Vijay Deshpande

With profound grief we inform about the sudden demise of Vijay Deshpande (63). He left for heavenly abode on August 15, 2011.

He leaves behind several articles for his readers on various political and economic issues with focus on strategy and value management. His timely and incisive articles, published on his blog and online news journals, will be truly missed.

We thank you for your support and feedback from time to time. Please pray for the departed soul.

Issued By
Pallavi (Wife), Priyanka (Daughter) and Payod (Son)

Global Wake-up Call from Standard & Poor

Global Wake-up Call from Standard & Poor

 

At the outset one must admire the professionalism, courage and conviction of S & P to stand firm on their decision to down grade credit rating of USA notwithstanding a $ 2 trillion error in calculations. The decision was not just reflecting the unbridled accumulation of debts but the ability of the government and Congress to handle the situation and take decisions on such a crucial issue of reduction in budget deficits and reduction in long term piling up of debts.

We will swim together or sink together?

By knocking one ‘A’ off the creditworthiness of USA, the rating agency has sent a grim warning to the global community that the time has come for tightening of belts all over the world. This means Europe grappling with economic crisis in Portugal, Italy, Ireland, Greece and Spain must find long term solutions to the issues thrown up by amalgamation of the European Countries into a Union. The economic mismatch of performances of these members has resulted in a drag on other stronger members like Germany and France. Any bailouts for them can be only temporary measures to ward off defaults. But sooner or later this has to impact their social order. And one can be sure that every other year one of these members could be a potential candidate for bailout putting strains on stronger economies. So a viable and sustainable model in Europe is the need of the day keeping experience of close to twenty years as a Union. Unfortunately, some politicians in Europe see the credit rating agencies as their sworn enemies!

USA – a Developing Country?

On this backdrop comes the scenario of a potential technical default from USA which resulted in a strong measure from S & P knocking off the credit rating from AAA to AA+ which was unchanged since 1941. So in that sense it is history in making. The time has come for remembering old adage ‘Physician, heal thyself”. Earlier USA & the European countries dictated developing countries through World Bank and IMF on economic reforms with conditionality attached to the loans. The reforms were generally aimed to get better entry into developing markets and friendly tariff regimes. Reduction in deficit financing was always one of the key parameter to comply. I remember President Nyerere of Tanzania had the courage to have thrown out IMF team due to such conditionality imposed during late seventies and early eighties. The developing countries always needed and need ability to have access to more finances than what they can save. This is where deficit financing plays a crucial role to bridge the gap, if a country has to develop in spite of lack of resources. But deficit financing has to be capped on the basis of ability to generate resources in medium and long term so that the loans can be serviced without defaults. Very strangely, USA today is in no different situation than a developing country, looking to live on future incomes and wanting no caps to print money!

Enforce the Economic Doctrine

Now with Europe and USA in financial turmoil, the doctrine has to be rigidly enforced at home by these countries before looking out. Ability of USA to print any amount of money by simply floating bonds, which would be picked up by China and others, has now been questioned as well as curtailed. China has also down graded US bonds with a holding of about 8% of US debts. Today US is in the company of Belgium and New Zealand with AA+ rating. Other rating agencies have not yet reacted but obviously would watch out the way things unfold with policy initiatives and specific measures in the USA. Obama administration has to work really hard to get that rating back before 2012 presidential election bid.

Resetting the Global Economic Order

S&P’s decision has sent ripples across the world and the stock markets are yet to find their bottoms. Close to a Trillion dollars have been lost in just a few days on the stock markets. US administration should have handled the rating review with S&P more professionally and saved the day for the world. Some of the European countries struggling in the financial crisis like Spain and Italy still enjoy good rating and are on the verge of being downgraded. I hope many more bold decisions will come from the rating agencies to reset the economic order into realistic framework. The agencies should remember that in spite of best of credit ratings Lehman Brothers and others pulled down the world overnight. It will do no good to world economic order to keep high ratings for potentially weak economies. Time has come for rating agencies to do their homework thoroughly and revamp the system.

Challenge to Obama

US has become uncompetitive in its pursuit of growth at any cost. There is no propensity to save. USA is living on savings of other countries like China and even India who keep buying their treasury bonds to finance the US deficit. The economic space of USA has shrunk in last 50 years with manufacturing close to vanishing. The avenues for generating national savings have shrunk. Encouraging savings has to be a part of the solution. Even though the credit rating is cut down at sovereign level, it has the associated costs percolating down to common man as well as the corporate levels.

If the proportion of debts to present earning capacity does not change at individual, corporate and government levels, the tendency would be to live on future earnings only without intrinsic strengths. The collapse of 2008 had the same message. This is the fundamental issue for survival of USA as a giant economic superpower.

Riches of USA coupled with self assigned ability to keep printing money have sustained it as most powerful economy of the world for a century. However, the world is changing fast. The politicians of all shades and hues in Europe and USA should read the writing on the wall. Can Obama break from the past and make the difference to meet challenges to sustain the country’s status?

Challenge to Obama administration has assumed huge proportions as under no other Presidency, USA ever lost its credit rating. Obama’s personal rating approval among the public is likely to drop to lowest level. Obama has been struggling both on domestic and international fronts with nothing much to write home about. Exception has been Osama Bin Laden. Retreat from Afghanistan is likely to be hastened leaving a strategic vacuum in the region. Foreign policy page is almost blank.

So the challenge to Obama is to reassemble his economic team to chalk out a specific plan to address long term and short term issues and assure the world beyond words that US has learnt a lesson to set its house in order and prepare her people to shake off laid back approach to life of living on tomorrow and accept some tough decisions. Hope he is able to convince his fellow Republican Congressmen!

I hope he repeats his famous words “Yes, we can.” And if he can, may be European leaders can follow. Remember, China is watching closely a USA minus one A!

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative

Pune- 411021

August 10, 2011

Visit my blogs on www.strami.com

Talking About Dementia, Yeddyurappa and Lok Pal Bill

Talking about Dementia, Yeddyurappa and Lokpal Bill

Genius of Kalmadi

Till now, it has been very common for any politician or a VIP fearing arrest or behind the bars to get admitted to hospital for chest pain or cardiac problems etc so as to either buy time or get sympathetic consideration for a bail. Now thanks to the genius of Suresh Kalmadi, there is a new way out of not just jail but out of any successful prosecution and that is dementia. Suresh Kalmadi, behind the bars for three months on account of CWG scam, wanted to be out of jail to attend parliament session. Having failed that attempt, now he has claimed loss of memory and tests are underway to get him declared a victim of dementia. This will enable to him to conveniently delete the memory files not suitable to him and walk past the prosecution to freedom. I am sure A.Raja and Kanimozhi may be secretly admiring Kalmadi. But age is on the side of Kalmadi!

Kalmadi was absolutely fit to participate in parliament session if he was permitted. He was fit to participate in Olympics in China just before arrest. As a parliamentarian Kalmadi surely knows the basics of qualifications required to represent people under the Indian Constitution. If he is medically certified to be suffering from dementia for last 4 years as claimed, then he stands to be disqualified for holding any position or public office. This means political suicide. Will Kalmadi gamble for such a heavy price for getting out of the mess he is in? Such attempts look more acceptable in Bollywood movies or a television serial in reel life but very rare in real life.

As is generally known it is relatively easy to get medical certificates of choice. But now that his case has been referred to AIIMS, New Delhi, we pray for his well being and hope that he is not suffering from dementia.

And as I write this piece, Kalmadi has just denied that he has dementia and told that he was taken to AIIMS for check up of heart problem! This is another lie to cover up the goof up, obviously after being alerted about the suicidal move. So the chance is that if he is let free on any ground, we still will have a member of parliament suffering from dementia publicly declared and best hidden from the nation. That would be a great misery heaped on the people. Hope the prosecution and judiciary is keeping vigil to ensure good health as well as justice for Mr.Kalmadi. That will be in the larger interest of the nation.

Noble Yeddiyurappa

On the other hand we have B.S.Yeddyurappa, CM of Karnataka, who has refused to quit even after indictment by Lok Ayukta in mining scam. He has also refused to fall in line with BJP top brass. Ever since he has been in power, he has been at the centre of controversy relating to misuse of authority and corruption. His stance has been “he may be morally wrong but was legally right” while defending favors to family members. Does this imply that courts have no jurisdiction on elements of morality when it comes to passing a judgment?

Yeddyurappa has projected himself to be always on the right side and ignored public rebuke from all quarters. One TV channel has quoted him saying that he should be given Nobel Prize for reducing illegal mining in Karnataka. Such self exaltation to height of morality, ignoring the mud sticking all over, speaks of the poor state of mind while making overall assessment of the public mood as well as ire on issues of corruption.

Test of BJP

Yeddyurappa may still hold political clout to have his own say in the party, but that will reflect not his strengths but the weaknesses of BJP who can not implement its own decision to make change in leadership in Karnataka State. BJP will prove to be wrong both on moral as well legal grounds if it fails to respond to Lok Ayukta’s indictment. It can not fight against corruption and Lok Pal Bill in forthcoming session as it will have no moral right having failed to sack Yeddyurappa or accepting his conditions for quitting as CM.

What happens to the report of the Lok Ayukta on illegal mining indicting Yeddyurappa and Reddy brothers amongst whole lot of politicians and bureaucrats etc? Yeddyurappa wants to ensure that there are no legal proceedings against him on the basis of the report and therefore wants to have legal / constitutional insurance cover.

Toothless Lok Pal Bill

UPA is introducing the Lok Pal Bill approved by the cabinet in this monsoon session of the parliament. It has no teeth. It has no provision for state level Lok Ayuktas. Just imagine if Santosh Hegde was not there as Lok Ayukta in Karnataka, the illegal mining scam would have never come out. That is precisely what UPA government wants so that scams can go on under the soft belly of Lok Pal Act when it is passed. All the bureaucrats except Group “A” officers will be out of ambit of the Lok Pal as if they are the only corrupt lot. It is the politicians and the senior bureaucrats who have shown in last one year what price the nation has to pay for their conspiracies and scam oriented thinking and actions. And they are the ones just being protected by keeping out of Lok Pal Bill and let pliable CBI do the boxing with them with velvet gloves.

UPA government has shown scant respect for morality or even the spirit of legality in its conduct on issues of corruption. Next few days will unfold if BJP falls in same category or they have the courage to stand out for their convictions.

Morality v/s Legality

Kalmadi may be morally wrong to hide behind possible undeclared dementia (technical term used may be different), even though he has denied it publicly. But he may be right legally and walk out of the jail in spite of being the master mind of CWG scam. Yeddyurappa now may be morally right, as he claims, but legally wrong and yet manage to get off the hook by hook or crook. Either way there is no accountability to public.

There have been many cases in recent past that accused have been set free for lack of adequate home work by prosecution or thin line dividing legality and morality.

Where does legality end and morality begin in politics and public life? Does morality have any place whatsoever in governance of the nation? I don’t think so. It is buried by the so called “elected representatives of the people”. It is time for our constitutional experts to read the fine prints and bring the rightful place for morality. The thin line dividing the two is threatening the moral fabric of the nation. The tragedy is that there is no concern even for legality. But who will bell the cat? If Anna fails this time it will be tragic and may be we lose another 20-30 years for national awakening which is over due.

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune 411021

July 29, 2011

Visit my blogs on: www.strami.com

Where Does the Buck Stop?

Where Does the Buck Stop?

 

 

 

 

 

In last few weeks, several important developments have taken place, some of which will have long term impact on Indian democracy. One is Anna Hazare’s Civil Society meeting a deadlock over Lokpal Bill with Kapil Sibal and his team rising as was expected the prospects of failure. (Read my blog “Hidden Agenda to Derail Anti Corruption Drive”.) The government team has given very clear intention of staying away from the main issues of corruption and bringing about a toothless bill and an institution which they can flog about to take credit for passing a Lokpal Bill which has been on the back burner for several decades.

While the discussions are still underway by bringing in loop all the political parties, one thing is clear that no politician wants to be held accountable. It is sad that the government team is hiding behind the façade of “democratic norms” and “supremacy of parliament” while presiding over the most corrupt administration ever. The mind boggling scandals are still erupting everyday. The cabinet ministers and secretaries themselves are engineering the frauds on the nation right under the nose of the prime minister.

Dayanidhi Maran, Union Textile Minister and former Telecom Minister had to quit as CBI reported to the Supreme Court on his involvement in 2G Scam during UPA I. We also read about Murli Deora, Union Minister for Corporate Affairs, offering to resign without stating explicit reasons but in anticipation of storm ahead for his role as Petroleum Minister. V.K.Sibal, Director General of Hydrocarbons, has been under scanner for favoring a private sector company and things will soon fall in place.

With 2 G scam stretching back to UPA I and Dayanidhi Maran, there is clamor for resignation of P. Chidambaram, then Finance Minister. Chidambaram did say as home minister “The buck stops here…”, but we do not know if the same can be applied for Chidambaram the finance minister. The buck never stops at Prime Minister and certainly not at Congress President Sonia Gandhi. So where does it go? Where is the accountability of the elected representatives sent by common man to rule the nation and uphold the supremacy of the parliament? When the fence starts eating the grass the fence has to be changed. That is what Civil Society and common man is just seeking.

Another important issue is the constitution of a SIT by the Supreme Court to investigate the issue of black money stashed abroad reflecting directly on lack of interest shown by the UPA II government in tackling the same. The Supreme Court is unhappy about non-disclosure of names of account holders in Swiss bank hiding behind the bilateral treaty. No doubt one can expect the government to challenge the jurisdiction the Supreme Court, but public interest and RTI have to be upheld. The government seems to have no intention to go overboard to tackle issue of black money stashed overseas. At best the strategy of toothless laws could be all they may have to offer under pressure.

There is a need to bring in higher judiciary also under some umbrella for accountability. This is accentuated by the scanner on former CJI K.G. Balakrishnan.

One must give due credit to the CAG, Vinod Rai, for his upright stances on all the exposures for the scams without fear or favor. The government tried to rubbish his claims and even PM objected to his press conference. He has withstood all the pressures and shown to the world that a constitutional authority can be independent and do justice to the task assigned. He is not elected representative of the people to be “supreme”. And yet he is the protector of their interests. With so many scams at highest levels exposed he has set new benchmarks in performance. There are many such upright officers of high integrity in the government and therefore there is no reason why we can not have effective Lok Pal or Lok Ayuktas.

Under these circumstances, the government must try to reconcile and make the bill stringent so that higher as well as even lower levels of politicians and bureaucrats feel the need for accountability. The corruption is all pervasive and it is no prerogative of any specific levels. While the prime minister may have the privileges on issues like national security and select fields, there is a need to correct the system of ownership of responsibility for a cabinet minister’s actions or lack of it. Nation can not suffer because of lack of supervision at highest levels in the name of delegation of authority.

It is just a mockery and denial of the facts visible to the whole world. If Anna Hazare sits on fast on August 16, 2011again, it will be a sad day as our parliament (elected representatives) would have failed to read the writing on the wall and would be driving the nation and particularly younger generation to wake up the politicians before the next general elections. Is it just possible that no corrupt sitting MP/ MLA would be returned to the house!!! The awareness has spread through social networking like wild fire and politicians can feel the heat later if not sooner. And the padyatras undertaken by politicians in next 2 years will ensure awareness amongst not so net savvy vote banks that can swing the mood of the electorate. Indian electorate has never adopted violent means to demonstrate. They have always chosen to surprise the political heavyweights by decimating them.

I can see a hung parliament or third front emerging at national level. UPA may lose because of its short sighted policies and BJP may not gain for the same reason. I can see that buck sneaking out of the corridors of powers and stopping at, you guessed it right, the people who elect the representatives to parliament / assemblies. May good sense prevail!

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune 411021

July 8, 2011

Visit my blogs on www. strami.com

Jail No. 6, Tihar Jail….

Jail No. 6,  Tihar Jail…..

A new address is very fast assuming importance next only to 10 Janpath or 7, Race Course Road in New Delhi. And that is Jail No. 6, Tihar Jail. Last week Kanimozhi, Member of Rajya Sabha and daughter of DMK Chief M.Karunanidhi, found her new home there. With Kalmadi & A.Raja already senior residents of the “colony”, Kanimozhi is not alone. There are other senior Bureaucrats, former chairman of PSU etc for the elite company. Only if they were allowed to talk to each other they could find some solace. DMK chief has charged Congress with politics of vendetta. I hope it is not so this time at least. If a relatively minority shareholder has attended all the board meetings and has been the brain behind Kalaignar TV’s operations, there can be no alibi like the ones being offered feigning ignorance. Hope law is allowed to take its course. And with Supreme Court monitoring 2 G scam one can hope for justice to prevail both for the exchequer as well as the likes of Kanimozhi, A. Raja and Kalmadi. Hope they don’t get acquitted at the cost of bureaucrats.

Stability of UPA II?

Congress has distanced from DMK on 2 G scam and DMK is in a jam of staying in UPA or quitting. Either way it is going to tough time for DMK for next five years. What will be the political ramifications of split with DMK for UPA II? Can one count on stability? Since no one wants to go to general elections there is a good possibility of Congress being able to muster support of others from outside to serve out the remaining term. It could mean a set back for what ever little legal. economic and political reforms have been work in progress.

UPA’s Loss is not BJP’s Gain

Recent assembly elections have shown that BJP is slipping up on all counts. They have tremendous opportunity to gear up for 2014 elections provided they are determined not to indulge in political hara-kiri. While in Karnataka, the governor is looking more like resident congress representative with responsibility to oust BJP government, the overall handling of situation leaves public frustrated at lack of governance and indulgence only on political one-up-manship. BJP must have strength enough to call for snap polls and get fresh mandate from people because the performance has not been anything worthwhile. The corruption must be nipped whether in Congress, DMK or BJP. The nation is fed up of the public loot assuming disastrous proportions as shown by A.Raja. Congress emphasized that corruption is not the issue for defeat of DMK in Tamil Nadu. But public has delivered the blow precisely for the same issue. No political party can indulge in such self consolation if not diversionary tactics.

Supremacy of Prime Minister

Public is expecting, against all the odds, that Supreme Court will give landmark judgment in 2G scam to ensure that scamsters get the punishment due to them. Congress will go all out to ensure isolation of 10, Janpath and 7, Race Course Road from any negative developments related to 2G scam. The prime minister has the responsibility to ensure that the ministers function within the overall framework and guidance set out by policies of the government. If A.Raja , Suresh Kalmadi or Kanimozhi cross the line it is prime minister’s responsibility to set the house right instead of pointing fingers after the damage is done. Some one must take the responsibility for non-compliance with policies and ethics by ministers and members of government. And prime minister is supposed to be such a custodian. Errant ministers or members should have been shown the way out of the government before damage is done. Politically convenient performance, Non performance or negligence resulting in losses to the national exchequer at such high levels can not set a new benchmark for future for the highest level. Supremacy of prime minister which has become secondary must be restored.

Adarsh scam of Mumbai has lot of political skeletons waiting to tumble out. It is time the government ministries stop losing files to protect the powerful. Congress will ensure that their leaders are well protected. It is only due to intervention of Supreme Court that high profile arrests have been possible in 2G and CWG scams. The nation awaits similar actions in Adarsh case.

Reverse License Raj?

Over six decades the political system has exploited the corporates encouraging corruption to get licenses, and manage the inspector raj. So if corruption has to be reduced it is not enough to go after corporates. Political class must be accountable as representatives of people. Every politician’s declared assets have multiplied. One does not know about their undeclared wealth. People have not given them licenses to make money at the cost of the nation.

Set New Benchmarks

Let us hope the 2 G, CWG and Adarsh scam judgments lead to drastic overall of measures for public accountability from prime minister downwards. The judgments may also aim at cleansing system with exemplary punishments and reprimands. The judgment should set bench mark deterrents to deal effectively with the political system out to subvert the nation’s resources.

Till then, may be Tihar should plan for expansion of their capacities to include J class or business class residents.

Vijay M. Deshpande,

Corporate Advisor,

Strategic Management Initiative,

Pune -411021

May 22, 2011

Visit my blogs on www.strami.com

Re-Discovery of Pakistan

Re-Discovery of Pakistan

There were days when map of Pakistan could not be drawn without reference to India as East & West Pakistan separated by India was the entity called Pakistan. Bangladesh liberation war changed all that in 1971. This provided leftover Pakistan an opportunity to mull over the events of previous quarter century of independence and decide its course for future prosperity. Pakistan had been unshackled from reference to Indian boundaries but the obsession with India did not go. Rather it increased to the point of becoming “raison d’etre” for survival of military of Pakistan. Punishing India for creation of Bangla Desh and humiliation of defeat in war became the drivers for strategic engagement with rest of the world leading to Kargil misadventure in 1999.

Lost Battles as well Wars

As the history and facts show Pakistan not only lost battles but also wars, founded as they were on wrong footings. Pakistan as a nation lost its sheen as it got embroiled in Afghanistan mess as so called “partner to fight against terrorism” for USA. President George Bush had the courage to publicly rebuke General Musharaff on his home ground for fostering terrorism and came very close to declaring Pakistan as “Terror State”.

Goal Post Shifted to Abbotabad

President Obama too was convinced that Pakistan is the home to all the terrorism of the world but still chose to go along as partners in fight against terror due strategic goals in Afghanistan. Well, that was until he discovered and found that the goal post has been shifted to Abottabad near military barracks not far from Islamabad. That is the game changer. Osama Bin Laden was picked up faultlessly in a show of stealth character and technological superiority of the mission. Osama’s death brought US full circle to where it started-“creation of monster called Osama Bin Laden”.

Unmistakable Stamp of Military Protection

While the sound of blasts in Abottabad may have been inaudible to the world, what exploded on full blast was hypocrisy, double cross, hide & seek game of Pakistan’s top brass. The civilian government can not say that it was slip of intelligence and they did not know Osama was in their backyard for almost 7 years. Nor can ISI or military establishment can claim so. The global leaders and intelligence fraternity are not novices as to buy such childish explanations. No high profile terrorist would ever dare to hide in the heart of military setup and go unnoticed for such a long time.

All the pointers lead to one conclusion that it was a carefully hatched plan to protect Osama Bin Laden in most secured place created for the purpose and camouflaged among military buildings around. This could be possible only with the full knowledge and approvals of the Army Chief and ISI Chief. Even if the present civilian President & Prime Minister were kept out of the loop, President Musharraf, as erstwhile Army Chief, and General Kayani can not feign ignorance. Only they could have approved such a major decision. It was Musharraf’s legacy which was carried on under civilian government.

Loss of Credibility

There would surely be blame game and a fall guy in ISI chief Pasha is most certain. But that will not help Pakistan to come out of the mess on global front because not just USA alone but all western countries who have been partners to fight terrorism would reject such explanations. Pakistan has lost its credibility completely. They have been exposed thoroughly on their double-speak. Trial of 26/11 terrorists is starting in Chicago and an army major has been accused of hatching and executing the plan to attack Mumbai. As the trial begins more skeletons will come out of the cupboard from ISI/ Army re-enforcing belief that Pakistan army, and not a disgruntled army officer, was directly behind the terror attack.

While there may be cutbacks in financial assistance to Pakistan in Aid and few similar punishments, it is possible that over couple of years Pakistan may come back again albeit with a limp and tag of unreliable partner.

Quo Wadis Pakistan?

Where does Pakistan go from here? On strategic front, Pakistan stands exposed and battered badly. It is for the civilian population, think tanks and intellectuals in the country to come out with a blue print as to what Pakistan stands for and what should be their conduct like in international affairs. They must clearly choose between military might and ambitions of a handful of officers and economic development for bottom of the pyramid. Pakistan does not face any military threat from India since India has never been first to attack Pakistan. Waging a war is not in Indian psyche. It has always been in retaliation or self defense that India was forced to respond. If Pakistani people desire economic prosperity no one can stop them. All they need is to decide their priorities right and accept that military might is not everything. Pakistan may have problem with its western borders and they can focus on same to resolve issues as their hands will be full if US decides to pull out of Afghanistan leaving it in a mess.

Abjure Terrorism

Pakistan needs to have very concrete plan to get out of the terrorism mess by giving up terror as state policy, dismantling training camps, taking serious action (not just superfluous detentions & to be released soon on flimsy grounds) against most wanted terrorists freely roaming around in Pakistan and showing the world that they mean business and deserve a place in the comity of nations. Such a job done, they may qualify to join the international force against terrorism. They can no longer expect sympathy from world that they too are at the receiving end of terror attacks. Terror has been their own creation and most important instrument of their foreign policy.

Terror Attacks not Helped Pakistan

Pakistan must rediscover itself, redefine their priorities and reshape their future discarding away the baggage of history in the same sea where Osama Bin Laden has been buried. India would prefer to fight out with Pakistan for an international contract, say in the field of software industry or export of commodities instead of skirmishes on the border. Common man of Pakistan would be a happier person in such a scenario. It would be a win-win situation for both the people of India and Pakistan. India has come a long way in economic development in last decade notwithstanding few terror attacks. Resilience of Indian economy was clearly visible when Mumbai was back on its feet the next day after the 26/11 attack. Such a realization must dawn on Pakistani establishment to give up its anti-India fixation of six decades.

Until then Pakistan will have to be satisfied by hanging around in sidelines of the international lobbies, brandishing their nuclear weapons, due to breach of international trust.

Vijay M.Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune 411021

May 11, 2011

Visit my blogs on www.strami.com

Hidden Agenda to derail Anti-Corruption Drive?

Hidden Agenda to derail Anti-Corruption Drive?

Anna Hazare’s fast unto death to press for demands on Jan Lokpal Bill in April 2011 took the UPA government at the centre by surprise in spite of intelligence inputs. The massive public response it evoked shook the crisis managers of the government. 24 x 7 media coverage had multiplier effect to spread the message and participation to the remote corners of India. As the response of the government unfolded, it became soon clear that UPA had no choice but to join the bandwagon to douse the fires of public ire and be seen as the one wanting to fight the forces of corruption. The overt response has been an exercise in public relations and as expected the covert operations began sooner than later.

Holier Than Thou Approach

The Prime Minister Dr. Man Mohan Singh and Pranab Mukherjee with help from Sonia Gandhi laid down the official policy of supporting Jan Lokpal Bill to be passed in the monsoon session of the parliament. But the brazenness with which political managers of UPA started picking holes in the profiles of the members of the civil society to discredit them and indirectly projecting government nominees on the drafting committee as “holier than thou” left every one in no doubt about the real game plan. The witch hunt has still not ended and possibly one can expect some masterstrokes just before the deadline for finalizing the draft comes close to comfort. If some members are forced out of the drafting committee, the bill may go for a toss.

Disruptive Responses

On another front the strategies of UPA members are a pointer to what lies ahead for Lokpal Bill. In case of 2G case, the PAC has been discredited and virtually made defunct. Same fate may await JPC probe also when it goes in to full drive. This reflects the unwillingness of UPA to get to the roots of the scams.

Even if the Jan Lokpal Bill gets passed in the parliament, our politicians have cultivated the art of keeping enough loopholes in the name of “consensus’ while drafting the bill. The crucial control points and “gateways” will be retained by the government yielding to lesser important demands to show their sincerity. The civil society members may have to be satisfied with “making a good enough beginning”.

Passing Jan Lokpal bill into an Act may be achieved with pressures from other opposition parties like BJP and allies. But haven’t been there a large number of cases where tardy execution and back seat driving by ruling party has resulted in making autonomous institutions like CBI or CAG a cruel joke? Will the institution of Lokpal remain on paper?

Multi pronged Strategy Required

The stakes involved in anti corruption drive are enormous as level of corruption may be running into several lakh crores. The beneficiaries are not going to let anti corruption drive succeed. It is going to be an uphill task to achieve a few crucial steps. Jan Lokpal Bill alone is not a panacea for all the ills facing our system of political governance. A multi pronged strategy to address the required reforms is necessary. Some of the important reforms include:

1. Elimination of protection provided to elected representatives against legal actions for violation of any law of the country. Tardy process of prior approvals to be done away with. Even the Prime Minister should be included as he/she has highest responsibility and therefore accountability to the nation and people of India. The prime minister can not close the eyes to wrongdoings of others in either the cabinet or the bureaucracy. (Read my Blog “Remove Political Vaccination to Curb Corruption” dated January 7, 2011)

2. State funding of elections to minimize the impact of money power. Our political parties have already innovated in recent state assembly elections with “Cash for Votes” distribution through NGOs and students.

3. Right to recall an elected representative. Right to cast negative votes to disqualify worst of the candidates if there is no suitable candidate. (Read my Blog “Electoral Reforms to Check Decline in Values of Political System” dated April 16, 2009).

4. Judicial reforms with separate independent autonomous wing to deal with cases of corruption.

5. Accountability of the civil servants to be raised to higher levels. Mere suspensions or transfers do not address the basic issues of mis-governance.

6. Bring back the unaccounted money from overseas tax havens and punish those involved.

The representatives of the civil society should make a comprehensive blue print for achieving the overall objectives and address issues related to execution with alacrity. They must also publish details of their ‘think tank” so that people know who are all behind the scene supporting 5 members nominated on the drafting committee. What will be their role beyond passage of the Lokpal Bill, their organization structure and constitution?

Yoga Guru Ramdev Baba has planned a massive protest with fast along with one lakh people at Jantar Mantar on June 4, 2011. This would provide further push just in case there are attempts to derail the Jan Lokpal Bill. Our political parties should come to terms with the realities and should read the writing on the wall.

Constructive Role for Media

Mr.H.D.Kumaraswamy, former chief minister of Karnataka, made a very important and significant statement in his TV interview, when he told that one can not be in politics without being corrupt! This not just reflects on himself as a politician but on the entire political system in India. So, there is no room for “Holier than Thou” approach.

Electronic media has played important role in spreading the awareness amongst people by exposing the corrupt. They should come together to develop a system of collectively announcing most corrupt person of the year at national, state and district levels. This could be segmented into politicians, civil servants, corporates and individuals (and of course media) categories. Call them “Bhrasht Ratna” or “Bhrasht Vibhushan” if you like. Obviously no one is going to come forward to receive such awards and would go into the Hall of Shame. But a mass media campaign of this nature with posts on internet would create a reason to think twice. Is the media ready to bell the cat?

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune 411021

May 1, 2011

Visit my blogs on www.strami.com

Managing Drivers of Inflation for High Growth

Managing Drivers of Inflation for High Growth

RBI deputy governor Subir Gokarn and Prime Minister’s Economic Advisory Council Chief Mr.C. Rangarajan have warned about the impact of high inflation on growth of the economy. RBI favors control of inflation at the cost of growth if the need be and therefore further tightening of interest rates can not be ruled. RBI’s concern is understandable as crude oil touches new high as a result of turmoil in the Arab world.

We have come a long way in last two years and full circle from high deposit rates of almost 11% to present rates of about 10% with lows of 6.5%. This, in a way, means that all the tinkering of monetary policy by RBI has taken us round this circle. While RBI is the most competent authority on monetary policies, the government needs to address the fiscal policies and bring down unproductive expenditure and tighten controls on schedules of projects to avoid cost over runs and avoid popular freebies in the times of elections if it is serious about reigning in inflation. We have seen inflation of 3-4 % together with 8% growth tag during NDA/UPA I regime. Fiscal prudence is unlikely to prevail. It is therefore time to look beyond the monetary policies for managing inflation.

Evolution of IT Industry

In more than a decade since NDA came to power there have been significant changes in drivers of the economy and hence the drivers of inflation. The most visible change has been emergence of IT/ITES sector as the driver of job creation in the economy at unprecedented rates. This in fact redefined the achievable growth scenario of the entire gamut of services sector by and large. IT sector has sustained high growth rates of 30-50% for long time and created massive job openings drawing qualified personnel from all sectors to meet their needs. IT sector became driver of the job market.

ITES companies offered job openings for even lesser qualified and skilled manpower at relatively very high costs. Since there was no pressure on margins, the IT companies started offering higher salaries and perks unheard of in other engineering sectors. To retain skilled and qualified manpower and stem the migration, other sectors had to follow the suit. 15-20 % annual increments have come to stay as against 6-8% of the old economy. IT sector became most preferred destination for job seekers.

Value Addition Lagging behind Wage Increase

Intra industry competition of IT sector resulted in poaching with offers of higher salaries with 30-50% jump even for fresher / raw recruits just to beat the deadlines of the projects. Changing 2-3 jobs in as many years to double the package has become order of the industry. Same trend reflected for higher echelons of the IT companies with greater differential. The value addition by such manpower in perpetual transit has not increased proportionately thereby creating a backlash in per capita productivity. If value addition in economy does not keep pace with money pumped in, it has to result in inflation as more money gets distributed over lesser number of goods.

Multiplier Effect

Sudden disposable surplus coupled with easy availability of loans drives up demand for goods and services enabling employees to live on borrowed money or future earnings. An employee with annual income of Rs 5 lakhs can draw a loan of 25 lakhs or smaller amounts for house, car and consumer durables. This definitely has generated growth of real estate and consumer durable sectors with ripple effect on other allied engineering sectors.

Living on Future Income

However, unbridled disposable surplus on one hand and easy loans on the other hand, has multiplier effect on “living on future income” as a strategy for individual growth. Western economies led by US collapsed in 2009 only due to this approach fueled by the banking system without back up of adequate ability to repay the loans. While India has weathered the storm very well due to conservative lending, we are definitely paying higher price for living on tomorrow.

Benchmarking Against IT Sector

The new benchmark of salaries set by IT industry forced other sectors to raise the bar. While the number of direct employees in IT sector may be just about 18 lakhs, (little more than Indian Railways) the opportunity quotient of IT industry has far reaching impact on standards of living and therefore has tremendous magnetic effect on job market. Thus raising the bar for other industries meant considerable impact on per capita productivity. And the most unproductive sector of all of them is government sector which quickly seized the opportunity to bench mark their pay scale revision through 6^th pay commission against IT sector. Over night lakhs of government employees, bank employees and allied quasi government employees got fat arrears for few years raising the liquidity considerably.

This coupled with ability to get loans, as said earlier, multiplied the total available money for spending on good and services not produced by extra money pumped in the economy. While the wage bills skyrocketed, the productivity or value addition did not keep pace with IT industry. This has been an important factor and driver for continued high rate of inflation for last two years.

What Can the Corporate Sector Do?

In the meantime there has been phenomenal growth in other sectors of economy such as health care, hospitality, real estate and construction, media and entertainment etc. In fact while IT sector is expected to generate 183,000 jobs in 2011, healthcare sector is likely to add 248,500 and hospitality sector will add 218,000. So the experience of IT sector in managing growth is likely to be transplanted in other sectors courtesy HR managers and top management personnel moving in across the industries.

No doubt IT industry has a lot to share with other sectors to avoid pitfalls of growth.

IT sector therefore has the onus of taking the lead to set an example in what other sectors can do as responsible corporate citizens and leaders. IT industry must evolve a model to sustain and improve their global competitiveness and work backwards to rein in their higher costs of ever increasing employees wage bills. At say NASSCOM level, industry leaders must agree on certain common business practices to keep the heat down.

1. Competitiveness of whole industry should be over riding criterion as against the competitiveness of individual industry units. The per capita wage bill / output norms may be evolved and bench marks with bandwidth set across the levels so that there is a reasonable flexibility without too much of artificial differential.

2. Members of industry should refrain from unreasonable poaching with healthy staff turnover across and within the industry. Frequent job changers should be discouraged so that employees stay on for reasonable periods for significant learning and therefore value addition. Suitable norms may be evolved.

3. While changing jobs the jump in package offered should be restricted across the industry. Moreover, the component of cash increase should be smaller and larger portion of jump (say in 1:2 proportions) may be in terms of contribution to PF, Superannuation etc which have no impact on immediate disposable cash surplus. The massage should go that the party is over.

4. Annual increments across the industry should be pared down from current high levels to reasonable levels.

5. Temptation to pay big bucks to get talent must be resisted and moderated. Higher levels may be exceptions as they are few in numbers.

6. Salaries may be benchmarked against new emerging threats from other developing countries so as to sustain competitive advantages in long run. This may bring the benchmark down for good.

7. Periodic reviews at industry levels for midcourse corrections may be necessary.

Other fast growing sectors should evolve similar approaches and plan for sustainable growth in job creation without losing competitiveness of the industry. Associations of industries like NASSCOM, CII and FICCI should spread the culture to keep India on global competitive map for different sectors of economy.

The Government Sector

Will the government sector bite the bullet? Do they have any road map for higher productivity? Will they ever reduce their expenditure? Unlikely though. On the other hand they will keep compensating employees for inflation with calibrated increase in DA with falling productivity.

The Way Out

Well, inflation hardily concerns the government in spite of the most qualified economist being the prime minister. And with elections round the corner, more money is likely to be pumped in sending inflation soaring further. As long as the net real interest rate on deposits after adjusting inflation is in the negative territory, the hard earned assets of common man are under threat of shrinking. So high growth rate coupled with high inflation, as feared by RBI, is a sure recipe for disaster waiting to happen. Every 2-3 years either there are assembly elections or Lok Sabha elections. We therefore should not expect government to do much about inflation. So the common man must cheer up and do something about it.

Higher productivity with lower costs is the basic mantra for managing and sustaining high growth and should be the guiding factor. Will the corporate sector pick the gauntlet and lead the way?

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative,

Pune 411021

April 6, 2011

Visit my blogs on www.strami.com

Nuclear Safety, DGCA and Our Work Culture

Nuclear Safety, DGCA and Our Work Culture

The Nuclear disaster in Fukushima, Japan, following massive earthquake was a wake up call for the sleeping nuclear fraternity the world over. Coming after a long gap after Chernobyl as it did, the nuclear safety experts from IAEA to individual power plants started dusting off their safety manuals. The anti-nuclear lobbies got a shot on the arm. The farmers of Jaitapur in Maharashtra also saw a ray of hope for shelving of the proposed nuclear power plant to be set up soon.

Nuclear Safety Audit:

Our own Atomic Energy Commission sought to dispel the fear of nuclear risks and assured safety of our atomic power plants. The Prime Minister was nevertheless quick to order a detailed safety audit for all the plants in the country. Until India signed pact with USA for nuclear cooperation, we were emphasizing on our safety records and abilities to manage the risks on our own without intervention from IAEA or international inspectors. In fact we managed to keep strategic units out of the loop of IAEA.

High Quality Standards of Japanese:

With the recent experience of Japan aided by US efforts to contain the nuclear fall out at reactors of Fukushima, the world has realized that it is not simple to manage such a disaster in spite of all the periodic rigid inspections and standards imposed by the Nuclear Suppliers Group and IAEA. Japanese industry is very well known for their high standards of engineering in anything they do. Japan has given the world concept of quality from Deming to Six Sigma. They are extremely uncompromising on quality & safety standards. Japan was the first country to experience the nuclear disaster in the world in WW II and later joined by Russia with Chernobyl melt down. Their concern and efforts for nuclear safety is therefore very genuine.

Hidden Lapses:

Come Fukushima and chinks in their armor were exposed with stories of gaps in maintenance and reporting of faults coming out. This was followed by stories of similar lapses in US nuclear plants. It is shocking to read that about a quarter of such faults are unreported even in the developed world. Common man does not know the implications of such neglect and lapses. One has to only pray that nothing wrong happens in the next door nuclear power plant.

Indian Safety Concerns and Standards:

India’s safety standards are borrowed from the leaders in the industry, IAEA, and NSG. We may have added a few from our local experience over the years based on our own mini-disasters in last thirty years. The safety audit ordered by the PM may throw new gaps and needs for fortification in terms of both the equipments and the procedures. While new equipments and physical safety features as may come out of global findings from Fukushima experience can be installed, the real worrying factor is the procedural part.

We in India are known for the “Chalta Hai” culture. It is deeply ingrained in our national character. Talking about nuclear safety, I am distracted in a relevant way by the DGCA and “fake pilot scam” of Indian Civil Aviation sector. Flying is the riskiest but fairly routine part of our modern life. Nuclear accident may happen once in ten years but flying accidents can be any minute anywhere. Most of such accidents are due to neglect in maintenance of aircrafts or negligence of the pilots. And how well secured are we in Indian aviation sector? We fly with comforting thoughts of brand image of the airline, little knowing that the pilot may be just a school dropout with a fake degree and a fake license. It reflects very poorly as far as our national concern for safety of million in the skies is concerned.

DGCA has ordered scanning of over 10,000 pilots as a fall out of the scam of the month. Four persons have been arrested in this connection. DGCA has also started dialogue with the flying training schools in the country. But it is difficult to believe that such a massive scam in sensitive area can be handiwork of few lower level officers. DGCA has miserably failed to regulate, identify malpractices and control the high standards of safety expected by the public. The civil aviation ministry interferes even in day to day running of the national airlines but it is strange that they have not yet been able to find a scapegoat at higher levels! Why no one is held responsible for such lapses in training and certification of pilots. In all probability, the scam will die down with reviews and tightening up of some norms. After all, we will be told that aircraft “Udata Hai Na?” version of “Chalta Hai” culture.

Lack of Safety Culture:

Coming back to the nuclear safety! The DGCA scam shows that our work culture is extremely weak even in high risk business of flying. Our nuclear plants may follow the best business practices and standards of the nuclear world. However, when it comes to our work ethics there is a lot to be improved. As of now we have not heard of lapses in atomic power plants and we hope they are in safe hands. But our concern for safety at all levels- from helmet for two wheelers to car seat belt, from crossing the roads to hiring aircraft pilots is abysmally low. Given such poor record of enforcing anything related to safety at individual, industry and government levels, it is a big question mark if we can be confident of safety of more than a billion people from our 18 nuclear power plants. Can there be different work culture? Can we learn from Japanese experience?

Allay Public Fear:

The prime minister’s review of safety must address such core concerns and allay the public fear not politically but on technical and humanitarian fronts so that Jaitapur and other locations can sleep in cozy comfort. The government must publish a white paper, after the audit and implementation of addition measures if any, which can be in public domain for common man to understand what the nation is doing to ensure highest levels of safety of each plant while planning for nuclear powered growth.

Disaster Management for Nuclear Safety:

We also need well trained disaster management teams, involvement & sensitivity of local administration and periodic drills involving local population to tackle any untoward nuclear incidents and mishaps. Remember we could not handle floods in Mumbai in 2005!

There is no doubt that nuclear power seems to be the only answer to the needs of the nation considering depleting coal reserves the world over. But the powers that be need to handle issues with great concern, care and well beyond political platforms. Or else, we may be told by the politicians“Aisa Chhota Mota Haadsa to Hotey Rehta Hai….”.

Let us pray that better sense prevails. Amen!

Vijay M. Deshpande,

Corporate Advisor,

Strategic Management Initiative,

Pune-411021

March 27, 2011

Visit my blogs on www.strami.com

Till Voters Do Us Apart…

Till Voters Do Us Apart…

UPA government has developed a knack to get mired into scandals every other day. And this time it is hit by Wiki-Tsunami. The disclosures of “cash for votes” payoffs in Wiki Leaks cables have pushed the government again to the wall. Now the government machinery, including Pranab Mukherjee and Dr. Man Mohan Singh, has become used to defending the government at any costs from scam to scam and getting away with it.

It was a very brazen statement of Pranab Mukherjee that “We neither confirm nor deny the Wiki Leak cables”. Since they can not deny the contents of the cable there is a scope for truth in it. This indirectly means clearly that Congress purchased votes for cash. In his statement in parliament on 18^th March 2011, Dr. Man Mohan Singh stated that the Wiki Leaks can not be dignified by discussing them as they are unverified. Since the cable is an internal secret communication of US government, there is no reason for it to be false.

Lack of Probity

After 2008 trust vote, K.C.Deo committee had clearly identified one Saxena as the bribe giver and suggested further investigation as its own mandate was limited. Somnath Cahtterjee, Lok Sabha Speaker, had also recommended detailed enquiry by the home ministry into three MPs who had brought cash for display in the house. However, these probes never took place and the government gave a quiet (and dignified?) burial to the issue once the vote of confidence was won.

Prime Minister stated that since there has been a general election after 2008 trust vote and UPA II has the mandate from people, there is no reason to resign. But the sins of UPA I are now in open in 2G scam and the prime minister was forced to admit now famous “error of judgment”. Same thing can happen sooner than later as the media goes after the facts of Wiki Leak cables and PILs are filed in the Supreme Court.

Now the prime minister says he is not aware of such a transaction of purchase of votes. Will this become future “error of judgment”? Not being aware of “cash for votes” transaction, not being aware of status of Thomas on palmolein corruption scandal before appointment, not being aware of A.Raja’s intentions in 2 G spectrum scam, or not being aware of who Hasan Ali is (As per CAG report 35% tax dues of the country are from Hasan Ali) does not speak well for a prime minister. Ignorance can not be bliss when you run a country of the size of India.

Among all the scams what is turning out is a well orchestrated cover up plan for each of them. Governance has come to standstill and entire machinery is busy in “save government operation”. How did lower court let off Hasan Ali and grant him bail only to be snubbed and reversed by the Supreme Court? Is political influence or money power playing the role?

A Reluctant Opposition

Opposition is seemingly helpless as government is unashamed and digging heels for long drawn battles. Opposition does not want to topple the government on this issue. The fresh-from-oven logic from L.K.Advani is that the members of parliament want to complete their term. In simple language, they want to hold on to their seats come what may! And how well do they know that the voters will again vote for them in next elections for a fresh term? Or may be they are sure that they will not be re-elected and therefore want to enjoy the perks till last the day.

Himalayan Blunders

Recent tussle of DMK-Congress over seat sharing was nothing but a façade behind which was negotiated safety of Karunanidhi & family including Kanimozhi from effects of 2G scam. But come Tamilnadu assembly elections and voters would decide whom to dump. But their choice will be limited to equally corrupt alternative of AIADMK!

UPA government has set new standards on mis-governance, political facades, and lack of probity, art of forgetfulness, ignorance, denials and judgmental errors of Himalayan proportions. The new coalition dharma seems to be free for all loot, quid pro quo on issues of corruption, and float together if not sink together.

Nevertheless, the voters are certainly not going to be forgetful. It is clear that UPA coalition government will survive till voters rip them apart in next assembly elections as well as Lok Sabha elections whenever they are held. But then is BJP gearing up to provide much awaited alternative?

Vijay M. Deshpande

Corporate Advisor,

Strategic Management Initiative

Pune 411021

March 18, 2011

Visit my blogs on www.strami.com