Are winds changing their direction in Indian Politics?!

Slowly but surely, the Congress is shuffling back into the game and Rahul, the man who everyone, including his own party, gave up on, is chiefly responsible for that.

In October 2012, Rahul Gandhi said in Chandigarh that seven out of every ten youth in Punjab had a drug problem. It sounded like an outrageous statistic and his claim was met with derision and ridicule. Even the fact that this was probably the first time a national leader had mentioned the subject in public was ignored – the very fact that Rahul had said it made it a legitimate subject for not just online trolling but also media criticism. Once again, it was emphasised that the young Gandhi family scion was simply not cut out for politics.

Since then of course Punjab’s drug problem has found its way into the political discourse, popular culture and journalistic investigation. We don’t now contest that it is a severe one, just what is the true extent of it and what is the solution.

Rahul in those days and for a long time could do no right. He was the object of ridicule, the callow and immature Pappu in contrast to the street smart, canny and clever politician Narendra Modi. Whenever Modi spoke of Rahul, it was in terms designed to humiliate. The election results in 2014 and several times subsequently showed the glaring contrast between the two as political players. Even those not inclined towards Modi were dismissive of Rahul and of course the trolls had a field day, making cruel fun of him.

Now, the tables have turned. Rahul is in a position where every utterance by him – even frivolous ones, like the tweet about his pet dog – is met with great approval. His US tour, where he met with academics, journalists and NRIs, has impressed many skeptics (nothing like endorsement from the West) and now he draws huge crowds in India wherever he goes.

At the same time, Modi has come under fire not just from politicians for the problems created by demonetisation and the implementation of the Goods and Services Tax, but even the business community, his greatest supporters, are angry. The PR spins about how both these initiatives have actually achieved a lot – the banishment of black money, reduction in terrorism and fake currency, a switch over to digital currency – have failed in the face of harsh realities on the ground. Small businesses are folding up and people are losing jobs. Even the BJP’s own MPs are now beginning to talk about it. Modi’s favourite economists may claim demonetisation was a success, but nobody is buying that anymore and this could have political repercussions in Gujarat, where elections will be held next month. A resurrected Congress, led by the same Rahul, is gearing up to give a good fight to Modi in his home state. An electoral upset could be humiliating and could set off an unpredictable chain of events; winning Gujarat is imperative for Modi.

The strangest things happen in politics and there is no saying how the public views its leaders and changes its mind, but it is still worth asking how this reversal came about. That the sheen has worn off Modi after three and a half years is understandable; people go by their experience and at the moment many Indians are hurting and more worryingly, have little faith that their lives will get better any time soon. But why is Rahul getting so much traction? Is it just that he is a port in the storm and Indians are ready to try him, or is it something more? No one is yet saying that he will defeat Modi in 2019 or even in Gujarat, so why bother to invest in him?

There are no easy answers, because public opinion is always a mercurial, even fickle thing, impossible to predict and difficult to fully understand. One cannot even assume that Rahul’s rising popularity and Modi’s dipping ratings are connected. Modi still has significant support. But there is no denying that Rahul is now being taken very seriously.

Indeed, the BJP, and especially Modi and Amit Shah, never did not take Rahul seriously. They saw that as long as Sonia Gandhi and Rahul were at the helm of affairs, the Congress would continue to remain a political contender – the constant refrain of ‘Congress-mukt Bharat‘ may have been a sign of the BJP’s arrogance, but also showed that unless it was completely eliminated, there was always a chance it would rise again. And to finish off the Congress, it was imperative to demolish the Gandhis, not just politically but as people.

The ‘suit-boot ki sarkar’ remark was the first time any political rival had said something of the kind at a time when Modi was at his peak. It was less than a year after Modi won his stupendous victory and it stung. That jibe became a kind of leitmotif and Modi has done everything in his power since then to show he cares for the common Indian citizen and is not just preoccupied with the issues of big business. His closest supporters have been startled at the populist turn of his policies (though of course in practice it is the humble citizen who has been crushed under them the most).

The point is that Rahul did on occasion have the ability to strike, but the narrative of him being indolent and largely ineffectual was so deeply rooted that nobody was willing to give him a chance. Faced with immense hostility from the BJP, its troll army and a media which moves in herds rather than think for itself, he remained a non-starter. In addition, his own party men were not inclined to fully back him up – in the absence of any clear signalling by his mother and senior party bosses, he was handicapped and did not have the full support of his own party. In addition, he was a poor public speaker who looked even weaker when compared to the bombastic Modi. Congressmen deserted the party in droves and some even blamed him directly for their decision.

But many who met him privately said, pleasantly surprised, that he was bright and well-mannered. They praised his grasp of issues. They expressed astonishment that this side of Rahul was not visible to the general public. But it was; he made several good speeches, but it was only when there was a peppy, headline-worthy remark – such as ‘fair and lovely scheme’– that it was given any significant coverage.

The US visit was an opportunity to speak to serious audiences without the ambient noise of the Indian media and Twitter nitpicking over every small word and remark. When every stray, often out of context, statement becomes a major ‘controversy’ in the Breaking News cycle and is analysed on the loop by breathless journalists, it is difficult to look at the matter soberly.

In the US, Rahul said that Modi was his prime minister too, refusing to get drawn into taking cheap potshots at him. He admitted that dynasty was a fact of life in Indian politics. In his sessions with editors of the big papers, he spoke about the Indian and the global situation (it was his insistence that the meetings remained off the record). All this filtered back to India and was met with approval, even some respect. The same people who laughed at him now saw him in a different light

Since then, he has been hitting pay dirt and his speeches are being given more coverage than in the past. He comes across as cheerful, relaxed and sharp. He is back to coining phrases like Gabbar Singh Tax, which catch the fancy of the social media. And he has also shown some political acumen in trying to tie up with the Patidar and other groupings in Gujarat.

In contrast, Modi the prime minister is sounding defensive and almost desperate – he has been holding public meetings all over the small state of Himachal Pradesh and has many rallies lined up in Gujarat. It hasn’t helped that his own party men like Yashwant Sinha are criticizing his policies. A year ago, what Sinha said wouldn’t have mattered; today it is lapped up. More significantly, the comedians are out in full force and hilarious memes on Modi are all over the place. Things have changed.

It may still not make the crucial difference in Gujarat and the BJP may still form the next government. That will give Modi much-needed breathing space and confidence as he marches towards the 2019 elections. Also, popularity with social media users is one thing, winning elections is another. Most of all, and this is something that Rahul needs to think about, his party is not making its stand clear on crucial issues such as secularism and the rising intolerance in India. We need him to make a forthright statement on where he and his party stand. Yet, slowly but surely, the Congress is shuffling back into the game and Rahul, the man who everyone, including his own party, gave up on, is chiefly responsible for that.

Did Left made another bigger blunder by denying third Rajya Sabha term to Sitaram Yechury?!

It took four hours for the CPI(M) to once again take a regressive step. Eloquent speaker and one of the best known Left voices, Sitaram Yechury, has been disallowed from sitting in the Upper House for the third time.

This comes at a time when the national party has been struggling to retain its all-India status; leave alone spread its influence in the country. In today’s age of divisive politics played on communal lines, the voices of the Left are more significant in Parliament than ever before. A vibrant democracy demands it.

Sitaram Yechury’s second and current stint in Rajya Sabha, which would end in August as the Upper House re-elects its members, has been more than stellar.

Whether it’s demonetisation, GST or jobless economy, the beef lynchings or cow vigiliantism, the anti-minority bent of the ruling BJP in the Centre, or the Money Bills passed unceremoniously in Lok Sabha that were heavily criticised and revisioned in Rajya Sabha – Yechury has been one of the tireless leaders of the Opposition’s pack, holding the government to account at every step.

The Left parties, especially the CPI(M), though are a curious lot. They want to hold on to the dogmatic ideology at the cost of everything else.

A heavily divided Central Committee opined on Tuesday that Yechury making it to the Rajya Sabha with Congress support defeated their political/tactical line affixed at the last Party Congress. The CPI(M) wants to maintain equal distance from both the BJP and the Congress, even at the cost of its fast-increasing political isolation.

It is this general rigidity that has cost the party heavy political losses in the past as well. In 1996, West Bengal chief minister and veteran Marxist leader, Jyoti Basu, had the chance to rewrite history by becoming the Prime Minister of India. The hardliner commies would have none of that.

The CPI(M) would not have its leader become PM because the Congress was supporting the government from outside. It’s also widely unknown that Rajiv Gandhi had appealed with Basu to become PM on two other occasions during 1990-1991 as well.

In 2008, Prakash Karat-led CPI(M) found it more viable to pull the plug on Congress-led UPA-I over the Indo-US nuclear deal. The days of arduous politicking and attempts of holding out an olive branch were summarily dismissed by Karat, who in his hubris further isolated a party the ideology of which finds few takers in new, now increasingly Modi-fied India.

The sacred ideology that certain sections of the party hold on to for dear life should be a means to an end. But CPI(M) sources from the West Bengal faction say that they fought tooth and nail to impress upon the party leadership that having Yechury as Rajya Sabha member would be a strength and not a weakness.

The fact that Congress was supporting the move was also a necessary evil. The Congress and the Left had aligned ahead of the West Bengal polls last year. Bengal leadership from both sides felt that it’s the best bet against Mamata Banerjee and the BJP, which has turned its divisive attention to the state.

The Left’s idea of a Third Front proved a dud. Friends like Samajwadi Party have fallen by the wayside. Politics needs allies, and realistically, the Left has only the Congress to join hands with.

But the highest decision-making body of the CPI(M), the Central Committee, comprising grand old daddies and other fogies, will never allow that to pass. Their myopic politics seems stuck in a time warp with the leaders making the same mistakes over and over again.

They refuse to keep pace with time, rejecting growth and evolution, and in the process becoming further estranged from today’s youth. There is no “alternative Left school of thought” in India any longer; the Indian Communists have unfortunately ensured that.

Make in India: Perception v/s Reality

It is always good to breakdown a complicated problem into parts for an easy understanding. Here let me take down the discussion by understanding the Importance of "Make In India", Past of Indian Manufacturing sector and then Claims v/s reality in Today's India

Importance of Manufacturing sector and Make in India:

No large country can become rich without manufacturing the goods that are consumed or demanded by its people. Most services, especially the basic, low technology and low value-added services will anyway be produced within the country. A country will move up the ladder of prosperity if it can manufacture the goods and produce the services required by its people and also export a considerable part of those goods and services.

Prime Minister Shri Narendra Modi was therefore absolutely right when he stated that his government’s goal was to give the highest priority to ‘Make in India’ and called upon the world’s manufacturing companies to “Come and make in India”.

Past of Indian Manufacturing sector: Manufacturing gaining its ground

The share of manufacturing in India’s GDP is about 16.5 per cent. Agriculture has declined steeply and the Services sector has risen sharply but, notwithstanding the changes in the shares of the two sectors, manufacturing has gained ground. 70 per cent of manufacturing units are in the private sector and about one-third of those are with the quasi-corporate and unorganized entities. Manufacturing’s share of GDP has risen steadily from 9.8 per cent in the 1950s to about 16.2 per cent in the 2010s. Our Government promised a further boost to manufacturing as part of its Make in India sloganeering.

To make a product and capture a significant market share is not an easy task. There may already be one or more persons making the same product. It may be imported too. To make the product, the intending manufacturer must make it better or cheaper or reach it to the consumer sooner or be able to offer something which makes his product more attractive to the consumer. It is here we face the hurdle of ‘factor costs’. Land, labour, electricity, technology, transport, cost of capital, cost of borrowing, and many others are factor costs. Unless some or all factor costs are favorable, no one will embark upon manufacturing.

The major manufacturing economies of the world have reached their positions by making factor costs more advantageous if the product were made in their countries rather than made elsewhere. Making in a country must provide a ‘competitive advantage’ to the manufacturer. Take cars. They were first mass-manufactured in the United States. When Germany and Japan emerged as major economies, they offered competitive advantages and the industry shifted to Germany and Japan. A few decades later, car manufacturing moved to South Korea. A couple of decades later, a significant portion of car manufacturing shifted to India.

The shift to India was not fortuitous. It was because of a well thought out strategy that was translated into clear policies. That story which began in 1991-92 deserves to be told separately.When our government promised to make India into a global hub of manufacturing, One assumes that it had been advised and it had reflected on the many hurdles that had to be crossed. 

We generally refuse to believe that ‘Make in India’ was just another slogan to enthuse the large gathering on Independence Day, 2015 but Is reality very different from what is artificially trending in social media and by so called Supari journalists?!

Claims v/s reality in Today's India:

Two years later, what is the status of ‘Make in India’?

The CSO has released the quarterly growth rates of Gross Value Addition (GVA) of manufacturing at constant prices (2011-12). I have placed them along side the growth of overall GVA:

	Manufacturing Sector GVA		Over all GVA
	2015-16	2016-17	2015-16	2016-17
Q1	8.2	10.7	7.6	7.6
Q2	9.3	7.7	8.2	6.8
Q3	13.2	8.2	7.3	6.7
Q4	12.7	5.3	8.7	5.6

Since the announcement of ‘Make in India’ on August 15, 2015, there is no evidence that manufacturing has gathered momentum. On the contrary, it seems to have lost steam and, in 2016-17, the sector had weakened considerably. Between Q1 and Q4 of 2016-17, the growth rate of manufacturing GVA had halved. The weakness of the manufacturing sector is reflected in the steady drop in the growth rate of overall GVA.

The conclusion is that apart from the announcement of ‘Make in India’, there has been little policy or administrative support. All other data points to the same conclusion. In the five quarters between Q4 of 2015-16 and Q4 of 2016-17, Gross Fixed Capital Formation (GFCF) as a proportion of GDP had declined — 30.8, 31.0, 29.4, 29.4 and 28.5. A drop of 2.3 per cent in 12 months is a disaster. Considering that GFCF was 34-35 percent only a few years ago and the government has done nothing to step up private as well as pubic investment, it is a catastrophe.

Data points to flop:

Data on IIP point to the same conclusion. In May 2014, the index was 183.5, in August 2015 it was 184.8, in March 2016 it was 208.1 and in February 2017 it had fallen to 190.1.

Data on credit growth point to the same conclusion. Credit growth to the industry sector has been negative since October 2016. Credit growth to micro/small and medium industries has been negative since March 2016 and June 2015 respectively.

Data on job creation point to the same conclusion. The eight leading job-creating industries created only 109,000 jobs during the period April-September 2016. That is a sign of stagnation.

Data on electricity demand point to the same conclusion. The average Plant Load Factor of thermal plants is about 60 per cent reflecting poor demand for electricity.

Everyone including me had welcomed ‘Make in India’. It was innovative and aspirational. Unfortunately, it appears that there was little homework done before and practically no policy support after. ‘Make in India’ has turned into a hollow slogan.

All data mentioned in the article had been taken from Bloomberg and CSO, Ministry of  Statistics

All views mentioned in this article are personal 

A brief view on the timing of Demonetization!

With all the debacles on “Demonetization" going around, this is not to give any arguments for or against the issue. Few questions, on the larger context have been coming across my mind in the hope of finding some answers, would like share some below.

Was this the right time? - Given the much known agricultural statistics of 58% employment dependency, 17 % contribution to GDP, 10 % contribution to exports and fourth most exported commodity. Have we largely ignored this space in planning this move? With Kharif season ending, and farmers planning to sell their produce, after much awaited better monsoons which probably had risen their expectations of better income this time. Can we afford to go for a cashless economy, and push some more farmers to the suicides or in the vicious circle of poverty? Also, there is a little gap between harvesting in Kharif and sowing in Rabi- If we might be reaping the benefit of lower food inflation today , created due to shortage in money supply leading to decline in aggregate demand ; Can we continue to do so in the next harvest, given there is always a supply lag in agricultural commodities? In long run undoubtedly this move might pull down inflation, but in short run haven't we compromised the "Zero Day vulnerability" of this important segment?

Isn't RBI an autonomous body? - According to RBI Act, 1935( by which RBI is governed) - “The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest,” , clearly stating that RBI is not a constitutionally autonomous body. Given the two bodies having similar objective of "Greater Good" but different (sometimes contradictory) instruments to attain it, with Government (Fiscal Policy) and RBI (Monetary Policy). Also, given the basic essence of the Constitution which has divided the powers of Judiciary, Executive and Legislature to encourage the system of checks and balances. Should we be worried about this increasing "coziness" between two bodies in present scenario, when the encroachment on one’s autonomy has already begun (which is also facilitated by the act)?

Can we afford to misunderstand working capital cash requirement, as a stock of Black Money? - To believe that black business is carried out with cash while normal business is carried out with cheques is a not correct. Because normal business also requires cash transactions. And if we demonetize a range of currency, we will also be disrupting this working capital cycle, which is an integral part of any small or large business. The working capital cycle (WCC) is the amount of time it takes to turn the net current assets and current liabilities into cash. Profit is calculated after simple adjustments made in assets & liabilities, and this profit is reinvested .The longer the cycle is, the longer a business is tying up capital in its working capital without earning a return on it. In light of persistent global slowdown ,fall in aggregate demand & investment and little success in "Make in India" campaign , can we afford to overlook the basic fundamentals on which these established business function ? According to the September data, IIP down only by 0.1% against 4% in previous year, Manufacturing up by 0.9%, and electricity production has also improved by 2.4%. If we fail to capitalize this opportunity, can it prove detrimental to the economy in times ahead? When experts have already speculated that Nomura current projection of growth which is 7.3 % in the December quarter, may actually be closer to 6.5 percent due to this unprecedented move.