A few days ago, President George Bush invited the three living former US presidents to the White House for a meeting with Barack Obama.
They chatted before the cameras for a fair time, but none of the others so much as looked at Jimmy Carter, who stood uneasily at a distance from the main group. I can't help feeling that the weird body language had something to do with the current violence in Gaza. Carter has written a book, Palestine: Peace, Not Apartheid, which places him at the fringes of the American political spectrum: way out left, like he was in the presidential gathering. The others in the meeting might have many foreign policy differences, but they have all been at pains to register their unwavering support for Israel. Perhaps even looking toward the only Nobel Peace Prize winner in the room and smiling would have sent wrong signals to the incredibly powerful pro-Israel lobby. Ironically, Jimmy Carter has done more for Israel's security than perhaps any non-Israeli alive. The greatest achievement of his presidency was the agreement at Camp David, signed by Menachem Begin and Anwar Sadat, which led to the normalisation of relations between Israel and Egypt. The land-for-peace formula established at Camp David became a template for future deals, but none of the agreements signed after 1980 proved as robust as the Egypt-Israel detente, which has endured for three decades. Carter put his reputation on the line to push the agreements through, extending the deadline for negotiations, patiently going back and forth between two leaders who hated each other. They got Nobel Peace Prizes immediately, he had to wait 22 years for his own gong. Unjust, perhaps, but better than the volley of bullets that was Sadat's ultimate reward for signing the treaty.
Over fifty hours after Ramalinga Raju confessed to carrying out the biggest fraud in Indian corporate history, the police have yet to pop across to his house and question the man, let alone arrest him. They say they are waiting for a complaint. Funny thing is, anytime people arrange a party, cops land up at 11pm and inform the organisers that playing loud music isn't allowed after 10.30. Those who enquire if anyone's complained are informed rudely that the authorities can act even in the absence of complaints. Then negotiations start over the amount of cash or booze to be handed over before the partying can begin again. I suppose Raju has sent negotiators to police headquarters in advance.
In my last post I wrote of how the threat of war distracts from the "roots of the crisis". I was referring to Pakistan's support of terrorism. The deeper root is, of course, the dispute over Kashmir. The current Indian administration could have negotiated some kind of deal while General Musharraf was in charge. He held all the levers of power and offered some very reasonable approaches to resolving the issue. Unfortunately, Manmohan Singh followed the tradition of Indian heads of government in showing no interest in resolving the vexed question. I wrote an article about it in the Sunday Times of India last April, and warned the window of opportunity would not remain open forever. Notwithstanding the recent election in Jammu and Kashmir state, that window seems to have firmly shut.
CNN IBN is not the only media outlet asking if India should bomb Pakistan, emulating Israel's assault on Gaza. A concise response to such an idea is provided by Tunku Varadarajan in a Forbes magazine article . When the possibility of attacking Pakistan is brought up in Indian newspapers and on television, there is, as a rule, no serious discussion of a potential nuclear holocaust. Pundits speak of surgical strikes and limited war, ignoring the atomic weapons pointed at Bombay and Delhi. We have no way of stopping those once the missiles take off. All we could do in response to the killing of millions of our civilians is to kill millions of Pakistani civilians. There is now talk of India buying a missile shield from the US, but it will be years before we get it and the technology's unproven in any case. If Hamas had nuclear weapons, Israel would never have attacked Gaza. If Saddam Hussein had nuclear weapons, Bush would never have invaded Iraq. India, then, needs to exert diplomatic pressure without rattling sabres, and that's precisely what it is doing. Nothing pleases Pakistan's politicians more than headlines about war. The world immediately get scared and does all it can to cool things down between the countries. The United States, which wants Pakistan's forces to focus on the border with Afghanistan, asks India to tone down its rhetoric in order to stop any shifting of battalions eastward. Attention is drawn away from the roots of the crisis. Pakistan's foreign minister tried to highlight the threat of war in a television address, but India didn't take the bait. It continued to demand a crackdown by Pakistan on militant groups. It saw that the Pakistani government had painted itself into a corner by reflexively talking about the need for proper evidence, and denying the terrorists were Pakistani. This time India did have evidence about the origins of the attackers. One of them was captured on cameras and closed circuit TV and then captured by the police. Now the Pakistan government has really tied itself in knots over the issue, as demonstrated by the sacking of the National Security Advisor. Compare the measured response of India now with its bellicosity after the Parliament attack of December 2001. All leave was cancelled for military personnel, and troops were sent to frontlines. Threats and counter-threats filled the airwaves. In May 2002, Prime Minister Vajpayee went to Kashmir and told troops to prepare for a 'decisive battle'. Of course, it was all just posturing, he was never going to be able to carry out the threat. In the end, nothing whatsoever was achieved by a tense standoff that lasted over a year. I have two classmates who joined the military after school: KJ is a naval officer and MB is in the army. KJ was posted in Bombay through the 2001-2002 crisis. When we met one day, he spoke of how easy he had it compared to MB, who was stuck in a tent near Jaisalmer in 50 degree celsius heat. That's how army officers and jawans spent 2002: without leave, without any opportunity to see their families. Does wonders for morale. I'm glad the current administration is low on posturing and high on procedure. That's what you get when policy wonks are in charge rather than poets. No charisma at all, little to appeal to the media or the public at large, but in the end more effective in making India's case to the world. I can't bear to watch Manmohan Singh speak for more than two minutes, but there's no man I would rather have at India's helm during the current global financial crisis. Pranab Mukherjee, I believe, has been an outstanding external affairs minister. He is, in a way, a ridiculous figure. It's almost embarrassing seeing his 4 foot 10 frame next to visiting foreign secretaries. Condoleezza Rice always has an amused smile when she's with him, and it sometimes appears she's trying hard to stop it from turning into a giggle.
Mukherjee's Bengali accent is so thick that I have problems deciphering what he is saying. I can only imagine the difficulty foreign visitors go through. It would be rude to ask for a translator, but how else to conduct a proper conversation? The Pakistani Foreign Minister Makhdoom Shah Mehmood Qureshi on the other hand has a bearing worthy of his impressive name. He is tall and poised, immaculately dressed, equally comfortable in Urdu and English. Clearly a member of the feudal elite, the sort who possess thousands of acres and an Oxbridge education.
Once you get past Mukherjee's physical limitations, however, you develop great respect for him. The nuclear deal negotiated by India with the US under his watch was the single greatest triumph of Indian diplomacy in the past thirty years. His speech in Parliament during the debate about the 123 Agreement was outstanding, though his careful argument was overshadowed by Rahul Gandhi's dimples. It's a pity so many Indians are deluded by the bluster of right-wingers and take to parroting nonsense about the country being a 'soft state'. What we need to be is not a soft state or a hard state but a smart state. A smart state is aware of its limitations. It does not cry havoc and let slip the dogs of war against a neighbour armed with nuclear weapons. And it understands there are many kinds of pressure that can be brought to bear on countries aside from the threat of invasion or bombing.
The letter sent out yesterday by Ramalinga Raju brought to mind an Agatha Christie story titled Murder in the Mews. A woman is found dead in her house, apparently having shot herself. The gun is in her right hand, but the wound is above her left ear, leading police to believe she has, in fact, been murdered. Evidence points to a blackmailer, but in the end Hercule Poirot discovers it is not murder disguised as suicide, but suicide disguised as murder. The victim's housemate returned home to find her friend had taken her own life. Wanting to implicate the blackmailer, whom she held responsible for the suicide, the housemate removed the gun from her friend's left hand and placed it in the right, knowing the police would immediately notice the discrepancy. How does this connect with Satyam? Well, when Ramalinga Raju decided to buy the family-owned Maytas Properties and the family-run Maytas Infra, everybody assumed that Satyam was bailing them out with its huge cash reserve. It now turns out that he was planning to pay them with money that did not exist, thus cleaning up Satyam's balance sheet while acquiring real assets for the company. It wasn't Satyam bailing out Maytas, but Maytas bailing out Satyam. Maytas, however, simply wasn't valuable enough to justify the price decided upon by Raju, which matched the amount of fictitious cash Satyam was carrying on its books. After the September-October crash hit real estate harder than any other sector, shelling out 1.6 billion dollars, most of it for an unlisted firm, was never going to fly. Had Raju acted a few months earlier, he might have managed to push the plan through, though opposition from insitutional investors was guaranteed.
Hobson-Jobson: A Glossary of Colloquial Anglo-Indian Words and Phrases, and of Kindred Terms, Etymological, Historical, Geographical and Discursive is a fascinating dictionary devoted to the influence of Indian languages on English (with a smattering of words from other colonies). The dictionary supplied substantial portions of the vocabulary used by British sailors in Amitav Ghosh's novel, Sea of Poppies. A native festal excitement, is how Hobson-Jobson defines its own title, whose root lies in Ya Hassan, Ya Hussain, the cry of mourners beating their breasts during Muharram processions marking the killing at Karbala of Imam Hussein, grandson of prophet Muhammad. Tonight's the night for those processions, climaxing ten days of prayer, preaching and tears. Those in Bombay interested in viewing the flaggelants can make their way to Dongri, a precinct with a strong Shia Muslim presence. Dongri, which gets its name from dongar, Marathi for hill, figures in Hobson-Jobson as the root of a word all of you will know. The area was a center of textile trading in the 19th century, producing a rough cloth called dongri kapad. This eventually mutated to dungarees, referring to overalls made from denim. Denim itself is related to another place name, the town of Nimes in France, which used to produce twill fabric known as serge de Nimes. Back in the nineteenth century, when the word Hobson-Jobson was in common use, the Ashura procession was the single largest religious gathering of the year in Bombay. Sunni Muslims participated in large numbers, as did Hindus, "especially the Mahrattas". After Lokmanya Tilak came up with the idea of public Ganeshotsavs, those Mahrattas got their own celebration to look forward to, and gradually dropped out of the Muharram ranks, switching from Ya Hussain Ya Hussain to Ganpati Bappa Morya.
The mainstream media in India have been turning tabloid for years, and the crises of recent weeks pushed their irresponsibility quotient up many notches. I was stunned last night to find a long discussion on CNN-IBN about whether India should emulate Israel’s response to Hamas rocket attacks. In other words, should we deal with Pakistan the way Israel is currently dealing with Gaza.
I will return to the specific issue of Israel-Gaza and India-Pakistan in a bit. For the moment, let me examine the media’s love of copycat formulations. A great example of this was the reaction of Raghav Bahl, Managing Director of India’s biggest business channel CNBC TV18, to the market crash of October 2008. Bahl suggested that interest rate cuts and stimulus packages were no way to tackle the crisis. What was needed was a “big idea”. His own big idea? India ought to shore up share prices by creating a Sovereign Wealth Fund that would buy Indian equities.
‘Sovereign Wealth Fund’ is such a buzz phrase that mediapeople are dying to jump onto the bandwagon and take their country with them. Me too, they shout, my country should have an SWF too. If Kuwait and Taiwan can, why not us?
Now, anybody who knows anything about SWFs is aware they are created by nations running budget surpluses as a way of deploying excess money. Most such funds are employed by countries whose economies depend on a single commodity. The investments serve as a hedge against the potential drop in price of that commodity.
India does not depend on a single commodity. More importantly, it does not enjoy a budgetary surplus. It has run large deficits for decades, the reining in of which has been one of the main challenges for successive administrations.
As for Bahl’s suggestion that we buy shares in Indian firms with this wealth fund, the purpose of SWFs is to acquire assets abroad. Purchasing in the parent country would defeat the primary goal of such vehicles.
Bahl suggested in an interview on his own channel that we dip into our foreign exchange reserve, sell 20 billion dollars worth of US treasuries, and use the money to buy shares. His interviewer politely suggested (I give him credit for this, since Bahl presumably has the power to fire him) that selling foreign exchange reserves would be unwise because, no matter where India takes the money from, it would add to its deficit, reducing its creditworthiness. Since the forex reserve is used as a marker of a country’s ability (and the ability of corporations within that country) to pay foreign obligations, lowering our reserves would immediately impact our credit rating. The cost of accessing funds abroad could rise for Indian firms, potentially negating any positive effect that shoring up share prices might produce.
Bahl replied: “If one doesn’t arrest the secondary price damage in the economy today, the equity capital formation will be gone and the GDP growth will be seriously jeopardised, and that is a fundamental downgrade. This is only a financial rejigging of the balance sheet of the country, temporarily, and I am not saying do this forever.
The US stepped in and picked up USD 6 trillion of gross Fannie Mae and Freddie Mac assets. It is a temporary measure. They are not going to be holding that forever. Why cannot our policymakers, given the cornucopia they have in their hands, go out and do that.”
Hacking our way through the jargon, we spot Bahl’s second copycat formulation. The first, remember, was: Kuwait and Norway have sovereign wealth funds, why not us? Answer: we don’t run a surplus and our government does not receive commodity-related windfalls.
Now the argument is: The US bought distressed assets, and provided bailouts, why can’t we? Well, consider the position the US was in. Its mortgage network was on the verge of collapse; the banking system was like a swimmer with cramp waving frantically before disappearing underwater; two of the ‘big three’ car companies were weeks away from running out of cash and filing for bankruptcy. Most people agreed the nation was facing its worst financial crisis for seventy years.
Compare with India. Is our financial system under threat? No, our banks are well capitalised and conservatively run. Is our mortgage market in danger? No, virtually all borrowers are able to pay back their loans because Indian banks never offer subprime clients easy money. Is any major Indian company about to go bankrupt? No, our big companies are, in general, financially healthy, and will be able to weather comfortably the fall in price of their shares. Is India looking at a painful recession? No, while the economies of dozens of countries, including the US, have begun to shrink, the worst case scenario for India in the absence of further global shocks is GDP growth of about 6% for the financial year 2008-09 and 4% for 2009-10. What if there are further global shocks? We'd be in deeper trouble, but buying 20 billion dollars worth of shares wouldn't help us weather that in any case.
You might recall that, in early 2008, India offered a bailout package of its own. It wrote off small loans that public sector banks had extended to farmers. The move was, without doubt, made with an eye to the general election of 2009. But it was also a reaction to the real pain millions of farmers were feeling. The loan waiver attempted to redress in some measure the enormous imbalances of wealth within the country. These imbalances have always existed, but the gap has grown substantially while India’s economy boomed these past years.
When the policy was announced, CNBC TV18 was full of experts deriding the measure, cursing government handouts, invoking moral hazards. A few months later, the head of the same channel argued for government support to the 2% of Indians affected by share movements, the same 2% who’ve been making money hand over fist for four years while markets scaled one peak after another. Moral of the story: subsidies are fine as long as they are given to the rich.
Anahita Mukherji writes in this morning's Times of India about books by Pakistani authors being pulled from the shelves of Oxford bookstore in Churchgate. An employee of the book store who is a member of Raj Thackeray's Maharashtra Navnirman Sena is apparently responsible for the temporary ban. The question arises: how did a book seller come to employ a person who clearly has no sympathy for, or understanding of, literature? If you've visited the shop (which is not connected in any way with the university of the same name) you'll know how. I've often joked that the owners of Oxford give prospective employees a test, and if any candidate shows evidence of literacy, s/he is disqualified immediately. When the place opened (about eight years ago, I think) I visited it enthusiastically a few times. The shelves full of publications on Indian history compensated for clueless staff. Since then, the space reserved for intellectually challenging work has dwindled, replaced by who-moved-my-cheese type stuff. It says something about Bombay that Oxford couldn't sustain its academic section though surrounded by colleges offering degrees in politics, sociology and history. This city's paucity of good booksellers means that no visit to Delhi is complete for me without a tour of stores in Connaught place and, whenever possible, a trip to Daryaganj for more specialised material. On my first visit to Ansari road, I walked into Manohar's outlet after stopping by Oxford University Press, Macmillan and other better known publishers. I was allowed to browse undisturbed by the two people manning the shop: a portly chap at the desk and an older guy with a large moustache, shirtless, wearing a vest tucked into trousers, who sat on a stool unpacking cartons full of books. After a long time the man in the vest asked, "are you looking for something specific?" I was a bit surprised to be addressed in this manner by somebody I'd assumed was hired help. I told him I was interested in books about Lord Curzon. He rose, walked up to a shelf and pulled out David Dilks' account of Curzon's time in India. I said, dismissively, that I'd read it, and felt it was very dated (the two volumes had been published in the late 1960s). I don't recall his exact reply, but it was something like, "older historiography still has something to offer if you get beyond its limitations". He was, of course, the owner of Manohar Publishers and Distributors. I ended up buying David Gilmour's biography of Curzon, and shelling out far more than I should have for a second hand copy of Begley and Khan's Illumined Tomb, mainly because I was so impressed by the gentleman in the ganji.
Just got a publicity release that reads, "Raza Foundation, a trust created for assistance and support for young artists in India and exclusively funded by the Paris based Indian master Sayed Haider Raza, has chosen 2 painters, 1 poet, 1 musician and 1 dancer for the Raza award carrying Rs. One lakh each for the year 2008." The two "young artists" chosen? Atul Dodiya, 49 years old, and Jayashree Chakravarty, 52. Nominating Dodiya is like presenting Roger Federer with the Promising Swiss Sportsman of the Year award. And Chakravarty would be better placed in the jury panel than among the recipients of the prize. My guess is Atul will donate the award money to a person who really has use for it, but one wonders what purpose is served by giving 'emerging artist' type prizes to internationally acclaimed practitioners. As a diversion, here's an image of Dodiya's painting, Bindu (After Raza), exhibited at Vadehra art gallery in 2007.
For those who don't get the context, Raza has spent decades painting the 'bindu', or dot, which comes with a lot of philosophical baggage. The Bindu inside Dodiya's dots is an actress of that name. At her peak in the 1970s, she played a variety of molls and bimbettes, most famously Mona Darling in Zanjeer, a film written by the young duo Salim Khan and Javed Akhtar that introduced Amitabh Bachchan's angry young man persona.
On August 27 last year, Delhi's posh art set crowded a spacious room at the Oberoi hotel to hear Sotheby's representative Oliver Barker speak about Damien Hirst, and to view a selection of paintings and sculptures from the auction house's sale titled Beautiful Inside My Head Forever. It was part of an effort to stimulate international buyer interest in the event, which offered 223 new works by Hirst directly to bidders without any dealer intercession. At one point, Barker quoted Hirst as saying, "After the success of the Pharmacy auction, I always felt I would like to do another auction. It’s a very democratic way to sell art and it feels like a natural evolution for contemporary art." A few audience members snorted at the use of the word 'democratic' to describe the vending of works estimated at a million rupees each for small sketches and many millions of pounds for large sculptures. But I could only chuckle. It was just Hirst being his usual self. I'm sure he knew exactly how outrageous the statement sounded. The Hirst auction's first session was held in London on September 15, even as Lehman Brothers' bankruptcy filing triggered a global sell-off in equity markets. By the close of the second session the next day, over 111 million pounds had been bid, well above the auction's high estimate. Beautiful Inside My Head Forever turns out to have been an apt title for an unforeseen reason: the phrase encapsulates how the early 21st century will be viewed by dealers, artists and curators who benefited from the unprecedented market expansion of that period, which is now decisively behind us. Sotheby's obviously realised long before September 2008 that the world's largest economies were in trouble, and that sustaining prices in the future would involve getting Russians, Chinese, Indians and Arabs interested in buying outside their immediate cultural sphere. The Hirst display in Delhi was a step in that direction. Unfortunately, the rot in the global financial industry were so serious that it set off a domino effect. Consumers in Europe and the US cut back on spending, driving down demand for manufactured imports as well as commodities like oil and steel, hurting China, Russia and the Middle East. No country, cartel or corporation was left with the financial strength to boost support for art. In late 2006, I had predicted the art market would see a downturn. I wrote in my Time Out column, "if the market keeps its present course, it’s heading for a crash sometime in the next two years", and outlined the reasoning behind the prediction. "[Speculators] are pricing genuine collectors out of the market. The turnover of paintings is frighteningly high: it’s not unheard of for a single canvas to be sold half a dozen times within a year. Auction houses have turned advocates rather than neutral sellers. Even Christie’s and Sotheby’s are featuring raw artists and accepting fresh-minted works consigned by galleries, in contravention of normal international practice. The boom that began with established masters has spread to artists with no proven track record or historical merit. Gallery owners, who should be turning off the tap of speculation by carefully vetting clients, have little power to set conditions. They have to suck up to popular artists in order to get a few works out of them. The artists, meanwhile, many of whom have known privation in the not-too-distant past, are keen to make their pile as quickly as possible by selling to the highest bidder. Despite these unhealthy symptoms, the experts have convinced themselves the party will go on forever. They, like everybody else, are having too much fun to think hard about tomorrow." I then suggested what would cause the slump: "The rise in art prices has been congruent with a global boom, and the crash is also likely to be triggered by global factors, as yet unknowable."
The point of quoting these lines is not to say I told you so (OK, maybe there's a teeny-weeny bit of that involved). Pretty much everybody in the industry knew prices were absurdly high and would fall sometime. The more polemical point in my article was about how Indian art would react compared to art worldwide: "Once the tipping point arrives, developments intrinsic to India will take over and probably make the correction deep and painful. Since few buyers are purchasing for love, people holding stock will want to cut their losses immediately, feeding supply even as demand fades. There is the additional dimension of mushrooming art funds to consider. These funds usually operate for stipulated periods, and will have to unload their wares even in a declining market, exacerbating the slide." Four months into a severe downturn, it is unclear if Indian art is doing better or worse than its emerging market peers. Everything has gone down so quickly that comparison at this point is useless. The question is how matters will play out over the next two or three years. The Indian economy is doing relatively well, so one might expect Indian art to outperform. But the art fund issue remains crucial. Nobody knows how many works these vehicles hold because their functioning is so opaque. It's certain that 2009 will see substantial liquidation of stock with very little counterbalance in the form of investments in new funds. One important factor has emerged since I wrote the column: about half a dozen contemporary artists are now established globally, represented by well-known international galleries. A dozen more are on the verge of such recognition. The work of these artists might end up delinked from India-specific ups and downs, and move in tune with global prices.
