From Ramlila Maidan to Zuccotti Park

8 OCTOBER 2011

People movements are demonstrating their power. Anna Hazare demonstrated the popularity of his fight against unbridled corruption at the Ramlila Grounds, in New Delhi, compelling the Government to take his demands for a stronger Lokpal bill with more serious intent than it had been doing in the decade earlier. Move over to Egypt, and the protest at Tahrir Square brought down a 30 year reign of Hosni Mubarak, purely on the back of people power. ---------------------------------------------------------- Free Video ----------------------------------------------------------

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Move further west and popular protest by those who claim to be the 99% majority unheeded by Government whose policies, they say, favour the top 1%, is being demonstrated in Zuccotti Park, in New York. They call themselves 'Occupy Wall Street' movement.

Well, the Tahrir Square popular protest succeeded in bringing down the Mubarak regime, although the jury is still out whether, as of now, conditions in Egypt have improved. The Anna Hazare movement has moved on to the next stage, with him making a public appeal not to vote for the Congress party in the next elections, as they have not yet taken up the Lokpal Bill with the seriousness he feels it deserves. One does not know how the endgame will be played out for the 'Occupy Wall Street' protest, but, according to Bloomberg, it may affect the chances of Republican candidate Mitt Romney which may not be a bad thing.

How successful the protests would turn out to be would depend on how committed the protestors are to affect change, but the pressure such protests put on venal political leaders, globally, to clean up their acts, is welcome.

Consider the Anna Hazare movement to have a stronger Lokpal, or ombudsman, with powers to investigate cases of corruption against public officials. Our Government has been pussyfooting on the issue and has even refused to request Governments, such as Switzerland, who are willing to provide information if requested, to do so! The only explanation is that there are people in Government, or friends of theirs, with such accounts. Now both UK and Germany have shown the way, by striking deals with the Swiss, which allow the names to be kept confidential, but the money to be taxed.

Details of these deals are now being revealed. Swiss banks would tax the principal amounts lying with them, at rates varying between 19 to 34%, depending on the amount of time the money is lying there, and then tax the income on the balance. The UK Government is expected to get upto 5 billion pounds sterling in the first year. Why does our Government not do the same? The money could then be used to provide food security for the poor, without having to enter into time wasting controversies about where the poverty line is.

In a way, the Anna Hazare movement, or the Tahrir Square movement or the Zuccotti Park 'Occupy Wall Street' one are all pointing to the protest by the majority against Governments which create policies favouring an elite few. This can, and does, affect the economy.

The India growth story is taking a hit because of poor governance.

SIAM (Society of Indian Automobile Manufacturers) has, e.g. scaled down forecast of domestic car sales growth from 16-18%, at the start of the year, to 6-8%. The Manesar plant of Maruti Suzuki is once again on strike, after a settlement reached only a week ago, on the grounds that casual labour has not been re-employed; the management promises to do so, as they scale up production.

Direct tax collection upto Sep is up a mere 2.2%, and indirect tax collections for customs and excise are also tepid; only service tax collection is good. But to create jobs for the millions of youth entering the job market, we would need to have strong growth of industry. The Ministry of Commerce & Industry is trying to establish a few special manufacturing zones, which would have policies to facilitate growth of manufacture, but is running into trouble by the Labour ministry (when they really ought to be pleased if more jobs are being provided).

The reduced tax collection and unabated public expenditure, makes fiscal management a challenging task. The Government has not been able, for example, to recapitalise banks. It will not let go of majority control and will not fund an expansion of capital either.

This is why Moody's downgraded, last week, India's largest bank, the State Bank of India, causing its stock to hit a 52 week low. SBI now has a rating below that of private sector banks such as ICICI Bank, HDFC Bank and Axis Bank.

In fact, Ajay Shah believes that it is the banks who should generate enough surpluses to fund their own growth.

Thus it is time the Government think of reducing its holding in the unnecessarily larger than required number of public sector banks it continues to hold a majority in, and allow private sector managements to use the capital more efficiently. Look at the Ajay Shah blog and compare the performance of HDFC Bank and Bank of Baroda, one of the better run PSU banks.

In a similar manner to the public protests, institutional investors have successfully protested the use of corporate resources of the Avantha group's Crompton Greaves, in purchase of an aircraft for Rs 270 crores. Gautam Thappar may greave for the loss of the aircraft, but institutional shareholders have compelled the firm to sell it.

Rightly so.

The protest by T Rowe Price, which holds 26% in UTI AMC (and has the right to approve management changes) has led to the splitting of the role of Chairman & Managing Director. The Government (Finance Ministry) choice of Jitesh Khosla, will be the Chairman and it is likely that Ashu Sayash (of Fidelity) would be the CEO.

The market rallied on Friday, when the sensex went up a whopping 440 points. Yet the BSE-Sensex ended the week down 222, at 16,232. The NSE-Nifty fell 55 points over the week, to close at 4888.

The rally could take the sensex up to 16500-600 levels, where it would hit its head against resistance and stall. There is no expected good news on the horizon which could help propel it further. Domestically, our politicians of all parties are emulating Nero and fiddling whilst India burns. Globally they are doing the same whilst Greece burns.

Perhaps, if European leaders manage to arrive at a restructuring of Greek loans (they go bankrupt in less than a month otherwise), there may be a relief rally which could take the sensex above 16,600, though not too much ahead. For Moody's and Fitch have downgraded Italy and Spain.

So if Europe doesn't suffer indigestion from moussaka, it may do so from pasta or from paella! Prudence should be exercised.

J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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1 Responses to "From Ramlila Maidan to Zuccotti Park"

Dilip Kulkarni

Oct 8, 2011

Activism causes a change in the governments is not material or is of no consequence to the general 99 % non-elites, but whether it causes a change in governance either in public administration arena or in the corporate arena, or both, is the matter of essence to them. Governments or corporates, in whatever format they operate, are always the establishments who are deeply entrenched and can react in a non-Newton manner ( not eqaul and opposite reaction, but more than double and multi-pronged ) to the forces of activism. I forsee that stage in all the situations you have mentioned, and this may cause periods of anarchy in those fields ( eg post-JP movement ). In India, that is likely to happen soon, unless the powers accept and understand the public pressure and effect changes in their behaviour.

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