Category: Miscellanea

Everyone
is busy celebrating collapsing oil prices, and the huge positives this
will bring to the global economy. From mid-June, prices are down by more
than 40 per cent, with Brent now falling to below $65 a barrel. There
are many highly credible commentators calling for a continued price
spiral, with price forecasts of $50-55 a barrel by mid-2015 not
uncommon. Where prices ultimately settle and for how long is obviously
anyone’s guess, but this is a huge move with global implications both
politically and economically. Is such a large move in so short a time
unambiguously positive for the global economy, as almost everyone seems
to believe? Is it a massive tax cut and more or less a free lunch as
most want to believe?

The decline in oil prices is simply a
transfer of purchasing power from the producer of oil to its consumer.
From the global economy perspective, there is no additional wealth
created

The obvious positive is that this transfer of wealth
from the oil producers to the consumers/importers should lead to a boost
in consumption. A $40-a-barrel decline in prices will lead to a
transfer of $1.3 trillion a year. It is widely accepted that this will
lead to a boost in global gross domestic product (GDP), as the
propensity of the oil importer to consume is greater than the propensity
of the oil producer to spend.

Markets also cheer as the
importers are the European Union, Japan, China, India and even the
United States, all far more relevant for global financial markets than
Russia, Venezuela, Iran or Nigeria (the worst hit by the decline in
prices). While this is a short-term positive for global growth, as
consumers spend and consumption accelerates it will imply a decline in
global savings, which may have longer-term consequences on financial
markets and interest rates. Ultimately, the oil producers were not just
sitting on their oil revenues, they were invested in some financial
asset, somewhere in the world. This investment will stop as consumption
picks up. There are other implications on global financial markets, not
all of which are positive. As the folks at Gavekal point out, nobody
seems to be thinking of the inventory and liquidity effects of such a
steep decline in oil prices. Assume the world consumes about 92 million
barrels of oil daily and carries about 100 days of inventory. When oil
was trading at $100, $920 billion was stuck in inventories, held by
someone in the system and financed by someone else. If the price of oil
settles at $60, the financing needs will drop to $552 billion. Almost
$400 billion of liquidity will get released into the global system. This
is a positive and will only add to the excess liquidity sloshing around
global financial markets. Such a capital release can fundamentally
alter the economics of many players in the value chain.

However,
somebody will also have to take the near $400-billion loss on existing
inventories as prices for all end products adjust immediately. Some of
the inventories will be held in sovereign strategic reserves, and these
losses will be absorbed or camouflaged in national accounts. However,
there will be collateral damage to the whole petroleum value chain, and
somebody will be on the hook for these inventory losses. It is not clear
where the losses will surface, and the absorptive capacity of the
losers. One cannot rule out some nasty surprises. During the last big
decline in oil prices, starting in 1985, large parts of the Texas
banking system went under, and it was also arguably a catalyst for the
eventual demise of the Soviet Union. Losses of $400 billion can stress
any financial system or counterparty.

Over the past few years,
we have seen a massive buildout of non-Organization of the Petroleum
Exporting Countries oil production capacity, largely in shale and tar
sands in North America. Many of these assets are unviable below $60-65 a
barrel, and the question then becomes: how was this rapid production
build-out financed? Clearly, the producers were not generating
sufficient cash flow to self- finance the production/drilling surge. It
was debt – either high-yield bonds or bank lending – that has financed
the majority of the infrastructure needed to sustain the production
surge we have seen in North America over the past five years. But at $60
oil, much of this debt can no longer be serviced.

This has
already thrown the high-yield market into a bit of a tizzy, as energy
was the highest share of the market and spreads for energy issuers have
surged. Most players in the sector have no ability to access new
high-yield issuance. If losses are significant, it may impact access to
high-yield debt for all sectors of the economy. At a minimum high-yield
spreads will rise. Either way, either access or cost of debt will be
negatively impacted for many sectors of the global economy that need
capital the most.

If banks are left holding the can, the
problems may be even bigger. The losses incurred by the banks on this
lending could erode their capital base and earnings power, further
weakening their ability and willingness to lend. If banks do not want to
lend, that has obvious implications for the pace and sustainability of
any economic upturn.

The other obvious negative of declining oil
prices is the impact it has on the relative attractiveness of
alternative energy and renewables. It will make the world economy more
carbon-intensive and less energy-efficient. Just when solar was nearly
at grid parity, the bar has moved downwards.

In a world fighting
deflation, lower oil prices do not really help the central banks. By
putting downward pressure on headline inflation, already low inflation
expectations may get further entrenched or blindside the central banks
to any pick-up in underlying inflationary pressures.

The simple
point is that there is no free lunch, and one should not ignore the
negative repercussions of such a sharp and quick move in a critical
global commodity. There will be both losers and gainers, and it is
important to think this through and not be caught with the losers.

(Source: Business Standard dated 12-12-2014)

With this conviction I decided to read Sanskrit a few years ago I wanted to read the Mahabharata. Mine was not a religious or political project but a literary one. I wanted to approach the text with full consciousness of the present, making it relevant to my life. I searched for a pundit or a shastri but none shared my desire to ‘interrogate’ the text so that it would speak to me. Thus, I ended up at the University of Chicago.

I had to go abroad to study Sanskrit because it is too often a soul-killing experience in India. Although we have dozens of Sanskrit university departments, our better students do not become Sanskrit teachers. Partly it is middle-class insecurities over jobs, but Sanskrit is not taught with an open, enquiring, analytical mind. According to the renowned Sanskritist, Sheldon Pollock, India had at Independence a wealth of world-class scholars such as Hiriyanna, Kane, Radhakrishnan, Sukthankar, and more. Today we have none.

The current controversy about teaching Sanskrit in our schools is not the debate we should be having. The primary purpose of education is not to teach a language or pump facts into us but to foster our ability to think — to question, interpret and develop our cognitive capabilities. A second reason is to inspire and instill passion. Only a passionate person achieves anything in life and realizes the full human potential. And this needs passionate teachers, which is at the heart of the problem.

Too many believe that education is only about ‘making a living’ when, in fact, it is also about ‘making a life.’ Yes, later education should prepare one for a career, but early education should instill the self-confidence to think for ourselves, to imagine and dream about something we absolutely must do in life. A proper teaching of Sanskrit can help in fostering a sense of self-assuredness and humanity, much in the way that reading Latin and Greek did for generations of Europeans when they searched for their roots in classical Rome and Greece.

This is the answer to the bright young person who asks, ‘Why should I invest in learning a difficult language like Sanskrit when I could enhance my life chances by studying economics or commerce?’ Sanskrit can, in fact, boost one’s life chances. A rigorous training in Panini’s grammar rules can reward us with the ability to formulate and express ideas that are uncommon in our languages of everyday life. Its literature opens up ‘another human consciousness and another way to be human’, according to Pollock.

Teaching Sanskrit under the ‘three-language formula’ has failed because of poor teachers and curriculum. But the debate is also about choice. Those who would make teaching Sanskrit compulsory in school are wrong. We should foster excellence in Sanskrit teaching rather than shove it down children’s throats.

The lack of civility in the present debate is only matched by ignorance and zealotry on both sides. The Hindu right makes grandiose claims about airplanes and stem cell research in ancient India and this undermines the real achievements of Sanskrit. The anti-brahmin, Marxist, post-colonial attack reduces the genuine achievements of Orientalist scholars to ‘false consciousness’. Those who defend Sanskrit lack the open-mindedness that led, ironically, to the great burst of creative works by their ancestors. In the end, the present controversy might be a good thing if it helps to foster excellence in teaching Sanskrit in India.

(Source: Extracts from an Article by Shri Gurucharan Das in Times of India, dated 14-12-2014)

One of the participants in the informal meeting gave some food for thought for the new government – after jobless growth and jobless mini-recession, will it be a case of jobless recovery? Going by the drift of the conversation, it was apparent no one knew the answer to that question. Technological change over the last generation has wiped out many low- and middle-skill jobs. Just think about the big army of secretaries, typists, telephone and computer operators and payroll clerks who occupied vast office space in earlier years? There are examples galore.

If this was the past, consider the future, and here the news isn’t too good for even some of the most skilled jobs. Though spoken in a different context, McKinsey Inc CEO Dominic Barton told The Economic Times last week, “If you are a heart surgeon in the US today, you better be worried about driverless cars because most of the heart transplants come from car accidents and car accidents are going to drop dramatically with driverless cars”.

If heart surgeons have reasons to feel worried about driverless cars, imagine the plight of truck and taxi drivers when computers start driving more safely than humans. And it’s not a remote possibility. In April 2014, the Google team working on the project announced that their driverless vehicles have now logged nearly 1.1 million km.

If you find all this talk about machines taking away jobs a little outdated, you could do what one of the participants in the informal meeting suggested – read a 75-page e-book, Race Against the Machine, by Massachusetts Institute of Technology’s Erik Brynjolfsson and Andrew McAfee. The authors have brought together a range of statistics and examples to show how technological progress has deep consequences for skills, wages and jobs. Faster, cheaper computers and increasingly clever software are giving machines capabilities that were once thought to be distinctively human – like understanding speech, translating from one language to another and recognising patterns. So automation is rapidly moving beyond factories to areas that provide most jobs in the economy. The e-book makes the case that employment prospects are grim for many today, as humans and our organisations aren’t keeping up with the pace of technology. Is it time to re-imagine the Skill India mission?

(Source: Article by Shyamal Majumdar in Business Standard dated 5th December, 2014)

We’ve
had to get rid of our TV set, which was eight years old, and was acting
up. Can’t you repair it? i asked the technician. He looked at me as
though i’d morphed into a Martian. You don’t repair eight-year-old TVs;
you throw them away, he said.

So we got rid of it at a literally
throwaway price, a small fraction of what we’d paid for it. Now, as i
sit and look at the new TV we’ve bought to replace the old one, i can’t
help but think of its impending demise a few short years from now.

It’s
not just TV sets that belong to what could be called the throwaway
culture. Cars, computers, mobile phones, anything you care to name seems
to be made so as to ensure that it will self-destruct, or be rendered
useless, within a relatively short span of time. And that short span of
time seems to be getting shorter and shorter.

No sooner have you
got the very latest smartphone/ music system/ iPad/ electric nostril
hair clipper when a NEW! IMPROVED! UPDATED version of the darn thing is
launched and you find yourself saddled with the old model which your
raddiwala might have to be cajoled into carting away.

It’s
called ‘built-in obsolescence’, designing devices in such a way as to
make them disposable almost as soon as you’ve bought them. What are
known as ‘consumer durables’ should more appropriately be called
‘consumer disposables’ in today’s transient technology where yesterday’s
new is today’s old.

In earlier times, people didn’t merely buy
durable goods like cars, or refrigerators; they developed a relationship
with them. They weren’t just mechanical devices; they were part of the
family, and like other family members they often developed all manner of
idiosyncratic behaviour – rattles, wheezing, sudden stops and starts –
as they grew older, endearing traits that humanised them.

Instead
of being ashamed of their age, people were proud of how old their car
was, or their fridge, or their music system. It showed how well they’d
been looked after, like aging relatives whom one cherished.

Those
days are dim memories in today’s disposable culture of inbuilt
obsolescence. To which India boasts one notable exception: the
never-say-die neta who successfully defers all attempts to be put out to
pasture and comes with a genuinely lifetime guarantee.

(Source: Times of India, dated 03-12-2014)

Amid the slowing of the world economy, Rajan on Friday cautioned the government against too much focus on merchandise export-led growth through this campaign and advised to supplement it with ‘Make for India’.

However, since domestic demand tends to get overstimulated, the government will have to frame suitable fiscal policies and RBI itself will have to ensure inflation remains low, Rajan said in his Bharat Ram Memorial Lecture here.

He said the path of disinflation may not be as steep in India as in industrialised nations and disclosed that RBI will talk to the government on the timeline beyond 2016 to keep inflation at four per cent, plus-minus two per cent.

To finance domestic demand responsibly, he advised that it be financed primarily through internal sources and suggested some more budgetary benefits for savings in this regard.

“The world is unlikely to be able to accommodate another export-led China,” Rajan said in his address, organised by industry body Ficci, in New Delhi on Friday.

Clarifying he was not suggesting pessimism for exports, he said, “I am counselling against an export-led strategy that involves subsidising exporters with cheap inputs, as well as an undervalued exchange rate, simply because it is unlikely to be very effective at this juncture.”

Rajan, formerl chief economic advisor in the finance ministry, said India would have to compete with China, which still has some surplus agricultural labour to draw on, when it decided to push manufacturing exports. “Export-led growth will not be as easy as it was for the Asian economies that took that path before us.”

Besides, industrial countries had themselves been improving capital-intensive flexible manufacturing, so much so that some manufacturing activity was being “reshored”, he said. “Any emerging market wanting to export manufacturing goods will have to contend with this new phenomenon.”

If external demand growth is likely to be muted, India has to produce for the internal market. “This means we have to work on creating the strongest sustainable unified market we can which requires a reduction in transaction costs of buying and selling across the country,” the governor said. Improvements in the physical transportation network would help but so would fewer, but more efficient and competitive intermediaries in the supply chain from the producer to consumer, he said.

At a time when the Centre is struggling to evolve a consensus with states on the issue of a national goods & services tax (GST), Rajan said: “A well designed GST Bill, by reducing state border taxes, will have the important consequence of creating a truly national market for goods and services, which will be critical for our growth in years to come.”

He also said the government would have to frame suitable fiscal policies and RBI itself would have to ensure inflation remained low, since domestic demand tends to get overstimulated.

He further pointed out that the path of disinflation might not be as steep in India as in developed nations and the glide path as advocated by the Urjit Patel committee suited the country.

“Our banking system is undergoing some stress. Our banks have to learn from past mistakes in project evaluation and structuring, as they finance the immense needs of the economy,” he advised. They (banks) would also have to improve their efficiency as they compete with new players like the recently licensed universal banks, as well as the soon-to-be licensed payment and small finance banks.

“At the same time, we should not make their task harder by creating impediments in the process of turning around, or recovering, stressed assets. RBI, the government, as well as courts have considerable work to do here,” Rajan said, pitching for financial inclusion and some Budget sops to boost savings.

“The income tax benefits for an individual to save were largely fixed in nominal terms until the recent Budget; this means the real value of the benefits has eroded. Some budgetary incentives for household savings could help ensure the country’s investment is largely financed from domestic savings,” he said.

Rajan said it was worth debating whether India needed more institutions to ensure deficits stayed within control and the quality of Budgets remained high.

“A number of countries have independent Budget offices and committees that opine on Budgets. These offices are especially important in scoring budgetary estimates, including unfunded long-term liabilities that industrial countries have shown are so easy to contract in times of growth, and hard to actually deliver.”

In addition to inflation, he said, a central bank had to pay attention to financial stability. This was a secondary objective but might become central if the economy entered a low-inflation credit and asset-price boom. “Financial stability sometimes means regulators, including the central bank, have to go against popular sentiment.”

The role of regulators was not to boost the Sensex but to ensure the underlying fundamentals of the economy and its financial system were sound enough for sustainable growth, he said. “Any positive consequences to the Sensex are welcome but are only a collateral benefit, not the objective.”

While emphasising on policies to attract foreign direct investment to fund the country’s current account deficit, Rajan said policies should not compromise India’s interests.

In this regard, Rajan said, the requirements to patent a medicine in India were perfectly reasonable, no matter what international drug companies said. He also said policies should not focus only on FDI but promote young entrepreneurs, arguing “if we make it easier for young Indian companies to do business, we will also make it easier for foreign companies to invest, for both are outsiders to the system”.

This meant a transparent and quick legal process to deal with contractual disputes, and a proper system of bankruptcy to deal with distress — both issues the government had taken on, he said.

Noting that India did not belong to any power bloc, Rajan advised it, besides other emerging countries, to not only ensure quota reforms in the International Monetary Fund and the World Bank but inject new agenda, new ideas and new thinking into the global arena. “No longer will it suffice for India to simply object to industrial countries’ proposals; it will have to put some of its own on the table.”

(Source: The Economic Times dated 13-12-2014)

But we are not referring to political manoeuvring or to apple polishing. We are using the term to mean the process of consciously working with your superior to obtain the best possible results for you, your boss and the company.

Recent studies suggest that effective managers take time and effort to manage not only relationships with their subordinates but also those with their bosses. These studies also show that this essential aspect of management is sometimes ignored by otherwise talented and aggressive managers…

The fact is, bosses need cooperation, reliability and honesty from their direct reports. Managers, for their part, rely on bosses for making connections with the rest of the company, for setting priorities and for obtaining critical resources.

If the relationship between you and your boss is rocky, then it is you who must begin to manage it. When you take the time to cultivate a productive working relationship — by understanding your boss’ strengths and weaknesses, priorities and work style — everyone wins.

Equally importantly, there remains a big question about the nature and effectiveness of “Modinomics” (which some heavyweight brokerages seem to be drooling over) at the national level.

I think investors need to ask some basic questions before putting their shirt on the Gujarat model. First, to what extent is the Gujarat model replicable for the rest of the country, given the diverse problems in different regions? Can his almost Nehruvian commitment to big industry be used to bootstrap growth for the rest of the country? Will he, for instance, ride roughshod over the new land acquisition norms and provide cheap land for industry? Or will he ultimately have to settle for the middle ground of compromise and consensus?

Second, assuming he does become prime minister, who will be his allies? Given his style of functioning – which even his staunchest admirers will concede is somewhat autocratic (and hence perhaps so effective in his own state) – how well will he lead a coalition of regional satraps who can be equally autocratic and stubborn in pushing their own narrow demands and agenda?

Third, let’s face the fact that even if Finance Minister P Chidamabaram were to produce a 4.8 per cent fiscal deficit-to-GDP ratio in 2013-14, it would not mark the end of India’s fiscal woes. The only way to compress the fisc this year is on the back of a hefty deferment of big-ticket expenditures such as subsidy payments for oil and fertilisers. These will become a drag on Mr Modi’s first budget. Besides, there would be the additional load of the full implementation of social programmes like food security. How will a new government handle this? Will it have the courage to prune or jettison some of these revenue-guzzling welfare programmes, and risk eternal damnation by voters? Can it afford to finally do away with oil and other subsidies at one shot? Or will the credit rating agencies start snapping at our heels again a couple of months after a new government takes office?

Fourth, there is a risk that Mr Modi’s appointment as prime minister will polarise Indian politics to an unprecedented degree. There could be various levels at which this plays out. For one thing, I suspect the growth (Mr Modi’s credo)-versusredistribution/ development debate will intensify. The pro-environment, pro-welfare “soft left” that has swelled in numbers over the last few years will take a harder line and the face-off could get nasty. Big industrial projects could continue to suffer. I also have no doubt that the aisle that separates the Opposition and the treasury benches in Parliament will be wider than ever. Thus, Mr Modi could face Barack Obama’s predicament, where consensus on any issue, however critical from a national perspective, is impossible to reach. Again, I would not put it past a Congress-led Opposition to take a leaf out of the BJP’s book and use the same tactics to obstruct lawmaking and the functioning of Parliament.

I am not apologetic or embarrassed about saying that I believe that Mr Modi has the “positive decisiveness” that former Goldman Sachs chief economist Jim O’ Neill so eloquently attributed to him. If a Mr Modi-led alliance does come to power, it will be a critical experiment in whether a single individual can yank an economy out of a low-growth trap created by its own diversity and the pulls and pressures of coalition politics. I am afraid that my a priori hypothesis is that the experiment will fail.

The complete “Decision on Deepening Reform” document lays out a host of major initiatives, including a decisive shift towards free markets, relaxation of the one-child policy, elimination of re-education labour camps and reforms in land tenure, state owned enterprises, taxation and migrant worker rights. This reform road map show Xi Jinping as being a far more assertive and visionary leader than his predecessor Hu Jintao. He has shown that he has a good grasp of China’s structural economic and social ailments, and is putting in place a plan to address the country’s deep rooted governance issues. He also seems to be putting in place the administrative machinery that will help him overcome deep seated resistance to change from SOEs, local government bodies, tycoons and other local officials.

These steps and announcements show that Xi Jinping has a strong vision for China and the political muscle to attempt change and to stand up to vested interests. He seems to want to move China in a more market – oriented direction than the growth trajectory of the past decade.

Three major points emerge from the document.

Xi Jinping is targeting broad reform of Chinese governance and not just tinkering with economic policies. Mr Xi’s reforms seem to be targeting not just economic development and an improvement in economic efficiency, but a more basic re-write of the function and role of government. This means pushing government agencies to stop direct intervention in markets and forcing them to focus on market regulation, public service delivery, “social management” and environmental protection. Improving governance, at both the central and local level, seems to be his main aim. This is important as most of China’s economic problems – be they excess investment spending or local government debt and the shadow financial system – can be linked to poor governance (especially local governance). Mr Xi seems determined to focus more on social services and amend the local fiscal structures to enable greater focus on these issues.

The most important signal from the party was strong support for the private sector and markets, referring to it as “non-public”. They did pledge to “unwaveringly encourage, support and guide the development of the non-public economy”. They also declared that property rights in the non-public economy may (equally with the state sector) not be violated. The document also says the party will “reduce central government management over micro-level matters to the broadest extent” and calls for an end to excessive central government intervention. The first section of the document is all about giving the markets a decisive role in resource allocation. The clear goal seems to be to reduce the ability of the government at all levels to manipulate either the prices or allocation of natural resources. While China has mostly deregulated its product markets, government bodies still can interfere in markets in many ways: subsidised capital, energy or land for favoured companies, a maze of rules and regulations that make it hard to set up new business and formal or informal restrictions on private enterprises entering certain sectors. The clear intent of the document is to chip away at all these anti-market distortions. The document also mentions “property rights as being at the core of ownership systems” and calls for fair competition and free consumer choice. The party also promised to reduce the administrative hassles and bureaucratic hurdles to doing business. The document also talks of better protection of intellectual property rights and “the lawful rights and interests of investors”, as well as a smoother bankruptcy process.

The main disappointment of the document has been the lack of aggressive state sector reform or a privatisation programme. China’s declining productivity growth and rising debt levels are both linked to the bloated SOE sector which has been guzzling a disproportionate share of bank credit but delivers declining returns on investment. It is clear that while SOEs will not be privatized, they will face much greater competition and tighter regulation. This approach seems to be in sync with the party’s view that competition, more than private ownership is the key to economic dynamism and strong productivity.

China seems to be on the march once again. It has found a strong and decisive leader, who seems to be committed to markets and improving governance. They have identified their constraints to growth and weaknesses in their prior economic model, and seem to have a game plan to address these short comings. Many investors feel comfortable underwriting 7 per cent economic growth for the country for the coming years.

The contrast between what China has just announced and demonstrated and the current situation in India cannot be more stark. Neither do we have decisive leadership, nor do we seem to have clarity on how to get back to 7-8 per cent economic growth.

India really need to get its act together and unveil a coherent road map to address our systemic weaknesses and show concrete action on the ground, more than just sound-bites. Investors will not remain patient forever.

Foreign funds and private equity investors, putting money in debt as well as equity in India, were taken aback when India last month notified Cyprus as a “notified jurisdictional area” under the Indian income-tax law. This meant higher walls of compliance that made Cyprus come across as a less attractive tax haven. It’s unclear what provoked India’s stand on Cyprus. Industry circles perceive that this was a fallout of the offshore jurisdiction’s response to certain enquiries by the Indian tax department. But within a few weeks of the notification by India, the Cyprus Government initiated discussions with Indian authorities in India to sort out the matter. A Cyprus finance ministry press release hinted that the two countries could be close to finding a solution.

According to the treaty, investors from Cyprus are spared of short-term capital gains tax – a benefit that puts Cyprus at par with Mauritius – and are charged a lower withholding tax on interest earned on debt investments. Consultations were held between officials of the two governments .

According to communique to clients by PwC, “Both delegations agreed that the circumstances that had caused India to notify Cyprus as a”notified jurisdictional area” under section 94A of the Act on 1 November 2013, can be immediately addressed by: (a) agreeing to adopt the provisions of the new Article 26 of the OECD Model Tax Convention (approved by the OECD Council on 17 July 2012) relating to Exchange of Information in a new tax treaty between the two countries; (b) improving the channels of communication and exerting every effort in facilitating each other in processing requests and responses in a swift and effective manner.”

The Cyprus government release also states that once the notification of Cyprus being notified as a “notified jurisdictional area” under section 94A of the Act is rescinded, it would be done with retrospective effect from 1 November 2013 which was the date of issue of the original notification. Further, the press release also indicates that the revised tax treaty (post renegotiation) between the two countries is expected to be finalised soon.

The future of Cyprus as a tax haven had come under question earlier this year after it ran into a financial crisis with several banks looking for a lifeline.

A combination of low withholding tax and zero tax on capital gains has over the years made Cyprus more attractive as compared to tax heavens like the Netherlands and Luxembourg, to overseas investors and foreign funds buying Indian fixed income assets.

The larger picture they reveal hasn’t attracted the requisite attention: the growing disconnect between the “hardware” and the “software” of Indian democracy. The “hardware” of democracy include legislative and executive institutions (Parliament, state assemblies, panchayats etc), the judiciary, official statutory and non-statutory bodies, political parties and the media. And the “software” relates to the observance of rules and regulations, conventions and precedents to enable the institutions to function in a transparent, accountable and effective manner. What is the record?

Judged according to these standards, our Parliament and state assemblies are little more than a hotbed of interminable intrigue, confrontation, mudslinging, filibustering and sometimes also outbursts of violence. This numbs the nerves of the executive and paralyses the legislature. The one cannot govern while the other cannot enact laws, adopt policies or, so far as the opposition is concerned, even act as a watch-dog of the government of the day. What stands out, therefore, is a mockery of their constitutional responsibilities.

The political parties are no better. Their public spats are less about policies and programmes and more about the acquisition of power and pelf. Many of them are akin to privately-controlled family businesses. Inner-party democracy is a rumour to them. The Congress, which has had the longest innings in power since independence, leads the pack. But others are not far behind: Thackerays and Badals, Karunanidhis and Pawars, Reddys and Yadavs. And then you have individuals without kith or kin who rule the roost in their parties: Mamata, Mayawati, Jayalalithaa, Patnaik et al. None dares cross their path. What “software” of democracy can they possibly bring to the table? Precious little.

But these permanently feuding parties from one end of the political spectrum to another can and do make common cause when their interests as a corporate class are in jeopardy. Consider their opposition to any serious effort to keep politicians with criminal backgrounds at bay. Consider, too, the alacrity with which they refused to come within the purview of the Right to Information Act. Such “software” contains far too many bugs to serve any worthwhile purpose.

The ailments of the judiciary, including, in the first place, that of the Supreme Court, are of another order. The alleged moral turpitude of some of the judges is only one of them. Even on this count, however, the judiciary is loath to allow an impartial and transparent probe by anyone other than the members of its own fraternity. The most recent instance concerns allegations of sexual misconduct against a recently retired judge of the apex court by an intern.

Add to this the growing interference of the apex court in legislative and executive areas that are, strictly speaking, beyond its remit. It is argued, doubtless with good reason, that such interference is inevitable when the government and the legislature are unable or unwilling or both to shoulder their constitutionally-mandated tasks. Governance, like nature, abhors a vacuum. But the danger in this argument is that it upsets the delicate balance of power between the three estates of the republic that the Constitution decrees. On this count, too, a lethal virus could render the “software” of democracy obsolete.

That danger is no less acute when governments, both at the Centre and in the states, deploy official agencies to get even with rivals. More often than not, such deployment is initiated outside the framework of laws, rules and regulations. Fake encounters and fabricated cases are evidence of this conceited insouciance.

But so is the intrusive surveillance of citizens suspected of making life difficult for the rulers of the day: rival politicians, nosey media persons, uncooperative civilian and police officials, NGOs. We recently witnessed such conduct in, among other states, Uttar Pradesh, Haryana and Gujarat. Surveillance of this nature, especially if it is pervasive, also contaminates the “software” of democracy.

The cases of Tarun Tejpal and Shoma Chaudhary of Tehelka and of Asaram Bapu fall in a different category. They relate to an unforgiveable betrayal of trust reposed in them by their readers, friends, colleagues and followers. What makes the betrayal odious is that these individuals professed to promote highfalutin principles of moral and spiritual rectitude. All three of them emasculated the substance of their calling and, in the process, polluted the “software” that is expected to keep state and society in India in fine fettle.