An urgently needed cabinet reshuffle is being planned by Narendra Modi and his Bharatiya Janata Party henchman, Amit Shah, as the Indian prime minister enters the third year of his time in office.

He has not achieved nearly as much as he should have done in the two years since he was sworn in on May 26, 2014, and he needs to install more effective ministers and top bureaucrats in order to implement the many schemes he has announced and pledges he has made.

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Modi and Modi at Madame Tussauds waxworks in London

Reshuffles are often rumoured, but the gossip is frequently spread by people trying to affect the outcome, and they often do not happen. This one however does seem to be in the works because Shah, the BJP president, said in a press conference at the party’s Delhi headquarters today that the “cabinet reshuffle will happen soon. The date is not yet fixed”.

Changes are needed because, till now, Modi and his government have failed to deliver his general election promise of introducing what he calls “achche din” or good times, which means providing jobs, security, and a cleaner more effective government. What has been achieved has too often been overshadowed by extreme anti-Muslim and intolerant Hindu nationalism that Modi has not done enough to curb.

His relations with the media are poor, and he tries not to expose himself to detailed questions. This week he has given an interview to the editor-in-chief of the Wall Street Journal, where he claimed that he has “undertaken the maximum reforms in the last two years”, exceeding anything that had been done before. But interviews (see the transcript here) at the level of editor-in-chief rarely involve close questioning, so Modi had the easy ride that he wanted.

There has been some speculation that Arun Jaitley, the minister of finance and company affairs, as well as information which makes him the main government spokesman, will be moved or at least shed some of his work. Along with Shah, he is the prime minister’s closest ally, but he clearly has too many jobs to be able to focus in depth, even though, as a top lawyer, he is well used to mastering a variety of briefs quickly. Critics say that  the country could do with a hands-on economics oriented finance minister able to over-ride top finance ministry bureaucrats who seem to have led Jaitley into some traps, especially on taxation.

A stronger minister of commerce – Nirmala Sitharaman currently holds the job as a minister of state – would also help trade negotiations and implementation of industrial policy that is focussed around Modi’s key Make in India manufacturing and jobs-oriented campaign.

Some successful Ministers

Ministers regarded as being specially successful on economic subjects include Piyush Goyal in charge of coal, power and renewable energy, Nitin Gadkari on roads, highways, ports (though his hype often obscures real achievements), and Suresh Prabhu at railways (though his plans have yet to yield many results).

Some observers include Manohar Parrikar, the defence minister, in the successful list, though he has failed so far to cut through the deeply entrenched defence establishment and fully introduce new policies and place major contracts. He sometimes seems distracted by BJP politics in Goa, where he was previously chief minister.

This is a key area for Make in India because the government can directly influence development of the job-creating manufacturing industry by placing urgently needed defence orders, which tie foreign suppliers to Indian partners, but progress has been lamentably slow.

Make in India has gained an amazingly successful brand image since it was launched in September 2014. Scarcely any foreign government official or business delegation dares to come to India without paying it lip service, while in the media it generates easy instant headlines.

Make in India lionIt has led to relaxation and removal of old restrictions on doing business that will gradually yield benefits, but it has failed so far to deliver much in terms of foreign direct investment (FDI) in manufacturing industry, and there is little evidence of jobs being created.

Extravagant claims have been made by Modi and other leading ministers and officials about the campaign’s impact, some alleging it has generated FDI growth of over 40%. A Business Standard analysis however has argued that the real figure is far lower and, I would add, cannot be attributed in any significant way to the campaign because of the lead time on projects.

In a way, the campaign symbolises both the success and shortcomings of Modi’s first two years. He was also a strong brand when he was sworn as the leader that India needed to revamp the way the country is run and revive the economy.

But neither he nor his pet campaign have delivered what was expected, both failing especially to revive India’s job market that needs to absorb 1m new entrants every month – that’s more than the population of Belgium or Greece every year.

The question now is whether he can drive through change, with programmes and reforms that could transform the way that India is run, by the time of the next general election in 2019. So far, there have been far too many high profile announcements with few tangible results, typified by the billions of dollar unrealised projects that Modi has announced during high profile foreign trips to some 30 countries (the total last November was over £80bn).

The focus does not now need to be on conventional economic reforms like a long-delayed goods and services tax, nor land acquisition and labour laws that the government has failed to introduce and now says should be introduced by individual states. The time for the services tax was in Modi’s first year in office, when he failed to move fast enough. He then ran into trouble in the Rajya Sabha upper house of parliament, where the BJP does not have a majority, and failed to manage the politics deftly enough to win support from other parties.

Swachch BharatHe has managed to have bills passed in areas like coal mining, insurance, real estate, and bankruptcy, and has adopted the previous government’s highly successful Aadhaar electronic identity scheme that opens up a wide range of facilities, especially for the poor. He has also managed to reduce corruption, though mostly only at the top levels of the central government.

More important now are programmes that could actually change the way that India works. In addition to Make in India, they include financial inclusion, Digital India for what is described as a “digitally empowered society and knowledge economy”, Swachh Bharat that includes Clean India and provision of toilets, and Skill India and Start-up India that are aimed at providing jobs and encouraging young entrepreneurs. Others include a mis-named plan for Smart Cities that mostly involves providing basic services and amenities that are regarded as automatic in developed countries.

These schemes help to bring focus to what the government wants to achieve but they need far more drive than they have been getting to ensure that individual states take up the challenge and that, for example, there is water and chemicals for toilets, electricity and internet for computer installations, and that financial inclusion involves active banking by the poor.

India is a slow-moving and complex society and is resistant to change. Modi said when he was elected that he needed ten years to transform India, but the electorate will expect evidence of change in three years’ time – and that is why a ministerial reshuffle is needed.

Posted by: John Elliott | May 24, 2016

Dodgy donors dog the lit fest circuit

LONDON:  When the organisers of the Jaipur Literature Festival arrived at London’s Festival Hall on the banks of the Thames for a day of bookish discussions and debates on May 21, they were worried about how far protesters opposed to Vedanta Resources, their extremely controversial lead corporate sponsor, would go in order to cripple the event.

20ARTBEATBRITISH-master768Two days earlier, protesters from Greenpeace had climbed pillars (left) that form the façade of the impregnable-looking British Museum and forced the first day of a big summer exhibition temporarily to close because BP was the sponsor.

As it turned out, there were few protestors at what is known as JLF SouthBank, the London spin-off from India’s highly successful annual festival in the Rajasthan city of Jaipur that attracts many tens of thousands of visitors every January and had 330,000 footfalls earlier this year.

There were only 20 or 30 demonstrators and they showed neither Greenpeace’s ingenuity and skill, nor a willingness to demonstrate calmly and engage in a debate on the issues. If they had done so, they would have found that a large number of people attending the festival agreed with their opposition to Vedanta, but did not see that as a reason to boycott a stimulating literary day.

“Angry, ugly and destructive”

They shouted and screamed and stormed into the main hall waving placards in the middle of discussions that they hoped but failed to halt. “Their cause was ok but behaviour (I was there) was angry, ugly and destructive – they rejected offers to debate issues, saying that would mean getting involved”, I commented on Facebook and Twitter.

Eventually their efforts fizzled out, thanks to quiet and patient police persuasion that steered them and their aggression outside the building.

That might have been the end of the story, but discussion has continued in the social media and in India, mainly because Vedanta, a London-based Indian-controlled mining, metals and oil and gas company, is regarded as possibly the worst of a very bad bunch of Indian and foreign miners. They care little for the social and environmental disruption that they cause, and they try to smother both the effects and the protests with heavily publicised social programmes and international public relations exercises such as sponsoring cultural festivals.

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Foil Vedanta’s call to protest

This raises some important issues about the sources of financial sponsorships for such events, the access that protesters should have, and whether literary and other figures should fall into line and withdraw from a festival, depriving a large number of people (some 650 at JLF SouthBank) of hearing from them. Sponsors rarely have much influence – at JLF a company chairman might get a spot in one of the discussions, but little more.

There should also be questions about the campaign. There is no doubt that Vedanta, and its founder chairman Anil Agarwal (below), have been accused, and in some cases found guilty, of all sorts of environmental irregularities (which of course they deny).

But there should be questions about the financial and other backing that such a protest campaign receives. There have for many years been suspicions that international aluminum producers finance non-governmental and other organisations to mobilise local people and block the mining of low-cost Indian bauxite that would disrupt markets with prices maybe 50% below international levels.

Such ideas can easily be dismissed as unreal conspiracy theories, but I don’t think they are necessarily unreal. The power and reach of the anti-Vedanta campaign is incredible – the Church of England even sold a £3.8m equity stake in the company in 2010 in response to the campaign.

This is not to suggest that Saturday’s demonstrators were being misled, but they probably had little idea of who was funding Foil Vedanta, which led the protests and has been in operation since 2011.

The focal point of the complaints is Vedanta’s $1.7bn plans for open-cast bauxite mining (with a nearby aluminium plant) on an Odisha (Orissa) mountain at Niyamgiri that the local Dongria Kondh tribe regard as sacred and part of their heritage and source of livelihood. The project was stopped by India’s last Congress government after a vote by people living in the area, but there are now attempts to reopen the issue, presumably because the current Narendra Modi-led government will be more sympathetic to the company.

The Foil Vedanta campaign is far wider however than Niyamgiri, accusing the company of “destroying lives and devastating the land” elsewhere in India and in Sri Lanka, Ireland, Zambia, Liberia, South Africa and elsewhere.

Anil Agarwal Chairman Vedanta (AA)In accepting Vedanta as the named top sponsor of JLF SouthBank, Sanjoy Roy, who runs Teamwork Arts, a successful and respected Delhi-based production company that organises festivals in India and abroad, clearly made a mistake. He failed to inform the festival’s two co-directors, Namita Gokhale and William Dalrymple, both well-known authors, that he was turning what had been Vedanta’s more informal support and lesser role as a donor into high-profile sponsorship. He must have known that they would oppose the move.

Roy did this in order to cover the costs of the event, which he has told me amounted to about £100,000 of which 60% came from Vedanta and far less controversial sources including the highly respected Aga Khan Foundation, India’s Tata group’s Taj Hotels, and Apeejay, an Indian group that includes a chain of bookshops. He has built up Teamwork over more than 20 years but had to divest a stake to financial backers to offset growing losses on the main Jaipur festival. This means he is under increased pressure to balance the books, and that has led the festival into some controversial associations.

Tata Steel, which has a mixed reputation environmentally and is criticised for 12 tribal people being killed during demonstrations at a steelworks site in Orissa in 2006, became a sponsor of the main Jaipur festival a few years ago and withdrew after facing some criticism.

The sponsor of the main event in January this year was Zee TV, a leading Indian tv channel, which led to JLF being drawn into a controversy when Zee was accused of tampering with a video film during student unrest at Delhi’s Jawaharlal Nehru University earlier this year.

There have been many other worthy supporters including the Getty Foundation and Harvard Humanities Center, and Dalrymple has said that “we have to try harder to find sponsors who don’t create division and dissension.”

There is of course a long history of sponsorships running into trouble, as Nilanjana Roy, an author and columnist, has reported in India’s Business Standard. In 2002, Germaine Greer and Jim Crace pulled out of the UK’s famous Hay-on-Wye literary festival. They were protesting against sponsorship by Nestle, seemingly an uncontroversial company, because of a powdered baby milk formula it was marketing in Africa.

In 2006, writers called for a cultural boycott of Israel in solidarity with Palestinian writers, teachers and film-makers, and this March over 100 writers called on the PEN American Centre to refuse support from the Israeli embassy for its annual World Voices festival.

And back in India, Vedanta and another much-criticised part of the Jindal family group has supported the Kalinga lit fest in Orissa, but protests are expected this year.

Hopefully JLF and Vedanta will now part ways because neither is good for the other – JLF provides the protestors with high publicity in their fight against the company, while the Vedanta label threatens to damage JLF which is becoming something of a national asset that needs protection.

Referring to diplomatic relations with the UK, Navtej Sarna, India’s new High Commissioner in London, described JLF SouthBank as “the single most important part of our soft power” when he opened the event.

Ideally there would be something like the UK’s Lottery Fund to provide support but, failing that, the Jaipur Literary Festival in Jaipur and London – and another spin off in the American city of Boulder – needs to be run by an independent not-for-profit trust that could hire Teamwork as the production company and impose strict sponsorship rules.

Unless something like that is arranged, one of India’s most astonishing and successful institutions will inevitably sometimes fall foul of critics who wish it no good and are envious of its success, and others who cash in on its urgent need for funds for their own purposes.

Hopefully, in future, the critics will be more constructive and open to debate than the crowd that failed to shut down JLF SouthBank last weekend.

Narendra Modi and two of India’s leading idiosyncratic women politicians (below) have emerged as the victors in assembly election results announced today after six weeks of polling in five states. Once again, the Congress Party led by Sonia and Rahul Gandhi are the main losers, followed in one state by Communist-led leftist parties.

MamaJaya India Today cover April '16

Mamata Banerjee (left) and J.Jayalalitha, described as India’s “feistiest chief ministers” on the cover of India Today magazine last month

The most significant result is Modi’s Bharatiya Janata Party securing a resounding win in Assam, plus increases in its share of the vote elsewhere.

Assam is the first state that the party has won in India’s North-East, and it has provided Modi with the boost that he needs two years after he won a landslide general election. Last year he suffered two disastrous personal defeats in Delhi and Bihar state assembly elections, and his government’s image has been declining.

The BJP has defeated a Congress government in Assam that has ruled for 15 years. Election for a further five years would be unlikely in any democracy, but the size of the defeat is significant – the BJP has won a clear majority with 86 seats in the 126-seat assembly, reducing Congress to 26.

Having learned from making Modi the focal point of its campaigns in Delhi and Bihar, the BJP changed tack in Assam and projected other leaders. It also focussed more on development than anti-Muslim rhetoric, though it tried to win votes from the state’s resident Muslims by playing on their fears of being swamped by an influx of Muslims from neighbouring Bangladesh.

The two women victors are Mamata Banerjee, who leads the state-level Trinamool Congress in West Bengal, and J.Jayalalitha, who leads a regional party, the AIADMK, in Tamil Nadu.

Both women are autocrats. Banerjee is a tough and erratic but accessible politician who lives modestly and has mass appeal, while Jayalalitha is a more reclusive elite and self-indulgent figure. Once a film star and mistress of a former Tamil Nadu chief minister (also an ex-film star), Jayalalitha was convicted and briefly jailed in September 2014 on corruption charges for holding assets disproportionate to her official income, but was acquitted a year ago.

Mamata NDTV IMG_0509

Banerjee’s TMC victory is specially significant because it marks the continuing decline of the Communists’ Left Front that ruled the state continuously for 34 years till it was defeated in 2011, having run a cruel self-serving and corrupt administration that ignored the development needs of the people.

While she is despised by many liberals and has recently been hit by corruption scandals and examples of inefficient government, Banerjee has populist pro-poor appeal because of her government’s success in rural development, public works such as rural roads and toilets, and other government programmes. She likes to call herself an LIP, a Less Important Person – an answer she gave today (above) on NDTV when asked if she’d like to bid to become India’s prime minister.

The TMC has won 211 seats in the 294-seat assembly, while the Left won just 33, working in an uncomfortable alliance with Congress that got 44. The BJP, despite a focussed effort to become recognised in the state, failed to get more than six seats.

In Tamil Nadu, power usually swings each election between Jayalalitha’s AIADMK and the rival dynastic and nepotism-ridden DMK, with Congress acting sometimes as an ally for one or the other. This time Jayalalitha, who runs effective administrations in a relatively prosperous state, became the first Tamil Nadu chief minister for 32 years to be voted back to power, winning 134 seats with the DMK getting 97 seats in the 232-seat assembly.

A Congress-led alliance was defeated in Kerala by a Left Front coalition by 90 seats to 47, with the BJP managing only one seats in the 140-seat assembly.

The Congress’s only success was in Pondicherry (now called Puducherry), a former small French coastal enclave surrounded by Tamil Nadu, where it emerged as the single largest party in the 30-member assembly and will rule in coalition with the DMK.

Modi’s aim is to make the BJP a pan-India party, which the Gandhis’ Congress once was. Its victory in Assam is a significant step in that direction, but it has a long way to go to overcome its lack of appeal in many parts of the country.

mayawati-kh0H--621x414@LiveMintToday’s results will lead to speculation about whether regional leaders such as Banerjee and Jayalalitha will link up with others like Chandrababu Naidu of Andhra Pradesh and Nitish Kumar of Bihar to form a third front, maybe associated with Congress, to try to stop Modi winning the next general election in 2019.

But that is a long way off and there are other key assembly elections to be tackled first, notably Uttar Pradesh (UP) and Modi’s home base of Gujarat next year. The BJP desperately needs to do well in both states, though it might find that difficult in UP where India’s third maverick woman politician, former former chief minister, Mayawati (above), is preparing a powerful challenge.

Defence corruption scandals in India never blow up and dominate media coverage and political intrigue for their own sake. They do not develop because the customer, neither the defence ministry nor the armed forces, want to get a better deal or catch the real law-breakers. Nor is it because the bribes may affect the quality of the equipment, even though specifications might be fudged.

The real reason is always either that a defence company wants to stir up trouble for a rival or, as in the case of the AgustaWestland helicopter (below) scandal that is currently dominating Indian politics, because politically embarrassing information has become public that one party can use against the other.

This usually happens when a scandal is being driven by events in another country. Rarely are inquiries initiated and followed through in India without being spurred on by foreign activity – in the helicopter case by recent court action in Italy involving Finmeccanica, AgustaWestland’s parent company, and in a famous Swedish Bofors gun contract during the 1980s by revelations in Sweden.

The political furore that has suddenly built up over the helicopter order illustrates many of the problems that have led India’s defence forces to be grossly ill-equipped to fight wars because the country relies on foreign suppliers for approaching 70% of its supplies and because most orders are endlessly delayed by bureaucratic inertia and blockages.

AW101_IAF

Most orders, it is also reasonable to assert, are linked to bribes, so scandals can be raked up wherever vested interests like. India’s long-awaited Rafale jet fighter order with France is now, as the media likes to put it, “under the scanner”, which could lead to more delays.

Narendra Modi’s Bharatiya Janata Party-led government is trying, with a new defence procurement procedure, to speed up orders and to increase the proportion of equipment made in India. It also plans to penalise foreign companies found guilty of paying bribes without barring them from future work, and to regulate the controversial role of defence agents.

India’s premier political dynasty, the Gandhis, has been the focus of attention in both the Bofors and helicopter scandals. In the case of Bofors, among those named were friends of Rajiv Gandhi, then the prime minister, and of his wife Sonia, now the party leader. It was widely perceived that the Gandhis or their friends and relations had benefitted on the $1.4bn contract from some  Rs64 crore (then about $50m) bribes

In the helicopters’ case, Indian names of possible recipients of bribes have been widely gossiped for a few years in private conversations and in the media – and all of course deny involvement. They range from Sonia Gandhi (named in the Italian court’s papers), and her son and heir-apparent Rahul, to Ahmed Patel, her influential political secretary, and M.K.Narayanan, a former national security advisor.

52_08_39_27_THAVD_TYAGI_1393745f_H@@IGHT_460_W@@IDTH_616Shashindra Pal Tyagi (right), who was chief of air staff from 2004-2007, is also named in Italy as a recipient, partly because his cousins are alleged intermediaries for the bribes, though it is extremely unlikely that he was operating without the connivance of top political figures.

Hinting heavily that the government wants to link the bribes and Tyagi to the Gandhis, Manohar Parrikar (below), the current defence minister, said two days ago that the government would go after the “big fishes” who got the helicopter specifications “tweaked” during the previous Congress-led administration. “There are definitely some small fish, but there will also be some big fish. We will try and best to ensure we get to the money trail,” Parrikar told the CNN-News18 tv channel.

When asked how he was convinced there were “big fish”, he said: “Obviously there were, as rules were tweaked to favour Agusta, which Antony otherwise would not have done unless someone was overseeing this.” That was a reference to A.K.Antony, the Congress government’s ineffectual defence minister who protected his non-corrupt reputation so carefully that he rarely authorized contracts or tampered with tenders unless, as Parrikar said, “someone….was over-seeing” him.

The AgustaWestland contract was relatively small, and is one of the least significant of the numerous defence orders that haven been hit by corruption allegations over the decades – beginning with an order for army jeeps soon after India’s 1947 independence and moving on to guns, submarines, aircraft and other orders.

The contract was for 12 VVIP helicopters to replace ageing Russian craft that transport the prime minister and other top leaders. It was initiated in 1999 by the then Atal Bihari Vajpayee-led BJP government and was concluded by the Manmohan Singh-led and Sonia Gandhi-influenced Congress government in 2010. Augusta-Westland’s Italian headquarters won the $450m order for its AW-101 aircraft produced at Yeovil in the UK. The alleged bribe was about $40m.

manohar-parrikar1The Italian courts have said that Tyagi lowered the Indian Air Force’s height requirement for the helicopters to operate up to altitudes of 6,000 metres so that the AgustaWestlands, which could not go so high, could be bought.

But, as Ajai Shukla, a leading defence analyst has recently pointed out, the Ministry of Defence said (two years ago) that the order to lower the service ceiling was issued by Brajesh Mishra, Vajpayee’s highly influential principal secretary and national security adviser before Tyagi became chief of air staff. (That has led to a theory that Tyagi’s cousins knew the decision had been made and extracted bribes from AgustaWestland claiming they would make sure it was implemented)

The contract was terminated from January 2014 by the then Singh-Gandhi government, by which time three helicopters had been delivered. Antony, burnishing his ultra-clean reputation, mothballed the three aircraft and banned Finmeccanica companies from Indian contracts after Italian investigators arrested Giuseppe Orsi, who headed the group, in February 2013  on charges of bribing Indian officials.

Antony did this to numerous foreign companies accused of bribery, thus outlawing leading suppliers and seriously slowing down the ordering and delivery of new defence equipment.

This was widely regarded as an untenable policy, and the current government started tentative moves soon after it was elected two years ago to levy financial penalties on companies accused of corruption instead of debarring them.

Shukla points out that Parrikar has even cited Finmeccanica as an example of the need for this change, saying that many of its 39 group companies were involved in crucial contracts with India. “Should we rule ourselves out of dealing with all of those 39 subsidiaries?”, Parrikar asked 17  months ago.

In the current political frenzy, that looks an unwise question because Congress Party leaders have asked what persuaded the current government to soften the anti-bribery stance. They are also even citing a theory (originating from one of the middle-men involved) that Modi offered to withdraw cases against two Italian marines accused of murdering two Kerala fishermen in 2012 in return for AgustaWestland evidence against the Gandhi family.

RafaleThat has led the government on April 29 to issue an almost embarrassingly long (1,350 words) statement trying to explain and justify itself.

This row will gradually fade from the headlines when another issue emerges for politicians’ and the media’s attention, though it will trundle on with Indian authorities’ investigations and can easily be ratcheted up again when political or other interests wish.

Neither the government nor the Congress however really wants to see the helicopter scandal get through to any real conclusion because of what might be revealed and because of other allegations that either side might rake up.

There are always more defence deals to be explored. The next big contract is for 36 Rafale fighter jets (above) that Modi personally ordered in a government-to-government deal (bypassing competitive tenders) for delivery “in fly-away condition as quickly as possible” when he was in Paris on an official visit in April last year.

That quick deal was supposed to cut through red tape that had virtually scuppered three years of $18-20bn negotiations for 126 of the planes after a long international tendering process. But, 13 months later, negotiations for the 36 have not been concluded, partly because of India’s demands for price cuts and for France’s “fly away condition” to include 50% of the price being offset by work done in India.

And now that too has become controversial because the Indian government has ordered an inquiry into arms deals started under the Congress government, and that includes the original 126-aircraft as well as others including Swiss-made Pilatus helicopters.

All of which shows that India’s politicians are more interested in scoring political points and embarrassing their opponents than they are with equipping the country’s defence forces with the aircraft and other equipment they need.

Posted by: John Elliott | April 16, 2016

Does Delhi care as Kashmir erupts again?

Vested interests underpin inaction on the Kashmir “problem”

“SRINAGAR: There is virtually no prospect in the foreseeable future of long-term peace coming to India’s disputed state of Kashmir, where the army has been called in today to quell a month of clashes between security forces and stone-throwing, mostly young, demonstrators.”

That was the introductory paragraph to an article that I wrote on this blog almost six years ago in July 2010 – and here is the almost identical intro to today’s article:

There is virtually no prospect in the foreseeable future of long-term peace coming to India’s disputed state of Kashmir, where the army has been called in to disperse people protesting against a soldier’s alleged molestation of a young girl.

Five people have been killed, some shot by the army – the fifth one when youth were throwing stones at an army camp. There are curfews in some areas, mobile internet services have been cut by security forces, and train services were suspended to the rest of India.

Life appeared to be mostly calm when I spent a few days in Kashmir just before the alleged molestation, though there were two indications of trouble even before the alleged molestation and army action.

PTI PhotoOne came after Kashmiri students at a National Institute of Technology (NIT) college in Srinagar in the politically sensitive Kashmir valley defiantly celebrated the West Indies defeating India on March 31 in a T-20 cricket World Cup semi-final. That triggered pro-India protests by the college’s students from other parts of the country who were then attacked with lathi (long bamboo stick) charges by Kashmir police. In the days that followed, the college became a fortress guarded by para-military forces (above).

The second indication came when thousands of people attended the funeral prayers (below) on April 7 of a militant belonging to Kashmir’s Hizbul Mujahideen separatist organisation, who had been shot by government forces in south Kashmir’s Pulwama district.

This was the latest example of people, especially the young, parading anti-India sentiment by attending such funerals – as many as 30,000 are reported, maybe with some exaggeration, to have been at the funeral of a Lashkar-e-Toiba (LeT) commander last November, and there have been several other similar incidents. Youth also sometimes throw stones at the security forces to divert them while a militant under siege escapes.

Body of Dawood Ahmad Sheikh, Hizbul Mujahideen - InEx March 9 '16

The youth joining the militants are reported to be increasingly from well-off families, having been born in the early 1990s at the height of the troubles, growing up surrounded by violence and arrests. Even the black flag of the Islamic State (ISIS) is sometimes waved as an act of defiance.

“In the 1990s, it was anger and alienation, but now it is hatred against India,” says Mirwaiz Umar Farooq(below), a prominent Muslim cleric and a moderate leader of the Hurriyat, an umbrella separatist organisation. “I know militancy is not going to solve the problem, but we can’t control it”.

26TH_MIRWAIZ_1913645fSuch is the fragile situation in the apparently idyllic surroundings of the Kashmir valley, where tourists last week dodged the rain to enjoy boat rides on Srinagar’s Dal Lake, and travelled 50kms to the 2,650m (8,530ft) high Himalayan ski resort of Gulmarg to be pulled by local ski-wallahs on toboggans and ride to 4,200m on a cable car called the Gondola (below).

Reputed to be Asia’s highest suspended tramway, the Gondola is symbolic. It was commissioned in 1988 by the then chief minister, Farooq Abdullah, just before Kashmir’s insurgency and Pakistan-aided terrorism began. Pomagalski of France started construction, but work was abandoned in 1990. It was completed when the situation calmed down and the first stage was opened in May 1998.

It is symbolic because it illustrates Kashmir’s superficial normalcy, with the flow of tourists varying in the past 20 years while terrorism and militancy has come and gone in waves.

gondola 2Little has been done in the intervening years by either the national or state governments seriously to tackle what is generally referred to as the Kashmir “problem” as an internal India issue.

There have been many attempts to tackle it by forging peace with Pakistan, which claims Kashmir as part of its territory, but these have all failed. Narendra Modi’s current national administration has, if anything, made the situation worse than it was because of an erratic see-saw approach to relations with Pakistan.

“We in India wasted so many years in containing Kashmir militancy and, once it was contained, we sat back and were happy with the status quo, instead of taking advantage of the situation to forge a political solution,” says A.S.Dulat (below), who was a special adviser on Kashmir in the prime minister’s office in the early 2000s after a career in India’s intelligence services.

Writing in his book, Kashmir: The Vajpayee Years that was published last year, Dulat explains that a major reason for a lack of progress is the role of vested interests who are happy for the current situation to continue.

ASDulat“The status quo has gone on a long time, with a lot of vested interests having been developed: the army, the police, the paramilitary, the bureaucracy, and politicians of every hue. Even separatists….obstinately cling on to the rebel identity because they are unable to grow” he says, pinpointing the different groups (he should have included the media) that enjoy consequential wealth, prestige, business opportunities and life-style in Kashmir (as they do in such situations elsewhere in the world).

Dulat admits in his book that the Indian government helps finance separatist organisations in Kashmir as well as informers from neighbouring Pakistan. Black money circulates widely, flowing across the Line of Control from Pakistan and from widespread corruption – and an increasing drug trade – that involves the security forces as well as the administration and other interests.

But what is the Kashmir “problem” that needs to be solved for the stand-off between the state and the rest of India to end, for troops and para-military forces to withdraw, and for life genuinely to return to pre-1989 normalcy?

Some Kashmiri separatist leaders still talk about becoming part of Pakistan or gaining independence, but that does not seem to be a popular cause because economic prospects would be reduced.

Protesters throw stones at police during clashes - PTI Photo

Protesters throw stones at police during clashes – PTI Photo

Calls for more autonomy from India are often heard and could be discussed if Delhi was prepared to bother, though that goes against the current Modi government’s approach to nationalism and its interest in repealing the state’s special constitutional provisions. Modi also refuses to recognise the Hurriyat as a legitimate party to any discussions (which conversely raises rather than reduces their image), while the Hurriyat insists on Pakistan being included in a three-way dialogue.

One view is that it is not really a “Kashmir problem” but a “Delhi problem” because it is Delhi that sustains the stand-off, preferring to leave things as they are, as Dulat’s book explains. To change that, Kashmir needs to be brought into the mainstream of India’s daily life, which would necessitate tackling the influence of the vested interests. “It’s an emotional issue. Kashmiris need justice and a feeling of dignity instead of feeling inadequate and ignored,” says an experienced observer.

There is now an opportunity for fresh initiatives because Modi’s BJP is a partner in the state’s coalition government with the local People’s Democratic Party (PDP). The government is headed as chief minister by the PDP’s Mehbooba Mufti (below), who succeeded her father, Mufti Mohammad Sayeed, after he died on January 7. Mehbooba now has to assert her authority and straddle the contradictions inherent in leading a coalition government with the Hindu nationalist BJP in a state which is nearly 80% Muslim.

419573-file-pti-mehbooba-muftiA first step would be for Delhi to meet local demands for abolition of the 1990 Armed Forces Special Powers Act (AFSPA), an emergency law that protects the armed forces from prosecution for alleged atrocities in the state. Next, some people suggest, Delhi could call the bluff of the Hurriyat leaders by reducing or withdrawing their covert financial support and persuading them to dare to test their real popular support in state assembly elections.

Delhi could also stop seeing Kashmir and Kashmiris through the prism of its relations with Pakistan. When the NIT college fracas began, the Delhi-based Indian media grossly over-played the clashes, criticising both the Kashmiri students for being anti-Indian (ie, pro Pakistan) and the local police for daring to beat up Indian students. (The reaction I heard in Srinagar was that the local police frequently beat up Kashmiri students, so why the fuss when they did it to those from the rest of India!)

The student clash need not have gown into a unnecessary crisis and should have been seen as just one of many displays of anti-India sentiment. For years, cricket matches have been used by Kashmiris for such protests, just as India-Pakistan matches have been used by Hindu nationalists, especially the Maharashtra-based Shiv Sena party, to protest against Pakistan.

As Basharat Peer, a Kashmiri writer, has put it succinctly in The Times of India, “Kashmiri students not cheering the Indian cricket team conveys the nature of the relationship between Delhi and Srinagar”. Even back in 1983, when Kashmir was peaceful, five years before the state’s insurgency and militancy began, there were cheers for the West Indies when it played against India in Srinagar. Some youngsters, remembers Peer, tried to dig up the pitch.

While a change of attitude in Delhi is essential, Kashmir urgently needs development to provide jobs for the youth and build hopes for the future. Big business is scared to invest because of the unrest and risks of terrorist attacks. Modi grabbed headlines when he visited the state last November and announced a Rs80,000 crore ($12bn) economic package, though not all the projects were new, and little has happened since then.

Basic development is needed with highways and sound village roads to open up opportunities for local trade spreading southwards. In the 1980s, I saw how the then new 800km Karakorum Highway through Gilgit-Baltistan to the Chinese border opened up village economies with locally-built connecting roads. The Chinese-built highway’s conception was strategic, but its main impact was developmental.

Delhi however has not proved itself good at such strategic thinking, preferring to leave things as they are, hoping (as India does in so many areas) that everything will be eventually work out ok, and can be fixed in the meantime.

As the final paragraph of my report said six years ago, “What hope is there then for the state’s youth? And what will they be throwing in the future if stones prove useless – grenades and bombs again, with Pakistan eagerly feeding their needs?”

MARCH 31: Tata writes down value of its UK steel operations to ‘almost zero’ reports the FT – company willing to give main Port Talbot away after failing to find a buyer. 

MARCH 30: Tata Steel’s decision late last night to seek buyers for its Corus steel business in the UK is the latest example of Indian companies finding they rushed too quickly and expensively into large foreign acquisitions that were all the rage a decade ago.  Some have been successful, notably Tata’s Jaguar Land Rover (JLR) car business but, for many, the burdens of rising debt, falling markets and lack of international savvy and expertise have led them to sell what they had bought during the “India shining” years of the 2000s.

tata-steel-corusThe Corus decision, which is triggering a political row in the UK, is a blow for the prestige of both Tata, one of India’s largest and most respectable conglomerates, and its former chairman, Ratan Tata, who drove the $13.6bn acquisition in 2007 despite opposition from some colleagues.

This was part of a plan to spread the group’s many businesses across the globe – $20bn was spent on foreign take-overs during Ratan Tata’s time in charge. Shedding Corus is the biggest and toughest decision taken by Cyrus MIstry, who took over as head of the group from Ratan Tata in 2012, presiding over (2012 figures) $100bn-plus revenues, more than half from 80 countries overseas.

It is also a blow for India – both the UK and Indian governments have been proud to boast that Tata is the biggest employer in the UK’s manufacturing industry, which it will no longer be once it loses Tata Steel’s 15,000 employees. Efforts have now started to find buyers at the same time as trade union opposition is being organised, with calls for the British government to help in what is becoming a major political issue over the future of the UK’s steel industry.

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The deal looked logical because of synergy between Tata’s iron ore mining and steel producing business in India with Corus’s blast furnaces, rolling mills and other allied operations in the UK. But the purchase price was high, the steel market slumped internationally and Corus could not compete. With its mentor, Ratan Tata, gone and MIstry needing to shed debt, last night’s news was perhaps inevitable.

Up for sale is Britain’s biggest steelworks at Port Talbot. It employs 4,000 people and Tata says it is losing £1m a day, which will make it hard to find a buyer – though there are some suggestions that the UK government might consider temporary nationalisation. Plants in South Yorkshire, County Durham and Northamptonshire will also be put on the market. One estimate suggests that as many as 40,000 jobs could be at risk in allied supply-chain and downstream businesses.

In May 2007, I wrote in Fortune magazine about “the first flush of nationalistic fervour” that had greeted the Corus takeover and commented that there had been “so much foreign acquisition talk by Indian companies it seemed as if herd instinct had replaced financial caution”. And indeed, it had. Indian companies had reported 34 foreign acquisitions totalling $10.4bn as completed or pending so far that year, according to Dealogic, a British research firm. The total for the year 2006 was $23bn.

(That is small compared with China’s current international acquisitions. The Wall Street Journal has reported Chinese companies did deals worth roughly $68bn in the first few weeks of this year, which is about half the total for all of last year, according to Dealogic.)

From pupil to master - The Economist - AFP

Ratan Tata, when he retired in December 2012 and handed over to his successor Cyrus Mistry

Bankers were encouraging companies to make acquisitions, often without taking into account Indian companies’ lack of experience in very different environments abroad. “Both Tata and Birla are cushioned by substantial internal cash reserves that will enable them to cover debt taken on with the acquisitions,” one leading Mumbai banker told me for my Fortune article, wrongly in the case of Tata.

“Many companies had surplus cash, access to easy money, and hubris – an over-inflated view of what they could achieve,” a Mumbai banker said to me today.

To begin with, the overseas acquisitions were seen as an example of Indian companies growing up enough to venture outside their home markets. But by about 2009-2010, the story changed because bankers and businessmen wanted to castigate the Congress led government and its environment minister Jairam Ramesh, for making India such an unattractive place to invest that they were fleeing abroad. That may have been true in some cases, but it was mostly political spin.

Unsustainable

Coal mines, steel plants, and power and other infrastructure projects top the lists of industries where Indian companies rushed headlong into unsustainable commitments.

Leading the pack of companies with problems caused by expanding too fast and too far is Arcelor Mittal, the world’s largest steel company that is controlled by Calcutta-born London based Lakshmi Mittal, which made an $8bn loss last year.

Companies shedding assets include Suzlon Energy, the world’s fifth-largest wind turbine maker and a stock market favourite some years ago, and a clutch of new infrastructure companies such as GMR, GVK and Lanco with interests in airports and other power, infrastructure and mining businesses.  Fortis Healthcare, run by part of the family that developed the Ranbaxy pharmaceuticals company, had a hospitals and allied businesses’ buying splurge in Singapore, Australia, Hong Kong and Vietnam and then shed assets.

Bharti AirTel, India’s biggest mobile telecom operator, over-reached when it assumed it could easily cope with mobile businesses across Africa. It has sold operations in places such as Burkina Faso and Sierra Leone as well as shedding a telecom towers business to raise cash. Mukesh Ambani’s Reliance Industries got out of a US shale gas investment (though it profited from it financially, investing $254m and selling for $1bn five years later).

The Aditya Birla group did well with smallish acquisitions in carbon black and viscose fibre but then, seemingly left behind by other companies that were rushing abroad, acquired Novelis, a US industrial aluminium company, for $6bn. That seemed a neat fit with Birla’s Hindalco bauxite and aluminium producing business, but Birla paid too much and has been saddled with a financial burden.

There have of course been successes. Tata Motors provided Jaguar Land Rover with the financial strength and management commitment and focus that it had lacked under Ford, the previous owner. It was thus able to build on design work for new models that Ford had started.

Bharat Forge (Kalyani group) and the Mahindra group have also done well with relatively small scale acquisitions in manufacturing businesses linked with the auto industry. There have also been successes in the information technology area with the industry leaders such as Tata’s TCS, Wipro and Infosys plus smaller players, in healthcare by the Godrej group for example, and in the pharmaceutical industry.

So all is not lost and lessons have maybe been learned – take it slowly in small bites and avoid being swept along by a desire for size rather than precise business logic.

 

Posted by: John Elliott | March 24, 2016

“BJP’s swing to jingoism does not augur well”

“Misinterpreting nationalism – BJP’s swing to jingoism does not augur well”, said a headline earlier this week in the Business Standard, one of India’s leading newspapers. It reflected concern in India and abroad over what the paper called the governing BJP’s “disturbing drift towards hyper-nationalism”.

The only word slightly wrong there is “drift” because there is a growing suspicion among observers that this is not some gradual meandering, but a determination to develop divisive politics, driven for vote-catching reasons by Bharatiya Janata Party (BJP) leaders, notably Amit Shah, the party’s hardline president, Rajnath Singh, the government’s rather stern looking home minister, aided occasionally by Smriti Irani, the voluble minister for human resource development.

The latest example of their drive has come with a strident demand for people to prove their patriotism by declaring “Bharat Mata Ki Jai”, which means “Victory to Mother India” (or the motherland).

Bharat Mata.jpgOriginally triggered a couple of weeks ago when a Muslim member of a regional assembly refused to recite the line, this is really a non-issue because a wide spectrum of the population (including some Muslims) have no problem with saying it (nor with others not saying it). It is also the slogan used by the Indian army. Some Muslims resist it because of the representation as a Hindu goddess (see illustration, left). Many people would prefer the conventional “Jai Hind” which means “Praise be to India”.

Narendra Modi, the prime minister, has led chanting of the Bharat Mata slogan at his big overseas Indians’ rallies in places like London’s Wembley Stadium, and this could have been a harmless debate until Shah and others said that not chanting it was “anti-national”. After a week of growing controversy that dominated the media, a meeting of the BJP’s national executive last weekend passed a resolution that said “refusal to chant victory to Bharat is tantamount to disrespect to our Constitution itself “.

The BJP ministers seem to believe that polarising opinion around such Hindu-driven nationalism, especially the word Bharat (Hindi for India), will be a vote winner for various assembly elections next month, followed by a key election in Uttar Pradesh state next year, and then the next general election that is due in 2019. For them, even opposition to the government is anti-national.

Modi presumably agrees, though he and they know that the BJP won the general election almost two years ago because of his image as a leader who would bring development and efficient government, not rampant nationalism. The BJP has lost key state elections in Bihar and Delhi in the past 15 months because Modi and others pushed the nationalist anti-Muslim agenda, but that has not deterred the hard-liners.

Modi and development

Modi is now stressing development. “Vikas, vikas, vikas (development) is my only focus and it is our country’s solution to all problems,” he said at the party’s executive meeting. He does not however seem to have tried to rein in Shah and the others, so maybe he and Shah will each run their own lines so as to broader the party’s appeal to voters.

That gels with reports that the RSS, the BJP’s ideology-driven parent organisation which steers the behaviour of the party’s leaders and government ministers, wants development to be included in the message. (The RSS has also recently softened its image by replacing its uniform of khaki shorts with long trousers). Arun Jaitley, the government chief spokesman and finance minister, said last weekend that both nationalism and development could proceed together – which is of course correct if the nationalist angle is not turned into social divisiveness.

It seems however as if the Hindu hardliners are continually seeking new ways of polarising opinion. This started late in 2014 when a government minister soured the government’s image by implying that non-Hindus (ie Muslims) were illegitimate. It continued through 2015 when eating beef, or rather not eating it, became a cause célèbre.

BJP's National Executive meet

Prime minister Narendra Modi (centre), BJP president Amit Shah (left), and finance minister Arun Jaitley at the BJP’s national executive meeting last weekend. (PTI Photo by Kamal Kishore)

A 50-year-old Muslim farm labourer was killed in September by a mob at Dadri, a town in Uttar Pradesh 56 kms from Delhi near the Noida satellite city, after the local Hindu temple broadcast a rumour that he had killed and eaten a cow. There have been other outrages over beef since then though, like the Bharat Mata, this need not have built up into a crisis because many many Indians have never eaten beef, including those who would never vote for the BJP.

Around the same time, a 76-year old renowned Kannada writer and prominent academic in southern India, was shot dead, allegedly by right wing extremists who objected to his rationalist views on idol worship and Hindu ritual and had frequently issued death threats. Lack of official concern for the writer’s killing (and two earlier murders of rationalists) led to country-wide protests, with many writers returning awards they had received in the past.

Last month there was a row at Delhi’s Jawaharlal Nehru University between left-wing leaders of the university students union, and the ABVP, the BJP’s student organisation that wants to gain control of the union. That led to violent protests and arrests on charges of alleged sedition and has now spilled over into unrest at other universities. There have been more violent scenes and arrests this week at a university in Hyderabad over unrest that was triggered by a student committing suicide in January after clashes involving the ABVP.

Intolerance

The intolerance of the hardliners was demonstrated a week ago at India Today magazine’s annual conclave in Delhi where the opposing sides in the JNU debate appeared together. The JNU students’ union president Kanhaiya Kumar, a left-winger who was jailed for three weeks last month for alleged sedition, and his deputy Shehla Rashid, were calm and rational, whereas the representatives from the BJP’s the right-wing ABVP leaders, bellowed their messages and did not make a sound case.

Alongside these high profile campaigns, there is a more insidious invasion of freedoms, especially in academia which has always been a target for Hindutva activists. The most recent include reports of Urdu books being specially vetted to ensure they are not anti-government “For Urdu Publications, the Government’s Default Setting is Suspicion”, said a recent headline on The Wire website. Lecturers in a Delhi college were recently reprimanded by the university management for signing a petition supporting the JNU students.

It was inevitable when the BJP came to power in 2014 that there would be an onslaught on academia – for example with attempts to rewrite textbooks to reflect Hindu nationalists’ views of history and patriotism, and to remove the dominant narrative of the Congress Party’s Nehru-Gandhi dynasty. That happened during the last 1998-2004 BJP government, even though Atal Bihari Vajpayee, a moderate, was prime minister.

What was not foreseeable however in 2014 was the extent to which divisive ultra-nationalism would become a primary aim of the BJP and senior ministers. Shah and his colleagues seem to want to change society so that India’s becomes a strict Hindu nationalist nation, and dissenters are given short shrift. But that is not what the government was elected to do!

Posted by: John Elliott | March 11, 2016

Good times fade for Vijay Mallya as they did for Subrata Roy

The rural Hertfordshire village of Tewin, 40 miles north of London, has become a target for the Indian media this week because Vijay Mallya, the high profile Kingfisher beer and airline businessman, is rumoured to be there in one of his UK homes. He left India last week, just as the courts were closing in on him for massive loan defaults totalling some Rs9,000 crore ($1.3bn), plus alleged money laundering and other offences, at a time when concern is growing about India’s mountain of bad corporate debt.

Mallya Sahara Oct 13 '11.jpg

Subrata Roy (left) and Vijay Mallya in 2011

Mallya, who likes to be regarded as the “king of good times” and has seen himself as India’s answer to Richard Branson, was told two days ago by the supreme court in Delhi to return and appear by March 30 – with his passport, which the government wants impounded.

Today he has  been called by the Ministry of Finance’s Enforcement Directorate, which looks into foreign exchange dealings and money laundering, for March 18 in Mumbai.

Meanwhile his motor racing partner, Subrata Roy of the controversial Sahara real estate and personal savings group, has been living for two years this month in Delhi’s Tihar Jail, trying to generate enough funds from asset sales for the courts to let him out on bail.

That is a fate which Mallya presumably fears he could suffer if and when he returns to India and does not show more willingness to correct the mismatch between his public debt and private wealth and answer other charges.

Both these men were seen for many years as India’s most colourful tycoons. They were clearly crisis-prone, but that did not stop politicians, film stars, media people, and other public figures and hangers-on flocking round them and their lavish life-styles. Roy has shared a Formula 1 motor racing team with Mallya since he bailed him out with of an injection of funds in 2011 (photo above).

Their stories demonstrate the importance – and uncertainty – of political patronage, which is a vital business asset in India for many companies, and especially for those that operate on the fringes of business ethics and the law.

VM-PC LancHse July '15 479056222 copy.jpg

Prince Charles talks to Vijay Mallya (and his friends) at a Lancaster House reception and charity auction in London last summer

As the power of social media and round-the-clock television news coverage increases however, those who have thrived for years on crony relationship are more likely to be pursued and pilloried than they were in the past when they come unstuck – Mallya has been hit by a media frenzy that is shaming him for having fled (which he has denied) with his millions, leaving behind not only massive debts but also his airline staff who have not been paid for three years.

Political clout can wane and even collapse, as it did for Roy two years ago and is now beginning to do for Mallya. Roy thrived on powerful political links in his home state of Uttar Pradesh as well in Delhi. Mallya blossomed with backing from almost all political parties across the country – he is an MP and secured sponsorship for his membership of the Rajya Sabha (the upper house) both from the Bharatiya Janata Party and a regional party in his home state of Karnataka.

It is difficult to pinpoint exactly when and why political backing falls away, but it seems to have begun to happen to both Roy and Mallya when they became exasperatingly intransigent and unhelpful in meeting the demands from authorities to clear up debts and other alleged financial misdeeds.

Impatience with Mallya grew when he appeared to be defying the authorities by throwing an extravagant three-day 60th birthday party in Goa last December, just a month after the State Bank of India had declared him a “wilful defaulter”.

Then he announced on February 25 that he was planning to spend more time in the UK with his family. There was nothing wrong with that – he has a home there. But he said it at the same time as it was announced that he was receiving Rs 515 crore ($75m) personal payment as a final settlement with Diageo, the liquor group that has built a controlling stake in his United Distilleries business. He said that the payment “secures my family legacy”.

Debt mountain

It looked therefore as if he was disappearing to London with his millions just as, unfortunately for him, India’s central bank, the Reserve Bank of India (RBI), and the government are beginning to tackle the country’s mountain of bad corporate debt with state-owned banks that has reached near-crisis proportions.

bad-loans-of-39-banks-FirstPost

source: First Post, RBI

On February 12, Raghuram Rajan, the RBI governor, set Indian banks a one-year deadline  to sort out their non-performing loans, and warned them at a meeting in Mumbai that this “may require deep surgery” not “band aids”. The escalating scale of the problem became clear when the RBI said that bad debts had more than tripled from Rs 15,551 crore for the financial year ending March 2012 to Rs 52,542 crore in March 2015. The Financial Times has reported that India’s stressed loan pile is now estimated to have hit about Rs8tn ($117bn).

It has also been estimated by The Wire news analysis that India’s ten most indebted business groups have about Rs.7.3 lakh crore (approximately $110bn) of loans in their books and are struggling to meet their interest payment obligations. Most of these companies are heavily invested in power, roads and telecom infrastructure projects or have been hit by falling world prices for commodities like steel.

Mallya’s inheritance

Mallya was just 28 when he inherited the United Breweries (UB) group with its Kingfisher beer and spirits business on the death of his father in 1983. When I interviewed him for The Economist in 2005, he told me he had “lived my age” – driving fast cars, breeding and racing horses, and partying. By 2005, he had a fleet of private jets, five homes in India and others abroad.

Opposition in 2011 to government help for Kingfisher Airlines

Opposition in 2011 to government help for Kingfisher Airlines

“Early in his career, he seemed set on fulfilling his critics’ prediction that he would squander his inheritance, as he expensively moved into chemicals and fertilisers, bought a stake in the Asian Age, a daily paper, ran two glossy magazines, and dabbled in filmmaking,” I wrote. “In America, he started a software firm, and bought some local papers, breweries and a vineyard”.

By 2005 he had done well, making UB the market leader in India and one of the world’s three largest liquor companies, but then he launched Kingfisher Airlines – primarily to enhance his beer brand. It was, he told me, “all about lifestyle, fun and aeroplanes – a complete Kingfisher experience”.

It was this ego-trip that saddled him with his current load of bad debt as he tried, ineffectively, to continue with a company that never made profits. He has often been accused of having a short attention span, and was known for his unstructured management style. He bought his Formula 1 motor racing team in 2007, when Forbes magazine put his wealth at a peak of $1.6bn, and a year later bought a cricket team in India’s private sector premier league, though by then he was already running into financial troubles.

Kingfisher’s problems worsened after it bought a budget airline, Air Deccan, in 2007 which blurred its up-market brand image. It eventually stopped flying in 2012, after it had failed to secure a government bale-out.

Since then, Mallya has seemed to be in denial, continuing his flash high-spending international life-style while the banks have been trying, without much success, to recoup their Kingfisher loans. Many of these loans were inexplicably extended and renewed (when the Congress-led government was in power), even though the airline was sinking.

The story of the past week or two illustrates both bureaucratic inefficiency and slothfulness, but it is also tempting to think that officials connived in letting Mallya leave the country.

NDTV March 9 '16.JPG

Media frenzy – NDTV, March 9

The announcements of the $75m payment and the move to London triggered a series of (ineffectual) steps by the State Bank of India and other banks to speed up recovery of their outstanding loans. However they appear not to have read the fine print of Mallya’s Diageo settlement, so do not seem to realise that he had already received $40m of the $75m and had probably banked it abroad. Money laundering, fraud and tax investigations and inquiries have been launched.

On March 1, Mallya attended the Rajya Sabha and the next afternoon flew out of India on a regular Jet Airways flight, without any attempt at secrecy.

But he seemed to indicate he was still in India by issuing a statement on March 6, when he was already abroad, saying, “I have been most pained at being painted as an absconder – I have neither the intention nor any reason to abscond”. It was not till two days ago that it was officially announced that he had left four days before that statement.

IMG_5350Today he has been on Twitter saying he frequently travels abroad and that “I did not flee from India, neither am I an absconder”. He reminded the media, which is hounding him, of the “help, favours, accommodation I have provided over several years which are documented”.

Subrata Roy, once the king of his own good times, has been in Delhi’s Tihar Jail for the past two years instead of in his closely guarded luxurious 270-acre compound in the centre of the north Indian city of Lucknow. He also mixed with film stars and powerful politicians of varying shades of respectability, many of whom, it has been widely rumoured, invested anonymously in his myriad of financial schemes that primarily drew savings from millions of the poor. He once owned an airline called Sahara which, like Mallya’s Kingfisher, was run not to make profits but to enhance the image of his main business.

Roy was jailed in 2012 after a series of cases and hearings involving the supreme court and SEBI, India’s stock market watchdog, which had ordered him to refund Rs24,000 crore (then $4bn, but the figure has now gone up to Rs36,000 crore) to 29.6m investors. Since 2012 he has been living what he claims in a new book  is a “stress free life”. He has been trying to secure his release on bail by raising Rs.10,000 crore to deposit with the court, half in cash and half as a bank guarantee, but has failed so far (operating from a rented conference room in the jail) to clinch sales of assets such as the grand but faded Grosvenor House hotel in London’s Park Lane.

There are many other much bigger groups hoping to evade bank strictures on their bad debts, and also more businessmen with dubious financial schemes. The courts have already shown what can happen by keeping Roy in jail with trial for two years. Now the legal system and the government have an opportunity to be tough with Mallya and show that a new regime has indeed begun that bypasses political patronage – if it has!

JNUSU President Kanhaiya Kumar at JNU

PTI Photo by Kamal Singh

Narendra Modi’s government got its come-uppance last night when Kanhaiya Kumar, the 29-year old Delhi student controversially accused of sedition three weeks ago, was released from jail on bail and immediately starred at a rapturous late-night rally (right)in the grounds of Jawaharlal Nehru University (JNU). Today he has followed that up with media interviews including two on television.

It is surely rare for a prisoner, other than a political hero, to walk to freedom and immediately hold such a protest meeting and challenge those who wanted him detained. Yet that is what the PhD student from a desperately poor background did, implicitly criticising Modi’s home minister Rajnath Singh, his emotionally combative education minister Smriti Irani, and B.S.Bassi, Delhi’s insensitively blunt police chief who metaphorically led the charge against students’ freedom of expression before he retired four days ago.

Kumar’s alleged crime (I wrote about it on this blog) was that a speech he made on February 9 was anti-national. “If anyone shouts anti-India slogan and challenges nation’s sovereignty and integrity while living in India, they will not be tolerated or spared”, Rajnath Singh had provocatively tweeted. “I have instructed the Delhi CP [chief of police] to take strong action against the anti-India elements,”

Violent scenes followed at the university and elsewhere, along with a national debate on the meaning of nationalism – and how far Singh and his colleagues thought that meant being loyal to their Hindu nationalist government. 

Kumar, who is president of the JNU students’ union, was the alleged leader of those “elements” and was arrested for sedition. Many legal experts said this was a mis-use of the law that dated back to British rule. Yesterday Kumar was freed on six-month bail on condition that he did “not participate actively or passively in any activity which may be termed as anti-national.”

That led him to establish his patriotism, saying, “We don’t want freedom (azadi) from India….We want freedom in India.” 

JNUSU President Kanhaiya Kumar at JNU

PTI Photo by Vijay Verma

Irani had demanded at the height of the row that the Indian tricolour flag should be flown on all university campuses, presumably daring students to challenge her instruction. So a large flag was waved energetically last night, in effect mocking Irani and demonstrating the student’s patriotism, though not for her Hindu nationalism.

It was compelling television, approaching midnight, and most channels ran it live. (It is worth watching the drama whether you speak Hindi or not. For the tv and an English summary click here – go to the last five minutes for the slogan chanting. For an English translation click here).

Kumar showed he has the charisma of a future political leader and now he has a national – and indeed international – reputation as a young leader who took on Modi and the government. He belongs to the AISF, the student wing of a minor Communist party, the CPI, but that need not restrict a political career in the future, though he has firmly said today that he is a student, not a politician. 

Last night he reasserted the students’ right to hold meetings and to protest, while carefully saying nothing that could encourage those in Modi’s Bharatiya Janata Party and its sometime-violent student wing, the ABVP, to strike back

Speaking  for some 50 minutes, Kumar said the charge of sedition had been used as a political tool against the students and attacked Modi for misleading people with his promises in the last election. If one criticised the government he said, a special cyber-cell would make doctored videos against you (as happened with him). 

IMG_5326 copyHe condemned BJP leaders and speakers on television discussion programmes for using the sacrifice of soldiers on India’s border with Pakistan to condemn the JNU students, some of who had been protesting about the execution of a Pakistani terrorist. He said he had been criticised for using the word azadi, or independence, and asked who he wanted independence from because India did not deny anyone their freedom. That led him to make the remark about wanting “freedom in India” and adding freedom from “hunger, corruption, poverty, casteism”.

A Delhi government-appointed inquiry by a magistrate did not, it was announced yesterday, find any evidence that he shouted anti-India slogans on February 9. It had examined seven tapes of students’ speeches, two of which turned out to have been been doctored to incriminate Kumar and other students

The events three weeks ago generated a wide debate, with many people condemning the students for their slogans and attitude, while opposing or at least not condoning the crisis that the government created with the sedition charges.

One extreme was illustrated by the judge in Delhi’s high court who said, when he granted Kumar bail, that some of what the students had said was not protected by freedom of speech and that it was “a kind of infection from which such students are suffering which needs to be controlled/cured before it becomes an epidemic”, adding:

“Whenever some infection is spread in a limb, effort is made to cure the same by giving antibiotics orally and if that does not work, by following second line of treatment. Sometimes it may require surgical intervention also. However, if the infection results in infecting the limb to the extent that it becomes gangrene, amputation is the only treatment.”

This is far from the end of the story.  Dates for state assembly elections starting next month have been announced today, generating desperate campaigning by the BJP and its extreme wings that will emphasise Hindu nationalism and try to strengthen its hold on the country.

India’s finance minister Arun Jaitley is the calm voice at the top of Narendra Modi’s Bharatiya Janata Party-led government. His role is usually not to worry so much about the economy, but to try to present a sense of sanity and reasonableness as the government’s spokesman and information minister, while Modi avoids making many comments apart from mega rally speeches, and Amit Shah, the party’s president, exudes fear-inducing Hindu nationalism.

Jaitley has performed both the economy and information functions today with his annual budget speech that ran for just over 90 minutes. He focussed heavily on helping the rural poor with schemes that aim to begin to double farmers’ incomes by 2022 (an over-optimistic and probably unachievable target), and on accelerating investment in infrastructure, especially irrigation.

That should, the government hopes, increase consumer demand and economic growth, while also (though Jaitley of course did not say so) conveniently countering the Congress Party’s opposition line that the government is “not pro-poor” at a time when state assembly elections are looming.

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Arun Jaitley and his team leave the finance ministry for parliament

Three days ago, Jaitley was performing the same calming role in an often screamingly angry two-day parliament debate after caste-based riots in the nearby state of Haryana had led to widespread violence and looting that cut water supplies to Delhi. The previous week had been dominated by clashes and protests in Delhi’s Jawaharlal Nehru University with rough police action and court cases, encouraged by government ministers, that irrationally accused students of sedition.

Image low

Today’s budget has therefore come when the image of India and the 22-month old Modi government has been damaged, and something is needed to revive confidence. Jaitley’s speech of course dealt with economic confidence, but it is really more important for the government to boost confidence in its politics and to show that it is not following a pre-planned policy of social divisiveness and restrictions on the freedom of speech aimed at strengthening Hindu nationalism and at enhancing the BJP’s Hindutva appeal..

Two friends visiting Delhi in the past week from the UK and US have told me how, viewed from abroad, India looks the best hope among major economies with its 7.6% growth at a time when other countries have problems. But, they both added, the social unrest and the divisive Hindu nationalist and repressive image of the government, was worrying investors.

It is against this background of social unrest and the government’s image problem that Jaitley made his speech today. His most important macro economic announcement was that he has not relaxed the government’s target of reducing the current 3.9% fiscal deficit to 3.5% of gdp in the coming year, despite being given conflicting advice that stimulating growth was more important.

Jaitley’s economic advisers, who produced the finance ministry’s annual economic survey at the end of last week, are suggesting that this year’s official 7.6% (some critics say inflated) growth figure might drop to 7% in the coming year instead of rising.

Nine pillars

Jaitley presented what he called a “transformative agenda”, with “nine pillars” covering benefits for farmers, rural communities, social issues such as health care, industry and skills, infrastructure, financial sector reforms, and governance and ease of doing business.

Proposed spending included $2.5bn in 2016-17 on delayed irrigation projects, $32bn on rail, road and other infrastructure. Another $3.6bn was announced to begin re-capitalising financially crippled state banks that have been hit by their often politically-inspired largesse of allowing massive bad loans to over-leveraged Indian companies.

But there were few significant economic reforms in the speech. Foreign ownership through direct investment is to be allowed in food processing and marketing businesses. The foreign portfolio investment limit in public sector corporations (apart from banks) is to go up from 24% to 49%, and 15% foreign investment will be allowed in stock exchanges, up from 5%.

Various measures were aimed at improving the ease of doing business in India’s rule-bound heavily bureaucratic environment, and a proposed bankruptcy code will ease the closure of bankrupt financial firms.

Chidambaram budget 2013

Palaniappan Chidambaram with his budget speech in 2013

Also included were a complex array of tax measures including some relief for small businesses, and an attack tax avoidance, plus a fresh effort (following a largely unsuccessful scheme last year) to persuade tax-payers to reveal undeclared assets.

Jaitley said that companies would not be hit, as was done in the past, by retrospective tax demands. He agreed to waive penalties and interest on outstanding payments, but failed to reassure companies such as Vodafone that are involved in outstanding multi-billion dollar cases.

Overall, the budget sounded like a long list of worthwhile innovations and incentives, though critics said it lacked an overall big idea, and that it would be difficult if not impossible to implement projects fast enough to use all the funds, especially in areas such as irrigation. Palaniappan Chidambaram (above), the last Congress government’s finance minister, noted that there had been no mention of (declining) exports, which was certainly odd. There was also virtually nothing to encourage private sector investment in manufacturing, and no mention of spending on defence where there was only a marginal budget increase despite inflated pension and pay commission costs.

Exports and the private sector however were not the targets of this politically targeted budget, which was aimed, as I have said, at shifting the government’s image from being pro-corporate to caring for the rural poor.

Now Jaitley’s job is to show, and to persuade his prime minister to show, that the government also cares for India being an open and free society without the repressive Hindu nationalist overtones.

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