A Follow On Inning

For a prolonged period in the Nineties the powder train of India's growth story provided a discernible fillip to equity values, including a booming primary market. To boot, some aggressive issue pricing meant even neophyte investors made a fairly consistent killing through a buy-IPO-sell-listing strategy. It was too good to last, and the market eventually turned a great leveler as it must. Some hangover of those glory days still seems to pull the retail investor (sample the now-thankfully-dear-departed 'MF IPO' mela) to this day though.

As it turned out, in this happy period, my college pocket money was hardly enough to afford any investible surplus. The result naturally was that my initial flirtations with stock-picking missed any skew from the confident swagger of tenderfoot success, nor adventure from lure of lucre. Learning the hard way (and armed with pearls from two notable masters: Messrs Buffet and Lynch) my confidence gradually crept up at least enough to venture my opinion on the table. And when for a few years in a row my portfolio reflected better returns on direct equity investments vs the Sensex (or those via the Fund route) the tendency to play to gallery won me to freely dispense stock advice!

Unfortunately, of late, my acquaintance grew with that familiar spoilsport: Time (or the lack of it). Consequently, most of my theories were tested vicariously - and though the results were not discouraging, the discipline to tend better to my portfolio was found wanting. It is in this backdrop (and to the accompanying bugle calls from a generally bullish market) that NTPC announced its mega FPO. Persisting with the axiom of my stock-picking being based on more mature considerations, here's how the issue stacked up:

• NTPC easily stood out as the largest Indian power utility, with reasonable historical revenue/ profit track record and operating efficiency in load/ availability factor terms
• The firm boasted of a healthy topline growth with plans to ramp up capacity by ~10K MW (over a third), assuming execution on track and equipment delays/ risks in control (Also important given its somewhat sub-optimal debt-equity ratio, affording scope for putting more equity to use)
• Significantly it was an infrastructure major with very low liquidity pressure atypical of the long gestation in the sector; and a comfortable funding position (~INR 17.5K Cr in cash alone) that weighed on its ROE as much as providing opportunity for backward integration
• Raw material pipeline was steady - a new 20 yr coal supply agreement with Coal India for 12 of its existing 15 units would get supplemented with captive coal mines and KG basic gas expected to kick in over next 2 years. Possible overseas mines acquisitions (hydro projects remain a concern) would provide increased flexibility. There was also strong partnership potential in 2000 MW nuclear power JV and ventures with BHEL and Bharat Forge to manage engineering and equipment needs
• Potential upside existed from sectoral deregulation, specifically unallocated power sale boosting returns or short term power trading (#2 player) and 3P modernization/ life extension practice

Yet, for the retail investor, the icing on the cake could only come from a price play. Indeed, it was key to whether the issue would draw more than institutional interest. The latter, some argued, would get committed any ways, a volume player being inelastic to entry point in view of the overall mood and potential. Given the value-unlocking protestations in UPA 2.0 policy (disinvestment being no more a dirty word at the very least) it was critical for the floor to be suitably defined so as to set the right tone for the aam aadmi investor.

Unfortunately, by any reasonable yardstick, the pricing and the issue came up short, saved the blushes only through 'motivated' subscription from SBI, LIC and other PSU players. The drama in the FPO (and my own prurient interest) were in itself well served by a simplified version of this script (rob Peter to pay Paul etc) but the back-room shenanigans transcended the staid approach the Govt and its hired guns usually adopt in such situations. In fact, far from commonly held misgivings on price, PSU entities actually bid at the high end, much higher than the floor price or the market - and that when FII interest was almost nonexistent! Extending the line, we had a series of seemingly unorchestrated sound-bytes (Goebbelsian devices that would have done any crafty market manipulator proud - case in point: Reliance Power) hinting at bear cartels that had been at work to drive price below its 'natural' 230 levels! And if any argument were left to be had, one merely had to look at the complete absence of commitment from NTPC employees. They knew!

In short, the promoter, the Govt of India, obviously needed the money - and as appears in retrospect, badly enough to brazenly flirt with the grey in an unprecedented manner. At the same time, it must be pointed out that such insidious conveyances could be but a short term tactic. Over the course of what promises to be a long summer, Fin Min mandarins would do well to imbibe better appreciation of their much professed principles of policymaking like public sector ownership by the public! Not only is the capital requirement in the current Grand Sale of PSU family silver way too high to afford being limited to incestuous bargains, but there is real fiduciary merit in spreading the spoils over a larger investor base. To boot, there may well be electoral arithmetic benefit in promoting an aam aadmi (or middle class, at the very least) lilt in any future auctions (even if at the cost of a marginal discount).

For now though the NTPC FPO kissa does leave more questions than it does answers, such has been the Government's conduct. And one thought the ignominy in a follow on was restricted to cricket!

Ode in Time of Crisis

Looking back the last few months, it is impossible to miss a humbling feeling of being amidst epochal events. Personally, last September was a heady high, a celebration of creation that rendered me well nigh unequal to the task of putting it to words! Time has flown since, each day a nouvelle discovery of wondrous joys, yet occasionally tinged with an undefinable sense of vulnerability. In my thirty-some years on the Planet, this pallete of emotions is sans parallel: cheer and blessing, joie de vivre, if ever!

The world, on the other hand, has been seized with circumstances of a lot less happy nature, best epitomized by episodes a year older. With the global financial system at its epicenter, an unprecedented and unrelenting series of economic upheavals have challenged life as we know it. Without getting into inordinate details of these trying times, suffice it to say that no walk of life nor section of society has been left untouched. Moreover, at least in some cases, things will never be the same again. Equally, though the worst is likely behind us, we are not fully out of the doghouse yet. It is clear that the speed, quality and sustainability of recovery depend on our generation's ability to rebuild the economic edifice. This effort must incorporate lessons from the current turmoil. Likewise, it is incumbent on us to have a sense of urgency lest the events and their aftermath fade from proverbially short public memory post recovery.

So what should constitute the bulwark of the Reset Economy? At the heart of reform must be a robust financial system that can not merely withstand future shock but proactively alert us to impending danger going forward. In fact the latter, curiously and completely missing in the run-up to the Lehman collapse or the events that followed, is the critical test for any proposed structural change. Unfortunately, at least for now, our response appears to me as coming up short. As a first step therefore, let me try and outline today a broad agenda, hoping to see the rest fleshed out in the New Year. (That which springs eternal in the human breast only magnifies early in a new year also a new decade, and when penning one's return blog after an interregnum!)

Firstly, we must recognize the character of the current downturn. Like someone put it, the crisis was a lethal combination of Market turmoil that eventually turned a Banking crisis and finally led to broader Economic consequences. Obviously such a debacle puts into the dock governments, central banks, regulators, banks/ lending institutions as well as corporates. It points directly to lack of coordination between these players, and piecemeal or inadequate appreciation of crisis drivers. Thus, a harmonized non-fragmented response and review is critical to future success.

Next we have the extent of the crisis and the pace of its transmission. For the malaise to spread like it did, the key ingredient was the interconnectedness of financial systems worldwide. This network is directly linked to ever increasing Globalization of world economy; and aided by rapid advances in Information and Communications Technology. In tandem, these ensure an all time high factor mobility, making the butterfly-in-China-shapes-NYC-weather connectedness an extant reality than mere Chaos Theory shibboleth.

Does this mean we turn contrarian to the forces of Globalization? One would think not. Not only is this fungibility not easily reversible, there are clear benefits the world has derived from them. This holds true for Technology too. In fact even contemplating any (even if theoretical) reversal effort suggests a need for a lot more calibration than the opposite - a coordinated global effort at crisis-corrective actions. Hence the near-consensus currently seen in implementation of near term solutions must stay the course for the longer term root cause fixes. With the plethora of stakeholders involved (and assuming you agree with me on the low feasibility for an outside observer to grasp its nuances), governments the world over have the primary onus to navigate through the intricacies of (micro and macro) prudential and accounting policies.

The logical extension to this argument is that we cannot let our focus waver even on exit strategies for the short-medium term policy and market interventions. Harmonizing these globally may be a tougher ask despite broad unanimity on its goals - sustaining the nascent recovery, maintaining financial stability and protecting a global level playing field. Policymakers would do well to use risk of unintended consequences as the touchstone for their formulations than unidimensional desired results. For instance, instead of getting swept off the feet by the obvious, namely increasing capital standards, consequences like drop in capital availability and inefficiency in the banking system, must be factored. (Interestingly, subprime mortage, now such a dirty word, was the output of one such political agenda, namely incentivization of housing ownership, where side-effects were not considered!)

Looking into 2010, the ball, as it does for most largescale change initiatives, is in the court of the Political kind (bureaucracy included by definition, for simplicity). The stakes are enormous, probably never bigger. Is the species up to it?

No More (Hopefully) Tax!

Some people are difficult to please. And when they belong to the tribe of left-leaning issue-hunting chatterati of our country, woe betide those that seek to propitiate them. So ran my thoughts on getting a buzz from the same Economics Einstein friend of mine who had played catalyst to my last. He was incensed my conciliatory gesture of a post – and at the suggestion of using a credit/ debit card driven payment system as an antidote to the cash impelled parallel economy. He called it many names – but the tags principal to his argument were three: it was effete, elitist (Long Live Comrade Dasgupta!) and uni-dimensional.

To the last of these, let me plead guilty immediately – the idea of a carded economy was admittedly made as an appetizer any ways. Some of the thoughts that came to me at various times this week:

• Speedy adoption of VAT and GST system, something that has been argued for in these pages earlier, underscored here since they track the production process through the value chain and hence enable significant MIS
• Comprehensive implementation of UID (linked with PAN) – with all registrars computerized across asset classes as well as company registration, customs and excise, tax, passport, licences etc – and cross-tabbed (if needed) with HNI indicators like asset ownership and lifestyle spends
• Better enforcement of annual personal tax returns – and perhaps early bird incentives than merely penalty for delay or default. (No doubt my friend would be happier to hear words like greater powers to enforcement agencies but very rarely have our national issues been about legislation instead of execution, and we perennially run the risk of bad intention.) My only exception would be for relatively high visibility downstream impact like on personal rights of holding elected office, driving license etc
• Clarity and continuity in wording rules and regulations – limiting the need for judicial interpretation that may be time-taking and (occasionally) contradictory. One can extend this to talk of faster determination of tax disputes but the need for specialized courts and higher judge-population ratio is a more widely-felt and urgently-needed action

And now, the other two charges. At the core of my premise of effectiveness in advocating an electronic payment system was its ability to capture information in a digital form, coincident with the actual transaction. Equally, the effort in its transmission, storage or retrieval would be marginal save for the investment in scaling up transaction infrastructure in a country as vast as ours (but which, in my defence, shibboleths of Financial Inclusion and Productivity would any ways force on the banking system). The data thus recorded could be mined to model smarter risk-based pricing solutions to help customers and banks, while sharpening the I-T department’s claws.

Almost in anticipation of this, my friend had pointed me to the PAN/ AIR project and its relative failure in achieving similar results – at least at the government end. He had sent me an article from HT on 24 Aug too, with analogous lamentations. The sum and substance of this report went thus:

• Compulsory PAN citation for all high-value transactions has not worked – of the INR 55.7 Lakh Cr total value reported in 2007-08, 30% were missing PAN. For instance, in realty deals (a known home of Black Economy) of declared value over INR 30 Lakh, capture was around 25%; saving bank deposits of INR 10 Lakh plus it was one-third etc (Folks with dark humour will savour the fact of ~10% of 3100 RBI bond sales of over INR 5 Lakh gettinh away without a PAN!)
• Moreover, cases of fake/ multiple cards abound, limiting the department’s ability to trace any transaction back to the beneficiary. It is any ways over its head in water on the high-value AIRs for investigation/ matching with I-T returns (Rumour has it that the department has been trying to build 360 degree profiles of HNI’s (politicians, bureaucrats, corporate honchos, high-growth businessmen – even people with flashy lifestyle not commensurate with known income sources) using AIR data for over three years

But perhaps we write the epitaph of this effort too soon. We can equally note that high-value transactions capture was up 2X between 2007-08 and its preceding year – clearly denoting detection successes than economic boom. Equally, the march of technology in the banking industry is relentless, making the switch to electronic financial administration easier by the day. Or, for that matter, let us not ignore the large-scale adoption of computers by Indians at large. Mind you, this is not the super-bright precocious pre-teens of the current day, the trend is equally discernible across age and economic strata. (My father, loath to the PC most of his life – or perhaps never having needed to take to one, courtesy a sarkari lifestyle – is now not merely a ‘Friend’ on my social networking account, but was actually preaching the virtues of Skype to me the other day!)

The fun times, however, are yet to roll. To my mind, far more than banking industry paradigms or designs of Fin Min mandarins – or even technology’s constant down-spiral of prices and advances in user-friendliness – the real clincher is, literally, in our hands. The convergence of mobile-phone and computing will be where my oracular protestations be put to test. As more and more of India takes to using the ubiquitous phone for functionalities beyond voice, they will buy in to its convenience for financial transactions too. If this adoption gets sweetened by promises of greater speed, increased transparency and lower transaction cost (why ever not, one would think), the inclusion revolution shall fly bottom upwards. Empowered handhelds will then achieve what its voice cousins have already done – bridge divides that most thought an impossibility in the Indian context. Not will this spread make the ‘card’ all pervasive, it will put pressure on high value transactions to conform, given an enormously shrunk cash economy in the future.

Hence, card, we dream… Goodbye elitism, farewell effete :D

Waxing Tax Too

In response to Friday evening post, one of my left-leaning intellectual (tautology, really!) friends called me for a not-so-quick tete-a-tete. Though certainly short of acrimony, the censorious tone of this conversation was hard to miss. The upshot of the lesson in economic history - or indeed its trigger - lay in how my blog piece in question had seemingly glossed over the Black Economy of India (emphasis as supplied), the continued advance of this Public Enemy Number One, and the calamitous consequences thereof. In other words, direct taxation reform was a condemnable (the word bourgeois was carefully avoided) distraction.

Frankly, this set me thinking. It does not require Keynesian genius to deduce skews in any economic structure hampered by the presence of an illegal economy. The news gets worse if this parallel economy breasts the tape at one-fifth the total as ours arguably does. So how does this work? In simple terms high preponderance and resultant cultural acceptance make such an economy difficult to unravel. Again, unfettered access to markets minus the burden of tax makes its cash transactions cheaper. The consequently uncompetitive legal economy thence loses marketshare, profit, and investible surplus. Clogging growth implies less employment and more pressure on government – more so in a regime of floundering tax collections. Need to shore up revenues to fund government spending pushes tax rates north, potentially incentivizing further tax evasion and hence growth of the illegal economy.

So far so good (or bad), in theory. In our case, one could well retrace the path to the days we made our ‘tryst with destiny’. Illegal economic activity had mushroomed in the run-up to independence, typical of wartime economics across centuries, and got a further boost with post 1947 nation-building economic action. Again, the Nehruvian model was resource hungry – revenue had to fund substantial public sector investments. The result was aggressive taxation coupled with a maze of incentives ostensibly put in place to foster savings. The fledgling Indian state just did not have the wherewithal to overcome the resultant tax administration challenges.

As it turned out, the next few decades saw a pronounced socialistic tilt in our policy. The consequent license raj added further question-marks around intent, to a tax regime with already suspect capabilities. While profiteering via artificial supply imbalances had been around for years, under the quota-permit system, policy formulation as well as enforcement became tools for malfeasance. (This in fact stays the biggest reason for celebrating the open-door approach in Direct Tax Code reform in my last post.)

Be these as it may, the most potent constituent of the parallel economy was the hawala-hundi system that allowed its ill-gotten gains to find their way to safe havens as much as to become a tool to finance new trades – and eventually, politics. Hence, even as the formal economy was constrained with pricing, taxation, forex and current/ capital account convertibility restrictions, enormous money transfers via the illegal market became a fact of life. If cash was in play as input or output (and what nefarious purpose doesn’t do both!) the answer in form of this high velocity-instant speed-currency agnostic money system became the oil greasing the Black Economy.

As various studies humiliatingly point out, the endemic corruption bred by such an all-pervasive Black Economy can sap individual will away. One does not need to conduct a Buddha’s Three Questions type of experiment to know that it is well-nigh impossible to go without cash (is king!) in life if registering a property, selling your car, or even making sundry household expenses. When the PM-in-waiting laments distribution losses, one sits up and takes notice!

Whither the disconnect with my more learned friend, one may ask. It lies in the essentially populist, two-dimensional corrective action he and his ilk typically advocate. Increasing taxes and duties changes the risk-reward equation making evasion more lucrative; adding legislative muscle to our inefficient executive breeds more corruption; and expecting a proletariat revolution to solve world hunger is, frankly, far-fetched.

So whence the solution? There must be many (only followers of Marx have the liberty to merely preach symptoms without offering a meaningful cure!) and for today, let me merely place the Korea model (if one plug be allowed) for consideration. This involves a large-scale and comprehensive adoption of cards as the sole payment mechanism for multitude of transactions (over a ceiling value, potentially) for individuals. Being electronic, on transaction speed and high-velocity rotations, credit/ debit cards can easily counter the ‘good’ in the Black Economy value-proposition. With increasing computerization, e-banking can work well in tandem with such a payment system, also addressing the Government’s benefit end-user discovery issue. The data explosion thus generated would do wonders for risk mitigation for any self-respecting funding institution – also helping buyer and seller price credit right. The government could use this information to plug tax evasion at lower cost, greater accuracy, and faster speed. And if a clincher was needed, for a terrorism frontline state as ours, one can well imagine the internal security benefits from better enforcement.

But, better not to stretch my ‘one plug’ luck too much, even for the hand that feeds etc!

Waxing Tax

Earlier this month, the Government of India placed a paper on a new Direct Taxation Code in the public domain for discussion. Such progressive procedure is as uncommon as it is laudable in a nation where administrative opaqueness has often been used to create latitude for backroom manoeuvering. In fact, the play in influence-peddling is believed to be so potent and widespread (so difficult to miss in Dilli's flaunt-it-if-have-it culture) that subterfuge of this kind is not merely accepted but expected. Drawing inspiration from the fortunes of sundry such power-broking carpetbaggers, if no other reason, it is incumbent on us to celebrate this wiki approach to policy formulation.

The jury, of course, is still out as to the merits of the actual proposal. It certainly deserves minute scrutiny and my current inability to appreciate its fine print is far too real to hazard any early judgement. Yet, it must be recorded that it heralds the resurrection of one eminently logical economic shibboleth hitherto consigned to the dustbin: The premise of lower incidence promoting higher compliance had been anathema to North Block mandarins for years and finally seems coming of age. A second toast to the Finance Minister!

Unfortunately, not much of the succeeding discourse on the tax code may be available for ready view in the medium term. The promise in this citizen-friendly reform however gives one the confidence to ponder the fate of another far-reaching change - the GST. Similar streamlining of tax administration has already been accomplished by almost every self-respecting economy of benchmark size and scale. The Indian effort has, lamentably, fallen into a quasi-political quagmire. Given the federal nature of the country's revenue system, GST can only come by via legislation, including constitutional amendments, to junk existing laws as also the creation of a common dual (State and Central) framework it perforce requires.

Building universal consensus on the GST, though, has led to endless debate over its management mechanism, including creation of appropriate infrastructure, and on sharing of its spoils. Equally, it may be simplistic to expect that the fact of different political formations being in power in key States and the Centre, and the much-voiced 'loss' to the former (plus concomitant demands for compensation) is merely a coincidence. It is, more likely, a refined filibustering tactic.

It does appear therefore that the question of whether a nationwide GST is actually needed, is a moot one. Much like Direct Taxes, India's Indirect revenue regime is an elephantine and often conflict-prone labyrinth of state and federal levies that we berated when studying Economics in college fifteen years ago (it was not new then; it is not new now). Fact is that the framework carries the baggage of its roots in our colonial past, and is arguably anachronistic. Applying whatever little one remembers (not that it was ever entirely put to rote!) of economic theory, there are two clear wins in its reform. First, elimination of multiplicity simplifies tax structure and fosters compliance (similar to what Pranab da has already been commended on above). Second, creation of a common market and lower tax burden boosts production, directly and via increased investible surplus: the logic on which EU was born, or ASEAN thrives today.

While actual gains from the implementation of a reformed Direct or Indirect Taxes regime are either the subject of impassioned debate (my Commie friends any way derive sustenance from chatter, especially of the idle kind) or entail expertise in macroeconomic theory more than is my métier, it is likely that Come April we may be raising ours for two and a half cheers to Mr Mukherjee!

Of Temples and Twitter

Long years ago, when trials typical of Tentative Teens had not yet become an amusing memory, a family trip got me to the Royal land of Rajasthan. The architectural delights were dime a dozen, almost too many, as we tried to take in those majestic forts, intricate carvings, and imposing ramparts. Amidst the breathtaking grandeur and wonders of craftsmanship, a hearty hospitality stood out (apparent even in our sarkari arrangements). Again, this sunny geniality was in flagrant contrast to the fractious infighting whose undercurrents were implicit in Rajputana's many a tale of valour.

Nowhere was this enigmatic paradox of gallantry and fraternal discord more manifest than the indomitable fortress of Chittorgarh. Its remarkably well-preserved battlements were monument to the doughty challenge Rajput kings had posed to numerous invaders, yet often felled by the enemy within. One artefact in particular held my imagination at once. The king's bed (literally) carried the most unflatteringly modest dimensions; one that no self-respecting modern hostel would proffer under the name. Truly, allowing for some inaccuracy of magnification intrinsic to heroic myth-building, it was difficult to imagine the imperial bulk measure up to five foot nothing! An explanation was requested; and readily provided. It turned out that the royals preferred a smaller bedstead to enable their feet, knee downwards, to stay unfettered in combat. And a duel was much in order, the slumber (likely) and awakening (surely) being caused by the potentate being tied to the couch by one of the family's over-ambitious black sheep!

If the threat within sounded surreal, its external cousin was a lot less so. Mind you, this credibility rating was not on account of any reduced lethality in its consequences. Simply put, its higher probability made it appear commonplace. The most potent of this deadly-but-discounted-as-way-of-life set of enemies through Rajput history was the advancing Mughal empire. (On a related note, the singular alacrity with which a number of their progeny, their might much depleted and xenophobia strangely muted, accepted British subjugation a few score years later, is a curious and educative quirk of history.)

Like many parts of Rajputana, one of the relics of Chittorgarh's struggles of yore was a partially ravaged Hindu temple. Now this was early 90s; with Ayodhya-Kashi-Mathura movements still a dominant influence in national politics. Thus, risking a frown of obvious disapproval from the pater, one could not help but ask our escort for some pearls in clarification of this Medieval history thread. He had many and, surprisingly for one in quasi-judicial employment, was voluble in voicing them, especially after (or since) the rest of the entourage was not in earshot. Of these reasonably insightful hypotheses, one struck a chord for its incipient logic and bearing, namely the role of the temple as a theater for organized dissent.

In a nutshell, the rationale went thus: once the victorious left, the vanquished would ritually congregate at the temple to mourn the dead and pray for their deliverance, but equally to bemoan their own plight, seek cameraderie in numbers and ultimately the strength to fight from the Heavens. On the contrary, with the shrine pillaged, first efforts would go towards its rebuilding, setting organized resistance back a few years in funds, foot soldiers and foundation. The symbolic value of mental domination, hence, was perhaps a mere bonus over this bondage of resources; a true Machiavellian masterstroke.

Of course, apart from realpolitik, dogmatic drivers fueled this plunder too, Aurangzeb being the flag-bearing specimen of this ilk (and most lambasted member). Piety aside, the missionary zeal and state sponsorship he accorded to the task of temple destruction, had no parallel. This is not to suggest that his predecessors were beacons of benevolence: history (even in its recounting under as heavy-handed a Marxist influence as ours) is never that black and white. For instance, Shah Jahan gave us the Taj, an icon of Incredible India, but its pristine glory is indelibly soiled by the sweat of millions who paid for it in taxes (not lessened by the fact that such a price in human suffering is embedded in similar Wonders of the World across ages).

In any event, Aurangzeb 'the Austere' remains the most reviled of all Mughal monarchs. Many counts have been cited of his bigotry. For instance, he ordered that holy verses and imagery of Caliphs in coin inscriptions be replaced lest they get tainted by kaffir touch or use in unworthy places. Scholars highlight his adoption of the Arabic Lunar Calendar, withdrawing court patronage of music or reimposition of jiziya in argument too. Yet, his promotion of temple demolition under a policy of prohibiting practice of 'idolatrous forms of worship' remains core to the anti-Aurangzeb charge. His reign and actions wrote the preface, if not the first chapter, in the eventual transition of theological dialogue into the arena of incendiary politics. Skim through later history and it is easy to discern elements of this: razing places of worship as tool of war, inflamed debates on primacy of schools of faith, or high voltage drama spilling over to the streets.

Other forms of insurgency are no less a worry, including an Establishment going overboard in reprisal, that lends a new lease of life to many dying rebellions. However, spare a thought for temples where the will of a silent majority, retreating in face of high decibel onslaught of instigators on either side, gets an opportunity to break free. It is these new gods that one must chart.

Technology today presents us with many such modes. Films, for one, may help a generation awaken: Jessica Lal, BMW hit-and-run et al bear testimony to its pulling power. TV provides a cause célèbre and hence expanded pressure group on occasion. Yet, these media (including print) remain essentially plutocratic, overweeningly Left-leaning, and occasionally self-serving. My closing postulate is that the most promise is held in the low-cost, easy-to-use (and someday ubiquitous) Mobilephone-Internet combination. True, the Twitter-enabled Iranian voice of dissent died without daunting the world, and guns beat phones hollow even in an RTI-enabled world, but peer-to-peer networks will change many lives yet, mostly silently, but sometimes in the theater of visible discontent.

Welcome to the After-Budget Party

Our Republic's General Budget for 2009-10 is now in the public realm. Debate around it has been far from secular, pitting commentators along predictable political lines. That said, while repetitive, this periodic posturing is not sans moments of insight. As sample, tune in to the laborious constructs of presumably neutral mainstream media (certainly chunks of its English-speaking contingent) to discern an overly friendly disposition to the Congress-led coalition (Padma awards do drive some value after all)!

Talking Budget, calls for a New Dawn were almost universal in the backdrop of an unexpectedly euphoric win and Opposition in utter disarray. Early noises via 100-day vision documents from sundry ministers were fairly path-breaking too. Measured against such epochal demands, Pranab Mukherjee's eventual business-as-usual pronouncements seem destined for footnotes, not glorious acclaim. The flip argument could be that nation-building is less about spectacular agenda than solid action, hence closer the FM's low-risk 2009 design. Let time tell if this workmanlike Budget was a winner.

Need of the hour, therefore, is to fix touchstones for our economic policy, leading me to my biggest peeve: the Aam Aadmi vs Big Business nonsense that circulates as truism (my last post). In the prevalent operating context, two axioms come to mind as pivots for Reform. First, increased goal-focus which implies turning the spotlight away from tasks to outcomes. For instance, Telecom is a poster child of how policy interventions can positively impact the economy at large (despite absence of China-like monolithic continuity in decision-making, a few highly visible recent coalition politics compromises, and some of independent India's biggest corruption scandals). Let me illustrate the multiple levels this can be seen in action, by a sample:

• Implicit in mobilephone's transition from an aspirational lifestyle product to a ubiquitous one, is a story of enabled livelihoods. Today your plumber is a call away, cutting out sundry middlemen/ contractors, with obvious impact on the value chain
• Connectivity bridged distances that investments in conventional infrastructure (alternative) would place prohibitively out of bounds. That distant aunt is a single-attempt call versus literally shouting over 1000 km Delhi-Patna 'trunk call' or, worse, forced physical travel
• What information availability (push or pull) has achieved is too complex to fully fathom. Central India's soyabean cultivator has the market on his fingertips now, with consequences on input/ output prices, in a fashion unimaginable in the Humble Farmer's reign
• Supply is perhaps the highest on impact (after all, benefits remain theoretical minus access). From chasing the friendly neighborhood DoT-man for an elusive connection, or rectify perennially 'dead' telephones; to being wooed by tariff wars, freebies and retention packages - we have come a long way

In short, we need an active marketing of outcomes. Dwell on our global leadership in airtime prices; or how one of India's most backward states is today the most spoilt for choice in telephony operators (almost all mobile). Similar stories from Banking, IT etc must establish that some nudges from the government (and occasionally despite them!) can create true win-wins. Celebrating these, 'selling' the Reform story as it were, is the key to consigning the People vs Business divide to the dustbin it so richly deserves.

This brings us to the second (trickier) postulate: growth is incomplete without redistribution. We are no strangers to sectoral imbalances or geographic inequity, but limited percolation of the spoils of Reform could bring the entire edifice down. This is not to disregard the need for a laggard manufacturing sector to pick up pace, agriculture to step beyond Monsoon's shadow, Hindi heartland to achieve Gujarat velocity growth, or better infrastructure in general. However, these pale into insignificance compared to the damage potential of broader discontent. Doubting Thomases here could start by noting that a third of rural India (by GoI's own admission) already lies in the Red Corridor, under Naxalite writ.

General disaffection of a chunk of its population from the Reform process, thus, is one of New India's stark realities. A simplistic hypothesis for this deepening unrest is built around heightened awareness (a la Maslow's Hierarchy of Needs). For instance, growing up in mofussil India of the 70s, one encountered few visible objects of wealth to pursue. Model refreshes of the ubiquitous Amby, case in point, were too disingenuous for laymen to discern and covet: it remained an immanent part of the milieu. Thanks to a misplaced Socialist slant in policy, choice was limited: products were inelegantly sarkari or retrogressively shoddy, often both. Not so today when the flashiest in the world is out competing for your wallet, lifestyles that TV broadcasts direct to your home.

This has clear implications for Reform. As the desire for the good life (alluring decadence even) is stoked to an all-time high, then means must be abundant for the game to be above board. For a nation with a relatively weak tradition in entrepreneurial wealth creation, it is not easy to ensure opportunities are adequate, despite intent. This is the principal argument for Redistribution as stated goal.

By definition, both axioms above are long term. However, Capital is a bugbear (typical of Emerging Markets) immediately. Our policy mandarins, busy congratulating themselves for managing the global meltdown's impact (an unintended by-product of delayed liberalization) need to be cognizant of this. With 9% gone, at least in foreseeable future, and Divestment war-chest stuck in a morass of political confusion, funding equitable growth remains an open question (an anchor scheme like NREGA by itself will need INR 100K Cr to sustain). Far more than improved experiences with Market vs the State, it is this prospect of mounting government debt that may yet force Mr Mukherjee to push for a more effulgent dawn.