Friday, 29 April 2011

The Massive Flight of Capital

The growth of the economy at 9.5% sounds mouthwatering, but wait till the following views might serve as a spoiler, an eye opener, only to leave your mouths dry. Pun unintended.
With a 2 trillion dollar economy, bustling at 9.5%, ever wondered, why there is not much to see on the ground, barring a few shining islands of excellence that you see peppered around the country (read major metro cities) yet still running up a huge fiscal deficit that successive ministers/govts fail to rein in ?
Politicians and powers that be will always take refuge behind the reasoning of the country's mammoth population and the efficiencies/inefficiencies of the great democracy India is, to put to rest any one pointing to the lack of an efficient system, and importantly the lack of an equitable system.
Everyone in the country loves the idea of capital coming in to the country, be it through FDIs, stock markets, outsourced jobs et al.
If the people of the country are hardworking, talented, and enterprising, the political class, bureaucracy, and powerfully rich individuals have let the country down big time.
We talk of country-wide scams adding up to big numbers, all associated to some politico or another. My take is, siphoning money off by a few select individuals in power in international trade dealings, though ethically absolutely wrong, is not so much of an issue for us all, so far as the money stays in the country black or white. Read on...
Its the flight of capital out of the country, for good, thats worrisome.
We are a nation that was ruled by foreigners, and still reel under the influence of a colonial hangover. The powerful and the political class do not mind serving as the agents of loot for erstwhile and currently rich foreigners in this new age economy too.
Its called the art of global politics, that in the age of globalization makes it all the more justifiable for the country's power brokers to cement their individual global standing by appeasing and pleasing their western and now also the nouveau rich eastern masters.
There are several known channels from where the flight of capital out of the country is made possible.

- Slush funds making their way in and out of the stock markets.
- Highly leveraged complex financial instruments introduced into the country by foreign financial institutions to tap into the greed quotient of a bubbling economy, understood well by a few and very well by only a select few.
- Unaccounted money stashed away in Swiss banks and those lesser known CROOK'S Island.
- Shady non-transparent defence, power, energy deals.

While we all revel and celebrate in our new found status of a powerful emerging economy amplified by our own sound bytes, there's a backdoor virus thats eating away deep into the foundation of our economy.
The country's fiscal state is held to ransom at the hands of the political class, and a few wealthy individuals, who've known to get around the system by decoding well this messy system that this great country operates in.
Investments in defense deals here takes the cake from among the three key points listed above.
With spends that are a significant chunk of the country's GDP, several deals involve buying of military hardware from western nations that are outdated and/or non-usable in the western economies itself, and our government terms it as upgradation of our defense systems. To rub salt to injury, there's a huge premium paid to these mostly western suppliers, much more than the market price, to get these upgrades into the country too; recent Russian deals being a case in point.
I wonder how many RTIs are raised for information seeking defense deal details. Perhaps these deals qualify for special immunity against RTI due to its classified nature, and thats probably what makes it a classical "protected" loot.

While all of this happens, we Indians will continue toiling away, with little clue about the gaping holes that allow this leak from the country's exchequer.

To make matters worse, all of this capital outflow, also translates to inflation created more out of artificial suppression on the supply side and less on the demand side.
For a country the size of India, rich in resources and vast areas that can be developed in to cultivable agricultural land and new urban zones, the premium that land attracts in the country is unjustifiable, despite the large population.
Guess what? thats just another route for our hard earned money to get into govt. coffers first and then fly out of the country.
The same laws then also apply to rising food, fuel and commodity prices. The Iraq, Afghanistan war stories, unrest in the middle-east in the name democracy, is for all to see, but its for us to assess the real implications once the dust settles. Not too difficult to guess who is orchestrating all of that eh!!

Please loot if you really have to "hey politicians", but plz ensure that you don't enable the capital to make its way to a foreign land. You can run mini-economies with that loot within this large country itself, with tangible benefits that our country can accrue out of your talents.
Go global by all means, but think local, when it comes to reaping the fruits of your loot.

Thursday, 7 April 2011

Flavors of Fasting All The Way to Lokpal

Score : Anna Hazare c PEOPLE b GOVT at 72

Appears Anna Hazare and his supporters' "Fast-fest" is a big case of mis-guided optimism.
The poor man doesn't deserve to be in the line of fire and lead charge at this grand old age.
More than his fast unto death, the media is the noise maker here, much like it is in most hyped tamashaas. Media is terming it as the biggest revolution ever to happen since independence. Thats playing with the power of words to "bheja fry" a nation into believing crap bytes.
Sample this, minus the media out of this Fasting gimmick, and you'll see people going back to normal.
Strangely, there's also a feel good factor among the supporters here, unlike in other movements, where there is disappointment, and disgust writ large over the revolting class. And I believe, there's something to do with the economic well being of the country in general, and at the same time an envious mindset we're developing to the staggering sums we hear in scams and contracts. Almost gives many ambitious and/or greedy people in a high growth economy a sense of endless possibilities !!!!!
Point is, if the Lokpal bill was to be pushed to have an inclusive civilian involvement, which itself is not a big deal actually, we might as well have the new age media screw the govt in to submission, why bother dear old Anna Hazare ?
Create a strong civilian group with representation by media bigwigs and a few from the sporting world, some from the corporate world, amply supported by mass referendum via twitter/facebook/blog and get the govt's Lokpal version tweaked. Simple !!!
But its not as simple, cos the whole idea of thinking that an independent unbiased civilian element in the Lokpal is gonna change things for the better, think again. That most certainly will NOT be the case. The govts, bureaucrats, and set establishments have emerged from the society, and not fallen from the skies. Its people like you and me for heaven's sake !!
Bringing about a change in the form of Lokpal, thinking that it'll get a billion plus to fall in line is the height of foolishness.
Some moderates would say, "there has to be a start somewhere...we cant allow things to just slip out of hand !!", to which I'd say, getting order of the magnitude thats desired does not happen through a bill, but a mindset change. Till the mindset doesn't undergo change, there's nothing to stop even the appointed members constituting the Lokpal getting corrupted. Such if the effect of Power...
A case in point is our judiciary, which was created to be immune from such vice and evils has also fallen prey to this.
Now, how to get that mindset change is the moot point here, and there are several ways of getting that implemented, which I'll cover in another blog instance. Till then Happy Fasting !!!