April update – and the contortions of the Left

Modi gets his man, triumphs in Delhi local polls; how the Left now backs the bankers; a great new magazine

A little bit of a round-up and some thoughts on the plight of the Left around the globe: I have been busy on something else this month (see below), so I am running around catching up on what I want to discuss on here. Back to normal service soon! OK …

At last Vijay Mallya, rural Hertfordshire’s most notorious alleged loan defaulter (but ask the banks and his wretched employees, who should know, or the Central Bureau of Investigation in Delhi, which recently charged the business genius with fraud) was arrested in London on 18 April on an extradition warrant. This doesn’t mean he’ll be dragged, handcuffed and squealing, onto an India-bound jet next week, desirable as that might be. It’s the start of a long, lawyer-enriching process that should nonetheless eventually see the ‘businessman’ back in the country he loves – and I do mean India not the Bahamas. PM Modi tweeted, ‘There is no place for corruption in India. Those who looted the poor & middle classes will have to return what they have looted.’ Not much fun to be in Modi’s crosshairs, I should think. Mallya’s besotted cheerleader at the FT must be sobbing.

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Antifragile India

What are we to make of the extraordinary progress and results that Modi is achieving? It could be the ‘antifragile’ phenomenon in action.

Of the five recent Indian state assembly elections – in Uttar Pradesh, Punjab, Goa, Uttarakhand and Manipur – the BJP either won outright or formed a ruling coalition in four of them. Only in Punjab did the party strike out, and this was easily foreseen. I think it is time to begin to speak of Modi making India – and himself – ‘antifragile’.

The most stupefying electoral result was from Uttar Pradesh. At the conclusion of my last post I cautiously guessed at a 60-70% chance of Modi (and I purposely say ‘Modi’ rather than ‘BJP’) winning in UP. It transpired that an unprecedented landslide in Modi’s favour gave the BJP 312 seats (excluding alliances) out of a 403-seat Vidhan Sabha. This is almost unbelievable, especially when the doom-laden predictions of electoral oblivion – heavily predicated on the ‘disastrous’ demonetisation of late 2016 – are taken into account.

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Election fever is breaking out in Uttar Pradesh

In a tight, dirty race, which of the electoral horses in a three-party race will cross the line first in UP?

In legal circles it is said that hard cases make bad law, but in electoral politics the opposite is true, and a crunchy election may be a decisive pinch point and an interesting, perhaps reliable indicator of the future course of events.

At present several Indian states are electing their assemblies, which is done every five years. For those not familiar with the Indian political structure, the simplest way to describe it is to say that it’s mostly like the US federal system, but with bits of the British parliamentary arrangement thrown into the mix.

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So much more than musical chairs

Studying the changing profile of power in Modi’s government will reward those who wish to understand and do business with India

A week ago Prime Minister Narendra Modi initiated a major reshuffle of his cabinet and ministers. Halfway through the NDA’s term of government is a good time to take stock in a significant way, and to position the government for the coming election in 2019 whose approach is still just below the horizon.

What seems clear is that with this reshuffle Modi is further putting his stamp on the character of the administration, and that he has one eye on the future electoral profile of the BJP: good performance is rewarded and poor performance, including ministers getting too big for their boots, is punished. The demotion everybody is talking about is Smriti Irani being moved from Employment to Textiles due to her proclivity for never knowingly avoiding a fight and admiring herself way too much. Some claim it is not a demotion but a sideways deployment that positions her to fight in the upcoming Uttar Pradesh elections. (Note that the Gandhi family ‘pocket boroughs’, Amethi and Rae Bareli – which hold the honours of the most severe child malnutrition in India, and some of the worst highways – are in Uttar Pradesh.) Others say that is nonsense and that caste issues by far outweigh any influence that Irani could bring to bear in that state. We shall see.

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Raghuram Rajan “resigns”

India may well regret seeing off a sober money-man if it now lets slip the dogs of boom

This weekend saw the announcement by Indian central bank chief (and former IMF director) Raghuram Rajan that he would not take up a second period where, appointed by the previous Congress administration, he has been in post since 2013. Instead, Rajan will return to the University of Chicago’s Booth School of Business. There he is Distinguished Service Professor of Finance, and has been on an extended sabbatical that has seen him steady and even turn around India’s economic situation.

At least that is what some say. Others, such as deadly loose cannon Subramanian Swamy, who campaigned for his removal, accuse Rajan of hobbling India and indulging in egotistical grandstanding, to the government’s and the nation’s detriment.

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Things are finally moving …

Modi entered Delhi facing an entrenched and obstructive government bureaucracy that was bespoke-designed over many decades to serve the bigwigs of Congress

Despite being Modi’s biographer and genuinely liking the man, I am not here to defend him. It is a fact that as we pass the two-year mark of the BJP administration in power, there are justified criticisms to be made. Overall the biggest complaint has to be the apparently slow and timid pace of change and reform – for, incidentally, nothing dramatically disastrous or unforgivable has occurred, despite such being endlessly predicted by Modi’s political and media enemies loyal to the Gandhi dynasty.

When I am asked, as I always am asked, the reason why Modi has not changed everything quickly and delivered India to its wonderful prosperous destiny already, I reply with an offering of a reality sandwich. First of all, Modi entered Delhi facing an entrenched and obstructive government bureaucracy that was bespoke-designed over many decades to serve the bigwigs of the Congress Party and the Gandhi dynasty. Very many careers were owed to and depended upon the established structure; forcing it to change was always going to be a Herculean task. The babus of government service constitute a complete society, unbelieveably  loyal to that Gandhi dynasty, and changing their orientation would be a work of years and would require a master administrator.

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On Vijay Mallya and committing gross acts of journalism

Business hero Vijay Mallya broke his dignified silence to speak to the FT.

As I write, Kingfisher airlines and beer boss, or rather ex boss, Vijay Mallya, is holed up in his ugly oversized Barratt home just around the corner from me here in North London; indeed so close that I can almost smell his distinctive scent of privilege, greed and egomania – traits characterised by a better writer than me as ‘sociopathic’.

India, which is owed 9000 crore rupees (nearly a billion pounds sterling, or £935,394,495 to be precise) by that genius of business – who is certainly not a corrupt gangster and thief despite what it might say in the arrest warrants – has tried to persuade the UK to deport Mallya back to his home country from whence he scarpered or made himself scarce on March 2, one whole day before his creditors were able to have his passport impounded.

But the UK demurred: ‘Sorry old chaps, but this Vijay fellow hasn’t actually committed any crimes on British soil so we’re afraid our hands are tied. Love to help if we could and all that. You might try extraditing him. We probably wouldn’t actually raise an objection if you went that route. Probably …’

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Bye-bye Facebook, Monsanto!

What’s behind India’s new-found assertiveness?

First it was Facebook. India’s potentially enormous, and as yet largely untapped, internet and mobile phone market will see about half a billion people come online over the next few years (I hope soon to write at some length about its implications). And this in the country that will enjoy the world’s best economic growth for the next two decades.

Mark Zuckerberg was salivating over this juicy prospect and launched a portal called ‘Free Basics’ that tied the user to Facebook’s domain in exchange for free online access. Except of course it wasn’t free because Facebook decided what sites could be accessed and would eventually have its own access to the most valuable of all commodities: the users’ saleable metrics and private information, the bread and butter of Facebook’s business.

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Budget – second helping

Aiming to get consumption up and savings down is a step in the right direction

Perhaps more of a footnote, or a doggy-bag.

Spending is up on infrastructure, farms and rural sector. Irrigation – Modi’s big innovation in Gujarat and the thing that, tied to electrification, transformed the state’s economic fortunes, is now a major element of the national Big Plan. Good.

The income of farmers is supposed to double over the next five years, providing a feel-good factor into the next general election, but more importantly giving more of the economic pie to households – increasing consumption at the expense of savings. This is also good and needs to happen because India has too many poor people, and at the same time absolutely massive potential internal markets. If spending goes up then India can become rich; that’s not going to happen if the mass of people has no money to spend.

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Indian budget takeaway

Rajan knows that all accelerated growth always leads to dangerous economic imbalances.

Revealing a despair that I shared, Elaine Meinel Supkis wrote in 2007 that,

‘There are very, very few fiscal conservatives around. We like reduced debts, sober analysis of economic facts and building for the future coupled with real capitalism, not predatory, debt-fueled speculation.’

Debt-fuelled speculation, aided by the venality of bad-faith politicians and academic central bankers, has ruined the economies of the West. We live in hope that India will resist mammon-obsessed financial quants, and follow a line of genuine value creation, unleashing prosperity across society and nurturing aggregate demand not asset-price bubbles, generating healthy rather than piratical profits. As Hyman Minsky eloquently put it , ‘The primary aim is a humane economy as a first step toward a humane society.’

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