Category Archives: View Point – Others

Are investors upset with the Modi government?

Is the market really upset with the government for not doing enough for the economy?

Rajesh Kumar, Mint 29/4/15


So far, the new government has done nothing but talk, and it is a shame because (Prime Minister Narendra) Modi had experience; he said he knew what needs to be done. He campaigned for many months saying he knows how to fix India, but he has done very little.” This is how veteran fund manager Jim Rogers, in an interview with Mint last week, assessed the performance of the Modi government, which will complete its first year in office next month. Rogers also added that he was getting disillusioned about India. (See: So far, the Modi government has done nothing but talk: Jim Rogers, 23 April.) Rogers is not the only one who is readjusting expectations; other investors, too, are doing so. The CNX Nifty, after touching an all-time high in March, is down about 10% since, and technical analysts are suggesting that it may fall further. So, is the market really upset with the government for not doing enough for the economy?

Many people in the market expected things to change dramatically after the Modi-led National Democratic Alliance government took office. In fact, the momentum in the market started building long before the first vote was counted on 16 May 2014. As a result, the benchmark indices gained about 30% in 2014, making it the best year for Indian equities since 2009. But in 2015, investor confidence seems to be dissipating, at least in some sections. Markets have fallen in recent days; the year-to-date gains for Nifty is almost nil. This is bound to make some investors nervous, especially those who came in late, and with hopes of making quick money.

However, the basic issue is that companies’ earnings haven’t matched the expectations of investors and analysts. The quarterly result announcements for the three months to March have so far been disappointing. An analysis published by this paper showed that the aggregate net profit of 101 companies that have declared their numbers fell by 9.23%, their worst performance since December 2012 (see: Fourth quarter results paint a grim picture, 27 April).

But this performance is not necessarily a consequence of what the government has done (or not done) since coming to office. For example, the uninspiring show by companies in the information technology business practically has nothing to do with how the government has performed over the past one year. The basic problem is that the turnaround in corporate profitability is taking more time than analysts had expected and, as a result, some investors are once again beginning to see other structural problems in the economy. “Even if Modi comes through, India’s bureaucracy is so entrenched, so powerful and so staggering. India does not have the education, infrastructure and work ethic that China does. India is a chaotic democracy—democracies can be extremely successful, but not chaotic democracies. In my view, India is not a terribly rational country. I would suspect more and more people in India will start to get impatient, and not just its youth who need jobs,” Rogers said in the above-mentioned interview. Clearly, these problems are not new, but if some investors expected these conditions to change in a year, they probably need to recalibrate their investment strategy.

Investors, overwhelmed by the Bharatiya Janata Party’s majority in 2014 election, had pushed stock prices and valuations in the expectation of big bang reforms and a possible cyclical upturn in company earnings. And both didn’t happen. On the economic reforms front, it is now clear that the government will move incrementally. In fact, the Economic Survey 2014-15 argued that big bang reforms normally happen in crisis situations. “Much of the cross-country evidence of the post-war years suggests that big bang reforms occur during or in the aftermath of major crises…. India today is not in crisis, and decision-making authority is vibrantly and frustratingly diffuse,” said the survey.

An incremental approach is not a bad thing, provided there is steady movement because in the end it all adds up. Investors can always argue that things could have been better, and they will not be entirely wrong, but it is also true that there has been progress on the policy front. In addition, lower oil and commodity prices have helped. But it appears that earnings revival will take longer than analysts have been anticipating. Crop damage due to recent unseasonal rains and the possibility of a poor monsoon can delay the process. This can also shift resources and government attention to the rural economy, which can affect market sentiment in the short run.

At a broader level, investors shouldn’t worry too much about the ongoing correction in the market as it will take out some froth and open up opportunities to buy good stocks at reasonable valuations. Seasoned investors, both domestic and foreign, would agree that India is a long-term story. Indian markets have satisfactorily rewarded long-term investors in the past and there aren’t sufficient reasons to believe that they won’t in the future.

In fact, conditions in 2014 weren’t as good as markets were portraying them to be and, perhaps, they are not as bad as some commentators are interpreting them to be this year.


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SEBIs Tightrope Walk

The market regulator is trying to strike a balance between what is good for the government and what is good for investors and markets at large. They are often not the same thing.

Aarati Krishnan, Business Line 23/4/2012


Ever since the government began to take an active interest in the stock market, life has been made difficult for India’s market regulator.

The Securities and Exchange Board of India (SEBI) is constantly walking on eggshells, trying to balance between what is good for the government and what is good for investors and the markets at large.

They are often not the same thing.


It started with the government coveting the ‘idle’ cash balances of PSUs. Taking stock of cash held by listed PSUs, the powers-that-be turned chary of sharing all that booty with public shareholders.

Why not have PSUs buy back shares from their promoter alone? – came the bright suggestion. Now, selective distribution of profits by a listed company to its promoters strikes at the very roots of minority shareholder rights. So SEBI was forced to scotch this plan.

But it did come up with an alternative. In January, it quietly tweaked its share buyback rules to say that, if one set of shareholders don’t participate fully in a buyback offer, the company could mop up more shares of others.

Now, what this means for retail investors is that if they fail to tender to a buyback offer, the promoter may avail more liberally of it. Isn’t this convenient for PSUs which launch buyback programmes?

Then, there was the problem of the lacklustre primary market, which made it very difficult for the government to offload its stakes in listed PSUs. With retail investors plainly disinterested and foreign institutions barely participating, how could these offers be pushed through?


Promptly came SEBI with the idea of fast-track offers for sale and institutional private placements — two new routes that allow promoters to sell their shares without having to reserve quotas for retail investors.

Age-old procedures for follow-on public offers — offer documents, detailed disclosures, price discovery through book-building — were dispensed with.

So was the ideal of broader ‘public participation’.

Instead, listed companies were allowed to put through quick ‘sales’ to select (domestic) institutions.


However, the latest regulatory move, where the government’s priorities are at loggerheads with investors’, is the Rajiv Gandhi Equity Savings Scheme. This scheme, mooted in the Budget, is the government’s brand new idea to revive retail participation in the stock market.

The scheme is yet to be notified, but details trickling in so far indicate the following:

Retail investors are to be wooed into stock markets through a tax exemption on their initial investment. Open only to those who earn an annual income of up to Rs.10 lakh, this scheme will provide an upfront tax exemption of 50 per cent on investments of up to Rs.50,000 in equities in a year.

Only first-time investors are eligible. Investors would need to open a separate demat account to participate in the scheme.

Brokers may be asked to provide ‘no-frills’ demat accounts, carrying zero upfront charges and annual charges of less than Rs.500, to encourage small investors to sign up.

The investments would carry a minimum lock-in period of 3 years. Recent reports suggest that it this could be reduced further, to one year.

Only PSU stocks or the top 100 companies may be eligible for this scheme.


Now, many of these proposals militate against what is good for retail investors and the long term interests of the stock market.

To start with, if one must lure first-time investors into the stock market (and why they should not be allowed to come in at their own pace, is not clear), direct equity investing is hardly the vehicle to do this.

Direct bets on equity, even the top 100 stocks, are not for the casual investor. In these days of high uncertainty, stock portfolios require careful selection, close monitoring and prompt action to deal with the many regulatory and business risks that hit companies with alarming regularity. For first-timers, routing the money through diversified mutual funds would be much better. That would also allow an investor to deploy money in equities in a phased manner through systematic investment plans. A lumpsum bet on stock markets can deliver poor returns, if the timing of entry is wrong.

Two, the heavy tax breaks offered may tempt the wrong sort of investors into putting money in stocks. If a retail investor is to stay on with equities, he must be comfortable with the risk that comes with it – that of capital erosion.

The upfront tax breaks may prompt risk-averse investors to take on equities unsuitable to their portfolio.

Same argument for the ‘no-frills’ demat account. If a person can’t afford the upfront charges on a demat account, must he be investing in equities in the first place?

Three, to sustainably increase retail participation in the stock market, investors must have a good return experience.

With boom-bust cycles in the Indian stock market typically lasting for three years, a person may need to hold on for five years at least to earn respectable returns. Investments with a 1 or 3 year horizon are likely to leave investors disappointed.

Finally, the main problem with the Indian equity market is that it already has too many short-term investors. It has taken a pretty long time for the Indian mutual fund and insurance industry to convince retail investors that equities are rewarding only if held for the long haul. Must we undermine this message?

SEBI has in fact been propagating precisely this, in its own communications to investors. ‘Don’t dabble directly in stocks if you don’t have the expertise. Use the mutual fund route and hold for the long term.’

But then, encouraging retail participation through the mutual fund route doesn’t help the government’s share sale plans. And now that it has made it clear that it wants direct retail participation, SEBI may not have much choice. It may have to step up to the plate and come up with a sub-optimal solution, yet again.


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6 Reasons Why I Don’t Invest In The U.S. Stock Market

found this Interesting Perspective… read on…

Auren Hoffman, source:

It has been conventional wisdom for the last 50 years that if you are a long-term investor, your best return will be in stocks. Almost every financial advisor will tell a 30-year-old to put upwards of 90% of their portfolio in equities.

Most people above median wealth have a substantial allocation of their liquid portfolio in the stock market. Some people pick individual issues (Apple, GE, Wal-Mart, etc.) and some invest in managed mutual funds (Fidelity, say), while others invest in index funds (the Vanguard S&P 500 fund, for instance).

Stocks are less than 10% of my portfolio. This is a long article (read time is going to be at least 12 minutes) but I implore you to read it in full.

“Never invest in a business you cannot understand.”Warren Buffett

That’s great advice from the Sage of Omaha. But we should take it a step further:

Never invest in a security you do not understand.

So the question is: do you actually understand the stock market?

Prices of stocks seem to be a mystery to even the most experienced investor. There are often market swings of over 1% per day.

Supply and demand

Most investors argue that fundamentals (like expected earnings) drive price. That doesn’t seem to be a complete explanation as we have had a market which has basically remained flat since the late 1990s.

The best explanation, beyond “fundamentals,” for long-term market movements: supply and demand. In this case, “supply” is the amount of total stock for sale and “demand” is the total dollars looking to buy those securities.

The key factor here is the demand. While supply (investible stocks) does change, its change is very small relative to the demand (amount of money looking to invest in the market). So as more money goes into the market, the market goes up. If money is coming out of the market, then the market goes down. It is basically that simple.

To properly be a long-term stock market investor you need to read the mind of the public. You should only put your money in the stock market if you think everyone else will keep money there. So to inform your portfolio allocation, we want to figure out if money is going to flow into the market or leave the market over the next 30 years.

Let’s examine the six key factors why money might be leaving the U.S. stock market:

  • 1. Retirement Savings

Retail investors, via their 401(k) retirement plans and pension plans, are one of the largest groups of investors in public stocks. One of the big reasons the market has been flat over the last 15 years (and not collapsed) is because so much retirement money has come into the market. Most of that money is held by people who are close to retiring and will likely be coming out of the market, albeit slowly, over the next 30 years.

Asset allocation would suggest that people should shift away from equities as they get closer to retirement. I don’t have data on this, but I would guess that most boomers still have over 50% of their portfolio (excluding real estate) in equities (even after the 2000 and 2008 crashes). This is way too high. Since many of these people are counting on the retirement income to live, they might flee from the volatility of the stock market and move to safer investments.

Robert Arnott, chairman of Research Affilitates (and an asset manager for PIMCO), recently said: “The ratio of retirees to active workers in the U.S. will balloon. As retirees sell stocks and then bonds to support themselves, there will be fewer younger investors to buy those securities, keeping a lid on prices.”

  • 2. Globalization

Globalization has been a huge boom to the market over the last 30 years. Today it is easy for anyone in the world to buy U.S. stocks; America has historically been the safest place to put your money. Because of this, we’ve seen a massive influx of capital from all over the world, and especially from oil rich nations that need to invest their profits in an historically safe environment.

But globalization is a two-way street. While the U.S. stock market has been a huge beneficiary of globalization over the last 30 years, it could be its biggest loser in the next 30. Today, it is becoming much easier for Western investors to invest in high-growth countries like Brazil, China, South Africa and India. And while I personally don’t invest in emerging markets funds (save that for another article), millions of investors will be drawn to the potential returns of these high-growth countries.

Globalization also means increased competition from old entrants as well as start-ups. New companies are disrupting old but profitable businesses – sometimes by giving away core products for free. We see that time and time again, the top companies are getting their lunch handed to them by new entrants. In every major field (including software, computers, energy, retail, media, defense and pharma), established players (those that had the highest market maps) are getting squeezed by the little guy. All this means that the average time a company will be a member of the S&P 500 should drop significantly.

All indications are that as the world gets more interconnected, it is also getting more volatile. We should see many more bubbles and more ups and downs as capital can zip around the world in nanoseconds. This volatility could be the enemy of the buy-and-hold index investor who is at the whim of much more sophisticated global banks.

  • 3. Technology companies

In the ’80s, ’90s and 2000s, tech companies drove a lot of the market growth.Microsoft (in 1986) and Dell (in 1988) went public while they still were extremely fast-growing companies and public market investors were able to ride the growth upwards. Even recent IPOs like Google (2004), Salesforce (also 2004), and Amazon (1997) went public early enough so that investors were able to participate in substantial gains as the companies grew. Remember that Amazon wasn’t profitable until 2001, four years after it came public.

Today, because of the abundance of private equity capital and regulations like Sarbanes-Oxley, tech companies are going public much later in their development. Companies like LinkedIn and Facebook were able to delay their IPO by 2-3 years because they had access to late-stage private equity. And while biotech firms are still going public before they are profitable, we will likely see more and more companies waiting to list. In today’s world, public market investors do not get as much of the benefit of a company’s early growth (most of that benefit will be going to private equity funds). So one of the biggest growth drivers of the market, hot tech companies, is being substantially reduced.

  • 4. Taxes

Stocks have been a very favorable investment because gains held over a year are taxed at the lower cap-gains rates and the taxable event only happens when you sell a stock (and many people can do tax arbitrage by selling their losers).

Long term capital gains taxes in the U.S. are near an all-time low. In the 1990s and 2000s, we saw a substantial decrease in the rate of capital gains taxes while taxes on ordinary income have remained basically flat on upper-earners.

One prediction we can confidently make: cap gains taxes are not going to go down further in the next 30 years (even though many of us would like them to). More than likely, we will see a rise in taxes on cap gains – especially on the upper-earners who control most of the money in the market. When this happens, stock gains will look less favorable and it will be another reason for people to rebalance their portfolio away from public stocks.

  • 5. Interest rates

Can interest rates be near zero forever?

Clearly the answer is no. At some point, the U.S. government will need to inflate itself out of its massive debt. In any scenario, interest rates can’t get any lower. When interest rates rise, future earnings of companies will suffer (and if that is not already factored into the price, stocks will fall).

  • 6. You are already over-correlated to the stock market

If you are reading this article (and you have gotten this far), you are probably part of the population whose job is over-correlated with the stock market. If you are in technology, finance, real estate, law, consulting, or in most of the other top-earning professions, then your future income and job security is probably very tied to the stock market.

If you do invest in the stock market, you need to have the ability to ride it out for the long haul (ride the ups and downs). If you are in a profession that is over-correlated with the stock market, you’ll have extra income (you’ll want to buy) mainly when the market is really high and you’ll need income (you’ll want to sell) mainly when the market is down.  You won’t be in a position to take advantage of the long-term market trends (and likely that others in the market will take advantage of you).

All this is not to say that you can’t make money in the stock market.

Some professional traders will be incredibly successful. But the traditional “buy and hold” strategy seems like it is going be “hold and lose.” When the stock market fails or remains flat over the next 30 years, our entire society’s savings strategy will need to be recalibrated.

You should only put your money in the stock market if you think everyone else will keep money there. If you think some people are going to start fleeing the market, then you should make sure you flee first.

But I want to make out-sized returns!

The best way to get massive returns is to invest in yourself.  Start a business, join a fast-growing company, or become the newest singing sensation. If you believe in yourself and your talents, focus on things you can control rather than things, like the stock market, that you can’t.

Special thanks to Stephen Dodson, Jeremy Lizt, Travis May, Patrick McKenna, Ken Sawyer and Michael Solana for their willingness to debate me on this issue.


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Free Based or Fee Based

A savings-only approach may not help you achieve your financial goals

SAIKAT NEOGI, The Financial Express 21/2/2012


A financial planner should not be in the business of guaranteeing returns, says Noel Maye, chief executive officer of the Financial Planning Standards Board (FPSB), a global organisation that offers the certified financial planning licence. In an interview with FE’s Saikat Neogi during his recent visit to India, Maye says, instead, the planner should help the client define financial and life objectives and needs, and develop a plan that takes into consideration the client’s current position, tolerance for risk and goals, and the current market environment and likely inflation.

How does an individual who is trying to secure his future get tailor-made solutions from a financial planner in a cost-effective way?

While managing costs is a key part of personal budgeting, it’s equally important to spend appropriate amounts of money on the right things. When it comes to choosing a financial planner, Indian consumers should interview more than one, obtain information, such as that listed on FPSB’s website, including information on compensation, and, then, select a financial planner with whom they feel comfortable and who is qualified to address their needs. It may be that the consumer wants guidance on a particular area of his life, and he can manage costs by focusing the engagement on that particular topic. The planner in addressing that issue should take into consideration all areas of the client’s financial life before providing recommendations.

How do you think the role of financial planners has changed after the global economic crisis?

The global economic crisis has highlighted the drastic impact unexpected events and unknown risks can have on a person’s financial position and ability to achieve life goals. It has provided an opportunity for consumers to focus on their preparedness for various financial and life events, and highlighted the value of having a financial plan and working with a qualified, competent and ethical advisor, such as a certified financial planner professional.

Given the volatility in every asset class, how can a financial planner give inflation-adjusted returns?

A financial planner should not be in the business of guaranteeing returns. Rather, he should help the client define financial and life objectives and needs, and develop a plan that takes into consideration the client’s current position, tolerance for risk and goals, and the current market environment and likely inflation. The planner should understand the nature of the products that will be used by the client to achieve investment strategies and how those products are likely to perform in the face of inflation. Through regular meetings, the planner and client can agree on any adjustments needed to address inflation or other developments.

While savings is an integral part of Indian households, how can one gain financial security through smart choices of financial products?

The most important aspect, for both the financial planner and the client, is to understand the function of each financial product and how it supports the client in achieving financial and life goals. Equally important is for the client to understand how a savings-only approach may prevent them from reaching financial goals, and the role various financial products can play in helping grow and preserve financial stability and wealth. Financial products should be the means used by the planner to help the client achieve financial well being, and only appropriate products should be recommended to the client.

Most Indians are used to free advice and the intermediaries earn commission. How can the model change and what is the global experience?

Most Indians do not realise that when they are paying commissions and getting what they consider is ‘free’ advice, the cost of the advice/service from the financial adviser is already included in the commission. Advice isn’t free; consumers just don’t know that they’ve paid for it and the amount they’ve paid. FPSB advocates a fiduciary-like obligation for financial planners to put the client’s interests first, disclose costs and fees, and manage conflict of interests. Clients should know up front all initial and ongoing charges and fees relating to a financial engagement. Globally, consumers are increasingly prepared to pay fees for advice once they understand a financial planner works in the client’s interest.

With conventional ways of investing seeing a paradigm shift, how should one look at retirement planning?

Traditionally, financial advisers have seen a person’s work life as the time to accumulate wealth and retirement as the time to disburse wealth. But with many consumers spending more time in retirement than in workforce, it’s critical that clients approach retirement with strategies that can carry them through 30 years of retirement. Also, many retirees want to live active lives in retirement and may take up part-time jobs, so old assumptions of the percentage of prior income needed or withdrawal rates may not hold.


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From ‘India Shining’ to ‘India Stinking’

From ‘India Shining’ to ‘India Stinking’

By M D Nalapat, source: Fwd Email

DURING 1947-92, those businesspersons in India permitted to undertake their trade by the colonial governance structure retained by ‘Father of Indian Democracy’ Jawaharlal Nehru were unsure as to how long they would be permitted by the authorities to remain in business. At any point in time, their businesses could be taken over by the state or its agencies, their funds confiscated and even their liberty extinguished.

All this was facilitated by the British-era laws continued past “Independence” by Nehru. At the same time, neither the primitive infrastructure and communication systems that were in use during this period, nor the regulations introduced by him and his successors encouraged sufficient expansion in the size of operations to benefit from the economies of scale. Of course, while local technologies were primitive, import from outside was blocked except to a handful.

Hence the focus of the mercantile community in India’s Nehruvian democracy was to (i) make as much profit out of (ii) as few units as possible (iii) in as little time. The result was economic stagnation. The consumer suffered while the middleman flourished. Now, after seven years of what may most accurately be termed the Maino Era — which is in tone and content a close cousin of the Nehru era—a similar situation has once again descended on the Indian economy. Knowing that the prosperity—or indeed the survival—of their businesses hinge on the inclinations of The Madam and those fixers and manipulators in her confidence, businesspersons in India are being forced to return to the mind-set of the first three decades of “freedom”, that places a premium on a cap on growth combined with a concentration of effort on managing the “governmental interface”, rather than tending to business operations with care and consistency so as to compete globally. Even more so than during the Nehru Era, in the Maino Era those who are favourites of The Madam and her courtiers get huge windfalls despite their rapacity and incompetence, while the others languish. Small wonder that India Shining has by now got converted to India Stinking. In just seven years, Sonia Maino has saved Europe the nightmare of competing with a tigerish India Inc just when it was losing ground to China Global.

An economy depends on its future on those who are efficient and innovative. However, such people are swept aside in the Nehru-Maino Eras by those whose only expertise is in greasing the palms of the powerful. Most of such operators are asset strippers. An example is coal, which was nationalised by Indira Gandhi in the 1970s so as to serve as a cornucopia for politicians and officials. While all subsequent governnents have given away this precious natural resource for a song, none had done so on the scale of the UPA. During the NDA period, an allottee of a coal block had to be running a power plant, or some other unit requiring large amounts of coal. Under the direction of their political masters in Congress HQ, the Manmohan Singh ministry did away with this requirement, instead alloting coal to favourites who had merely to “promise to set up a power plant” later. None of the Maino favourites who were given coal blocks during the years just before the 2009 elections have thus far generated even a kilowatt of power. However, they have since been allowed to sell the coal in their possession on the market, thereby getting a return of several thousand per cent on their investment. As most orders were conveyed orally, the official then within the PMO who ensured that the AICC core was kept satisfied on the issue of coal blocks has little reason to fear that he will be held accountable for placing the interests of the party leadership over that of national needs.

While Andimuthu Raja is now in jail—and hopefully will remain there for a long time, unlike other well-heeled folk who usually escape after a few days or weeks of incarceration — it needs to be remembered that Spectrum was given away almost free of cost by previous Telecom Ministers to a handful of companies, who enjoyed a monopoly for more than a decade. During this time—and despite the free Spectrum—they imposed a high cost regime on the consumer, and blocked efforts at reducing call charges. Even such everyday advantages as Mobile Number Portability were blocked. The TRAI functioned more as a PR instrument for the telecom operators than as a consumer protection agency. It was in the disgraced Raja’s time that more players were permitted into the telecom market, and of course, they must have paid for the privilege. For reasons that are obvious, even the new players initially paid very low sums for Spectrum, although more than the piffle they parted with in the past, at least on record.

What needs to be done by the JPC is to investigate the gift of Spectrum since 2001, and to ensure that those who gained this advantage finally pass on the bulk of this benefit to the consumer. Both the JPC as well as the Supreme Court-monitored CBI need to investigate the functioning of TRAI as well, as there are credible reports that the agency has often been suborned by those it is supposed to oversee, just as ONGC has been regarded as being since the 1970s, sabotaging crude oil production rather than boosting it.

In a system where the only rules of the game are decided by the few who rule, there is a deliberate absence of direction. There is drift, because only such ad-holism can create the massive bribes that are these days flowing in unprecedented profusion to offshore banking accounts. There is confusion in both policy formulation as well as in its implementation, and the Maino Era is marked by the withdrawal of those mandated by the Constitution of India to administer from any pretension to leadership. The resultant vacuum in policy and implementation has got filled by decisions taken in an ad-hoc manner by officials and politicians close to the ruling establishment. Each such action has been designed to favour select beneficiaries.

In agriculture, which is still the major employer in a country that has for long limped in comparison with that other Asian giant, China, ever since the 1920s, only middlemen have taken away the cream. The deliberate neglect of the creation of effective storage facilities, and the absence of transparent markets and adequate credit, have meant that farmers have been forced to sell to those who savagely add markups of 400 per cent and higher on the crops that they purchase. Only a few “political” farmers benefit, while much of the rest have the option of suicide or starvation. Clearly, such a situation is not cricket, and yet it has deliberately been allowed to continue, so that speculators and profiteers—including some large companies—can benefit through artificial scarcity, the way their progenitors did during the 1943-44 Bengal famine. Millions died during that tragedy, and because of that catastrophe, a few traders became billionaires. Of course, they gave over a tiny part of such famine-created to the Congress Party and to the Mahatma, who never lacked for affluent friends willing to host him and those—including dedicated young men and women— who accompanied the saint wherever he travelled.

Increasingly, the Maino Era is beginning to take on the contours of British India. Then, as now, the functions of governance were to choke off innovation and enterprise in India, except for the few favoured entities linked to alien interests, so that industry in Europe would be protected from competition originating in India. Another characteristic of British rule was to make the accumulation of revenue the sole—rather than just the primary —purpose of governance. This is exactly the approach introduced by Palaniappan Chidambaram in the Union Finance Ministry in 2004. Another feature of colonial rule was to give back substandard facilities and zero social security, or precisely what is the case now.

The 99.998 per cent of the population not blessed by the Maino Court is forced to endure power cuts in heat waves, get spondylitis by bumping along “roads” that would make the surface of the moon look smooth, and watch helplessly as state-funded schools and hospitals are such that no rational human being would be satisfied by them. If since 1992 the private sector was given some freedom, including the education sector, this is now being taken away, so that private facilities will fall to the same standard as public. This is the paradise made available to those who pay more than 70 per cent of their income in taxes, if we club the higher rates of income-tax with service tax and taxes on commodities. In other words, 70 per cent of the income earned by an individual is spent on a governmental system geared towards the interests of those few families wallowing in the benefits that come with power in the present era, and 30 per cent on the taxpayer himself and his family. Naturally, such a state of affairs suits elite politicians, including those in the so-called Opposition, as they know that the merry-go-round of Indian politics should ensure that they have their chance at amassing illegal wealth within a relatively short time. In the meantime, they can disappear on their holidays in London or Miami.

A decade more of such “governance”, and the people of India will once again be as dependent on foreign shores as they were in the 1930s. Not accidently, an effort is now on to ensure that private education in India cease to challenge schools in the UK or elsewhere favoured by the elite. Soon, private hospitals will follow. Government-mandated quotas and restrictions will destroy quality education and health care in India, so that those seeking such standards will need to once again go to the US or the UK for treatment. This will gladden the hearts and fill the wallets of those such as Lancet, who seek to demonise Indian health care in order to protect their own monopolies. Over the past few years, standards in India are being pushed down leaving China as the only Asian giant still posing a challenge to the dominance of the US and the EU.

As if to mock the people of India, favourites of the Maino Court write multiple tomes about how Jawaharlal Nehru “brought democracy” to a heathen populace. In fact, Nehru ensured that the substance of democracy was eliminated, and that only the form remained. The laws, institutions and procedures that served the British so ruthlessly and faithfully for more than a century were protected in their entirety. As in the British era, discretion belongs to the State, obligations to the people. Whether it is an individual or a corporate, any of several dozens of officials can convert life into hell, all for lack of a bribe. In the past, during the British Raj, whites were regarded as being divine, able to handle any task. These days, the “honorary whites” are the Central Services. An IAS officer is presumed to be able to competently handle anything from Agriculture to Science to Commerce. The situation in the country shows that Nehru’s insistence on retaining the colonial structure and rules and laws in a so-called “free” India was an error of historic proportions. We need an IAS seeded with people from industry and academe, together with those taking a civil service examination. We need such examinees to take 3-year sabbaticals in industry and elsewhere, not at the top (as at present) but in far lower levels. These days, the only passion of the IAS and the IPS is to insert their people into as many nooks and crannies of the governance system as possible. Small wonder that the country has remained desperately poor even seven decades after “freedom”.

Natural resources, including land, are taken away from the poor and handed over to those adept at carrying suitcases of cash around. The reality is that the people of India are still bound in colonial servitude. Only the substitution of the British colonial system continued by Nehru with a genuinely democratic one can ensure that the people of India get freed from slavery. Till then, for those outside the ranks of the privileged, it will continue to be India Stinking. Only the Friends of Maino will enjoy the benefits of India Shining.

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