Sunday, January 31, 2016

Chinese Communist Party - Root Cause of Global Market Turmoil?

My basic thesis is because ruling Chinese Communist Party does not have any legitimacy typically awarded by regular elections, we are facing turmoil in global capital markets. Mao' Party for sure had the legitimacy in early decades of People's Republic of China as it defeated imperialists and established people's raj. But at some point Chinese rulers needed to renew their legitimacy lease on continued basis from people's mandate. Due to dictatorial instincts of Communist Party Leaders as well as developed vested interests of party apparatus; PRC avoided democratic elections resulting in legitimacy drought of Chinese Communist Party. 

Given this state of illegitimate rule of Chinese Communist Party; lately party's leaders are pressed to run after ambitious goals to impress Chinese People by gimmicks - all just to remain in power. After Tienanmen Square, it was liberalization of Trade under Zhou Rhongji[1] for admittance to WTO. Hu Jintao chased the glory of 2008 Beijing Olympics; all to hoodwink Chinese People to push structural problems of Chinese Economy under the carpet and postpone questions about legitimacy about the Party.

With Xi Jinping - the problem is exasperated. Nowadays, there is much less demographic dividend to be had. Bills of largesse paid in terms of 2010 stimulus have to be repaid. There is no more any room for 'debt-fueled-state-company-behemoths-driven-growth' since Chinese banks are saddled with non-performing loans. Result is - Xi's chase of national glorification by muscle demonstration in South China[2], unprepared ascend to IMF reserved currency status at a great cost and grandiose dreams of modern day Silk Road by way of Asian Infrastructure Investment Bank.

All these dreams of Xi and his simultaneous attempts:
- to quell unrest which can be caused by rationalization of public sector when labor is shed in millions, 
- to stabilize stock prices which were oversold by Communist Party[3] or 
they are not working. These contradictory policy imperatives are unlikely to make job of Xi Jinping any easy. Lack of elections means relentless pressure on Chinese Communist Party Leadership to keep producing economic miracles. No wonder, the party leadership in the end runs out of ideas and corners itself by various past actions result of which could lead to a disaster.

One way for Xi Jinping to avoid this chaos is to come clean with his own people. But because Xi Jinping's own legitimacy is questionable; it is unclear whether Chinese People will trust him even if he wanted. Xi Jinping is not elected by Chinese people, he just maneuvered Party Machinery to grab the power and is simply perpetuating Communist Party tradition of committing to grandiose, over ambitious plans to keep away people's distrust of party. Also, there is no political catharsis possible as like how ruinous economic policies of previous regime are swiped aside by a new leadership with a healthy dose of new economic policies with a fresh start. When elections happen, a new leadership comes in; people's expectations are reset. There is no such luxury to Chinese People.

So long as that is the game in Beijing, periodic bouts of lack of confidence in Chinese Capital Market, and by consequence in Global Capital Markets, are unavoidable.


[1] - Zhou Rhongji has been the only competent money and economy manager Communist Party has produced in last 3 decades.

[2] - Xi's northern neighbor Vladimir Putin has been practicing 'rabid nationalism' as a substitute for governance for a while now.  

[3] - These stock prices are going down because of slowing Chinese Economy and weakening Yuan; wiping out Trillions of domestic Chinese investors who were exhorted by the party to buy stocks as some kind of patriotic duty.

Friday, January 29, 2016

Commentary - His Father's Son

The incumbent chief minister of Jammu and Kashmir, Mufti Mohammed Sayeed, died of multi-organ failure on 7th January 2016. He wasn’t ailing as such, except for the last bout of illness that lasted for less than a month. So, though he was almost 80 when he died, his death was rather unexpected. 

His political heir was supposed to be his daughter, Mehbooba Mufti. And she seems to be buying time before taking over. Very likely, she is playing patience, to make the BJP jittery. BJP could never think of ruling JandK, certainly not on its own. Though the National Conference had allied with BJP earlier, it was during Vajpayee’s tenure. Vajpayee era is now a distant past. So if Mehbooba’s PDP snaps ties with BJP, it will be back to opposition for BJP. PDP, NC and Congress can play all the possible permutations and combinations without any hassle. 

So far, it seemed to be a tale of political one-upmanship. But in a true filmi style, the twist in the tale has become apparent. Mehbooba’s younger brother, who had kept himself completely away from politics so far, has been introduced to the party. And he has started speaking politicalese with real ease. This interview is enlightening in more ways than one.

It re-underlines the Indian reality that politics is primarily a fiefdom of the incumbents, irrespective of the eligibility of the new entrant. In this case, Tassaduq Hussain Mufti, is an established cinematographer, known for Vishal Bhardwaj’s ‘Omkara’ and ‘Kaminey’. For all known records, Tassaduq had crafted a career far away and far different than his father and sister. Furthermore, in this case Mehbooba is already well-entrenched in politics. So why did she feel the need to introduce her brother? Is it a manifestation of the male-dominant society? Or is it the kind of insecurity that gripped Indira Gandhi and made her install Sanjay (and later Rajiv)?

Read the interview, and you realize that Tassaduq is making mundane and inane noises and nothing more. In a true ‘political’ style, he has spoken a lot without saying anything.

One dumb question – if Tassaduq is prevented (for whatever reason/s) from working as a Cinematographer, can he install one of his family members to replace him?

Thursday, January 28, 2016

Golden Jubilee of Hereditary Politics in India

On 24th January 1966, Indira Gandhi became the Prime Minister of India. She succeeded Lal Bahadur Shastri, who died a sudden (and to many, mysterious) death in Tashkent, hours after signing a peace accord with Pakistan to end the 1965 India-Pak war.

Indira was not new to politics. She became the President of Congress Party in 1959. It was a very prestigious post (till then), and her ascendance to the post was primarily due to her familial connection; she was her father’s unofficial secretary.

Feudal attitude or nepotism or hereditary entitlement has always been a blatantly integral part of the social, cultural, political and industrial fabric of India. But till then, political ruling class was relatively free of this malice; the class of ‘political rulers’ was just a couple of decades old.

Looking back after fifty years, it marks a watershed in India’s politics for a variety of reasons. It explains her innate sense of insecurity, which resulted in Emergency. It lays the foundation for the rise of her son, Sanjay Gandhi, which was cut short by his accidental death. It leads to the ascendance of her other son, Rajiv Gandhi, who succeeded her as Prime Minister.

But it marks a watershed for another reason. It provided an established role model for other political parties, mostly regional parties. Only the communists and BJP can be said to be a reasonable exception. BJP is still in the learning mode – currently only two (Phadnavis of Maharashtra and Scindia of Rajasthan) out of its eight Chief Ministers have hereditary connections. And communists have their own Brinda Karat, who became a Rajya Sabha MP on the very day (11 April 2005) her husband became the Party General Secretary.

But for all other political parties, the picture is beyond scary. Because the malice is spreading and affecting the supply of young blood to politics.

Let us look at the Lok Sabha. This report indicates that all the MPs who are below the age of 30 have hereditary connections. Of the MPs below 40 years, 65% have hereditary connections. For age group 41 – 50, the percentage is 37%. The percentage decreases steadily till it reaches zero for age above 81 years.

Let us look at it from another angle and leave aside the numbers. Is there any major political party that doesn’t have familial connections as the ‘necessary and sufficient’ condition to get in? BSP ( Bahujan Samaj Party) and ADAM (Anna Dravida Munnetra Kazhagam) seem to be the only two names that would be obvious.

The malice is scary because contrary to popular belief, it has grown with the growth in technology, increase in the standard of living and overall ‘globalization’ of all paths of life. Politics has become a field where no eligibility criteria is needed whatsoever. This is very apparent in case of politicians who die naturally/accidentally. Take the case of R R Patil, a first generation politician from Maharashtra, who really worked his way up from the lowermost rung. He died of cancer in 2015. His widow Suman Patil, till then completely away from politics, won by a huge margin. Let us move to Uttar Pradesh; when Charan Singh was nearing the end, he hastily installed his son Ajit Singh, a computer scientist by profession, as his successor. Continuing the tradition, Ajit Singh has further installed his son Jayant Chaudhary. In Odisha, Naveen Patnaik joined politics after the death of his father Biju Patnaik. After ruling the state for the last fifteen years, he still doesn’t know Odia language.

If one keeps digging, one can unearth many such squirming worms from the level of the local corporator to the highest level. Even in ‘apolitical’ RSS, the spokesperson M G Vaidya was replaced by his son Manmohan Vaidya.

On the golden jubilee of Indira Gandhi’s ascendance, let us reflect on this. Hereditary politics is like diabetes; it doesn’t kill by itself, but it aggravates every other known and unknown ailment. And the similarity doesn’t end there; there doesn’t seem to be any cure for hereditary politics as well, at least not in India.

Wednesday, January 27, 2016

Why the Nepali press is prejudiced against Madhesi movement

The Madhesi movement in Nepal now promises to enter what may turn out to be a dangerous as well as decisive phase. After nearly six months of agitations along the Indo-Nepal border and above fifty deaths in police firings, the agitators, especially the youth may turn to violence and their leaders may not be able to dissuade them. There is already some talk of marching to Kathmandu and confronting the government in a decisive faceoff. Nepal’s new constitution is an outcome of several years of negotiations among the different political groupings and is supposed to be celebrated according to some. But the Madhesis feel that the constitution gives them a raw deal as second class citizens. There is even talk of the hill people, particularly the upper castes among them treating the terai [plains] as their colony and a captive breadbasket. With the terai area responsible for above fifty per cent GDP and with a thirty per cent population, the terai populace is placed very strategically – in a landlocked Nepal, they can shut off the borders and create a calamitous lack of supplies as they have indeed already done. Whether India is complicit in this action along the borders is not very relevant at this stage. As the article in question demonstrates, it is the internal dynamic and the deeply entrenched pig-headedness of the privileged hill elite that is responsible for what seems a manageable mess at this point but may not remain so too long.

This article written by a foreign journalist who spent several months in Nepal unveils why we are not getting a true picture of the goings on across the border except some occasional scrappy murmurings in the Indian regional press. The Nepal media itself it seems is heavily dominated by the doggedly opinionated advocates of the hill elite. This is probably for the first time in many months that someone with a close view from the ground is reporting on Nepal. The article appeared in a Delhi-based monthly and not even a daily which only goes to show how oblivious of our immediate neighbours the Indian mainstream media can be.

Tuesday, January 26, 2016

Why a development mission dedicated to Bihar makes sense

by Ratnakar Tripathy   

The decision of Nitish Kumar, the Bihar CM to set up a Bihar Vikas Mission [Bihar Development Mission] has several implications, both political and governance related that deserve nation-wide attention. With the Bihar cabinet clearing the move on Monday 25th January, a new developmental dynamics is about to unfold in Bihar after a drift and relative torpor of five years during the second stint of Nitish [2010-2014]. The mission that seems like a fluid and period-bound version of a planning commission aims at fulfilling the election promises made by Nitish which went under the nomenclature ‘Saat Nishchay’, meaning seven resolves. As we all know the fate of electoral promises whether at the centre or the state level has been rather dismal allowing governments to go adrift soon after a victory till the next round of the polls. This is made possible by the vagueness and the broad nature of the promises made. Politicians avoid making clear-cut promises so they can safely steer clear of the answerability and the accountability that it entails. It is thus rather unusual and very welcome move for an Indian politician to base an entire mission on the specific promises made during the election speeches which really amounts the bold willingness to be pinned down to specifics in the coming months and years, 2016-2020 to be precise.
The seven resolves mentioned above include providing electricity to all habitations and villages of the state in the next two years, providing each household with a drinking water pipeline [thus far only a measly 3% are connected], constructing 172,000 toilets to get rid of open defecation, providing class 7 pass students the facility of loan of Rs.4 lakh with an interest subvention of 3%, setting up a venture capital fund of Rs.5,000 crore for young entrepreneurs, and free Wi-Fi facilities in colleges and universities. The seven resolves were made in response to Prime Minister Narendra Modi's special package of Rs 1.65 lakh crore including Rs 40,000 crore of previous packages announced during the 2015 elections. This is indeed a tall order for a state like Bihar with economic dead ends facing it wherever you look. But even the worst of sceptics and political enemies will have to admit that if nothing else Nitish has made it possible for them to make very pointed attacks in the days to come if the resolves fail or succeed only in part.
An interesting part of the Development Mission is the institutional setup headed by Nitish’s electoral advisor Prashant Kishor who will work on it directly under the CM and also hold a cabinet rank. Apart from the ministers and the bureaucrats, the setup will also seek regular inputs from around 1,500 policy experts, technical experts and researchers at three stages - to find solutions to problems, to find the resources to implement them, particularly domain experts, and finally to ensure timely execution. The administrative structure of the mission however ensures that the consultants will be guided by the higher ups who will receive inputs from the consultants and no more. The combination of political will, administrative drive and systematic knowledge inputs seems too good to be true. But the fact is it will take Bihar nothing less to move out of its development morass – with weak infrastructure, near nil industrial-entrepreneurial activity combined with the prevalence of small holdings and low productivity in the agro sector, every segment and sector in Bihar needs a massive and well-orchestrated push of the kind that only something like the Bihar Development Mission can give. The critics may argue that such moves are much too heavily statist but where is the choice? This is probably what Nitish meant when he claimed that the Gujarat model does not apply to a backward Bihar, even if one assumes that the so-called Gujarat model suited Gujarat itself.  

Nitish’s heightened political stature in recent times can make one forget that his party has two other allied it depends on – Lalu Prasad’s RJD and the Congress. Coalitions at the centre have their own limitations but a coalition in a state can be crippling. This is why the Mission has much political significance. Once the RJD and the Congress become part of the seven resolves the fear of tug of war and avoidable compromises over policy gets minimized. Prashant Kishor, the man in charge is notably not simply known for his strategic and logistical acumen but also his incredible ability to get along fabulously with both Lalu and the Congress. Remember, Kishor will along with his Bihar assignment also be assisting Punjab’a Amarinder Singh in the forthcoming elections in the state. All this also point towards the wider plans of the Mahagathbandhan [Grand Alliance], however tentative at the national level. 

The plight of Bihar and a majority of the Indian states require solutions that are unique to the region, rarely allowing the so-called developmental models and templates to be applied blindly. Additionally, even within a state the sub-regional variations can be mind boggling! This alone necessitates a federal slant in thinking as the need of the hour. The present regime at the centre if anything is even less sensitive than the earlier UPA regime to such nuances that have the potential of playing a decisive role in regional development. The unsaid aim of the Bihar Development Mission may thus also be to keep Bihar safe from the policy drift and indecision that has increasingly marked the centre for the past year and half and is becoming a matter of worry for a broad range of political hues and area experts.

Friday, January 22, 2016

Commentary: Start-up Sops

One must give full marks to BJP for being considerate. They force-feed us a plethora of terms in its inimitable election campaign style. But they keep changing the menu. Before and during the elections, ‘development’ and ‘black money’ were the terms that were stuffed down our throat. After the elections, it was ‘development’ all the way, apart from ‘cow-saving’ and ‘patriotism’. Now ‘start-up’ seems to be the new flavor for 2016. This article, very objectively and yet incisively, lays bare the minuscule infrastructure on which this mammoth hyperbole is being built. The so called ‘start-up India’ campaign is neither new, nor sufficient. And a host of other variables will have to fall meekly in place before it succeeds.