Terror strikes, brazenly

After the terrible attacks in the last week of November in Mumbai, where 10 heavily armed militants who came in from the sea virtually held the city to ransom for almost 3 days, and in which more than 180 civilians and a few of the best Police Officers in Mumbai were killed, I was dismayed that the top leadership of the country is thinking of setting up one more intelligence / security organization - this one apparently to fight terrorism. We should move away from such knee-jerk reactions. Having more organizations will only add to the overall confusion. The fact is that India has enough institutions to gather intelligence and thwart organised attacks on our people and our way of life. There is RAW for external intelligence, there is the Intelligence Bureau for internal intelligence, and then there is the local Police force in each state. Even within the Police, cities like Mumbai which are prone to terrorist attacks have anti-terrorist squads (ATS). But now we know just how effective this squad was, with its top cop laying down his life bravely defending the city. For us to protect ourselves effectively, the following steps need to be taken –

• As one correspondent in the Mint has pointed out, we need something like a SWAT (Special Weapons And Tactics) team within the Police. This could either be done by keeping resident NSG commandoes in India’s big cities or, alternatively, the ATS can be split into two parts – one should be an intelligence wing, which will carry out investigations and intelligence; the other should be a group of trained anti-terrorist commandoes who are suitably trained and equipped to act in situations like this so that we do not have to rely on mobilizing Naval commandoes / central forces wherein precious time and lives are lost.

• Police reforms are imperative. The service conditions, equipment and training given to our Policemen in most of the states in India is abysmal. Political meddling further demoralises the Police Force, and what we are left with are corrupt, ill-equipped and brutal police forces which are feared by ordinary citizens and derided, or even worse, patronised, by organised criminals, many of them having politcal connections. As a society, we need to train our Policemen (especially the 'men'; the officers are of fairly high mettle, thanks to the tough competition that they have to crack just to get into their uniforms), arm them properly with weapons and communication equipment and ensure that they are paid well enough to hold their heads high and live with dignity without begging from traffic violators. This would also mean better facilties, like housing, medical facilities, life and health insurance and English Medium schools for their children. At the officer level, this would translate into freedom from political interference in the matter of postings and appointments. As Police reform Commission after Commission has recommended, we cannot have a professional Police force which can enforce the rule of law impartially, unless there is fixity of tenure; and postings of Officers of, and above, the SP level, are decided by a professional committee. This committee should have representatives from all the key stakeholders - the State Home Ministry, the Police force (like the DGP of the state) and a retired Judge of the High Court or Supreme Court to preside over the deliberations. Decisions can be taken by majority. Junior appointments at the city / District level can be made by the Police Commissioner / SP with appeals (which should rarely be entertained) lying with the DGP of the state. It was heart rending to hear how our Policemen rushed at the terrorists with sticks (Lathis) when the latter were armed with automatic weapons. Today we have managed to catch a live terrorist because of the tremendous bravery shown by ASI Tukram G. Omble in holding to an AK47 pointed at him even as bullets riddled his body.

• Actionable Intelligence: One point that has often been mentioned recently, is 'actionable intelligence'. For far too long, we have ignored the importance of an intelligence network. It appears that RAW had even intercepted messages that referred to an attack on Mumbai, but these did not reach the Mumbai Police. The way I see it, this is a failure of the IB and the National Security Advisor (NSA). Having a doddering old NSA, however competent a Police officer he might have been, definitely didn't help.
• Stop the infighting - we fell once to the British and lived through close to 200 years of slavery, because we could not come together as one; let us not repeat that folly again. We must reject political leaders who attempt to divide us on linguistic, caste or religious lines, trying to keep us from focusing on the critical issues and powerful external threats, and creating a false constituency for themselves.
• Good people in government - finally, for all the shrieking by News anchors, all the candle light vigils, all the furious typing in blogs like this, nothing is going to be really achieved, unless there are good, competent people in government who do something to change things. Whether it be setting up of SWAT teams or equipping forces with better bullet proof jackets, it is the government that will do it. And we have to ensure that good, sensible people make it to the government, by entering the political process or by entering the bureaucracy. The least we can do is to participate in the political process by voting for the right people.
• Jettison the soft state image - We should declare that we will refuse to negotiate; whether with Pirates in Somalian waters, or with terrorists holding people hostage. We should take the stance of 'shoot first and then talk'. A country that aspires to be a world power cannot be held to ransom by Pirates and small bands of armed militants. And the next time China stakes claim on Arunachal Pradesh, India's foreign Minister shouldn't just say that Arunachal Pradesh is an integral part of India. He should first challenge China to come and take it from us if they dare to. Moreover, we should declare that if China lays claim on Arunachal Pradesh again, then India would like to stake its claim on Shanghai !

The Significance Of Barack Obama

So Barack Obama finally managed to become the first Black President of the United States. And convincingly so, thereby demonstrating the disillusionment of the American people with the muddle of aggression and complete lack of respect for justice that the George W Bush regime had come to represent. The fact is, more than a rejection of Mr. John Mccain, this was a vote for Obama, against the policies of the Republicans and against an unnecessary war in Iraq that has cost hundreds of thousands of lives. As one correspondent wrote - it had almost become shameful for Americans to say where they belonged to, such was the loathing that greeted them in foreign shores. They have almost redeemed themselves and hope to regain their pride by this collective action.
However, the election campaign clearly brought out the fault lines in American society, in a world integrated by 24X7 Live TV. The questions of race, and whether Mr. Obama was a practising Christian or Muslim should not have been relevant in a society that holds all men to be equal. But that is an ideal---people, with their petty prejudices, are often less than perfect. Hence, there were worries that the 'Bradley effect' (where people are embarrassed to accept that they would rather vote for a white man purely for the reason that they are white, named apparently after a black Gubernatorial aspirant in the 1970s who led in opinion polls and ultimately lost in the hustings) would rob Mr. Obama of crucial votes on D-Day. Thankfully, that did not happen. America voted with its heart. It voted not for expedience, not for skin tone, not for experience, but for the man who stood for change. A change from fear, divisiveness and 'stuff happens' to hope and optimism.
The Bush years, were marked by Bushisms (which were funny) and by a shameful contempt for all norms of justice, international law and human rights---that was not-so-funny. Institutions like Abu Ghraib and Guantanamo Bay don't sit well with the Declaration of Indepedence and the Gettysburg Address. Martin Luther King's prophetic words " Injustice anywhere is a threat to justice everywhere" were drowned out by the aggressive rhetoric belted out by the Bush Administration. In an environment permeated by fear and insecurity in the wake of the 9/11 terrorist attacks, the Bush Administration created further paranoia by citing the looming threat of 'Al-Qaeda' and linking them to the 'Weapons of Mass Destruction (WMD) with the rogue military regime of Saddam Hussein in Iraq. Whereas American intervention in Afghanistan against a regressive, fanatical and cruel regime is welcome, and perhaps even justified (even though it creates a dangerous precedent in international law and peacekeeping), the same cannot be said of its invasion of Iraq. Whether it was for oil contracts or to teach a dictator who thumbed his nose at America a lesson, it was an invasion launched on a foundation of falsehood.
Mr. Obama, hopefully, will take America away from this path by first, closing down the illegal and repressive Guantanamo Bay prison where foreigners are being held without trial and then either bringing them to justice or letting them go; and then concentrate on the really important issues like healthcare and the domestic economy.
People have been debating about whether Barrack Obama's election will be good for India in terms of his views on outsourcing (he has promised tax benefits for American companies which keep jobs in America), his ambivalent stand on Kashmir and the traditional Democratic leaning towards protectionism. However, these people are missing the significance of this event: Mr Obama represents---as his own book so succintly says---'The Audacity of Hope'. He represents the victory of a decent, educated man in politics----which often attracts, well, not exactly the kind of people you would like to marry your daughter to. And like Abraham Lincoln, his is an unlikely victory---as men of Finance like me would put it, a statistically 'tail event', an 'outlier'. The product of a brief union between a Kenyan student and a white young lady; abandoned by his natural father, Barack Obama Jr lived a fairly Bohemian and nomadic life that brought him to Asia for a considerable period of time. He then managed to educate himself in Columbia University and topped it off with a Masters in Law from Harvard. Even his political career started rather unremarkably---apparently he failed to even gain entry in to the Democrat convention in 2004.
But then, there he is---the first black President of the United States. I have heard him, and yes, he speaks well. After long years, here is a man in public life who seems to be saying more than rhetoric---whose earnesty seems to come through. Let us wish him well. He is an ideal for every voice of reason, every patriot who wants to, in the words of Theodore Roosevelt, "Dare mighty things" , anywhere in the world. Like a slightly odd-looking, tall, top hatted gentleman born about 200 years ago.

Defending those who defend India

The 6th Pay Commission, led by Justice Srikrishna, was appointed to review and revise the salaries of close to 4 million civilian central government employees and about 1.5 million members of the defence forces.
Whereas the government's decision to revise the salaries of government employees to ensure parity of standard of living in a regime of rising inflation and some kind of benchmarking to the market is commendable, it is unfortunate that it has done a great injustice to the members of the armed forces, the men and women who have promised to lay down their lives in the defence of India. It is perhaps another sign of the lack of vision both among our political masters and among the mandarins who would have assisted Justice Srikrishna, that in the same scale of service, a member of the defence forces, putting his or her life and limb on the line to defend the country, would get paid less than a Civilian Babu fattenening himself in some government department.

The whole issue was exacerbated because the Armed Forces were not given any representation in the 6th Pay Commission. It just shows the shameful manner in which a myopic, complacent and arrogant administration has treated its most powerful wing - which thankfully, has not given in to the temptation of seizing power from the Civilian Administration, a phenomenon fairly common in our neighbour, Pakistan. However, when the 6th Pay Commission recommendations came out, the top brass of the Armed Forces thankfully took a stand against the glaring anomalies and refused to implement the report's recommendations till these were resolved. They are not beggars; they are people who have promised to lay down their lives defending us, and are often called upon to do exactly that; if we treat them shabbily, it hits their morale and would weaken India's whole defence mechanism. One of these glaring anomalies: Lt-Colonel rank officers have been relatively lowered by retaining them in Pay Band-3 (Rs 15,600-39,100), while the civilians and paramilitary officers at the same level have been raised to level PB-4 (Rs 37,400-67,000).
Some nitwits in the print media have been calling this a mutiny of sorts. However, it is far from the truth. This was a very restrained, very just demand by the Armed forces. And the reason was not just money---it was, as Gen Deepak Kapoor, the Chief of Army Staff, rightly described it--- a question of honor. At a time when the Indian Army is some 13,000 short of offficers because young people, with 'Officer-like qualities' are going in for other career options, this could not have been more poorly timed.
The government thankfully, saw sense. A Committee of senior Ministers including the external affairs minister, Mr. Pranab Mukherjee, the Defence Minister Mr. AK Antony and Mr P Chidambaram, the Finance Minister, was formed to look into the grievances / anomalies. Hopefully, this august committee will do justice and help to stave off a bigger crisis in the Armed Forces, which are already cronically short of officers at the critical, operational levels.
In the end, soldiers and their families agree to make the 'supreme sacifice' not because they are paid x sum of money at the end of the month (it never really is enough to miss growing old with the man / woman you love and seeing your children grow up and go to college; or miss the thousand other little experiences that bring joy to our lives). It is because they think that it is honourable and glorious to do so. The least we can do, as a nation, is not to dishonour them.

The Battle for India's Soul

The 2009 elections are going to be important. In all the media circus around the American elections, middle class India has almost forgotten that India too is scheduled to elect a new Parliament in 2009. This time, thanks to the short-sightedness of our people and the unchecked venality of our 'leaders', there will be issues, unfortunately, more fundamental than the 'BiPaSa' (बिजली पानी, सड़क)---power, water and roads--- issues discussed during the last General Elections in 2004.

Cry, Beloved Country

Empirical evidence shows that more often than not, a people really get the government that they deserve, and by extension, the political leaders that they deserve. If people are wise, if they are really humane and civilized (not every one in a large collection of people can be, but at least if the large majority of them are), then they would elect the right kind of people. People who stand for truth and justice. People who focus on the real issues---livelihoods, law and order, education, health, infrastructural development. However, we have political leaders around the country who are creating constituencies by projecting themselves as representatives of a particular caste or community and by polarising society along these lines. These politicians are seeking to create an unhealthy 'us-vs-them' mentality, tearing India's rich multi-cultural and multi-ethnic fabic to shreds in order to achieve narrow short-term political gains.

They Lead and We Follow

Whether it be marauding, sectarian mobs in Orissa or the Maharashtra Navanirman Sena's army of goons in Maharashtra, or Narendra Modi's wild popularity in Gujarat, there is ample evidence to show that shameless, Nazi-style parochialism is supported by at least a certain segment of society. Some of them have, again, cold efficiency to support them (like Narendra Modi); some like Naveen Patnaik in Orisa don't even have that.

The Price of Freedom

In the recently concluded National Development Council, there was a lively debate on which was the bigger threat – Islamic Terrorism, which typically followed guerilla tactics or Hindu Nationalism. I see both these as two sides of the same coin---the willingness of intolerant people to threaten or use violence against those whom they perceive to be different or who do not toe their line. As a citizen, I would very much like the state to act---decisively and justly---but I am wary of the state taking on draconion powers like POTA or TADA ostensibly to 'protect' us---the fact is that there are enough laws to take action against terrorists who have been proved to be so; if at all the state hopes to break the back of terrorism, it is through better surveillance, by being seen as acting equally tough with Hindu Nationalist mobs and by better communication with high-risk groups like Madrassa graduates---not by taking on powers to arrest people on suspicion and doing away with 'legal niceties' which actually seek to protect vital individual human rights against the organised might of the state. In fact, the irony is that we again let the terrorist win, when we sacrifice the rights of the individual to ensure the protection of the masses. The price of freedom is eternal vigilance; and sometimes a little blood. I would rather die in a bomb blast triggered by a maniac who keeps an explosive in a plastic bag and then scurries away into the darkness, than in a torture cell funded by my own tax payments. In fact, I appreciate that the government--- if it is serious about protecting individual life and liberty--- cannot always prevent a terrorist attack. A sinister mind can create explosives and then keep them in a public place and then disappear among evening shoppers and office goers and shop-keepers; he only needs to get it right once---the government, in contrast, has to get it right every time if it is to avert a disaster. I think the most compelling answer to the terrorist is what Mumbai did after the train bombs---it is stoic resistance; it tells the terrorist that he has not succeeded in breaking us; that our government will not resort to indiscriminate killing to avenge the killing of innocents; that we will thumb our noses at them and continue to live our daily lives.

The Bigger Threat

I see forces like the Bajrang Dal, the Maoists, the MNS and the Salwa Judum as a greater threat to me as an individual citizen and collectively to us as a country because they don't keep bombs in plastic packets and surreptitiously disappear; under the garb of being popular movements (pandering usually to certain disgruntled elements in society in the same manner as terrorist organizations do), they openly challenge the supremacy of the Constitution, and the Rule of Law, that is the hallmark of any civilised society.

Defending the Constitution

So right-thinking Indians have to first defend the idea of India by speaking up; by standing up and being counted. We need to expose leaders who are playing the divide and rule game, creating false constituencies, since they have nothing constructive to offer us. One very effective way to do this is obviously to elect the right kind of people. Are we a parochial , uncivilized people who were led by a generation of Western-educated liberals and were bestowed a Constitution that we neither deserved, nor can we defend ? Unfortunately, the electoral choices for India are rather limited: though the Congress still plays lip service to a multi-cultural India, their failure to act time and again when the Constitution was openly challenged (as by sectarian forces in Orissa, and by the MNS in Mumbai) calls their willingness and competence to question. There are hardly any hopes one can harbour from the BJP, since it has openly aligned with Hindu Nationalist forces, in a blatant and shameless show of majoritism.
So finally, it is a bit of a chicken and egg question – the right kind of people need to stand for elections to be voted in. I believe we still have a few (though not enough by far ) sane, civilized people entering the fray; those of us who believe that we need to defend India’s soul, need to sound the trumpet that will rally the forces---by casting our votes for these people, so that at least some of the good people who want to enter Parliament / the State Legislatures get to do that.

Buldge-bracket Wall Street I-banks lose their 'I'

So finally, the last two I-banks left standing after the dust settled down on Wall Street have also bitten the dust. Not being able to garner enough funds from the equity market, and not having access to the cheap current and savings deposits that their more 'plain-Jane' commercial banking cousins have access to, Goldman Sachs and Morgan Stanley have also decided to become commercial banks. The turn of events brought about by the Glass Stegal Act in the 1930s has finally turned full circle.

As my last blog on the fall of Lehman Brothers has said, the basic problem was three-fold: poor lending practices by commercial banks, including NINJA loans (loans to people with no jobs, no income and no assets)---these were packaged off into murky colateralised pools by I-banks and securitized debt issued backed by these pools, often inadequately rated and tracked by the credit rating agencies; poor judgement shown by sophisticated financial intermediaries in investing in assets which had little or no value if house prices fell (as they started doing from the latter half of 2007) and there were foreclosures; and inadequate risk management i.e. over-leverage, in a bid to shore up profits, but not leaving enough capital if there were Mark to Market (MTM) losses (underestiating of VaR and Economic capital).

Of course, as soon as these annoncements were made, both thse banks saw some investor interest: the venerable Warren Buffet decided to buy a substantial equity stake in Goldman Sachs, a firm he had aparently once visited as a starry-eyed child. Morgan Stanley too got an offer for much-needed equity infusion from MUFJ Japan.

America's most respected stand-alone I-Bank was being bailed out by a largely individual investor; It's second greatest I-Bank was being kept afloat by a Japanese bank; and its third great I-Bank, perhaps the cockiest of 'em all--- Lehman Brothers, had gone belly up. Merrill had already sold out to Bank of America.

The Cookie Crumbles
I had been fascinated by the glamorous world of I-bankers - complex financial structuring, fat bonuses, credit spreads, derivatives trading and apparently sophisicated risk management. Now I see that for all the fancy talk, it was plain old greed, allowed to go reckless in the pursuit of quarterly targets. And like children hurt in a melee, the fat cats of Wall Street are now lamely standing by, expecting big brother Henry Paulson and Fed Chairman Unca' Ben to bail them out and tend to their injuries.

The Fall of Lehman Brothers

Lehman Brothers, one of the world’s most respected investment banks and America’s fourth largest, with a history that dates back more than 150 years, has filed for bankruptcy. To put things in perspective, this mighty financial institution arranged for funding of the American Railroad company in the 1860s, rode out the Great Depression and funded the oil rush of the 1930s; even in 2007, it was ranked the most ‘Most admired Financial Securities Firm’ by Fortune magazine.

The sub-prime crisis has had a bigger impact than what the global financial services industry had dared to imagine. After 5 years of low interest rates and heady growth, it seemed unlikely that suddenly everything would come to a crunching halt. But business cycles, consumer demand and investor confidence are far more fickle than what the Big Daddies of Finance had foreseen. Investment in sub-prime real estate loans and repackaged debt has pulled some of the world’s biggest and most respected financial firms into terminal tailspins. Let us talk about the three things that people talk about in any unfortunate situation: what caused it, what can we learn from it and the possible future outcomes.

Causes

Though I am not completely aware of Lehman’s trading positions (and probably we never will know), there is a strong chance that Lehman had taken leveraged positions in financial markets, i.e. borrowed (at low rates of interest) and used the borrowings to purchase huge positions in financial assets like securitized bonds. So, say with an own capital of $8, they bought risky assets of $100 (roughly 11 times leverage). The borrowings usually would have low interest payouts, so Lehman had the chance to make disproportionate profits on own capital when markets moved in their favour. Taking the given example forward, let us say they borrowed $92 at 4%. Now, their open position of $100 moves favourably to $120. They will get to keep the balance ($16.32) after paying out interest of $3.68 (4% of $92). Return on investment (ROI): 16.32 on an investment of 8, which works out to be a heartbeat-skipping 204%.

But all this happens if the market moves in their favour. The situation becomes disproportionately risky when the market moves against them. If the market moves to 90, not only is their own capital wiped out by the mark-to-market (MTM) losses, they will either have to sell their positions or borrow a further $3.68 to pay out the lenders. Unfortunately, Lehman was stuck with illiquid positions that it could not sell in a hurry and nor did it find any suitors or lenders to bail it out.

The problem was three-fold: As part of its market-leading debt repackaging business, for the last couple of years, Lehman underwrote or bought large tracts of mortgage-backed securities. These bets would turn sour in 2007, but at the time they were bought, this would have been difficult to predict, so no one can blame them for it. In any case, everybody and his brother-in-law was into mortgaged backed securitized debt in the early years of this century, so they just followed the Wall Street herd. As is common knowledge now, the cataclysmic downturn in the American realty sector in the latter half of 2007 led to higher than expected defaults in mortgages and these securitized bonds lost value quickly, thereby making them illiquid and hitting Wall Street’s big boys with massive mark-to-market (MTM) losses. To make matters worse, Lehman would have taken highly leveraged risky positions to maximise return on invested capital, so when MTM losses hit, they would have virtually wiped out Lehman’s liquid reserves and perhaps even their owned capital. The second, related problem would have been that Lehman’s risk managers could not correctly predict the probability of extreme downward market movements, thereby undercapitalizing the firm’s positions.

The situation still might not have been so bad, had Lehman got funding when the losses became imminent. Its attempts to shore up capital in the last month and find a buyer in the last week before bankruptcy was a case of too little, too late. It is unlikely that the top management of a mighty financial services behemoth that hires some of the brightest human beings in the planet was not aware or did not understand the magnitude of their misfortune; probably they went into denial, as all human beings tend to do, when they were hit with bad news, or perhaps, as some news reports have speculated, Lehman’s CEO Richard Fuld was too arrogant to admit that they had screwed up big time and go around begging for money. As some correspondents have indicated, half-humourously, schadenfreude might have played a role in Lehman not getting any suitors within the Wall Street community.

What We Can Learn From It

The lesson is simple: more effective risk management. Investment banking is a high-risk, high-return business, because firms take on leveraged positions; sometimes the size of the leverage is multiplied manifold by margin trading in derivative markets, where the nominal could run into mind-boggling billion dollar figures, whereas actual capital invested may be a couple of million. So investment banks need good risk managers who can temper the greed with fear. People should be moved between trading and risk management, so that there is better understanding between these units; for this to happen, rewards have to be shared generously with the ‘spoilsports who say no to everything’, as the risk managers are often branded. In any case, rewards, even for traders, should be based on risk-adjusted returns (which take into account the relative risk of the position in terms of variance or Value at Risk) rather than absolute return on capital.

Possible Future Outcomes

Though there might still be bombs waiting to detonate in Lehman’s books, I believe that it would still make a fantastic buy for any financial services firm. Lehman has brilliant people. It is known for its financial innovations, perhaps a tad ironically, in the debt capital space. It also has a good corporate finance practice (Equities, M&A) and it is a globally renowned player in derivatives trading. It would propel a general banking and financial services firm like Barclays or HSBC into the top league in the prestigious, high margin, investment banking space and bring into its fold some very smart traders, at a ‘never-before-and-never-again’ price. But liquidity is tight all around, and we still do not know the size of ‘toxic assets’ in Lehman’s books, so perhaps potential suitors have stayed away. If the court appointed receiver does not sell off the firm piecemeal to buyers, Lehman might still come back to life from this near-death experience; in fact, in my view, it can become a supremely profitable firm again. At some point in time, the housing sector will pick up; the foreclosed assets that are behind Lehman’s mortgaged-backed securities will turn profitable and Lehman’s traders will once again be able to demonstrate their virtuosity in the world’s leading fixed income and derivative markets bringing back the multi-million dollar bonuses. Following the maxim ‘That which does not kill you makes you stronger’, Lehman will, additionally, have better risk control mechanisms, having learnt a lesson from this traumatic event.

We Are Like This Only

Though it affects only a small proportion of people, I believe that Apple, in a blatant example of profiteering, has priced the Iphone in India at almost 4 times the current market price in the US, its home country. Partly this is about 'skimming the market', i.e. taking advantage of the initial craze that surrounds a new product (and that too from the stables of a so-called 'iconic' and aspirational brand like Apple; but that apart, I think it points to a deeper malaise: the apathy, the callous smugness and self-obsession of the urban upper and upper middle class in India. It is perhaps ironical that around the same time as the Iphone was launched in India at its ridiculous price, statistics from the World Bank tumbled out: an estimated 42% of Indians live in proverty, i.e., as the World Bank defines it, on less than $1.25 per day. In other words, in one year they earn less than half of what a new Iphone costs in India.

It is not my case that the rich should not live well, or that we should all live frugal lives and give away the rest. But it is shameful and symptomatic that a country where there are so many poor people (some people say the world's largest collection of the poor), is seen as a market that can absorb higher, and not just higher---but 4 times higher---prices than the prevailing market price in the world's most developed economy. The rich play here, like the rich every where; but perhaps like in Russia, they play here with an extravagance that is as schizophrenic as it is ugly, given the ground reality of millions of our countrymen.
If you are one of those incredibly lucky people whose hard work has been rewarded by pecuniary gain (or you've won the 'Ovarian Lottery' in terms of a good inheritance) and have cash to burn, then by all means you can, and should, live it up. But don't hand over your extra cash to a profiteering and greedy US company which is making a fool out of you, while millions of our countrymen starve.
Parting note: some people have been saying in the press that apparently, the revenue per user is less in India so the cell phone companies cannot bear part of the Iphone's cost, hence jacking it up for the consumer. This is nothing but false propoganda that the press has been parroting ad nauseam. If revenues are less in India, so are costs. And nothing prevents the two service providers from entering into lock-in arrangements with their users. In any case, the whole argument is specious because as any first year CA Student will tell you, by now the Iphone should have costed a lot less, because most of its fixed costs and initial development costs have already been recovered from the US market.