Wednesday, June 16, 2021

Magic, Illusion or just Trickery – The story of ITC

Quarterly Magic of ITC Numbers

The greatest trick the devil ever pulled was convincing the world he didn’t exist. And looking at the way ITC is managed, it can be said with reasonable certainty -

The greatest trick the ITC is pulling is to convince its shareholders that its board exists and is indeed responsible for the company.

The alarming regularity with which the stock price is manipulated weeks before every quarterly result, the rumours about the demerger, stellar results round the corner, special dividend in the offing and buyback, only to be disappointed quarter after quarter - is nothing short of a movie plot. The retail investors also known as the hopeful romantics within the ITC fraternity, keep buying the stock, while Wealth Managers across the country have created an entirely new and risk-free business model of selling ATM call options month after month and making a killing, as they exactly know where the stock is going - NOWHERE  

Here’s the secret Y’e stupid shareholders of the ITC

ITC will never ever demerge its businesses as the present comfort of the high tide that hides all the executives that are swimming without pants will get exposed. The cash machine that ITC is, through its cigarette business is good enough to keep the party going for a very long time.

And no one likes the party to end isn’t it?

When I wrote this piece some 8 months ago asking some pertinent questions to the board, the least they could have done was to gather some data, do some math and respond with a sound and logical rebuttal or future strategy, especially when thousands of shareholders resonated with my thoughts all over the world, but obviously rebuttals require courage, facts, demonstration of intent and a clear conscience – all of which seem to be missing in ITC.

Can we even begin to imagine if ITC was managed / owned by Mr. Ambani or Mr. Adani how happy we minority shareholders would have been? Or if the representatives of SUUTI, LIC and a few Mutual Funds along-with BAT could discover their spines jointly, and make the management answerable – ITC has the potential to be one of the best companies in India. But alas….

So while the latest investor presentation used the word robust 31 times and growth 41 (the same is missing from actual performance), it has no mention of shareholders, reduction in executive compensation during the pandemic year but they did try and take credit of reducing “controllable” fixed costs. Fixed costs are uncontrollable and that’s why it requires serious executive courage to control them. Controllable Fixed costs? – Are you kidding me?.

At a time when the entire listed corporate world has left shareholders spellbound in the last 15 months, with appreciable reduction in costs, stellar EBITDA margins, efficiency not seen in the last decade, ITC has at best established itself as a mediocre company with a mediocre P&L, poor decision making and afraid of taking any meaningful steps that are value accretive for its shareholders. – 

details later here…..

The talk of a robust dividend yield is akin to shifting money from one pocket to the other because the board doesn’t have the courage to declare a buyback for the fear of losing control and were gleefully diluting the value of minority shareholders till recently, when BAT put an end to equity dilution through issuing stock options in year 2018. Since then, the company has changed its policy and it gives Stock Appreciation Rights (SARs) which entails more cash-outflow for the company. We aren’t sure that the principle of 'High Water Mark' is being followed to ensure that SAR isn’t brought lower to adjust to the stock’s abysmal performance.

Isn’t it surprising that the top management of ITC, despite generous grants of stock over the years, owns less stock than perhaps me and my family and are selling their stock with alarming regularity. So much for the confidence in their own executive abilities. The issue of ESOPs and quick-sale data is available here.

Fun fact : Just top 282 employees of ITC sold shares worth 1024 Cr in the last 3 years. And the top 10 sold shares worth 190 Cr. The real KBC is being played here at the cost of minority shareholders.

SEBI came out with a bold skin in the game reform for the mutual fund managers by   mandating that a minimum of 20% of the compensation of mutual fund managers and other key personnel in an asset management company (AMC) should be in the form of units of the mutual fund schemes they manage.. 

I wrote a recommendation piece about the same some 3 years ago and when I heard of this reform, I was pleasantly chuffed about it. I am proposing 2 more reforms and will write to SEBI soon that : 

a. Companies that don’t have a promoter shouldn’t allow its executives to draw a compensation beyond a pre-defined threshold and all other compensation should only be in form of dividends generated through restricted stock options monetizable only upon end of employment.

b.  The other skin in the game reform for promotor-less companies where the promoter or the KMP has less than 20% stake should definitely have a representation of minority shareholders on the board and that too in the proportion of their stake.


That would indeed be another set of ‘skin in the game reforms’ for promoter-less corporations.

If this would’ve been the norm and discipline, one celebrated CEO of an American corporation wouldn’t have been allowed to fly fresh salmon from Norway for lunch in the company’s private jet. The folklore has it that he was terribly fond of Salmon.

But lets get back to the recent stellar quarter of ITC and study the ‘FMCG giant in the making’ narrative:

1.  Companies that make significant growth, report their numbers in absolute numbers and        the ones that enjoy growth on the base effect of extreme underperformance only talk in         percentages.

2.  While Marico (Sales up – 10% y/y, PAT up – 15% y/y), Britannia (Sales up - 13% y/y, PAT up – 33% y/y), and Dabur (Sales up – 10% y/y, PAT up – 17% y/y ) grew at a remarkable pace, ITC sales de-grew by (2%) and PAT de-grew by (15%). ITC has almost become like a few other PSU Banks where “the worst is behind us” and “the future is bright” narrative is being peddled for years, quarter after quarter while the balance sheet at the cost of tax payers needs to be recapitalised ever so frequently and here in the case of ITC, the minority shareholders are underwriting the underperformance.

3.   Further its pertinent to note that a large part of the FMCG growth came from a very very expensive acquisition of Sunrise which means that for every Rs 1 of growth in revenues, the shareholders paid Rs 4.

4. Remove the Sunrise acquisition, and the revenues from Aashirwaad atta (where the EBIDTA margins are negligible) the real growth would be much lower.

5.  “Value Accretive M&A” is a meaningless metric until ITC acquires another company that’s trading at cheaper valuations than itself. And thereby creating some shareholder value. M&A at the cost of free-cash that generates lower ROE than treasury yields is nothing short of financial hara-kiri.

6.  Recently a new kid on the block – Rossari Biotech trading at 80 PE acquired Unitop Chemicals trading at 10 PE (just an example). But ITC is the only generous and philanthropic organisation that itself barely manages to trade at 19 PE but acquired Sunrise at 38 PE. So much for its negotiation ability and size leverage.

7.  ROCE of ITC has been dramatically falling. In just last 5-6 years alone the ROCE has declined from 50% to just 29%.

8.   With a consistently falling EPS and ROCE the cash generation will likely not keep up with the abysmally low shareholder expectation of atleast earning dividends that match treasury yields and ITC will be forced to dip into their cash reserves thereby weakening the only reasonable moat around their balance sheet.



This division can single handedly bring the entire ITC down. Someone from the industry recently informed me that ITC keeps building hotels because one (deceased now) earlier Chairman liked hotels. Wow that’s some real compelling investment argument to destroy shareholder wealth. ITC hotels hasn’t been able to develop its own distribution network in so many years and relies on Marriott and Preferred for its booking engine and loyalty program. And it talks of creating a world class brand.

Allow the powers that be in the hotel division to raise funds, deal with financial institutions, consider capital an expensive and rare resource and then make investment decisions and only then gloat in the glory of making green hotels and winning global awards. Every investment and every new hotel would then seem like a wasteful expenditure. But then the past Chairman liked hotels……..

If managers don’t have the ability to raise and manage capital and understand the concept of ROCE, then either the managers need to be replaced or the businesses sold off.

Rather than trying to acquire Oberoi hotels (through the present 14% ownership) for the purpose of empire building, ITC should sell their hotels to some global hospitality chain that has the edge of a superior global brand recall and a distribution network. That indeed would be value accretive for shareholders.

All the We-assure and the marketing campaigns that the hotel division indulged in couldn’t prevent an outbreak in the Chennai hotel when the entire hotel had to be shut down. Marketing is good, but gimmicks are misleading especially in the face of the ferocity of Covid-19.

If hospitality was a separate division, the mettle of the managers would have come to fore and perhaps the expression “house of cards” would be exemplified if they would have had to raise working capital through ECLGS, deal with financial institutions, institute meaningful salary cuts and worry about cash to sustain rather than dip in papa’s pocket whenever money runs out.

Can we – the minority shareholders know the equity invested and ROE (return on Equity) only in the Hotel division alone please?

The segment assets of 6,525 Crores (post an approx. 30 yr opportunity cost) tantamounts to approx. equity worth more than approx. Rs. 50,000 crore destroyed in hotel division alone. And we aren’t even talking of Capital Work in Progress that will further erode the shareholder wealth. This money over 30 years with any half-wise capital allocation would have added atleast Rs. 2-3 lac crores (26 – 39 billion USD) in market cap alone



Agri business grew at 23% for the year but the EBIT that should have grown better or more only grew at 11% resulting in EBIT margin going down from 8% to 7% (Poor operating leverage). Does that mean that there is a possibility that Agri margin is being sacrificed to prop up the margins of FMCG business through transfer pricing tricks thereby misleading shareholders?

Or does this mean that the company has no clue or understanding or internal controls to increase operating leverage??


FMCG - Peer Group Comparison

Now if there was a my-baap in ITC these numbers would have been treated like murder – but we have no doubt that the powers that be in the FMCG division would not only have got ample pats on their backs but also huge increments and ESOPS (needless to say – value destructive for minority shareholders) 


All Hope isn’t lost


While much has been debated about ITC’s strategic decisions on business ventures, capital allocation and performance of the businesses, all hope is not lost as company can alter its approach and enhance shareholder’s value through a few short term and long term initiatives which are presented below –


1)  Hotels – While company has created admirable properties across India, The present management neither runs these with any sense of ownership (would have been reflected in the numbers else) nor do they take decisions that are prudent in the interest of shareholders.


Due to the evolving dynamics of the industry, hotels are not value accretive as these have very long gestation periods. Further, the pandemic has grounded even the most ardent believers of face-to-face meetings and have compelled them to adopt the ‘new normal’ of Zoom and WFH, and this trend will permanently impair business travel as demand side will dramatically drop.


The pandemic provides a great opportunity to sell the hotel division ‘NOW and HERE’ rather than continuously bleed the consolidated B/S and putting good money after bad.


If the wishes of the past chairman are so dear, then reimagine the division to make it profitable and figure out WHY (do we exist), HOW (will we prosper) and WHAT (needs to be done).


Value Unlocking:


a) Demerge the business which will bring financial discipline and bring more accountability as mentioned earlier



b) REIT - Develop a REIT structure, divest stake in the business to a global alternate asset manager who is looking to lock capital for a longer period to time. All the owned assets can be transferred to a separate trust and properties could be leased back at an attractive yield. Not only would this make the managers accountable, as they would have to earn to pay the lease, but also this would unlock the shareholder equity to the tune of approx. Rs. 25,000 crores and thereby become an efficient Operating Company (OpCo)



c) Sell all the owned assets to strategic players i.e., global hotel chains to focus on Cigarette and FMCG business.  



d) Become a Property Company (PropCo) and get some of the best global operators to manage hotels


2)  FMCG – Building FMCG companies from scratch can take years. The company has done a commendable job in building some widely recognized brands by channelizing its strong distribution network. However, ITC has high volume and low margin businesses, and products are largely ‘Me too’. If the company were to achieve Rs. 100,000 crores target by 2030 (Vision statement) the top-line of FMCG should grow by ~23% in the face of cigarette sales degrowing by 5% YOY over the decade which is much higher than the present 13% growth rate. But I am sure ITC is managed by magicians and this growth wont be hard to achieve. We have faith in the magical powers of the executives but pls don’t behave like a minister who recently, famously said – “don’t go into numbers and don’t do math” have faith.


Tatas, Ambani and Damani are all getting into D2C and private labels to create an edge. Use the power of your network to take advantage of the large fortune at the bottom of the pyramid rather than wasting time selling some expensive chocolate that will remain unprofitable. If ITC doesn’t evolve or acquire (not at Sunrise valuations) some new-age businesses, it faces an existential crisis in the modern well connected e-world.




a)  Product Innovation/Creation of category: Stop being a me-too company through Yipee and Sunfeast biscuit. Create a new game-changing category.


Tell me the second man on the Moon and the Everest – no one knows them. And ITC should stop being a distant No.2. Unless ITC gets its mojo to create and sustain a category, it has no future.


b)  Spotting trends early: While market share gradually shifts from unorganized to organized, it is a multi-year process and this seldom results in high margins. Few of the interesting areas that look promising are Frozen food market, Adult Health & Nutraceuticals, Cosmeceuticals etc.


c)   Geographical Diversification: ITC is ITC – don’t allow regional players such as  Adani Wilmar to weed you out. Get your act together or you wont exist.


d)  Contract Manufacturing:  Demonstrate the power of the ITC brand to outsource a large %age of products to contract manufacturers and free up capital. ITCs incessant desire to do all-by-myself is hurting its shareholders.


3)  IT Services -  Demonstrate the ability to become the Larsen and Toubro Infotech or stop pretending to be an IT company and allow the super-efficient Board to be distracted. There is no way that ITC Infotech can ever become anything meaningful or it would have already become.


4) Cigarettes and general – As the capex requirements are complete, the company should return the money to the shareholders in form of buybacks. Rs. 60,000 crores buyback can be planned for next 6 years, utilizing existing bank balances and the rest through borrowing. Theoretically, if the earnings yield is more than the post-tax borrowing of the company, the company should do a buyback until such time that palatable debt is reached. Debt magnifies RoEs and buyback reduces the equity base, both done today maximizes returns for shareholders.


But that would mean sacrificing a bit of control to BAT – but Boards that mean well for the company and its shareholders think beyond the virtues of selfishness and control freakery.


Overall -


1) Selling Non-core assets – Small business should be sold or shut down. Stakes held in other hotel chains should be sold at optimal valuation as of yesterday.


2) Shareholder Communication – Company of this size should have analyst concalls, provide definitive guidance on the numbers. (the way Infosys does)


3) CAPEX Guidance – Company of this size should declare its capex plans so that it can be built in pricing of financial models.


And above all -


4) Appoint Minority Shareholder Directors – The company should onboard an eminent small shareholder director with a relevant experience so as to amplify the importance of retail shareholders as well.

A family can never be fatherless. And if it is – the minority shareholder should become the deemed one.

When someone posts an opinion or an article on ITC, the emotion and response that it generates is overwhelming. If the true meaning of Stockholm Syndrome needs to be understood, delve deep into the mind of an ITC shareholder – That’s the Enigma of ITC. 

During my hospital visit to look upon someone some years ago, I learnt that the ECG monitor of a dead person is just a straight line. ITC stock price graph reminds me of that line I saw years ago because the price is more stable and straighter than that line.

Long live ITC…..


Monday, May 10, 2021

Hope amidst Virus, Vaccines, Quarantine and Quaintness

The reality of Covid doesn’t really hit you till it hits you. March of 2020 through Sep Oct while Covid ravaged thru the planet, India seemingly remained unscathed - more so when the same was analysed in relation to the large population base.

As early as May 2020 the street vendors were back in business selling paani poori and the food appreciating Indian population thronged back to restaurants and bars and pubs by October and large part of Indian population took refuge of the Pent-up desires and most of the service providers thought that just wearing a glove (all day without changing those) solved for the situation at hand. The powers that be were quick to take credit of flattening the proverbial curve and at one instance the RBI governor even derived an analogy of flattening the virus curve by bending it like Beckham and almost took credit for it.

The abject neglect of virus lessons from around the world can be interpreted as the amazing power of human resilience and the ability of homo-sapiens to move on from one crisis to another and survive and thrive OR sheer plain stupidity of ignoring expert advice by subject matter experts, thereby putting themselves and fellow humans in peril.

The Second Wave has hit our country in a manner that no one had anticipated and the shock and awe as a result is unfathomable. The horrific stories, loss of lives, unavailability of resources (medicines, oxygen, hospital beds and even cremation slots) has traumatized the entire nation.

If you read a lot you become hypochondriac, and if you don’t you catch the virus and if you are unlucky you get it nevertheless to one’s surprise.

My experiences of going  through the virus curve

Till April 2021 my family and I managed to exercise all restraint, follow protocols, wear a mask and avoided all unnecessary travel.

Zealously we ensured that all elders were vaccinated  at the first available opportunity and I took my first vaccine shot the day I became eligible on the 1 April. Maybe to be slyly fooled by the vaccine itself on the April Fools Day.

Of Vaccines..

I took the vaccine (COVAXIN) as directed – (first day first show) and by the end of the day my energy levels started dropping and within 24 hrs of it, I was devoid of any energy – not even able to get up from the bed. Doctors advised that the body’s immune response was developing and a few Sr. Dr. classmates from school advised me against popping paracetamols as suppression of inflammation and pain through consumption of prophylactics blunts the immune response.

Take a paracetamol only if you must (when temp crosses 102F). Human body is a complex eco system where it repairs itself, fights and does everything to survive.

During the time I was bedridden and worried, I followed the basic common-sense to keep myself hydrated with lots of coconut water, usual vitamins.

Zinc, Vit C and Vit D are known to create some sort of a protective shield and boosts the body’s immune response. There is a theory that derides the use of external vitamins as body has this immense ability to assimilate and process everything consumed to everything it needs. And that explains how 2 different saplings of different fruits or vegetables can turn out to be big fruit and vegetable bearing trees with just water poured during their lifecycle. But we must still take external vitamins to supplement the deficiency.

8 days after the vaccine when I was still not feeling perfect, I started sensing a loss of smell and got a RTPCR test done to be declared positive on April 9th – 9th day of the first vaccine shot.

Of Virus..

When you hear stories on social media you empathise, but when you get hit you get damn scared esp when you have a 3 Yr old daughter and a 70 Yr old mother at home.

So while blaming the vaccine was an obvious response, Covaxin is a dead virus that is supposed to mimic the live one – when it enters Your body and activates body’s immune response and creates antibodies. I actually thought naughtily that since I wasn’t chanting jai Shree Ram or Har Har Modiji , the dead virus became alive to attack me. Perhaps that was the message to be taken from Mr. Modi s foto on the vaccine certificate.

But jokes apart, vaccines comprise of dead, non infectious disease that’s injected, or mRNA (synthetic mutated RiboNucleic Acid) used by JnJ and Moderna, that mimic the disease and allows the body’s immune response to develop the virus fighting antibodies.

We immediately got tests done for the rest of the family and the responsibility of 3 girls (daughter mom and wifey) was a worry. All came positive with viral CT values around 30 while I was the only one with 21.

Higher the CT value lower the Viral load – remember below 24 you need to be worried and above 24 you need to know the protocols that are available for immediate intervention. seems to have their act in place. Doctors all over the country are available online within minutes. The consultation fees is less than Rs.800 on average and most of these Docs are seemingly nice and patient and are available for 3 days on chat after the initial consultation even though I didn’t get a response when I tried to chat on the 3rd day.

Don’t panic at all. It’s a naughty and a deadly virus but still a virus and behaves like a viral fever with difficult symptoms. Eventually it will weaken and remain amongst us like so many other viral flus. Its a collective fight against a common enemy. If we follow protocols and advice, we will win else we will only make the enemy stronger (allow it to mutate to become more virulent and infectious)

Children have a very different and believably stronger immune profile and are generally recommended Zincovit syrup 5-10 mg and advice to monitor their temperature and oxygen saturation. Again – Human body knows how to fight and to survive. Don’t blunt its response by getting worried if fever is mildly high. In most cases children will recover and will fight this devilish virus in no time.

Adults need to keep an eye on fever and oxygen saturation levels. The state of the country at present demands that we remain cautious and stay at home.

Oxymeters just like masks were an almost unknown underappreciated resource. Every home must now have compressed oxygen can, oxymeter, sanitizing sprays and quarantine protocols in mind (incase the need arises)

Of Quarantine..

My wife wakes up daily at 0530 and in the last 10 years of our marriage, I haven’t been able to figure out what she does till 0730. She uses a nomenclature “Me-Time”. Google search does throw a definion. And it took Covid and Quarantine to understand how therapeutic Me-Time is how every individual must find ones Mojo in a bit of it everyday.

My heart is full of gratitude that the severity of my situation was manageable at home that allowed me to write this note but quarantine was perhaps the most zen time I have had in the last 45 years. Almost 2 weeks of solitude, abundance of Me-Time, importance of being self reliant (washing, cleaning, working in a confined space) while being on the edge of a health situation that could have been potentially fatal.

If you have more than a bedroom, try and make the sunniest room as the quarantine room. It allows you to  recharge your batteries with sun and removes the gloom. Sun is worshipped as a God - not without a reason.

Ensure that You have adequate supplies of your clothes, detergents of various kinds and a spray sanitiser (that allows you to exchange goods / supplies with family, when required using this sanitiser).

Move a small desk and chair to enable you to take calls, use laptop and create some sort of a workstation.

Besides access to internet, kindle and your fav books, ensure you have your fav Bluetooth speaker or Alexa to indulge in a bit of pleasant music as and when required. I never got a chance to appreciate symphonies but developed an addiction of Beethoven, Mozart, Vivaldi and Bach in these 2 weeks. Believe You me – its really de-stressing

Due to lack of movement, mild muscle atrophy can set in without you knowing at all. Ensure you do some basic exercises each day. A few Situps, pushups, cruches and surya namaskar is all that’s required to keep the blood flow going and the body in shape.

Ensure that you follow a routine of sleeping and waking up in time. Don’t allow an iota of gloom creep in. And irrespective of whether you are working or not, follow a routine to dress up like on a usual day (shoes et all). Wear your daily perfume even if your sense of smell has gone for a toss. This really helps in giving a sense of purpose esp when there is gloom and doom all around.

Watch as little covid data and news as possible. You are already in a situation and you cant do a damn about anything. Keep your spirits up and if you are active on social media try and help people in need by connecting the needy to the resources. Altruism produces all the 4 most vital hormones at the same time that in-itself heals and motivates you even more.

We are all a product of our thoughts that lead to action and that leads to character. Good thoughts are like cocaine. These give you a high. Think and remain positive.

Connect with all lost friends whom who have always wanted to be in touch. Connect with memories that bring a smile on your face and twinkle in your eyes. Remember that we are all creatures of our memories. No one knows what the future holds and stop fretting about it. You are just a spec in the scheme of things of 4 billion years of life, 4 million years of humanity and 8 billion of us floating around at this time – All of us thinking that we will make a difference. No one gives a damn.

Moral compass is a vague concept that isn’t empirically defined. Make an effort to calibrate that. Calibration of ambitions, ethics, morality, right-wrong, relationships can only be done when you have time to think, be quiet and seek answers to questions that you have never sought before. And you don’t need a Britannica for that. All you need is an acceptance that you are seeking and you shall find.

If possible set a target of learning something (the lowest hanging fruit) that you always wanted but never found time. I learnt a skill that I have been meaning to learn for 20 years but couldn’t. I read every article and many books on the subject and ensured that I reached a level of conversational competence in that subject. This was hugely gratifying.

Allow your mind to acknowledge and accept that This too shall pass or You will pass away. No one cares, nothing matters. Ikigainess and lightness if sought is always almost granted.

Of Quaintness..

The modern day life is all about continuously driveling and this has reduced our ability to stop and pause and achieve a state of shunyata. Ability to empty ones mind of all thoughts, desires even if momentarily - is an amazing feeling. Most of us living today might not get this opportunity and I pray – should not!. But if you do encounter an opportunity to stare at quaintness, make the most of it. Explore the virtues of Maun Vrat and its benefits.  

Fearlessness is an almost impossible virtue to achieve. FOMO, Peer Pressure, Social Obligations are the drags and headwinds that no one wants yet we get sucked into these. Jot down on a piece of paper that you can stick on your desk that really defines all your needs. And You’ll be surprised at the outcome esp. when you are in a forced quarantine. One really needs far lesser than what we imagine or anticipate.

Life is very very short and very beautiful don’t waste it with the boundaries and shackles of the deadly sins.

And lastly start appreciating your wife’s Me-Time for she is in a state of Nirvana that you are seeking and still struggling to find. Gratitude allows you to free up of your mental shackle of deprivation and external unfairness.

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Saturday, January 9, 2021

The Standout Winner of the 'Amazing 2020'

Depair and Pessimism was abound and doomsday declared by almost the entire humanity in March 2020. People involved with stock markets, most of whom had fading memories of March 2000 and Oct 2008 were in utter disbelief and majority of the fund managers with less than 10 years in business couldn’t believe that markets could make 2-3 days of downward circuits and March 2020 would remain etched in the memory of humanity for a long time.

But the year has been phenomenal in every aspect of measurement and fathom and 2020 might go down in history as one of the best years of the century and here is my argument in continuation to a piece that I wrote a few months ago ‘Corona May Be The Biggest Blessing In Disguise for Humanity, …..

  1. Humans wished well for everyone else on the planet – Such a far cry from the erstwhile world order where ethnicity, religions and beliefs were the divisive catalysts.
  2. Global Medical Fraternity came together to share data and research and a slew of vaccines were made with great proven efficacy in just less than 9 months – pertinent to mention that only 7 vaccines were ever successfully produced in the last 100 years.
  3. Altruism got redefined by the frontline Covid Warriors across the planet. These noble souls that form the medical fraternity worked for days without any rest, put their lives in danger, hundreds lost lives but still held fort for the greater common good of humanity. Our heads must bow down in deepest debt of gratitude for them.
  4. Families found solace and enhanced emotional connect amongst and within each other and started respecting the virtues of looking inwards. The joy of spending time while acknowledging and appreciating what we do for each other (often taken for granted) has been a virtuous re-discovery.
  5. Friends for a season or a reason lost significance and we longed only for true friends for a lifetime and rekindled the lost connects and relationships that were always strong and reliable but had lost sheen because of the natural efflux of time.
  6. The struggle by all people trying to connect digitally through skype and webex and failing miserably over the last 2 decades, came to an end with the newfound frictionless experience provided by ZOOM. Never ever in the history has a noun become a verb in such short time. Even Google took a whole lot longer to become a verb.
  7. The struggle ordained by executives wearing their ill-fitting suits and soiled tie knots that hadn’t been ever untied and taking early morning flights at wee hours to travel across the country and globe to attend futile meetings, mostly non productive a the cost of the corporate profits – came to an end and sales calls and meetings could just be acceptably attended by one and all. But for an accidental camera-direction malfunction (that became global news instantly to the benefit of lockdowned populace longing for amusement), just a boxer with a shirt and tie - almost became the globally accepted attire as long as the camera didn’t capture it.
  8. Homemakers unapologetically discovered guinea pigs within their families by experimenting with exotic cuisines without the option to their partners to give any honest feedback about their culinary skills, but on a serious note discovered the orgasmic joy of cooking and experimenting with gastronomy. I personally leant the fine art of making shushi and some of my friends who also happen to be members of the mutual appreciation club believe that I can probably give competition to Sukiyabashi Jiro
  9. Mark Zukerberg and Steve Jobs are legends who changed the world but another personality trait of theirs, of an entire life wearing similar clothes became a fashion trend. Most of us have found the amazing virtues of minimalism where we could consciously differentiate between our needs and wants and could discover virtues of ikigai style of living and conduct and thereby decluttering our lives.
  10. Contrary to the pursuit of materialism and proving a point to someone around us, humans learnt that health is the real wealth. The suddenness of the possibility of kicking the bucket made us all realise that we and only we are responsible for how we treat ourselves and our body that’s the temple of our existence. People are exercising more, eating less and are generally demonstrating gratitude towards simple things such as good health.

But the winner is none of all this….

The winner of this year gone by, is human resilience and adaptability that makes us homo-sapiens a truly advanced and evolved creation of God that adapts itself to changing circumstances, is audaciously hopeful of a brighter future, demonstrates grace in adversity and above all can overcome all vicissitudes that are thrown towards us.

A rotten lemon came by in the garb of 2020 and the humanity made the best lemonade.

What lies ahead

  1. More tolerance and appreciation of all the things around us. The bounty of nature and respect for mother earth.
  2. Bitcoin lovers will be able to buy their Bugattis
  3. The stock market lovers will continue to believe that there is no bubble and that Nifty PE of 40 and over is very justified because quality is never expensive and one cannot overpay for quality.
  4. Indian gene pool has proven itself to be the most superior – let there be no doubt. The control of the pandemic and dramatic flattening of the curve isn’t because of any amazing managerial, political or medical superiority. Our peninsula seems to be producing the most intelligent and most resilient homo sapiens. Survival of the fittest stands proved.
  5. IMHO the Indian street food, Pani Pooris and Chana Bhaturas (cooked in suspicious conditions of  hygiene) might have built the strongest immunity for Indians over the last 100 years.
  6. India is likely to emerge many shades stronger for the respect that it has garnered over the last few years. Our rapidly advancing economic, social and political clout will make us emerge into a force to reckon with while China seems to have spread itself terribly thin because of its misadventures (border, virus, currency manipulation, mysterious disappearance of dissenters) on various fronts.
  7. Meaningful affiliations and alliances with India is no longer an option but a necessity for the G7 nations
  8. As deep-rooted corruption ebbs away slowly albeit steadily, India’s friction points, ease of doing business, infrastructure will all dramatically improve catalysing a steep uptick in GDP. 5 Tr $ by 2025 might be a distant dream but 10 Trillion by 2030 looks achievable.
  9. Travel and Tourism Industry ( from the present 7 million inbound and 50 million outbound ) is set to see a resurgence like never before. Imagine the demand uptick when these 50 million outbound Indians decide to discover the virtues and under-appreciated tourist treasures within India.
  10. The coming decade undoubtedly belongs to India and we will see it achieving its colloquial adage ‘the golden bird’ all over again

Our responsibilities as a citizen

Kennedy said – ‘Ask not what your country can do for you, but what you can do for your country’ – As responsible citizens if each one of us just resolves (just one resolve) to stay away from any form of corruption, corruption through diluted intent, thought, deed - at every level, and not fan it by resigning to the demands of the system. Stop maintaining neutrality in the times of moral crisis, this itself will remove dozens and dozens of friction points from the system that’s presently known to be sluggish and inefficient and will eventually bump up our GDP, national profitability and global stature by hundreds of basis points.

Happy New Year, God Bless You and God Bless India. 

follow manu on twitter @manurishiguptha

Saturday, November 28, 2020

Hope and Despair - The Unmaking of India

Why I’m losing Hope in India – By Andy Mukherjee

No single essay has captured my life's experiences, hope and despair, and articulated it this verbatimly. Wanted the same to be on my timeline permanently. Taking the privilege to share. -manu


My generation of Indians has often been disappointed in our country, and we have sometimes despaired about the direction it was taking, but it’s been impossible for us to stop hoping.

Our own past has trained us to see the silver lining.

Opportunities we couldn’t imagine growing up in the 1970s and ’80s emerged from nowhere and changed our lives, and many of us believe history will keep repeating, with the pain of the pandemic shocking the economy out of its pre-Covid inertia.

So it breaks my heart to have to suggest to today’s rising generation that this crisis is different than others we have weathered, that the walls are closing in again, and the opportunity set for India is shrinking, perhaps for a very long time. The national dream of emulating China’s rapid growth is receding — by some economic yardsticks, we can’t even keep up with Bangladesh.

A disturbing arbitrariness has crept into policymaking, institutions have decayed and the economy’s structural deficiencies have worsened. Animal spirits have been sucked out of all but a handful of firms. Zombie business groups are perched atop the debris of debt-fueled expansion, waiting for politicians to signal what role they still have, if any. The defeatist slogan of self-reliance, which blighted our parents’ generation, is back. Politicians are using religious discord and caste conflicts to drive a wedge in the society.

To make matters worse, India has handled the coronavirus pandemic with the same inept authoritarianism that’s come to define its approach in all spheres, economic, political and social. With more than 9 million infections, India is the second-worst affected country after the United States. The economy slipped into an unprecedented recession last quarter.

The post-lockdown economy will simply not have enough demand to consume what can be produced. There’s some attempt to reform the supply side — labor and farm markets, in particular. But not much is being done to revive demand, either in the short or the long run. Some of us are wondering if this callousness will cause India’s demographic dividend — two out of three Indians are still in the magic age group of 15 to 64 years — to go unclaimed.

Yes, there’s time. If India stops turning inward and embraces an open, transparent partnership with global investors, hundreds of millions more would get a shot at prosperity. A stagnant world economy could tap a new source of future demand. The West might win a strong and reliable security partner in Asia. The ’90s optimism will renew itself. But if India remains stuck in a middle-income trap, people will soon stop asking if it could be the next China. My generation already has.


A previous generation of Indians also knew violent change. My parents went from being British subjects to citizens of an independent republic. They carried the trauma of partition and lived through four post-World War II armed conflicts, one with China, three with Pakistan.

They recoiled in horror when Prime Minister Indira Gandhi — the child of the great democrat and freedom hero Jawaharlal Nehru — suspended democracy for two years in the mid-1970s.

Amid this turmoil, they underestimated the shadow on their lives of the mid-’60s economic crisis, when after a bad drought, India devalued the rupee by 37% because that was the World Bank’s condition for assistance.

The promised funds didn’t arrive in full. Indira Gandhi, too new to power to be in control, took a sharp pro-Moscow turn and rejected the capitalist path that South Korea, almost as poor as India back then, was choosing for itself. She raised tariffs, nationalized the banks, but failed to democratize credit. The government bloated up; small firms remained stunted.

The “developmental enthusiasm” of Nehru’s idealistic socialism gave way to political expediency and policy incoherence. The post-colonial dream of rapid industrialization faded. India remained agrarian and poor, led by a tiny English-educated urban elite. At the top of the order were bureaucrats with the power to say “no” to any expansion in the private sector. The economy’s speed limit was 3.5%, pejoratively described by scholars as the “Hindu rate of growth.”

To those of us whose families neither owned rural land nor had secure urban jobs, life was about making the most of a heavily state-subsidized education. Very few experienced upward mobility, and often only when the U.S. or U.K. embassy stamped their passports. The friends and family who came to see off the newly minted doctor or engineer at the airport went back to their unchanging lives.


All this ended when Manmohan Singh, the economist who became finance minister in 1991, devalued the currency to stanch the bleeding of foreign reserves, made the rupee convertible for trade, dismantled industrial licensing and began slashing import duties.

After the Soviet Union disintegrated in 1991, our politicians ran out of their anti-imperialist excuses. India engaged with a victorious West, my elder brother got a job in New Delhi with AT&T Corp., and he brought home a shiny red push-button telephone.

A hook-up from the state phone company still took years, so we borrowed the neighbor’s line. But there was no time to brood over what we lacked — or what our parents had lost to autarky and state planning. Somehow we knew that our shortages were ending, and our choices were expanding. India’s ruling elite had run out of options for self-preservation. It had to open the doors to a better life to more of us. There was work to do.

Fledgling software firms got down to it with the help of a colorful lobbyist. Dewang Mehta sported a luxuriant crop of hair — it was a wig — and went around selling a puffed-up story to global corporations that their computers were going to crash at midnight on the new millennium because of the Y2K bug. Outsourcing of code-writing, at a fraction of what it cost in the West, began in earnest. Jobs were created in telecom, media, technology, finance and newly denationalized aviation industries; the median home-buying age began to fall. Global carmakers came to India, inspired by the popularity of a small hatchback, the Maruti 800, made locally by Suzuki Motor Corp.

China’s example beckoned. After the June 1989 Tiananmen Square massacre, Beijing wouldn’t brook political freedoms, but the economic reforms begun by Deng Xiaoping were deemed irreversible and foreign investors were mostly welcomed. The economy took off. China joined the World Trade Organization in 2001 and grew at 10%-plus rates for 20 years.

It was never going to be easy for India to emulate its neighbor, whose single-party state struck a bargain with foreign investors, while discriminating against its own business class. Such stratagems weren’t possible in India’s noisy, federal democracy. Politicians couldn’t ignore local businesses that gave them money to fight elections. So India cleaned up the stock market and opened it to overseas investors. This made sense. Unlike China, which was saving more than half of its national income before the 2008 global financial crisis, India lacked the capital to sustain a liberalizing economy through messy cycles of coalition politics, let alone to build the roads, power plants and other basics of missing infrastructure.

So we put our faith in institutions. Our heritage of English common law, independent courts and regulators held the promise of fairness and protection for all stakeholders, and we thought these would get stronger over time. The state, we hoped, would shrink as an economic player, and become a more robust referee. Governance would improve, endemic corruption would recede. The anonymity fostered by urbanization would smash the regressive caste system. We liked it when scholars such as Yasheng Huang, a professor at MIT Sloan School of Management, said that India could overtake China.

To me and many of my generation, Manmohan Singh was a savior, someone who carried the scars of partition and had known poverty as a child. He was one of us. Our disillusionment with him was 20 years in the future.

Unfinished Reforms

The 1990s reforms in India began with trade and investment liberalization. Tougher “second generation” reforms in markets for land, labor, capital, energy and goods were to follow.

However, myriad interest groups captured the weak coalition governments that became a norm after 1996. Even as India’s openness grew, the larger project of boosting competitiveness kept getting shelved. Internal markets continued to malfunction.

An additional problem arose: Now that the government was retreating from being a producer, it had to give land, energy and commodity rights, wireless spectrum and other concessions to the private sector and procure — on behalf of the public — electricity, roads, ports, telecom services and jobs. The opportunities for corruption swelled, and a nexus of businesses, politicians and criminals coalesced to exploit them.

By 2004, the once-dominant Congress Party’s Manmohan Singh was prime minister, leading yet another ragtag coalition. He returned to power in 2009, but the triumph of his victory didn’t endure. With the world economy entering its post-2008 funk, India’s unreformed markets, political opportunism, fiscal profligacy and the private sector’s unregulated greed overwhelmed Singh’s second term.

Around 2010, I was heading up editorial operations for a business TV station in Mumbai. That’s when, surrounded by the nouveau riche (my toddler’s return gift from his host at a birthday party was an iPod), I began to notice cracks in the enterprising spirit of the ’90s. Peeking from those gaps was a business class seeking riches in private rents. Praful Patel, the then-aviation minister, gave me an interview at the newly modernized Delhi airport, which was going to replace the shambolic terminal that used to frustrate and embarrass us. The private consortium that had won the 60-year management contract wangled a passenger fee to cover a big part of the cost of the upgrade — after snagging the project. “This important condition should have been known upfront to all the bidders at the time of bidding,” the government’s auditor noted.

Public-private partnerships of all hues proved problematic. Uttar Pradesh, the most populous Indian state, made a special zone for alcohol distribution and gave it to an Armani suit-wearing businessman named Ponty Chadha, who on a November day in 2012, went to his farmhouse on the outskirts of New Delhi with his security detail. His brother arrived with his own henchmen. The two sides were there to sort out a property dispute. Before long, they were shooting at each other. Both brothers ended up dead.

The vulgarity of crony capitalism became a lightning rod for mass mobilization. An “India Against Corruption” movement fed a frenzy of disgust against crooked politicians and businessmen who were usurping farmers’ land, promising to create jobs and then not delivering. But most crucially, people’s anger was aimed at the Nehru/Gandhi dynasty. Even as Singh nominally ran the government, Indira Gandhi’s daughter-in-law, the Italian-born Sonia, and her son Rahul wielded real power, as Singh’s former media adviser Sanjaya Baru claimed in “The Accidental Prime Minister.”

Scandals surfaced and metastasized. In 2012, the Indian Supreme Court cancelled 122 telecom licenses. The government’s auditor said that the granting of those licenses had cost the country $23 billion. This debacle was soon dwarfed by what the auditor said was a $42 billion scam in allocating coal mines to private firms. Those were also scrapped.

Wounded and cornered, Singh’s government lashed out. It began to hound long-term investors like Vodafone Group Plc for outsized tax liabilities, charged retrospectively. It passed a law that made it prohibitively expensive for private businesses to acquire land. None of this helped politically. Singh’s failures, meanwhile, were helping to make Narendra Modi, a leader of the opposition Bharatiya Janata Party and chief minister of Gujarat state, look good. Although his stint there had begun with huge Hindu-Muslim riots in 2002, Gujarat’s economy grew 10% annually through the first decade of the millennium, faster than the rest of the country. 

As the 2014 general election approached, many voters thought that only muscular leadership could end India’s economic paralysis and social stasis. Even those of us who found Modi’s Hindu right-wing politics abhorrent thought his development record as an administrator had earned him a place in federal politics. In our impatience for growth, we ignored the warnings of scholars such as Indira Hirway that Modi’s capital-intensive “Gujarat model” was built on generous subsidies to businesses, and that the state was slipping in poverty reduction, human development and hunger removal. I wrote that Modi could be like Japan’s Prime Minister Shinzo Abe, a leader who would suppress his nationalist instincts, and use his popularity to drive hard economic reforms.

Modi’s “Permanent Revolution”

Modi came to power promising business-friendly policies and an end to “tax terror.” But when he tried to undo the previous government’s land acquisition law, the opposition attacked him for being anti-farmer. Modi had to drop the plan.

Vodafone’s troubles in India didn’t end. In fact, harassment by tax authorities intensified. “Sab chor hain,” Hindi for “Everyone’s a thief,” became the state’s informal motto for dealing with the private sector.

Then, in November 2016, Modi performed a high-voltage stunt: He outlawed 86% of the country’s cash, presumably to unearth illicit wealth. People queued up for days to return their worthless notes. New currency was in short supply. Small businesses in my hometown — a shoe-making hub — couldn’t pay workers. Women-run micro enterprises on the outskirts of Mumbai later told me that their going rate for weaving golden threads into a sari crashed to 4,000 rupees ($54), from 7,000 rupees.

Ultimately, demonetization was a fruitless exercise. Most of the outlawed money came back to banks, but the pain Modi inflicted on society helped launch his cult. As Arvind Subramanian, then Modi’s chief economic adviser, would argue later in a book, sacrifice, “as a necessary condition for achieving a larger, loftier objective,” resonated with the population because it harked backed to Mahatma Gandhi’s strategies during India’s freedom struggle. That elevation of Modi in the public consciousness was a turning point in the citizen-state relationship. Unquestioning devotion was in; critical examination was out. Gone was the pre-poll promise of “minimum government, maximum governance.” The dirigisme of the ’60s and ’70s was back. “We are now entering the politics of ‘permanent revolution’,” Pratap Bhanu Mehta, a political scientist and commentator, presciently warned after Modi’s currency ban.

Since then, the government’s whimsical decision-making has intensified. Don’t like what a consumption survey shows? Suppress it. Getting flak for a slowing economy? Publish unbelievably rosy GDP data. Think Covid could get out of control? Impose a nationwide lockdown on four-hours notice.

“Sab chor hain” now defines most interactions. Homebuyers don’t trust builders to deliver homes; financiers don’t trust property developers to repay loans. The government doesn’t trust either the builder or the lender. Nobody trusts politicians, though Modi, like all strongmen leaders, can elicit any response he wants from the public. During the coronavirus lockdown he asked Indians to light candles, go on the terrace and bang utensils. They did, as told.

True, some bottlenecks have eased. After failing to double in size in the four decades before 1991, the national highway network has quadrupled since then. From less than 65,000 megawatts in 1990, power generation capacity has surged to almost 375,000 megawatts. Half of it is in the private sector. A further doubling by 2030, without setting up any more polluting coal-fired plants, is possible, thanks to investor interest in solar and wind power.

But therein lies a problem, a variation of the old resource crunch. A large section of the capitalists to whom a cash-strapped government outsourced roads, ports, airports, power stations and mobile towers is bankrupt.

Bag a concession from the state, inflate costs, pay bribes, get financing from dominant state-run banks, fleece consumers, siphon off funds into private accounts in Singapore or Switzerland. This, with some variation, was the business model. In 2012, Ashish Gupta, a banking analyst at Credit Suisse Group AG in Mumbai wrote a report, titled “House of Debt.” The last eight years this house has burned. It’s still aflame and singeing the banking system.

The IL&FS Group, an infrastructure financier-owner-operator I’ve tracked since I was a newspaper intern in Delhi in 1992, enriched a small cabal by taking everyone — its partners, consumers, capital providers and regulators — for a ride. I described its 2018 bankruptcy as India’s “mini-Lehman moment.” The sudden collapse of a highly rated institution with billions of dollars of unpaid debt froze credit markets. The psychological impact ran deeper. Before IL&FS went belly up, the overextended Indian private sector was putting up a brave face, chanting “Modi, Modi,” and trying to retain its best assets with cheap refinancing. Now the entrepreneur just wants to avoid going to jail. Economic power is concentrating in fewer hands.

When I was growing up, telecommunications was a government monopoly. Then came a bustling wireless market hosting a dozen operators. Now the player count is once again down to three effectively. One of them is in serious stress, and the other says it may not be able to bid for 5G spectrum next year. Another private group is establishing a chokehold on seaports and airports, which also were once the state’s preserve. Conglomerates may also be allowed to enter banking because government-run lenders don’t have capital to grow. For my generation, swapping one form of concentration with another doesn’t look like progress.

The rest of the economy is still highly informal, and inefficient: 80% of the output of farms and by small businesses goes to pay for capital, which is scarce. Labor’s share is 20%. Workers are liberally rewarded only in a bloated public sector, much of which ought to have been privatized long ago. Because it wasn’t, taxpayers have to keep alive debt-addled firms such as Air India Ltd.

The push toward higher wages should have come from higher farm productivity, which would have raised the price of migrant labor coming to cities. India missed this page of the East Asian playbook and failed to create a permanent urban working class.

Instead, it went straight to global services like computer software. For a while, this shift papered over the cracks, even though the billion-plus-people economy only worked to meet the demand of 150 million top income earners.

My father’s small firm made shoe uppers, my mother knitted sweaters. There are millions of families in similar circumstances today, with two differences: Prices of everything (including education, which was almost free for us) are decided by a small consuming class, and a billion others must struggle to afford them. Second, there are now gig economy jobs and microcredit, even though the income to sustain borrowing eludes most families.

The structural demand deficiency, as Rathin Roy, an economist at the London-based Overseas Development Institute, describes it, was a problem even before Modi’s Covid lockdown in March left millions of scared migrant workers without jobs, shelter or food. Their long, lonely journeys to the safety of their village homes revealed the shaky legs of India’s urban growth story.

Workers will eventually return. But getting back to pre-Covid levels will only pull 40% of a billion people of working age into the labor force, Mahesh Vyas at the Centre for Monitoring Indian Economy says. At least 10 million jobs are needed annually — matching China’s rate between 1990 and 2014 — to raise the participation rate toward the world average of 66%. But the post-pandemic developed world will nurse a massive unemployment hangover. The “End of History” ebullience that greeted my generation of Indians in the early ’90s is unlikely to repeat. Besides, creating jobs amid rising automation will require heavy spending on social security, healthcare, childcare, housing and education. Four out of five women in Indian cities weren’t in the workforce even before Covid. China, Bangladesh and Sri Lanka are all doing better.

Entrepreneurs Redux?

It would be cynical of me to believe that another entrepreneurial explosion isn’t around the corner, and that a larger number of Indians won’t be kicking in the doors to progress than in the ’90s.

In 2001, the telecommunications firm run by Sunil Mittal, a former bicycle-parts trader and manufacturer of the plastic Beetel phone my brother brought home, won its millionth mobile customer. Today, Mittal is a billionaire, and Bharti Airtel Ltd. has 293 million users in India, and another 116 million in Africa.

Crashing data prices and cheap smartphones give India a chance to spawn its own large internet businesses. Facebook Inc. has bet on Mukesh Ambani, India’s richest man, to build the country’s most valuable digital carriage, content and commerce triple play. The 152-year-old Tata Group might create its own rival “super-app” to compete against Ambani’s.

Perhaps digital capitalism favors “winner take all” monopolists. Rather than bemoan the concentration of economic power, maybe I should look at the bright side?


India could also attain the productivity boost China received from the likes of Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The country has built a robust real-time mobile payment system, dominated by Alphabet Inc.’s Google and Walmart Inc.’s PhonePe. October saw transactions on the network doubling from a year ago to 2 billion. E-commerce and payments data could come to replace collateral in loan contracts, offering small borrowers like my dad’s erstwhile shoe-upper firm a chance to get around their perennial shortage of marketable assets.


The China-U.S. cold war — in trade, technology and finance — comes with its own rich prospects. Indian-born executives such as Microsoft Corp.’s Satya Nadella, Alphabet Inc.’s Sundar Pichai, International Business Machines Corp.’s Arvind Krishna and MasterCard Inc.’s Ajay Banga are in a position to drive investments and jobs to their country of birth.

Of late there’s also progress on long-pending reforms. In a shakeup of rural power structures, the Modi government has taken a political gamble by freeing farmers from the institutionalized tyranny of having to sell their produce in designated market yards, where they get shortchanged by middlemen. It’s also possible to be tentatively hopeful about labor reforms. Merging 44 federal labor codes into four, for instance, may see more workers on formal contracts, a privilege that eludes most Indian wage earners.

But there are questions: One, how will supply-side reforms fill the demand gap? Two, when will the broken financial system be made whole? Finally, will the narrow elite running India by proxy agree to compete fairly, or will it simply hijack the direction and pace of reforms for its own advantage, leaving a majority of people behind? Modi’s government adopted a bankruptcy code in 2016, and bandied it as a weapon against crony capitalism. But after the domestic business class lobbied hard against losing prized assets, the insolvency reform lost its sting. Once the Covid-19 disruption began, the bankruptcy tribunal closed its doors to new cases. Out-of-court restructurings are a mess. A resource-starved country is unable to free the capital trapped in dying firms.

Meaningful correction would involve more than tweaking laws. The Indian state must put limits on its powers, end its overreach and rebuild trust. It must clarify if the goal is to remove “socialist” from the preamble of the constitution, something India’s economic conservatives have always wanted, or if it is to drop “secular.” Turning a 14% Muslim population into second-class citizens is hardly a recipe for peace and prosperity.

Resuscitating society’s trust is more crucial now because New Delhi can’t put itself back in the driver’s seat. The pandemic has sapped the little fiscal strength it had. The investment-grade rating, which took the country more than 15 years to reclaim, looks increasingly vulnerable.

But trust requires honesty. Indians are surrounded by social media spin and empty slogans like “$5 trillion economy by 2024” — from $2.7 trillion before Covid. How exactly will this miracle happen? When Toyota Motor Corp. recently said it was halting expansion because high taxation is suppressing demand, ministers rushed to do damage control by calling it fake news. To acknowledge and fix shortcomings in the 2017 goods and services tax — the five-rate GST is a compliance nightmare — is to doubt Modi’s acumen.

Independent voices that could challenge the official narrative are being muffled; institutions that could force the executive branch to right its wrongs have been defanged. All this runs contrary to our hopes that our media, judiciary, regulators, professional bodies and civil society groups would get stronger over time.

India’s central bank has seen off two governors in the last four years after unsuccessful attempts to force bankers and their politically connected borrowers to clean up their acts. Electoral financing is now via anonymous bearer bonds, with no checks on the source. Recent judgments of the top court, as well as its dithering on important constitutional issues, have invited criticism that its approach is “more executive-like than the executive itself.”

In the absence of institutional protection — not even of habeas corpus — trying to engage with the state has become a crime. Protesting peacefully, demanding rights, exposing wrongdoing by powerful people, criticizing policies have all become risky ventures.


The prime minister has made his core supporters ecstatic by breaking up Jammu & Kashmir, India’s only Muslim-majority state, into federally administered territories, but the move hasn’t exactly buttressed India’s image as a multi-religious, secular democracy.

The West will be prepared to overlook much of this. As Ashley Tellis, an analyst at the Carnegie Endowment for International Peace, puts it, the exigencies of balancing China would force the West into a “constrained acquiescence to partnership.” That’s a poor substitute for “the enthusiastic boosting of India that would otherwise occur if its liberal credentials were not contested.”

The Indian middle class, though, may be less forgiving. In economist Albert Hirschman’s framework, the “exit” from India option was only for a minority. Others had to stay, and it was their “voice” that kept alive Indian democracy.

Now a Muslim friend from my hometown says he wants to emigrate because his seven-year-old daughter is being reminded by her classmates that she’s different from the Hindu majority. A bank analyst in Mumbai wishes he’d left long ago. He reckons on many years of sub-5% GDP growth. The U.S. investor visa program saw a 400% jump in demand from Indians between 2016 and 2019. Modi’s supporters troll dissenters on social media, and ask them to “go to Pakistan.” As many as 7,000 high net worth Indians left in 2019, according to Global Wealth Migration Review. That’s 2,000 more than in the previous year. It’s unlikely any of them went to Pakistan.

Wither India?

My mother’s side of the family comes from Faridpur, in what is now Bangladesh. Once a part of India, Bangladesh will overtake it in current per capita dollar income this year. When and how did we lose the plot to be the next China?

The problems began in the complacency of the mid-2000s. That’s when India should have looked beyond software and semiconductor design and doubled down on shoes, shirts and toys — manufacturing that took advantage of the less-skilled workforce. Rather than turning special economic zones into a land grab, India should have created a few large enclaves. Demonetization and the flawed GST made things worse, and Modi’s campaign of self-reliance may do yet more harm.

Why’s the public not angered by it all? In the dirt-poor, northern state of Bihar, almost as populous as Japan, Modi’s Covid lockdown forced migrant workers to return, fearful and jobless. Yet while interviewing voters before elections for the state legislature, Bloomberg News reporters found no dent in Modi’s appeal. People’s ire was reserved for his coalition partner, the state chief minister. And even he managed to retain power thanks to the prime minister’s boundless popularity.

When Manmohan Singh’s government was in office, it was preoccupied with people’s rights to education, food, work and information. Modi, on the other hand, identified touchpoints in everyday lives — a bank account opened with a unique identification, cooking gas to replace a coal- or wood-burning stove, a toilet in the village home — and delivered, up to a point. Whether there’s money in the account, running water in the toilet or the means to replace the empty gas cylinder isn’t something for which people blame him. Not when he has a bigger civilizational agenda, like building a temple for Ram, the Hindu God, in the same place where a mosque once stood until it was razed by Hindu mobs in 1992. As a 22-year-old student, I didn’t fully realize what its razing meant. We were still giddy about the Berlin Wall coming down. The next generation of Indians, I’m afraid, will have to pay a price for that injustice.

The better-governed, faster-growing southern states of India have mostly shunned Modi’s strongman cult, but they’re bit players. It’s the poor, over-populous northern states that matter disproportionately in Indian politics, and it is there that Modi has managed to shift the Overton window, supplanting material prosperity — which no party has delivered since the ’90s — with chest-thumping nationalism and an atavistic yearning for a pre-Islamic past.

It’s no coincidence that Modi’s ascendancy in public life began after the 9/11 attacks in the U.S., and export of terror from across the border in Pakistan. In the last parliamentary election following one such attack, Rahul Gandhi, the opposition Congress Party leader, couldn’t even retain his family borough in Uttar Pradesh, previously won by his mother, father and uncle. And that was after he promised the equivalent of $1,038 a year to each of the country’s 50 million poorest families. The losers of development have turned skeptical even of compensation.

Sadly, I don’t see northern India’s economic pessimism — or its caste enmities, religious hatred and deep-seated misogyny — making way for a less toxic, more aspirational politics. I say sadly, because I have always been secretly hopeful about India, even when criticizing its cumbersome red tape, crumbling infrastructure or clumsy policymaking.

But the 1990s dream has ended, the world has changed, and so have we.

Just typing that previous sentence feels like betrayal. India is where I was born, grew up, started work and got married.

I have left the country for long stretches, and my teenage children don’t have any feel for its culture, cuisine or languages. Yet India and I have never let go of each other. When I write about other places, it’s as a foreign correspondent. The India stories are different. They aren’t all strewn with the first-person pronoun, but they’re all personal. Increasingly, they’re also bitter. Like this essay.


Call it buyers’ remorse. Those of us who thought that muscular leadership would revive India’s dream of mimicking Chinese-style double-digit expansion are not just disappointed. For many of my generation, our long-cherished hope for a better, greater India is all but gone. We wanted to trade some of our democratic chaos for a little bit more growth. We ended up with less of both.

(Updates in 6th paragraph with India slipping into recession. Corrects the cost to India of licenses in 30th paragraph and the number of high net worth individuals in 66th paragraph.)

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Originally published on Bloomberg

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