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Modi’s Disruptive Innovation

 

In the field of business and technology, this is the era of disruptive innovation. Displaying his quintessential Gujarati entrepreneur’s character, Prime Minister Narendra Modi has unleashed the most disruptive innovation for the economy. He fully understands that India is a predominantly cash economy, and has thus withdrawn almost 86 per cent of the currency overnight. His decision to demonetise the high value `500 and `1000 bank notes is the boldest possible disruptive innovation to check the menace of black money.

 At once holders of black money are faced with a Hobson’s choice. Either they put the money in the banking system, follow the rules or that money is worthless paper. It is a win-win situation for the prime minister irrespective of the choice the holders of black money exercise. In either situation, the system would be flushed of unaccounted cash. It is nobody’s case that the entire high value currency represents the parallel black economy nor do we have any firm estimates of the black money, but in the process of demonetisation whatever percentage comes back into the system would signify a boost to the GDP, the revenue income and the taxation system. Besides, it would act as a booster dose to the debt-ridden banking system, with all the major banks either reporting losses or a decline in profits.
 
It is obvious that the move represents a significant disruption of the economy. While the attention is focussed on the hassles faced by the people who have to get the currency notes replaced or the problems in carrying out transactions without the assistance of currency notes (immediate payments at every point), the real impact of the decision would be felt by politicians, bureaucrats, real estate dealers, jewellers and diamond merchants - all people with a proven track record of handling large chunks of unaccounted cash. 
 
Now the penalty that has been proposed for those who declare more than `2.5 lakhs in their bank accounts that is not commensurate with their previous tax returns is the usual rate of taxation plus 200 per cent fine (this is akin to virtually confiscating the money) is likely to be a deterrent for the persons with black money. In the past when this route was used for unearthing black money in 1978 only 15 per cent of the cash came into the systems.
 
Observers point out that at that time the high value denomination notes constituted less than 10 per cent of the cash in circulation, but now this figure is as high as 86 per cent, so that cannot be a basis for comparison. But the move comes with a certain amount of pain, that is real and cannot be simply wished away. For instance, the farm sector and especially the one that deals with perishable products. This runs mostly on cash and if the traders do not have the cash to lift the produce from the mandis then the decline in demand would be real. Likewise, the problems of families that have marriage scheduled between November 10th and December 30th the cash crunch is simply crippling. Similarly, for patients admitted to private hospitals and with planned or unplanned surgical treatments that entail huge costs - cashless transactions are not an option. The other segment to suffer would be the small wage earner who is below the income tax bracket, and has substantial savings for future expenses. The limit for exchange of old notes is crippling for such people.
 
The only hope for such people is that the gain in terms of lower inflation is worth the pain. Or else it does not make much sense to call `500 a high denomination note, when you can buy just 2 kg of dal with it.There is a compulsion to have high value currency in the market, and this also explains the need to introduce `2000 notes to factor inflation (after all it is much easier to replace four `500 notes with a `2000 note) but it does not seem to inspire confidence that this would reduce the generation of black money.
 
The managers of the economy are fully aware that the denomination of the currency notes in circulation has nothing to do with the generation of black money. The system to check that has been less than efficient, and there is a real danger that the current demonetisation exercise may prove over time to be something akin to mopping the floor with the tap running in so far as curbing the menace of black money is concerned.
 
In the immediate future, the impact could be seen on the state assembly elections due in Uttar Pradesh and Punjab that even otherwise witness a play of liquor and money, and drugs in the case of the latter. Even if there is no real cash crunch as the politicians will continue to use high profile choppers and maintain their life style, the move would be a good alibi to starve the workers and the activists of the funds.
 
The author is the chairman, Editorial Board of Lokmat Media 
and former member of Rajya Sabha.

 

 

 

Bhopal shoot-out & the rule of law

 

 
 
It seems that by some unwritten law the long standing chief ministers of the Bharatiya Janata Party have to graduate as efficient administrators through a rite of passage - ruthless encounters. The bar had been set by the then Gujarat chief minister Narendra Modi to show that he had the steely resolve to take on alleged terrorists - Ishrat Jahan being the most notorious of them all.
 
So, last week when eight activists of the banned Students’ Islamic Movement of India (SIMI) escaped from the high security ISO certified Bhopal Central Jail and were shot dead in an encounter within an hour, there were no surprises. Chief minister Shivraj Singh Chauhan had just made the grade. He too had presided over the ‘elimination’ of dreaded terrorists.
 
If this sounds disturbing for all those who believe in the rule of the law, then the ‘nationalist’ discourse that followed these killings in the public domain shakes the belief in the fundamental values of our democratic ethos. The BJP argument ran thus: Those who were killed were dreaded, who have any sympathy for them? If left alive they would have committed more acts of terrorism and inflicted more pain on the society? So, instead of criticising the Madhya Pradesh government the Opposition should actually congratulate it. Of course, there was the usual stuff about the Congress playing to the gallery of minority appeasement as well. 
 
This combo - the killing and the argument - is the stuff that destroys the Constitution. We must remember that this is happening at a time when the Prime Minister Narendra Modi is second to none in holding the Constitution in highest regard. His words and the deeds during his dispensation only serve to highlight the dangerous dichotomy between the promise and practice in this regime. Needless to add, we must only go by the practice while respecting the words.
It should be remembered that we are a country that follows the rule of the law. It was this adherence to the rule of law that saw us wait for several years before Ajmal Kasab, the lone Pakistani terrorist caught alive in the 26/11 terror attacks, was hanged to death after the courts pronounced him guilty. May be public sentiment would have been pacified if Kasab too had been shot dead in cold blood. But then that would have been against the rule of law.
In killing the eight SIMI activists who escaped from the Bhopal prison, the Madhya Pradesh police has violated this rule of law. Governments are mandated to follow the rule of law, and not violate it. Similarly, political parties are expected to pull up state governments when they violate the rule of law. Fairness demands that they should discharge this role irrespective of whether they are in power or opposition. But in the current partisan political atmosphere, it is too much to expect that a party in power would criticise a government headed by one of its leaders.
 
The errors of omissions and commissions of the Madhya Pradesh police in this episode have been laid bare in the public domain by a flurry of amateur videos that have surfaced after the shootout. The cops are seen shooting the SIMI activists above the waist in gross violation of the guidelines that a fleeing person should be shot in the leg or below the waist so that he/she cannot escape. The idea being that the culprit should be caught alive so as to facilitate further interrogation. But the video evidence in the case of the SIMI shootout seems to suggest that there was a determined attempt by the cops to snuff out any signs of life that were visible to make sure that no one lived to tell any tale.
 
It is this determination on the part of the police that brings us to the first part of the SIMI saga. The police have told us that they did not have any firearms, but were armed with spoons and steel plates. Now it challenges your credibility to believe that eight dreaded terrorists could escape a high security prison merely with spoons and plates, and climb a 32-foot wall with the help of bedsheets - how did the bedsheets tied to another get converted into a taut rope that anchored itself to the high security perimeter wall that is electrified without anyone becoming aware of the escapade is a question that haunts every rational mind for starters. Then it is significant that Abu Faisal a SIMI activist who masterminded the 2013 Khandwa jailbreak and is still a prisoner in Bhopal was not a part of the escape plan. Then again it is also a coincidence that three CCTV cameras became dysfunctional on the night of the escapade.
 
All these anomalies are too cosy to hide the reality. In some or other form the authorities facilitated the jailbreak, and to ensure that no dirty secrets are leaked out, eliminated all the SIMI activists in cold blood. The probes that have been ordered by the state government into the jailbreak and the killing would tell their own tales, but the cold-blooded killing is there on the videos. Additionally, the minister for jails Kusum Mehedale has conceded the possibility of internal lapses in the jail.
The BJP as the party in power at the Centre has the responsibility to ensure that the Constitution is followed in letter and spirit. By whipping up popular sentiment, it may hope to gain some political mileage in some election or elsewhere, but its masters would do well to realise that they have climbed to positions of high authority basically because we have a Constitution and an adherence to the rule of law. Whatever be the short-term gains in subverting this rule of law, in the end it amounts to cutting the branch of the tree on which you are sitting. It is indeed a penny wise and pound foolish policy. But the danger to the society is that by the time this realisation dawns upon the rulers, a lot of irreversible damage would have been done.
 
Before I conclude
 
The NDA government’s decision to take off NDTV India for one day as per the orders of the inter-ministerial committee for its coverage of the Pathankot terror attacks can only be seen as an instance of the Modi Sarkar shooting the messenger for the sake of the message. No government has ever gained by strong arming the media, and the sooner this government realises this, the better it would be for all stakeholders. The order should be withdrawn, before the courts interfere with it.

 

 

 

 

Turmoil in House of Tatas

Succession issues in families, political parties and business houses have always demanded extremely skilled handling of the complexities involved. There can be no set formula for success, and every situation evolves itself depending on the way the players acquit themselves in the process.

It is an unfortunate reality that the great house of Tatas with its impeccable business reputation is now in a state of turmoil after the board of Tata Sons that controls the majority shareholding in the $ 103 billion conglomerate that makes everything from salt-to-textiles to software, decided to sack the 48-year-old chairman Cyrus Mistry in a move that initially appeared to be spontaneous but turned out to be a well deliberated decisive action by the Tata Sons board. If Mistry had exited quietly, then it would have simply been a matter of change of guards as his predecessor Ratan Tata had been appointed the interim chairman and a five-member search committee had been appointed to find a new chairman. But that was not to be.

Mistry sent a five-page email ostensibly to the board of directors to air his grievances but in this age of super-fast communication, it was all over the place. It was a virtual chargesheet against Ratan Tata and the core allegation being that Mistry was never allowed to function independently as chairman. Also included in this de facto chargesheet were the loss making business decisions with the high profile Nano project faulted for being continued due to emotional reasons.

Since then not a day has passed without some fresh allegation or defence of his actions from Mistry’s side with the entire effort being to show how he has been wronged. It has also been put out that four months before his ouster the Tata Sons board had recommended Mistry for a raise in appreciation of his fine performance. The Mistry supporters have also claimed that Ratan Tata was in the loop on the major decisions taken by Mistry as these were approved by the board where Tata is also a member. Now that all this is water under the bridge, the issue is not whether Mistry was right or wrong. The key point is as Ratan Tata says that the board decided that Mistry must go, and that was in the interest of the group.

The fact remains that now Mistry has to come to terms with his ouster. What sort of price he extracts for his final exit is a different matter.

It is not just the question of boardroom battles spilling out into the streets. With Mistry continuing as chairman of several group companies including Tata Motors, Tata Steel and refusing to step down there could be protracted legal battles with their consequent fallouts in terms of the image of the company and its impact on the stock market. Already, no one is enjoying the bitter aftertaste of the Cyrus-Ratan fracas.

The question of Ratan’s insecurity has been publicly discussed even before Mistry came on the scene. Even now corporate watchers have observed that as long as Ratan does not allow the next chairman to be his own man or her own woman permitted to grow on the job making mistakes and effecting course corrections there is a real danger to Ratan’s legacy. After all the next successor cannot be Ratan’s mirror image and would need the leeway to improvise and innovate depending on the contours of the challenges.There is the crucial question of the core values of the Tata legacy, and though for some this may be an abstract and elusive concept, no one working for the Tata group can claim to remain aloof from it. The Tata world view according to Morgen Witzel, a UK-based author of a book on the Tata companies is that shareholder value should not be an end in itself. As Witzel wrote: “Companies are not machines for making money. They exist to provide value and service to their communities; profit is a by-product of that process.”

From the point of view of a bystander not privy to the goings-on inside the boardrooms, it appears that a clash over this world view is at the heart of the present turmoil in Bombay House that has been the headquarters of the Tata Sons. It appears that Mistry was attempting to gradually transform Tata from a sprawling empire of middling businesses into a much more focussed profit-driven enterprise, but that involved decisions like axing businesses and jobs, moves that jarred with the Tata ethos. Beginning with Corus steel in the UK, there are many such ventures that came under Mistry’s scrutiny. One does not know the list of companies it would have included in the months to come, but there is a possibility that some brands and properties that have been built over the years could have also been axed. The fact being that over time, though the Tatas have built up a fantastic reputation, the size and the resistance to change meant that many of their businesses were not able to keep up with the times. Thus, Tatas may be using their profits for philanthropic purposes, but the inevitable question is what social good they can do if their businesses do not make profits?

But this rather academic debate should not detain us from the real question that the sound business health of the Tata group of companies has a wider element of national interest as well. It is not without reason that Prime Minister Narendra Modi met with both the outgoing chairman Cyrus Mistry and the interim chairman Ratan Tata after the decision to sack Mistry was taken. Ratan Tata also had a meeting with the Union finance minister Arun Jaitley. The government is also keeping a close watch on the developments.

For the present the legal battles or the boardroom squabbles may engage the public attention, but in so far as the Tata companies are concerned, Ratan Tata has set the right tone by exhorting the leadership of the companies to focus on their respective businesses, without being concerned about change in leadership. As a company spokesperson said: “He has asked Tata companies to focus on profitability, growth and enhancing shareholder value, and on their market position vis-a-vis competition rather than comparing themselves to their own past. He has said the drive must be on leadership rather than to follow,” and added that they should not be distracted by recent developments.

In the ultimate analysis, as the patriarch of the house and its elder statesman, the responsibility for finding and grooming a successor also rests on Ratan Tata’s shoulders. He would have to give the freedom to chart an independent course, and retain the trust to ensure that his counsel is sought at the appropriate moment. It is quite a judicious balance to strike, and given his experience and business expertise there is no reason why he should not be able to accomplish this task. That would end the current turmoil, and maybe usher in a new era. In the meanwhile, it would be a good thing if the Mistry affairs also ends without more muck-raking.

The author is the chairman, editorial board of Lokmat Media and a former member of Rajya Sabha 

 

 

Remembering martyrdom, but selectively?

 

 

 
A small reference in the upcoming autobiography of former foreign secretary of the country Shiv Shankar Menon has been published, recently. He writes that soon after the Mumbai terror attack in 2008, the UPA government was contemplating a direct attack on Pakistan. But it was thought that observing restraint instead of mounting an attack would be a better decision in view of the then domestic and international situation. It was a government in minority and there was no assurance that the international community would support India. If we compare the present times against that background what picture emerges?
 
Ever since Prime Minister Narendra Modi assumed the reins of office, he has been constantly visiting different countries of the world. He has not only visited the developed nations but also followed the ‘Look East policy’ of the former Prime Minister P V Narasimha Rao. Modi befriended most of the Islamic nations in the world. He enjoys a majority in the country and also moulded the international opinion in favour of India. After ensuring the inside and outside support, Modi gave full freedom to the army to conduct surgical strikes in the Pak-occupied Kashmir. The army showed an exemplary courage during the operations and hence it deserves our salutations.
 
Despite the army teaching a lesson to Pakistani soldiers, terrorists and government, the cross border mischiefs have not stopped. But now the Indian soldiers are crushing the evil designs of the cross border terrorists. Many former military officers are feeling proud and praising the valour shown by the Indian army and Modi government’s policy for supporting them. Not just army but even the ordinary Indian citizens are feeling proud. But did this happen for the first time in the country?            
 
Actually, the situation in the 70s was as favourable as it is today but the global situation was not that favourable then. Mrs. Indira Gandhi took note of the just feelings of the Bengali people of the East Pakistan and created an independent Bangladesh by asking the Indian army to act. The then US government tried to pressurize India to prevent the action and put its Seventh Fleet in the Bay of Bengal. Actually, it wanted to frighten India. But Indiraji remained firm and unshaken. Though India enjoyed the support of the then undivided Russia, it still required heart and courage for launching a direct military action. Indiraji displayed great courage and fortitude in creating Bangladesh. The entire country supported her action and held her in high esteem. The veteran statesman Atal Behari Vajpayee described her as ‘Durga’.        
 
When Khalistan movement in Punjab reached its peak, unleashing the unbridled violence, there was fear that it might lead to the division of the country. Again, Indira Gandhi herself took the bold step and commanded the Army to act. The Army flushed out the militants who had taken refuse there. Did she not have an idea of what its repercussions will be? She knew. She was aware that her life may be in danger. In fact, at a rally in Bhubaneswar (Odisha), she had spoken out about the danger to her life and unfortunately her prediction came true. The next day Indiraji was gunned down by Khalistani terrorists. It was October 31, 1984!
 
 How many people today are aware of the sacrifice made by Indiraji for the country? I am sure that millions of Indians who loved the great personality and her leadership skills are aware of her supreme sacrifice. But what about the Government? The other day Central government observed the National Unity Day on October 31 by paying homage to the Iron Man Sardar Vallabhbhai Patel. There is no question of denying Sardar Patel's contribution to the country's freedom movement and post-independence consolidation of the country.
 
He was the real Iron Man. But by the same yardstick, Indiraji was also an Iron Lady. But why is our government stooping so low as to push the memory of Indiraji into oblivion? History can be looked at from different aspects. But can history be wiped out or changed? If the sacrifice never goes in vain, then becoming selective about honouring sacrifice and trying to deliberately ignore somebody cannot undervalue the worth of sacrifice. It will only reflect poorly on the tendency of those indulging in discrimination.
 
What has been the fate of Indiraji is also the fate of Rajiv Gandhi. This government came to power on the basis of the media revolution. It was Rajiv Gandhi who was the father of the media revolution and he sacrificed his life for the country. Can the people who would not remember their ancestors, and lack respect for them, call themselves the sons of the country?
 
Before I conclude
 
During all his foreign tours, Prime Minister Narendra Modi invokes legacy of Mahatma Gandhi. Even in Varanasi, his Lok Sabha constituency, he mentioned the ideals of Bapuji. And it is good. However, Acharya Vinoba Bhave, who sought inspiration from Bapu and made lakhs of landless in the country landowners, is being consigned to oblivion. Why this double standard? Is it because Bapu has international recognition? After undertaking fast, Vinoba laid down his life in Diwali. I salute to his and Indiraji’s sacred memories.