Sunday, December 17, 2017

Takeaway from exit polls

The shelf-life of exit polls of Gujarat  elections gets over today. So, it is imperative that we make sense of the exit polls right now. Actual counting of votes scheduled tomorrow may confirm or contradict the exit poll findings to the delight or dismay of people depending on their political proclivities.

Rahul Gandhi spearheaded the Congress campaign. He has since become the President of the party. It is therefore unavoidable that he will gain respect or ridicule depending on the final results. Arrogating credit for victory and abdicating responsibility for defeat is an obsolete and unacceptable strategy.

22 years of BJP rule (misrule according to Rahul Gandhi) alongwith attendant anti-incumbency mood, immense inconvenience caused by demonetisation and trader-unfriendly implementation of GST should have dealt a death-blow to BJP and enabled a cakewalk for Congress. Disenchantment among Patidars , fusion among OBCs and dalits against BJP and poor performance by BJP in the local / panchayat elections preceding the Assembly elections were additional advantages to Congress.

Rahul Gandhi's reaction to credibility of exit polls is not known. But he commented that BJP has lost credibility among Gujarathis. It was also strange to hear him say that foundations of BJP in Gujarat are weak.

The political situation was ripe for Congress riding back to power. If Congress continues to fail at the hustings as told by the exit polls, it can only be interpreted as a consequence of fatally-flawed policy and approach of Rahulji. The 47-year old leader is not a newcomer to politics. He is misplaced as national leader of the main opposition party in the country. His metamorphosis as an energetic and persuasive leader during the Gujarat campaign was perhaps dubious.

This raises the question of tenability of Rahul Gandhi as President of Congress. It is obvious except to the most obsequious that he is in that position purely by accident of birth in a family. Congressmen need to accept the fact that the party is more important than any person. One may argue that only a Nehru-Gandhi can hold the party together in these perilous times. This argument is specious because the alternatives have not been tried for a long time. Continued reliance on the family will only aggravate the party's misery. A political party that totally depends on a family for its survival is fit only for dissolution.

If Rahul Gandhi relinquishes the party's presidency thrust on him by his mother, he will go down in history as a true democrat who placed party's interests (and country's interests because we need an effective opposition) above personal interests. Maybe this is too much to expect from a person brought up on the culture of entitlement. 

Monday, December 11, 2017

Indo-Pakistan dinner

Mrs and Mr Mani Shankar Shankar Aiyar hosted a dinner for their friends including Manmohan Singh, Gen.Deepak Kumar, Hamid Ansari, Khurshid Kasuri and the Pakistan High Commissioner. There is nothing wrong or criminal about this.

It is true that one does not expect a former prime minister or a retired army general or a former vice president to hobnob with diplomats of a country with whom we have strained relations. In particular, Manmohan Singh could have exercised better discretion and stayed away.

This ill-planned dinner meeting has made Narendra Modi see red. He is obviously trying to sway the Gujarat voters away from Congress taking advantage of this opportunity gifted to him by  Mani Shankar Aiyar who is a serial malapropist.

The Congress party queered the pitch further by denying the meeting altogether till confirmations of the meeting came from all directions. Manmohan Singh had no hesitation in confirming the dinner-meet though he lashed out at Modi for the latter's innuendo.Singh's explanation is funny:

“I reject the innuendos and falsehoods as I did not discuss Gujarat elections with anyone else at the dinner hosted by Mani Shankar Aiyar as alleged by Modi,” Singh said. “Nor was the Gujarat issue raised by anyone else present at the dinner. The discussion was confined to India-Pakistan relations.”

When he says "I did not discuss Gujarat elections with anyone else", does he mean  that he discussed with some and not anyone else? Or, did he discuss only with himself?

Friday, December 08, 2017

Neech Aadmi

Mani Shankar had (has) no control over his words. Shashi Tharoor had (has) no control over his actions. Manmohan Singh had complete control over his words and deeds. He said nothing and did nothing. Singh has now become aware that he has the freedom to speak but perhaps with Soniaji's prior permission.

Mani Shankar thought he was doing a great service to his party when he referred to Narendra Modi as "Neech kism ka aadmi". Poor fellow, he does not know the meanings of 'neech'. He is able to speak in Hindi fluently but without understanding what he is saying. Does a politician need any greater qualification than this ? He claims he thinks in English even while speaking in Hindi. Does he want us to believe that he thinks while talking? If this is the oral output after thinking, one wonders how his speeches will be when he does not think which being a politician is his default position.

He has offered to 'pay the price' in case the Congress does badly in Gujarat elections because of his neech statement. How do we isolate the consequences of this statement from the effects of campaigns by Rahulji , Hardik Patel etc.? We are of course foolish in asking this question because he has already said he is thinking in English.

I used to think low of Mani Shankar for his utterances. Now I realise how wrong I was. I must first ask him the meanings of his statements before coming to a conclusion.

Monday, December 04, 2017

Gujarat Elections: Prospects and Consequences

As we near the polling dates in Gujarat, suspense about the likely winner keeps mounting. Hardly a couple of months ago, the BJP winning the elections hands down was considered a cinch. There has since been a dramatic turnaround and it now looks more like an even contest.

What has changed the likely fortunes so drastically is the unexpected rejuvenation of Rahul Gandhi, the soon-to-be President of the Congress party. It remains to be seen whether reanimation of Rahul Gandhi will resuscitate the Congress in Gujarat.

It does not require a fortune-teller to predict that three results are possible. 1) A clear victory for BJP, 2) A narrow victory for either party, and 3) A clear victory for Congress. It is strange but true that straight contests are more unpredictable than multi-cornered contests. In Gujarat, we are witnessing essentially straight contests since parties like the AAP  have only a nominal presence.

Rahul Gandhi and Narendra Modi have both invested a lot of political capital in this election. If BJP is able to retain or increase its strength in the Assembly, it will embolden Modi and Amit Shah to introduce more economic reforms which could possibly result in more short-term economic pain for the people in India in anticipation of sustained long-term growth.

A clear majority for the Congress will make the party more vigorous nationally. In such an event, BJP will be politically constrained to rework its economic policy, place further economic reforms in the back-burner and present a populist Budget in February. This will impede economic growth.

A narrow victory for either party will be a morale-booster for the Congress party. If BJP fails to obtain a clear victory, the Congress party will attribute the result to Rahul Gandhi's acumen and popularity. If the fortunes of Congress continue to be in the dumps, EVMs and Modi's 'communalism' will get the blame.

Whatever be the electoral outcome, one hopes that both national parties will be mature enough to  recognise that this is only a state election and not a referendum on Modi's leadership or Rahul's political skills. But it is more likely that the result will be proclaimed as total vindication of the victorious party's leadership and complete rejection of the losing party's histrionics. In politics, electoral outcome is the only validating criterion for the parties.

Friday, December 01, 2017

Political gimmicks

Credibility of politicians in India (and in some other countries too) is already low. Politicians are working overtime to shame themselves even more. Elections enable these politicians to suddenly discover their "real identity".

Rahul Gandhi is a Hindu though he is a Catholic. He may be a Hindu in Gujarat, a Jain in Rajasthan, a Muslim in Kashmir and a Christian in Nagaland !

His Shiv bhakti is a proof that he is a Hindu. In fact, he is a 'jenaudhari'. He wears his sacred thread publicly when occasion demands. Publicly in the sense that he wears it over his shirt ! He claims that he, his family and Indira Gandhi are all Shiv bhakts. It is not known what he means by his family apart from his dog, Pidi.. Could it be the entire nation because 1) every politician claims entire nation is his family or 2) if he is a Shiv bhakt, there can be nobody who cannot claim to be one. It is a mystery why he does not wear Rudraksha mala like his grand mother, Indira Gandhi. Possibly, if he wears one, his mother would drive him away from home.

Modi is more sophisticated. When the nearby mosque starts its prayers, he goes silent. Rahul Gandhi has not learnt this trick. His mentors have not trained him adequately.

Tuesday, November 21, 2017

Credit Rating and outlook

Apart from rating an entity, credit rating agencies also provide an outlook for the rating. The outlook which is now expressed as positive, stable or negative is an indication of direction of rating in the foreseeable future. (Change in rating is technically known as rating migration.)

Thus, positive outlook is indicative that the rating is more likely to be revised upwards in the foreseeable future rather than being retained or downgraded. Similarly, negative outlook denotes the greater likelihood of downward revision. Stable outlook connotes the greater likelihood of the rating being retained when the periodic revision is due.

Sometimes we come across an entity (company or country) whose immediate or foreseeable future is likely to be different from the present but it is difficult to say whether it will be a positive development or negative development. In other words, change is likely but the direction of change is unpredictable. Such an outlook may better be called 'unstable'. So, credit rating agencies may assess the need for widening the basket of outlook by including 'unstable'.

Sunday, November 19, 2017

Moody's revised rating for India

When a borrowing company gets a better rating from a recognised credit rating institution, two consequences follow: 1) the lender, say the bank, reduces the rate of interest charged to the borrower because the borrower is now considered to be a bit less risky and 2) more lenders may come forward to lend to the borrower or the present lender(s) may get ready to be a little more liberal in the quantum of loans.

When international credit rating institutions upgrade the ratings of a country, the consequences are the same. How people react to such revisions in ratings depends on where they come from. A politician will react differently from an economist who in turn will react differently from an objective layperson.

It is helpful to understand the implied meaning of a rating or its revision. Moody's adopts 9 overall gradations in its rating scale. These are, in descending order of credit quality, Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C. In addition, to indicate marginal variations within a particular rating / symbol, numbers 1,2 and 3 are used as a suffix for ratings from Aa to Caa.

Thus, A is better than Baa in terms of credit quality (better the credit quality, lesser the attendant credit risk.) Similarly, Baa1 is of better credit quality than Baa2 which is better than Baa3. Though Baa1 immediately follows A3 and Baa2 immediately follows Baa1, the difference in credit quality between A3 and Baa1 is more than the difference between Baa1 and Baa2.

Baa is considered significant because any rating Baa3 and above (that is better) is supposed to signify that the rated entity (company or country) is worthy of being invested in. Thus, the ratings from Baa3 to Aaa are treated as 'investment grade'; in the other direction, Ba1 to C are considered as 'speclative grade' or 'junk grade'.

Credit rating is additionally qualified by what is called as 'outlook'. Outlook may be positive, stable or negative. These in turn indicate the probable direction in which the rating is likely to move in future. For instance, Baa3-positive means that the rating has reasonable chance of getting upgraded during next revision. This is only an indicator based on current expectations. Baa2 -stable means there is unlikely to be a revision in rating foreseeably.

Moody's have upgraded India's rating from Baa3 (lowest investment grade) positive to the immediate next better quality Baa2 stable. This is a big deal or not depending on one's political inclination.

Announcement of ratings is accompanied by release of rating rationale. This justificatory statement is nuanced enough to enable politicians to pick and choose certain sentences to support their parochial viewpoints.

The Congress party can quote the following:  "A material deterioration in fiscal metrics and the outlook for general government fiscal consolidation would put negative pressure on the rating. The rating could also face downward pressure if the health of the banking system deteriorated significantly or external vulnerability increased sharply."

However, BJP can highhlight the following: "The rating could face upward pressure if there were to be a material strengthening in fiscal metrics, combined with a strong and durable recovery of the investment cycle, probably supported by significant economic and institutional reforms. In particular, greater expectation of a sizeable and sustained reduction in the general government debt burden, through increased government revenues combined with a reduction in expenditures, would put positive pressure on the rating. Implementation of key pending reforms, including land and labor reforms, could put additional upward pressure on the rating."

The purpose of ratings of countries by credit rating agencies is to enable international investors to decide where to invest. Trivialising the process to score political brownie-points is only despicable political opportunism.