CONSTITUTIONAL AMENDMENTS

In 2003, the BJP felt that popular support was slipping, and thought of amendments to the Constitution to make their hold more secure. Luckily, nothing came of the amendments. This column was published in Business Standard of 29 April 2003.

MAKING DEMOCRACY SAFE FOR THEMSELVES

The central cabinet has proposed three amendments to the Constitution. The first would overturn the amendment passed under Rajiv Gandhi, under which a member of Parliament or a legislature forfeits his seat if he defies the party whip, unless the defiance comes collectively from a group which has at least one third the strength of the party. Instead, it proposes that the member would forfeit his seat under all circumstances.

The second amendment would restrict the number of ministers to a tenth of the strength of the legislature or seven, whichever is higher. It is not clear whether the strength referred to is the strength of both houses together, where they exist, or only one; just now it looks as if it will be the strength of the lower house.

Under the third amendment, assembly seats would be delimited using the population figures from the 2001 census.

All three amendments are political dirty tricks. First, the amendment that would ban defections. It is really proposed to keep the BJP from shrinking into insignificance – of suffering the fate of the Congress – in UP. For UP today has a chief minister who proudly exhibits a shameless lack of scruples. She has been recorded as telling her MLAs to give a commission to her party from the bribes they would accumulate out of projects financed in their constituencies out of their budgeted quota. For exposing her, she has filed criminal cases against the leaders of the Socialist Party and set the stage for their imprisonment.

She has once before been in coalition with the BJP. At that time she had made a pact with the BJP that she would be chief minister for six months, and then give over the chief ministership to the BJP for six months. She reigned as chief minister for six months in which she made umpteen transfers for consideration that can be imagined, and then broke the pact and the government. The BJP leaders would have to be advanced amnesiacs to trust her an inch. Still, they have forced the state BJP into a coalition with the BSP to share in the loaves and fishes of power.

But in the intervening five years, Mayawati has gained in ambition and guile. She broke the Congress legislature party and lured away half its MLAs by offering them four seats in the ministry; just to underscore the signal that she is arbitrary and hence powerful, she left out the dissidents’ leader in the cold. She is in danger of losing the support of Muslims to the SP because of her cohabitation with the BJP. To prevent that, she has tried to put the leaders of the SP in jail. Although she was elected almost a year ago, she has called the assembly to session only once – when a cooperative speaker declared a vote in her favour without any vote having taken place. Even her most sympathetic observers must wonder: would she stop at anything? If they are in the BJP, they will wonder, will she hesitate to do to the BJP what she did to the Congress – lure away its MLAs, and then throw it away like an empty plastic bottle out of the coalition?

It is that thought, that fear, that has prompted the NDA cabinet to propose that anyone who votes against the party whip must lose his seat. Earlier, the BJP had shown much enthusiasm for a section in the German Constitution under which a government, even if defeated on the floor of the house, does not have to resign unless an alternative government is voted in. Then, when Mayawati showed her colours, the BJP lost its enthusiasm for this provision: if she chose to break the government by unmentionable means, she would arrange well in time to put another government in place.

It is ironic that an amendment to limit the size of ministries should come from a Prime Minister who created the largest ever cabinet in independent India’s history. Why he did so is well known: he wanted to reward as many footling parties as possible so that he could cobble together a majority. Just what Mayawati did when she gave what she felt was disproportionate representation to the BJP in an equally oversized UP cabinet. When it suits the BJP, it would put every MP or MLA supporter into the cabinet to form the government. And it does not have to do that. Narendra Modi has put a number of his MLA supporters into chairmanships of state corporations with ministerial status. That gives them a car, a house and chaprasis, as well as an empire to lord over. And those positions, which are ministerial in everything except in name, would be untouched by the amendment proposed by the NDA cabinet. These politicians are clever. Or they think the electorate is stupid.

And the amendment to delimit assembly constituencies on the basis of the 2001 census is in reality an amendment to delimit them on the basis of the 1971 census. For that census is the basis of the present constituencies; the results of the 2001 census will not be out till the end of this year, so all the state elections this year will be held on the basis of the 1971 election. Why? Because constituencies that have been the strongholds of BJP leaders in Delhi for decades will be redrawn and become marginal. That much is known; the leaders pointed it out to their central leaders. What is not certain, but likely, is that the BJP would get fewer seats in the assembly elections if the boundaries were withdrawn.

But this is nothing compared to a constitutional amendment this government has already got passed: right till the 2036 elections, parliamentary constituencies will remain the same, delimited on the basis of the 1971 elections. Why? Most leaders cultivate a constituency: the Gandhi family cultivated Phulpur and later Amethi, Vajpayee, a true backwoodsman from Madhya Pradesh, has cultivated Lucknow, and Advani, who does not know a word of Gujarati, is in the process of creating a fortress in Gandhinagar. They like the electorate they have cultivated to remain unchanged from election to election. They do not like redrawing of constituency boundaries. So the demographic changes in sixty years will not be reflected in election results till 2036.

I once went to see an ex-Prime Minister in Jamaica. He made me wait, because he was anxiously listening to the radio: there had been a gunfight between his followers and the police in his constituency. What they do over there is to recruit an armed gang; it throws out from a constituency all opponents of the politician – turns it into a garrison. Over here, we do it by “constitutional” means. But the impulse is the same: politicians want to make India safe for themselves, even if they make it unsafe for democracy thereby. They will try their worst to stick on to power – all we can do is to throw them out at the first opportunity. The Jamaicans almost never vote a party back into power.

HOW TO MAKE INK

Ever since I visited the Volkswagen assembly line in Wolfsburg as a student in the 1960s, I have been a connoisseur of factories. I have been to few factories as fascinating as those of Hindustan Ink, now called Microink. This was published in Business Standard of 29 April 2003.

THE PRIDE OF GUJARAT

I was picked up at Santa Cruz airport and driven over to the old aerodrome which has now become a helipad. From there a helicopter took me north over the volcanic hills and the banana gardens to Vapi. There we landed next to an emerald green cricket field. Just ahead was a nine-hole golf course, and behind it, nestling in the lap of a hill, a palace with three domes. It was called a guest house, but it had all the comforts of a luxury hotel – including a circular swimming pool under the middle dome. I was visiting a company that had grown as fast as any IT firm in the 1990s. And it produces ink.

I counted eight factories – five in Vapi, two in Daman and one in Silvassa. The first thing that struck me about all of them was the space, cleanness and lack of clutter. I generally expect a certain degree of disorganization in an Indian factory – materials lying around, broken machinery put on one side, humans lounging without a purpose. None of that in Hindustan Inks factories. Although inks leave their mark everywhere, all areas except loading areas were remarkably spick and span. Every factory gave a sense of space. And every worker was engrossed in something. The processes were similar; everywhere, ink was being cooked in containers. The containers were small – say, 8’x6’x4’ for speciality inks – and huge – as big as a few rooms – for that mainstay of printing, black ink. The plants in Daman, which are more recent, looked more like modern office buildings. There was a beautiful garden in front of them. SAP had recently implemented enterprise resource planning for the entire complex, which produces 60,000 shades for 5,000 customers; now, a salesman in Delhi can enter a customer’s order, and tell him in how many days the inks will be delivered. There is a record of every pigment ordered by a customer, and Hindustan Inks can make sure that he gets exactly the same shade as he ordered many months ago.

I had always thought that ink making was a pretty simple process: you took some pigment and mixed it with some solvent to make a liquid. Actually, colour is only one dimension of an ink. More important than its look is the purpose for which it is going to be used. It may be used to print on various surfaces – paper, metal, glass, plastic or ceramic. Each has variants of texture and absorptivity. Next comes the kind of finish one wants – sharp or soft, smooth or grainy, bright or dull – these are not alternatives but spectra along which variation is possible. Thus an almost infinite range of varieties of ink can be imagined.

Ink-makers’ general approach is to make pigments – resins – on  a large scale, but to mix them into usable inks in small plants closer to clients. Many small ink-makers buy the pigments and concentrate on mixing them for clients. Hindustan Inks prepares inks in a finally usable form in its factories around Vapi and ships them across the country – and increasingly across the world. Instead of powders, it produces what are called flushes – ink concentrates dissolved in the medium – the “vehicle” – in which they are going to be finally used. That gives it the headache of supplying the precise requirements of thousands of customers; but provided it can do so, it also puts it in direct touch with final users and gives it a considerable hold on the market – a third of the Indian market. And production of flushing inks reduces material requirements by 15 per cent, and gives a superior product. The matching of customers’ demands has been made much easier by the introduction of ERP.

Hindustan Inks and other group companies are run by a family with a penchant for extreme letters of the Roman alphabet – Anjum, Yunus and Zakir. The vision is Yunus’s. After looking at the plants I went to see him. There was not a single piece of paper in sight. I asked him, “Do you do any work?” “Sometimes,” he said, “I get together with half a dozen people who have been with me for a long time, and we talk.” “What about?” I asked. “We talk about what to do in the coming years.” “And what about managing your companies?” “I don’t have to worry about that,” Yunus said, “I have very good line managers.”

He does not recruit them; he grows them. Most people joined him in their youth, and few have left. Almost all are graduates of unknown colleges like Yunus himself. I met one – manager of a restaurant in Daman – who had left Hindustan Inks. I asked him why he had left. He said it was a mistake. A friend had lured him into starting a business which failed; now he would like to go back to Hindustan Inks.

The thinking about the future has paid off. It is behind the company’s growth rate of over 50 per cent a year. It has led to the setting up of a subsidiary in the US in 2000, managed by locally recruited, experienced industry specialists, which broke even within two years. It accounts for the fact that Hindustan Inks is the lowest-cost producer in India despite the fact that it is using only a third of its capacity.

I asked Yunusbhai how he kept his capital costs so low. He said that every piece of machinery had been locally fabricated; that kept costs low, and if a machine gave any trouble, its maker could come on his bike from Vapi in 15 minutes and set it right. What did the local mechanics know about ink technology, I asked. He said that the entire technology was overseen by a consultant from Baroda who was only a few hours away.

I asked Yunus whether it was not extravagant to bring me by helicopter from Bombay. No, he said. Any company the size of Hindustan Inks would have an office building worth a billion Rupees in Bombay. He did not have one; with the money he saved, he could run a number of helicopters if he wanted. And customers from abroad would not much appreciate being put up in the Taj. But when they were flown to Vapi by helicopter, and kept in the palatial guest house, they felt they had been special guests.

Although I am hardly likely to be buying ink, I was much impressed by Yunus Bilakhia’s business sense – and also his humanity, his patriotism and his ambition. He is so Gujarati in so many ways. He is comfortable speaking in Gujarati; English is still a foreign language for him. He is unassuming and has no airs. He has oodles of common sense. He does not waste money. He trusts people. These are the characteristics I associate with the Gujaratis I know. Today, when Gujarat has become notorious for violence and prejudice, it is heartening to know that the essence of Gujarat continues to live somewhere.

KNOWING VS SELLING INDIA

The visit of a cocky foreigner made me think about what I was doing and how well I was doing it. This column was published in Business Standard of 22 April 2003.

EMBARRASSED BY INDIA'S SUCCESS?

Christopher Woods, chief strategist of CLSA, has for long been a regular visitor to this country. At least once a year he comes and notes down what I have to say about the Indian economy. Soon after his last visit in March, he gave an interview to Business Standard. That itself is unusual; most foreign financial firms jealously guard their intellectual acquisitions. They absorb all information and views, which they then sell to clients at huge prices. So I was surprised to find Woods scattering wisdom free to our readers. What he said, however, surprised me more. He felt that the Indian reform process had gathered critical momentum; “[T]his is despite the skepticism of many of the capital’s ultra-negative intelligentsia, who have inherited from the British a talent for cultivated cynicism.”

That recalled our recent meeting. I had conveyed to him my view of the BJP government’s economic policies – at his request on a busy day, free of cost. Since he has come so often to see me, I assumed that this sort of interrogation was useful to him in his work. I did not undergo it to dampen his optimism about the Indian economy; if I had known he had made up his mind, I would have spared myself the time – and him his irritation.

But his interview made me wonder if I was too negative on India. Certainly, when I was in the finance ministry, I felt that the Indian journalists who came to interview me were misanthropes. Some were habitually distrustful, some malevolent. Most were neither, but by and large, Indian journalists looked for dirt rather than facts, and for views rather than analysis. Foreign correspondents varied in their level of knowledge. But most would come after doing some homework and ask very specific questions. One or two were so good that they made me feel I was walking on eggs; I looked forward to their visits. There were some great Indian journalists too – Swaminathan Aiyar was the best. Admittedly, it was my job to put a positive spin, and healthy skepticism towards what I said would not have been out of place. But we in the ministry had a consistent picture of the economy, and even a critic would have found it valuable to understand our reasoning. The best milked me of facts and analysis and then wrote what they liked; the worst sought a headline, right or wrong.

I wondered if, after nine years of journalism, I too had become negative and cynical. I have a less clear picture of the government’s economic strategies today than when I was in the government, because I do not have the resources to construct one. The basic way a journalist would get the picture is by reading statements, speeches and reports. I read the Economic Survey and get no sense of strategy. I read the Commerce Ministry’s export strategy, and found it focused on commodities and embedded in the past. In his many speeches, Yashwant Sinha almost always said the right things, but I found no connexion between what he said and did. Jaswant Singh talks too little. I know only one major speech by him, to the Indian Banks’ Association in Bombay; he said basically, I want you to lend to such and such of my constituents.

I have from time to time had friends in the government, but have not necessarily been better informed because of them. They were eager to defend, and reluctant to explain. Some were very good friends before they got strategic posts and after they left them, but became poor communicators just while they were in those posts. Manmohan Singh and his principal officers spoke with one voice because they were united in thought. There was so much articulation of policy on file, in the minister’s speeches, in documents which he invariably read through, that one could speak with confidence for the ministry. Today’s officers, however good they might be, cannot, because the ministers are not capable of understanding and developing policies – and do not have the confidence in the officers to leave policies to them.

How then can one function as an economic journalist? I try to make up for lack of official inputs by reading newspapers. The great thing about India is that so much leaks out of the government; if one reads newspapers carefully, one generally gets the picture. The difficulty is that the picture does not emerge out of day-to-day reading of newspapers, for they do not give the background and do not connect up stories. There are no economic magazines with a broad sweep. Economic and Political Weekly comes closest, but has too few facts and too much opinion (except on monetary policy). So what I do is to sit down once in three months and read through the quarter’s newspapers – those that I respect.

That reading gives me an idea of where the action is and where it is tending. But it still does not give me the impression that Woods has – that the reforms process has gathered momentum. One can make a list of the “reforms” being done – sale of a PSU, introduction of state VAT, freer foreign exchange for exporters, reduction in import duty on hair oil, etc etc – and derive an impression of a process. But reforms must have a macro objective; the objective would define what is a reform and what is not, and whether it is significant or not. I see no overall end-result that this government wants to reach; instead, I see the enormous damage it has done by, for instance, borrowing ever more, raising agricultural import duties, and making government expenditure ever less productive. I just do not see the momentum of reforms. I see the unrelenting momentum of instinct for survival and greed.

Some of Woods’s cheer comes from the performance of the Indian economy; it must not be mixed up with the quality of economic policy. The Indian economy is surprisingly resilient; it reacts positively to small stimuli. But as Dharmakirti Joshi showed in his article in Business Standard last week, every industrial boom after 1996 has been short, modest and narrowly based. We do not know about the current one yet; but there are enough historical grounds for skepticism.

My remit is to write for the Indian reader. I cannot make her happy by telling her that India is doing better than Burundi or Colombia. In any case, it is not my job to cheer her up, or to make her buy pharmaceutical or software shares. I am employed because someone thinks my judgment of economic affairs is good; my job is to give the reader an honest, serious personal view. So I am afraid that for the moment I do not see an alternative to cultivated cynicism. But I hope to make my cynicism amusing.

US INVASION OF IRAQ

The Americans learnt to hate Saddam Hussein so that they could have a reason to take over Iraq. But all industrial countries have a problem for which there is no domestic solution, namely the burden of caducity. This column was published in Business Standard of 15 April 2003.

GERONTOCRACY AND THE INVASION OF IRAQ

Most auto-rickshaw drivers in Delhi are young – in their teens or twenties. Apparently, many passengers do not pay, and the drivers have to be tough enough not to be intimidated. So I was surprised that the driver of a rickshaw I took recently was gray-haired. Not only old but sick: he had dark shadows around his eyes, and seemed to be about to drop off to sleep. I asked him whether he was drinking or sick. He said he had a gallstone. I told him that he was obviously in pain, and should have an operation soon. He said that he could only afford to go to a government hospital, and that it was very difficult to have an operation in one. I thought that his life may be short and painful.

It was not very different in the Roman empire 2000 years ago. The average longevity then was 35. It was most unusual for someone to live beyond 50. There were some occupations where age did not matter; that of Caesar was one. But in most, it was unusual for anyone to be working over 50. Those that had accumulated wealth and reputation by then could become wise men, and join the senate or write history. The rest lived on someone’s mercy.

Things are different in advanced countries today. The British Queen writes a letter to every centenarian on his birthday congratulating him or her and wishing her or him an even longer life. But she no longer signs it personally; instead, the signature “Elizabeth R” is electronically reproduced. The day is not far when the number of letters the Queen has to dispatch will exceed a thousand on an average day.

Today, the average age to which people live in advanced countries is more than twice what it was in imperial Rome; but the retirement age has advanced only from 50 to 60 or 65. So the number of idle people has risen enormously. An idle mind is a devil’s workshop; but so is an idle body. It is amazing in how many ways a geriatric body can malfunction. The result is a huge rise in resources required by the old and the sick. Provision for the old commonly takes 10-20 per cent of the income of advanced countries; medical care takes another 8-15 per cent – and a good deal of it is care of the old.

The Romans did not believe in looking after the old. Those that were rich enough hired servants or bought slaves to look after themselves; the rest died of improvidence if they were foolish enough to live into old age. But advanced countries no longer allow that. All of them provide for state pensions that support old people reasonably well. It is another matter if the old fall sick; in that case, the quality of care a state gives them varies considerably from country to country. But in no state are they likely to die because they are not able to look after themselves; they will be looked after to the end.

As the number of old people rises in all countries, the state-financed retirement-to-grave welfare systems are beginning to fail. Old people are worried. In Holland, the Old People’s Party brought down the government when it tried to limit their benefits. Elsewhere they have not gathered the strength and the numbers to influence politics. But they will; it is only a matter of time.

State pensions and medical care are one alternative; the other two are that private employers fund their employees’ pensions and that old people live on their savings. Employers, like governments, are feeling the pinch, and are cutting the cost. They do it in two ways: they are changing over from pensions that depend on the employee’s last salary to those that are determined by his accumulated contribution; and they are cutting down their own contribution to pensions and encouraging employees to contribute more. So the net effect of penny pinching, whether it is by governments or employers, is the same: that people have to save more for old age.

When people retire, they stop doing anything productive, but continue to consume; in whatever way old people are cared for or care for themselves, their consumption must come out of other people’s production. Savings are not accumulated consumption; they are only accumulated claims to consumption. The extent to which consumption goods can be stored and used later is limited; most of old people’s consumption must come out of surplus production by the young. The very survival of the old implies transfer of goods and services to them from the young. And the burden of that transfer is increasing as the proportion of the old increases at the expense of the young.

The young could bear that burden without reducing their own consumption if their production were going up. Rise in productivity, brought about by innovation, has been the hallmark of industrial countries for over two centuries: so much so, that economists take persistent technological change as what distinguishes advanced countries from “developing” countries.

But productivity in Japan has not increased for over a decade now. It has been crawling at snail’s pace in Germany. Its growth has slowed down in the entire industrial world. The only exception was the United States, which saw a tremendous burst of productivity increase in the 1980s and 1990s. But the bubble burst in 2000. Now productivity is crawling in the US as well – and there is muted fear that the Japanese disease may hit the US.

If productivity ceases to increase, inter-generational transfers will become a zero-sum game: the growing number of old people can be fed only by reducing the consumption of the young. It will not matter even if state pensions and medical care decline and are replaced by private savings; that will only change the distribution of benefits amongst the old. However the old are supported, their growing numbers will mean a declining standard of living for the young.

Is there no way both the young and the old can live better? There is: they should acquire slaves. Arabs in their years of prosperity brought invariably younger brides from India, Germans from Thailand, Americans from Russia. Soon after the “liberation” of Russia, there used to be organized tours to introduce single Americans to attractive Russian women. But sooner or later, the imported slaves exploit the laws of their host countries and become free. Even sooner they cease to be willing slaves.

A better way would be for a country to acquire colonies. Colonies are no more willing servitors than concubines. But their exploitation can be efficiently organized; and they can be subjected to different laws from their conquering countries. Maybe realization of this is behind the subjugation of Iraq. Oil will soon get cheaper for its conquerors.