Leveraging upon a mix of anecdotal evidence and hard statistics, it is relatively straightforward to prove that Bihar has witnessed a sustained mass exodus of its youth to other states, in their search for better jobs and/or educational opportunities. However, most of the people hailing from Bihar also claim that the biggest boon of Nitish Kumar’s multiple reigns as the CM has been the marked improvement that he has effected in the state’s law & order situation - the reason which even earned him the moniker “Sushasan Babu”. Further, one could conduct any perception poll and it would eventually lead to the end conclusion that Laloo Prasad Yadav is widely perceived to be much more corrupt than Nitish Kumar, especially owing to the infamous Fodder Scam allegations. By extension, common sense would dictate that any regime with Laloo Yadav / Rabri Devi at the helm would more often than not be as lawless (if not more) than a regime which has Nitish calling the shots. I decided to prove/disprove this hypothesis because the kind of reportage emerging from Bihar could never let me reconcile, without a pinch of circumspection, what I read with what I have been hearing. To perform this simplistic data-driven exercise, I have used the following:

1) Crime statistics of Bihar - http://biharpolice.bih.nic.in/menuhome/crime-in-bihar.html

2) Bihar’s census - http://www.populationu.com/in/bihar-population(I have pro-rated the long run growth trends to perform analyses along gender-neutral and gender-specific axes)

Basis a rough analysis of the census figures in Bihar, coupled with some of the unofficial recent population estimates from a bevy of newspaper reports, it becomes clear that Bihar has experienced a sustained long term average growth rate of 2.1 – 2.3% in population over the past 20 years. In other words, for ease of analysis, one could assume Bihar’s population trajectory to have largely adhered to a trajectory representing linear growth. Given this precept, I chose to analyze 5 different buckets of crime (and a wider category of cognizable offences) by benchmarking its trajectory against the same for population (i.e. time-series correlation (TC)) to arrive at some simplistic inferences – it intuitively follows that the lower the TC, the better it is. This bundle of statistics is further reinforced by the compounded annual growth rates for each category. The periods over which the analyses have been conducted are:

1) 2001 – 2005 (Laloo / Rabri’s last reign)
2) 2006 – 2010 (Nitish Kumar’s first reign)
3) 2011-2015 (Nitish Kumar’s second reign; with Jitin Ram Majhi stepping in for a year towards the fag end)
4) 2016-2020 (Nitish Kumar’s third reign; 2016 – mid 2017 [RJD + JDU], mid 2017 – present [JDU + BJP])
5) Last 4 years (2017-2020 / JDU + BJP)

The broad trends that emerged from a gender aggregated analysis tie off reasonably well with respect to those emerging from the lens of a gender-skewed analysis. Hence, I have stuck to the former in presenting these statistics here. Basis the tabular data, these are some of the insights I could derive and/or the follow-up questions I have:

1) If you were to consider any discrete 5 year tenure, the TC for 2001-2005 was the lowest in the last 2 decades. Further, if one were to do a cross-sectional average of the TCs across categories, the same period was yet again the lowest over the past 2 decades. Was this just a function of superior law and order? Or, were the crime incidents systematically under-reported during the RJD regime? Much of the anecdotal evidence that I have derived from books and various interviews compels me to zero in on the latter, despite not being equipped with any hard evidence to back the same.

2) Most stakeholders subscribe to the viewpoint that Nitish Kumar’s first reign was his best showing as far as his governance skills are concerned. However, the headline TC stats summarily disprove this popular myth. Kudos are due to Nitish though for emphasizing upon reducing the cases of crimes against women – this was surprisingly the only time period in my analysis window where the incidence of such cases underwent a contraction.

3) If one were entrusted with selecting which phase was the absolute worst for law and order in Bihar, then Nitish Kumar’s second regime takes the cake. Barring murder, every other category bore witness to the worst imaginable figures, be they analysed through the lens of TC or CAGR. The data here ties off with the ground reality of the times though. Nitish Kumar was then actively campaigning to become NDA’s PM candidate and he aspired to beat Narendra Modi to the race, so much so that he even supported Arvind Kejriwal against Modi for the Varanasi seat in 2014’s Lok Sabha elections.

4) Basis anecdotal evidence, I know for a fact that a majority of the riots experienced in Bihar are communal in nature. It isn’t surprising that the same category had undergone a steady period of deceleration under the Laloo Yadav / Rabri Devi regime, and almost immediately spiked up after Nitish Kumar’s regime commenced, therein peaking to nigh scary figures in 2011-2015. This data point helps embellish the RJD’s secular credentials, which I personally feel is their biggest USP.

5) There’s one interesting conundrum regarding the TC & CAGR buckets for Nitish Kumar’s latest regime (2016 – 2020) and the last 4 years (2017-2020), where the two sets seem qua irreconcilable. In other words, 2016-2017 was akin to a watershed year in Bihar politics wherein the rates of crime across every conceivable bucket experienced a rapid surge. The large base at the end of the 2016-2017 fiscal ensured that the subsequent years underwent a consolidation of sorts under the leadership of Nitish Kumar – Sushil Modi, a duo that has jointly governed Bihar for more than 8 years prior to their latest jugalbandi. Was Tejasvi Yadav such a rabid bull in the china shop that he precipitated a crisis in Bihar’s law and order situation during the few months he served as Deputy Chief Minister (with his father implicitly calling the shots)? Or, can we attribute this surge to the BJP’s mischief as a part of their bid to gun for power at all costs? My reading of the current dispensation of the BJP compels me to weigh in on the latter. The fact that the most severe category of crimes (murders) has seen a steady growth during the same period helps reinforce this thesis as well.

Given this evidence, if I were asked to confirm or negate whether Nitish Kumar deserves the moniker “Sushasan Sahab”, then my answer would be a resounding NO. Nitish Kumar is a wily political creature endowed with tenuous claims to upholding moral values, a feature which he has corroborated time and again by having been bed-fellows with every actor across the political spectrum from the extreme Left to the extreme Right. His carefully crafted image too is largely a function of robust marketing and impassioned story-telling. Thus, the fact that most opinion polls now clearly read out the voters’ growing sense of disaffection with him shouldn’t be surprising.

I fashion myself as a liberal and I have reiterated my belief in the power of free markets time & again. Despite that outright disclaimer, there are a few unaddressed issues that make me circumspect about the agricultural bills that were intended to liberalise every component of the agri supply chains running in this country. In this context, it would be prudent to understand in a nutshell the broad contours of the ecosystem. The APMC linked legislation isn’t the rave revelation that it is being widely touted as - this has been work-in-progress for close to two decades now. Further, the regulation of APMCs is a state subject. What the Centre has passed is an APMC outline bill, which will serve as a quasi "directive principle" upon which subsequent state legislations are expected to be premised (both agriculture and agricultural marketing are state subjects).

1. Whenever any consultant is employed to do a SWOT analysis of a new policy, the first resort would invariably be the study of the impact of such a policy in a similar ecosystem. Our states are at different stages of having liberalized or having completely done away with the APMC Act. Take Bihar for example. Bihar repealed the original APMC Act in 2006. The experience thereafter can be described as anything but salubrious to the health of its farmers. While the core infrastructure going awry has more to do with political incentives, several unregulated middlemen have mushroomed over the years and they essentially partake in activities amounting to rent-seeking from both the traders & farmers.
2. The APMCs have been endlessly vilified for years due to its statist mould. This has been used as a ruse to not invest enough to bolster the infrastructure that a typical marginalized farmer has on offer at the marketplace (yes, this can mean something as simple as a weighing scale). Prof Himanshu of JNU writes in details on the very same issue here.
3. While the desire to unify the Nation as one monolithic marketplace is noble per se, we must understand the means that the government wishes to use for the same, i.e. e-NAM. Despite being launched in 2016, the response to e-NAM has been quite tepid - the extent of penetration is still short of 20%. Among the 20% who have registered, one can impute basis anecdotal evidence that around 30-40% actually derive tangible benefits from the electronic marketplace. This is a again a perfect example of India formulating policy by blindly basing it off a similar policy in a first world country (without according due importance to our operating-level realities). The exact figures, as enunciated by our Hon’ble Agri Minister Narendra Tomar in the Rajya Sabha today are detailed here.
4. We’d all be in consensus upon the fact that any policy that wants to truly accrue benefits to farmers using unfettered markets as a policy lever should strive to provision unfettered markets, both in letter & spirit. Or, in other words, farmers should be able to get the best price for their produce without fear of facing prosecution for having committed the crime of "hoarding" or any other form of coercion thereof. Right? The recent ban on the export of onions (due to a surge in its price) summarily put paid to any hopes I had towards that end. Given the natural predilection of the State has always been to resort to statism, we can’t hope to reap a sustainable slew of dividends unless our legislators are willing to jettison even the minutest centralising tendency with due alacrity.
5. Any free market’s efficiency is linked to how frictionless it is. Given our past track record, I really doubt if the market will remain as "efficient" as envisaged when crony capitalism enters the game full throttle. On the flipside, the benefits of this will accrue more to farmers endowed with a certain bare minimum scale. It is unrealistic to expect very small / marginalized farmers to market their produce to end customers directly. I’m afraid that a new kind of implicit master - slave agreement will emerge between scale & smaller farmers eventually. We’d probably need a full-blown Operation Barga 2.0 equivalent to fix this malaise if it were to reach that stage. You can read about Operation Barga, analysed through an economic lens in my paper.
6. I’m not sure how a Minimum Support Price will co-exist in a framework ostensibly steeped in free market economics. Either one has to give. I’m guessing MSPs will eventually be phased out. They are just being kept for the time being to contain the extent of backlash.

I'm not trying to glorify middlemen in the very least. After all, an entire business (Ninja Cart) hit platinum with an obliteration of the middle-man serving as their key business proposition. I'm just asking if our priorities are once again grossly misplaced? We seem to be harping on about supply side reforms a bit more frequently than required. Farmer distress won't subside unless we hit the root cause, i. e. pump up demand. We shall be at a loss perpetually till the "animal spirits" are duly stoked!

🙂

Acronyms are paradoxical creatures. On one hand, they facilitate succinct communication without enforcing the need for a concomitant rationing of ideas. On the other, they proffer the potential to be misused as grandiose jargon albeit to little effect. Central to the pantheon of such terms is VUCA, a creation of the US Army College, which is bandied about ad nauseum in business circles. It is ironic that the multiple contemporaneous crises that we have on our hands now make VUCA sound like a euphemism; especially when it is used to denote the things that could go wrong in a potential worst case scenario. The margin for optimism now is understandably quite high; especially when aggregated over multiple sentient beings in a society. Given that the COVID-19 pandemic is largely a function of incomplete knowledge, an effective response ought to be characterized by a system thinking approach underscored by openness, the intrepid desire to innovate, enabled by an environment conducive to constructive criticism. This generalized framework can be used as an Occam’s Razor to think about some of the immediate changes that this crisis warrants. I shall use this article as a medium to opine on some of these changes with an India-centric view. I strive to offer balanced, practicable insights and I hope the ivory towers do not find the underlying theses objectionable.

Quite expectedly, the efficiency of our public systems and India’s economic response to the crisis constitute the dyad around which most of the macroscopic debates of the times have crystallized. For the ease of analysis, I shall subdivide the former into three constituent pillars, viz climate change, healthcare infrastructure and urban infrastructure. It has been established beyond doubt that climate change is a bane that we have gradually engendered in our society by virtue of our myopic understanding of the true import of “well-being”. Kicking the can down the road is not acceptable anymore – a swift rebalancing of policy objectives with a view towards incentivizing sustainability is imperative. This can be achieved by a policy suite meant to facilitate clean energy. It would be prudent to seek inspiration from countries like South Korea, who dovetailed a significant overhaul of their energy cortege to a healthcare response in the wake of SARS/MERS. While a commitment to use clean energy looks good on paper, India’s crisis managers should ensure that this objective is duly institutionalized with a long-term orientation. The quality of public healthcare facilities is another avenue where India has been found to be lacking and the reasons for it are endemic to how a democracy works.

Infrastructure spending, when analyzed in terms of its bang-for-buck with respect to electoral gains, necessarily makes investing in hard infrastructure (highways, stations, airports, et al) seem more lucrative than healthcare. India’s ignominious healthcare deficit is further exacerbated by the contrasting degree of access to healthcare facilities that different states witness. For example, while West Bengal ranks first among the country’s more populous states with an average of 2.25 government hospitals beds per thousand citizens, the number in Bihar is a measly 0.11. The Ayushman Bharat scheme, though well-intentioned, has been found to be grossly inadequate in terms of its implementation by most states. One would hope that the post-pandemic world would witness a reduction in the healthcare deficit thanks to revision in the political class’s understanding of incentives. To understand how to ameliorate urban infrastructure / city planning, it would be instructive to map the density of population in each region with how its COVID curve has panned out. One can use this lens to rationalize not only the concentration of COVID hotspots but also the resultant migrant crisis, which is an indelible blot on our country’s collective conscience. A utopian policy brief would prescribe an ad lib mixture of the usual suspects: defensive design, better infrastructure, and mitigation of informal settlements (or, in layman’s terms, fewer Dharavis). I would, however, like to take a stab at the root cause of this humanitarian crisis, and therein segue into the economic implications of the same.

Describing the development of opportunities in India, on a spatial axis, as disparate would not be hyperbolic; select states like Maharashtra and Karnataka have disproportionately higher opportunities. In addition to the inter-state deviation, the intra-state inequity is equally startling. The recent Amphan crisis exposed another inadequately addressed dimension of this problem – a complete resettlement of Sunderbans’s natives is grossly circumscribed by the limited transferability of their skills. India’s growth model thus far has been largely driven by low cost labor, wherein these low wages ultimately translate into a denial of agency to the bottom-of-the-pyramid. It is ironic that these individuals can make or break a politician’s electoral fortunes. Towards this end, a preliminary understanding of Realpolitik would compel any sane individual to anticipate that the Indian state’s economic response to the ongoing crisis would place this demographic segment at its cynosure. Further, given the current dispensation’s original ideological stand wherein they dissed “maximum government” in no uncertain terms, one would have expected a much decentralized approach towards the disbursal of the said “largesse”, owing to India’s variegated regional preferences. The actual economic package, announced over several bite-sized sessions to aid comprehension perhaps, amounted to just the reverse in its intent. What adds insult to injury is the fact that while the package was widely advertised to amount to 10% of India’s GDP, most generous brokerage houses pegged the actual outlay to 2% of our GDP at best. For brevity’s sake, I choose not to belabor upon the minutiae of the package here.

Many quarters have alleged that the said stimulus seems especially disheartening when one compares it to the stimulus doled out by the USA. However, supposed bijections with the world’s largest economy would seldom yield actionable insights for an emerging economy like India due to three primary reasons. First, one must take cognizance of the de facto gigantic fiscal space that the USA is endowed with owing to the dollar’s status as the world’s preferred reserve currency. Second, a bespoke form of financing that entails the RBI monetizing a ghastly deficit by printing rupees would set a terrible precedent in signaling India’s enduring commitment to macroeconomic stability. Third, the relatively large amount of public debt that sits on India’s balance sheet effectively restricts the state’s options with regard to maintaining the much-requited tradeoff between making tough decisions and not straying from the path of fiscal stability. The only choice that India has is to pivot and focus on a limited set of sectors (health, social safety, et al) to achieve maximum impact. In other areas, the Indian state should limit its presence and depend upon the efficiency of unfettered markets to provision the best solutions to the intended beneficiaries. At this juncture, I fear that I risk incurring the ire of readers who are aware that markets are only perfect in theory; arbitrage opportunities regularly pop up in real life. A further discussion along these lines would entail that we transition into a brief discussion pertaining to some of the pressing short/medium-term microscopic issues that we must contend with.

The economic impact of the ongoing pandemic on the Indian economy will be substantial – there are no two ways about it. While the 2008 GFC was primarily driven by unhinged speculation via exotic financial instruments, we are set to face a demand-driven real economy recession this time around. The effects of the same can already be seen on the ground: rampant wage cuts, job losses, etc. The gloom is so entrenched that some analysts estimate that a proportion as high as one-third of the Indian MSMEs could be forced to shut shop. There are two potential trajectories that a firm could take hereon. For a firm whose business model has not been invalidated by the ongoing pandemic, being nimble-footed is par for course to weather out the storm. For those whose business model ceases to remain viable in the foreseeable future, a search for new pockets of opportunity presented by the pandemic should serve as their nectare vitae (at least, in the short term). However, given the circumstances, it would not be prudent to let good money chase bad money; bankruptcies should be precipitated wherever that outcome seems inevitable. This should occur in tandem with a more buffed up Insolvency & Bankruptcy Code to deal with the envisaged slew of cases. In the medium term, I expect civil society to play a bigger role as stakeholders in big corporations as a means to foster sustainable business practices. This change should be stewarded gradually by increase the contribution of ESG factors to corporate performance measurement metrics. The predicament of those constituting the other side of the coin, i.e. workers, is more precarious, especially for those with little/no savings to fall back on. The only silver lining in this spate of job losses and sticky wage cuts is that it would expedite a reimagining of how one perceives a job in the Indian context. More specifically, a job would mutate from being a skewed contract wherein an employer has monopoly rights over an employee’s time to a more equitable agreement wherein the rights are only limited to an employee’s output, with an unambiguous set of pre-defined quality filters. Further, the culture of “work from home”, a construct that has been in vogue in the IT industry for a while, will hopefully enjoy wider patronage as an alternative to working out of office even the threat of the pandemic subsides. These factors, in conjunction, would not only minimize job-switching costs in the new post-pandemic world but also enable individuals to get side hustles in place that could serve as fall-back options if the need ever were to arise.

About a month ago, the Financial Times published an article which advocated radical reforms intended to reverse the extant policy direction globally. Further, the article exhorted every government world over to accept a more active role in the economy and therein prioritize a refashioning of public services as investments (and not merely liabilities). This was nothing short of a watershed moment in the history of global capitalism. For the uninitiated, FT’s unflinching ideological espousal of free market capitalism has been one of the defining features of the newspaper since its inception. Ironically, this clamor might strike a discordant chord with most Indians given that the presence of a deep-seated behemoth-like State has been an abiding feature of our Nation’s post-Independence history thus far. While this was feature was necessary perhaps in the initial years as a temporary feature to define the terms of engagement post-Independence, many pundits concede that it has now morphed into a permanent bug that has overstayed its welcome. The simmering disaffection evoked by the same often compels cynics to sardonically joke that our Nation’s achievements are despite the State, and not by virtue of it. Six years ago, I was very hopeful that statism would die a natural death whereby the State would transcend to the background and limit its role to that of an enabler. I need not clarify here that my hopes have been summarily dashed. This facet of our dysfunctional democracy is further aggravated by the low quantum of trust that our citizens tend to repose in our institutions. The fact that India’s migrant population chose to make their way home by foot despite repeated entreaties by the states/Centre regarding the facilities that they would supposedly be provisioned at their original locations bears testimony to the same. Thus, it is apposite that I qualify the ideas that I have presented thus far. The success of most of these broad ideas is premised upon the presence of a robust set of institutions which will in unison be responsible for not only setting the grand narrative but also ensure that adequate checks & balances are in place. Given India’s sheer size and complexity, this can only be achieved if the institutions in question are committed to spearheading pragmatic, system-driven policy formulation, informed by agile feedback mechanisms. While this goal might seem insurmountable given our current circumstances, we should endeavor to effect the change through incremental progress rather than utopian, big-bang interventions. To make a start, our institutions could afford us the privilege of basic transparency rights. This entails something as basic as having the unequivocal assurance that our personal data would not be misappropriated to usher in a surveillance economy; or, knowing how the funds that have been purportedly marshaled for our welfare are being mobilized towards that end. Hope seems elusive till we have taken this first step.

In analysing the first slew of bazooka announcements, I shall be restraining myself to two sets of policies due to the following reasons. First, basis my understanding, the remaining measures do not effectively amount to any real stimulus per se (a government paying off its dues isn’t an economic stimulus; it’s basic hygiene) or the ambit of their coverage isn’t wide enough to yield significant positive externalities. Second, I have avoided a subject like taxation because I do not consider myself literate enough to opine on the same. For brevity’s sake, wherever I’ve chosen to envelope a term within double quotes, I’d request my readers to please refer to Investopedia to get a layman’s definition of the same. So without further ado, here’s my feeble attempt at donning the hat of an economic policy boffin:

1. The MSME sop(s)
In no uncertain terms, this is a very welcome move; and according to me, its arrival is already late in the day. To draw a very geeky financial analogy, the 3 lakh crore collateral free automatic loan for MSMEs is tantamount to a “Credit default swap”; albeit with no upfront premium collection. For the uninitiated, this is the same instrument which was at the cynosure of the Global Financial Crisis. Thus, I feel that the extent of coverage should have been capped at 70-80% at max. 100% leaves enough room for a moral hazard problem to kick in: borrowers will be incentivized to default and/or lending FIs will not walk the extra mile to prevent the precipitation of bad loans. This should have ideally operated as a “convertible bond” with the split: 70% (losses borne); any further losses are automatically converted into equity.
Regarding the resolution of stressed MSMEs, I have a fundamental question that I still can’t find a definitive answer to. Should such an MSME be even allowed to mushroom as “going concerns”? To address this situation, the government should ideally invoke external counsel to perform a due diligence of each MSME with a view to understand if its insolvency is merely an expression of the current crisis, or does the MSME have a faulty business model in the first place? At this stage, given India’s current financial situation, we can’t afford to let good money chase bad projects at any cost. The employees therein should be rehabilitated as extensively as possible in other MSMEs operating in a similar space. A “bad bank” like equivalent should be set up to rationalize such MSMEs in case their frequency shoots up; in order to unleash economies of scale. Given these ideological precepts, I feel that the equity infusion scheme (currently standing at 50, 000 crore) should have been the primary modus operandi in dealing with the manifest stresses in this sector. However, the ambiguity regarding the formulation of a “mother structure” like vehicle could have easily been avoided – we already have a designated agency for such activities (SIDBI). The E-commerce platform for multifarious MSME needs (ranging from sourcing to supply chain financing) is a welcome move as long as the platform is stewarded by a third party agency; the margin for minimum government in these matters is at an all-time high.

2. Addressing the enduring liquidity crisis at India’s NBFCs
Most NBFCs will be rolling over their corporate debt in the coming months. Further, this sector has largely not succeeded in recovering from 2018’s ILF&S debacle yet; in other words, liquidity is still tenuous. This explains why this category of financial institutions warrants special attention. If the Lehman crisis introduced us to the term “Too big to fail”, I’d like to categorize a potential Indian NBFC crisis as “Too many to fail”. Towards this end, the Special Liquidity Scheme and the Partial Credit Guarantee Scheme are both welcome moves; especially, with the government stepping in to act as an “Equity tranche” investor in the latter. However, given the tepid response that TLTRO 2.0 met with (viz. 50% subscription), the successful translation of the success of these schemes from theory to practice is contingent upon an adequate addressal of the elephant in the room: DEMAND.

I shall use this segue to urge the government to address some of the enduring concerns that India’s wider populace has (and rightfully so); so as to avoid a scenario that entails a quasi-perpetuation of a Mental Lock-down even after the Physical Lock-down has been lifted. In my book, announcements towards that effect should have gained precedence over the supply side issues that were addressed. To offer a more tangible example; micro-financial institutions are a category of NBFCs which have traditionally witnessed the least amount of volatility in terms of their asset-liability profile. However, MFIs shall continue to witness tepid/no activity in the foreseeable future because their target clientele is currently busy traversing the country by foot, desperately hoping to reach home at any cost. Eschewing any mention of these individuals for too long isn’t a sustainable solution by any measure; lest we soon witness a TV advertorial featuring an emaciated man with hollow eyes staring into the screen and uttering those very same immortal words that caused a seismic shift in my country’s psyche: “JANTA MAAF NAHI KAREGI”.

“Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.”

- Gordon Gekko (Wall Street, 1987)

When invited to speak at Teldar Paper’s annual general meeting immediately after having been disparaged by Mr. Cromwell, minority shareholder Gordon Gekko proffers a not-so-subtle riposte by directly questioning the firm’s efficiency and how the deep-rooted bureaucracy bodes ill for its future. Gekko’s borderline psychedelic & gusty rhetoric doesn’t stop just there, though. It goes on to raise several pertinent questions regarding capitalism, in particular, and human philosophy, in general, headlined by the oft (mis)quoted phrase: “Greed is good”. And that’s when this movie in the truest sense acquires subliminal proportions, going to be widely regarded as one of the best movies ever made. In doing so, Oliver Stone’s Wall Street, a post-modern take on the life and times of a quintessential swinging & jiving corporate raider, offers a deep insight (steeped in observational realism) into the machinations that drove the capitalistic binge of the 1980s USA. Specifically, it provides us a ringside view to one of the most fundamental tenets of American investing: shareholder activism.

The real doesn’t differ significantly from the reel wherein the US has borne witness to a number of successful activist shareholders (especially institutional investors) over the years. Institutional investors have time and again abandoned their traditional passive hats and become more active in the governance of their corporate holdings. Although selling out of their stakes in under-performing companies is always an option, these holdings often become too large to liquidate without driving share prices downwards, thereby suffering significant losses. Hence, they’re compelled to resort to proxy proposals to enforce strict norms of corporate governance in order to mediate the conflict(s) of interest between managers and shareholders. Be it Bill Ackman’s long-standing feud with Allergan, Paul Singer’s 15-year litigious battle against Argentina on its debt default (he even impounded one of the country’s warships), or George Soros bringing the Bank of England down to its knees by betting against the pound: there stories are the stuff legends are made of. More so, given that we currently live in an age where the likes of Carl Icahn can merely move by markets by virtue of a single tweet.

Despite the spate of financial crises afflicting the Indian economy for decades, activist shareholding had hitherto been a relatively unexplored concept till as recently as 2014 when minority shareholders of Tata Motors ensured that proposals for granting salaries in excess of permissible limits to its executives. Although insignificant by US standards, this was certainly a watershed moment in India’s corporate governance regime. Ever since, shareholder activism in India (spearheaded by DIIs & FIIs) has been gaining ground at a rapid pace, resulting in reversed resolutions at behemoths like Coal India Ltd and Maruti Suzuki India Ltd. A recent high-stakes conundrum in the healthcare space only further corroborates the fact that Indian shareholders are now quite cognizant of their rights and won’t accept any and every lame deal dished out to them by promoter-shareholders.

The premise seemed routine enough though. Last year, in December, the erstwhile promoters of Fortis Healthcare (Malvinder & Shivinder Singh) ceded control of the firm after failing to redeem pledged shares in amidst a court ruling that went against them during their sale of Ranbaxy to the Daiichi Sankyo group. Subsequently, the case got even murkier with the Singhs being accused of siphoning funds away from the hospital chain and their NBFC lender, Religare. After having maintained a low profile for a while, the Singhs resurfaced two weeks ago and publicly waxed eloquent about the demerger of Fortis Healthcare’s hospitals division, including a majority stake in SRL Diagnostics, to Manipal Hospitals (ref: Exhibit 1), wherein each Fortis Healthcare shareholder is scheduled to receive 10.83 shares of the acquirer for every 100 shares of the target held as of ex-date. Specifically, despite being almost half of Fortis’ size, Manipal was pegged at a valuation merely Rs. 100 crore less than that of Fortis, resulting in a deal which would be extremely dilutive for the firm’s existing shareholders. This can readily be evinced from the 11% dip in Fortis Healthcare’s price seen on 28th March, 2018 (ref: Exhibit 2). A group of minority shareholders, who collectively own ~30% of Fortis, have chosen to harness their resources and collectively assume the roles of the proverbial “barbarians at the gate” per se, hoping to win a greater ethical battle fought on deontological grounds. As expected, their primary points of contention raised include the structure of the deal, in general, and the gross mis-valuation of Fortis in deciding the terms of the deal, in particular; and the 36.6% residual rights Fortis would wield over SRL Diagnostics by virtue of this deal.

Eastbridge Capital in particular has been an instrumental unifying force among the “barbarians” wherein they have over the past week increased their stake in Fortis through open market transactions. The rebellion has been espoused by another stake-holder, the “Big Bull” Mr. Rakesh Jhunjhunwala as well who has questioned the fundamental sanctity of the board which approved the Manipal deal given that it had been constituted by the Singhs, who at this point hold only a paltry semblance of their original stake in the said concern. In conjunction with the resistance, the Delhi High Court’s directive to Fortis to provide an urgent response to Daiichi’s plea to stall the restructuring process and maintain status quo for all of the hospital chain’s assets, has only bolstered the cause of the activist shareholders with Fortis Healthcare gaining 5% intraday last Friday (ref: Exhibit 2). The hearing of this case may have been stalled till 25th April, 2018 and irrespective of what the ultimate outcome proves to be, the last 2 weeks have proven beyond doubt that India has really traversed a long, arduous journey since post-Independence gross shareholder timorousness. India should build upon such economic episodes to inculcate a sustainable culture of activist shareholding, with the activists’ endeavours drawn towards the greater good, viz. ethical capitalism, and not the kind of “greedy” capitalism that is the preserve of “corporate-raiders”. Simply put, we need many more of the likes of RJR Nabisco and many less (if not ZERO) of the likes of Bluestar Airlines. At this very moment however, all we can do is to just hope that Blue Horseshoe hates Anacott Steel this time around.

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The closing session of a recently concluded global economic conclave in Mumbai turned out to be quite the clincher with an unusually candid Hillary Clinton baring it all. As expected, the questions meandered around the 2016 US Elections, in general, and her rival Donald Trump, in particular. Of the many revelations she proceeded to make, what particularly piqued public interest was that she believed Trump has an outright affinity for dictators owing to their “strong authoritarian posturing”. If this is true, then Trump’s impending parley with the bellicose North Korean leader, Kim Jong-un ought to be nothing short of “covfefe”. Despite his modest physical stature, Kim exudes raw brutality, commands a million-strong battalion and as per popular media, tests ICBMs a hobby. Kim’s actions this week, however, seem antithetical to this image wherein he undertook a twenty-hour long train journey from Pyongyang to Beijing: a journey which could potentially alter the global geopolitical order to a great extent.

Although the exact details of the dialogue haven’t been disclosed yet, most are in consensus that this secret visit was undertaken by Kim as a means to mend fraying North Korea — China ties. However, it would be prudent to note that this is Kim’s first such visit outside his home country ever since he succeeded his father (the late Kim Jong-il) in 2011. This puts paid to only one plausible inference: Kim is now more comfortable in his skin than ever and has the confidence to expand his tentacles beyond his parochial roots to become an ‘internationalized’ leader per se. In this context, China seemed like the obvious choice as North Korea’s first openly avowed partner in a long time primarily due to the geopolitical might China wields over its peers in the region. Secondly, Kim is more likely than not to have resonated with the Chinese leader, Xi Jinping given that both of their individual political ideologies have been marked by two like fundamental pillars, albeit varying in intensity: repression of political opposition and an espousal of large-scale grassroots liberalization programmes. On a different note, this excursion would definitely stand Kim in better stead as he heads into a summit with the South Korean leader, Moon Jae-in hoping to revise their terms of engagement at a time with South Korea itself is mired in a vast quagmire of corruption-related woes.

The visit fits exceedingly well into Xi’s scheme of things too. Having recently extended his term as leader to life, Xi has informally managed to become the third major order of the Chinese politico-cultural heritage after Mao Zedong and Deng Xiaoping. Furthermore, he has determinedly pursued his ambitious, expansionary global vision (Belt & Road Initiative, OBOR, et al) wherein he envisages China at the cynosure of the future world order despite this being opposed tooth and nail by the Western world, spearheaded by the US. Given that the Trump-Kim deliberation would occur closely at the heels of this sudden visit, Xi has been implicitly anointed as the gatekeeper of any talks on the North Korean peninsula, especially when it comes to something as critical to Kim’s scheme of things as North Korea’s nuclear programme. The fact that Washington has thus far chosen to keep the terms/intended outcome of the negotiation with Kim fuzzy, only serves Xi’s interests better.

The 84th plenary session of the Indian National Congress held recently, despite the copious dose of brouhaha and chuptzpah, paradoxically acknowledged a fundamental strategic corrigendum by virtue of a foreign policy resolution passed as a part of the proceedings. Presented under the sub-heading of “Global Scenario”, this line encapsulates the crux of the matter: “There is an urgent need to recalibrate equations with the US, arrest the slide in relations with Russia and improve communication and trust with China”. A more self-critical confession couldn’t be warranted from a party which in successive regimes: UPA-1 (under the moderating influence of the Left) and UPA-2 (sans the Left), single-mindedly pursued a US-centric foreign policy (like the preceding NDA dispensation), achieved possibly at the cost of a diminution in its relationship with Russia. The ongoing buzz in pop culture is that the ideal place for the historical Trump and his “little rocket man” would be an upscale Parisian salon courtesy their rather zany coiffures. If the current trends are anything to go by, Xi would in all probability be their common hair-dresser if they wish to leave with smiles on their faces. More so, will this be a one-off? Or, will this increasingly become the norm going forward? Only time will tell.