Pinch me quick I'm having a revisionist nightmare

Pinch me quick I’m having a revisionist nightmare

If only Dr. Jekyll knew, and could actually remember the Mr. Hyde of it - that socialist nightmare of bread lines and gas lines and rationed notebooks and eighteen-year waiting lists for an Ambassador - before he drank the draught that transmogrified him! If Dr. Jekyll Manmohan Singh knew and remembered, he would not be backsliding to his former Delhi School of Economics Marxist professor ways. Which Dr. Jekyll in his senses would jeopardise his Harley Street practice, his lady-love and his very life on purpose? Later on, of course, it was too late. The repeats came on thick and fast because the bestial Mr. Hyde had possessed poor Jekyll. It’s a morality tale worth the remembering – about how easily the much vaunted Marxist dialectic can turn into a singular monomania. And just how tyrannical Marxism can be in practice, with its foolish anti-prosperity stance, its ever willingness to destroy rather than create, and most tellingly, how little it ends up doing for the poor. After all, administered loans to Congress goons and calibrated licence-permit shenanigans are not designed to benefit the aam aadmi.

I don’t know how Dr. Singh handles his economic schizophrenia. But it seems to be hitting him with increasing frequency now that he is past his third year at the top-job-but-one. But this much is sure, the thought of the implied self destruction involved has a Kamikaze quality about it. His bouts of Marxism alternated with nuclear-power-pursuing Capitalism are quite liable to judder into the body economic square on. And wouldn’t that be a pity, all of us going up in flames for the price of his Marxist nostalgia? There can be no valid argument against putting a stop to his Kamikaze economics. We must get the 9.4 per cent GDP achieving doctor back into his economically liberal straight-jacket without delay.

Trouble is, this nightmare, like others in the repertoire, is always about underlying causes. Could it be that Dr. Singh, standing in on our behalf, cannot withstand his own success? Is the death-wishing longing for the squalor of an antediluvian Marxism so strong that he feels compelled to watch its approach helplessly, with the paralysed fascination of an ant with Godzilla lumbering his way? Why does the good doctor’s mid-term course correction sound like he wants to be hit, along with all of us in tow, by one of Shri Lalu Prasad Yadav’s profit making freight trains? What happened to his Liberal World Banking phase that not only made him personally solvent but also created him into the economic architect of liberalisation in 1991? Why is the same gentleman going around apologising every second day for doing well by the country? Why is he wringing his hands in anxiety for taking India away from its creeping death two per cent per annum GDP former self?

Perhaps the cancer is in the Congress Party itself, nostalgic for its Socialist glory days of being feted and flounced in the USSR, an entity since deceased, and by the domestic gaggle of Left Parties that persist in “supporting” it, even if it’s all the way into the ground. Could it be that this new fangled success and recognition that India is enjoying is too much to bear for many Congress Party dinosaurs wedded to the Socialist era? These Congressmen have their reasons to clamour for the old ways, but what is causing a change of heart in the prime minister? Why is he feeling guilty when spurious and motivated comments are made about his being a prime minister of the rich alone? Instead of showing the grit needed to take his reforms to the next stage and the next thereafter, Dr. Singh is busy exhorting the successful to avoid flaunting their success. With the record number of new billionaires that market reforms have created, it is definitely too late to hide such bright lights under socialist bushels. But isn’t this by way of the wrong emphasis anyway? After all, the Reforms, never on an overtly accelerated path in Dr. Manmohan Singh’s government, are now practically extinguished, thus putting paid to the possibility of automatically including the many that have not yet benefited from them. By reacting to criticism the way he has, Dr. Singh is in danger of besmirching his own best legacy unless he manages to show a political acumen for doublespeak that has not been evident so far.

Maybe his current bizarre reversals and about turns are knee-jerk reactions, scared up by one election loss after another, while dreaming of former near or absolute majority days with a comfortable supporting cast of Marxists behind the Congress Party. So the mantra handed down to him may well be - the economy be damned! After all, the economy does not vote. It does appear beyond the think tank capabilities of Congress policy formation to get away from the old snake oil and bamboozle-the-public prescriptions. Instead of taking the benefits of a strong economy to improve infrastructure for the masses they would rather suppress what gains have been made and reverse the flow to achieve the uniform poverty and inefficiency they have been comfortable with for decades. But infuriatingly, it has also been the Congress way to adopt a two-faced Janus push me-pull-you tactic of milking business and industry for funds while indulging in pro-poor propaganda and populist give-the-man-a-fish sops as elections near.

Perhaps a malleable Dr. Singh as prime minister, called the “weakest” ever by Mr. Advani, elected without any grass-roots support, via a safe Assamese seat to the Rajya Sabha, was hand-picked for his lack of angularity. But Dr. Singh may actually lack conviction too because this is not the first time his economics has changed to suit the role. He has gone from Marxism to free-market policies to the present misguided “inclusive” mish-mash of subsidies and sops. This abject pandering to short term non-productive expenditure is a drain on the nation’s resources and will lead to inflation. It is the productive parts of the economy that will consequently face higher interest rates and other curbs on their growth potential. Dr. Singh knows better and should have been reluctant to follow these failed policies. But the question is, two years from the hustings, just how much Dr. Jekyll is still left in Mr. Hyde?


(1,055 words)

By Gautam Mukherjee
Thursday 31st May 2007

Philosophers of simulation

Essay-trends



Philosophers of simulation


The latest in the field of millennium thinking is all from France. And one of the most interesting and influential theories going around is about simulation. That’s simulation, not stimulation- as in pretend activity, not the breath-quickening kind, though it is arguable that some simulation is a lot more stimulating than the “real thing”.

French philosopher Jean Baudrillard, who died on March 6th, 2007, at the age of 77, once famously said everything in a “post-modern” context is simulated. Post-modernism is a term coined by fellow Frenchman Jean Francois Lyotard in the late 1940’s. It is defined as, among other things, as a time after the era of “metanarratives” or grand theories that pushed “universal truths”. Lyotard obviously thought post-modernism was born already when he enunciated the definition.

And when Baudrillard said everything is simulated, somewhat later, in the eighties, he meant everything, even war, or maybe, particularly war, which he likened to a video game. So a soldier knows he’s at war not in any metanarrative sense but because of the amount of ammunition he expends or the tonnage of bombs he’s dropping. And Saddam Hussein knew he was at war by the number of Iraqi soldiers he was turning into cannon fodder just so that he could maintain himself in power. There is, according to this vision, no metanarrative involved. Neither is there any “real” war going on without the metanarrative, despite the suffering and bloodshed it engenders.

Baudrillard spoke of the seductiveness of something standing in for something else, the simulation itself. It works well enough, as long as we accept that we live in a post-modern era of fractured universal truth. The eclecticism we see all around us would strongly suggest that this is so, and so, by implication and empirical observation alike, everything around us is simulated. All things great and small are updated by means of simulation. Baudrillard explained that “object” has grown more important than “subject” and more attractive too.

So, by inference, the blatant steel and chrome excess of a 1950’s Cadillac Eldorado, which for all its sensual curves and protuberances, its classic sexiness, was merely “modern”. Alors Voila! Witness the post-modern simulated Cadillac: it is half the size to reduce fuel consumption, has just a hint or two of its former chromatic exuberance, retains a lot of sound-proofed pizzazz under the bonnet, and enough leather-coddling luxury on the inside so that you can, and do, recognise it. It’s Marilyn Monroe updated to Scarlett Johansson. It’s different, this simulated being, but you have to be very churlish to complain.

But what happens to the purist? There may be no go but to cater to him. But just remember he too is a simulacrum of a purist himself. But since you still have retro-people like this, and classicists, and the unbending orthodox, you might just point him towards a Porsche 911, almost unchanged, or the Oyster Perpetual from Rolex. Even they have moved the rest of their lines behind the mirror to avoid extinction. Where, pray, are Ovaltine and Binaca? But those who thrive and grow still - McDonald’s and its “healthy” Big Mac, the butch new Germanic Rolls Royce Phantom – are unabashed simulations of their former selves, Mata Hari, RTD2, Swastika- even some NASA chic.

When Baudrillard wrote of the entire post-modern landscape being simulated, it’s because a turret or belvedere perched on a suburban house and a Doric half pillar clinging to the side of a penthouse, is indeed simulation. Neither becomes Blenheim Palace or the Parthenon by virtue of such embellishment. But both are touched and benefited, however improbably, by a resonance of those places and others like them.

Followers of Baudrillard’s social theories termed his vision, or at least a part of it, Hyperreality, meaning a simulated reality that is more real than the real. Simulation itself creates this Hyperreality, constantly enriched by an ever varied menu. It is an evolving species, just like economic theory, moved on from the static visions of Adam Smith and Karl Marx. Consider that in the 20th century you were a Liberal or a Conservative or even a Communist. In the 19th, you were sometimes a Feudalist and a Slaver and an Imperialist in addition to being a Whig or a Tory. But now you can be an issue-based both/all three/manifold, without betraying your beliefs for the jettisoning of the metanarrative. The simulation in all this, according to Baudrillard, is in the fact that the media today puts in most of the simulation. It is media that amplifies and repeats, distributes the labels, highlights the importance, defines the definition, turns it hyperreal.

In other words, simulation is not a fringe activity appealing to well, a fringe, but mainline evolution that is changing the way we think and perceive. The masses have good simulation antennae. It is a poor man’s aptitude, to grasp fractured nuances, to inductively leap over the metanarratives it replaces - because the poor long, much more than the others, for change and progress. The related implication is that the rich tend to be reactionary, metaphorically hanging on to their treasure chests and their status, looking at everything through the prism of vested interest. The middle classes are haplessly entrapped, choosing to emulate the rich except for their maverick outriders. But when the changes wrought by simulation become ubiquitous, even simple things wafted up from the street like wearing your shirt outside your trousers with a coat, or replying “good” to “How are you,” then, the middle classes vanguard the change, sometimes making the rich follow them into adoption. Adoption may well be the idiot cousin of simulation but we never ever call it names.

It was Jean Baudrillard and his thoughts that also inspired the makers of The Matrix. It is remarkable just how much The Matrix and its sequels appealed to the young. They were not confused by its esoterics, nor disturbed at the notion of being imprisoned by a rampant technology.

I suppose you have to like mirrors. And remixes too. But which part of the mix is the most real? But that’s like wanting to look into the core of an onion. Jean Baudrillard himself put it differently. He said: "What I am, I don't know. I am the simulacrum of myself."

( 1,050 words)

By Gautam Mukherjee
Friday, 18th May 2007

This and all other original essays on GHATOTKACHSERIES are copyright 2005-2007 by Gautam Mukherjee. All rights reserved.

Money Never Sleeps!

Money Never Sleeps!


The present clamour from small garment exporters and the like who hope to pressurise the RBI to continue softening the resurgent Rupee is unjustified. They can, as their bigger brothers have always done, go in for a spot of forward buying of the Dollar, Yen, Euro or Pound, and thereby hedge nicely against currency fluctuation. If the clamorous ones find, despite this, that they are priced out of the export market, they can always turn their attention inwards, towards domestic retail, or work out value addition strategies with their foreign buyers.

Many other exporters who first import items, value-add to them and then export, most notably in the diamond trade, acknowledge that a strong rupee reduces their import costs. And that cheaper imports help them make more money than they lose from stiffer exchange rates. Besides, in the larger picture, a country like ours, at this juncture, is not as dependent on exports as China or the other Asian “Tiger” economies. Instead, we are busy modernising everything; we also buy oceans of petroleum; acquire companies abroad and are upgrading infrastructure with rampant imports. A strong rupee puts much more change into our pockets than a weak one as we set about doing all this.

Artificially pegging the Yuan to a competitive exchange rate with reference to the US dollar certainly helped China’s export juggernaut, driving her economy to over 10 per cent growth. She put her nearly one trillion in foreign exchange reserves to work, because export was the thin edge of the wedge she used to find her place in the sun. While much smaller in absolute economic terms, India too is poised on the brink of double digit growth, provided we can coax our agriculture to double its rate of growth from two to four per cent and simply hold the candle steady on the rest of the economy at present levels. And even if we wanted to manipulate the currency, in imitation of China, it is doubtful if RBI could sustain an assault for any prolonged period with only a couple of hundred billion dollars in reserves. And it would become even more difficult as the Indian economy grows.

So, when India decides to finally abandon the idea of an “administered” currency, and assuming that the interaction of global influences continues to go in our favour; we can look forward to a reduced import bill, greater FII and FDI, reduced inflation and a higher GDP as just desserts. And all this, inclusive of exports based on calculations befitting tomorrow’s world rather than yesterday’s. A strong currency is a necessity, seen both as a symbol and symptom of national vitality even in an interdependent world. A strong rupee, many percentage points stronger than it is today, will only engender support and investment interest worldwide.

And a strong rupee will also give us the confidence to go fully convertible on the capital account in the not too distant future. The very strength will axiomatically see to it that there’s no running off with the money. Instead, a strong rupee will result in a gush of inward flows. But even in the midst of this vision of future perfection, it is nostalgia, for a tightly “administered” economic reality that many people long for. The truth may well lie in the opposite direction, but many are having a hard time getting used to it, from the power-slipping-through–my fingers politician to the itinerant landless labourer with no fixed address.

But pursuit of the obsolete, if history is one’s guide, leads to total loss – of empire, of riches, and much too often, of one’s head too! It happened to Princely India after the British left them in the lurch. There they were, muttering to themselves in disbelief, fingering the curlicues on their suddenly useless individual treaties promising “eternal protection”.

The need of the day therefore is to develop an enhanced appreciation for our relatively new found “economic freedom”. We need an urge to learn how to play with its bells and whistles at the earliest. There is no going back. The recent installation of Nicolas Sarkozy as France’s President denotes that one more bastion of socialism in the “free world” has fallen. This too is symptomatic of the times.

We will, after all, need a lot of money for all those state-of-the-art nuclear power stations from Sarkozy and also for all those planes, guns, tanks and ships for defence, and those bio-engineered inputs we need to modernise agriculture, for industry, roads, ports, airports and so on. The scale of our appetite for the best the world has to offer in a plethora of fields is indeed gargantuan – some of the biggest economic opportunities for world business, recognised by all, including China, in fact.

The chances of our exports alone growing sufficiently to take care of this kind of import bill is very remote. So it is domestic demand that is the cause and domestic consumption that will become the effect. India will suck in large draughts of the world’s investible funds and relentlessly strengthen the rupee all the while. But as it stands, even a fifty per cent appreciation from present levels can do nothing to harm us given our agenda and the length of time it will take us to execute it.

Currency, this medium of barter between people and nations, is indeed a strange thing. It fattens on anticipation of productivity and expenditure, as it has begun to do in India’s case, and loses weight over stagnation and inefficiency, particularly in a relative sense. In this process of give and take, it is possible that one day the Rupee may become too strong for its own good but that day seems somewhat distant given the amount of catching up we have to do. Meanwhile, we can take comfort from a celebrated quip from Gordon Gekko, that rapier sharp fictional cult hero from Oliver Stone’s 1987 rendition of “Wall Street”. Gekko is about to come back for a Fox Studios sequel. Michael Douglas, now 62, will play Gekko again. The name? It’s unchanged, and straight out of the Gekko Gospel of twenty years ago. It’s “Money Never Sleeps”. Not even the Rupee.

( 1,042 words)

By Gautam Mukherjee
Monday, 14th May 2007

The last thing that flew out of Pandora's Box

The last thing that flew out of Pandora’s Box


Why is liberalisation in hibernation three years into the term of the United Progressive Alliance (UPA)? How did the great and good in Sardar Manmohan Singh, Sardar Montek Singh Ahluwalia and the brilliant cool of Shri P.Chidambaram fade away to a moribund twitter? Why are the architects of robust eight plus, even nine per cent GDP growth over the three, with aspirations to take it to double digits for the remaining two, being hounded, curtailed, proscribed and blamed by their own side?

This triumvirate, backed somewhat cagily by a foot-in-both-camps Kamal Nath, is under attack, not only from the Red trio of Karat, Yechury and Bardhan who like to support the presumed agenda of the common man by keeping him forever common; but also by family retainer cum Marxist Aiyar, camp follower and leftist Ramesh, and via media missile and internal missive alike by a trio of all important Gandhis, mother, son, and not to be forgotten for not saying much, daughter. But what desperate remedy, LSE/Oxbridge obfuscation, proletarian threat or comic book strategy makes the aforementioned critics think that by hobbling and stymieing India’s economic progress, they might better their chances of winning elections?

If you’re in the Opposition National Democratic Alliance (NDA), or even an Independent that prefers to lean away from Mount Gandhi; you might be quite appreciative of the work being done internally by the UPA to your general benefit. It would seem good to see the unity of the enterprise falling apart, and we’re only into the first half of 2007? The whisper campaign has it that the old stalwarts might not be in favour with the heir apparent busy forming his own team largely from generation next. It’s a déjà vu situation, reminiscent of 1984 and 1985, and in 2007, it’s still hard to visualise it succeeding with mature men who control grassroots politics. How can they agree to an order of change that might sweep them out in its sweep? That is why in India, politics is a game most successfully played by old men but who can stop the baba log wanting to join in the great game?

But in the forefront, taking more flak than they deserve, is a distinguished triumvirate, probably the most professional set of men in their respective posts India has had the good fortune of seeing in a long time, brought to the point of frustration, humiliation and debility by a set of badly thought out and self-seeking political initiatives. It is an old Stalinist politburo tactic not to mention an old Congress, even pre-independence, stratagem, to weed out inconveniences by citing “internal contradictions” and invoking the common man or aam aadmi. It is another thing altogether that it is inexplicable how stopping progress can actually benefit the aam aadmi. But somehow, it seems to be enough to set up a carping and sniping even if it benefits The UPA nothing at all. Learned commentators, in the context of the Uttar Pradesh Assembly elections, just concluded, have stated that it appears that voters are motivated more towards throwing incumbents out irrespective of their economic performances. In the estimate of the electorate, a spring cleaning is good and expected to help proceedings. So, it probably makes no difference to the mass voter whether the political classes, factions and would-be usurpers of power in the UPA blame the prime minister, the finance minister and the planning commission chief for their unfeeling growing of the economy and their insensitive modernisation initiatives!

But the ones that are being hit, and hard, by the drift, are the performers in the Indian firmament, business, industry, services, export, infrastructure development, even the foreign entities keen on investing and participating in India’s growth story. And before the Left trots out its ruralist argument for the umpteenth time, let it be said that there is no reason why agriculture won’t leap-frog ahead, if, as per the recommendations of The Planning Commission, we throw a determinedly large amount of capital at modernising and supporting it. It just takes more than hypocrisy and lip service and the realisation that uplifting rural India is still no automatic guarantee of the votes of rural India. But perhaps Communists, with their bully-boy cadres and their blood and guts persuasions know this only too well. What you say is not what you do- elementary, my dear Watson!

But “internal contradictions” is a classic beggar-thy-neighbour phrase that the Marxists have always enjoyed using with regard to their persistent fantasy about the imminent demise of Capitalism. They have been dreaming, internationally, for over ninety years now, for Capitalism’s “withering” and collapse. This is ever since the success of Lenin’s Russian Revolution of 1917. But, as Boris Yelstin’s recent demise reminded us about yet again, it is Communism - with its complete lack of economic success anywhere around the world that seems to have done almost all the “withering” and “collapsing”, from causes known and unknown, admitted and not. The story is uniformly bleak, be it in the erstwhile USSR, Cuba, the pre-Deng China, in the Marxist/Naxalite rebellions and guerrilla movements around the world and nearer home; our, by now middle-aged Communist run states of Kerala and Bengal, ravaged by three decades or more of Left Front rule, taking inept steps towards a market economy with a sheepish look on old “comrade” faces.

It is a bitter pill to swallow, the realisation that populism and purple speeches like Aiyar’s at the CII does not actually feed people. It sounds good, generates hope, touches the odd heart, but cannot, in and by itself, for lack of legs to stand on, deliver results. They say the last thing to fly out of the calamitous Pandora’s Box was “Hope”. But according to Greek myth, Hope wasn’t let out by Pandora. Zeus and the Greek Gods actually prevented it. The first wave of fliers were strictly no-hopers, just dreary, weary silver-fish coloured things, flitting out across the world on their little bat wings. Inflictions they were, one and all, designed to cause grievous hurt. Nobody knows how Hope got out, but get out it did, waving and smiling to the fifth column that animated Mount Olympus and gave it most of its spice.

The toxic new introductions, released into the atmosphere, were a pandemic of cutting-edge harmers called Greed, Vanity, Slander, Envy and Pining! Sentiments that might be considered bad anywhere, everywhere too, but indubitably so in idylls. Zeus and his cronies were particularly peeved at the first act of piracy in paradise. Piracy committed by Greek myth’s first Johnny Depp called Prometheus, an immortal Titan. Prometheus, who loved mortals because it was he who had shaped the first ones out of inert clay himself. And, of course, it was Zeus who breathed life into them in the first place and now wanted to place a pox on them. Prometheus upset the gods something terrible when he nicked the gift of fire from Olympus for the use of man. Bad enough, that Prometheus had fashioned men in the image of the gods themselves but this handing them the matches was just too much!.

This was, come to think of it, the first inter-galactic class war wasn’t it? The Greek Gods dealt swiftly with Prometheus in a manner that would probably impress the one-eyed Taliban leader Mullah Omar.They chained Prometheus to a high peak in the Caucus and an eagle was detailed to tear out his liver every day because it would grow back into his torso overnight, on and on, for eternity.

Prometheus is presumably still at his post, paying interest on the capital as usual, even as mankind is cooking and warming and melting things with his gift. Though our livers are our own to corrupt as we please the human curse is more complicated, a kind of slow burn might be apt description, appropriate enough for beneficiaries of fire stolen from the gods. And to get us going on our angst-ridden path, Zeus created Pandora, the “all-gifted” one, into the first woman, mixing exaltation, beauty and contraries in equal measure. There, who says the Gods can’t laugh? But all is not lost. There is still Hope.

(1, 337 words)

By Gautam Mukherjee
Wednesday, 9th May 2007
Also published in main OPINION column on edit-page of The Pioneer www.dailypioneer.com as "Fake concern for the poor" on Saturday, 12th May 2007

The Widow's Mite

Essay-going after the bottom of the pyramid and a broad bottom it is too


The widow’s mite

I have always found the Biblical parable from the Synoptic Gospels (Mark 12:38-44, Luke 20:45-47,21:1-4) about the Widow’s Mite fascinating, because, in the Kingdom of Heaven, her offered mite, actually two of them per the parable, count for more than all the gold and silver offered by the rich and powerful. I found this parable fascinating because it forced me to get my child’s mind around relative value as a concept even though I wouldn’t have known enough to call it that at the time.

For God, the fact that the widow was putting all she had into the church collection counted for more than the rich putting in a miniscule portion of all their wealth into the self-same collection. But fine and fair as this may be, it almost made a mite sound like a button or something that merely felt like a coin if you felt for it in a church’s contribution sock. So what actually is a mite you might ask, and ask indeed you might! It makes you think of a miniscule bug as in “dust mite”, but it is, or was, the smallest Roman coin, made of bronze, minted by Alexander Jannaeus, King of Judea, 103-76 B.C. and was extant in the time of said widow in parable.

But going at a tangent from the meaning emphasised in the Bible here, I have to speculate that there must have been a lot of mites in the possession of a lot of poor people of the time, people, in fact, like poor people anywhere today, who were unlikely to see, let alone possess, any measure of gold and silver coinage nestling in suitably fancy purses. Mites however, were likely to have been fairly common in their poverty stricken lives, minted as currency for their daily survival by the state; minted with a pretty anchor upside-down in a circle on the obverse (heads) and a star of eight rays on the reverse (tails).

Quaint and touching as this talk of mites may be to those who regard the poor with a patronising eye, it is also seen as a fair and square business opportunity to others. Ones who see all money, however humble the denomination, as worth having. After all, it is self-evident to any monetarist and quite a few market strategists, that if you piled up a hill of bronze mites you’d be able to exchange it for a neat and impressive compact of gold or silver anytime you wanted. And by inference, the poor, living in a local economy ruled by mites, can be persuaded to lay out one or two or even a clutch of them-oh, on a flutter, a gamble, a bet, even an investment!

The latest move to increase the penetration of mutual funds in India, inspired, no doubt, by a variation on the theme of the Widow’s Mite, is from ICICI Prudential Mutual Fund, the second largest mutual fund in India, with assets under management tipping the scales at Rs. 42, 268 crores as of April 2007. In a move that illustrates the axiom that runners up try harder, ICICI Prudential MF lowered the minimum limit for its systematic investment plan (SIP), to just Rs.50 per month in the third week of April 2007. In a SIP, an investor invests the same amount month after month in any scheme of his choice. This lowering of the bar has set a new bench-mark and paradigm in the mutual fund industry for other houses to follow.

Mutual funds have for long maintained a minimum amount of Rs. 5,000/- in their investment schemes including SIPs, claiming that the administrative costs were unviable below this figure. Then, a year ago(April 2006), in a bid to broaden its customer base, UTI Mutual Fund reduced the SIP to Rs. 100 per month, but only for its “pension scheme” available to even those who did not have a bank account at all. Following on from this, in March 2007, the Number one Reliance Mutual Fund with Rs. 48, 828 crores under management, lowered its SIP limit to Rs. 100 for all its schemes. And it is likely, provided these fund houses succeed, that almost all the others will follow suit.

The current quantum of assets under management(AUM) in the mutual fund industry, composed of 30 fund houses, has grown to Rs. 3.5 lakh crores ( 3,50,441 crores in April 2007), according to the Association of Mutual Funds in India (AMFI). Not bad for an industry that only made its Indian debut in 1994, if you don’t count UTI and its now infamous Unit 64 scheme. The growth in the customer base has accelerated of late. According to Sundaram BNP Paribas AMC Managing Director, TP Raman, it has grown almost 300 per cent in the last three years.

The top five fund houses today are Reliance Mutual Fund at No. 1, ICICI Prudential MF at No. 2, UTI Mutual Fund (Rs.35, 517 crores) at No. 3, HDFC Mutual Fund (Rs.31, 485 crores) at No. 4 and Franklin Templeton Investments(Rs.24,510 crores) at No. 5. Even as these top five fund houses account for 52 per cent of the total present AUM, all 30 houses collectively have only managed to penetrate some 3 per cent of the population located in the top 20-30 cities and towns so far, according to Mr. TP Raman.

While the challenges going forward for the low-end SIP customer include education, particularly amongst the illiterate, and distribution at the micro-finance level, important in the 200 or more small towns being targeted now; the response to the moves made by the top three funds is encouraging, and Reliance Mutual Fund CEO Vikrant Gugnani has called his fund’s foray into the “small investor” segment a “striking success”.

Mr. Balbir Punj, in a recent opinion piece in The Pioneer (4th May 2007), quotes the latest National Sample Survey(NSS) to suggest that of the 100 million households in this country, only the top ten million households account for the bulk of the consumer expenditure and that this is expected to grow to about 25 million households in the next two or three years. But the other 75 odd million households, largely left out of the loop as it stands, need to be “directly addressed”.

It is possible that the parable of the Widow’s Mite as applied to the mutual fund industry might just be a step in this direction? After all, as Mr. Punj writes, quoting both the NSS and noted Professor CK Prahlad, there is a business opportunity in catering to the 75 million largely unengaged households in this country because they together represent a business opportunity as high as Rs. 31.11 trillion. Indeed, in this season of trillions, India having just become a trillion dollar economy also, this is a bracing prospect.

And combined with the findings of the latest McKinsey study that expects rising incomes in India to lift 291 million people out of poverty and create a 583 million middle class over the next two decades - targeting the bottom of the pyramid may make astute business sense for the early bird and the late comer alike. The Kingdom of Heaven knows what it is talking about.

(1, 229 words)

By Gautam Mukherjee
Saturday, 5th May 2007

Whistleblowers not allowed!

Whistleblowers not allowed: so how did Rakhi Sawant break into the big league?!


The prime minister, Dr.Manmohan Singh, in an intriguing but most welcome Labour Day speech at the inauguration of the new campus of the Institute for Studies in Industrial Development (ISID) in New Delhi said, among quite a few other things, that, “The employment intensive nature and the greater regional spread of SMEs makes them an attractive option for industrial growth”.

An SME, for those not familiar with the acronym, is short for small-and-medium-enterprise. The prime minister went on to suggest that SMEs need to be protected and encouraged and felt that the bulk of the industrial growth was being cornered by the big-boy-beneficiaries of a desi species of “crony capitalism”. In fact, Dr. Singh referred to media comments that had suggested that most Indian billionaires operated in “oligopolistic markets and in sectors where the government had given them special privileges.”

Anyway, the “enterprise” that the prime minister was specifically referring to was manufacturing industry and he was speaking in the context of stimulating employment opportunities. Presumably, he meant manufacturing industry in both the so-called “organised” sector, (meaning establishments incorporated under the Indian Factories Act, 1948, Mines and Minerals (Regulation and Development) Act, 1957, the Company Law, the Central/ State Sales Tax Acts, and the Shops and Establishment Acts of the State governments), as well as the “unorganised” sector, (meaning all unincorporated enterprises and household industries which are not regulated by any acts of the above mentioned type and which do not maintain any annual reports presenting the profit and the loss and balance sheets).

Because much too often, the government is silent on the unorganised sector, as if its existence was some kind of dirty secret. The facts however illustrate how different the truth actually is. For the moment, however, if one interprets Dr. Singh’s intent broadly to cover all enterprise small and medium that has a potential for generating employment including self-employment - then it is quickly apparent that the travails of small and medium industry are shared by professionals and small/medium entrepreneurs alike in a wide swathe of fields that fall both within the organised and unorganised scheme of things.

Sadly, too many worthy citizens of India have been blatantly discriminated against for much too long even though they may be part of a vital and thriving field of endeavour that could benefit from some policy support. Translated and bluntly put, this means money and other practical inputs at the operational level but this has not been forthcoming despite 92 per cent of India’s 457 million workforce being employed in the unorganised sector. And despite 98 per cent of total enterprise in India being classified with the unorganised label. And even after this unorganised lot accounts for 60 per cent of our GDP (Gross domestic product) as per the latest figures!

It must be noted that the entire farm sector (and thus some 60 per cent of the population) falls under the unorganised sector, while only one-fifth of the non-farm workers are found in the organised segment. Estimates suggest that in non-farming activity, as one moves up the income ladder, the share of the unorganised sector gradually declines. It makes you wonder why the organised economy gets away with all the kudos!

It might help if we look at the basis for calling this majority of enterprise and productivity “unorganised”. The ILO (International Labour Organisation) defines the unorganised sector as having such features as a low level of organisation; being small in scale, usually employing fewer than 10 workers, often from the immediate family; possessing ease of entry and exit compared to the formal sector; usually involving minimal capital investment; little or no division between labour and capital; labour-intensive work requiring low-level skills; an absence of formal training; labour relations based on casual employment and/or social relationships as opposed to formal contracts, and so on.

But how applicable is this in India when the unorganised sector is not only a parallel economy but 20 per cent bigger than the organised economy? The government has little control over the unorganised sector and has chosen to ignore it officially for decades. In fact, the first nationwide survey on the unorganised sector under the National Sample Survey (NSS) was conducted during the 55th round (July 1999-June 2000) and included all unincorporated, proprietary and partnership enterprises in its purview.

Perhaps the categorisation needs to be looked at afresh now for whatever can be incorporated. After all the sector includes everything there is a demand for - not just hawkers but all sorts of informal cooperatives, a good deal of Bollywood, much underworld activity, street and ad hoc financing, small scale manufacturing and a good deal of informal broking, banking and other servicing industry. The supremely efficient Dabbawalas too were once unorganised.
Of course, all of this accomplishment has come about without a paisa of government support though it is true that not many of these citizens pay taxes or own PAN cards. But when the prime minister is soul searching on how to be inclusive he should perhaps spare a thought about these citizens, engaged in such myriad activities and eagerly helped on to the electoral rolls by grass roots party workers for their ubiquitous vote.

The discrimination towards the unorganised sector is both unfair and baffling if you consider just how much of the mainstream political activity is funded by the prosperous in this sector. In fact, much of the organised sector itself maintains a degree of flexibility by keeping more than a nodding acquaintance with its friends on the other side of the fence.

But so far not only has the government been unhelpful but it does nothing to restrain the nominally autonomous public sector banks, the lending institutions, the credit card companies and even the private banks that also discriminate against the unorganised sector. They all prefer to lend to the safer bets but here too they stay away from categories of would-be borrowers described in the so called “negative” list.

The “negative list” includes journalists, lawyers, policemen, politicians, anyone connected with real estate and the stock market. All such people have to dissemble about their source of income to get as much as a credit card let alone a loan of any kind. And this when the country makes its external payments with the FII money that comes into the bourses, reduces the housing and office space shortage by virtue of all the entrepreneurs building housing and offices, and informs the electorate via the fourth estate!

Even if one concedes a natural fear of lawyers and policemen, should it form the basis for blatant discrimination? As for politicians, it’s just as well that most of the time and in most cases they don’t need bank money anyway. But it should be remembered that such discrimination does not diminish the whistle blowing and influence peddling potential of any of these people.

Others who have trouble getting a loan from anyone are, as always, the poor. That is why the Grameen Bank and micro-credit was born. Nobel laureate Mohammad Yunus of Bangladesh said he lends to the marginal and the forgotten that the World Bank won’t touch with a bargepole. But he has done it and turned it into a grand success story. We need it badly here in India, to extend credit to the poor honestly and differently from the traditional village money lenders of yore typecast for their venality in countless Hindi movies.

By way of contrast, we, in the cities, who are so conditioned to believe that Sensex and Nifty companies drive the economy and employ tens of millions need to be aware that in 1999-2000, for example, the organised sector's total contribution to employment was a paltry 8 per cent, of which the private sector's contribution was only 2.5 per cent. The remaining 92 per cent came from the unorganised sector.

So much so, that the Planning Commission estimates that if the organised sector, which includes the government and public sector enterprises (PSUs) grows at 20 per cent per annum and the private organised sector at 30 per cent per annum, their contribution to employment will increase by some 1.5 to 2 per cent of the total over the Tenth Plan period. Accordingly, in a burst of recently discovered pragmatism, the Commission has targeted the unorganised sector to achieve its Plan target of employment creation!

Ignoring the unorganised sector hasn’t stopped its progress. And like the charming and vital if arriveste actress Rakhi Sawant so delighted to hold forth one-on-one in Koffee with Karan recently, it will get to its objectives with or without official help. The smart thing to do therefore is get on with inclusion. And official policy may have just signalled its willingness to do so.

(1476 words)

By Gautam Mukherjee
Budh Purnima, May 2nd 2007
This and all original essays on GHATOTKACHSERIES are copyright 2005-2007 by Gautam Mukherjee. All Rights Reserved.