No Short Cut To Success

The Naxal theatre seems headed for a bloody conflict. There are indications that the army may also be pulled into the comprehensive operations that are planned to be launched against the Naxals in the near future. The CRPF is already there; units of the BSF and ITBP are also likely to be deployed.

Union home minister P Chidambaram recently admitted that the challenge of left-wing extremism had been ”underestimated” by the government. The Naxals, on the other hand, appear to have underestimated the strength of the Indian state. It is indulgent, has enormous patience, and it gives a long rope to political dissidence. But once it realises that enough is enough and decides on firm action, the strongest of oppositions is decimated. This is what happened in Punjab in the 1980s.

The People’s Liberation Guerrilla Army of the CPI (Maoist) may be a ragtag formation compared to the terrorists of Punjab, or the LTTE of Sri Lanka, but its geographical spread is daunting. As stated by the home minister himself, various Naxal groups have pockets of influence in 223 districts in 20 states across the country.

What is particularly disturbing is the qualitative change in the pattern of Naxal violence. Earlier, their violence was directed at individuals who were considered class enemies. These included landlords, moneylenders, police informers and right-wing elements. Now, the violence is directed against the state and its apparatus. High-profile targets are chosen: there was an attempt to assassinate the chief minister of Andhra Pradesh and, lately, Naxals had the audacity to threaten even the prime minister, Congress president and the home minister. Police stations are attacked, the district armoury is looted, jails are broken open, trains are detained, and security personnel ambushed with a frequency which erodes the credibility of the state. The Naxalites’ objective essentially is to capture state power.

The recent stepping up in the tempo of Naxal violence is part of a calculated plan. The politburo of the Communist Party of India (Maoist) aims to ”aggravate the situation and create more difficulties to the enemy forces by expanding our guerrilla war to new areas on the one hand and intensifying the mass resistance in the existing areas so as to disperse the enemy forces over a sufficiently wider area”. They are also keen to exploit ”the worst ever economic crisis” by recruiting new members, and undertaking daring counter offensives. The government, as conceded by the prime minister, has ”not achieved as much success as we would have liked in containing this menace”.

A militaristic approach to the problem would nevertheless be unwise and is bound to prove counterproductive in the long run. The security forces may be able to shatter the Naxals’ armed wing and there may be a large number of surrenders also, but the success thus achieved would be temporary and illusory. The problem would resurface after a few years – unless we address the causes which aggravate discontent against the establishment and make people gravitate to the Naxals. We must also remember that we are dealing with a movement which is basically indigenous and has in its ranks large segments of poor people and a sizeable number of tribals who have been alienated for a variety of reasons. We cannot declare war against them. It would be a blunder and amount to seeking a short-cut solution to a problem which requires a comprehensive strategy over a long period.

It would be akin to saying that we are incapable of modernising the police force, of going through with police reforms, and that, therefore, we shall employ paramilitary forces and the army to crush the Naxal movement. It would also amount to saying that we cannot alleviate poverty, that we cannot introduce land reforms, that it is not possible to improve governance beyond the present level, that corruption is pervasive and we have to live with it, and so the easier option is to eliminate the Naxals.

The home minister was right when he outlined the Centre’s two-pronged policy police action and development. He could have added mobilising the support of the people and the political option of dialogue if and when the Naxals agree to it.

As far as police action is concerned, it needs to be emphasised that the state police holds the key. It would, of course, need to be reinforced by paramilitary forces. Andhra has been able to cut the Naxals to size. Tripura has successfully contained tribal insurgency. There is no reason why their successes cannot be replicated in other states. Is the political leadership up to the challenge?

The army is likely to face formidable challenges along the borders with China and Pakistan in the foreseeable future. Its strength should not be frittered away on internal security duties apart from the fact that any deployment in the Naxal-affected areas would be wrong in principle.

The writer was a member of the Planning Commission’s expert group to study the Naxal problem.

Wake up! China wants to break up India

 The Chinese have spoken out what we always knew but refused to acknowledge, caught as we were in the jargon of Hindi-Chini bhai-bhai and, of late, the rising India-China trade relations.

 They want to encircle India from all sides, fan sub-nationalism in India and break up the Republic. Assamese, Tamils and Nagas along with Bangladesh, Nepal and Pakistan and the “decadent ” Hindu religion will all  be used to decimate India or rather dismember the great Indian federation. An article espousing such a strategy has appeared on a quasi-official Chinese website. So it cannot be taken lightly. China is not India, where democracy in expression of opinion prevails. On a quasi-official site, it is an opinion that has possibly some sort of official sanction.

 The Indian government has rightly taken exception to the article, which incidentally has appeared just a few days ahead of our 62nd Independence Day. Whereas the Indian government and you and me have the right to fume at this open Chinese desire to break India, isn’t it a fact that we are all party to this “weakening” of India. Sixty-two years after our “tryst with destiny” are we really Indians, or do we think ourselves as Bengalis, Punjabis, Tamils, Malayalis, Gujaratis and Marathis?

 Is our Hindu, Muslim, Christian or Sikh identity more important to us than our Indian tag ? This is a point worth pondering over. Most of us, when asked the question, will say that our Indian identity is more important to us. But in reality our Indian identity becomes the most important identity when we are travelling abroad or watching a cricket match. In our own country we think nothing of denigrating other communities and generally looking down on them. This may not be the attitude of each and every one of us, but generally it is true. Worse still, most of us have made no effort to understand the sociology and culture of Indians living in other parts and their problems and would prefer to fly off abroad for a holiday rather than visiting other states.  

 Sixty-two years later not only have we failed to consolidate our Indian identity, but have regressed the other way. So in large parts of India, not to talk of being Indians, we are not even Marathis, Biharis, Tamils or Telugus. We are Rajputs, Reddys, Patels, Kshatriyas, Jats, Kurmis, Vaniyars, Dalits and what have you. This is the reason why the Chinese talk about balkanisation of India:  they realise that if the Indians are moving in the opposite direction, instead of consolidating their Indian identity then it would not be too difficult to break them? Are they wrong in thinking so? 

 The Chinese may take delight in the dismemberment of India but we must also look inwards to figure out why we are unable to consolidate our Indianness and our position as a nation. A hundred and fifty-two years ago in 1857, the British were able to crush the Indian revolt because Indians did not think of themselves as Indians then — there were Sikhs, Biharis, Rajputs and Marathas. The British were able to play one community against the other and take the support of some of them to crush the others.

 In 1993, RDX smuggled in through the sea route with the connivance of customs officials was used to bomb Mumbai and kill over 300 people. A senior customs official who allowed the consignment in said he did not know what the consignment contained. He just took a bribe and allowed the consignment in, and this is what he did for all consignments. Fifteen years later on 26/11, terrorists from Pakistan launched a deadly attack on the same city. They came by the sea route and one can be perfectly sure about this that they had local logistical support. So things have not really changed. Why blame the Chinese then for harbouring ambitions of dismembering India? Two hundred and fifty-two years ago in 1757 that is precisely the way Robert Clive was able to plant the English flag in India after the battle of Plassey. He bribed a general of the Nawab of Bengal, who stood inert with his troops as Clive’s men cut down to size the other part of Nawab’s team.  
If our “tryst with destiny” has not resulted in consolidating our Indianness in 62 years, neither will it by taking pledges on August 15, which we do every year. But it is time to ponder and seriously think how to consolidate the concept of India, Indianness and Indian nationalism. It is not too late still. But time is running out with the enemy lurking around. And his ambitions are not hidden any more. What are your ideas, fellow Indians?

Beware of bank consolidation

One outcome of the present global crisis is that large banking monsters have come to be feared. That is why the recent death anniversary of Lehman Brothers drew a barrage of comment. And Lehman wasn’t even a bank, it was an investment bank. We worry now not just about large banks but about ‘systemically large’ financial institutions.

Economist Joseph Stiglitz and many others want banks to be limited either in size or in scope. Stiglitz wrote recently, “We need to break up the too-big-to-fail banks; there is no evidence that these behemoths deliver societal benefits that are commensurate with the costs they have imposed on others.”

Stiglitz’s views are echoed by several others, including Henry Kaufmann, a much respected figure on Wall Street. It’s a different matter that Mr Kaufmann has woken up to the dangers of bigness rather late in the day: he happened to be on the board of Lehman Brothers.

In contrast, here in India, there is a revival of the clamour for bank consolidation. The chairman of SBI, Mr O P Bhatt, wants Indian banks to grow bigger. Mr Bhatt has been quoted as saying: “The size of Indian banks is not good enough, we need to consolidate….Even SBI is not large enough to serve Indian corporates”. Mr Bhatt thinks there should be at least two to three banks bigger than SBI and half a dozen banks the size of SBI in the country.

Can Indian banks get a lot bigger quickly? Should they do so? Do we need bigger banks at a time when others want their banks to shrink? In the first place, Mr Bhatt’s suggestions do not appear feasible, given the present sizes of Indian banks. Yes, we can have banks bigger than SBI by merging SBI with its subsidiaries or with other banks.

But having two or three banks bigger than SBI or half a dozen banks the size of SBI is almost impossible. To get just one more bank the size of SBI, we would have to merge the four biggest public sector banks (PSBs) after SBI. Mergers of private banks with PSBs are difficult to contemplate and even these will not produce banks bigger than SBI.

That apart, the arguments typically made for bank consolidation in India lack substance:

Indian banks are much smaller than global giants: True. In 2007, SBI was not even one-tenth the size of the tenth largest bank in the world. But this also means that no amount of consolidation will give Indian banks a global size in the foreseeable future.

Bigger size is needed for scale economies: Yes, scale economies are useful. But beyond a certain size, the benefits of scale taper off and tend to be offset by growing complexity. Internationally, studies have shown that a size of around $20 billion is optimal. India’s top ten banks meet this size requirement.

Our banks need to be bigger in order to meet the needs of large corporates: Why should one bank meet the needs of any large corporate on its own? From the point of view of risk management, consortium financing is preferable. Some large requirements of corporates, such as overseas finance, cannot be met by Indian banks, however large they may become.

There is too much competition in the Indian market: Concentration in the banking market works to the detriment of customers. Fragmentation is bad for banks. You need to strike a balance. A good way to see where a banking system stands is to compare the share of the top five banks in assets. In India, the figure is 44%, which comes somewhere in between the 60% for France and 30% for the United States.

Not only are the arguments for bank consolidation not persuasive, there are a number of compelling arguments against bank consolidation.

First, large banks are harder to manage and create greater disruption when they fail. That Indian banks are smaller in absolute terms than global giants is no comfort. When it comes to systemic risk, the relevant measure is balance sheet size relative to GDP.

Secondly, merger is required where the potential for profit growth is limited. This is emphatically not true of the Indian market. In a normal year, one can expect commercial credit to grow at 20-25%, with a net interest margin of around 2.5%. Not many markets in the world can boast of a similar potential.

Thirdly, mergers make huge demands on HRD capabilities. This is precisely the weak spot for PSBs. Most PSBs face a decimation of their top management in the next three to five years. So this would be quite the wrong time to attempt consolidation. Instead, PSBs should concentrate on delivering better performance at their present sizes. If you cannot get the most out of assets of Rs 250,000 crore, you are unlikely to do better with Rs 500,000 crore of assets.

As India returns to a growth rate of 8% and sustains it over a decade, our banks will attain a globally respectable size. There is no need to leapfrog the process through consolidation. The motto for Indian banks should be one that applies universally: don’t grow too big for your boots.

क्या है डुअल लिस्टिंग? क्या भारत में है इसकी इजाजत?

डुअल लिस्टिंग उस प्रक्रिया को कहते हैं, जिसके तहत कोई कंपनी दो अलग-अलग देशों के स्टॉक एक्सचेंजों में खुद को सूचीबद्ध कराती है। जब दो देशों की दो कंपनियों के बीच कारोबार को लेकर समझौता होता है तो डुअल लिस्टिंग के जरिए दोनों ही देशों में इन कंपनियों के शेयर सूचीबद्ध बने रहते हैं। यहां महत्वपूर्ण बात यह है कि दोनों ही देशों के स्टॉक एक्सचेंजों में दोनों ही कंपनियों के शेयरों की खरीद-बिक्री की जा सकती है। दूसरे शब्दों में यदि भारती एयरटेल और एमटीएन के बीच होने वाले सौदे में डुअल लिस्टिंग की शर्त शामिल होती है तो भारती के शेयरों की बिक्री जोहानसबर्ग स्टॉक एक्सचेंज में की जा सकेगी, जबकि एमटीएन के शेयर ट्रेडिंग के लिए घरेलू स्टॉक एक्सचेंज में उपलब्ध रहेंगे।

अभी कितनी कंपनियों में डुअल ट्रेडिंग होती है?

डुअल लिस्टिंग में कई जटिलताएं हैं, जिसके चलते यह ज्यादा लोकप्रिय नहीं है। हालांकि, डुअल लिस्टिंग के कई उदाहरण हैं। रॉयल डच शेल के शेयरों में इंग्लैंड और नीदरलैंड के शेयर बाजारों में ट्रेडिंग होती है। बीएचपी बिलिटॉन के शेयरों में ऑस्ट्रेलिया और इंग्लैंड में ट्रेडिंग होती है। इसी तरह रियो टिंटो ग्रुप के शेयरों की ट्रेडिंग भी ऑस्ट्रेलिया और इंग्लैंड के बाजरों में होती है। यूनिलीवर के शेयरों की ट्रेडिंग इंग्लैंड और नीदरलैंड के बाजारों में होती है।

क्या भारत में डुअल लिस्टिंग की इजाजत है?

अभी भारत में डुअल लिस्टिंग की इजाजत नहीं है। इसके लिए देश के कंपनी कानून में बड़े संशोधन करने पड़ेंगे। इसके अलावा रुपए को पूर्ण परिवर्तनीय बनाना होगा। डुअल लिस्टिंग में कोई निवेशक एक देश में शेयरों को खरीदकर दूसरे देश में बेच सकता है। इसके लिए रूप को पूर्ण परिवर्तनीय बनाना जरूरी है। विदेशी मुद्रा विनिमय अधिनियम (फेमा) में भी संशोधन करना होगा। इसके अलावा रिजर्व बैंक की इजाजत के बगैर विदेशी मुद्रा में कारोबार वाले शेयरों की ट्रेडिंग घरेलू बाजार में नहीं की जा सकती है।

अभी ऐसा लगता है कि भारती और एमटीएन के बीच प्रस्तावित सौदे में डुअल लिस्टिंग की जरूरत नहीं पड़ेगी। हालांकि, यदि ऐसा होता है तो भारती के शेयरों को जोहानसबर्ग स्टॉक एक्सचेंज में सूचीबद्ध कराना होगा, जबकि एमटीएन की लिस्टिंग बीएसई और एनएसई में करानी पड़ेगी। इसके अलावा कंपनियों को विदेशी कंपनियों के समान अपने बोर्ड का गठन करने के लिए सरकार की मंजूरी हासिल करनी होगी।

 

बंदरगाहों की सिथति

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