease to minority pressure groups)
  6. Decisive governance
  7. More IT leading to easier and transparent processes
  8. Better prioritization of tasks

To be sure Modi will need a good bit of time to get going. Let me provide an example. In the 90s, I was put in charge of a branch that should have been a wonderful branch of SBI. However, at the time, despite being in the campus of a big public sector giant, with captive business, the branch was a mess. Successive BMs never stuck around long enough to make a difference and, when I was posted, I had arrears of housekeeping, customer service issues, staff and Union issues and what have you. It took me a good 18 months or so to set things right as my entire time and energy was spent in burying the ghosts of the branch’s chequered past. With God’s grace, I was able to work hard with the staff, both clerks and officers putting in exemplary efforts and bringing the branch out of the morass. My point here is that out of a 30 month period I spent there, 18 months is what it took to set things right.

I see a similarity in the circumstances surrounding the probable anointing of NaMo in the hotseat of PM. One readily admits that running a country is infinitely more complex than running a branch of SBI! Although NaMo is an extremely intelligent and capable administrator, the mess created by the UPA will take a while to unwind. In the first term NaMo will have to put together a good, nay a great team, and work in a highly focused manner to set right things. Thereafter, only can one hope to do some real work. Am sure that someone like NaMo is shrewd enough to realize that expectations can be inordinately high and the work of scrubbing out the dirt left by the UPA will take some doing. That is a challenge I expect him to take up with gusto. One of the points in Modi’s favor is his incorruptibility. Another is his ability to communicate very well. After a reticent MMS, he will be seen to be very different. Here’s hoping that the indicators, which appear to be favourable to him, are correct. Here’s hoping that his not inconsiderable administrative skills are more than adequate to slay the numerous problems that have been left by the congress lead UPA.

What many of us are hoping to see is an early death to ‘travesty secularism’ and instead see real Secularism, which as NaMo himself said is India First. We also hope to see a quick injection of confidence in the country, which would enable the Nation to get back on the road to economic progress after it has regressed in confidence and growth over the years of patented misrule by the UPeeA.

The Great Indian Rupee Trick

This piece is not about how the economy is tanking. That is a known phenomenon and I wrote about it in my previous piece here .  Well that was around 8 months back. There was no doubt in my mind that the economy was in serious danger and the US Marines were unfortunately not there to come to the rescue, unlike the themes of several movies seen by me in my formative years.

Here this is about how our currency, the Indian Rupee is just poised on quicksand  and all the inflation that we have been tolerating so far is very likely to come back to bite us right on our collective backsides.  In Jan 2000, the CPI was around the 90 mark and in Jan 2004 it rose to 104. . However, the rate rose sharply from 2008 onwards and went from around 125 straight to 220 in all of 5 years.

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Here’s one more statistic showing how our external trade position has fared.

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Just below zero in 2004 and then it started getting more and more adverse. We are now having a trade deficit of close to 1000 Billion rupees or in USD as on date, it is around USD 18.62 Billion. Please note the sources from where these stats have been taken, before you accuse this Jan Sanghi of fudging statistics to show the Govt. in bad light.

Let us see how exports have fared

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Not bad one would say till you see this one: –

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And this has got progressively worse in 2013. No matter what you are told about easing in percentage of CAD to GDP, there is merit in believing the worst.

Why oh why is the Rupee seeing its worst days against the US dollar? The answer lies in two factors that you need to see, one is the relative rates of inflation, which determines rates over a longer time horizon and the other is supply and demand in the market for dollars. As you will see in this piece written at the time of Budget 2013-14, we are dependent on foreign inflows in the form of FII and FDI to keep the rupee afloat. All very well, except that there seems to be no reason for the world to support the INR. So when the collective thought of investors is to seek alternative avenues for investment rather than India, as they did by exiting Govt. securities and the stock markets, to a lesser extent, the Rupee just tanked shocking everyone. Shocking, hardly I would say. We should have seen this coming. A house built on a sandy foundation with no support will collapse. One cannot ignore economics entirely and expect that there will be no consequences.

One of my Gurus, Mr A.V.Rajwade made this perspicacious observation here in May this year: –

“AV Rajwade: Again I am taking a longer view and yes I think that our belief that we are an exception to every rule is a wrong belief. We cannot keep on living on others’ money forever. Nobody can, nobody has. Nobody has ever grown fast based on capital inflows. These are facts and I do not believe that we are an exception to this basic rule what we have seen in the last 70 odd years in the global economy.

The question is what kind of time horizon money is looking up? As I said our current account deficit is horrendous, there are few signs that there is going to be a significant improvement. Trade number for April was bad and that is likely to persist, iron ore exports have gone down, coal imports will go up. I would believe that in the medium term the rupee’s fate is going to be decided far more by the competitiveness of our tradable sector, not on what happens to the dollar index or what happens to the dollar yen rate or whether there is risk on or risk off and so on so forth. Those are essentially for traders and I am not a trader in currencies.”

The markets react on a short term basis but eventually settle into sanity once the exuberance is over.  This will happen soon.

The Rupee’s fate is only a symptom and not the cause. It has tanked only because of the mismanagement of the economy by the UPA, mainly the congress. One of the factors that affects exchange rates is the differential of inflation. The differential of inflation between the USA and India is roughly 8% p.a. since around 2009. This would affect the Indian rupee directly, if the rupee were a freely traded currency on the capital account. However, since the Rupee is traded only within India for the greater part,  it is governed by supply and demand. At present demand is greater than supply because more USD is remitted out than coming in.  Our exports need to go up substantially and the imports need to be brought down so that we can see a strengthening of the rupee organically. The paradox is that thanks to the mismanagement of the economy, the Rupee should be around Rs 75 to the dollar, based on relative inflation of the USA and India. Our exporters are a resilient lot and will settle for sales proceeds at Rs 60+ to the USD and we can see some short term increase in exports with a slight lag. On the imports side, there is a need to identify what we don’t really need and stop these imports. Is there any reason for us to import apples and oranges? Or soft toys? We must ruthlessly stop nonsensical exports and see how to improve supplies from within. This will result in an internal surplus that will also affect the external deficit in a positive manner for the country.

It’s a pity that the UPA has, for short term electoral gains, reduced our people to a set of wimpy freebooters. Hopefully we will see a new dawn soon and find India on the path to greatness. But that seems to be at least a year away and the path thereafter will include tough and politically unpopular decisions. Well, I can dream!

Coming back to the Rupee, I am of the strong opinion that we will see a big depreciation once again because our economy, at least on the forex side, is floating on a sea of hot money that will just evaporate. How much of our reserves are real and durable reserves of a medium to long term nature, and how much is made up of volatile flows is not clear. Our people have lost faith in the Govt. and banks, and are moving away from deposits as their mainstay. While Gold has stayed down, it will not be long before it starts rising encore. Wait till Deepavali for that. Also when people lose faith in the economy they gravitate towards gold. There are some people like me who have only a limited happiness in seeing the dollar rise. I am well aware that purely in a selfish way, it is nice to get that much more for each Dollar I remit, since I work outside India. Overall, however, I would prefer to see a situation where the Rupee starts appreciating once again on the back of good export performance and the govt. is able to trim down imports.

Finally, here is why I believe that the Rupee will tank further and stay low for a long time: –

  1. No FDI is coming, regardless of the noise made by the #PaidMedia and the dishonest Govt.
  2. The trade deficit shows no sign of decreasing as the imports exceed exports by a good USD 20 billion or so every month
  3. Oil has just touched 100 and will only increase as winter sets in and demand increases. So unless, the oil companies have booked forward at a good price, we have to deal with the reality of higher oil prices
  4. Sooner rather than later, the India story will wither away, thanks to high fiscal and CAD and plain mismanagement and scams, and it will be very difficult to resurrect it. The consequence would be a flight of capital with a deleterious effect on the Rupee

Well, the people have voted for a ‘subsidised’ life with Bharat Nirman and FSB and NREGA. The results are there for all to see. Where are we headed? To a hellish life made more hellish by runaway inflation, a Rupee tanking and looming food shortages as farmers find no labour to help in sowing and harvesting their crops and a whole generation bred on freebies.

We have one hope and he will come in on the back of huge expectations. But I am sanguine that he will assemble a crack team that will take unpopular decisions in the short term to ensure a long term surplus for all of us. If we have UPA3, kiss the idea of India Good Bye!

Dr. Manmohan Singh and the Dustbin of History

This is turning out to be an exercise in pessimism. In my last post in this blog, https://ramanujapuram.wordpress.com/2012/06/03/will-the-economy-perk-up/ , I had at least toyed with the idea of a possible turnaround in the economy. This appears to be a distant dream now.

Why would I say so now when the stock markets seem to think otherwise? Let us see. In 1992, there was one person who talked of “irrational exuberance” of the markets and also about not losing sleep over its movements when the markets were moving diametrically opposite to fundamentals. I can see parallels here. The movement is entirely due to exuberance following a perception that FDI will come pouring in torrents, quite unlike our monsoon that is playing truant in the current year. What is the reality? I do have some friends in the investment banking fraternity and their take is that corporate India is busy looking for bargains in Europe and elsewhere. Businesses have tanked across the globe and there are bargain basement sales going on. How well our businessmen will be able to manage these businesses is another story. But that I understand is the flavour of the month and hence we will find these worthies heading lemming like, to the continent to keep up with the Mittals or the Jhunjhunwalas.

So, who will, braving all the hurdles that our esteemed bureaucrats and politicians ensure come in the way of businesses, invest in India. There could be two sources, one the MNCs who have, in all probability, already fed some ‘motamaal’ to the powers that be. The other could well be the motamaal itself seeking new investments in India. After all, politicians appear to be rather fond of airlines as an investment destination. So they could well choose the FDI route rather that the FII route through sunny Mauritius. Unfortunately, FDI needs a lot more openness and transparency to be brought in. For instance, all KYC norms would apply for the purpose of opening bank accounts, registration and what have you. Thanks to young Chidu, it’s possible to invest in the stock markets through the PN route, which is another name for hot money seeking an investment outlet. Wonder how big names such as Morgan Stanley etc. lend their face to nameless individuals and help them to invest in Indian stock markets. That aside, I wonder how many big names in the USA etc. would risk their money in a country that has demonstrated its incompetence in managing the economy. From once being touted as an economic tiger we have become a whimpering pussy cat.

The P word or Patriotism is considered an old fashioned joke. When everyday brings a new scam to light, is there any doubt that whatever comes in will come with a price tag for services rendered. Any businessman will only do business where his investment fetches him a very good return. For instance, if one is employed in a high profile job with a salary of x, the expectation will be a return of 5x or more. Similarly with money invested in bribes etc. The expectation will be to make a quick buck and recover this ‘investment’. All the more reason to do it quickly, because Governments are notably fickle and are prone to change too.

Having pfaffed on for three paras, let me get to the nub. Where did we go wrong? There was a lot of good in the economy from 1999 onwards. Am seeing the inflation rate as an index of ‘Aal ij Waal ness’. The inflation rate as per the diagram here taken from the Net tells me that inflation in India was around 5% or less throughout the period between 1999 and 2007. Mind you, the NDA was in power for 5 of those 8 years and thereafter, the UPA took over.  So here is the graph for inflation: –

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The graph tells its own story. NDA rapidly brought down inflation fires stoked by a period of instability in Govt and ensured it stayed below 5%. Also note that inflation climbed up during Congress Raj in the glory days of Dr. MMS. One could no doubt talk endlessly about oil prices being low and other blahs that the sarkari fed journalists talk about but the graph tells its own story. One of the great quotes in Chak De India is “Team banana ke liye neeyat chahiye.” Or making a team requires (proper) intention. Similarly for achieving anything one needs some intention. Here the declared intention is one thing, and the actual one quite another.

Whatever spin the meisters of the UPA in the form of #PaidMedia conjure up, the fact remains that we have seen unprecedented loot of the country. And the audit of NREGA will surely tell its own story. From India Shining to India Whining in 8 years is the story of the UPA. They have managed to reduce the self respect of our country to a negligible fraction of what it was during the time of the NDA, dominated by the BJP. This has been accomplished through schemes designed ostensibly to help the Mango Man or Aam Aadmi, but somehow contrive instead, to help fill the pockets of various UPA politicos and their contractors who aid and abet in looting the exchequer. Worse still, the NREGA has robbed people that have made India, of their ability to work hard and earn a proper living and created a generation fed on doles, content with doing nothing for the better part of the year. Soon we will see food production suffer because of the non availability of agricultural labour during sowing or harvest time. We can see for ourselves the deleterious effect of an entitlement mentality on generations to come, provided of course, that there is anything left to distribute.

Let’s now turn our attention to the Current Account deficit, starting from 2000 to 2012. The Manhattans above the Plimsoll level signify surpluses and the ones below show deficits. Here is the picture: –

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Source: http://www.tradingeconomics.com/india/current-account

So while the NDA was busy trying to manage the economy well and ensure a surplus in the current account the UPA has squandered away the advantage through bad fiscal management. Data on fiscal deficit as a percentage of GDP shows the following: –

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Here you can see that the deficit was pegged for the most part at a decent 3% or so during NDA days and that has since escalated to a high of 7.8% in 2009 and is at 4.6% in 2012, according to estimates. Actual fiscal deficit is now revealed to be 5.8% as per the following link.

http://www.indianexpress.com/news/fiscal-deficit-at-5.8–india-worst-in-brics/956287/

Let us see the trend of fiscal deficits or the difference between revenue and expenditure. This graph says it all. Notice how deficits have gone higher from around 2007 onwards.

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Well, a good economy cannot be run down immediately, even by the ‘experts’ in scamming of the UPA. Inheriting a great and healthy vibrant economy with a positive feel and pushing the country down the path of rack and ruin has been the Congress’s speciality. They have done it yet again. With the Dynasty back in the saddle, at least doing the backseat driving they are so used to, they have managed to get all indicators back to negative territory!

So far from doing any good to the country, the combined burden of fiscal profligacy with do gooder schemes such as NREGA, Nehru Gandhi schemes etc. as also the burden of numerous scams that have landed us in a position where we end up borrowing to cover the holes left by these fiscal misadventures, we must now depend on the following to bail us out of this mess: –

  1. FDI investment
  2. FII inflows
  3. The US Marines, maybe

Too bad that the FDI inflows will take their time coming in, FIIS will take their profits and go and the US marines are busy scrambling around to ensure that their salaries are paid.

So who was that worthy who said he would not lose sleep over the movements of the stock market. You guessed it! Our wonderful PM, Dr Manmohan Singh is he, the one who now feels that money does not grow on trees. Late discovery, Dr Singh. What were you doing when we had loot of the Treasury under your watch? What were you doing when your Economics endowed brain knew that NREGA etc. would drain the coffers of the Govt.? Remaining Khamosh or silent is not the answer to anything. People who do not take any money but allow others to do their mischief also get sacked. History will consign you to a hard to reach dustbin as you are undeserving of any respect. 

Will the Economy Perk Up?

After my last piece on the budget, which proved to be reasonably popular, it did not give me much happiness to see the end result. The economy has started unraveling much faster than expected.

An unusually perceptive commentator on Twitter @barbarindian dredged out figures from the DOE report and presented them. Nothing here makes for a pretty picture. I have added a comment G or B to indicate Good News and Bad News against each of these items

  • The overall growth of GDP at factor cost at constant prices, as per  Advanced Estimates, is estimated at 6.9 per cent in 2011-12 as compared to the revised growth of 8.4 per cent during 2010-11. The growth in real GDP is placed at 6.1 per cent in the third quarter of 2011-12. (B) (worse still, 4th Quarter real GDP growth was just 5.1%.)
  • The cumulative rainfall received for the country as a whole, during the pre-monsoon, 2012 (March 1 – May 31), has been 20 % below normal as on 16.5.2012.  (B)
  • Food grains (rice and wheat) stocks held by FCI and State agencies were 54.33 million tonnes as on March 1, 2012.
  • Overall growth in the Index of Industrial Production (IIP) was (-) 3.5 per cent during March 2012 as compared to 9.4 per cent in March 2011. During April-March 2011-12, IIP growth was 2.8 per cent as compared to 8.2 per cent during April-March 2010-11. (B)
  • Eight core Infrastructure industries grew by 2.0 per cent in March 2012 as compared to the growth of 6.5 per cent in March 2011. During April-March 2011-12, these sectors grew by 4.3 per cent as compared to 6.6 per cent during April-March 2010-11. (B)
  • Broad money (M3) (up to April 20, 2012) increased by 2.3 per cent as compared to 2.2 per cent during the corresponding period of the last year. (B)
  • Exports, in US dollar terms decreased by 5.71 per cent and imports increased by 24.28 per cent, during March 2012 over March 2011. The cumulative growth for April-March 2012 was 20.94 per cent and 32.15 per cent for exports imports respectively. (B)
  • Foreign Currency Assets stood at US$ 261.5 billion in end April 2012 as compared to US$ 260.7 billion in end March 2012. (G)
  • Rupee depreciated against US dollar, Pound Sterling, Japanese Yen and Euro in the month of April 2012 over March 2012. (B)
  • Year-on-year inflation in terms of Wholesale Price Index was 7.23 per cent for the month of April 2012 as compared to 9.74 per cent in the corresponding month last year (G)
  • Gross tax revenue April-February 2011-12 has increased by 12 per cent in comparison to the corresponding period in the previous year.  (G)

So we have three pieces of Good News as against 7 of bad. And the seven items make for more bad news as they point to possibilities of worse to follow. For instance, there has been a marginal increase in the Forex reserves as on April 2012 as compared to March 2012. However, when seen in the context of increasing import growth and decreasing export growth, it presages further decrease in forex reserves. Hitherto, the RBI had been playing the role of a stern watchdog and ensuring that the forex reserves, money supply and fiscal deficit were kept in check. I am sure that they must be putting up the right notes to the Finance Ministry and ensuring that they perform their role as far as possible. However, this Govt. has gone rogue with populist policies that threaten to bust the Bank and send the country hurtling into bankruptcy. All this is being done, merely to placate an ignorant high command that is eager to put into practice schoolboy or schoolgirl socialism, egged on by jholawalas who think that Naxalites are Gandhians with guns.

Just take a look at these stats culled from the document released by the Reserve Bank of India http://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/39AT_BCS090512.pdf . This again is courtesy @barbarindian. Am greatly indebted to him for fishing out the numbers from various Govt and RBI sources.

The NDA left a trade deficit in 2004 of Rs 657 billion. As at the end of 2011, after 7 years of blessed UPA rule, we end up with a trade deficit of Rs 5409 billion. The news gets even gloomier. Cumulative Trade Deficit as on December 2011 for the last fiscal year is Rs 3343 billion. And we have not got stats for the current calendar year yet! Going by trends, we can expect an increase of roughly 1400 billion which will ensure that we get closer to Rs 5000 billion trade deficit.

We now have a potent cocktail of increase in money supply (http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=26560), a burgeoning trade deficit, increases in borrowings, as per projections and possible inflation that will kick in with a lag. The lag is due to delay in feeling the effects of the weakening Rupee. Next we have the presence of 800 pound gorillas known as mega scams, which are going to put more pressure on the fiscal deficit.

Do you wonder why the stock market has tanked, GDP growth is down to 5.3% on an annualised basis and overall inflation is walloping the daylights out of the Mango Man, or Aam Aadmi, who cannot afford mangoes? All because of schoolboy or schoolgirl socialism, an electorate that is easily fooled and an opposition that knows only how to snatch defeat from the jaws of victory. In an environment such as this, what chances of any increase in investments. Even the black money coming in through the PN route seems to have crawled back where it came from!

Yet there is hope in the form of Narendra Modi and it looks like his time is well nigh. Pray and hope my countrymen, for that is all you have!