Posted by: John Elliott | March 19, 2017

Hardline Hindu priest becomes UP chief minister

BJP takes a gamble after winning election with development agenda

The Bharatiya Janata Party has unveiled what could turn out to be its vision of the future leadership for a Hindu-nationalist India with the appointment yesterday (March 19) of a hard-line Hindu priest as the chief minister of Uttar Pradesh. He will be backed up by two deputy chief ministers, one from the backward castes that form a crucial vote bank, and the other a high caste Brahmin professor of commerce.

yogi-adityanathThere was widespread shock and surprise when Yogi Adityanath, a long-standing BJP member of parliament from eastern UP who always dresses in saffron priest’s robes, was unexpectedly chosen (left) by the party’s leaders following their landslide state election victory a week ago. Other candidates, including the two who are now his deputies, did not get enough support for the top job, and no-one had been named during the election campaign. Adityanath, who has no experience in government, was later endorsed by a meeting of newly elected state assembly members and was sworn in today (March 19).

Known as a fire-brand Hindutva (Hinduness) leader with a string of legal cases against him, including criminal intimidation, attempt to murder and incitement to violence, Adityanath has often fallen out with BJP leaders.

He stressed after being sworn in that he would follow a development agenda, but he is expected to revive the highly controversial construction of a Hindu temple at Ayodhya, where Hindu demonstrators demolished a Muslim mosque in 1991. One of his first tasks may be to fulfil an election manifesto pledge and close slaughter-houses that are mostly operated by Muslims.

Age 44, Adityanath is eight years younger that Amit Shah, the party’s hard-line president, and 22 years younger than Narendra Modi, the prime minister. He has a clean image in terms of corruption and is a new type of face among the younger generation of BJP leaders, and presumably could rise to the top if he succeeds in his first task of ensuring that the party does well in the 2019 general election, with UP returning at least if not more than the state’s current 71 MPs, and is then re-elected as chief minister UP in 2022.

Communal tensions

Arguably UP voters, who gave the BJP its massive majority of 312 seats in the state’s 403-seat assembly, expected a development-oriented chief minister to run the state with its population of 220m people and not such an extreme and controversial Hindu nationalist who could inflame communal tensions. The challenge is to provide better government, less corruption and stronger law and order than the dreadful record that recent state governments have managed.

Modi has projected a development agenda and has underlined this in recent statements, which he repeated today. Yet he agreed to the appointment of Adityanath probably, it is being widely suggested, under pressure from the Rashtriya Swayamsevak Sangh (RSS), the BJP’s extreme right wing umbrella organisation, to which he and Adityanath, and the two deputy chief ministers, have allegiance.

It may be that the leadership of the fervently Hindu-nationalist Sangh Parivar (family of organisations) to which the RSS and BJP belong, felt that the opportunity to put a strong Hindutva stamp on such a big election victory should not be missed.

Yogi Adityanath  elected leader of the BJP Legislature Party

Yogi Adityanath arrives for the selection meeting

This has meant however that a Hindu agenda has been stressed earlier in the life of the national BJP government than Modi seems to have intended. He successfully won the 2014 election by appealing to the frustrated aspirational young who wanted him to change the way that India is run.

The UP victory shows he has now won the support of the poor, who want to move on from the Congress Party’s sops and corrupt aid schemes, mostly named after the Gandhi dynasty, to positive development policies and an attack on the rich and powerful – epitomised (wrongly) in their view by Modi’s demonetisation note-ban project.

One of the two deputy chief ministers is Keshav Maurya, the BJP’s state president for UP, who has a background in the Sangh Parivar’s ultra-hard line and sometime violent Vishwa Hindu Parishad as well as the RSS. He was elected an MP in 2014 when he declared ten criminal cases against him.

The other is Dinesh Sharma, currently mayor of Lucknow, the capital of UP. A commerce professor in the University of Lucknow, he is known for developing good relations with political opponents and others including the Muslim community.

Muslim fears

Adityanath’s task, along with these two deputies, should be to bridge the gap between the Hindu and development agendas, and also to show that Muslims, who make up about 18% of UP’s population, have little to fear. Controversially, the BJP did not field a single Muslim candidate in the state’s assembly election and made no attempt to woo Muslim votes, though there was one minister from that religion among the 47 cabinet ministers and ministers of state who have been sworn in.

Adityanath, whose name originally was Ajay Singh Bisht, has led campaigns to convert (or re-convert) Christians and Muslims to Hinduism, and to encourage “love jihad” where Hindus marry Muslims to convert them. He has run an activist and sometimes violent youth organisation, the Hindu Yuva Vahini and has been prominent in cow-protection and anti-beef eating campaigns. He is even reported to have said that those who did not practice surya namaskar, a yoga practice, should leave India.

Yogi NDTV Prannoy Roy March 4 '17He has taken a strong line on Hindu dominance in India and said, when asked recently on NDTV (picture right, and the video is here) whether he was a Hindu first or an Indian first, replied (speaking in Hindi), “I am a Hindu and, being a Hindu I am also an Indian – Hindu and Indian are two meanings of the same word…..The word Hindu is our cultural manifestation and the word Indian is our geographical symbol, so there is no difference.”

Currently, as well as being a very active MP in the Lok Sabha, he is head priest of a temple in his constituency of Gorakhpur, and was a mathematics graduate in his youth before becoming a follower of the then mahant (head) of the temple. A strong public speaker, he is reported to have wanted to be the BJP’s chief minister candidate in the recent election, but Modi wisely deflected that and made himself, presidential-style, the focus the campaign.

So, having voted for Modi, the electorate of UP have got Adityanath, a hard-line and sometimes ruthless Hindu priest, who has been appointed in the most daring controversial and transformational experiment that Modi and his fellow leaders have tried since they came to power in 2014.

BJP grabs Goa from Congress and is set to do the same in Manipur

Arun Jaitley takes additional charge of Defence ministry

State results a personal blow for Rahul Gandhi and setback for AAP

Narendra Modi has established himself as India’s only credible national political leader and has set 2022 as the target year for developing a strong India. He has achieved an astonishing landslide victory in the key state of Uttar Pradesh, where the Bharatiya Janata Party  has won 312 out of 403 seats, compared with a figure of around 190 that was the highest generally expected.

The result was announced on March 11 when counting took place in five states’ assembly elections. The BJP is now set to form the governments in four of them, having also won in Uttarakhand, and staged controversial coups that eased the Congress Party out of a leadership position in both Goa and Manipur.

The UP vote was primarily for Modi, not for local candidates, even though he will not be running the state. Having dominated the campaign in presidential style and achieved the victory, he will hand that task to a chief minister, who is yet to be named. The chief minister’s tough task, working in the shadow of Modi and his main henchman, Amit Shah, the hardline Hindu-nationalist BJP president who ran the campaign, will be to replace past UP governments’ corrupt and ineffective rule with development-oriented policies and  strong law and order.

At a victory rally (below) in New Delhi on March 12, Modi said: “My target is 2022, not 2019. 2022 will mark 75 years of India’s Independence”.

That means he is looking beyond the next general election in 2019 to the end of the five-year term of this weekend’s state assembly results.  Talking about a “New India”, he said: “If everyone bears the mood of development, then all our dreams and progress would be achieved. This is the environment we need to create.”

Prime Minister Narendra Modi addresses supporters

The UP result, which reflects voting trends in the BJP’s general election landslide in 2014,  is even more remarkable because the party has not done well in the state for 25 years. In 2012, it won only 48 seats , whereas its total this time is 325 including its allies.

The BJP has now recovered from embarrassing defeats in Delhi and Bihar state polls after the 2014 general election. It rules in states covering more than 60% of the population, and it is clear that Modi has established  a dominant leadership position nationally with no rivals to challenge him. Barring unforeseen events, he can look forward to the second term as prime minister that he craves after the next general election in 2019 – providing he is perceived to be delivering in the next two years.

The BJP’s large number of UP (and other) assembly seats will help Modi choose the country’s next president, who will take office in July. It will also help gradually to strengthen the party’s clout over the next year or so in indirect elections  to the Rajya Sabha, the upper house of parliament, where it has been in a minority. That will eventually ease the passage of legislation, which has been blocked by the Congress Party.

The result was devastating for Rahul Gandhi, dynastic heir apparent to the leadership of the Congress Party which has managed only seven seats in UP (down from 28 last time) while its partner, the state-level Samajwadi Party, has 47.

Rahul Gandhi should step down

If ever there was a time for Gandhi , 46, to back off from politics it is now because he has proved himself to be a lightweight with no leadership potential and no positive political or economic message. His lack of focus and leadership has allowed Goa and Manipur to go to the BJP.

Congress has even had the humiliation of the BJP winning six out of ten assembly seats in the Gandhi family’s traditional political base – the UP districts of Amethi and Rae Bareli, where Rahul and Sonia Gandhi are MPs.

Rahul’s mother and the party president, Sonia Gandhi, is not well and is reported to be abroad for a health check-up (presumably at a New York clinic, which she has visited before). His sister Priyanka unexpectedly did little campaigning – two weeks ago she was spotted by a friend lunching with Sonia in the Italian Embassy’s cultural centre café in Delhi. Unless Priyanka steps in, the dynasty will decline and drag the party with it – and it may now be too late for her to mount a rescue.

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BJP supporters celebrating the UP victory with colour sprays that are a feature of the Holi festival, celebrated this year on March 13

Congress won in Punjab with 77 assembly seats out of 117, but that is widely seen as primarily a personal vote for Captain Amarinder Singh, a veteran state-level leader who comes from an old regional royal family and was 75 on March 11. He will now become chief minister for the fourth – and, he has said, final – time.

The results are a serious setback for the Aam Aadmi Party, led by Arvind Kejriwal, Delhi’s chief minister, who wanted to spread the party’s role to other states. The party had hoped to be a close challenger of Congress in Punjab, where Kejriwal led the campaign, but came a distant second with only 22 seats. It did however beat an alliance between the state-level Akali Dal party (which was in power) and the BJP that together have 18 seats. It also contested in Goa, where it failed to win any seats.

The UP result is a major defeat for Akhilesh Yadav, the 43-year old out-going chief minister who recently seized the Samajwadi Party leadership from his veteran politician father, Mulayam Singh Yadav. Akhilesh linked up with Congress, primarily to woo the state’s large Muslim vote, but that partnership failed.

In other results, BJP won in Uttarakhand, adjacent to UP, with 57 of the 70 seats, ousting a Congress government and pushing the Congress seats down to 11.

BJP coups in Goa and Manipur

In Goa, Congress and an ally won the most assembly seats – 18 out of 40, beating the BJP which has been in power and only won 14 seats with allies. But the BJP has recruited a small regional party to form a coalition that will be headed by Manohar Parrikar as chief minister. Parrikar held the job earlier and has been India’s defence minister since late in 2014. Arun Jaitley, the finance minister, has been given additional charge of defence, a double-post he held for a few months in 2014.

The BJP also expects to form the government in the north-eastern state of Manipur, even though Congress led the polls with 28 out of 60 seats compared with the BJP’s 21. The BJP tally was good for the party, which has not previously had a presence in the state. It gathered support from other parties and individual assembly members, and has chosen a local politician to be chief minister.

That will leave Congress to form the government only in Punjab, a success that pales into virtual insignificance compared with the defeat in UP, where Rahul Gandhi personally led his party’s campaign with Akhilesh Yadav.

Modi’s charisma

Watching Modi in Ramnagar on the banks of the Ganges near Varanasi, when he went there on March 6, I was struck by the charisma of authority and leadership that he projected. He absorbed the “Modi Modi” screams and chants from the crowds and reflected a sense of standing and authority.

Contrast that with the floppy hand waves that Gandhi gives to crowds that have no more meaning that the way that friends say goodbye to each other. Gandhi also has no message of hope, whereas Modi inspires a widespread respect for trying to tackle the country’s immense problems of corruption, lack of sound governance, and inadequate achievement.

Significantly, the BJP and its allies won all the seats in Varanasi, where Modi has been the MP since 2014. There has been considerable resentment about a lack of progress there in the past three years, and this prompted Modi to be based in the constituency for the final three days of campaigning  – an investment that has clearly paid off.

It is not just in Varanasi that Modi is failing to do all the things that voters, especially the poor, think he is and should be doing. The recent bank note ban of demonetisation is wrongly seen, even by people who have suffered, as a worthwhile attack on the rich and corrupt.

Like several of other attention-catching schemes that Modi has launched, demonetisation has yet to show any significant positive impact, apart from some increased use of electronic and digital banking,. Schemes such as Make in India and Start-up India have had little real effect on manufacturing investment and new businesses, while the Swachh Bharat cleanliness and sanitation project is under-performing.

The big picture

Some 60% of the 140m electorate in UP (which sends 80 MPs to parliament) turned out to vote, about 40% of whom voted for the BJP. The BJP had done careful caste-based calculations in its choice of candidates and local election strategies, but the result confounded experts who had minutely dissected the views of the state’s various castes and of minorities, notably Muslims. As a television reporter said, “it was a big picture result – people who relied on detailed analysis lost the plot” – the big picture being that Modi has captured the minds of voters desperate for change, especially the poor, straddling castes and classes.

There was relatively little of the communal divide that Modi and Amit Shah have generated in the past. There were some anti-Muslim issues but generally Shah, who should take the credit for organising the BJP’s election campaign, projected a development message and curbed most of his own and his more extreme activists’ sentiments.

Modi’s challenge now is to accelerate his government’s performance nationally and deliver the improvements that voters expect to see in their lives. His next test is an assembly election later this year in his home state of Gujarat, which the BJP should win easily, and then other key states next year.

After that, the 2019 general election is his, to win.


Originally posted on March 11 with the headline Modi landslide win in Uttar Pradesh projects him for general election victory in 2019″, this article was updated and reposted on March 12 and was further updated on March 13



BJP could top UP state polls but maybe not in Modi’s constituency

If hyper activity is sometimes a sign of both a desperation to win and a fear of defeat, then Narendra Modi’s frenetic saturation of Varanasi with three days of political rallies and speeches earlier this week reflects the prime minister’s worry that the Bharatiya Janata Party’s candidates in the constituency face the risk of losing tomorrow in Uttar Pradesh’s assembly election.

Modi was elected to parliament from the sacred Ganges city in 2014, so defeat of the BJP’s candidates in his constituency would be a bitter blow for a politician who thrives on mass adulation but who has not yet achieved enough during three years as prime minister to be sure that he still has sufficient pulling power with the electorate.

Prime Minister Narendra Modi in VaranasiThere have of course been plenty of signs of frenzied adulation by crowds of thousands in and around the city of Varanasi during the three days, as I saw yesterday  morning at Ramnagar (below) on the banks of the Ganges. Modi visited the town alongside a famous old Mughal fort to make politically charged homage to the memory of Lal Bahadur Shastri (left), who lived there as a child.

Shastri was briefly a Congress prime minister in the mid-1960s in a rare break from the Nehru-Gandhi dynasty’s domination of the party’s leadership.

Modi’s visit was a neat political swipe against the dynasty but, more importantly, it was also aimed at appealing to upper caste voters – Shastri belonged to the literate and influential Kyastha caste  – in a state where such distinctions play a significant role in elections.

For a prime minister to spend three days focussed on one city and its surrounding area is rare enough, but Modi also brought in a large number of government ministers (some reports say 25) from Delhi to impress the electorate. Such tactics could easily backfire with voters who have been feeling largely ignored by Modi and his colleagues and could resent such blatantly self-serving attention at election time.

There is widespread disappointment and even anger that Modi has not done more for Varanasi since he became its MP, and that he has not delivered on specific promises. High profile claims that he would have the Ganges cleaned have failed to produce results, and he has done little to improve the city, which is a centre for Hindu pilgrims and tourists from within India and abroad. There has been some improvement in cleanliness on the ghats (steps) along the river bank, and a rather bleak promenade and terrace has been constructed alongside Assi Ghat at the southern end of the city.

Modi Ramnagar

A partnership between Varanasi and Kyoto, which was arranged when Modi visited Japan in 2014, has yielded little in the areas of co-operation that were envisaged such as waste and transport management, developing Buddhist tourism, and co-operation between universities.

More was also expected from Modi on initiatives in education and development of Varanasi’s historical spiritual base. Two local social scientists told me that Modi and Shah were more interested in the politics of Hindu nationalism than in promoting Hindu learning, and this is resented locally.

Voting takes place in Varanasi and other nearby areas tomorrow (March 8) in the seventh and last stage of the UP assembly election. Along with four other states, the votes will be counted on March 11, though a prior indication of the possible result will come from exit polls that will be published on the evening of Thursday March 9 (postponed by a day because polls in one constituency are delayed following the death of a candidate).

Rahul- Akhilesh road show

Big crowds at rallies do not necessarily turn into votes, and they are even more irrelevant as an indicator of the electorate’s intentions if the crowds have been paid and bought in from outside the constituency, as the BJP has been doing in large numbers to build up a picture of support for Modi.

Crowds at a large Modi rally a day earlier were nevertheless said to be smaller than those at a rival event staged by Akhilesh Yadav, the state’s chief minister and leader of the Samajwadi Party, with Rahul Gandhi, heir apparent to the Congress Party’s leadership. The two parties are working together as the main opposition to the BJP.

Victory is important for Modi because it will underline his role and that of Amit Shah, his chief henchman and the BJP’s hardline president, and propel their authority on to the next general election in 2019.

Victory for the Samajwadi and Congress parties would project Yadav as a prominent north India political leader and would also begin to boost Gandhi’s flagging reputation. The two men (above), both in their mid 40s, seem to have worked well as a team during the campaign, building a mutual understanding that could be politically important in the future if both survive. Having Akhilesh as a partner for Gandhi had “revived the whole energy of Congress,” a party official told me.

UP provides a test of whether voters, especially the poor, are still prepared to support Modi, saying that “at least he is trying, which others have not done before”.

That is a refrain heard constantly, especially over Modi’s demonetisation project which instantly removed 86% of bank notes from circulation on November 8 last year. This hit all strata of society, but the poor do not seem to be complaining because they perceive, wrongly, that the rich and corrupt were hit hard – wrongly because most illicit hordes of bank notes were successfully banked through various fraudulent transactions.

Experts have found it difficult to predict the results in most of the states polled in recent weeks. My best guess for UP is that the BJP will win the most votes overall in the 403-seat assembly, though it might not have enough to form a government on its own, in which case the Bahujan Samaj Party (BSP), headed by Kumari Mayawati, could join it in a coalition. Mayawati has been chief minister of UP four times, the last being 2007-12.

An experienced Congress politician on my flight back to Delhi said the UP prospects looked evenly balanced, which I took to mean that Congress (with the Samajwadi Party) was not expecting to win. Similarly, a young Congress worker in Varanasi told me he was “hoping for the best, but preparing for the worst”.

Posted by: John Elliott | February 24, 2017

Infosys and Tata rows raise questions on India’s corporate ethics

Retired chairmen challenge their successors and upset reputations

Two of India’s most iconic and respected companies have been hit by damaging publicity caused when their previous chairmen objected to the way the businesses were being run by their successors. In both cases, the main accusations have been that the new managements were breaking established traditions and ethics..

This has led to questions not only about the wisdom of the former chairmen’s outbursts, but also about what this revealed concerning the general state of India’s corporate integrity.

Tata, India’s biggest and most respected conglomerate, has begun to emerge from its four months of damaging publicity with a new executive chairman, Natarajan Chandrasekaran, who took over on February 21 from Ratan Tata at Tata Sons, the main holding company. Previously chairman for 21 years, Tata had reappointed himself as interim chairman on October 24 last year when he organised a boardroom coup that ousted his successor, Cyrus Mistry, 50, triggering legal challenges to his action and media exposure to negative aspects of his legacy.

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Narayana Murthy (right) with Vikas Sikka in 2014 shortly after handing over the Infosys top executive job

The other is Infosys, which is widely regarded as one of the most ethical and entrepreneurially successful of India’s big information technology companies, rivalled only by Tata’s TCS and Wipro. Criticisms were launched earlier this month with maximum publicity by Narayana Murthy, one of Infosys’s founders 36 years ago and the company’s first ceo. They raised questions about boardroom ethics and were aimed primarily at the current chief executive, Vishal Sikka, and at R. Seshasayee, the non-executive chairman and a former head of the Hinduja group’s Ashok Leyland autos company and IndusInd Bank.

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Ratan Tata (left) and Cyrus Mistry in 2012 when Tata stepped down

Ratan Tata never made it really clear why he organised Mistry’s dismissal, using his popwer as chairman of Tata Trusts, the 66% majority shareholder in Tata Sons, beyond making often-contradictory claims about Mistry’s alleged performance failings, whereas Murthy could not have been more explicit when, having no boardroom or dominant shareholder power, he went for media headlines.

In a big interview with The Economic Times earlier this month, Murthy complained about a “concerning drop in governance standards” as well as “arrogance” and a “complete lack of fiduciary responsibility”. He focussed on a large Rs173m ($2.6m) severance payment secured (initially without being recorded in board minutes) by the chief financial officer, Rajiv Bansal, who had left the company in 2015.

Reflecting rumours that are still circulating in Mumbai despite denials by the company, he said that “such payments raise doubts whether the company is using such payments as hush money to hide something”. He also implicitly criticised Sikka’s $7.3m pay package (which is roughly double the earnings of Tata’s Chandrasekaran, who was then head of TCS, and four times that of Wipro’s top executive). Sikka has produced good financial results since he took over in June 2014, raising profits by about a third and starting a fresh approach to innovation, automation and other key issues.

Whistle-blowers

Murthy’s outburst prompted two anonymous whistle-blower emails to be sent to SEBI, the stock market regulator, linking the size Bansal’s severance pay to a purchase in 2015 of Panaya, an Israeli software company strong on automation, for $200m, 25% above a recent valuation.

The inference was that Bansal had not been happy with the deal so resigned and had to be compensated for his loss of job and silence. This has been denied in detail by Infosys, which also faced down other complaints, including Sikka’s use of executive jets.

A cacophony of complaints followed from other disgruntled former Infosys employees including Mohandas Pai, a regular performer on  noisy television debates, who was praised by Murthy and was a top executive and board member till 2011.

Inevitably, Murthy’s action led to questions about his motives coming so soon after Tata had ousted Mistry and had temporarily taken over himself. But Murthy had already reinstalled himself as executive chairman in 2013 when the company’s buggins turn system of  its founders each take the top job led to poor financial results and a loss of market share. He stayed a year till Sikka was hired as chief executive from SAP SE, a German software company, and Seshasayee joined as non-executive chairman.

Seshasayee has refused to resign, but has admitted that there have been “cultural differences” with Murthy and the other founders. With Sikka, he has taken steps in the past few weeks to answer the criticisms and placate Murthy. Sources in India’s corporate world however believe that all the questions have not been adequately answered and that the company’s leadership has not yet been stabilised.

Murthy and his fellow founders together have about a 13% stake in the company, but their real power lies in their status as respected elders, though there is criticism of Murthy’s apparent search for the media spotlight .

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Natarajan Chandrasekaran (left) took over earlier this week from Ratan Tata

At the Tata group, the damaging allegations came ironically not from Ratan Tata but against him from Mistry after he had been sacked. They have raised serious questions about both the group’s and Ratan Tata’s claim to a clean record.

These issues will now have to be handled by Chandrasekaran. They include revelations of alleged questionable payments in a Tata aviation joint venture with Air Asia of Malaysia, and about financial deals which Ratan Tata did in the past with Chinnakannan Sivasankaran, a controversial south Indian businessman who has been surprisingly close to him, plus other telecoms investments and contractual relationships.

That is in addition to allegations of mismanagement by Ratan Tata and the Tata Trusts, and various legal and regulatory actions, started by Mistry at the end of last year.  The most significant are rulings awaited from the National Company Law Tribunal (NCLT) on pleas by Mistry’s family firms, which have an 18.4% equity stake in Tata Sons, challenging Mistry’s dismissal and alleging mismanagement and oppression of minority shareholders.

Chandrasekaran, as he is known, will also have to deal with legacy issues left behind by Ratan Tata when he originally resigned in 2012 such as Tata Motors’ never-successful Nano car and Tata Steel’s UK Corus loss making business. Tata resented Mistry trying to solve these problems and there are others that need tackling in Tata Power and other companies. That is in addition to sharply declining earnings at Tata Motors, and the risk of TCS’s role as the group’s main cash cow being hit by President Trump’s likely restrictions on software engineers ‘US visas.

As he took on his new role this week, Chandrasekaran said he would “focus on three strategic priorities” – bringing the group closer together to leverage collective strengths, driving operating performances, and bringing greater rigour to capital allocation policies.

The question now is whether Tata is willing let him get on with those aims and stand aside without trying to wield veto powers as head of the Tata Trusts.

“Convinced that he was irreplaceable”

In a lengthy Financial Times article on the group last weekend, Simon Mundy, the Mumbai correspondent, had a specially telling paragraph about a longstanding acquaintance of Ratan Tata who said the “adulation” of him gave cause for concern as he approached the group’s mandatory retirement age of 75.

“In this last phase, an ordinary man became an icon. His health was beginning to get stressed, and I don’t doubt that he genuinely wanted to find a successor. It was not a charade. But the trouble was, he was convinced that he was irreplaceable,” said the (unsurprisingly) anonymous source.

Similarly, the question can be asked whether Murthy still considers himself indispensable as Infosys’s chief mentor, which is the title he was given when he first retired.

So what has Ratan Tata achieved with his vengeful ejection of Mistry? He has removed a chairman who wanted to reduce the trusts’ constant grip on Tata companies’ decisions, and who might eventually have tried to disrupt Tata traditions, though that has not been established.

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Chandrasekaran on Mumbai’s Marine Drive – Business Today photo              .                      

With Chandrasekaran, an insider, in charge, the main Tata traditions of social and well as corporate aims are intact, even though tougher management decisions will have to be taken. But Ratan Tata has dimmed the previously venerated group’s protective halo by provoking Mistry to air allegations about ethics, and he has shattered his own halo.

He has also endangered the group’s Parsee traditions by packing the Tata Sons board with a motley collection of outsiders who he knew would support him in ousting Mistry, but who observers fear might have other aims in the years ahead. Chandrasekaran can offset that by bringing more top Tata group executives onto the board – The Economic Times yesterday reported that this is being considered.

Neither Tata nor Murthy have earned much if any praise for the heavy-handed way in which they have tried to right what they have perceived as their successors’ failings. Both had understandable interest since they had built up the businesses, and they both had status as promoters under Indian company law. But that does not excuse the way that they took action.

The Tata group will begin to bounce back from the past four months hiatus as it approaches its 150th anniversary next year, though it has serious business challenges to face.

Ratan Tata’s personal image is unlikely however ever to regain its previous sheen. The same goes for Infosys and Murthy.

And India’s corporate scene has few other prominent ethical icons to look up to.

Aam Aadmi Party could disrupt  national politics in Punjab and Goa

State assembly elections that are now in progress in five states will indicate how successful India’s prime minister Narendra Modi has been in meeting the aspirations of electors who voted him into power with a landslide victory three years ago to change the way India had been run by ineffective national governments.

Uttar Pradesh is the biggest prize, but the states of Punjab and Goa could make political history by launching another agent of change, the Aam Aadmi (people’s) Party, into national politics outside its current base of Delhi where it was elected two years ago.

kejriwal-iranian-new-year-115_647_031916080248_011017051019This means that the current elections are vitally important for three political leaders – Modi who is desperate to prove himself by winning the massive state of Uttar Pradesh (UP), Arvind Kejriwal (left) of the AAP who wants the Punjab and Goa results to propel his party to other states, and Rahul Gandhi, the fading Congress Party’s hapless dynast, who urgently needs success in UP where he is focusing his electioneering.

Voting took place in Punjab and Goa on February 4 and began in UP on February 11. There will be another seven polling days in UP finishing on March 9 – spread out because security forces have to be relocated across the vast state with its 140m voters in a population of 220m (more than Brazil, the world’s fifth largest). Voting is also taking place in Uttarakhand, previously part of UP, and Manipur in India’s north-east. The votes will be counted on March 11, and exit poll results will be announced on the 9th evening.

Modi’s desperation

UP is always regarded as a bell-weather state. That is specially so this time because of Modi’s desperation to defeat an alliance between Congress and the regional Samajwadi Party, which is currently in power. The other main contender is the Bahujan Samaj Party (BSP) headed by Mayawati, a maverick former chief minister, but it is running a distant third in opinion polls (which may of course be proved to be wrong).

If the BJP wins, Modi will claim it as acceptance of his controversial demonetisation project that was launched on November 8 and is still causing shortages of bank notes after three months of widespread social and economic disruption. It would also boost him politically two years ahead of the next general election in 2019.

If he loses to the Samajwadi-Congress alliance however, it will seriously damage his political standing and that of Amit Shah, his chief henchman and the hardline BJP president, and will provide Rahul Gandhi with a desperately needed victory.

akhilesh_yadav_pti_650_636192039936377969Opinion polls are divided on who will win. Akhilesh Yadav (left), the 43-year old current Samajwadi chief minister who has just won a leadership battle with his father and former party leader, Mulayam Singh Yadav, is drawing support from the youth. Rahul Gandhi, 46, however is a weak ally. The BJP seems a stronger contender, but is weakened by the absence of a chief ministerial candidate, making Modi the focus of the campaign with Shah (together, below).

While UP is significant, it is Punjab and Goa that could have a major disruptive effect on the future of Indian politics. If the AAP does well in either or both those states, even if it does not win, it will be seen as a potential national political party. Its next target would then be Gujarat, Modi’s home state, where assembly elections are due at the end of this year.

Some recent opinion polls are tilting in the AAP’s favour, with some even giving it a chance to win in the Punjab and upset a traditional BJP versus Congress contest in Goa.

Turnout was high on February 4 with 75% of the 20m electorate voting in Punjab and 83% of the 1.1m in Goa. This could be good for the AAP because it indicates a desire for change, quite possibly away from established parties – notably the Akali Dal, a state-level party, which is in coalition with the BJP in Punjab, and also away from the current BJP state government in Goa.

modi_shah-_2921205fPunjab needs a change from the Sikh-dominated Congress and Akali Dal parties that have dominated the states politics for decades with one and then the other in power. The state’s once prosperous agriculture has problems, and widespread corruption has deterred private sector investment and the maintenance of public services.

There is a high level of youth unemployment and a serious drug problem among the youth, protected by politicians and fed by supplies from neighbouring Pakistan. “The smugglers throw parcels of heroin across the border in bottles, or enlist farmers to carry the drugs after pushing the parcels into long plastic pipes,” a counterintelligence official in the Punjab police told Ellen Barry of the New York Times.

The possibility of a Punjab victory for the AAP first emerged early last year in shock opinion polls that gave it a clear lead with as many as 75 to over 100 seats in the 117-member assembly. It then lost ground with a series of scandals and defections that developed as the established parties tried to annihilate the upstart’s surge in popularity.

Indications now are that it has recovered, even though it has no experienced prominent local political leader to parade as a potential chief minister and has no ethnic links with Sikhs, who form 60% of the population. It is specially strong in the Malwa region in the south of the state, which has 69 of the 117 seats, but Congress is tipped to win in the other two Doaba and Majha areas.

Delhi problems

Kejriwal, a prominent anti-corruption campaigner, formed the party in November 2012, but failed disastrously to govern effectively when he led a minority Delhi administration after assembly polls in December 2013. He and his fellow ministers spent more energy on street protests than trying to run the city, and he resigned after 49 days.

The next election led to an AAP victory in February 2015 when it won support from both youth and the poor. This was a major defeat for Modi because the BJP had expected to win and was routed with just three assembly seats against the AAP’s 67. The AAP has had a bumpy ride since then. The BJP has undermined its policies whenever possible, acting mainly through a compliant lieutenant governor (recently replaced) who has extensive powers, including control of the police, because Delhi is only a quasi-state. The AAP complains that he has blocked plans ranging from water supplies and buses to schools.

The AAP failed to win any of Delhi’s parliamentary seats in the 2014 general election and did not win anywhere else, apart from four seats in Punjab, despite fielding candidates across the country. That made it look as if it had been marginalised in both national and Delhi politics.

But it has rebuilt itself and has replaced its former image of disruption and protest with a more constructive approach.

This a major blow to Modi who sees his programme of economic and governmental reform along with his Hindu nationalist ideology as the way to build a strong India That voters are still looking for an alternative must worry him and Amit Shah.

Better not to win?

It might be better for the AAP however if it does not win an election this time. It does not seem to be ready to form a government in Punjab, unless Kejriwal plans to be chief minster which has been denied. It would be better maybe if it was a strong runner-up in both Punjab and Goa because this would give it a chance to build local experience and develop senior politicians ready for the 2019 general election and then the next state elections.

Meanwhile, it could turn its attention to harrying Modi and Shah in Gujarat next winter.

Posted by: John Elliott | February 7, 2017

India Art Fair scores with prospects of Basel zing next year

Jaipur Lit Fest gets massive crowds for books and fun

A Souza oil gets an amazing $8m price tag but is not for sale

North India’s two annual cultural jamborees have this year again pulled in tens of thousands of expanding crowds from home and abroad as they reach their ten-year anniversaries – the Jaipur Literature Festival last month and the India Art Fair next year. Both provide a mixture of culture, education and entertainment, having begun in a relatively informal way without any great ambitions.

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This Souza work is recognised by experts as possibly one of the top five works of Indian modern art – its owner, Ashish Anand, says it’s the best

The lit fest (known as JLF) started as a small part of a wider Jaipur arts festival for two years before it became a separate event. It is now the largest in the world, while the art fair (IAF) began as a public relations company venture and is gradually achieving international recognition.

Both have their stars. The art fair’s top painting (left) was Man and Woman Laughing by F.N.Souza, one of India’s great “modern” masters. Bought for $2.6m at an auction two years ago by Ashish Anand of the Delhi Art Gallery, it appeared on an art website on February 2 with a $8m price tag – and the art fair organiser’s press release included $8m as the top end of the price range available at the fair.

Top Souza works “worth $8m”

That improbable figure is almost double the current $4.4m record auction price for an Indian painting, but Anand describes the $8m as “an equivalence vis a vis artists of that period in India and overseas” for a Souza work. “We believe his good works should command that price,” he told me, adding that “it is not for sale, not even at $15m”. 

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Not the three wise monkeys but one of six prints called Peace Owners II by Sunil Sigdel from Nepal

While the art fair has the same star artists every year, the lit fest produces new top writers from India and abroad. This time they were led by American and Indian poets, Anne Waldman and Gulzar, along with novelists Paul Beatty from the US and Alan Hollinghurst from the UK.

Both events have expanded and developed at a time when there is a increasing appetite in India for what they offer, as well as growing international interest in India’s modern culture. About a quarter of the 400 authors and other speakers at Jaipur came from abroad, as did 18 of the art fair’s 76 galleries and other exhibitors, despite debilitating (and expensive) government customs regulations on the import of art from abroad.

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A papier mache packhorse by Kashmiri artist Veer Munshi on the ArtDistrict XIII stand

In terms of control, one of the events has been lost by India. The art fair is now foreign owned. Its founder, Neha Kirpal, has reduced her stake to just 10% with the sale five months ago of a controlling 60.3% to MCH Group of Switzerland that runs the internationally famous Art Basel fairs in Basel, Miami and Hong Kong.  Angus Montgomery Arts, a UK-based exhibition and events company, bought 29.7% in 2011, which it retains.

The lit fest, which had 400,000 footfalls over five days with 80,000 registered visitors, looks firmly anchored in India. It is produced by Sanjoy Roy, head of Delhi-based Teamwork Arts whose leading investor is Ambit Capital of Mumbai. Intellectual leadership is provided by writers Namita Gokhale and Willie Dalrymple, the co-directors.

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A striking oil on canvas by Shivlal Saroha on the Art Heritage stand

But while the lit fest does not need foreign investor involvement, the art fair will undoubtedly gain from MCH’s Basel expertise and international contacts. Despite a splendid layout and evident popularity – it reported 90,000 footfalls over four days – the fair has settled in the past two or three years into a relatively bland groove and needs a boost.

MCH Swiss Exhibitions (Basel), headed by Marco Fazzone, hopes to invest in about five regional art fairs around the world and will encourage links for them to liaise and expand. The IAF is its first investment and its second (announced Feb 9) is a 25.1% stake in a German company that organisers the new art fair ART DÜSSELDORF. 

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Eventually, the art fair will have an app that will enable, for example, a visitor to access information about a work by focussing on it with a mobile phone. That will generate enormous potential for increasing knowledge as well as for art sales on-line, which many galleries now say are becoming an increasingly significant part of their business.

This year, the organisers and galleries were specially cautious about what was displayed because they were worried that India’s demonetising banknote ban, which was suddenly imposed by prime minister Narendra Modi early last November, would restrict sales because of the uncertainty about the economy and lack of available cash. 

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A large M.F.Husain painting and a K.S. Radhakrishnan sculpture on the DAG stand

The modern art market has been flat for some time. A new report by Art Tactic, a London based analyst, says that auction prices of Indian modern art rose by just 0.5% in 2016 and sales fell by 25%.

Domestic demand for miniature paintings and other classical Indian art had however risen by 84% since 2014, indicating that collectors were widening their horizons.

The gloom seems now to have lifted as new bank notes have become available and government restrictions have eased. Many galleries on Sunday night were reporting satisfactory sales, or pending sales. The art fair organisers reported, somewhat over-optimistically, that “strong sales” from $1,000 (Rs67,000) upwards were reported by 94% of Indian galleries and 85% of international galleries. Most of those that I spoke to on the final evening however told me that their best sales were still being negotiated; some had just about broken even on the costs of attending.

The galleries’ displays were dominated by old “progressives” such as M.F.Husain, F.N.Souza, S.H.Raza and Ram Kumar, plus later but equally safe names such as Lalu Prasad Shaw, K Laxma Goud, Sakti Burman, Satish Gujral, along with some younger artists doing easily accessible work. 

Ashish Anand’s Delhi Art Gallery had a display area far bigger than any other exhibitor and he was named “collector of the year” at India Today magazine’s annual art awards. He describes Souza’s Man and Woman Laughinga 60 x 48in oil on Masonite board, as “the most iconic painting in Indian art” and says it would “beat any Picasso”.

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A few more adventurous galleries showed installations like Mithu Sen’s Phantom Pain pink dental plates (above) that was on the Nature Morte stand, and a painting (above) of three Peace Owners including Donald Trump that drew attention to the Nepal Art Council’s booth. Nepalese modern art is little known and Trump and his cohorts attracted visitors and helped to put it on the map.

With its massive crowds and the excitement of top authors and other speakers who can be listened to and engaged in conversations, the lit fest is a more exciting event than the art fair and stimulates ideas and influential debate. 

Controversies crop up every year. This this time it was liberals objecting to hardliners from the Rashtriya Swayamsevak Sangh (RSS), the extreme right wing umbrella organisation of the governing Bharatiya Janata Party, being invited as speakers. A few years ago, author Salman Rushdie was prevented from attending by Muslim protests over his controversial Satanic Verses novel.

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Celebrations at the Jaipur lit fest

The festival has something for all tastes and interests. I mostly attended sessions on current affairs and controversies with writers of books on China’s one child policy, murder and mystery linked with the compiling of the Oxford English Dictionary, Indian politics, London’s infamous Jack the Ripper sadist, and Britain’s colonial misdeeds in India.

I moderated sessions on Modi’s banknote ban and the new world of the digital economy – appropriate since an attempt to make the festival cashless crashed on the first morning because of inadequate internet. With a total of some 200 sessions, there were plenty of alternatives for those with a more literary or poetic bent.

Both the lit fest and the art fair have now established themselves as important annual events, alongside others including the biennial Kochi festival that is on now in Kerala. Both have also led to the creation of similar but smaller events elsewhere in south Asia.

For the future, the art fair awaits a Basel boost while the lit fest will continue to be an important part of India’s cultural diplomacy – it is staged, by invitation, in London and Boulder and next weekend will be popping up in Melbourne.

Posted by: John Elliott | February 1, 2017

India Budget tries to bounce back from misery of bank note ban

Government admits demonetisation caused widespread disruption

Arun Jaitley, India’s finance minister, today presented his annual Budget which was aimed at bouncing the country’s political and economic focus away from the miseries of prime minister Narendra Modi’s three-month old bank note ban and at projecting an economy with increased growth and less corruption.

Known as demonetisation, the cancellation of Rs1,000 ($14.8) and Rs500 notes was suddenly introduced by Modi in a nation-wide broadcast on November 8. It removed 86% of currency in circulation and led to widespread economic and social disruption and hardship that Jaitley and Modi have always underplayed in public statements.

img_1507Although Jaitley did not spell this out in his speech (left), the government has now admitted that demonetisation has had “significant implications for GDP”, reducing 2016-17 growth by 0.25% to 0.5% from an expected 7%. That statement came with the finance ministry’s annual Economic Survey, that was published yesterday and included an analysis of the problems and potential benefits.

“Like all reforms, this measure is obviously disruptive, as it seeks to change the retrograde status quo,” was all that Jaitley would acknowledge. “Drop in economic activity, if any, on account of the currency squeeze during the remonetisation period is expected to have only a transient impact on the economy”.

Modi initially said that the aim was to curb the role of black money but, when it became clear that massive amounts of cancelled notes were being corruptly banked and converted into new currency, the government switched to say that the aim was to drastically reduce the role of cash in the economy by encouraging digital transactions. Amitabh Kant, chief executive of Niti Aayog, the government’s revamped planning commission, has even claimed that “by 2020 India would make all debit cards, credit cards, ATMs and POS machines totally irrelevant”

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Arvind Subramanian, chief economic adviser, launching his annual Economic Survey

The Economic Survey however was more realistic and said that “digitalisation is not a panacea, nor is cash all bad”. Public policy should balance benefits and costs of both forms of payments and “the transition to digitalisation must be gradual; take full account of the digitally-deprived; respect rather than dictate choice; and be inclusive rather than controlled”.

In his speech today, Jaitley put more focus on reducing corruption, which has been a major government policy since the general election nearly three years ago.

He talked about how “tax evasion for many has become a way of life”, which “compromises the larger public interest and creates unjust enrichment in favour of the tax evader, to the detriment of the poor and deprived”. That had bred a parallel economy that was “unacceptable for an inclusive society”. Demonetisation sought to create “a new ‘normal’ wherein the economy would be “bigger, cleaner and real”.

To illustrate that India was “largely a tax non-compliant society”, Jaitley said that only 172,000 people declared annual income of more than Rs50 lakhs ($73,500), yet in the last five years more than 12.5m cars had been sold and, in 2015, 20m Indian citizen flew abroad for business or tourism. “The predominance of cash in the economy makes it possible for the people to evade their taxes,” he declared.

Political funding

The government now needs to show that it will follow up the possible demonetisation gains by taking more steps to tackle corruption than it has done so far. One major area is funding of political parties, which depends on massive use of black money. It was widely assumed that Modi’s November 8 note ban was timed to hit hordes of Rs500 and Rs1,000 notes collected by regional parties in five states, including Uttar Pradesh and Punjab, for campaigning in assembly elections that start on February 4.

Jaitley announced that the maximum cash donation that any party could receive from one source would in future be Rs2,000. Other donations could only be by cheque or a digital transaction. The Reserve Bank of India will be issuing electoral bonds that donors could buy for redeeming by a political party. These measures however fall far short of full declaration of party funding, which Modi said recently was desirable. Sceptics say that the Rs2,000 limit will not be effective.

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Arun Jaitley with his ministers of state and senior bureaucrats

Jaitley also said the government is considering introducing legislation that would provide for the confiscation of assets owned by people who leave the country to evade court action. Although he did not name him, the most recent such example is Vijay Mallya, former head of the leading liquor and (bankrupt) airline business with the brand name Kingfisher, who has failed to return from the UK for court hearings.

One significant reform is the abolition during the coming financial year of the government’s Foreign Investment Promotion Board (FIPB), whose main job since it was founded in 1991 has been to examine foreign investment proposals (sometime attracting bribes).  With FDI inflows totalling $75bn in the past year, more than 90% of FDI inflows are now automatically cleared without vetting  Plans for further easing FDI restrictions and phasing out the FIPB will be announced in the next few months.

Fiscal deficit

The budget’s aim, Jaitley said, was to “transform, energise and clean India”. In an attempt to boost employment and consumer spending, there were measures for agricultural and allied sectors including rural jobs schemes, plus $58.8bn more spending on infrastructure, notably highways and the railways. Taxes were reduced for the poor and raised for the higher paid.

The fiscal deficit for the coming year has been set at 3.2% of gdp instead of the planned 3%, presumably because Jaitley does not want to over-restrict the economy when recovery from the shock of demonetisation is the main priority.

For the first time since 1925, there is no longer a separate Railway Budget. This is one of three significant changes this year. The speech has been brought forward from its traditional February 28 date to February 1 to enable the government ministries and states to plan for the start of the next financial year. Complex distinctions between what have been called plan and non-plan expenditure have been abolished to simplify financial allocations.

Overall the budget has been welcomed, as it always is, by business federations that rarely dare to criticise the finance minister publicly. Opposition political parties have inevitably attacked it for failing to tackle basic problems of joblessness and sluggish investment.

More independent observers however have seen it as a politically competent budget that has tried to move on from demonetisation by boosting growth and taking some anti-corruption measures. There is little to show how its plans will work in practice, but its pro-poor rural announcements might well help garner votes for Modi and Jaitley’s Bharatiya Janata Party in the coming assembly elections.

Posted by: John Elliott | January 12, 2017

Tata has a new chairman from inside the group

Natarajan Chandrasekaran of TCS to take over next month

India’s Tata group today began rebuilding its seriously damaged image as India’s most respected and stable conglomerate when it announced the appointment of Natarajan Chandrasekaran, 53, (below) who heads the highly successful Tata Consultancy Services, as executive chairman of Tata Sons, the main holding company.

chandrasekaran_ptiHe will take over on February 21 from Ratan Tata, 79,  (below) who was previously chairman for 21 years and reappointed himself as interim chairman on October 24 when he organised a boardroom coup that ousted his chosen successor, Cyrus Mistry, 50.

Chandrasekaran began to emerge as the possible choice when Ratan Tata picked him to join the Tata Sons board a day after the Mistry sacking. 

It was almost inevitable that an insider would be appointed, partly because it was most unlikely that any outside candidate would accept the job, given the way in which Ratan Tata has for the past 25 years dominated Tata Sons, the main operating companies and the Tata trusts that hold the majority of shares. It was Ratan Tata’s unwillingness to let go of the reins and be content heading the Tata trusts, along with a new life as a venture capital investor, that largely led to the Mistry bust-up and sacking.

Given the history, it was also essential that the new chairman should be trusted by Tata and be able to work well with him, which Mistry could not. Chandrasekaran has headed TCS as chief executive officer and managing director since 2009 and, although Tata was  little involved in its affairs, the two men will have established mutual respect.

Tata said on October 24 that a new chairman would be appointed within four months and it was done in less than three, indicating that the group realised it needed to move on as quickly as possible.

Tata might also step down from chairmanship of the trusts later this year when a new chairman is found. Media reports last month, including interviews with one of Tata’s close advisers, indicated that he is willing to go when he thinks it appropriate, maybe some time this year. 

ratantata-kjzh-621x414livemintWhen that eventually happens, it will mark a new era and the $100bn group could be on its way to restoring its battered image. 

Ratan Tata has been widely criticised for the impulsive way in which he organised Mistry’s sacking after three years of increasing frustration and months of plotting, and for not providing coherent justification for the move. He presumably assumed that Mistry would go relatively quietly, but he was wrong, and he certainly could not have had any idea of the corporate earthquake he was unleashing.

Mistry has been removed from all the Tata operating boards and will probably be off the Tata Sons board by early February, but he has fought back publicly. That has led to a series of headline allegations and counter allegations that have criticised Tata’s governance and lifted the lid on its businesses and some of their more dubious dealings. Legal cases have been started in courts and regulatory tribunals, including the key National Company Law Tribunal, by Mistry and Tata. Mistry is challenging the legality of his dismissal and of other actions taken by Ratan Tata, and is also accusing the group of malpractices.

Chandrasekaran will therefore take over a group that not only needs urgent action to sort out what are dubbed operating companies’ “legacy” problems inherited from Ratan Tata’s 21 years in charge, but one that is also embroiled in a potentially embarrassing and damaging legal jungle.

A statement from the company this evening says that the Tata Sons board “believe he will now inspire the entire Tata group to realise its potential acting as leaders in their respective businesses, always in keeping with our value system and ethics and adhering with the practices of the Tata group which have stood it in good stead.”

That is not just public-relations-speak. It goes to the heart of the Tata-Mistry dispute, with Ratan Tata accusing Mistry of not adhering to those values and practices. Mistry (below) denies he deviated from the standards and that has said he was indeed trying to ensure that the business’ potential was realised by operating companies including the debt-laden Tata Steel with its loss-making Corus business in the UK, Tata Motors with the loss-making Nano mini car, Taj Hotels which needed slimming down, and similar exercises elsewhere.

cyrus_mistry-dec-19-ptiChandra, as he is known, joined TCS in 1987 straight from engineering college. He has played a leading role in the growth of what is by far the group’s most profitable business that contributes 70% of Tata Sons’ revenue and is India’s largest IT company. Turnover and profits tripled while he has been in charge, with annual revenues of $16.5bn.

He will command respect within the group as a professional manager because of his achievements at TCS and has had extensive experience dealing with leading multi-national banks and companies that use TSC’s services. He is  credited with being a strong chief executive who implemented a corporate reorganisation that broke down what was a monolith into more than 20 business units.

He leaves TCS however at a difficult time because of Donald Trump’s likely presidential moves to curb US companies using offshore IT firms. At a TCS press conference today announcing buoyant quarterly results, Chandrasekaran said the industry would be able to “tackle any headwind”

The Tata and the Mistry families belong to the Parsee (Zoroastrian) community and religion, and Chandrasekaran will be the first non-Parsee chairman of Tata Sons. That marks a major break with tradition. He will also be only the second chairman not to have the Tata name, Mistry being the first. His appointment means that Noel Tata, Ratan’s low profile step-brother who heads some of the group’s retail companies, has for the second time been passed over for the top job. 

“I like the way the peaceful Buddha can influence that giant creature,” Chandrasekaran has said, talking about his favourite painting of a meditating Buddha seated near an elephant, the Business Standard newspaper has reported this evening. That was in 2014, long before he could have even dreamed that one day he would be in charge of the giant Tata creature.

Posted by: John Elliott | December 24, 2016

Merry Christmas!

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Posted by: John Elliott | December 22, 2016

A bitter battle has started for the future of the Tata group

Ratan Tata has shattered his and the group’s protective halo

The Tata group, India’s largest conglomerate, faces an unpredictable new year with a battle developing for control of what has always been regarded as India’s most stable and respected business group. The end game is far from clear at this stage, but what is clear is that serious damage has been done to the Tata image.

On one side is Ratan Tata, the veteran former chairman who instigated the sacking on October 24 of Cyrus Mistry, his successor as chairman of Tata Sons, the group’s top holding company. He is trying to find a new chairman who will rebuild the image and the group’s relationship with Tata trusts that own a controlling 66% stake in Tata Sons

On the other side is Mistry, who was the first chairman not from the Tata family and held the job for nearly four years. His Shapoorji Pallonji family, which belongs to the same Parsee religion and community as the Tatas,  owns an 18.5% stake in Tata Sons – the largest minority holding after the trusts. Mistry has started destabilising regulatory and legal actions that are aimed at changing the governance structures of the group and, consequently, control.

In the wings are members of the Tata Sons board who have been backing Ratan Tata but who, according to unsubstantiated rumours swirling around Mumbai, may have other plans for the future of the group.

Mistry’s immediate aims include removing Ratan Tata from the temporary chairmanship that he assumed on October 24, and also removing board members who he has recruited in recent months. Also planned are changes in the way that Tata charitable trusts, which are also headed by Ratan Tata, relate to the companies.

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Cyrus Mistry – Dec 19, PTI photo

The first stage of Mistry’s legal campaign began today (Dec 22) with the National Company Law Tribunal (NCLT) holding a preliminary hearing on a petition from his investment companies for an administrator to take over the group’s affairs, pending the appointment of a new board – led, it is suggested, by a retired supreme court judge. The petition is based, under India’s companies’ legislation, on allegations of oppression of minority shareholders and mismanagement of Tata Sons.

Ratan Tata, who is 79 on December 28, was chairman of Tata Sons for 21 years till the end of 2012 when he was replaced by Mistry with his support. During most of those years he was also chairman of Tata trusts and of the leading operating companies, which meant he dominated decision making and few people would cross him.

That absolute authority ended with Mistry’s appointment, though Ratan Tata continued to exert corporate authority as chairman of the trusts, and less formally as the bearer of the Tata name, which gradually led to his relationship with Mistry breaking down.

The current (unnecessary) upheaval is the result of him deciding in October that he could no longer tolerate dealing either with Mistry, aged 50, or with Mistry’s top advisors, who many saw as excessively abrasive. Talking to contacts in Mumbai and elsewhere over the past few weeks, I have found far more support for Mistry than Tata on almost all grounds, except on the advisers who formed a general executive council and are widely criticised.

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Ratan Tata in October, PTI photo

Ratan Tata could have waited till next April when Mistry’s current contract expires and had him replaced then. He has said that he will take the reason why he had to act when he did “to my grave”.

The apparently impulsive action has shattered a protective halo that has surrounded both the group’s and his personal image for decades. It has released streams of pent-up personal criticism that has rarely been uttered in the past but now constantly crops up in conversations with businessmen, professionals and observers.

Mistry’s 344-page petition was served on 23 people, including members of the Tata Sons board – industrialists Ajay Piramal of the Mumbai-based Piramal group and Venu Srinivasan of TVS in Chennai, together with Nitin Nohria, Harvard Business School dean, Amit Chandra, India head of Bain Capital, Vijay Singh, a retired bureaucrat, and Ronen Sen, a former top diplomat. Also in the list is N.A.Soonawala, a Ratan Tata confidante and former top executive, now on the Tata trusts.

The inference is that these people, who Mr Tata has assembled on the board and who backed the removal of Mistry, have plans for the group that will be detrimental both to the reputation and success of operating companies, maybe after Mr Tata has finally retired. Linked with this is what would happen to the 18.5% stake that Cyrus Mistry’s Pallonji family has in Tata Sons as the biggest minority shareholder. Among the names, Piramal is know to have an appetite for takeovers.

Tata rebuts Mistry’s allegations which have been building up in a series of public statements since October. They include revelations of alleged questionable payments made by a Tata aviation joint venture with Air Asia of Malaysia, financial deals which Ratan Tata did in the past with Chinnakannan Sivasankaran, a controversial south Indian businessman who has been close to him, and other telecoms investments.

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Ratan Tata leaving the Finance Ministry in Delhi in November after lobbying Arun Jaitley, finance minister – PTI photo

The tribunal is also being asked to investigate whether the Tata trusts have breached insider trading regulations by asking for price-sensitive information from publicly-listed operating companies – something that Mistry annoyed Ratan Tata by resisting on one planned takeover.

“This is about governance — it’s not about me, it’s not about my position,” Mistry told the Financial Times yesterday. “Whatever I have said has been said for the long-term interests of the group. Nothing that I’ve said is not backed up.” He said that he would end his campaign “when a structure is put in place at the trusts, which clarifies [their role] with regard to Tata Sons”. He said that this would involve making sure that strategic moves were not made purely on the strength of “one person’s decision”.

Tata Sons dismisses Mistry’s public campaign as “a personal issue which reflects his deep animosity towards Mr Ratan N Tata”. It has also said that the group followed “the highest standards of corporate governance”.

Ethical reputation

That statement goes to the crux of recent events. For decades, the Tata group has been seen as one of India’s most ethical and corruption free businesses. Ratan Tata has often spoken about this, telling for example how he missed out on an aviation deal with Singapore Airlines in 2000 because he would not pay a bribe. Yet the revelations challenge such a reputation.

After Mistry was removed from the Tata Sons chairmanship, Ratan Tata started moves to remove him from the chairmanship of operating companies in steel, hotels, power, chemicals, beverages, and motors, alleging that Mistry was a “serious disruptive influence”.

The companies involved called emergency general meetings, several for this week. Mistry forestalled that by voluntarily resigning his chairmanships and board memberships on the evening of December 19, presumably knowing that he would lose the shareholders’ votes. Tata Consultancy Services removed him last week.

Yet all the companies, including Tats Sons, had given Mistry excellent reviews of his role as their top manager in the past few months. This meant that Ratan Tata has had few categorical reasons for sacking him, and it also led members of some of the companies’ boards to vote for Mistry to remain as chairman. Yet, Tata alleges, “Mistry has done precious little to build the goodwill of the Tata Group, built through the hard work and dedication of its employees.”

nusli-wadia-pti

Nusli Wadia – PTI photo

Mistry’s alleged misdeeds include not implementing changes he had proposed when he was being interviewed for the chairmanship in 2012, and not  moving fast enough on resolving problem areas including heavy debt burdens that he inherited.

He is also however accused of moving too fast on plans to close Corus, part of Tata Steel in the UK, at a time when the steel demand is picking up. There have also been criticisms of the way he handled a joint venture severance dispute with DoCoMo of Japan, plus rumblings that he clashed with Ratan Tata on the need to close down Tata’s personally-inspired but failed Nano small car project.

On the sidelines of this saga, there is a row involving Nusli Wadia, 72, a prominent Mumbai businessman and previously a close Ratan Tata friend and adviser. He is on Tata’s motors, steel and chemicals boards and has outspokenly backed Mistry.

Tata responded by calling for his dismissal from the boards – the first response came yesterday with Tata Steel voting him off its board. Wadia has filed a Rs3,000-crore defamation suit against Ratan Tata and the board of Tata Sons, and has complained about Tata’s corporate governance to the Securities and Exchange Board of India (Sebi). He has also issued a series of allegations against Tata, including criticism of the Nano production line not being closed,.

Ratan Tata has been getting a bad press internationally, though most of it has been directed more at the dominant relationship that he has expected to be able to exert on Tatas Sons through the chairmanship of the Tata trusts, plus his recent tactics.

Media reports last weekend indicated that he is willing to step down as chairman of the Tata trusts sometime next year. That would be in addition to handing over to a new Tata Sons chairman, which he has said should happen in the first two months of next year. But he wants to leave the trusts when he thinks it appropriate, not when Mistry or others seek to ease him out.

The FT’s respected Lex financial comment column took a tough line yeserday: “In resorting to counterclaims against Mr Mistry, Tata has done itself no favours. By throwing mud of its own, rather than presenting evidence that its process is clean, Tata is left with a bigger mess on its hands”.

What was left unsaid is that the whole “mess” could have been avoided with a little patience and with more care in the implementation of such a major generational change of top management.

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