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 well 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 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 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.”

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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.

this post has been replaced with a new one – A bitter battle has started for the future of the Tata group –  http://wp.me/pieST-3mk

 

 

Posted by: John Elliott | December 19, 2016

Modi-generated economic worry curbs bids at Christie’s auctions

MUMBAI: Christie’s high profile annual art auctions in Mumbai just managed yesterday to overcome growing concern about the direction of the Indian economy. They yielded a respectable but unexciting sales total of Rs72.17 crores ($10.79m) that acted as more of a warning than encouragement about future prospects.

In an evening auction of South Asian modern and contemporary art, 53 lots were sold out of 73 (72%) producing a total of Rs68.01cr ($10m). That was far below Christie’s record sale last December of Rs97.7 crore ($14.7m), the highest for any auction held in India, and the previous record of Rs96.5 crore that it achieved at its first Indian sale three years ago.

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Tyeb Mehta’s Untitled/Diagonal 

An afternoon sale of classical Indian art produced dismal results with just 38 lots sold out of 71 (53%), including 50 miniature paintings of which only 42% found buyers. The total was Rs4.13m ($609,076).

That is not the sort of result that Indian art’s leading international auction house expects to achieve, though it was the first time Christie’s has held a dedicated classical sale in the country. The result would have been far worse but for a colourful though little-known British cigar-wielding collector living in India who made most of the successful bids and became known as “paddle number 28”.

“Christie’s pulls it off again, just!” was the most optimistic comment that I heard from collectors at the end of the day. “Out of all our four auctions here, this one was the hardest,” said William Robinson, the modern art auctioneer and international head of Christie’s, told local media.

“Potential buyers are holding onto their money because of a growing fear of bad times ahead – across broad areas people are hurting,” said Geetha Mehra, who runs the Sakshi Gallery in Mumbai.

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Vasudeo Gaitonde’s Untitled

That reflected the over-riding verdict in India’s commercial capital – that Narendra Modi has led the country into unnecessary economic problems with his unexpected “demonetisation” announcement on November 8 that 86% of currency notes would become unusable.

His aims of tackling black money and encouraging India to move towards a cashless e-economy are accepted, but the impact of his seemingly unplanned methods is condemned.

The high spot of the moderns auction was the sale of two paintings by Vasudeo Gaitonde, a leading member of India’s Progressives artists’ group who died in 2001, and another by Tyeb Mehta, also one of the Progressives, who died in 2009. “Along with other works, this sent a strong message to the market,” said Deepanjana Klein, Christie’s international head of south Asian modern art.

Gaitonde has been doing well in recent years and he currently holds the record for the highest auction price achieved by an Indian modern artist, but Christie’s were anxious about the sales because it failed in September to sell a Gaitonde estimated at $1.8m-$2.2m in New York.

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Vasudeo Gaitonde’s Untitled

Yesterday’s two works by Gaitonde, both 60in x 40in (approx) oils on canvas, sold after slow bidding. The highest hammer price of Rs13 crore ($2.34m including buyer’s premium), which exceeded the top estimate, was achieved for a work (above) that had more detailed drawn shapes than many of Gaitonde’s paintings.

The other work (right) achieved Rs9.5 crore ($1.71m including the premium), just above the low estimate.

The lot on which Christie’s had pinned most hope was a striking 66in x 51in oil on canvas by Tyeb Mehta (above). This failed to meet the low estimate of Rs10 crore, but sold for Rs8.5 crore ($1.5m including the premium). The auction catalogue explains that, in the late 1960s, Mehta abandoned his expressionistic style and produced paintings dominated by a diagonal line that violently sliced his canvases into two. In this work, the focus is on two human figures in the centre with disjointed bodies, but there is less subtlety than in other Mehta series.

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Interior of a Temple, an early Bhupen Khakhar that sold after strong bidding for a hammer price of Rs2.2 crore, marking this artist’s growing popularity with a solo exhibition at London’s Tate Modern that closed last month

An important attraction of the moderns sale was that 41 of the lots, including the Mehta and one by Gaitonde, came from a collection assembled by Abhishek and Radhika Poddar who are raising funds for a museum of art and photography in Bangalore. Abhishek (interviewed here) has been collecting since he was a teenager and became friends with many artists who are now famous.

Such collections strengthen the provenance of works and thus usually boost sales, though that did not happen in the classical auction where 42 of the lots came from a famous collection assembled by Colonel R.K.Tandan of the Indian army, who died in 2009. Christie’s experts can console themselves that the potential buyer base for classical auctions in India is smaller than abroad because the works cannot be exported, so international collectors cannot bid.

A year ago however Mumbai-based Saffronart, the leading Indian auction house, staged its first sale of classical Indian art and had the rare achievement of all the 70 lots being sold, yielding Rs16.4 crore ($2.5m). That auction also included a large number of works from Tandan’s collection, though experts say the quality of the art was better than yesterday’s

Till now, the main collectors of miniature paintings have been in the UK and US, plus the Middle East. They buy and sell works that were taken abroad many years ago and thus were not caught by the current ban on the export of antiquities. There have been few Indian collectors though specialists believe that this now could change as Indian collectors of modern art realise the appeal and prestige of the best miniatures and sculptures. Many of these works can be obtained for around $10,000, which is far less than for the best moderns – and is also lower than prices being paid abroad.

radha-in-the-moonlightThere has been a spate of other south Asia art auctions since a successful one held by Sotheby’s in October in London. The most notable was staged last month by Pundole, one of Mumbai’s oldest art galleries that holds regular auctions in the city. It sold 85% of its 92 lots totalling Rs42.25 crore ($6.31m), its highest score since it began auctions in 2011.

This included Radha in Moonlight, a 57.5in x 41.5in oil on canvas (left) by Ravi Ravi Varma that was sold for a hammer price of Rs20 crore ($2.99m). This was well above the Rs8 to 12 crore estimate and set an auction record for the artist. It was also the second highest auction price for an art work in India. Believed to have been bought by Kiran Nadar, India’s most prolific collector, for her art museum in Delhi, it is a registered antiquity so is not exportable.

Ravi Varma, who died in 1906, is an important painter from the second half of the 19th century. He merged European artistic styles with Indian life and sought commissions from the rich and powerful. This work was originally in the collection of the dewan (prime minister) of Travancore in southern India, whose great-grand children sold it to the previous owner.

Delhi Art Gallery (DAG), a new entrant to auctions, had mixed results in Delhi earlier this month when it sold only 45 of 70 lots totalling Rs12.99 crore (without buyers’ premium). It has high ambitions and, unusually for an auction house, took all 70 lots not just to Mumbai but to four other cities – Chennai, Bangalore, Hyderabad and Pune. It plans more auctions and showings in more cities next year.

Overall these results show that the Indian art market is constrained by Indian buyers’ concern about the domestic economy and also, along with international buyers, by worries about developments abroad, notably the looming Trump US presidency and Britain’s Brexit. At such times, people conserve their wealth.

Film star to chief minister Jayalalithaa dies in Tamil Nadu 

India lost one of its most controversial and charismatic political leaders with the death last night of  J.Jayalalithaa, the 68-year old autocratic chief minister of Tamil Nadu. A former film star, Amma (mother) as she was widely known, managed to mix a reputation for massive corruption and an intensely reclusive lifestyle beset by illness with efficient administration, widespread and effective welfare schemes, and an erratic but sometimes powerful role in national politics.

jayalalithaWhen she was briefly jailed for corruption two years ago, several people committed suicide by setting fire to themselves, as they had done in 2001 when she was ejected from office on a supreme court ruling. She calmly announced in 2001 that “loyal and loving brothers and sisters” had become “martyrs” and gave each family a compensation payment of 50,000 rupees (then just over $1,000).

“For more than two decades, Jayalalithaa loomed large on the horizon, in the minds of the public as a benevolent despot, a tough politician, an unforgiving leader, a vengeful opponent and an unfriendly, intolerant, ruthless chief minister who dragged journalists and opposition leaders to court on defamation charges,” says an article in The Times of India today headlined “Tragic End of a Lonely Empress”.

Narendra Modi, the prime minister, flew to Chennai today along with many other political leaders. He said Jayalalithaa’s death left a “huge void in Indian politics.” Hundreds of thousands of people, many weeping, thronged through Chennai to a public hall where Jayalalithaa’s body, draped in the Indian flag, was on a raised platform. Later, they followed a procession taking her body in a glass coffin to a beachside burial ground.

The city has been under tight security for two days with at least 5,000 police and other security personnel stationed around the Apollo Hospital where Jayalalithaa had been in intensive care since September, with more paramilitary troops on standby.

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The worry has been that there would be suicides along with general unrest and violence as news of her death spread through the massive crowds. That was avoided last night with a carefully planned series of moves involving police and politicians, including other leaders of her AIADMK regional party, that led up to the death announcement shortly before midnight and appointment of her successor.

Jayalalithaa had been on life-support following a cardiac arrest on Sunday night. Respiratory and other ailments that took her to hospital three months ago had seemed to be improving after treatment by a stream of doctors from India and the UK. On November 13 she sent a message from her hospital bed to tens of thousands of followers saying “I have taken rebirth because of your prayers and worship”.

That statement helped to mobilise distraught AIADMK party workers for imminent local elections. It also added to the god-like aura that surrounded Jayalalithaa who aroused a level of adulation that is hard to explain, even in Tamil Nadu where the cult of personality merging films and politics exceeds India’s general love and adulation of icons.

Jayalalithaa came from a more prosperous family background and higher levels of education than many regional politicians – doing well at Bishop Cotton Girls’ High School in Bangalore and Church Park Convent School in Chennai, with an ambition to be a lawyer or academic.

jayalalitha-youngHer mother pushed her to enter films rather than academic studies  and, after training in western music and Indian classical dance, she became one of the most popular Tamil film stars in the 1960s, famous for her looks and voice.

She became associated with Marudur Gopalan Ramachandran, known as MGR, a cultural folk hero and a film star turned chief minister, who became her mentor and promoted her in politics from the early 1980s. She was a Brahmin, India’s highest caste, but her party was founded on anti-caste ideology.

When MGR died in 1987, there was a tussle between Jayalalithaa and his wife for his political legacy, which Jayalalithaa won, securing the AIADMK’s general secretary post in 1989.  She led the AIADMK to victory in a state assembly election in 1991 and become chief minister. She later won four more elections, the latest being in May this year.

She was voted out of office in 1996 amid corruption allegations and criticisms of her extravagant and cult-like lifestyle – cabinet ministers rolled on temple floors and pulled golden temple chariots to mark her 48th  birthday just before the polls. She had an outrageously extravagant life style and was reputed in the 1990s to be collecting Rs10m (then US$300,000) a day in kick-backs.

Corruption cases based on owning assets disproportionate to her occupation have dogged her since those days. They have stemmed mainly from extravagant wedding celebrations that she staged for her foster son in 1997, which were reported to have cost over $1m. Later, 400 pairs of diamond- studded gold bangles, 30kg of jewellery and 750 pairs of slippers were found when her home was raided.

She managed to stave off court cases till she was convicted and briefly jailed in 2014. She was acquitted a year later, but that acquittal is being appealed by the Congress Party in Karnataka where the case was heard.

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Jayalalithaa (right) and Mamata Banerjee of West Bengal described as India’s “feistiest chief ministers” on the cover of India Today magazine in April

Tamil Nadu’s other main political party, the DMK, has been her main rival and generally alternated with her AIADMK ruling the state.

Headed by Muthuvel Karunanidhi, a prominent film script writer who is 91 and currently in hospital with an allergy, the DMK’s leaders centre around one dynasty with excessive nepotism and corruption, and links to national as well as local graft cases

From the mid-1990s, these two unlikely leaders ran an efficient administration. Tamil Nadu became an ideal location for investment by both Indian and foreign companies, despite demands for money and favours. “She is a chief minister we can do business with,” an American ambassador said in the mid-1990s after he had met Jayalalithaa.

She won popular support with a series of “Amma” welfare schemes including subsidised pharmacies, meals, salt, drinking water and gifts for mothers with babies – and gifts of lap tops at election time.

She was an autocrat and said in interviews that this was necessary for her to succeed as a woman politician. In recent years she has rarely met visitors, including her civil servants and fellow politicians, often ruling via messages from an upper floor of her home. She demanded outrageous displays of loyalty with her most senior political colleagues, bureaucrats and police chiefs making obeisance and touching her feet in public.

jayalalithaa“Over the last 25 years, what Jayalalitha has done is ensured that there was no second line, no third line, no fourth line, that there was not a single leader who had his own support base,” a local historian, A.R. Venkatachalapathy, told the New York Times. “She ensured that everyone in her party was dependent on her and her alone.”

Her successor as chief minister, who was sworn in this morning, is O.Panneerselvam, the state finance minister who stood in for Jayalalithaa twice as chief minister when she was banned from office and jailed, and again in recent months while she has been in hospital. He is reported to have displayed the limits of his power when he ran a cabinet meeting recently with a photograph of Jayalalithaa in front of him.

Power has also wielded by others during years of intrigues, notably by Sasikala Natarajan, Jayalalithaa’s closest friend since the 1980s – it was the 1997 wedding of Natarajan’s nephew, adopted by Jayalalitha as a foster son, that led to the corruption cases. Natarajan performed the last rites today – a duty usually performed by a man. She is being tipped as a possible party general secretary, though her political power without Jayalalitha will now be tested. She has no formal political position and she is also one of the accused in the corruption cases that are now being appealed.

With Jayalalithaa gone and the DMK’s Karunanidhi ailing, Tamil Nadu politics are set for a period of uncertainty and upheaval as new leaders emerge. This will leave openings for Modi’s Bharatiya Janata Party to extend its reach in south Indian politics and also for the Gandhi family’s weak Congress Party to strengthen its links with the Tamil Maanila Congress that broke away in 1996.

New charismatic politicians will no doubt emerge again but they are unlikely to combine the positive and negative mix that made Jayalalithaa so irresistible to her followers.

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People pay homage to the body of Jayalalithaa in Chennai today – photo Adnan Abidi/Reuters

Cameron says No Regrets as he pockets six-figure fee

“Why are you wearing a suit? !ts not as though you’ve got a job”

He looked and sounded like the prime minister that he was. There was no loss of agility, humour or conviction when David Cameron ran with his old style, bounce and speed up three steps onto the platform of a conference in Delhi this morning. 

cameron-ht-speechWhatever one’s politics, and whatever one thought of his elite toff’s origins and his record when he looked an over-confident prime minister, one could not but admire the style and content of his speech – and regret that such a political talent had been wasted by the unnecessary and disastrous Brexit referendum that he called.

An Indian friend commented later that it was a pity that Indian politicians weren’t able to show similar often self-deprecating humour, while an  American visitor thought that Donald Trump might not have won the US presidential election if he had faced an enthusiastic Cameron as a rival.

Perhaps this praise came because the performance  was such a contrast with Cameron’s successor, Theresa May, who showed no humour or enthusiasm when she made a rather drab visit to New Delhi a month ago, though she relaxed a little when she went on to Bangalore.

The former prime minister was speaking at a Hindustan Times two day conference (video here with Cameron on first) in Delhi for a  fee rumoured to be around £200,000, well above levels that he is reported to be charging including £120,000 for a one-hour speech to Blackstone Properties in New York a few weeks ago. This morning his speech lasted just 15 minutes and was followed by 30 minutes answering questions.

It was, he said, his first public speech outside Europe since resigning as prime minister after the Brexit vote in June. He met Narendra Modi, India’s prime minister yesterday, and told the conference he was “bowled away” by the progress he has seen the government making with “bold decisions to try to fast forward” economic reforms and growth.

david-cameron-at-the-14th-edition-of-hindustan-times-leadership-summit

That was an oblique reference to Modi’s current controversial “demonetisation” exercise which has removed 86% of the country’s currency from circulation and caused widespread economic and social disruption.

Cameron, who came to India three times as prime minister and hosted Modi in London a year ago, replied cautiously when asked about this. He said it could help the government’s main targets of tackling corruption, widening use of the banking network and the digital economy, as well as increasing the tax base. The objectives of demonetisation were “worthy”, he added, which was scarcely wholehearted endorsement.

He started his speech as if he was still prime minister extolling India and Britain’s “very modern partnership” co-operating in a range of areas from investment and trade to terrorism and projects such as smart cities and skills training.

Populist upsurge

On his speech’s theme of “the western world in crisis”, Cameron talked about the rise of populist and extremist political forces in Europe and acknowledged he had lost his job because of a “populist upsurge”. While globalisation had benefited people around the world, the belief that “the rising tide will raise all the boats” had not come true, and there were many people who thought they had been left behind while the mass movement of migrants was leading to too many cultural changes, he said.

He still thought the Brexit referendum was the right thing for “a democrat” like him to do and that it was not a dead end for Britain. The country’s attempt to be inside the European Union but outside many of its institutions like the Euro currency would now be replaced he hoped by “being out but in some of its elements”.

He did not comment (and wasn’t asked) about how that hope gelled with Theresa May’s hard-Brexit approach. A victory of Marine Le Pen, the far-right candidate in the French presidential elections, would he said be a “body blow” for the European project.

With Trump “look for the positives”

Optimistic as ever, he said on America’s presidential election that, “as a free trade man, as a NATO man, I am concerned about some of the things Donald Trump has said. Modern leaders have to make most of the circumstances. Let’s start to look for the positives”.

Finally, at a time when England has lost two matches in its current Test series with India he avoided controversy and praised the English team and said its skipper Alastair Cook was one of the best batsman in the world.

With that, the former prime minister left the stage, declaring that his future interests and activities would include writing a book on his time in politics, development issues, a youth-oriented national citizen’s service of which he is president, and promoting research on dementia and Alzheimer’s. 

His son, he said, had asked when he left for the flight to India, “Why are you wearing a suit? It’s not as though you’ve got a job or anything”.

Posted by: John Elliott | December 1, 2016

Judicial activism orders national anthem in India’s cinemas

For more than 30 years India’s courts have issued instructions about how the country should be run, usually filling gaps left by inefficient and indolent governments. Yesterday however the Supreme Court arguably went too far with judicial activism when it unexpectedly said that cinemas should play the national anthem before every film screening. Images of the Indian flag should be shown on the screen and “all present in the hall must stand while it is played” with the doors shut.

The aim was would instil “a sense of committed patriotism and nationalism”, said two Supreme Court judges, displaying a degree of compulsive nationalism that one might expect from some members of Narendra Modi’s governing Bharatiya Janata Party (BJP), not from independent members of the country’s top court. “Be it stated, the time has come, the citizens of the country realise that they live in a nation and are duty bound to show respect to the national anthem,” said the judges.

but-first-our-national-anthem-the-new-yorker

“But first, our National Anthem” – The New Yorker

It is of course difficult for Indians, or most other people, to object to standing for the national anthem in any country, but this judgment, which comes into force in ten days’ time, is being widely criticised.

“The order appears to have erred the realm of judicial legislation and gone much beyond the constitutional mandate,” said Soli Sorabjee, a veteran internationally recognised lawyer and former attorney general.

Other commentators wondered about concerts, sports matches and other public events, while some wryly hoped that the courts and parliament would similar play the anthem. The law and practice varies around India, especially on whether it is necessary to stand up whenever the anthem is played – there was a court case on this in Kerala in 2014.

There is concern about how the order could be implemented, and a fear that nationalist extremists linked to the BJP will use it to persecute people and cause havoc inside cinemas. In October, a wheelchair-bound international tennis player was reported to have been kicked in a Goa theatre for not standing while the anthem was played.

Activist petitioners

The Supreme Court ruling was issued in response to a public interest litigation (PIL) petition by Shyam Narayan Chouksey, 78, an activist who 13 years ago complained to the Madhya Pradesh high court that a film depicted the anthem in a poor light and should be banned The judge then was Justice Dipak Misra, one of yesterday’s two supreme court judges. In 2003, Misra ruled in favour of Chouksey, but was overruled by the Supreme Court.

Petitioners like Chouksey have used PILs since the end of the 1970s to develop judicial activism and mobilise the courts to intervene in government. Cases were first accepted and adjudicated by judges to provide people with protection and social justice, irrespective of whether they were brought by aggrieved parties or other plaintiffs.

Such judicial activism is a controversial issue in many countries. In India, judges have radically extended their remit since the 1970s and have taken over the role of government. They frequently reflect public opinion or a national need for action, though yesterday’s national anthem order was issued suddenly without any public demand or debate.

Cases have ranged from protecting bonded labour and enforcing environmental regulations to ordering buses to be powered by compressed natural gas, cancelling telecom and mining contracts, and challenging food distribution systems. In 1996, a judge in Delhi even started her own case against the municipal authority for allowing rubbish to pile up in the streets, which was quickly cleared.

president-pranab-mukherjee-at-the-fourth-retreat-of-supreme-court-judges-in-bhopalIn the past year, the Supreme Court has ordered state government to stop temples encroaching on footpaths, told Delhi state government to use helicopters for emergency air services and to ban new diesel car registrations. It has  asked which airlines would benefit from national aviation agreements with the UAE, has chased the national cricket board (BCCI) to implement reforms, and has tried to intervene in how the country’s disaster management is funded.

In April, Pranab Mukherjee, India’s president and a former top Congress politician, warned against excessive judicial activism. In a speech at the National Judicial Academy (above), he acknowledged that “for the enforcement of fundamental rights, the Supreme Court, through judicial innovation and activism, has expanded the common law principle of ‘locus standi’”. He also said however that, “Each organ of our democracy must function within its own sphere and must not take over what is assigned to the others…Judicial activism should not lead to the dilution of separation of powers, which is a constitutional scheme”.

Arun Jaitley, the finance minister and a top lawyer, went further and said that “step by step, brick by brick, the edifice of India’s legislature is being destroyed”.

These remarks came at a time when the government and courts have been battling over the degree of public influence on top judicial appointments and when there is growing concern about the massive backlog of cases in the judicial system – over 20m cases are pending.

That has led many commentators to wonder today whether the courts, and especially the Supreme Court, wouldn’t serve the country better by processing outstanding cases instead of pandering to the whims of a veteran campaigner with an unnecessary order that will be hard to implement and could cause social problems.

Arun Jaitley says demonetisation will lead to India’s “new normal”

Ministers use post-truths on bank notes crisis and train crash

The publishers of the Oxford English Dictionary last week made post-truth their new word of the year.

A few days later Arun Jaitley, India’s finance minister, produced one when he declared that a cashless “new normal” was being introduced by the demonetisation of Rs500 and Rs1000 bank notes, and brushed aside the severe currency shortages and mass hardship it has caused over the past two weeks.

There was another yesterday (Nov 20) when Suresh Prabhu, the railway minister, tried to obliterate public criticism of a disastrous train crash that killed over 140 people by announcing that “enhanced amount of ex-gratia compensation to the victims of this unfortunate accident: Rs 3.5 lakh in case of death” (about $5,000 or £4,000).

ox-dictThe Oxford Dictionaries website says that post-truth is an adjective (though it also works as a noun). It defines it as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”.

All governments of course rule with such announcements that are intended to fudge reality and stem criticism. In Britain, Theresa May’s “hard Brexit” may turn out to be a post-truth if, as some people suspect and many hope, it eventually emerges as a precursor to something softer.

India however goes further than most supposedly open democracies in the way that the government expects public opinion to be easily diverted from objective facts.

Narendra Modi, the prime minister, who set the tone for Jaitley and Prabhu on both demonetisation and the train crash, excels. “Mr Modi is a master in evoking the emotional reasoning that is the essence of post-truth – as indeed is Donald Trump. Don’t confuse me with facts, what I feel is the reality”, wrote T.N.Ninan, a veteran columnist and publisher, in his Business Standard newspaper over the weekend.

derailment-kanpur-169-copyThe “objective fact”, to use the Oxford Dictionaries words, in the train crash (left) is that India has more disastrous railway disasters than maybe any other country, and seems to do little to stop them. Their appalling frequency was underlined by The Times of India headlining this one as the worst “in 6 years” – not ten or 20 years, just six!

Every time there is a crash, railway ministers rush to the site, as Prabhu and his deputy did, and immediately deal with emotions by announcing large cash hand-outs to the families of those killed and injured. An inquiry is ordered that leads to broad-brush reports of what happened, but no report of any subsequent action being taken.

It is a test of how much Modi has fulfilled his general election promise of changing the way the government operates to see whether the hand-outs and promises of action remain post-truths this time or not.

The “objective fact” on demonetisation is that there has been country-wide disruption of the economy and business, plus widespread personal inconvenience and hardship especially in rural areas, following Modi unexpectedly on the evening of November 8 withdrawing from circulation the Rs500 (about $7.50, £6) and Rs1000 bank notes that accounted for 86% of the currency – as I described on this blog on November 14.

The move has been described as the “most sweeping change in currency policy that has occurred anywhere in the world in decades” by Larry Summers, former US Treasury Secretary and Harvard president, writing in the Financial Times. He is sceptical about the prospects for curbing corruption and says that the “ongoing chaos in India and the resulting loss of trust in government” fortifies his view that the costs of withdrawing notes from circulation exceed the benefits. The last time there was a big withdrawal of high value currency in India was in 1978, but people then were given a week to exchange the notes, which softened the blow.

The Reserve Bank of India said today that banks had received Rs5.45 trillion rupees ($80bn) in the old Rs500 and Rs1000 notes by the end of last week out of $220bn in circulation. Banks have issued $15bn in new Rs2000 notes.

People standing in long queues

Queues of people at ATM and bank – PTI photo Nov 21

The disruption has ranged from farmers’ shortage of money to buy seeds (they can now use the old notes) and markets closing because of lack of cash to families wondering what to do with substantial quantities of cash they routinely keep at home. People have not been able to use old notes to pay for wedding arrangements, doctors’ fees and other routine expenses without using old notes illegally. Those who got new Rs2000 notes have found most shops do not have enough Rs100 notes and smaller currency to give change. People have even been reported dying from heart attacks and other health problems in bank and ATM queues.

While the situation has eased in some areas, there are still long queues at closely guarded banks and at ATMs that have to be mechanically reconfigured for new smaller-sized Rs2000 notes that are in short supply. The ATMs also quickly run out of Rs100 notes that everyone wants. The Supreme Court asked the government why it was not doing more to fend off a crisis.

The post-truth came from Jaitley who talked at an Economic Times conference in Delhi on November 19 (below) about just “initial inconvenience”, claiming without any basis in reality that the money queues were now “extremely small” – see November 1 photo above.

a-fireside-chat-between-arun-jaitley-minister-of-finance-jeff-immelt-chairman-ceo-ge-and-anand-mahindra-chairman-mahindra-group-at-the-india-economic-conclave-in-delhi-on-18th-nov2016

Arun Jaitley with Anand Mahindra of the Mahindra Group (left) and Jeff Immelt of GE (right)

His bigger post-truth was that demonetisation will drastically reduce India’s massive “parallel economy” which has been running outside the banking system for the last 70 years. “Shadow or parallel economy had become a way of life. When you have a large chunk of currency outside banking system, the taxation base is narrow and the shadow economy becomes way of life….Demonetisation will set a new normal for the economy,” he declared.

Taking 86% of currency out of circulation obviously cuts away at the parallel, heavily black, economy. It is also true that many people and businesses are opening bank accounts and switching to credit and debit cards and other forms of e-money. But cash will build up again as new Rs2000 and Rs500 notes come into circulation if for no other reason than that corruption is endemic in India and relies on cash.

Accommodation entries

What the government is not talking about are the corrupt methods that political parties and their leaders, real estate developers and construction companies, traders and market operators, gangsters, lawyers and many others are using to clear at least some of their often massive hordes of old notes without falling foul of official inquiries and tax demands.

I have heard that there has been a surge in accountants and bank managers colluding with clients in a system know as accommodation entries where false loans, names, book entries and accounts are used to launder large quantities of black money. There are also stories of people in bank queues seeing suitcases being carried into banks while everyone else is kept outside. These and other methods will, reports suggest, involve the beneficiary losing perhaps 25- 40% of the notes’ value. Trading is also still taking place using old notes, albeit at a discount.

Despite all this however, there does appear to be widespread support for what Modi and Jaitley are trying to do, even though there is growing criticism and impatience over how it is being done and of insufficient advance preparations. There is also concern that economic growth, and in particular agricultural output, could be hit. Opposition political parties are disrupting parliament in protest.

Modi won the general election 30 months ago partly on the promise of cleaning up the economy and that is why there is a surprising willingness to give him and Jaitley the benefit of the doubt.

The big post-truth questions now are whether Modi will manage to introduce enough further anti-corruption measures to turn all this into Jaitley’s “new normal” reality and, in the shorter term, whether he can make his claim that people’s inconvenience will last no more than 50 days become an objective fact.

When Indians elected Narendra Modi as their ultra-nationalist prime minister two and a half years ago, they were voting for change in the way that the country is run, just as American voters did last week when Donald Trump was elected president (albeit by a minority popular vote).

But they did not vote for the countrywide chaos and misery that has hit them since November 8 when, late in the evening, Modi suddenly went on television to announce that, as part of a drive against corruption, Rs500 and Rs1000 bank notes ($7.5 and $15) would not be useable from midnight.

rs-2000-note

That decision – curiously called demonetisation – stole the headlines from the over-night election count in America. It immediately took some 22 billion bank notes – 86% of the Rs16.4 trillion rupees ($245bn) of currency – out of circulation, leaving only Rs100 ($1.50) and smaller value notes and coins as legal tender until small quantities of new Rs2000 notes (above) began to be introduced three days later.

Modi departed a day after his announcement for Japan (where he agreed an historic nuclear power deal), leaving his finance minister, Arun Jaitley, to announce that it would take “two to three weeks” for adequate notes to be put into circulation.

Modi returned over the weekend when the upset that he had caused – dubbed “minor inconveniences” by Jaitley – had reached such a crisis point that he choked back tears during one of three theatrically emotional speeches.

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Crowds queued in Old Delhi on Saturday – photo Altaf Qadri, AP

He appealed (photo below) for people to bear the “pain” till December 30, not just two or three weeks. “After that, I’m ready to face any punishment meted out by the people,” he declared. He said he “shared the pain” which of course he hasn’t because prime ministers don’t queue at ATMs and bank branches, nor do they run cashless small shops, nor do they have to feed a family without ready money. (Rahul Gandhi of the Congress Party did pop up at an ATM queue for media photographs).

Rarely if ever can a country’s leader have caused such immediate disruption impacting an entire population. It was an example of how Modi likes to spring surprises and hit headlines, but it also led to days of muddle and deprivation as banks closed, ATMs stopped functioning, shops pulled down shutters, families ran out of small change for daily necessities, and armed police controlled massive queues and crowds when banks and ATMs began functioning again.

The banks and ATMs exchanged old notes for small quantities of new Rs2000 ones, though not quickly enough to deal with even a fraction of people who queued for long hours. Some 200,000 ATMs have had to be reconfigured because the new notes are smaller than the old ones.

PM Modi in GoaThere are reports of income tax raids on shops and businesses, and officials have warned that people depositing large sums of old notes would be penalised if they could not explain where the cash came from.

Various concessions were introduced, allowing old bank notes to be used for urgent purchases such as medical supplies, milk, air and railway (uncancellable) tickets, petrol and other fuels, cremations and burials, and highway tolls.

There is general public support for Modi’s drive against overall corruption, and Indians have for generations tolerated scarcity and discomfort along with muddled and inefficient government.

But the inevitable lack of warning and preparedness for a move of such massive proportions has tested both the support and the tolerance – hence Modi’s impassioned speeches yesterday. There has also been widespread criticism of the lack of preparedeness and the extent of the disruption.

Although it had been known for several months that the government planned to introduce new Rs2000 notes, only about ten people in government are believed to have known in advance about the plan to demonetise the old notes. Cabinet ministers were not even allowed to leave a confidential briefing on the 8th evening till after the prime minister had spoken to the nation.

Modi’s aim was to wipe out masses of undeclared black money hoarded by the rich and famous, by crooks and gangsters, by traders and many if not most businesses (especially real estate and construction), and by political parties.

Many people believe, given the timing, that his main target was to hit the funding of regional parties in the state of Uttar Pradesh (UP), which would now be starting to use their stashes of Rs1000 and Rs500 bank notes in preparation for assembly elections due early next year. In a country where little is ever straightforward, it is widely assumed that his Bharatiya Janata Party leaders in UP had somehow been warned to deploy their money before last week.

old-notes

the old notes

Modi has taken a gamble that the UP voters will not resent the misery that they have had to suffer, and will not vote against such an insensitive political party as the BJP

Modi is also gambling that the misery will have been forgotten by the time of the next general election in 2019, and that voters will come to see that he did what had to be done to speed up moves against corrupt business and political dealings.

The government also hopes that people and small businesses will move to credit cards and other forms of electronic money, in line with its plans for rapidly spread ng financial inclusion.

When I went to local shops last week, I used a debit card for some purchases, paid with Rs500 notes for petrol, and got credit from my fruit and veg seller who said he would be installing a credit card machine, though he would then have the problem of finding enough cash to pay his suppliers. These supply chains for food have broken down because of the lack of acceptable bank notes in the past week.

A young manager, who came to Delhi from a provincial city along with his brother and sister to build careers, told me that they only had enough cash between them for two days’ food. He had queued that day for five hours at an ATM which ran out of bank notes.

There have been stories of people rushing to turn their hidden wealth into gold and other jewelry, and of others burning or burying bank notes to avoid penalties for unexplainable wealth.

Worst hit however are innocent poorer people without access to banking, plus various levels of the middle class who keep cash at home for special events and emergencies and will probably lose some of the money.

“Ordinary salaried people, retirees and small farmers who store their legitimate incomes in cash for future durable and rainy-day purchases, will not be able to change all their money for fear of harassment [by officials] and not being able to explain how they got it,” Kaushik Basu, a senior World Bank official and former chief economic adviser in the finance ministry, told the Financial Times.

bank-queues-inex

Bank queues on Friday – Express photo Gajendra Yadav

He tweeted that the move was not “good economics” because the damage it would cause – including slowing down the economy – would be greater than its benefits. “This can be very disruptive, increasing the costs of small business and trade and causing a drop in aggregate demand in the economy, thereby slowing growth.”

Critics also say that the short-term disruption is out of proportion to what can be achieved, and that the move only tackles past corruption and current hordes of black money, but does nothing to stop fresh hordes being accumulated when new notes are fully in circulation. That of course is correct, but Modi has tried to paint a broader picture, saying that his next targets will be real estate and other transactions carried out in “benami” (false) names.

In the past year, the government has tried to flush out undeclared wealth horded in India and abroad with amnesty-style schemes and the prospect of heavy penalties. Dealing with corruption was one of the main planks of Modi’s election campaign.

That is not far removed from Trump’s emotive “draining the swamp”, and Modi can be expected to do more in the next two years.

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