ஏழாம் உலகம் (Ezham Ulagam) - Darkness personified.

Ever since I saw the movie Nan Kadavul I wanted to read Jeyamohan’s novel Ezham Ulagam.  Nan Kadavul is a movie that had left a lasting impression in me, it changed my perspective towards movies, that is when I realized that not all movies need to be entertaining, there is a lot more to it.  Having read the novel, I am finding it extremely difficult to express how I feel, it would be a gross understatement if I plainly say ‘I enjoyed reading the book’, and hence the blog.

  

Ezhan Ulagam is a novel that documents the day to day lives of beggars and racketeers who ‘own’ them, yes they are owned.  It was extremely hard for me to digest the fact that they too live in the same world that we live in, death would be the obvious choice for fortunate people like us, if we have to live their life even for a day.  More than once I simply closed the book and started to stare the skies without uttering a word, I just went blank, my thought process was empty, it was difficult for me to pick the book again and continue reading, such was the heaviness.  The author has tried to explain the point that humans will still be humans even in the worst living conditions, they don’t become animals, and their willingness to endure explains the human tenacity to survive even in a world that is unimaginably dark and ugly.

The story is quite descriptive about the way beggars are bought and sold, it reinstates the fact that human slave trade is still pertinent, in fact prominent, despite the social, cultural and economic change that we have all witnessed over the years.  Muthammai, a conspicuous character in the story is described as a heavy women with only one breast, dysfunctional legs, one arm, eyes that are almost covered by the thick flesh that hangs from her forehead and an inconceivable gory face.  Muthammai cannot move an inch on her own, she has to be carried.  She is forced to have sex with similarly handicapped ghastly beggars with an intent to produce more such filthy creatures, which are eventually sold or used as a tool for begging.  She refuses to breastfeed her 18^th newborn which is yet another grim that is terribly handicapped, she is ruthlessly kicked by Pandaram, the one who owns Muthammai  and subsequently forced to feed.  

 

The shockwave started there and continued till the time I completed reading the book.  Beggars are transported like garbage from one place to another, the organs of a relatively healthy beggar Thorrapu is sold to a hospital, a female beggar Errukku who has a broken spine is picked and brutally raped by policemen and thrown out, she is picked from the streets by an NGO, Murugan an employee of the  Pandaram fraternity, ties knot to make the officials believe that she is his wife, only to make her beg on the streets again, yet she considers him as her husband from then on. 

The author also takes us through the other side of their miserable lives, they laugh, they cry, they love, crack jokes and make fun.  They even feel sorry for their shabby boss Pandaram when his daughter runs away with a local goon, they console him, overlooking all his brutalities.  They seem to live a content, happy life in spite of being fed only once a day that too with leftover rotten food sourced from local hotels and made to stay in conditions that we can’t imagine of.  Regardless of all the ugliness, they still continue to live as humans with all emotions like that of those in the normal world.  It was an overwhelming experience to read about their happiness.

Pandaram, who makes his living by managing a gang of ill-fated beggars, is a staunch devotee of Lord Muruga, his day begins with the darshan of his favorite deity.  Pandaram absolutely has no regrets nor guilt for making money at the cost of sufferings of the hapless beings.  On the contrary, he happens to be a loving husband, a caring father of three children.  He travels all the way to nearby town to buy bangles in the middle of the night to make his daughter happy.  From his perspective, he is a god fearing, honest and humble person.  He does not even consider the beggars as human beings, hence turns a blind eye to their sufferings and leads a guilt free life.

Over the years  Pandaram sells all the 18 babies of Muthammai, but still her love for her kids never fade, she once says to Errukku that while breastfeeding a newborn, she feels as if the baby is trying to say something to her.  Her only wish in life is to have sexual intercourse with a ‘normal’ man and give birth to a healthy baby with no abnormalities.  The story begins with Muthammai giving birth to her 18^th dislodged kid and ends with her being brutally raped in a marshland by another disfigured beggar bought by Pandaram for the lone reason, who unfortunately happens to be one of her own 18 kids that she had given birth to.  She identifies the man to be one of her own children (hunch back, blind and one finger in the place of the hand).  Her screams and scrambles fall into deaf ears and the story ends..  Heaviness in my heart as I write this, I was dumbfounded, it took me 2 to 3 days to come out of the intensity.

Ezam Ulagam is a novel that has to be read by everyone, the only hindrance while reading this book is the colloquial Tamil in which the book is written, author has extensively used Kanyakumari slang which is a blend of Tamil and Malayalam, it makes it difficult for an average Tamil reader but we get used to it after the initial chapters.  Please do not restrain from reading this book just because of its dark and intense content.  After reading this book, there is bound to be a change in our individual perspective towards life, you feel blessed and start to realize the value of life.  My biggest takeaway after reading Ezhan Ulagam, “someone out there is a lot more happy with a lot less than what you have”, appreciate what you have rather being unhappy over things that you don’t. 

A change within us becomes imminent after reading Ezham Ulagam.

Our obsession with Western lifestyle and its consequences

I would like to start this post with Nobel Laureate Paul Krugman’s quote “Much of the past 30 yrs of study in Macroeconomics was spectacularly useless at its best and positively harmful at its worst”. 

The word ‘Globalization’ has been misunderstood by almost all of us.  Liberalization, Privatization and Globalization (LPG) does not necessarily mean that we must mindlessly follow the Western way of living and bluntly implement the economic policies formulated in the West (which are in any case proving to be a disaster).  Our policy makers fail to understand the Indian society and the Indian way of living.  India is different from the West (America and Europe) and policies formulated in the West before 30 years will not deem fit to the Indian economy which is structurally different.  

The economic policies that are declared obsolete in the West are being re-branded as big ticket ‘Reforms’ by our policy makers, the best example is FDI in retail.  The common man like you and me must go the extra mile to understand and question the policies that are thrust upon us, rather we like ‘herds’ accept whatever is propelled on us without any due diligence.  The present generation seems to be carried away by the western lifestyle, which is largely fueled by the new found so called ‘economic prosperity’.  

Sayings like “Live within your means”, “Save for the rainy day” have become old fashioned.  India that has traditionally been a savings driven economy is now fast turning to be debt driven.  I could see school / college students flaunting mobile phones that cost anywhere between 30k and 60k, young executives parading with 1500cc motor bikes and ultra luxury cars that cost a Bomb!!  Thanks to the easy availability of Credit (read EMI).  The culture of saving that has been the backbone and face saver of our economy is dying a slow death.  High disposable income in the hands of irresponsible youngsters has adverse impact not only on themselves but also on the nation at large.    

A young executive (from a middle class background) who earns Rs. 60,000 a month has a credit card outstanding of 3,00,000, car loan of 4,00,000 and a personal loan for 2,50,000 and savings….  ZERO!!  The new mantra is spend over and above your means, enjoy life and make merry.  Such reckless attitude towards money has larger implications that impacts the economy at large and not just the individual.  Read on.  

The Market driven economic policies formulated and propagated in the early 80’s by the then British Prime Minister Margaret Thatcher (Thatcherism) and American President Ronald Reagan (Reaganomics) that are proved to be the root cause for most of the current economic woes in the US and Europe, are re-labeled as ‘Economic Reforms’ in India.  To put it in simple words, Economic policies that are considered outdated and discarded to dustbins by the Western nations are cherry picked by our ivy league educated policy makers and put to use in India.

Free markets, foreign investments, control over public expenditure, huge tax cuts and rebates to multinational corporations, privatization and deregulation of the economy are the strategies of Thatcherism and Reaganomics to revive their respective economies from depression.  As a consequence, no doubt the West reached heights in terms of economic prosperity, but it is these very policies that perpetuated the current global economic meltdown.

Well, now let us understand the economic model for growth and development the west has been relying and advocating for decades.  Shop for growth, spend for development was the sole mantra of the US government, the policymakers and the so called intellectuals were literally running a campaign “Shop for America”.

As an extension to this, the Fed (like we have RBI in India) started to cut down the interest rates to near zero levels.  In the 1980’s the US prime rate was as high as 21.50% which has dwindled to 3%.  The policymakers were encouraging the alarming trend of not just spending, but even went to the extent of propagating “borrow and spend”, it is with this intention the interest rates were curtailed and brought down to near zero levels.

The infamous Fed chairman, Alan Greenspan once in his speech said that people in the 3rd world Asian countries like India save because they feel insecure, he further said that the government of such countries were not capable of providing social security to the poor, unemployed and the aged. 

Mr. Greenspan failed to recognize the fact that in countries like India and Japan unlike the west, it is the family and society which forms the basis for social security and not the government.  In India, the father takes care of his son till he finds an employment, the son takes care of his aged parents, the disabled siblings are taken care by the family, the orphans and the left alone oldies are taken care by the society.  Therefore people in India SAVE, they do so not because they are insecure of their future but to support their family and society.  A father saves because he has to fund his son’s education and daughter’s marriage; a son saves because he has to take care of his aging parents.  This family and society driven economic model is the structural difference between the West and the East.

In the West, we can find that the families are awfully disrupted, statistics say that 51% of the 1st marriages end in divorce, 65% of the 2nd marriages end in divorce and a whopping 70% of the 3rd marriage end in divorce, therefore there is no ownership or obligation for the citizens towards their family, neither a necessity to save.   

The savings to GDP ratio is a stunning 35% in India which is one of the highest in the world, whereas the savings to GDP is negative in the America.  There is absolutely no necessity for the Indian government to rely on foreign investments to fund the burgeoning fiscal deficit or to finance infrastructural, industrial development.  For all those who think it is the dollars from America that is fueling growth in India, the ground reality is different, it is a mere 2% of India’s investment which is funded by the FII’s and the FDI’s, the rest 98% is generated from within the country by “domestic household savings”, while the West is compelled to borrow money from India, China, Japan and other emerging economies to lend its citizens who are used to ‘borrow and spend’ culture.  It’s high time we take pride in being a savings driven economy unlike the west that is consumption driven.

It is our family, society and the culture of saving that saved us from all the economic catastrophes that our country had faced earlier.  Unfortunately the current generation seem to think and act like westerners, spending over and above one’s income is considered fashionable.  This culture of borrowing and spending is a perfect recipe for disaster.  There is no doubt that India is an emerging economic power, there are 100’s of reports that suggest that India will emerge as the supreme ‘soft’ power in the future.   In order to be a more matured and responsible super power, we must stick to our basics, learn from the mistakes of our western counterparts and not try to ape their way of life, a copy paste will prove to be a tragedy.

Try to live within your means, spend what is left after saving, avoid wasteful expenditure, never borrow to spend, be simple and charitable, appreciate and live the “Indian way of life”.  Jai Hind.

Breakaway from the routine - an escapade with the GODS

One fine day one of my friends casually asked me if we could go on a day long trip to visit temples of lord Shiva, "Why not?", I said and that is how the plan was made.  We initially decided to visit Chidambaram, Vaitheeshwaran koil, Seerkazhi and Mayavaram.  8th December, the Saturday was chosen as we could afford to take rest the next day.

It was decided that we start as early as 4:00 am in the morning in order to cover all the 4 temples in one day, we requested the cab driver to come by 3:30 in the morning since everyone had to be picked from different locations.  I woke up by 3:00 am, soon after my morning routine, I woke my mom by 3:30 and asked her to prepare some breakfast for the group, the idea was to spare the time spent eating breakfast in a hotel.  The breakfast was prepared and packed by 4:00 am, Amma had already made the arrangements the previous night, the commitment of our mothers are bluntly incontestable.

I received a call from Sangavi by around 4:30 in the morning, she said that they have started from Korratur and would reach Mylapore in a while, though the driver had some difficulties spotting my place, the cab arrived at 5:00 am.  The cab was occupied by Sangavi, Nitheesh (Sangavi’s younger bro) and their mom.  I got into the front seat after waiving a "hi" to the three of them and gestured a "bye" to Amma, she was standing in the balcony to send me off.  We left straight to Tambaram to pick others.  By 5:45 am we reached Tambaram to pick Jaishree, her mom, Chitra and Vijay, pleasantries were shared as we got introduced to each other (since we were meeting for the first time).  We left from Tambaram by sharp 6:00 am, a mighty 2 hr delay from what we had planned.

The roads were covered with fog, there was barely any visibility beyond 10 mts.  Myself and Nitheesh were seated in the front seat and we got ourselves cracking on a variety of subjects.  Building a conversation was never a problem, I have a topic for everyone ;).  We were discussing about Cash Flow statements and their financial implications, we also discussed about the key financial parameters to be scrutinized before investing, while the girls were having a gala time giggling and chitchatting, girls you see ;)..  It must be around 7:30 am, we stopped at a place that read ‘Kumbakonam Coffee’ it was hard for us to resist, we had breakfast and sukku kaapi and left by around 8.  Straight to Chidambaram.

  (Sri Panakatteshwarar temple)

I was sharing my experience about 1,500 to 2,000 year old Sri Panakatteshwarar temple that is located in a small village by the name Panayapuram near Villupuram, I had visited this temple a month before.  As per the inscriptions in the temple, King Sibi Chakkravarthi (the one who offered his flesh to save a dove) had offered his prayers to Panakatteshwarar.  

   (Sri Panakatteshwarar temple)

It is said that Surya Bhagavan worshipped Lord Shiva here to regain his brightness.  A rare feature in this temple is that, in the months of April – May (Tamil month Chithirai) the Sun rays fall directly on the lord as well as Ambal, bathing them from top to bottom as he transits from morning to evening!!  Is it not an architectural marvel??  As I spoke about the temple, it so happened that Nitheesh spotted Panayapuram sign board while we were driving past Villipuram, we thought it was a good idea to stop by and visit the temple before we proceed to Chidambaram.  Do we call it a coincidence?  In my opinion, nothing is coincidental, it is all well planned, orchestrated and executed by HIM.  After the soulful darshan of Sri Panakatteshwarar and Puravammai, we left to Chidambaram by 10:30 am. 

We had to rush since we wanted to cover Chidambaram before 2 pm, else the temple will be closed for visitors.  We reached the Thillai Natarajar temple in Chidambaram by around 11:45 am, exactly when uchi kala poojai was going on.  It was splendid to see the lord of the lords Nataraja in his “Ananda Thandava” posture amidst the ringing bells and deeparadhana.  The “Ananda Thandava” posture of Nataraja represents pancikritya functions of the head of Gods, Shiva is believed to have formed the dynamic force to create the world.  Hara Hara mahadeva.. Goosebumps as I write..  

(Natarajar)

After worshipping Thillai Natarajar, we offered our prayers to lord Vishnu who was in the form of Govindaraja Perumal, it is to be noted that  it is one of the 108 divyadesams.  As we moved around the temple we offered our prayers to Shivakami Amman, Ganesha and Murugan.  We were mesmerized and stunned by the architecture of the grand old structure, there were amazing sculptures all around the temple pillars and extraordinary paintings in the ceilings.  It is believed that the temple was originally raised in the Sangam period (30th century BC to 4th century CE) with additions later in similar style in the 12th and 13th centuries respectively by Aditya I, Parantaka Chola I, Kopperunchinga I, Krishnadevaraya and Jatavarman Sundara Pandyan.  Marvy!! isn’t it? to be offering prayers in a temple that was worshipped  before 2 millenniums.   

(Thillai Natarajar temple Gopuram)

The time was 2:00 pm and the authorities asked us to vacate the temple, while we were moving out, Chitra gave an interesting explanation about the mythical creature Yali that is found as stone carvings in numerous temples in Tamil Nadu and across South India.  Since Lion was the emblem of Pallavas, the Cholas created an imaginary character Yali that has the head of a lion with tusks of an elephant and tail of a serpent.  Chitra also shared her spiritual disclosure with respect to vibrations and positive ambiance that she experiences while visiting temples, especially the Ancient ones.  It is wonderful to be on a spiritual tour, particularly with "Like minded" people around, the feeling is simple inexplicable.

(The place where we had lunch)

We started from Chidambaram by around 2:15 pm and headed towards Vaitheeswaran koil.  We found an excellent shady place on our way which was brilliantly spotted by our driver to have lunch.  A huge tree, branch of a river, cool breeze, two cute little puppies around, WOW, we couldn’t have enjoyed such a luxury even in the finest of the Hotels.  Sangavi and Jaishree’s mom had prepared delicious puliyodharai, curd rice, pudina thogayal, chips and pickle.  We relished our lunch and rested for a while, we utilized this time to know more about each other, since most of us were meeting for the first time.  The time we spent was sort of an ice breaker, now we were a more open lot, the journey was filled with fun and frolic as we reached Vaitheeswaran temple by 3:00 pm.

(Vaitheeswaran koil holy tank “Siddha Amritam)

We were told that the temple will open only by 4:30, we used the one hour time to freshen up.  I took a dip in the holy tank Siddha Amritam which is located within the temple complex.  It is believed that the holy tank contains nectar and a holy dip is supposed to cure all diseases.  We were still left with some time, myself, Nitheesh, Sangavi, Chitra, Jayashree and Vijay sat in a circle and were discussing about Lord Shiva and his various forms.  Jayashree and Sangavi spoke about their aptitude to connect with lord Shiva after reading Amish Tripathi’s immortals of meluha while I agreed to disagree.  Nonetheless it was a healthy conversation.

The sannidhi opened by 4:30 pm, we bought archanai tickets and vilvam for Vaithyanatha Swamy and Thayyal Nayagi.  All of us were made to sit inside the prakaram by the priests, I do not know what induced the priest to call us inside.  All of us had fantastic darshan of  Lord Shiva who was in the form of Vaithyanatha Swamy.  During the Ramayana period, Rama and Lakshmana have worshipped the deity in this place.  It is believed that Rama and his brother Lakshmana cremated the vulture king Jatayu (who was killed by Ravana) at this place.  We also offered our prayers to Angaraka (Mars) who has a separate Sannidhi, Murugan and Thayyal Nayagi.  We procured some prasadam from the temple counter, without any further delay we got into our Cab and advanced towards Sattainathar Temple in Sirkazhi.

Sirkazhi temple is just 6 kms from Vaitheeshwaran temple, we reached Sattainathar Temple by 5:30 pm.  Sirkazhi temple is an ancient temple complex where Shiva resides in three different forms, Bhramapureeswarar, Thoniappar and Sattainathar.  First we offered our prayers to Bhramapureeswarar, there was hardly any crowd in the temple, which was like icing on the cake.  We proceeded to Tirugnana Sambandar’s sannidhi, this is one temple that has a separate shrine for Gnana Sambandar.  There is a mythological story that when Sambandar was three years old, Shiva and Parvati appeared before the child that was crying for milk, goddess Parvati breastfed the little Sambandar and that is when the child became Gnana Sambandar and this incident is said to have happened in this grand old temple.

(Sirkazhi Sattainathar temple)

Since most of them were visiting the temple for the 1st time, I kept saying that everyone will be taken by surprise when they climb up and take a glimpse of Sri Thoniappar who resides at the second level.  We were ‘awestruck’ by the gigantic figure of lord Shiva who was in the form of Periyanakar with Periyanayaki sitting on a Thoni, no one could utter a word, as we were completely swept off by HIS magnificence.  I could ask for nothing but thank him for this wonderful life he has bestowed me with.  Lovely parents, very good education, a decent job, wonderful set of friends and most importantly a heart that is content..  What else could one ask for in life?  The priest explained us the sthala puranam, it is said that after pralayam (world coming to an end) in the treta yugam, Shiva and Parvati came on a Thoni and hence the name Thoniappar.  We further climbed upwards to worship another form of Shiva Sattainathar through a small window, we were told that the shrine will be open only during specific days in the year.  Sirkazhi temple remains very close to my heart for numerous reasons, it is said that those who visit this temple will get their mind purified and get over ignorance, true in fact.

(The team)

It was around 6:30 pm, we packed ourselves back into the cab, despite waking up as early as 2:30 in the morning, continued by tireless travel, everyone were so enthusiastic and overwhelmed.  We were extremely satisfied on how the day was spent.  The fact is we did not plan or organize the trip as such, things just fell in place, HE made the plan for us.  Had we planned, I am not quite sure how the outcome would have been.  It reminds me of a quote, “Surrender to the Cosmic plan, don’t be a victim of your personal agenda”.

Our way back to Chennai was really entertaining, we cracked a lot of jokes and pulled each other’s legs.  We had some confusions with regards to the route but it was later sorted out.  It was 10:00 pm when we stopped for dinner, everyone had almost lost their desire for food.  It was a usual highway restaurant, as suggested by Jaishree we all sat outside and had dinner in moon light, again a lot of jokes were cracked on a variety of topics.  Sangavi was sharing her experiences about a wild life tour that she had been with her office colleagues.  Though the food was very average, we didn’t bother much since the fun element made up for the bad food. 

At last we reached Tambaram by around 12:30 midnight.  Jaishree, Vijay and Chitra who were in deep sleep had to be woken up to be dropped.  From there I was dropped in Mylapore by around 1:15 am, and lastly Sangavi, Nitheesh were dropped in Korratur by 2:00 am.  600 kms and 22 hrs of assiduous journey had worn us out (and enriched our souls).  All of us went back home carrying sweet memories of the day long road trip..  Om Nama Sivaya!!!

Euro Debt Crises - a discussion

This post is in continuation to my previous post "The euro area's debt crisis", below you can find a series of discussion I had with Karthick and Yeshwant.  I thought it is worth posting it for two reason, one, I could register our discussion so that it doesn't get lost, two, I felt the discussion would immensely benefit fellow readers too.  Happy reading :) as always, your comments, thoughts, questions are most welcome.

You didn't talk about the rise of Euro crisis. A Little of history of why Euro? could help. Why some countries opted out/were opted out ? I would like to know was Germany/France hesitant against Euro and if so why ?

The purpose of the write up (Euro Debt Crises) was essentially to highlight the mounting public debt by countries in the Euro zone and gross fiscal irresponsibility by the ECB.  We have discussed enough about the birth of the crises, it all started off with mortgage defaults which ultimately lead to failure of the banking system in the west, and that had a  contagion effect.  Still if you are interested, we can work on a detailed cover story analyzing the birth of the crises, well, “why Euro” is a topic in itself :), could not have done justice with just a para on it.

Well, Germany isn't opposing the Euro publicly, but somewhere the insiders want to dump the Euro as they feel it is an unnecessary financial burden, the fundamental question raised is, why the average German taxpayer should pay for making up the losses of Greece, Spain, Portugal?  which could otherwise be used to fuel their own economic growth.  Some even argue that the weak Euro is the reason behind Germany's recovery :-) (Very political and controversial).

The countries in the Euro zone wanted to leverage the financial strength of stronger Euro nations like that of the Germany and France to raise money from the international markets to fund their budget deficits (which is used for large scale bank bailouts), otherwise it is virtually impossible for Greece or Portugal to raise money at tolerable / sustainable rates of interest, given their fiscal position.

Restructuring a insolvent country's debt. What does this mean ?
 
Sovereign Insolvency is when a country is unable to service its debt obligations.  Restructuring is nothing but revisiting the rate of interest and bond tenure in order to make the debt repayable which would otherwise become a bad debt.

We cannot see this only in the light of Sovereign debts/Fiscal deficits. I guess UK, Italy too run huge deficits. The problem is unequal distribution of wealth and supply [goods, Man power]

Not just the UK, even the US runs mammoth deficits, but the US and UK have their respective dollar and pound to fall back upon.  Since the dollar is considered a global reserve currency, the global trade is dominated by the dollar and pound, hence it is easier for the US to raise money from the international markets to fund its deficits or even print money (though this would result in hyperinflation).  And the Euro was proposed to challenge the virtual monopoly of the dollar and rest is history.

This brings us to the fundamental question, how was the value for Euro as a currency determined ?  How is exchange rate determined for the first time? I understand later, it is the open market operations that determine. Still, How is china able to control it's remnibi internally ? Isn't it a violation to set currency exchanges if they were part of WTO ?

Well, there are primarily two ways by which value of a currency could be determined (This calls for a separate, more serious discussion in itself), one, exchange or market determined which is referred to as free float two, a fixed exchange rate regime also known as Pegged system.  A lot depends on capital account and current account convertibility as well.  Please be informed that interest rates, bond yields have a very important role to play in determining the value of a currency.

If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand (which is what is sustainable in my opinion).  A movable or adjustable peg system is a system of fixed exchange rates, but with a provision to devalue the currency.  For example, between 1994 and 2005, the Chinese renminbi was pegged to the United States dollar at renminbi 8.2768 to $1.  China was not the only country to do this, from the end of World War II until 1967, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.

The China is able to control remnibi internally through open market operations, i.e the Govt would buy dollar from the currency market if it wants devalue remnibi and sell the dollar if it wants the remnibi to appreciate.  This is an internal issue and the WTO has no direct control over open market operations to my knowledge. 

Even India resorts to buying and selling of dollar through the RBI in order to avoid the Rupee from appreciating.  This is much politically motivated, we can have a separate thread to discuss its wide implications.

As in how can they value and devalue their currency just by buying/selling dollars. I am sure there is lot more factors into it like Balance of Payments, etc

Indeed, a country can very much manipulate the value of its currency by buying and selling dollars in the open market, but it is not as easy as said, this is just a stop gap arrangement.  In the long term, the value of a currency is purely dependent on the demand and supply mechanism which in turn is largely dependent on the Balance of Payments.  For example, if a country has strong export growth year on year, the aggregate demand for that country's currency grows in the international market, as a result the currency appreciates and if the vice versa happens, currency depreciates.

Because if that is the case, why does India and other 3rd world countries not go for a pegged system..?

I have clearly said that a pegged system is indeed not sustainable at all, unless and until the economy happens to be export driven like that of China, or if the currency is backed by a cartel of nations like that of the Euro.

A pegged currency makes the system more vulnerable to a Currency Crises, it's consequences are disastrous and unexplainable.  Such crises may result in hyperinflation or extreme deflation.  Therefore, for a domestic demand driven economy like that of India or any 3rd world country for that matter, implementing a pegged system is without a doubt "Suicidal".

China on the other hand has a very strong hold on exports, Chinese products have become household for the West, with such strong export growth and BOP, Current account & Capital account surplus, China is able to afford a pegged system.

Chanakya's Chant by Ashwin Sanghi

Chanakya's Chant is possibly India’s answer to Dan Brown.. :-) Ashwin Sanghi’s “Chanakya's Chant” is as engaging and intriguing as Kalki’s “Ponniyin Selvan”, I am drawing a comparison only for the reason that both being novels with historic reference.  The author’s uncanny ability to make every line exciting as well as enlightening, make us contemplate if authors like Chetan Bhagat are much overrated!! 

The book runs two stories in parallel, one in 340 BC where Chanakya, Chandragupta and how the two of them due to their efforts managed to unify most of India under one king.  Two, story from modern Indian politics that of Pandit Gangasagar Mishra and his protege Chandini Gupta.  The narrative keeps alternating between Chanakya’s efforts to make Chandragupta the emperor of India and Pandit Mishra’s efforts to make Chandini the Prime Minister of India..  The author switches between the past and the present with ease and fluidity, both the stories mesh together effortlessly.

Well, I am not quite sure how much liberty the author has taken with respect to history, on the face of it looks like history has not been mangled with, barring quite a few sub-plots and sub-stories that are too farfetched to be true.  Nonetheless the book makes an excellent screenplay for an action paced thriller, came to know that UTV had already acquired the movie rights for this book.

Chankya's Chant is an eminently readable novel.  Happy reading..

Bottom line – War is Politics with Blood, Politics is war without blood..  Power has always come at a price and the price as Chanakya points out is not just one’s emotions but one’s conscience as well. 

Investments in Purti Power & Sugar legitimate indeed..!!

 

I was baffled by the media reports that alleged 14 shell companies with fake addresses and directors having invested crores of rupees in Purti Power & Sugar ltd in which Nitin Gadkari used to be the chairman besides holding a minority stake (he resigned as the chairman after becoming BJP president).  He was accused of channelizing black money through ‘shell’ companies which amounts to money laundering.  Being a keen observer of politics and corporate scams, I decided to spend some time to understand the money laundering allegation against Nitin Gadkari and investments in the Purti group.  Ultimately I found that media has been misquoting facts and blowing issues out of proportion.  The allegations were NOT based on researched facts or investigation.  The media seems more interested in sensationalizing which only demonstrates their desperation to stay relevant in today’s 24*7 media.  Read on..

The first and the foremost allegation against Nitin Gadkari is the controversial investment of 47.34 cr in the Purti group by 14 ‘shell’ companies that have fake addresses, directors and are ownerless.  A closer look at the Balance Sheet of Purti Power and Sugar Ltd will reveal that the investment of 47.34 cr was made in 2002 and not recently as claimed by the media.  The 47.34 cr which is a little over 85% of the total share capital in Purti which is 55 cr, was made between 2002 and 2006 by a well known Nagpur based business group (The Mehta Group that manages an asset base of over 2000 cr) through 12 of its legitimate companies with real operations and NOT ‘shell’ companies as claimed.  It is worth mentioning that the IT department had conducted a probe in Purti way back in 2006 and has accepted that the 47.34 cr investment made by the Mehtas to be legitimate.            

If the 55 cr investment in Purti is lawful at the time the investment between 2002 and 2006, how come it is claimed to be illegitimate after 2010? 

A comprehensive look into the issue reveals that Mehta group, the genuine investors of Purti have transferred their shares from the 12 companies that made the original investment to 14 of its own ‘shell companies’ in the year 2010.  Please note that the Mehta group has taken ownership of these 14 shell companies and these are NOT ownerless companies as claimed.  Had only the media gone back in time to track the original source of the 47.34 cr in Purti, it would have realized that the investment is indeed genuine and not bogus.  This very fact demolishes the media’s pitch that investment in Gadkari associated Purti are made by ownerless and fake entities.  If the Mehta group decides to transfer 85% of shares in Purti to 14 of its own shell companies, the original investment of 47.34 cr made until 2006 DOES NOT become illicit overnight..!! 

Coming to the 14 shell companies, it is to be noted that these 14 shell companies were not created overnight to transfer the shares, as a matter of fact these 14 companies were owned by the Mehtas ever since 2003-04 and have even been pledged as collateral with nationalized banks as a substitute to Mr. Manish Mehta of the Mehta group.  That being the case, I do not understand on what grounds the media claims that these 14 companies are bogus and ownerless. 

Next question, why did the Mehtas transfer their shareholding in Purti to shell companies?  Read on.. 

Purti has been primarily operating in the backward areas an, as a result it had accumulated losses to the tune of 64 cr by the end of 2009.  Following which the loans sanctioned to Purti were categorized as NPA as per banking norms.  The RBI guidelines stipulate that if one loan becomes bad, all the loans given to the promoter group companies have to be categorized as NPA.  The Mehtas who manage business worth 2000 cr did not want their reputation to go for a toss just because Purti has become “sick”, therefore Manish Mehta effected a pretentious separation of his group from Purti by transferring his share holding to the ‘shell’ companies and pledged the shell companies with the banks as security for further loan.  Now this is a secretarial issue and cannot be considered as illegal or even immoral.  Though the above said restructuring in Purti might bind the Mehtas “morally”, Nitin Gadkari has absolutely nothing to be blamed of, neither moral nor legal.

Three facts are incontestable.  One, the investment of 47.34 crore by the Mehtas through 12 of their functioning companies have been accepted by the IT department as legitimate after thorough investigation.  Two, only the legitimate investment was transferred from 12 functioning companies to 14 shell companies (it is as simple as transfer of money from one pocket to another).  Three, the Mehtas are the true owners of the 14 shell companies which have been accepted by the Banks as collateral on behalf of Manish Mehta, which disproves the allegation that the shell companies are fake and ownerless.

Based on facts, any right minded individual will arrive to the logical conclusion that Nitin Gadkari is neither criminally nor morally culpable for investments in Purti.  Had only our media been a little more diligent and investigated the matter with patience, truth would not have been fabricated as it has been; nonetheless enough damage has already been done to malign the BJP and its national president which will ultimately help the Congress to counterattack the BJP when the issue of corruption is raised.  It is worth to point out that the total shareholding of Nitin Gadkari in Purti is less than a ‘lakh of rupees’.       

Let me confess, I am not a fan of Nitin Gadkari or his style of functioning, in my opinion he has a long way to go to even come close to tall leaders like Atal ji / Advani ji who have dedicated their lives in growing the party from day one and has been successful in making the BJP a viable alternative for the Congress.  However Gadkari‘s hands are clean with respect to investments in the Purti group, therefore there is no need for him to resign as the national president of the BJP just because certain sections of the media have made mindless contentions.  

Note: All the facts mentioned above are based on findings by Shri. Gurumurthy that is available in the public domain.  

Jai Hind

A commentary on Union Budget 2012-13

Let me confess, I am not all the excited to write about Budget 2012-13, I am genuinely disappointed as a taxpaying citizen of this country, and I couldn't find a better way to express my disappointments but to write a blog and share my perspective.   Let’s look at the pre budget scenario before actually analyzing the important aspects of this budget, we will in particular discuss in detail the opportunities missed by the Government to set the growth trajectory on track.

These are no normal times to have a normal ‘status quo’ budget, in the last decade, India was considered a ‘low-cost high-growth’ economy and the present Government has been extremely successful in transforming it to a ‘high-cost low-growth’ economy.  For seven successive quarters, which aggregates to 21 months, India's has recorded a steady decline in GDP, from 9.4% in Jan-Mar 2010, to 6.1% in Oct-Dec 2011, and the worst is yet to come, going by the current trend, I expect India to register a sub 7% GDP growth in 2011-12.  Cost of subsidies is set to cross 2.5 lakh crore, borrowings are expected to hit the roof at 5 lakh crore, and fiscal deficit will surpass 5.6% of GDP.  While fiscal deficit of over 5% is tolerable (given the fact that we don’t have a choice) if the economy grows at over 9% and domestic savings rate at 35% of the GDP, alas, both seem a distant dream in the current scenario.

While the Government argues that the reasons for the slowdown are exogenous and driven by global factors, truth is that the crisis indeed is a ‘self made disaster’.  The Govt states that the reason for the worrisome fiscal situation is on account of the economic stimulus announced in 2008, but the fact of the matter is, it is the political stimulus (read sops to woo voters) that accounts for the major chunk of Govt borrowings. 

Now coming to Mr. Pranab Mukherjee, I have great respect for this man, no one can level any personal allegations against him, all leaders across parties have great respect and faith in him, well is that good enough qualification to be the finance minister of a dynamic economy like that of India? Read on. 

Pranab Mukherjee is better known as the troubleshooter for Congress than as the finance minister of India, he is the fire fighter for every ally and crises in the UPA.  He is the Chairman for largest number of EGoMs (Empowered group of Ministers), he is often reckoned by the party high command to solve political differences with its allies and the opposition, well he also ‘happens’ to be the finance minister. 

A complex economy like India which is need of a full time finance minster, ironically has the busiest politician of the UPA for the post.  Every minute and hour he spends on political schema, has an adverse bearing on the economy.  There is always an ongoing clash of interest between Pranab Mukherjee the FM and Pranab Mukherjee the politician, what can Pranabda do? How does he set his priorities?  FM Mukherjee is aware of the fact that there is a pressing need to curb subsidies, but the politician in him doesn't allow him to act in that interest.  Very unfortunate, isn't it.

High cost of money..

High interest rates restrain investment activities in the Economy, but to bring down the interest rates, the Govt has to reduce its borrowings.  The startling fact is, when the UPA came to power, the Govt's borrowings stood at Rs. 200 crore a day, the figure currently stands at a whopping 2,500 crore a day!!  This is freakin alarming and the situation demands bold measures to curb revenue spending, austerity measures which are quite easy to preach are seldom practiced.  The UPA regime hiked the interest rates by 5.25% in less than 18 months, which business can handle doubling of interest rates coupled with slowing growth? 

This budget offered Pranab Mukherjee a wonderful opportunity to leverage the crises and present an agenda for good economics by way of cutting exemptions to corporate sector, to initiate phased withdrawal of subsidies and to raise new stream of revenue.  But what we got from him was quite the opposite; the Finance Minister has indeed missed yet another opportunity to set the trajectory for growth, but what more can we expect from Pranab Mukherjee the cut throat politician?

The NDA Govt had earlier enacted the "The Fiscal Responsibility and Budget Management (FRBM) Act" in order to check the raise in Fiscal deficit, as a result the Fiscal deficit declined to a low of 2.5% of GDP in 2007-08 of which only 41.4% was revenue deficit.  The very next year the fiscal deficit was allowed to go up to 6% of GDP and revenue deficit from 1.1% to 4.5% of GDP.  In percentage terms, the share of revenue deficit in the overall fiscal deficit increased from 41.4% to an alarming 75.2%, it further rose to 80.7% in 2009-10. 

Fiscal deficit can arise either on account of Capital expenditure or Revenue expenditure.  Revenue expenditure in principle is considered to be unproductive in nature, it primarily comprise of consumption expenditure of the economy.  The so-called stimulus package announced by the Govt in the wake of 2008-09 crises, largely accounted for consumption expenditure of the economy which simply cannot be rolled back unlike a Capex focused stimulus package which could be rolled back once the economy is out of crises.  This has also eroded the credibility and moral authority of the Govt to advise the State Govt's to check their respective fiscal deficits. 

The ever-increasing deficit, on the absence of solid policy measures to remove supply side bottlenecks, has only resulted in sky rocketing inflation, especially on essentials, which has forced the RBI to raise interest rates and squeeze liquidity, thereby money becoming an unaffordable commodity for the private sector, and as a result, all planned investments were stalled, so were creation of new jobs.

Hike in Service Tax and Central Excise..

We saw how fiscal deficit and reckless Govt borrowings have fueled inflation.  For nearly three years our economy has been battling inflation and slow growth, high prices of essential commodities have continuously eroded the purchasing power of an average Indian consumer, high inflation and high rates of interest have been the primary cause for decrease in consumption and private investment.  Any reasonable common man would expect the Govt to announce stringent measures to curb inflation in the Budget speech, but look at what the Govt did to address issues pertaining to inflation and growth? It imposed a mighty 20% hike in excise and service tax on goods & services, from 10% to 12%, which will further induce inflationary pressure and thump consumption in the economy which is already battling a sub 7% GDP growth.. Poor economics? Read on.  

In an attempt to pacify the taxpayer, Govt has announced Direct Tax benefits for those who earn and are in a position to pay taxes to the tune of Rs. 4,500 crore, cheap applause..? And on the other hand levies Indirect Tax across board to the tune of Rs. 45,000 crore, which will directly impact every segment of the society, including the poorest of the poor.  You might argue that raising tax revenue is inevitable to bridge the gap between Govt Revenue and Expenditure, now that the taxpayer has done his job by agreeing to pay higher taxes, has the Govt reciprocated by curbing its spending on borrowed money?  The answer is NO, the economic survey states that in 2011-12, the Govt borrowed Rs. 1,397 crore every day; in 2012-13 the Govt will be borrowing Rs. 1,560 crore each day.  Interest payments which accounts for the largest portion in Govt’s revenue expenditure, will shoot to Rs. 3.19 lakh crore from Rs. 2.75 lakh crore!!  The Union Budget 2012-13 can be an ideal case study for “poor politics & poor economics”..

Taxing Derivatives...

We saw how the Govt has completely screwed the country's fiscal situation, now that calls for innovative ways & means to raise Govt revenue and cut unwarranted spending to check the burgeoning fiscal deficit, isn’t it.  The Finance Minister is expected to look at new sources of revenue to fix the plug rather simply tampering with the existing tax rates, like it did with Excise and Service tax. 

After the introduction of service tax by the NDA, there were hardly any innovative measure to raise revenue, tampering with existing rates of service tax, central excise will only increase the inflationary pressure which simply does not solve any purpose.  There is one such area which has huge potential, but seemed to have completely missed the FM’s radar, intentionally or unintentionally is a question which I am not equipped to answer.

While there is Securities Transaction Tax (STT) on all stocks bought and sold by retail investors irrespective of whether they makes profit of loss, why isn't the Govt taxing transactions pertaining to speculative Derivatives traded on Stock, Forex and Commodities market?  The total derivative turnover in stock markets is Rs. 1,92,48,200 crore, in forex markets its Rs. 3,46,00,000 crore, and in commodity markets, it's Rs. 1,37,00,000 crore.  The sum total of the derivatives traded is Rs. 6,75,48,200 crore..!!!    

Tax of 10 paise per Rs. 100 derivative will yield the Govt over Rs. 70,000 crore!!  It doesn't stop here, it is these feckless derivative transactions that distort the value of Rupee more than the actual transactions, and it is derivatives which cause huge swings in commodity prices, the resultant of which is skyrocketing inflation which drags the economy to the vicious cycle of high interest rates, low investment and poor job creation.  Therefore taxing derivative transactions will not only be resourceful in generating additional revenue for the Govt but will also check reckless speculation by traders who trade in derivatives.  I am cent percent sure that a tax of 10 paise on Rs. 100 derivative will not burn the hands of genuine users of Derivatives who use the instrument as a tool to hedge, but this will certainly work against the speculators who make money day in and day out trading derivatives. 

If only our finance minister been a little more imaginative and announced Derivatives tax in his budget speech, it would have opened up additional stream of revenue to the tune of Rs. 70,000 - 80,000 crore, which would have been instrumental in curbing the fiscal deficit, but our beloved Pranabda has again failed to act in the interest of the economy, yet another opportunity missed..?  This is a move which no ally would dare to contest on the floor of the house, Mamata inclusive.

On the whole, the finance minister and the Govt have collectively failed to capitalize a wonderful opportunity, both to raise new stream of revenue as well as to curb discretionary Govt spending on borrowed money.  On the contrary, it has taxed consumption by hiking the indirect taxes, which will invariably kill growth and fuel inflation.  If I were to sum up the Union Budget 2012-13, it is an “Opportunity Lost” by the finance minister to have set the growth trajectory back on track.  Is anyone listening..?

Jai Hind