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.

Sunday, November 12, 2017

Arun Jaitley's complicity?

This is copied from

"For the past three weeks, a huge tussle is going on between the Enforcement Directorate (ED) and certain corrupt and pliant persons in the Finance Ministry under Minister Arun Jaitley. All the people in the corrupt ecosystem of Delhi are baying for the blood of ED Chief Karnal Singh and ED’s Joint Director Rajeshwar Singh after decisive action against former Finance Minister P Chidambaram in the Aircel-Maxis scam and Congress leader Ahmed Patel linked Sterling Biotech, caught in Rs.5000 crore bank frauds.
Prime Minister Modi speaks day in and day out on acting against corruption and such questionable calls by Jaitley is creating doubts in the minds of many.
Last week the ED officer Rajeshwar Singh approached Supreme Court for protection from anonymous complaints. ED Chief Karnal Singh wrote to Revenue Secretary Hasmukh Adhia against actions on frivolous complaintsagainst honest officers of the ED. It is reliably learnt that Adhia was forced to act on the anonymous complaints because of pressure exerted by Arun Jaitley. If this is true, then the Finance Minister Arun Jaitley must explain why.
Prime Minister Modi speaks day in and day out on acting against corruption and such questionable calls by Jaitley is creating doubts in the minds of many.
Further, it is reliably learnt that many Gujarat cadre Indian Administrative Service (IAS) and Indian Police Service (IPS) officers are trying to pull wool over Prime Minister Modi’s eyes on actions started against Ahmed Patel, a fellow Gujarati. These officers appear to be clever with Modi while maintaining their secret links with Ahmed Patel, who used to pull the strings till May 2014.

Central Bureau of Investigation (CBI) Director Alok Verma has now openly come outagainst Gujarat cadre IPS officer Rakesh Asthana, after his name was found in the monthly payout diaries seized from Sterling Biotech. Now CBI has registered two First Information Report (FIR)s against Sterling Biotech where the first FIR mentions the role of Ahmed Patel’s son-in-law Irfan for bribing accused Income Tax officers. The second FIR is for a Rs.5000 crores bank loan fraud. It is a mystery as to how Asthana continues to be in CBI, when hisname is found in the accused company’s bribe payment diaries! Moreover, the banks under Finance Ministry have not acted on the Rs.5000 crores fraud by Ahmed Patel’s companies.
Asthana who handled Agusta Westland case has now diluted it making only Air Force officers as accused. Till date Sonia Gandhi or Ahmed Patel, the key players in the Agusta Westlandcase was not questioned by CBI, though the Italian Court judgment detailed their role. PK Mishra, the Additional Principal Secretary in PMO is behind the illegal promotion of Asthana, even after CBI Director objected. PK Mishra is also a Gujarat cadre officer and controlling all senior appointments and promotions. This veteran officer was a close confidant of Sharad Pawar and served as Agricultural Secretary during UPA tenure. It is a known secret that PK Mishra plays his own games in the everyday tussle between Shiv Sena and BJP to protect the political mileage of his old boss Pawar. The question is why Mishra is protecting Asthana, whose name was found in Ahmed Patel linked company’s diaries. Do both these Gujarat cadre officers have secret deals with Ahmed Patel?
Back to Arun Jaitley. The ED is totally under Revenue Department (always looking for new sources of revenue) in the Ministry of Finance. ED summoned Chidambaram’s son Karti in two cases and till date, he has not yet appeared. Why has Karti not been arrested? Thebuck stops with Arun Jaitley.
Why is he keeping quiet while an honest, efficient officer Rajeshwar Singh is facing hardships for attaching Karti’s properties in Aircel Maxis scam? The Income Tax  Department (ITD) is also under Arun Jaitley. On Subramanian Swamy’s complaint Prime Minister Narendra Modi has ordered the ITD to probe into Chidambaram family’s illegal assets in 14 countries and Karti and his firms undeclared 21 foreign bank accounts under the new Black Money andBenami Act. Modi ordered in June 2017 and till date, the ITD too has not arrested Karti.
Mr. Jaitley has much to answer – his inactions in moving against Chidambaram, son Karti, Ahmed Patel and son-in-law Irfan"

Chidambaram's tentacles?

This is copied from

"The Supreme Court on Wednesday (Oct.25th, 2017) barred all “illegal and dubious” probes against Enforcement Directorate’s Joint Director and 2G cases Investigating Officer Rajeshwar Singh. In his petition, the ED officer said that some anonymous complaints were filed against him after he attached Karti Chidambaram’s bank accounts and properties in Aircel-Maxis scam. The Bench comprising of Justice J Chelameswar and Justice S Abdul Nazeer issued a notice to the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the Government of India to reply within three weeks and directed no action would be initiated against Rajeshwar Singh till Court’s approval.
Rajeshwar Singh’s advocate Gopal Sankaranarayanan highlighted the hardships faced by Rajeshwar Singh for the past five years. Supporting the petition, BJP leader and 2G cases petitioner Subramanian Swamy told the court that Rajeshwar Singh is an “honest officer” and Court should protect such honest officers targeted by corrupt politicians. Another petitioner Prashant Bhushan also supported the petition.

First, a set of complaints were registered against the ED officer in 2010-2011 when he summoned controversial lobbyist Nira Radia. The Supreme Court had trashed all the complaints and ensured protection to the investigating officer in 2011. During the UPA’s tenure, Chidambaram as Finance Minister did all dubious activities to shunt Rajeshwar Singh from ED and his attempts were failed after BJP leader Subramanian Swamy approached the Supreme Court. The officer joined ED in 2006 from UP Police Service and was absorbed in the ED by the Union Public Service Commission (UPSC). But in 2012, the Finance Ministry under Chidambaram rejected the absorption for some mysterious reasons. Rajeshwar won the case in Central Administrative Tribunal and all other forums. The Finance Ministry under Arun Jaitley and officers like the then Revenue Secretary Shaktikanta Das tried every trick in the book to shunt the officer from ED, who was reporting directly to the Supreme Court-monitored 2G and Aircel Maxis scam.
At one point, the Finance Ministry under Arun Jaitley lied in the Supreme Court that all probes in Aircel-Maxis probe were over and that Rajeshwar Singh should be transferred. In September 2014, on Swamy’s petition, Supreme Court ordered permanent absorptionof Rajeshwar Singh in three days. Even after the Supreme Court’s order, the Finance Ministry conducted a service case against the officer. His promotion as Joint Director wasdelayed for more than three years.
Rajeshwar Singh in his petition to the Revenue Secretary Hasmukh Adhia said that all these are frivolous complaints after he attached Karti Chidambaram’s properties. Recently after the attachment of Karti’s properties in Aircel-Maxis scam, all the enemies of Rajeshwar Singh ganged up and started filing anonymous complaints against. Their motive was to harass the officer and prevent his due promotion as Additional Director."

Supreme Court

The oft-quoted observation of Justice M.Patanjali Sastri in State of Madras vs V.G.Row, Union of India, and others that "Supreme Court has the role of a sentinel on the qui vive" has been perversely perceived by the present generation of judges. Scholarly Sastri meant that the court should eternally be on guard to protect citizens' rights. CJI Justice Dipak Misra seems to have mistaken it to mean that the court ought to jealously protect the interests of the judges.

How else can one interpret CJI's egregious violation of the first principle of natural justice that "no one shall be a judge in his own case" (Nemo judex in causa sua) ?

There is a pending petition of one Prasad Education Trust (PET) in the Supreme Court. It is up for hearing in the court presided over by the CJI. Meanwhile CBI arrested Justice I.M.Quddusi formerly of the Orissa High Court and some of his alleged co-conspirators on the allegation that they were conspiring to subvert justice by bribing judges in the PET case. So there is an allegation, however far fetched or truthful it may be, that the CJI and may be some other judges are sought to be compromised.

Senior advocates Prashant Bhushan and Kamini Jaiswal smelt blood in this development and started playing their card. We will visit this a little later. Before that let us see what the Bhushans think of Misras.

Shanti Bhushan who was the Law Minister during 1977-79 is an eminent lawyer and is Prashant Bhushan's father. In September, 2010 Shanti Bhushan presented a list of 16 judges who he alleged were probably corrupt in an open hearing in the Supreme Court and dared the court to punish him for contempt. (Needless to add , he was not punished lest further skeletons should stumble out of the cupboard.) The list was topped by Justice Ranganath Mishra who was the CJI during  1990-91. The present CJI Justice Dipak Misra is Ranganath Mishra's nephew.

Way back in the year 1979 when Dipak Misra was a practising lawyer, the Orissa government allotted to him 2 acres of land on lease. Dipak Misra, in order to be eligible for this lease, had falsely declared that he was not owning any land. This impropriety was highlighted by Shanti Bhushan in an article he wrote in in August 2017 to forestall the possible appointment of Justice Dipak Misra, the then second senior-most judge in the Supreme Court, as CJI . However, Misra took charge as CJI on August 27.

An NGO, Campaign for Judicial Accountability and Reforms (CJAR), filed a petition in the Supreme Court pleading for converting the CBI case in the Prasad Education Trust issue into a court-monitored SIT case. The case was argued by Prashant Bhushan pleading that the case be heard by a larger Bench but without the CJI since there was apparently an allegation against him. Subsequent to the admission of this petition, Kamini Jaiswal's petition seeking a similar remedy was mentioned in the court of Justice Jasti Chalameswar who is next only to CJI in seniority. Justice Chalameswar took cognisance of the seriousness of the issue and ruled that a 5-judge Bench should hear the case and that five senior-most judges would be on the Bench (this obviously includes the CJI also). The five senior-most judges are the CJI, Chalameswar, Ranjan Gogoi, M.B.Lokur and Kurian Joseph. Surprisingly, but significantly, the latter three judges do not figure in the controversial development so far. (It is interesting at least as an aside that Dipak Misra and Chalameswar were appointed to the Supreme Court on the same day, Oct 10, 2011.)

Chalameswar's decision to constitute a 5-judge Bench was over-ruled by a 5-judge Bench consisting of the CJI, Justices R.K.Agrawal, Arun Mishra , Amitava Roy and A.M.Khanwilkar. CJI also ruled that this 5-judge Bench will hear the petitions of Kamini Jaiswal and CJAR. This august Bench has held that the CJI is the master of roster and therefore he alone can decide which case would be taken up by which Bench. Such a scrupulous Bench which is respectful of court procedure is also expected to defer to principles of natural justice and keep the CJI away from a Bench which looks into issues involving him.

We can expect more fireworks from the Supreme Court in the near future. A recent cartoon regarding the American Congress says that what was meant to be an institution of checks and balances has become an institution of only checks (cheques). It is hoped that our Supreme Court will not reduce itself to be similarly portrayed. 

Wednesday, November 08, 2017

Rahul Gandhi's views

Rahul Gandhi has expressed his (?) views on Indian economy and Modi in a brief article titled "Modi's reforms have robbed India of its economic prowess" in the Financial Times.

He rightly concludes that fear might have brought Modi to power but it will never create jobs and make our country fit for the 21st century or fix India's institutions. He has quoted CMIE's finding that 1.5 million Indians have lost their jobs in the first four months of 2017. The cause for India's present economic malaise, according to Gandhi, is the double whammy of Demonetisation and GST. He has also said that China creates 50,000 jobs every day whereas India creates only 500.

Figures do not lie. Gandhi has done well in referring to these numbers. However, he gets hoist with his own petard when he complains about emergence of "Licence Raj" because GST Act gives unlimited powers to officials. Has he forgotten, or is he aware, that it was his great-grandfather Jawaharlal Nehru who created Licence Raj in India. Rajaji departed from the Congress complaining that Nehru was creating "Licence-Permit Raj" and emasculating the economy. Socialism and bureaucratic prowess are not Modi's creation.

Gandhi also contends that disenfranchised workers voted for Brexit, Trump and Modi. He blames China's dominance in manufacturing for the plight of workers in other countries. Gandhi implies, but does not admit, that UPA under Manmohan Singh could not protect Indian workers from the China effect. But narrating this as the reason for Modi's electoral victory in 2014 is only a partial story. UPA voted itself out by its culture of corruption which Modi brilliantly exposed in a manner that the electorate would swallow hook, line and sinker.

Gandhi faults increase in connectivity for the rise of Modi who is characterised as a democratically elected autocrat. Reason for Modi's success is identified correctly but it is strange to complain against connectivity. Rajiv Gandhi who played a major part in IT revolution in India would be appalled by Rahul Gandhi's complaint.

There is also the customary Congress conclusion that Modi has damaged India by converting anger created by joblessness and lack of economic opportunities into communal hatred. Whoever wrote the article could have done better.

Monday, November 06, 2017

Narendra Modi meets Karunanidhi

A courtesy call or a Machiavellian meet? Modi's surprise courtesy call on M.Karunanidhi on Nov 6th has a dramatic impact particularly because it was not programmed / announced in advance. Of course, Modi must have had it in mind even before coming to Chennai. Is this why Stalin rushed back to Chennai from Sharjah?

Modi not calling on Jayalalithaa when she was bed-ridden / kept in Apollo was another master-stroke. Had he visited her, questions will now be asked was he aware / part of the apparent conspiracy. Sometimes non-moves are the best moves we make.

Modi does not seem to go by others' advice or information.  He utilised the opportunity yesterday to know first hand 1) if MK is aware of what is happening around him or has become a vegetable like Jaya post-Apollo perhaps was and whether whatever happens to Kanimozhi would affect him or not and 2)whether Dayalu Ammal is really demented as her advocate claimed in the 2G case.

This tendency of Modi not to delegate and trust is normally dysfunctional, but somehow he manages to avoid its negative consequences.

Modi may be knowing that ADMK jokers cannot last long. Supporting the Congress cost the DMK  the prospect of gaining majority in the last general election. Aligning with BJP may keep Kanimozhi away from jail. If DMK  takes centre's (BJP's) help, some ADMK MLAs will decide not to oppose DMK coming to power now.  DMK and BJP  both will gain in the short term. Modi is trying to create a situation that will be beneficial to BJP / centre whether the present government in Chennai continues or falls. Odds I win, tails you lose?

Friday, November 03, 2017

Abhishek Manu Singhvi : Dr.Jekyll and Mr.Hyde?

November 2nd. A rainy day in Chennai. A working day too. Many competing programmes in the city including a conversation between  T.M.Krishna and Perumal Murugan around the same time at a venue less than a km away. So who would attend a talk on Democracy by Abhishek Manu Singhvi? Or so I thought.

The lecture at Srinivasa Sastri Hall on 'The institutional pillars of Indian democracy' by the well-known lawyer-cum-politician was surprisingly well-attended. Gopalkrishna Gandhi, Sriram Panchu and Suhrith Parthasarathy were among the audience.

It was raining cats and dogs outside. This was realised only after the speech was over when one had to return home. The lawyer was dissecting the democratic pillars with surgical precision inside the silent hall. Singhvi referred to 9 pillars , namely secularism, federalism, socialism, judiciary, press, CAG, army, Election Commission and Parliament. Executive was a notable omission perhaps due to want of time.

What enthused the listeners was the totally apolitical approach of the speaker who is capable of spewing venom in any discussion on a TV channel. He eschewed any needless reference to political parties and diligently marshalled his arguments to prove that India is not only the largest but also an exceptional democracy. Similar ex-colonial countries have drifted far away from democracy whereas India continues to be a nuanced democracy though appearing as a functional anarchy.

Gandhi and Nehru, according to Singhvi, ensured that democracy was deeply entrenched in India. Their sequential position, Gandhi first and Nehru later, placed the country in a goldilocks zone to accept, nurture and enhance the features of democracy. He deftly stayed away from the Nehru vs Sardar controversy.

Secularism is not a condescending gift to minorities, but a requirement for sustenance of a pluralistic society like ours. Federalism - or quasi-federalism as it exists in India- is a safety valve that quarantines local problems. Chief Minister of a state, any state, is 5 times as powerful as a central cabinet minister in terms of administrative and financial powers even though they rank pari-passu in governmental protocol. He explained how panchayati raj is coming out of the shackles of benamidars and is becoming reflective of empowerment of women and the marginalised.

Some politicians may be right-wing in non-economic matters but they too are left-wing in their espousal of socialism and concern for the poor and the downtrodden. India's right-wing is far to the left of American left-wing in economic philosophy. Singhvi conveniently ignored the fact that free India was not born as a secular or socialist Republic. These were latter-day political developments.

Delays in judicial appointment have been disabling timely delivery of justice in the country for a long period. Singhvi felt more political will is needed to redress this easily rectifiable issue. When Sriram Panchu tried to trap him on his optimism about judiciary by pointing out that we need a more unpliable judiciary when we have an autocratic leader (Modi?), Singhvi declined to talk about any political leader and without contextualising commented that Indian judiciary is robust most of the times.

Singhvi came down heavily on the media. Paid news, advertorials, incestuous relationship between owners and editors and concentration of ownership were the ills pointed out by him. In his opinion, Press Council of India has failed miserably and is as toothless as Medical Council of India or Bar Council.

CAG was mentioned just in passing. Army must be allowed to be anonymous. Election Commission is our pride and others' envy. Parliament can become more productive if only private members are allowed to initiate legislation, scope of whips is reduced and disruption of proceedings is dealt with an iron hand.

I was happy that the rains did not deter me from attending this lecture.