Tuesday, May 31, 2011

Two Giant Shows!

Book Review:-SUPERPOWER? The Amazing Race between China’s Hare and India’s Tortoise by Raghav Bahl {PENGUIN, ALLEN LANE, 2010, RS699}.

The two Asian giants-Indian and China are now undoubtedly the force to reckon with, after their long hibernation out of plundering colonial setbacks, these two nations are now retrieving their civilisational glory. With many commonness and ofcourse differences, relation between India-China stands on antagonistic construct…historically very close until the defiance of trust did by the China in 1962 that permanently fixed a big if in the psyche of Indians. Though with enhanced aspirations in new world order, both Indian and China are constructively heading to defy all the adverse obstinate impediments with wider framework to usher in a special kind of relationship primarily based on economic interests. Indeed it’s a way forward to cope with the swiftly changing geo-politics…time now is to revisit the history, politics, economics, culture of these two superpower with new insights but without burying the old prudence.

Raghav Bahl {Journalist, founder Network18 Media} did this superbly with his scintillating views and meticulous documentation that easily lead the readers to comprehensive realities of the race of dominance between the two powerful neighbors. This book, {SUPERPOWER? The Amazing Race between China’s Hare and India’s Tortoise} presents the narratives, how the India and China going to make history within their own set of rules. China’s monolithic political system and India’s vibrant democracy-both with their pros and cons are occupying a stout functional feet to show the resistance at global platform. Preface marks the distinction of Indian growth which is statistically sluggish than China’s achievements…title says it better, why don’t they get India?

Prologue of the book has demystifying hold, China and the Art of Escape Velocity? Napoleon’s quote which is an all time super remarks, vehemently define the China and its inclusion completely fit here. Paul Krugman’s The Myth of Asia’s Miracle: A Cautionary Fable gives an ample back up to consider on the Raghav’s insistence on knowing closely the intricacies of Chinese miracle vis-à-vis the leaders of world economy. Albeit it will be overestimation to anticipate by the assumptions that who’s going to be swift and finally on crest-China’s Hare or India’s Tortoise…here is need to be adequately judgmental.

Which way will history turn? Raghav is exactly right in reminding the readers that history unfolds over several decades, perhaps even in fractions of centuries and a search of perfect match of growth between these two countries will be an abrupt proposition. If China rebound post financial meltdown wit huge debt and vicious deflation side-by-side the weak demand and prices-India’s experience was much better with lower debt and modest inflation. It will be also worthwhile to know that India’s nominal GDP grew twice as fast as China’s for a few quarters-remarkably, it’s a first such experience in last three decades. So, the notion of India, who? Seems eroding with a positive world view for India story. Goldman Sach’s brainchild, BRIC {2001} strengthened the world views for India’s slot only next to U.S.A and China in the years ahead…this sounds realistic, even when the author himself acknowledge the many odds in the way but China is also not immune from adversities. For knowing the fragility of Chinese growth, reading of Premshankar Jha’s scripture like work on China “Managed Chaos “gives the appropriate scenic realities behind the China’s miraculous growth!

The Race Begins:- This is a catching nomenclature of a chapter inside the book which precisely relates to what the term exists between India and China. With big markets and sound indications, China and India have emerged as “shock observer” after the global financial meltdown-may be theirs ties will be shoot up atleast in economic arena but chances are feeble that China will give India any space within the ambit of its “Asian solidarity” block. This closeness of China naturally evolve the doubting stances over its intention but the aspiration for material growth is stronger than any other tantrums, so it’s possible that China will maintain a balancing ties with its most close competitor-India. Quotation of M.J.Akbar “The language of conflict has passed its sell by date. The poor want to be part of the Indian Rising Story” can be maximized here in Chinese context too.

A Hare on Steroids:- Chapter delves with the China’s downside of growth and its complex consumerism that yields many grave concern generally surpassed under the China’s complacent indicators. In next chapter “A Tortoise with new Muscle” inquisite the structural edge of India’s growth, here Stephan Rouch’s views gives sublime touch. The next chapter “Rule of Law, Rule by Law” searches the base of Chinese Law in “Patriotism”-infact, the Chinese state uses laws as policy instrument instead like western democracies where the principle of law believe as supreme and all public policy to be implemented within the law. Here, a missing link is quite evident from China’s own experiment with a liberal system in 1912, after the fall of Qing dynasty…today; China hardly carries even a tint of liberal vision of Sanayat Sen. Ahead of this, Raghav beautifully dwell with the India’s democratic experiments along with a full overview of Indian constitution. Reference of Bhagalpur incident of late 1980’s and Olga Tellis {1981, Bombay} protest against the BMC ruling of eviction for pavement dwellers present the uncomfortable face of our democracy. Next, a fine delineation has made over the China’s story of virtual justice and the state of corruption in both the country…byline is too much sultry-My Scam is better than your Scam!

Geo-politics:- Niall Ferguson’s brainchild CHINMERICA or Journalist Joshua Ramo’s coined term “Beijing Consensus” to draw the attention how China has maximized its stature and outgrew the “Washington Consensus” in investments, aid and trade to Africa appears too much apprehensive from western perspectives. China gave lease to such expectations by spending over $55billion during the 2010 Shanghai World Expo to remind the world that its economy remained unscratched from the grave financial recession of 2008. Undoubtedly, such showing of China and to an extant of India has rearranged the world of an Eagle {U.S.A}, a Dragon {China} and Elephant {India}.

Though this book adequately covers the India’s landmarks in foreign and strategic affairs but it scrimp few detailed take on China’s potential role in India-Pakistan &India-Nepal relation. China’s cold war era complexes are hardly fading away despite the all progress, it should be the India’s primary concern to leverage China for an all round collaboration because it’s alone China which tolls around half of India’s strategic attention. India know much better that the tag of “Sleeping Tiger” is things of past for China under the new ambition and feeble moral restraint.

Part three of the book, Entrepreneurs, Consumers and English speaking is naturally India-centric-remarks of George Soros on India “Your entrepreneurs have built world class companies which I simply don’t see in China…such views are common placed. India also has edge with demographic dividend and systemic transparency…the worst thing happened in China that its communal enterprise turned into cronyism. Still India is away from such large scale coercive methods to achieve quick and visible success…noticeable is the fact, era of Sanjay Gandhi never repeated in India unlike the Deng Xiaoping’s tracts that kept flowing relentlessly in China. China’s capitalism is complex and ambiguous; most of its enterprise is in state control or owned by the party organs and theirs command.

Part fourth of the book “Urbanization and Infrastructure” presents a sound comparison between India and China on the very important issues. Here China has lead with its single minded strategy on building infrastructure…India is now too following the big dreams with emphatic eagerness, the next few years will bring some level playing in this regard. The concluding part of the book revolves around “Social Infrastructure”-Raghav has succeeded to make his point that Chinese consumerism is on peak under the better equitable economic arrangement of China. The Indian case is of fifty-fifty market, which leading historian Ramchandra Guha said on India’s experiment with market reform…book ends with such conclusion.

At some front, China has edge but it’s grappling with many serious systemic flaws unlike the India where democracy is vibrant and freedom of action is inherent. Years ahead will be very vital for both the India and China… these two nations are now naturally placed to lead the world, if these two nations can collaborate in fresh spirits, theirs dominance will be enhanced many folds. More and more of understanding of Chinese policies are needed…work of Raghav Bahl is promising in this regard-addition of knowledge on China will be remain worthwhile from Indian perspectives…after all, we are now aspiring for new dimensions in our relationship.

Atul Kumar Thakur
May 31, 2011, Tuesday, New Delhi
Email: summertickets@gmail.com

Monday, May 23, 2011

The Unquiet Regulation

In India, RBI has an edge to regulate key financial markets-money markets, government securities market, credit market and forex market besides the usual role of a Central banker. This enables RBI to apply regulatory purview over the interconnected channels between banks and other financial sector entities-but with such unusual regulatory load, do RBI justify its every role as top authority from financial stability perspective? It’s hard to defy the growing overload on RBI-creation of Financial Sector Legislative Reform Council {FSLRC}&Financial Sector Development Council {FSDC} during the last Union Budget have even maximized the RBI’S overtures with Finance Ministry. The mammoth task and hyped expectations forced RBI Governor, D.Subbarao to accept the denial of additional arrival of debt market under the purview of RBI; he even laid stress for divulging the existing power from governor to respective committees on key policy decisions.

Out of conservatism and indeed with many insightful policy measures, RBI has ensured over the years a stable growth of Indian financial market albeit the shade on its autonomy and new circumstances in the post reform era have diminished its earlier touch on crucial policy matters. If RBI knows that despite hard efforts, still half of Indian population is unbanked, so the goal of financial inclusion is distant reality-on the other side, Finance Ministry works on popular temptations of growth instead considering inclusive and stable development of economy. Confrontations of RBI-Finance Ministry, especially in last few years have sharpened and it’s obviously an unfortunate outcome of Finance Minsitry’s intervention in day to day working of RBI. This is a worrying trend and must be checked out before the nerves of Indian financial market will be finally derailed from the esteemed regulation of RBI.

Following the incessant soft touch on credit policy and its ineffective impact on inflation in last few quarters, RBI has increased the Repo and Reverse Repo Rate by 50basis point and deregulated the Saving Bank Deposit Interest Rate. In a recent discussion paper on Saving Bank Deposit Interest Rate {RBI, April 2011}, the reason cited that monetary policy transmission has been suboptimal as it was unchanged since 2003 when the rate was last raised from 3.5% to 4%. As expected banking stocks promising negative past credit policy of RBI, hereafter atleast in short terms, investors will have to cope with the perplex scenarios.

Inflation is much bigger issue and RBI Governor, D.Subbarao sounds very rational when he said there is no quick-fix solution for inflation control in a rapidly growing economy like ours-in a complex economic matrix, it’s truly unreasonable to expect that only monetary policy will ease the pain of inflation. Those who are in political authorities have to realize sooner that inflation is not strictly the sole by-product of demand supply mismatch from the technical parameters of Whole sale Price Index{WPI}& Consumer Price Index{CPI}. The growing cohorts nexus among Corporate, Politicians, Government officials and relentless supply of unclean funds by many routes including suspicious Sovereign Wealth Fund, Participatory notes are making this nation reach in terms of obscene numbers of billionaires and leave majority lagging behind that itself narrates the story of our wounded economy.

Amidst the surging scams, Government/Regulators stand like mute spectators which mark the complete shift of democratic values. There uses to be time, when for a few lakhs rupees of wrong investment, Nehru’s son-in law and MP, Feroze Gandhi started a historic debate in the Lok Sabha [1958}on the state-owned Life Insurance Corporation’s investments in the dubious companies of a tainted industrialist, Haridas Mundhra {The Mundhra affair, Indian Express, December 12, 2008, Inder Malhotra}-though the financial charge was a few lakhs but Nehru’s response was in sharply contrast to what happens these days. He spoke of the “Majesty of Parliament” and instantly ordered a judicial inquiry by one of the most remarkable judges, M.C.Chagla. The inquiries findings led to the resignation of finance minister T.T.Krishnamachari and an exceptional Civil Servant, H.M.Patel. This was the first such case of high official’s sacking Indian democratic history but alas, similar couldn’t replicated here onward and what we witnessed the consistent erosion in democratic values with terrible misuse of power.

In such gloomy parochial atmosphere, it’s hardly surprising to see the working of regulators like SEBI&IRDA which runs like sovereign horse… without any clear mandate or essential /constructive intervention from government. G.Mohan Gopal, a former board member, SEBI has recently highlighted how the SEBI board abused powers to protect Chandrashekhar Bhave {Then Chairmen, SEBI} in IPO scam {2003-06}-it’s an open secret now how the Bhave has stagnated the highly promising Indian Mutual Fund Industry through many ambiguous regulatory changes. He scrapped the load regime that made this sector unhappening in terms of employment &further very unfortunate spate with the insurance regulator, IRDA over ULIP products finally forced the mutual fund business on fringe. Apart from jeopardizing the business, he outgrew the credible impression of fund management in India. Following the too much technical line, no big hope can be conceive from the new Chairmen of SEBI, U.K.Sinha…most of his announcement are equally ambiguous and unusual like predecessor and holds no bright prospects at all. Without any reversal on entry loads, he has plan to widen the geographical spread of mutual fund business, which is completely ironical…another big fatal, he is going to make by pushing the investments by foreign pension and retirement funds on the line of global markets. Ruling out a review on the asset qualities and nature of funds with an extra regulatory shortfalls, here in India, mutual funds’s ordeal is still seems far from being over.

Presently, Indian financial market is grappling with many awkward regulatory instances-a swift appropriation is worthwhile in some area by little more supplementation of regulatory measures and at other end, relaxation to let them work more freely and in accordance to situation instead of popular demands. As the entry of third generation private sector banks and many other reforms are on hold, government must collaborate with regulators much efficiently and without thinking of deviating political compulsions to forward ahead the Indian financial sector from this transition. Integrity and performance by the three regulatory arms of Indian finance-RBI, SEBI and IRDA will decide the overall growth of Indian economy in coming years. The unquiet regulation can lead to dooms, so it’s terrible and undeserving…an efficient regulation instead can further the broader task, so government should choose later and let make the ground clear for good and impartial business. But in meantime, we have to wait to see when and how the financial regulation will be streamlined…
Atul Kumar Thakur
Tuesday, May 23, 2011, New Delhi
Mail: summertickets@gmail.com