Roots of progress & Rules of respect

By: Mallikarjun R Bandyala

International oil prices have come down dramatically in recent past and continue to face pressure in commodity markets around the world. Aftermath of 2008 financial crisis, United States and other major economic players eased their respective monitory policies significantly in order to save their economies from a steep dive into a recession. Initially the monitory easing viewed and politically sold to citizens of those nations as jobs saving measures. Central banks led by Federal Reserve of US, coordinating with other main central banks around the world so far been successful in being able to avoid any of the funds crunch scenarios of 2008. Speculators looking for the next crash in stock markets will have to wait bit longer because it may never happen under current eased policy circumstances unless confidence erodes in the whole system. In other words, central banks standing by ready with a loaded bazooka of cash and happy to fire to rescue any misadventures in financial system. It also means you can do what ever you want to profit and get away with it. After all, current generation of ours have invented the new and mind bogglingly innovative “too big to fail”.

In a perfect world of demand and supply, more than half of US banks should have been bankrupt and were about to fade away from our memory by now. Well if you belong to that world, bad luck. Those banks not only survived the difficult times of financial crisis but have emerged as cash cows for stock market investors. Of course US attorney general has filed several cases of misconduct on these majors and made some of them to pay fines of a token value. Of course fines have run into millions of dollars but compared to the near death certainty they have faced, its peanuts. Those executives and directors should have been jail facing life terms. The attorney general has since been replaced. A poor guy who belonged to the traditional world of demand & supply and do the deed & do the time times.

If you are wondering where I am going with this, well that grand old traditional world of demand & supply is striking back at us. Falling commodity prices and negative rates for bank deposits are signaling the eminence of it. Switzerland has started charging bank deposits a fee. So depositors have to pay the money to store their cash in its vaults. The rules of capitalism that are tinkered with and interference with life and death cycle of corporations has come back to haunt us for many years to come. World economies, especially those termed developed looking down the barrel of years of deflation, low growth or no growth. World has missed the opportunity to cleanse itself of old guards in the financial systems. Bailouts have not only saved and protected the select wealthy, perhaps made them wealthier. It has effectively stopped new blood of entrepreneurs to step in and build next level of shockproof financial system. In other words we are stuck with the old guard with no real self or market led reform in the way they conduct their business.

So what is this world of demand & supply look like? It is exactly what we have learned in our textbooks in our school, hasn’t changed a bit and it’s pretty certain, won’t change in future either. If it’s so powerful then who dared to change it? And who sat ideally by helpless and who did go along with it? The most powerful nation on this planet has dared to tinker with it, why? Well, it could. Competing powers and trade partners have simply followed it. Printed or eased to the core of their economic balance sheets to keep the current economic theory of growth and demand. As we discussed, it’s fast becoming a hard sell when real growth in wages going backwards and business confidence is in decline. Put it simply some people in real investing world beginning to suspect the whole thing as rigged environment to get in. They are happy to sit on cash pile or invest only in real assets and wait for the Babylon to fall. The mega asset bubble may have a long time to run this time around as eased/printed money trying to find refuge in quality assets. Pundits are predicting a temporary asset bubble on its way. According to them, everything will be up except liquid cash.

I doesn’t have to end badly just because things were handled very poorly. They would have almost have escaped with no question marks on their past actions if they have put same effort and gave helping hand to developing and underdeveloped world. The new entrants into real world economy could have been the catalysts to spur demand for products and services. Instead the powers of the world are busy engaging in plotting on each other and working tirelessly for the opportunity to pull the rug under the feet of their opponents. The easing has led to currency wars and is well and truly is here and looking restlessly for its next victims. Is it going to be Japan? China? Or the master himself, The US!? Who is going to blink first? We don’t know the answer to it yet. Time will tell and we all will see it unfold.

Once dubbed as the messiah of hope, President Barak Obama, in his inaugural presidential speech promised not just to the citizens of US but also the rest of the world living in “forgotten corners of the world” a new kind of politics, rebooting relations with Russia and a new & meaningful engagement with Islamic world. I don’t have to give the progress updates on those promises as we all are watching it unfold on our TV screens now a days. What a disaster, but he did try to do few good things where he had the full control of the situation. He made US to produce its own energy sources and made it less dependent on (Islamic) Arab world. That means in future, less murders in the Arab world in the name of freedom and democracy, not at least on grand scale. Of course nobody can stop Arabs killing themselves, you see even messiah has limitations. His hands are tied down and probably told the real Arab spring of democracy will take his power away and threatens Saudi and other friendly royal families in the region. But Obama’s effort to make tiger agreeing to become a vegetarian has failed, naturally. With its own energy resources at home US war machine is happy to sit idly or further deteriorate the war it has created to let the Arab world slip into Stone Age. Well, it’s very popular with anti Islamic electorates in the west. Ask Tony Abbott of Australia; he will tell it all until cows come home. Politicians in the west found scapegoats in their own societies relating to the violence in the Middle East to distract wider electorate from developmental agenda and poll promises. West is also fast running out “civilisational stuff” to preach to the rest of the world. Some are engaged currency printing, overstepping their own capitalist rules and some selling thier dignity in “bazaar” by giving out wealthy the permanent recidenciy in their countries, all in the name of economic sustainment. I am not expecting any dramatic positive improvements in this regard. If you are an emerging nation, west is at bottom of a list to look for “values” side of the inspiration.

Why is it all relevant to us, the Indians? We are happy in our own little world getting on with what ever that comes in our way, why bother. Yes, its not relevant and we don’t have to bother if we want to continue as what we have been in last 75 years. Change is required only when you want to prove yourself to the rest of the world. India with its billion plus population moves ahead to reform its society and influence the rule setting at international level! It is an ideal scenario for not just to Indians but for the rest of the world too. Things are bit shaky internationally and we all are in unchartered waters lately as discussed. The question is, can we be that catalyst of change in world’s social, economic and political setup? Can we become a beacon of hope to the rest of the world? Do we have the courage, confidence and the strong character to create our own opportunity? Do we have what it takes to be “Vishwa Guru or Jagath Guru”?

Above exercise was necessary to develop the viewpoint to assess our social and political setup in India and weather we are up for the challenge. The recent general election has delivered a clear majority government. Cancelling out any future excuses of a political uncertainty. Market loved the notion that Nerendra Modi would have free hand to reform and revitalize an under achieving Indian economy. Mumbai stock exchange is probably the most loved darling of international fund managers after US markets, raked up more than 30% of gains YTD. There are enormous expectations on Modi’s government to deliver the perceived fruits sooner than later. Markets don’t behave like naïve and gullible voters; they are born with cutthroat approach and are less likely to forgive or forget when things don’t go according to the plan. The fiscal health of Indian corporate companies is an issue at this point of time. The top 500 companies trading in our top exchanges have combined total $114 billions in debt. You heard that right, yes more than 100 billion US dollars in debt; only a handful of those companies can actually raise equity meaningfully and manage their debts. What about rest of them? Bad luck, they either need to be sold to new owners or old promoters needs replacing. Does it make them look good? Probably not, but that’s how bad companies get make over in the ‘modern’ economic world. These figures are in public domain, available to all investors including international investors. Then why are they buying up shares of crappy companies? Well, investors or markets look ahead at least 12 -18 moths time. They eagerly waiting to see the ‘Indian messiah of hope”, Narendra Modi has arrived and he will turn India’s fortunes around. An immediate prospect of double digit GDP growth % may provide these companies much needed “sacred Ganges dip” which can clean them of past misdeeds and allow them to grow. The million-doller question is will it happen soon enough?

I don’t have exact figures to accuse those companies, but according to several media reports, most of the corporate rotten eggs are set up and run by personal whose only main investment is connections with the ruling elite. When you had ruling party’s blessings, your 10 lakh investment gets morphed into 10 crore. 10 rupee shares gets sold at 10 thousand rupees and state run banks take those remaining holdings at later value to give out loans to promoters. Because they are state owned banks, companies with the blessings of ruling elite, you don’t bother pay installments, all you may have to do is to sponsor election campaigns of that elite. Once elites settles into the office, government announces grand scheme of corporate loan waiver, all in the name of boosting economy, and pardons those loans as political situation allows. This is just one modes of operendi of modern India, aspiring to be an international player! We are rotten with in with out even any external financial crisis. So this rotten system is probably the biggest challenge awaits Modi’s government. Culprits are spread across party lines. Will BJP take hardstand against them? I don’t see any signals yet in that direction. Same old path of a public bank backing an unviable coal mine of Modi’s close aid Adani’s group in Austrarlia pointing to this end. I don’t think world economy has taken any special note on Modi and his “vision” yet. If it did, commodities should have become expensive not cheaper especially when he says he would build 100 smart cities. He earned the name “Feku” by his opponents in social media already but I desperately want him to prove his opponents wrong.

The BJP or Modi, is elected on the slogan of development. 200 days later India waking up to the RSS and its chief Mohan Bhagawat’s rethorics of a Hindu nation. A dramatic setup of events to question religious conversions, legalize it or illegalize it. Well, I am disappointed to see all these issues taking the national prominence than the expected ‘development’ agenda but finally happy to see the Hinduism is setting itself up to face some logical questions. A friend tweeted this morning that we Indians don’t believe in logic but in magic, that is why nation is full of Babas and Swamies. We even send them to Parliament. Nobody has the problem with that if entire planet earth covered by “BHARAT”. The problem Indians face is that, there are numerous nations out there as old as ours and as traditional as ours. Unfortunately detrimental to India that most of those nations and its populations are bound to and like to go by the logic.

Instead of going haywire on religious conversions, RSS and VHP who think as head faces of faith do not bother to introspect on unfair cast system of Hinduism that kept millions of Indians living as third class citizens. The centuries old setup has denied them the rights and opportunities that upper classes have enjoyed. I feel empathetic to the comments made by the Dalit CM of Bihar saying “all upper class Indians are from a foreign land” I understood why he said that but Media houses which are mostly run by upper classes were naturally successful in making him a national mockery. He doesn’t have to worry much, give it 100 more years all of them will end up back to foreign land anyway; Why do you fault adult citizens deciding to convert in seeking some equality and dignity in their communities? Hinduism, in my view has failed to evolve and console all of its believers. Not all of them found answers and meaning of life with it. The marginalisation of masses also kept this nation’s energy dormant for centuries. Not that i am the fan of any other particular religion, i go to Masjid, Church and Temple every day, that’s bit sarcastic to say but my point is that this monkey business of religion must be limited to a person or the family but not be a playing field of national politics. If VHP and RSS are serious on restoring some faith into their faith, start a national reconciliation with Dalits and other untouchables and make the nation, say official “sorry” and move on. As long as India and Indians don’t treat all of its masses as equal and contributors to nation’s future, we are going nowhere. Until then World can wait and basically ignore us for it and we can’t complain. You can argue that US was already powerful in sixties before it recognized its black population as equal. Well then give up the aspiration to become “Jagath Guru”. Fair comment? It’s an embarrassing and cringeworthy to educated liberals to see the nation that dreams to be the “teacher of the world” so far has failed to properly enquire and punish the perpetrators of the massacre of minorities that happened under the watch of both current ruling and opposition parties.

“Development” must be taken up first and rest can wait. We are on the cusp of a real multi polar world order. With trillion dollars plus foreign reserves, China is playing alternative to IMF and world bank institutions. It has initiated to start BRICKS bank recently. It has saved Argentina from the international banking vultures and will play the same role in helping Russia and its Ruble. The game can only get better and fairer from here on internationally. China is throwing a formidable challenge to the status quo and is determined to change it. What’s our role in it? Not much so far. So to make India ready for the business internationally, we need the leader with not just a grand vision but total commitment to transparency, accountability and most importantly not believe in “magic” and its advocates. Just not “swachha bharat” but also “Swaccha Dil” (clean heart) needs displaying when we have vulnerable lower classes and voiceless minorities in the country. Any traces of the attitudes of the past will not only make the task impossible but also make India miss the “opportunity of the century”. I call it as the opportunity of century because of the brewing international political situation. It has never been this favorable to India than any other times in the past. We have near unlimited access to western technologies; international markets are looking at us favorably than they ever been. International non-alignment political alienation is the thing of the past and geopolitics of the region making India as a more reliable partner to west than China for a “peaceful” world. What else an emerging nation needs!? The onus is on India to deliver. Not just for its poor and helpless but for the rest of the South Asia and beyond.

Source: Bandyala.Wordpress

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