Shed a tear for Shanno...

Shed a tear for Shanno’s smothered innocence. It is my fault, of course. I didn’t learn the alphabet. The teacher is right to punish me. But why this weakness? Why is the ground blurring? I must be strong. The sun is so hot today…
Shed a tear for Shanno’s pain. I stood in a contorted position, like a criminal in a self-righteous policeman’s cell. But maybe that’s the way of the world I’m going to grow in.
Shed a tear for Shanno’s perplexity, her confusion. Wasn’t this school the temple of learning, the route to a better life? This suffering, then, must be a trail to that route.
Shed a tear for Shanno’s aspirations. I too will, one day, through education and learning, cross over to the other side, the side of light, joy and fulfilment. The side they call ‘emerging India’. I too will lead my country, buy a car — and play all day. I will be Prime Minister.
Shed a tear for Shanno’s ignorance. She died without knowing she could protest.

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Why Savita will vote but I can’t

I am an Indian but bureaucratic procedures will not allow me to vote from my real constituency. She is a Bangladeshi but will elect a representative who will likely govern us. She is neither ‘Savita’ nor Indian but her paper-perfect Indian identity entitles her — and the 20 million illegal migrants in India — to vote.
You may have seen her, spoken to her, even hired her. They are all over the place in select ghettos across Delhi, Kolkata and Guwahati — their first destination when they jump the border. The influx of illegal immigrants from Bangladesh is a reality — their numbers are large and growing; their networks are strong, allowing them to turn invisible; their enterprise is organised as each migrant provides a base for the next.
Their getting an Indian citizenship through a maze of corruption and manipulation, is not merely a supra-political paper issue. In real and tangible terms, they hurt Indian labour by offering lower wages and replacing them. Quite like what the Indian outsourcing industry does to workers of the developed world. With one difference: they are illegal.
In different ways and through the stories of different Savitas or Sameers, all of us know this. As do the officials who, through a mesh of bribes, are their catalysts. The local leaders as well as the local mafias — to which they provide competition — know this. The state governments (the Nano-Singur episode is one recent example) are also well informed.
And the Centre, at the highest level, too. “He has no business to work here unless he has a work permit,” home minister P Chidambaram told a TV channel in a January 11 interview. “He is a Bangladeshi. I think we issue very large number of visas to Bangladeshis every month. There is no reason to issue so many visas. And there is very ineffective monitoring system (to check) whether the guy has gone back to Bangladesh or remained here.”
In the earlier NDA administration, George Fernades, speaking as defence minister in September 2003 had said: “My discussions with the Eastern Army Commander this week revealed that there are about 20 million Bangladeshi migrants in India, which are altering the demographic character of the north-eastern states.”
Whichever government takes charge after elections and whoever becomes home minister, defence minister and foreign minister, will have one more tool to fight this menace at the diplomatic and policy level: Kamal Sadiq’s fascinating first insights into the subject.
In Paper Citizens: How Illegal Immigrants Acquire Citizenship in Developing Countries, Sadiq convincingly and compellingly argues that it is not just developed countries like the US, Canada, UK, Germany or France that face an influx of illegal immigrants. Developing countries like India (from Bangladesh), Pakistan (from Afghanistan) and Malaysia (from Philippines) too are major destinations for illegal immigrants.

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Summit over, here are India’s G-20 gains

Gautam Chikermane, Hindustan Times
New Delhi, April 05, 2009

The royal receptions and grand speeches are fond memories now. With PM Manm-ohan Singh back home from the glitzy G20 meeting in London, it’s time for a reality check.

In the final analysis, the six pledges that the heads of G20 leaders signed on April 2, will mostly, not completely, work in India's favour. However, there’s a catch: these pledges are non-binding and hence some of them may just bring false hope.

The pledge to not repeat the “historic mistakes of protectionism” is likely to have the greatest short-term impact. The members have also pledged "to refrain from raising new barriers to investment or to trade in goods and services.” So, India could look forward to markets in, and funding from, developed countries, which had taken a hit following the downturn, to open their doors again.

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Obama, PM off to a good start

Gautam Chikermane , Hindustan Times
London, April 02, 2009

"The US sees India as a global power." This is what US President Barack Obama told Prime Minister Manmohan Singh as they stepped into a bilateral meeting on the sidelines of the G20 Summit.
"Our relationship with India is very important,” Obama told the TV crews. “India is a country, like the US, that’s full of energy.”
Turning to Singh, he said, “Mr Prime Minister, the rise of India is attributed to your wisdom. You unleashed the economic power of India as finance minister and now have been guiding the country for five years. Turning to Singh, he said, “Mr Prime Minister, the rise of India is attributed to your wisdom. You unleashed the economic power of India as finance minister and now have been guiding the country for five years. By the time this meeting gets over, I can call you a friend. I am grateful for the time I’ve had in London with you and I look forward to visiting India.”

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A new world order is born: Brown

Gautam Chikermane, Hindustan Times
London, April 02, 2009

Globalisation is not dead – yet. Leaders of the Group of 20 countries on Thursday agreed to a $1.1 trillion (Rs 55 lakh crore) deal to combat the worst economic downturn since the Great Depression.
The G-20 leaders agreed that this sum will be made available to the world economy through the International Monetary Fund (IMF) and other institutions. This will include $250 billion of the special IMF “currency” called Special Drawing Rights.
“This money will be available for lending to all IMF members,” British Prime Minister and summit host Gordon Brown said at a press conference after the summit.

Story in Hindustan Times

G20 leaders hope to revive global economy

Gautam Chikermane, Hindustan Times
London, April 02, 2009

Even as thousands protest the G20 (Group of 20) summit in London “for robbing the poor to benefit the rich”, on Thursday, the global community expects the 20 nations to come up with a plan to arrest and reverse the global downturn.
"G20 is not going to agree on every point,” said US President Barack Obama in a press conference with UK Prime Minister Gordon Brown on Wednesday. The G20 countries have an "obligation to lead", he said, and in the days ahead, they "will move forward with a sense of purpose".

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G20 D-Day tomorrow: a Summit that could have been

The London air outside is cold but refreshingly so. The road outside Crowne Plaza at St James near Buckingham Gate is empty but for a sudden buzzing cavalcade that seems to be carting G20 leaders who are busy with four things — meeting the US President Barack Obama, meeting UK Prime Minister Gordon Brown, meeting the Queen and possibly meeting one another.
And from what we see as bystanders and vicarious observers, the London Summit of G20 is headed towards being one that could have been. The intellectual and nationalist positions that were expected to soften as the April 2 deadline approached have got harder.
In a twittering analysis this is what I see:
The US-UK combine that’s been fishing for greater stimulus packages from the rest of the 17 (plus EU) countries’ heads have put their aggressive stance behind them, rather reluctantly but still, and are talking cooperation. That’s good.
But Japan has put its hat in the stimulus debate with its Prime Minister Taro Aso suggesting Germany and France don’t know what they’re talking about.
The French President Nicolas Sarkozy has dropped a position bombshell. “If things don’t advance in London, there will be an empty chair,” the Guardian reported him saying. “I’ll get up and leave.” To him, and most of Continental Europe, if the London Summit did not create new rules for capitalism it would be worthless, Sarkozy reportedly said at a cabinet meeting.
From the South in this North-South dialogue, Brazil’s President Luiz Inacio “Lula” da Silva, who last week blamed “white and blue eyed” people for the crisis, will meet Sarkozy, now his G20 rebel leader in arms, tomorrow. Together, they hope to raise support for increasing regulation and a harebrained idea of a global regulator.
In all this, India stands like its spiritual past: calm, composed, collected. It has also been able to win a small victory in this great battle: an entry into Financial Stability Forum, bringing protectionism to the forefront of G20 discussions and be seen as one of the important world’s saviours of the world over the next 24 months where along with China, it will be the only other significant economy to show growth.

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1 day to G20: 157 expectations, 20 heads, 1 day

In the high profile tracking of recommendations from governments and multilateral agencies, I overlooked some others. Here are four that I wasn’t able to bring to you as they were released but are nevertheless important. This quad of recommendations are important not because of what they contain, but because it heightens, very elegantly, the expectations people across continents, ideologies and interests have.
The first count of recommendations took me to 101. On second count they rose to 119. Adding this list, we stand at 157.
The G-20 London Summit 2009: Recommendations For Global Policy Coordination. This March 29 report by The Brookings Institution lays out nine recommendations.
1. Stimulate, Reform, Coordinate: A Macroeconomic Agenda for the G-20 by Eswar Prasad
2. Tame Protectionism and Revitalise Trade by Paul Blustein
3. Speed the Flow of Money to Poor Countries by Homi Kharas
4. Mobilise the G-20 to Respond to the Global Economic Crisis by Colin Bradford and Johannes Linn
5. Empower the Regional Development Banks by Mauricio Cárdenas
6. Aid Africa by Ernest Aryeetey and John Page
7. Good Governance: Learn from the Missing Countries by Daniel Kaufmann
8. Focus on What Asia Wants by Lex Rieffel
9. Understanding and Addressing Political Instability by Raj Desai
New ideas for the London Summit: Recommendations for the G20 Leaders. Released on March 28, you need to know the context where this report is coming from. Chatham House, an eight-decade old “source of independent analysis, informed debate and influential ideas on how to build a prosperous and secure world for all.” The other contributor, The Atlantic Council, “promotes constructive US leadership and engagement in international affairs.” Its recommendations going beyond general declarations at the London Summit and apart from the six broad actions, there are detailed recommendations in this report.

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G20 should help reverse slowdown: Manmohan

Gautam Chikermane, Hindustan Times
On Board PM’s Special Aircraft, April 01, 2009

Two hours before he departs for London to participate in a global summit of G20 nations on April 2, Prime Minister Manmohan Singh has his priorities clear but words them in diplomatic and stretchable words: “It is important and necessary for the Summit to take credible decisions which will help to halt and reverse the current slowdown and to instill a sense of confidence in the global economy.”
What is less ambiguous is his agenda for the meeting with US President Barack Obama. “This will be our first meeting and will be an opportunity for us to review our bilateral relations, as well as hold discussions on important regional and global issues such as terrorism, the situation in Afghanistan, energy security and climate change,” Singh said.

Story in Hindustan Times

2 days to G20: India still keeps its cards close to its chest

Not that other countries have a position paper ready to dish out, but most of them have their stances clear. Between November 15 when the Washington Declaration was signed and today with the London Summit just 48 hours away, the positions — and the divides — are fairly clear.
The US and the UK stand together on two issues: keeping stimulus high and avoiding over-regulation. It’s a relief that they’ve reversed their insistence on coercing other countries to follow their 2 per cent spending tip, which their very obedient and loyal mouthpiece, the International Monetary Fund, yelped with full gusto.
Continental Europe, led by Germany and France, while rejecting all calls to spend, seek stronger regulation, nationalisation and more control over financial entities.
China, worried about its dollar investments that add up to $1 trillion at last count, is seeking an alternative global currency — an interesting proposal, possibly useful too.
Other emerging countries like Argentina, South Africa and Russia, but not excluding Australia that technically doesn’t fall in the “emerging” club, are largely silent, with the sole exception of the crude (and comic?) comments of Brazilian President Luiz Inacio “Lula” da Silva, who said ““This crisis was fostered and boosted by irrational behaviour of some people that are white, blue-eyed.”
India has not yet opened its cards. “We were very involved in the preparatory process, that’s why you have this impression,” Foreign Secretary Shivshankar Menon told reporters at a press briefing.
Unofficially, India’s overarching stance is to fight protectionism. ““We are against protectionism,” Menon said. “We would like to see a very strong statement coming out of G20 against protectionism.”
Earlier, I had spoken to the heads of some of India’s leading industry opinion makers and protectionism was indeed the theme of greatest concern, particularly US President Barack Obama’s comments on outsourcing, buy American and so on.

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3 days to G20: the US-UK-IMF “Spend!” proposal is destined to die

I hate to say ‘I told you so’, but I told you so — I really did.
Coming to a global congregation of the world’s largest economies and hoping 18 members to blindly follow what the US dictates and the UK furthers was nothing short of a foolish expectation. High on intent, reason and morals but low on humility, persuasion and mutual respect, the audacious spend-your-way-out-of-the-crisis proposal, born in the USA, grown in the UK and parroted by IMF, was destined to die.
True, the G20 economies add up to 85 per cent of the world’s GDP. But what perhaps escapes US President Barack Obama and his chorus comprising UK Prime Minister Gordon Brown and the IMF is a simple fact: smaller they may be when measured by output, but all, repeat all, other 18 countries still carry their economic uniqueness and sovereign dignity — the credit crisis has not been able to scratch that.
Here’s what some of the leaders said, according to the Sunday Times story:
“I will not let anyone tell me that we must spend more money,” said German Chancellor Angela Merkel.
“In these conditions I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” said Spanish Finance Minister Pedro Solbes.
French President Nicolas Sarkozy added his two bits about reforming capitalism being more important than cutting taxes.
Talks of such a package have begun in India, but I see neither much fiscal room nor administrative force (until the next government comes into power) for it to fructify.

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12 days to G20: IMF’s spend-your-way-out-of-the-crisis recommendations are best ignored

In its predictable conclusion-first-analysis-later approach when it comes to ensuring that the interests of its key stakeholder, the US, are protected, the International Monetary Fund has cobbled together a recommendation that resonates, reiterates and reeks of the US line: spend, spend, spend.
I had pointed out yesterday how the US is pressuring the world in general, and G20 that meets in London on April 2 in particular, to mimic its policies, ostensibly to get an even response globally to a situation that’s global. This, I said, won’t work because each country is structurally different.
My warning as a result: “Some of the tensions in G20 — between emerging economies and the emerged, between US-UK and Continental Europe led by France, between US and China and among fringe groups — are because of differences like these between countries. And while domestic political pressure on leaders of all G20 countries is the same (get the economy back on track, now), expecting all economies to behave the same way under the broadsword of the same solutions through a magnified geopolitical pressure on the same leaders is going to prove counterproductive.”
We saw the first murmurs of this discontent, muffled as it was, today as EU leaders resisted calls for new spending.

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4 days to G20: children have some advice for leaders

Finally, the single most important reason why G20 must solve the ongoing credit crisis: children.
BBC has an excellent story on how the crisis is affecting children in three schools in Glasgow, Islamabad and Mbabane.
“In future we think there will be fewer scholarships,” say students of Waterford Kamhlaba United World College in Mbabane, Swaziland.
“We have given up hobbies such as dance classes and sports as we simply can’t afford them anymore,” say students of St Ninian’s High School in Glasgow, UK.
“We would show the G20 leaders beggars in search of food in garbage disposals, filthy canals and along pedestrian tracks,” say students of Islamabad Convent School in Islamabad, Pakistan.
Mallika, 16, a student of Springdales School in New Delhi says: “The people who have had to bear the brunt are those who do not have steady jobs or income. Many of those below the poverty line are not receiving even a minimum wage. These are the people I would introduce to the G20 leaders because they reflect the true effects of the economic crisis. People who can barely afford a meal for their families on a daily basis.”

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5 days to G20: the debate gets dirty

The undercurrents at G20 just got public and the London Summit just got racist. Standing next to UK Prime Minister Gordon Brown, the Brazilian President Luiz Inacio “Lula” da Silva brought the black-brown-white frustrations on the global finance table.
“This crisis was caused by no black man or woman or by no indigenous person or by no poor person,” Lula said after talks with the prime minister in Brasilia to discuss next week’s G20 summit in London, Guardian reported.
“This crisis was fostered and boosted by irrational behaviour of some people that are white, blue-eyed. Before the crisis they looked like they knew everything about economics, and they have demonstrated they know nothing about economics.”
Lula’s irritation with bankers is understandable and justified. What’s not acceptable is for the leader of the world’s 10th largest economy, someone who seeks to drive the global finance agenda through greater vote share in institutions like the IMF to turn the London Summit into something so small, so trite, so disgusting.
Lula said he did not know a single black banker. Well, I know several who are brown — and all of them are their by the sheer power of merit (you can condemn the direction of that merit, the use it’s been put to and so on). Using probability theory, I am confident that there will be several black. Some of them may even be part of the bonus-maximising herd that ignored risk and brought global finance and through it the real economies of many economies, including Lula’s Brazil, to its knees.
Whatever else Lula maybe, I would fear to put something as sensitive and as powerful as global finance into his hands. I’m glad he’s not driving the agenda and a black man is.

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6 days to G20: a new paper tells Obama what to do

A March 20, 2009 paper from Yale has tips for Obama to negotiate this crisis. Written by Michael S. Solender, a senior research scholar and visiting lecturer at Yale Law School, How the Obama Administration Should Regulate the Financial Sector puts forth five key attributes that US regulators should have. These are:
1. The right people, which could be those with industry experience — this is something Indian regulators desperately need. In India, the only financial regulator with industry experience is C.B. Bhave, chairman, Securities and Exchange Board of India; the others are bureaucrats.
2. Enough access to the companies and their employees. “No matter how capable or experienced the personnel employed by the regulatory agency, a regulator is unlikely to be able to obtain information and avert problems and crises without sustained and meaningful access to the regulated companies and their personnel.”
3. Enough information that regulators should maximise. “This will require achieving the proper balance between robust enforcement of the law and creating the proper incentives for those they regulate.”
4. Creation of an internal brain trust “to accumulate information acquired from individual companies and industries and make comparisons between companies and across industries, looking for trends and warning signs.”
5. Creation of a rapid action team empowered to act quickly in a financial emergency. “The team should draw upon different skill sets — attorneys, economists, examiners, and policymakers — and from personnel from the different financial regulatory agencies.”
I like what I read.

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7 days to G20: Obama writes an agenda strengthening op-ed

Surprising for a superpower that still believes it leads a unipolar world, US President Barack Obama’s March 24, 2009 op-ed published in 31 newspapers was free of arrogance. Whether that’s a recognition of the emergence of a multi-polar world a quarter of a century down the road or whether that’s a true spirit of cooperation that Obama hopes to usher in following the country’s Bush-led isolation, we will know some day.
His prime focus, as he has spoken about earlier, remains the same: “Our efforts must begin with swift action to stimulate growth.” That to him means fiscal stimulus, which not all G20 members would be able to afford. Obama urged the G20 to “embrace” open trade and investment and resist protectionism.
Protectionism is something that Prime Minister Manmohan Singh too had laid out strongly, and India was probably the first to flag the issue, during the Washington meet on November 15, 2008. Subsequently, it became part of the Washington Declaration — under Point No 13 and as part of G20’s commitment to an open global economy, the G20 leaders put out this rather brave statement, which subsequently, as we all know, was thrown in bin on the way out.
“We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.”

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8 days to G20: it’s raining recommendations — 101 and counting

Speaking only of official recommendations — that is, suggestions made by governments or regulators of G20 and not think tanks or economists — I have with me a master list that has crossed a century. Taking the 126 page The Turner Review, published by UK’s Financial Services Authority on March 18, 2009, which adds 32 of its own (listed at the bottom of this post), the total number of sovereign suggestions stands at 101 — and counting. Here’s the timeline.
First came the November 15, 2008 Washington Declaration that listed out six broad policy responses, five common principles of reform and request to the G20 finance ministers to formulate six additional recommendations. The rather overstated “action plan to implement principles for reform” had 47 — repeat forty-seven — recommendations.
Then came the communiqué that the finance ministers put together on March 14, 2009. “We agreed further action to restore global growth and support lending, and reforms to strengthen the global financial system,” the communiqué stated. All told, eight new “further actions” were suggested across two themes — restoring global growth and strengthening the financial system.
The March 19, 2009 leak of Macroeconomic Stability and Financial Regulation: Key Issues for the G20 — the final report of the first of the three working groups set up before the G20 meet — to breakingviews.com followed next. This contains 24 recommendations, which while put together the various issues that leaders of G20 will be confronting in the April 2, 2009 meeting, have accountability missing.
And now, The Turner Review — a product of FSA chairman Lord Turner who was asked by the UK’s Chancellor of the Exchequer to review the events that led to the financial crisis and to recommend reforms — which has been critiqued by some economists who call it “flawed”.

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9 days to G20: China likely to get influence support from Down Under…and other stories

Today, Australian Prime Minister Kevin Rudd pressed for a greater role of China in International Monetary Fund (IMF) as a prelude to the G20 meeting on April 2. With this, the first step in reforming this multilateral institution has been taken. That step is to give a greater voice to borrower countries that are poorer than the wealthy nations that lend to the bank.
On its part, China is ready to take the reins. According to a Reuters report filed today, the country’s vice foreign minister He Yafei “told reporters that Beijing would press for reform of international financial institutions with a view to giving a bigger voice for developing countries.”
A November 2006 paper by Brock Blomberg of Claremont McKenna College and J. Lawrence Broz of University of California, San Diego, explores this conflict. Titled, The Political Economy of IMF Voting Power, this short paper is insightful as much as it is mathematical.
“The IMF’s membership is now divided into two blocs: rich country “creditors” that provide the lion’s share of IMF resources, and poor country “borrowers” that draw upon the Fund for financial assistance and are subject to its policy conditionality,” the paper says. “This division creates tensions around governance issues and voting power because rich country creditors have different interests regarding the terms and conditions of IMF lending, and are sceptical about ceding greater control to developing country borrowers. To oversimplify, developing countries favour quota increases and less conditionality since they are more dependent on the IMF for payments financing and more vulnerable to financial crises. Industrial countries resist quota increases and favour increased conditionality and surveillance since they have access to private credit markets to finance deficits and do not rely on the IMF for support (as it was the case in the 1960s and 1970s).”

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10 days to G20: a reading list that hopes to change the world

If you’ve been visiting my blog over the past week, when it turned daily, you would broadly know the issues confronting the heads of the 20 most powerful nations on earth today — how to get their economies going. That is, how to get banks to lend, industry to invest and households to buy, well, houses. So complex has the debate around resolving this global financial crisis (the first for this generation), so vested the interests (of countries, of bankers, of companies) and so wide and deep the consequences (from the US and Europe through Asia to Africa), that it has moved from global boardrooms to our bedrooms.
Nobody knows for sure how to resolve this crisis. Not economists, not policymakers, not politicians — and certainly not the bankers. But all are trying. Here’s what they are saying. More will follow over the next week.
1. The Washington Declaration. The story of the London Summit began with the Washington meet in November 2008. This November 15 statement from the heads of the G20 nations explored the causes of the financial crisis and listed out the “actions taken” and “to be taken”. They put together the common principles for reform of financial markets that included regulation, international regulatory cooperation, strengthening of international standards and their consistent implementation. They listed out five common principles for reform — strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation and reforming international financial institutions.

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11 days to G20: 24 recommendations but no breakthrough

For those looking at a sneak preview of what’s to come in the London Summit of G20 on April 2, breakingviews.com has a leak.
“The G20 blueprint programme, a copy of which has been obtained by breakingviews.com, is largely a statement of principles,” said Hugo Dixon, the website’s editor in chief and chairman. “The scheme will have to be blessed when the leaders meet in April. Detailed numbers and regulatory mechanisms will then need to be worked out in the coming months.”
I waded through the “scheme” and tried to figure out just what’s in store. My conclusion: more of what we already know, much of what we already expect, lots of holy-sounding noises but nothing revolutionary, and maybe, just maybe, the first step in the creation of a new global financial order. Here’s a quick analysis of what the report’s 24 recommendations mean.
“Recommendation 1: As a supplement to their core mandate, the mandates of all national financial regulators, central banks, and oversight authorities, and of all international financial bodies and standard setters, should take account of financial system stability.”
My view: Of course! Stability, after all, is the new keyword, the overarching word of global finance today.

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12 days to G20: IMF’s spend-your-way-out-of-the-crisis recommendations are best ignored

In its predictable conclusion-first-analysis-later approach when it comes to ensuring that the interests of its key stakeholder, the US, are protected, the International Monetary Fund has cobbled together a recommendation that resonates, reiterates and reeks of the US line: spend, spend, spend.
I had pointed out yesterday how the US is pressuring the world in general, and G20 that meets in London on April 2 in particular, to mimic its policies, ostensibly to get an even response globally to a situation that’s global. This, I said, won’t work because each country is structurally different.
My warning as a result: “Some of the tensions in G20 — between emerging economies and the emerged, between US-UK and Continental Europe led by France, between US and China and among fringe groups — are because of differences like these between countries. And while domestic political pressure on leaders of all G20 countries is the same (get the economy back on track, now), expecting all economies to behave the same way under the broadsword of the same solutions through a magnified geopolitical pressure on the same leaders is going to prove counterproductive.”
We saw the first murmurs of this discontent, muffled as it was, today as EU leaders resisted calls for new spending.

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13 days to G20: set broad principles, leave detailing to sovereigns

When a herd runs, it doesn’t differentiate whether it’s plains or plateaus, trees or shrubs, calves or bulls. In a frenzied panic, it tramples just about anything and anyone. The herd in financial markets is no different. And if the ongoing credit crisis is to be seen from a distance, when the participants are the mightiest of the mighty (the world’s largest banks, the world’s largest investment banks, the world’s largest governments, the world’s largest dealmakers), the herd is the very face of destruction.
Countries, companies and individuals that had absolutely nothing to do with the crisis are suffering the aftermath of loose regulation and looser morals of executives who helped lobby and create the deregulated financial atmosphere even as they collected — and continue to collect — their million-dollar bonuses.
The US Congress’ proposal to tax the bonuses of Wall Street at the rate of 90 per cent yesterday is the one sane act in a sea of chaos where even now executives are playing the profiteering game by getting taxpayers to sign their seven-digit bonuses — well done, Obama.
The herd is blind and will remain so. It was blind on the way up, as the high tide of excess liquidity lifted markets across the world, altogether, irrespective of the underlying. Then, everyone thought Russia’s oil, Pakistan’s low economic base, Chile’s commodities, South Korea’s diversified manufacturing, Brazil’s mines, China’s Olympics and India’s infrastructure potential, were opportunities that wouldn’t come again, at least for the next few millenniums.
Now, with liquidity almost dry, a reversal is underway — harsh, sweeping, bloody.

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14 days to G20: no space for a common global financial regulator

As the world — well about 85 per cent of it, if you add up the collective GDPs of the 20 countries that comprise G20, which meets on April 2 in London to take coordinated action against the ongoing credit crisis — gives regulation of financial products a new global rethink, Dani Rodrik of Harvard throws in a warning: a common global regulator won’t work.
In a well argued piece in The Economist, Rodrik says that the logic of global financial regulation is flawed. “The world economy will be far more stable and prosperous with a thin veneer of international cooperation superimposed on strong national regulations than with attempts to construct a bold regulatory and supervisory framework.”
The issue is tricky and views are strongly divided. On the one hand is the sovereign right of countries to make rules and implement them within their domains. Accepting a global regulator will be seen to be a needless meddling in domestic affairs.
Howsoever democratic the global regulator be in terms of representation, staffing or execution, and howsoever equal that representation (I presume it won’t create the mess like the UN has through the formation of false institutions like the Security Council), a compromised sovereignty will constantly loom in the background, providing political fodder to opposition parties in all G20 countries, except China that doesn’t have one.
All countries enjoy the benefits of global finance — as long as the money flows into the countries (though not too far back, some like India were scared of those inflows) — as the money comes in and sets the wheels of industry and households in motion through their holy intercourse with markets. And that’s the way it should be.

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15 days to G20: can India grab its geopolitical moment?

If experts are to be believed, China is the emerging global strategic power. But India has a strategic opportunity starting it in the face. The question is: can it grab it?
As geopolitics has evolved from the “age of sails” through the “age of space” to “the age of wealth” and conquest is now for the mind of the global consumer — a large chunk of which lies outside any national border — the severe meltdown of the developed economies has lightened their strategic weight.
In a brilliant article in Foreign Affairs (a must-read journal for anyone with more than a casual interest in strategic issues), Roger C. Altman, US deputy treasury secretary in 1993-94 argues that the crash of 2008 is “a geopolitical setback for the West”. You can read part of that piece here, the rest is unfortunately paid.
“This movement,” he argues “also reflects the rapid rise of other economies, especially China and India. The US share of world GDP has been declining for seven years before the financial crisis hit. And it looks increasingly likely that China’s GDP will surpass the US’ at some point during the next 25-30 years.”

Blog post on Cutting the Edge

17 days to G20: look who’s driving the G20 agenda

With anti-protectionist policies on top of G20 finance ministers’ March 14 communiqué, Prime Minister Manmohan Singh and the Congress trouble-shooter and finance minister Pranab Mukherjee can safely claim to have set one line on the global finance agenda.
By keeping pressure on the expansion of Financial Stability Forum (FSF) to include voices from the East and ensuring it happened, once again, the UPA government scored a small brownie: on March 12, a hallowed institution with a hallowed mandate, finally expanded its membership to include “Argentina, Brazil, China, India, Indonesia, Korea, Mexico, Russia, Saudi Arabia, South Africa and Turkey. In addition, Spain and the European Commission will also become FSF members.”

Blog post on Cutting the Edge

16 days to G20: will G20 bring solutions?

The new financial high-rise — the foundations of which were laid in Washington DC on November 15 — in which G20 will lay the ground floor in London on April 2, is going to be the world’s biggest economic-diplomacy build up, ever. And already, the builders of what is increasingly being referred to as Bretton Woods II, are divided.
On Saturday, finance minister Pranab Mukherjee scored a small victory for India, when he said India will fight against “protectionist policies” gaining ground globally, particularly in the US, a fight that has taken the issue to the No 1 global revival agenda slot. “We commit to fight all forms of protectionism and maintain open trade and investment,” the G20 finance ministers’ and central bank governors’ March 14 communiqué said.
BRIC nations (Brazil, Russia, India and China) are seeking greater control of International Monetary Fund from developed economies. And among the latter, opinion on how to resolve the crisis is sharply divided between the conservative continental Europe and the apparently adventurous US.
Beyond all that lies a huge constituency comprising six billion households who know very little about what’s going on but are the most affected by the global meltdown. The issue seems to be out of the public consciousness in India — all events of extreme importance from religion to finance seem to end up that way. But nothing is going to be as important for all of us as the conclusions that come out of, or get buried in, the London Summit of G20 that begins 18 days from now, on April 2.

Blog post on Cuting the Edge

16 days to G20: will G20 bring solutions?

The new financial high-rise — the foundations of which were laid in Washington DC on November 15 — in which G20 will lay the ground floor in London on April 2, is going to be the world’s biggest economic-diplomacy build up, ever. And already, the builders of what is increasingly being referred to as Bretton Woods II, are divided.
On Saturday, finance minister Pranab Mukherjee scored a small victory for India, when he said India will fight against “protectionist policies” gaining ground globally, particularly in the US, a fight that has taken the issue to the No 1 global revival agenda slot. “We commit to fight all forms of protectionism and maintain open trade and investment,” the G20 finance ministers’ and central bank governors’ March 14 communiqué said.
BRIC nations (Brazil, Russia, India and China) are seeking greater control of International Monetary Fund from developed economies. And among the latter, opinion on how to resolve the crisis is sharply divided between the conservative continental Europe and the apparently adventurous US.
Beyond all that lies a huge constituency comprising six billion households who know very little about what’s going on but are the most affected by the global meltdown. The issue seems to be out of the public consciousness in India — all events of extreme importance from religion to finance seem to end up that way. But nothing is going to be as important for all of us as the conclusions that come out of, or get buried in, the London Summit of G20 that begins 18 days from now, on April 2.

Blog post on Cuting the Edge

Desperately seeking…thinkers

Killing neighbours who until yesterday shared curds and broke bread together. Allowing dogmatism to overrule reason by following fatwas of Islamic clerics or Hindu extremists. Allowing ourselves to be misled by people whose moral credentials are at best suspect. Taking a minor traffic brush as a religious attack and turning rage into a serial killer on roads.
Never before has this trait, this prime differentiator between men and all other species, been needed as much or in as many. Unfortunately, never before has this ability — to think, to arrive at conclusions and take decisions that help take individuals, groups, neighbourhoods, societies, civilisations forward — been so wanting.
In cities, behind the brittle safety of our EMIs, SUVs and digital wealth, we watch this insanity streaming through TV, that while ‘taking us to the event’ pushes us further away, as we transact a vacation on Blackberry during commercial breaks. Under the imagined protection of anomie, we “dissolve restraints on the passions of humans” and turn into a mass of bodies that work, buy and have sex with one another, but remain aloof.
Blog on Cutting the Edge

Management in poetry, strategy in verse

It reached me last week, but this 2003 paper is the most unique I’ve read in many years. Not for the ideas it carries or takes forward -- as every paper is expected to -- but for the treatment it uses. Written in verse, eStrategy is a paper that will appeal to the poet in scholars and managers. And it may just about pull in the poets, get them to appreciate the “real” world of business and strategy, from which the authors have borrowed ideas -- cybernetics, semiotics, general systems theory, biology, psychology, thermodynamics, information theory, organisation theory, and strategic management. Sample this:
Organisation is information:
About entities, attributes, and relationships,
A construction of our mind.
Information is organisation:
Of signs, signals and symbols,
Through semiotics of our mind

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Interim Budget: Poll dance, but no item number

No relief for households, no tax cuts for industry. Just what more can you get from an interim budget? An election message, perhaps.
With an eye on polls less than three months away, as Pranab Mukherjee presented India’s 12th interim budget, the undertone behind his 80-minute drone was clear: “Vote for the Congress.”
Neither the “dream run for the economy”, nor the “fastest ever improvement in living standards over a four-year period” could stop the Sensex from falling 329 points — with India’s biggest companies tumbling: Reliance Industries and ICICI Bank fell 5.8 per cent.Gushing with what the UPA has done for major votebanks — farmers and minimum wage employees through reminders of schemes launched in agriculture, education, rural development and health — Mukherjee, who last presented a budget on February 29, 1984, dashed the expectations of the industrial elite.
Story in Hindustan Times

An insider tells the Railways’ turnaround story

To me, tracking a turnaround is a stimulating. When that turnaround is of an organisation that’s as politically charged and as huge as the Indian Railways, it becomes all the more exciting. And when all of it has details as well as the big picture in a small 207-page book, it becomes compulsive reading.
On Friday, as Lalu Prasad presented his last Railway Budget (interim) as part of the current UPA administration, his speech took me on a journey that’s five years old — I’ve been following Lalu and his Railways since he took charge in 2004 as Minister of Railways.
Check out this piece on the interim budget, this interview and this podcast with Lalu.
Blog on Cutting the Edge

On Rail Budget day, Lalu’s message to India ‘We are changing’

With a Rs 90,000-crore surplus over five years, Railway Minister Lalu Prasad says the real change in the Railways is not about the money but the shift in thinking. “We are conscious about remaining a profit-making enterprise,” he told Hindustan Times in an exclusive interview following his interim rail budget. In an interview to Gautam Chikermane and Varghese K George, he conceded a lot needs to be done to improve amenities.

The turnaround is good, but what have travellers got?
Reduction of 2 per cent in fares across classes is not a small thing. In the last five years, we made a record surplus — Rs 90,000 crore. Before that, Nitish Kumar and his alliance with the India Shining campaign ruined the Railways. Today, Indian Railways is being talked about across the world. We worked with the same people and situation and achieved this without causing trouble to anyone. This is only the beginning. We have set a high benchmark for the Railways and we have to cross that.

Interview in Hindustan Times

Podcast: Sudhir Kumar

Interview with Sudhir Kumar, officer on special duty to Railway Minister.
Podcast in Hindustan Times

Podcast: with Lalu Prasad

Interview with Lalu Prasad a couple of hours after he presented his interim Railway Budget 2009-10.
Podcast in Hindustan Times

What, after all, is Rs 90,000 crore?

Gautam Chikermane, Hindustan Times
New Delhi, February 13, 2009
Nothing, if you ask the people of Railway Minister Lalu Prasad’s constituency, who when told that the Railways had made a profit of Rs 70,000 crore in the four years to 2008, couldn’t relate to it. All they knew was that the fare from Hathua to Siwan in Bihar has fallen from Rs 7 to Rs 4.
Nothing, if you ask the Railway Board, who when armed with a Rs 15,000 crore surplus in 2006 and asked to reduce passenger fares by Re 1, said it would serve no end. The reality: for 88 per cent of travellers who pay an average price of Rs 10 per ticket, it does make a difference.
Story in Hindustan Times

Highway to happiness is littered with theories

The highway to happiness has many alleys. Kids in college, happiness was simple — cut an album, tour the world, cut another album. All we had then were our passions, cigarettes we never had the money to buy, a modest collection of cassettes and a track record of having won the first or second prize in all inter-college music festivals.

A decade-and-half later, I find that the same highway to happiness is also littered with theories. From its very definition to methodologies of measuring it, psychologists, biologists, economists are in a highly competitive space out there.

Blog on Cutting the Edge

A paper on regulation that even makes sense

In a short but crisp and tightly written paper, Luigi Zingales, a professor of entrepreneurship and finance at University of Chicago, shows why the new regulation following the global meltdown needs to be fundamentally different from the one written 70 years ago in the 1930s.

Titled The Future of Securities Regulation, his primary argument in this paper is that the focus of regulatory protection needs to shift away from “unsophisticated investors vis-à-vis the underwriting of securities to the investment in mutual funds, pension funds, and other forms of asset management.”

Blog on Cutting the Edge

Is knowledge stealing our silent moments?

As knowledge rips away the sense of marvel from one delightful phenomenon after another, I wonder if we (you my readers and I your blogger) are condemned to an existence that’s as exciting as quadratic equations, chemical reactions and a series of numbers that we can’t even begin to imagine, leave alone comprehend.

Fire is not something that powers romantic fantasies; it is a process of rapid oxidation, usually with the evolution of heat and light. Space is not something you, in your quieter moments of solitude, reach out to for lessons in humility; it is a boundless, three-dimensional extent in which objects and events occur and have relative position and direction.

Somehow, somewhere, scientists and researchers across time and space have decoded and deciphered almost everything about our amazing world. And still, according to many, we barely see the tip of the knowledge iceberg.

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Insightful, gripping…and deliciously skewed

Its uniqueness comes from what its authors represent. Known to be highly opinionated market fundamentalists whose answer to everything is to bring in economic reforms and let the markets do their magic, Ajay Shah and Susan Thomas have brought out — with Michael Gorham as their co-author — what I see as the most unique look at India’s financial markets. You may quarrel with the approach, the slant from where India’s Financial Markets: An Insider’s Guide to How the Markets Work has been written, but no student of economic policy will be able to put this book down without finishing it — it is fresh, it is well written, it is insightful, gripping. Most important, it helps contextualise events and actions and is written at a time when the tribe of liberals is shrinking, the intellectual atmosphere is turning anti-reforms and the people who are supposed to be benefiting from them are having mixed (economy) feelings.

Blog on Cutting the Edge

How long; how deep?

The two questions almost everyone has been asking me since October 2008: how long; how deep? That is, for how long will the ongoing global meltdown continue; and how bad will it get? In other words, when will this insecurity over our jobs, our income streams, our businesses, our investments end; and how much lower will asset prices of properties and stocks fall?

I wish I knew.

Blog on Cutting the Edge

Cutting the edge

How did the Hong Kong market move this morning?
Is Bank of England going to cut interest rates?
Will GM get the bailout package in the US?
Should India seek a peace dividend by investing in Sudan?
What does the slowing down of China mean for India?
Can Chindia drive the world economic growth in 2009?
Will the coming together of G-20 nations resolve the meltdown?
Was Alan Greenspan wrong?
Is John Maynard Keynes really back?
Is nationalisation the new currency of economic growth?

The 10 questions above are those that until September 2008 only scholars asked or were interested in. September 15, 2008, when Lehman Brothers went bankrupt, exposed the bankruptcy of ideas, actions and intent among the world’s largest financial institutions, and led to a global meltdown that is increasingly being compared with the Great Depression of the 1930s. And as a result, these are questions that lay people across the world are discussing in their bedrooms.

Blog on Cutting the Edge

2009: Towards a sweet spot between fear and greed

Gautam Chikermane
New Delhi, January 01, 2009

From high inflation and tanking markets to seesawing oil prices and growing layoffs, 2008 proved to be a year of great learning for most of us. Overnight, terms that only the financial suits used in boardrooms or over trading terminals — sub-prime, decoupling, Lehman Brothers — came into our bedrooms, threatening our economic foundations. We learnt who the Reserve Bank of India (RBI) governor was and why he is an important man. We met and cursed former Fed chief Alan Greenspan for lowering US interest rates. On the tickers, suddenly company performances were given the go by and the Sensex shivered to the tune of markets in Tokyo, Hong Kong, Singapore, London, New York.

Opinion in Hindustan Times