US approaches fiscal cliff; India over moral cliff - Straight from the Hip by J Mulraj
Investing in India - Straight from the Hip by J Mulraj
US approaches fiscal cliff; India over moral cliff A  A  A

29 DECEMBER 2012

The obdurate and warring political parties in the US have two days to strike a deal and avoid the fiscal cliff which is reached Dec 31, after which certain tax exemptions are compulsorily withdrawn and some Government expenditure is compulsorily curtailed. These are expected to result in a 0.5% reduction in GDP growth, which is faltering. President Obama has called a meeting at the White House; whether they strike a deal (in which case global markets would shoot up in January when markets open) or they fail to (in which case markets would droop).

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Politicians can be pretty crass headed and obdurate everywhere, and American ones are no exception, so which way this goes is anybody's guess.

In India, besides being crass headed and obdurate, the politicians have also thrown away their moral compass. They refused to meet a demonstration of very angry protestors, protesting the inhumanly brutal rape of a medical student on a Delhi bus (she later died) and thus allow the protestors to verbally vent their anger, as is their right in a participatory democracy. This was utter foolishness and a moral slide down from the times when Mahatma Gandhi would, without any security whatsoever, personally walk into angry crowds of protestors to pacify them.

Sadly, the politicians of today consider themselves a class apart, and beyond the rule of law. Forget about mingling with the crowd, bereft of machine gun toting security, they do not even consider talking to them to hear out the grievances and soothe their souls. They surround themselves, instead, with police protection, one of the reasons why there are fewer policemen for the sort of surveillance to prevent the occurance of such heinous crimes.

The pace of out judicial system is so slow that it does not act as a deterrence. It takes such a brutual incidence, and the swell of public protest, for thick skinned politicians to contemplate methods of speeding up the judicial process. The number of unfilled vacancies amongst judges is perhaps a third; a shameful commentary on the low priority this is accorded by the political class.

Here's an idea for deterrence.

Pass a law making it obligatory to those found guilty of such violent rape to recompense society for their crime, by donating their body parts. An eye. Or a kidney. Or anything that can be transplanted. The fear of having lead the rest of their lives with a vital organ missing ought to make them pause, and it would be of use to some needy person in society.

One does not envisage that any political party would oppose such a suggestion. So if politicians really want to act, and not merely give inane promises, as the Prime Minister has done, of doing so, why don't they consider such a suggestion?

The fall over the moral cliff by our politicians also impacts, of course, the governance of the country and of the economy. For they interfere with the working of the law enforcement agencies using the weapons of transfer (for those who do not yield) and promotions (for those who do). This further subverts justice.

They also get averse to commonsensical decisions. Examples abound.

The foolishness of subsidising petro product pricing continues, yet. The Government has decided to increase diesel prices by a mere Rs 1/litre every month, and that of kerosene at an even more glacial pace of Rs 10/litre over two years. They are concerned about rising inflation should diesel prices rise faster, which impacts transporters costs. What they are missing is that the current rate of inflation is an artificial one, subsidised as it is for petro products. The sooner we get out of such a make believe world, the better.

Making decisions on such subsidies/giveaways is easy but getting out of them is politically difficult. It would thus be a great idea for future subsidy schemes to come with an expiry date, which would make it politically easier to end them for fiscally prudent reasons.

It would also be a great idea for political parties to be made responsible for bearing say, 10%, of the cost of such subsidies, from the party coffers, in proportion of the voting pattern.

Take the case of subsidy on urea, which continues, even whilst that of other fertilisers has been done away with. Consequently, there is overuse of subsidised urea, and underuse of potassic and phosphatic fertilisers, which ends up destroying the soil quality and hurting farmers, instead of helping them. Yet, a decade ago, when the then Finance Miniter Yashwant Sinha tried to raise urea prices by Rs 1/kg, he was booed down by the Congress, then in opposition, and had to retract the proposal. There is now a serious shortage of urea, which India needs to import. The Government is now offering an assured return to companies willing to invest in urea plants. Thus investment is not market driven, but policy driven, based on guaranteed returns. This must necessarily result in a controversy at a future date, when the guarantees can't be met.

This is what has happened in the Oil & Gas sector. When the first round of NELP (new exploration and licensing policy) was held, to attract investment into this risky business, the Government introduced a production sharing contract under which the capex cost incurred by the operators of the blocks was recovered some 2 times over, up until which time, the share of revenue accruing to the operator was higher.

It was about a decade later that the Government awoke to the possibility (correction: publicly awoke to the possibility) that such an assurance of recovering capex, and then some, could lead to gold plating of costs. The PMs Economic Advisory Committee, under the Chairmanship of Mr Rangarajan, now wants to alter the PSC to avoid an assurance on capex, and to lay down revenue shares ab initio.

The simplest methods are the best. The Government ought to be able to auction oil and gas blocks on the basis, simply, of the % of revenue the operator is willing to pass on to the Government, with the operator bearing all costs of exploration and extraction.

Ultimately commonsense prevails. The tragedy is that it takes policy makers so long to recognise common sense and agree to it.

Take for example IKEA, the furniture maker that operates in 44 countries, with 336 stores employing 131,000 employees. Initially, the Government sought to impose conditions, disallowing IKEA from establishing half its 29 broad categories, including coffee shops. When IKEA gave a 'take it or leave it' all or nothing offer, the Government relented and it is now permitted to set up the stores as it wishes to.

Similarly, the environment ministry has eased norms to allow for more coal to be produced, but it took a crisis in the form of a nationwide blackout, to reach that decision.

The world of exchanges is undergoing transformation. Last week the 12 year old modern, electronic exchange, ICE, took over the 200+ year old NYSE in an $8.2b. deal. Though the $33 price was at a premium to market price, it was below the peak price of $ 108 in Nov 2007, pre financial meltdown. A year ago the NYSE tried to do a $ 11b. transaction with Deutsche Bourse, of Germany, but it was not accepted by regulators.

The Hong Kong Stock Exchange is the most valued, at $ 19.5b, followed by the Deutsche Bourse, at $ 11.8b. The valuation of the Bombay Stock Exchange which is over 130 years old, is a mere $ 0.5b. It appears that newer, technology driven exchanges, are in favour and are preferred by investors. India's latest exchange, which got recognition last week, is MCX-SX which is technology driven.

Last week the BSE-Sensex gained 202 points, to end at 19,444, and the NSE-Nifty added 23 to close at 5,870.

Technically, the market looks like it is headed, backed by Foreign Institutional Investors (FIIs) support, towards the 20,500-21,000 resistance level. This could happen early January, especially if a deal is reached on the fiscal cliff.

Perhaps it may be a good idea to get a bit lighter at those levels.

Wish all my readers a happy New Year.

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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3 Responses to "US approaches fiscal cliff; India over moral cliff"
Shishir Lall
Jan 1, 2013
Thank you & wish you a very happy & prosperous new year too Mr Mulraj. I enjoy reading your very informative page everyday. Agree with your thought process most of the time. Like 
Dec 31, 2012
Regarding your suggestion about taking a body part of a criminal,the Chinese have gone a step further.
They simply shoot a criminal in the head and harvest ALL THE SALVAGEABLE parts-eyes,liver,kidneys heart etc.and SELL them to wealthy foreigners in state run hospitals.
This I know for a fact as a friend from an ASEAN nation got a kidney transplant for his mother done at a hospital in Mainland China and the secret was revealed by him.
So,the Chinese kill many birds with one stone.
Oh but we are a Democracy--blah blah blah....
Dec 30, 2012
While you have suggested mutiliation of body part of the rapist as retribution,a better way is caning as practised in Singapore today (as well as in India during British raj). Pls read the article below 'Wield the rod, stem the rot' by Lakshmi Narayan:
It was a Sunday morning, just a couple of weeks after we had relocated to Singa­pore. I was doing nothing in particular, as I moseyed down Sera­n­g­oon Road, the Indian quarter. My attention was drawn towards a bunch of girls dressed in their Sunday best. I did not know then that these smartly-turned-out wo­men were Filipina maids, out having fun on their weekly day off.

Suddenly I heard one of them scream, “He touched my breast.” I turned around to see a swaggering man — obviously Indian — leering at them. The next thing I knew, the girl had caught him by the collar and was shaking him angrily, shouting, “Why did you do that?” Even as he gave some reply full of bravado, another dusky man in what seemed like a deep blue safari suit stepped in. “What’s happening?” he asked gruffly. Seeing him, the stuffing went out of the first man as he collapsed like a heap of rubbish at the girl’s feet. “Forgive me, sister. I’m sorry. I won’t do it again,” he whimpered. This was when I realised the second man was a police officer. “He touched your breast, eh?” he asked, as he expertly handcuffed the quivering man.

There was ample reason for the man to shiver in fright. In Singapore, forget rape, even a case of molestation draws justice that is swift and merciless. A few strokes of the cane on the rump. This may seem rather mild as far as punishment goes. But it is meant to put the fear of god in the culprit for life. As one recipient described the unbearable pain he felt, “If there’s a word stronger than excruciating, this is it!”

Caning — introduced during the British era and continued to this day — is a legally accepted form of discipline in Singapore. The whole process is gone through meticulously with cold-blooded efficiency. Only a male aged between 18 and 50 is eligible, after he’s been certified fit by a medical officer. Although the maximum number of strokes to be administered at a time cannot exceed 24, I have seldom read of a judge handing down more than six to a molester.

A rattan cane four feet long and half-an-inch thick is soaked in water beforehand to make it more flexible and effective. And, some say, more agonising. The guilty party is made to strip and secured to a caning trestle. Protective padding is placed on his lower back to shield the spine and kidneys. The caning is always on the posterior because this area has the most fat deposits in the body and will not damage vital organs.

The cane is then brought down with full force on the bare buttocks at 15-second intervals. They say the torment is so intense that many faint. It takes between one week and a month for the wounds to heal, leaving behind indelible white marks that will remind the reprobate to forever look at a woman only as a mother, a sister or a daughter!

Sad to say, most of the sexual transgressers in Singapore seem to be of Indian origin. When I was working for the Straits Times, I remember one such case at our daily morning meeting that the reporter read out. The miscreant was travelling by bus one morning when he espied a woman — a complete stranger! — from the window. “I saw her and wanted to feel her breasts. So I got off the bus, stood next to her and fondled her,” he admitted nonchalantly. I cannot remember how many strokes of the cane he was administered, but, rest assured, he didn’t have these urges again!

In my book Bonsai Kitten set in Singapore, I have dealt with the plight of the maid Saroja undergoing maltreatment at the hands of her husband Pakkiri. One instance is when he places a hot iron on her private parts and she blacks out. Let me confess here that with all the imagination at my bidding, I could not have conceived of such a sick scenario on my own. It was related to me by my temporary maid with chilling detail. I felt compelled to incorporate it into the story because it is frightening that such savage acts are accepted submissively and unquestioningly by women as their due.

Nearer home, we are all sickened by the mindless carnage being inflicted on women, be it acid throwing by disgruntled wannabe boyfriends, dowry deaths caused by greedy in-laws, or gangrape. One can safely say that in this country, at least 90 per cent of women have been subjected to sexual abuse of some kind.

Our films actively encourage eve-teasing. Our movies go one step further in enforcing the age-old bias that the woman is “asking for it” either because she wears Western apparel, or because she has told off a man or goes out on her own. I recently saw a runaway Tamil hit where a woman tries to chide a man and she’s told, “Put your finger away. You cannot wag your finger at a man. You are only a woman.” When she gazes angrily at him, he threatens her with, “Look down. Don’t you know a woman is not fit to make eye contact with a man?” How do the censors pass such dangerously degrading rubbish?

As for the votaries of the she-asked-for-it school of thought — which also includes women politicians — I would like to tell them that in Singapore, women not only wear the skimpiest of outfits in public, but also go to restaurants, nightclubs, bars and movies alone and return home late at night without fear of being attacked. This, I feel, is not just because of stringent laws but greatly because of mindset. The average Chinese and Malay man does not leer at women or pass dirty remarks and, most important, does not undress them with his eyes. Which is exactly what we do in our country — a country espousing Devi Maa, the Mother Goddess!

The latest heinous crime to hit the headlines is of the gangrape victim in Delhi who is fighting for her life. Our collective national psyche is screaming out for castration and hanging as a means to stop this senseless brutality. In India, our men first practise their inhuman sadism at home. Then they’re fully equipped to try their luck with strangers. We are all tired of saying we should sensitise them to women’s issues. But let’s face it. It’s not going to happen for the next 100 years. The rot is too deeply ingrained. What then is the answer, since civilised society will not allow us to impale rapists, sear acid throwers or incinerate bride burners? The only effective deterrent is something that will make such people swear to themselves they’ll never do it again. Let’s organise fast-track courts in every city first. Then introduce Singapore-style caning for molesters and those who indulge in domestic violence.

Amnesty International has condemned judicial caning as cruel, inhuman and degrading. But do these evildoers deserve to be classified as humans?

The writer is the author of Bonsai Kitten
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