Wednesday, July 31, 2013

Ill-said, Mr.Chidambaram

It is unbecoming of any minister to condemn a constitutional authority. Mr.P.Chidambaram has gone on record criticising the former CAG, Mr.Vinod Rai. "I think the former CAG did considerable damage to the system.He exceeded his jurisdiction and exceeded his mandate."

1) Considerable damage to the system: Yes, the former CAG did disrupt the corrupt system masquerading as the cabinet. Is this condemnable? Was Vinod Rai not doing his constitutional duty?
2) Exceeding his jurisdiction and mandate: Was it beyond his jurisdiction to audit the accounts of ministries and departments? Was it beyond his mandate to probe manifestly corrupt deals? Does the minister expect the CAG to be a cheer-leader for government's misdoings?

Is it the Finance Minister's argument that telecom and coal scandals existed only in the imagination of the CAG? The minister is bullying the present CAG to 'behave or else".

If the minister honestly felt that the then CAG was exceeding his authority, should he not have taken up with the Supreme Court? What prevented him to seek parliamentary action against Vinod Rai? P.Chidambaram was derelict in performance of his constitutionally - mandated duties as he had failed to protect the constitution.

A bad workman blames his tools. A dishonest minister blames the CAG.

Saturday, July 27, 2013

Chairman's address at AGM: HUL and ITC

Differences between corporates are brought out clearly in addresses by their chairpersons to shareholders. Hindustan Unilever and ITC interestingly had their AGMs this year on the same day, 26th July. Similarity begins and ends there.

One was held in Mumbai and the other at Kolkata (ofcourse, you may blame the legal requirement that AGM should be held where Registered Offices are located for this West-East polarisation). HUL has no tag line adorning its logo. ITC's tag line is "Enduring Value". 'Enduring' is an over-used word in corporate vision / mission statements and logo tag lines. Apart from long-lasting, 'enduring' also means tolerating. 'Tolerating Value' obviously gives an unintended, pejorative meaning.

Press release of ITC Chairman's address carries Y C Deveshwar's picture. HUL's culture is too anonymous to permit Harish Manwani's picture in the release.

Manwani conveys precious little about company's operating performance (one may ask what is there to talk about?). This is probably because he is a non-executive Chairman unlike Deveshwar who is firmly in the saddle as an executive Chairman. He waxes eloquent on 'VUCA' (a military acronym for Volatility, Uncertainty, Complexity and Ambiguity) and also talks about the megatrends which in his view are digitisation, rise of the developing world and sustainability. Old hat, perhaps. HUL's new business model 'looks beyond shareholder value towards creating shared value'. One hopes this does not mean sacrificing minority shareholders' value to sustain value for Unilever. Deveshwar's address hints at this. Manwani argues that growth has to be responsible apart from being consistent, competitive and profitable.

What is the winning strategy in a VUCA world? Foresight and agility, Consumer centricity, Local thinking and Global acts (reversing the hackneyed paradigm 'think global, act local') and Attraction of great talent will do the trick. Is business so simple? 'Lifebuoy' soap is a constant refrain in every year's address as far as one remembers. Manwani also says, "Lifebuoy is more than a bar of soap". Yes, it is also literally a lifebuoy for HUL.

 Vijay Govindarajan and Chris Trimble convincingly argue that it is time for corporates to look beyond glocalisation and invest in Reverse Innovation. Manwani could have referred to this.

"Values-led " and "Purpose-driven" leadership also is a recurring theme for HUL. Manwani justifiably takes pride in the company's brands being agents at the forefront of social change. Manwani finally assures (warns?) that "at Unilever and at HUL, we have a clear point of view about where we need to go and how to get there". One hopes that HUL and its minority shareholders will not be forced to forgo their interests in favour of Unilever. Companies are apt to misuse the royalty payments tool.

Deveshwar straightaway talks about ITC's continued robust growth. The company's triple bottom line (financial, social and environmental)  performance is stressed at great length. ITC has been water positive for 11 consecutive years, carbon positive for 8 and solid waste recycling positive for 6 years. Harvard Business Review named YCD as the 7th best performing CEO in the world in early 2013.

Deveshwar leverages India's unsustainable Current Account Deficit to go hammer and tongs at royalty payments made to foreign companies. He advocates larger creation of intellectual property within the country. A typical motherhood statement nobody can contest. He bemoans the vice-like grip of foreign brands in Indian market. He makes a legitimate claim that ITC aspires to build world-class brands in India. "India is perhaps the only country in the developing world where domestic world-class cigarette brands (nurtured by ITC) have been able to outclass any foreign brand by a long margin."

ITC chairman has cleverly points out that royalty payments to foreign companies may be misused to reduce tax payments to Indian government. He is logical in pleading for similar tax deductions for domestic companies which are developing their own brands.

Deveshwar concludes by thanking the shareholders, a courtesy that Manwani is too professional to uphold!

Who is poor?

Project "Garibi Hatao" was undertaken in late sixties and early seventies with gusto. So, we may be excused if we suppose that there is no poverty in India now. Disappointingly, the Planning Commission keeps reminding us that there are still some poor people in India though their numbers are rapidly shrinking.

Consumption expenditure per capita of Rs.34 per day is enough to upgrade a city-dweller from poverty. When one can have a full meal for Re.1 near Jamma Masjid in Delhi, what and where is the problem? Why don't we lower the poverty bar to Re.1?

It is sad to hear Kapil Sibal and Digvijay Singh question Planning Commission's scholarly figures. How can they forget that our economist-PM is the Chairperson of the Planning Commission?

For now, Mr.Singh is maintaining his typical majestic silence. If the criticism against Planning Commission's 'erudite' figures becomes more shrill, we may expect him to reiterate his disassociation from the Commission of which he is only the chairperson. If he can so easily estrange himself from his own Cabinet, why not from the Commission? Keep it up, Mr.Prime Minister. As  the CNN IBN Hindu polls show, we continue to be in awe of you.

This is not done, Mr.Chidambaram

It is generally believed that P.Chidambaram is among the more competent and better-behaved ministers in the central cabinet. He is even tipped to be our next prime minister if the UPA is again returned to power. There are some who wish that he would become the prime minister but they want the UPA to lose. A typical example of self-contradictory hopes! So, if such a person does something inappropriate, we have reasons to be disappointed.

Indian Bank is opening a branch at Manamadurai today. Punjab National Bank is opening three branches at Tirupathur, Alangudi and Sivaganga today and tomorrow. Oriental Bank of Commerce also is opening a branch. All these branches are in Sivaganga district. All are inaugurated by the Hon.Finance Minister. He has similarly opened a large number of bank branches in the same district in the recent past.

There are two glaring irregularities here. Why should public sector banks bend over backwards to open disproportionately large number of branches in the minister's home town? Would they open these branches in Sivaganga if someone else is the Finance Minister? These banks are owned by shareholders and are accountable to them. As regulators, RBI and SEBI are expected to prevent this manifestly unethical practice.

Secondly, why is the minister regularly sparing his 'valuable time' to open bank branches? He can inaugurate a bank , say the upcoming Women's Bank. The idea of a Women's Bank may be hare-brained but its inauguration may merit the presence of FM. If the prime minister does not disapprove PC's action, may we expect the PM also to start opening bank branches and post offices in his home district in Punjab and, er, Assam?

Hung parliament?

CNN-IBN-Hindu polls indicate that elections if held now will throw up a hung parliament. Some concerned citizens hope that instead of parliament, parliamentarians should be hung! Such is the quality of politicians in the country now.

Friday, July 26, 2013

Amartya Bhagwati or Jagdish Sen?

Even as the bitter slugfest between the two Economics pundits continues, both are feeling the heat and are desirous of reaching a decent patch-up. That is why Amartya Babu has started saying that he was never against growth and Jagdish Bhagwati claims he is not supporting either Narendra Modi or Rahul Gandhi.

But the damage has been done. The whole world has been witness to how low great minds can stoop to score a point over a deemed adversary. Chandan Mitra has contributed his share to the entertainment seeking cancellation of Bharat Ratna award given to Amartya Sen. Sen could have gracefully ignored Mitra, but chose to observe that he would surrender the award if so asked by Vajpayee. Sen knows only too well that Vajpayee is unfortunately in no condition to apply his mind.

It in interesting but has been generally overlooked that Sen is now distancing himself from the methodology adopted for Food Security. There are obviously limits beyond which he will not stake his academic reputation at the altar of political opportunism.

Wednesday, July 24, 2013

Political trespass

In best of times, the line dividing economics and politics is imperceptibly thin. During surcharged times as at present, the distinction gets even more blurred and economists charge into political terrain as if it is their own. No wonder therefore that even a sensitive economist like Amartya Sen deems it perfectly in order to comment on prime ministerial fitness of aspirants. Narendra Modi is a no-no because he is not ' secular enough'. So there are degrees of secularism which an economist can measure and advise you. Sen certainly deserves the Nobel!

Rahul Gandhi? Sen cannot comment on him because he is not aware of the latter's political instincts! That Rahul is inexperienced, callow and politically inert is known to everyone including perhaps the famous economist. But apparently these qualities do not in limine disqualify him for prime ministership because he is adequately secular! Sen's sycophantic encomium that Rahul Gandhi was a keen student in England is laughable.

In economics, secular means 'in the long run'. It will be healthy if economists confine themselves to pontificating on secular trends in economic sense rather than religious sense. Equally perplexing is the publicised view of Sankaracharya of Kanchi Mutt that Modi should be our prime minister. Political India will suffer if theoretical economists and religious leaders freely wade into politics. 

Monday, July 22, 2013

Distress in Detroit

"The low end of the market is a gold-mine, not a ghost town, if your vantage point is Delhi instead of Detroit", say V.Govindarajan and Chris Trimble in their best-selling book "Reverse Innovation: Create far from home, Win everywhere". This prophetic observation stares us in the face as Detroit files for bankruptcy.

Municipalities going broke is not a big deal. But a motown with an impressive heritage is an odd candidate for Chapter 9 bankruptcy. What will happen to the pensions of ex-municipal employees? Debts in the range of $17 billion for a population of around 700,000 are a big burden. We may wait and see if there is a ripple effect tempting some more municipalities to seek insolvency protection. Times are dangerously uncertain.

It is a sobering thought that America is solvent only because its foreign commitments arising from imports and other transactions are met by printing more dollars which surprisingly are lapped up by rest of the world. The day the dollar bluff is called, America will become one big Detroit. Till then, Dollar is king and in America, we trust.

Sunday, July 07, 2013

Asiana Airlines Accident: jinxed by 7 ?

A Boeing 777 flight of Asiana Airlines, a South Korean airline crashed at San Francisco International airport on 6th July. It was already 7th July in S.Korea. (7th day of 7th month). The flight number was 214 (adding upto 7). There were 16 crew members. It was the 25th year of operation for the Airlines. It is worth noting that this was the first-ever fatal accident involving Boeing 777. Sadly, two passengers died and more than 190 out of 300 passengers were injured, some of them seriously.

Scans and scams

In one of his rare contacts with Manmohan Singh, Obama thanked the Indian prime minister for supporting the U S's surveillance of foreign nations and assured him, "Yes, we scan". This elicited a spontaneous and truthful response from Singh, "Yes, we scam". Obama was not sure whether he heard the prime minister correctly. He is still reviewing the tapes of the telephonic conversation.

Obama ordered enhanced surveillance of Indian government ministries. He was amazed at the extensive use of American tactics by the Indian government. In a most secret meeting of Sonia Gandhi's trusted advisers which also doubled up as a high-powered ministerial committee, it was decided to do an "operation twist" and increase the scope of 'QE'. The committee was eager to gather 'bipartisan support' so that filibustering by the prime minister and his economist-friends would be prevented.

President Obama did not know that operation twist means resorting to ordinance instead of parliamentary legislation, QE is an acronym for questionable expenditure which will ultimately go into politicians' coffers and bipartisan includes both Soniaji and Manmohanji. GOI soon issued the Food Ordinance. 

Friday, July 05, 2013

Finance Minister's influence on Indian banks

P.Chidambaram is known for his assertiveness and does not like any non-compliance to his diktat. CMDs of banks, atleast a vast majority of them, are known to be extremely faithful to Finance Ministry.

Public sector banks are now under pressure from PC to reduce their base rates and hence interest rates on loans. Though PC argues that reduction in interest rates will increase credit offtake, many studies have pointed out that interest rates are now not a deterrent to borrowers.

Public sector banks are listed in the stock market and their managements are supposed to protect the interests of all shareholders. Forcing them to reduce interest rates is not conducive to corporate governance. It is unfortunate that banks' regulator, RBI is becoming more subservient to the ministry.It is in a way SEBI's responsibility to ensure that interest of banks' shareholders is protected. But then SEBI also is controlled by tentacles of Finance Ministry.

Unless public sector banks are truly independent from governmental influence, professionalism will be absent. Though the government is certainly a shareholder, a major one at that, it has no right to dictate managerial decisions to banks. Let bank managements manage; don't make them puppets.

Thursday, July 04, 2013

Edward Snowden and Charudutt Deshpande

Everyone in the world knows Edward Snowden, everyone in India now knows Charudutt Deshpande. The U S government is hunting for the former; Tata Steel is alleged to have harassed the latter to death. Is there a parallel between the two?

Snowden threw open the modus operandi of American National Security Agency to the world at large. The government is peeved. The most charitable reason for NSA's snooping is to deter terrorist activity. The likes of Salman Khurshid may shamelessly twist facts and justify NSA's activity as just a "pattern analysis". We can expect the U S government to adequately reward Khurshid, but not his country. This is not diplomacy, but craven behaviour as pointed out by Brinda Karat. If the American government is convinced about legitimacy of NSA's activity, it would not be desperately looking for Snowden. The government seems to be tensely awaiting the 'gotcha' moment.

What about Tata Steel? It is alleged that ever since Forbes India magazine published an article on the company's present predicament Tata Steel has been paranoid on who had 'leaked' corporate information to the magazine. (I had gone through the article but was not sensitive enough to spot any unsavoury information.) The company allegedly found the Chief of Corporate Communications and PR, Charudutt Deshpande 'responsible' for outing the information. According to his friends, Deshpande was a responsible professional who would not 'betray' his company. Deshpande reportedly became very despondent over the company's alleged snooping on him even after his resignation. Did he end his life because of Tata Steel's strong-arm methods?