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.
Friday, October 10, 2008
Tuesday, September 23, 2008
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.
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.
Thursday, September 18, 2008
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.
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.
Sunday, September 7, 2008
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.
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.
Saturday, August 9, 2008
Reservations
Some say on the basis of an outdated census, when Mr. BP Mandal gave in his recommendations on enhanced caste-based reservations for Other Backward Castes (OBCs) in 1980---over and above the existing caste-based reservations for Scheduled Castes (SCs) and Scheduled Tribes (STs)---in government jobs and institutions of higher learning supported by the government, little did he realise that it would become one of the most frought and hotly debated issues of independent India. The report recommended, among other things, that reservations for OBCs should be proportionate to their proportion in the population (i.e. about 52%). For almost 10 years, in fact, the document gathered dust in the Union Home Ministry, and then VP Singh, smarting against his political ostracization by the Congress, let the genie out of the bag by promising to implement it. In a single shot, the proportion of reserved seats would shoot up from 22% to 50%---just fitting the legal limit of 50% permitted by the Supreme Court of India.
The Bone Crushing Competition
An estimated 300,000 people take the Civil Services examination every year, to get into India's elite civil services cadre. Out of that just about 100 make it to the elite Indian Administrative Service (IAS) and close to a 1000 manage to make it to any service at all. The success rate ? 0.03% if you take just the IAS and 0.3% if you take all the 12-odd services that recruit through this examination. For the IITs, only 3500 odd make it from the 300,000 odd who take the exam. In comparison, the 10% chances of getting into a Harvard Business School or the LSE makes them look like a walk in the park.
Injustice Everywhere
"Injustice anywhere is a threat to justice everywhere" The Rev Martin Luther King had said. Though VP Singh implemented the enhanced reservations for OBCs in government jobs, he did not extend it to educational istitutions funded by government, which still reserved seats only for SCs and STs, and not for OBCs. So the quantum of reservation was only 22%. The rest were selected on merit, though the brutal competition kept out many meritorious students who could, given the resources, get into the top institutions for education in science and technology in the world without too much effort. The examination system has another flaw: people have to take the exam on a given day,which subjects the whole process to chance. If that day you had a headache or a stomach upset, you have to try again next year. Youngsters who don't get into the IITs usually get into other elite government engineering colleges (like the National Institutes of Technology, earlier known as Regional Engineering Colleges or RECs) or VJTI or the DCE.
The Bone Crushing Competition
An estimated 300,000 people take the Civil Services examination every year, to get into India's elite civil services cadre. Out of that just about 100 make it to the elite Indian Administrative Service (IAS) and close to a 1000 manage to make it to any service at all. The success rate ? 0.03% if you take just the IAS and 0.3% if you take all the 12-odd services that recruit through this examination. For the IITs, only 3500 odd make it from the 300,000 odd who take the exam. In comparison, the 10% chances of getting into a Harvard Business School or the LSE makes them look like a walk in the park.
Injustice Everywhere
"Injustice anywhere is a threat to justice everywhere" The Rev Martin Luther King had said. Though VP Singh implemented the enhanced reservations for OBCs in government jobs, he did not extend it to educational istitutions funded by government, which still reserved seats only for SCs and STs, and not for OBCs. So the quantum of reservation was only 22%. The rest were selected on merit, though the brutal competition kept out many meritorious students who could, given the resources, get into the top institutions for education in science and technology in the world without too much effort. The examination system has another flaw: people have to take the exam on a given day,which subjects the whole process to chance. If that day you had a headache or a stomach upset, you have to try again next year. Youngsters who don't get into the IITs usually get into other elite government engineering colleges (like the National Institutes of Technology, earlier known as Regional Engineering Colleges or RECs) or VJTI or the DCE.
But alas, what do venal politicians know about working hard and getting something on the basis of merit. Especially when the Minister in question is from an erstwhile 'royal' family. In the name of social welfare, the old coot has implemented caste-Ccentrally funded universities and autonomus institutions also. What is a little injustice if it yields votes though the intended beneficiaries may never even make it to the minimal criteria, given the abysmal state of most of India's state-run schools ? Some who gain entry through this route find it difficult to complete the course. This is a short-cut to demonstrate ' social inclusiveness' rather than fix the problem where it is really broken: access to quality primary education for the poorest, whereby they can compete for the best educational institutions; instead we have the government denying this right to other meritorious students, because they are born in the 'wrong' caste. Moreover, the government has not implemented the SC judgement properly - the SC categorically said that the 'creamy layer'---the proprtion of SCs, STs and OBCs who had benefited from reservations / social advantages in the past should be identified and excluded.
Not only will this unfair system dilute the quality and reputation of our institutions of higher learning, it is also a wider matter of concern for all public minded citizens - no society can hope to become great if it is unjust; if it chooses patronage over merit.
Making it Worse
Before I finish---what makes it worse is the paucity of institutions of higher learning in India. That is why there is this insane and brutal competition for a few seats, where again the government has imposed reservations. We simply need more institutions of higher learning, imparting globally recognised quality education. However, this cannot happen unless the government liberalizes the sector from the tyranny of the incompetent and, if media reports are to be believed, corrupt AICTE. Criteria for the entry of foreign universities has to be fixed and they should be allowed. The system should have a robust and independent accredition mechanism so that students can judge on their own. And most importantly, the existing IITs and IIMs need to be given more autonomy in the areas of fixing pay-scales and deciding their admission procedures and criteria. As they said in the stories of my childhood, "that, my friend, is another story that I shall tell you at a diferent time !"
Sunday, June 1, 2008
The Little Blue Book
Published in the Hindu Businessline:
http://www.thehindubusinessline.com/2006/01/05/stories/2006010501971000.htm
The Little Blue Book
Raghuvir Mukherji
RECENTLY, on a trip to London, I overheard a Bengali colleague saying he had to go to India House to get his son's visa for India. Intrigued, I asked my friend what nationality his son carried. "Australian," he replied, without batting an eyelid. "How come?" I asked, since I knew he had spent a major part of his childhood in Delhi, and had presumed he was an Indian citizen, as also his three-year-old son.
"Well, I am an Australian citizen, so junior is Aussie too," he said with a shrug, adding: "I had gone to Australia to do my MBA," he replied, "and after that I started to work in Australia, and then I got the opportunity to take citizenship, so I just took it." "Anyway," he explained further, "What difference does it make? It is just a travel document. An Australian passport makes it easier to gain access to European countries and the US. At heart, I remain an Indian... I support India on the cricket field," he added, a bit defensively.
Travel document? I always thought the ticket is the travel document. A passport is a proof of identity. A document certifying who you are, and where you belong. As one writer had put it, "a nation is a covenant between a land and its people." When you let go of your passport, whether for pecuniary gain or ease of travel, you break that covenant.
This may sound politically incorrect in the age of globalisation, when the government is bending over backwards to attract investments and money from the Indian Diaspora.
And why is the country now offering these people a sort of secondary identity for them to escape the rules that govern foreigners in India, when, for all practical purposes, they are foreign citizens who have sworn allegiance to another nation?
India is, barring the occasional communal conflict, an example of a working multi-cultural, multi-religious and multi-lingual society. An Indian identity cannot be defined by one racial type, one language or one religion. So what remains is that tiny blue book, with the `Republic of India' printed in clumsy gold lettering on top and our names in it.
A vast majority of Indians do not have that little book. But they proudly share that identity and carry the burden of all the trials, tribulations and hopes that come with it. Those of us who do have it should cherish it, because it binds us to this identity and represents our common hopes and dreams for a better future, for a better India, free of poverty, ignorance, corruption and communalism.
http://www.thehindubusinessline.com/2006/01/05/stories/2006010501971000.htm
The Little Blue Book
Raghuvir Mukherji
RECENTLY, on a trip to London, I overheard a Bengali colleague saying he had to go to India House to get his son's visa for India. Intrigued, I asked my friend what nationality his son carried. "Australian," he replied, without batting an eyelid. "How come?" I asked, since I knew he had spent a major part of his childhood in Delhi, and had presumed he was an Indian citizen, as also his three-year-old son.
"Well, I am an Australian citizen, so junior is Aussie too," he said with a shrug, adding: "I had gone to Australia to do my MBA," he replied, "and after that I started to work in Australia, and then I got the opportunity to take citizenship, so I just took it." "Anyway," he explained further, "What difference does it make? It is just a travel document. An Australian passport makes it easier to gain access to European countries and the US. At heart, I remain an Indian... I support India on the cricket field," he added, a bit defensively.
Travel document? I always thought the ticket is the travel document. A passport is a proof of identity. A document certifying who you are, and where you belong. As one writer had put it, "a nation is a covenant between a land and its people." When you let go of your passport, whether for pecuniary gain or ease of travel, you break that covenant.
This may sound politically incorrect in the age of globalisation, when the government is bending over backwards to attract investments and money from the Indian Diaspora.
And why is the country now offering these people a sort of secondary identity for them to escape the rules that govern foreigners in India, when, for all practical purposes, they are foreign citizens who have sworn allegiance to another nation?
India is, barring the occasional communal conflict, an example of a working multi-cultural, multi-religious and multi-lingual society. An Indian identity cannot be defined by one racial type, one language or one religion. So what remains is that tiny blue book, with the `Republic of India' printed in clumsy gold lettering on top and our names in it.
A vast majority of Indians do not have that little book. But they proudly share that identity and carry the burden of all the trials, tribulations and hopes that come with it. Those of us who do have it should cherish it, because it binds us to this identity and represents our common hopes and dreams for a better future, for a better India, free of poverty, ignorance, corruption and communalism.
Balance
My wife and I have often discussed the 'troubles' that the working population faces in taking the old and the young with us in our journey through life. In an increasingly individualistic society, it is becoming too much for some of us to take care of aging parents or have children. The only things that matter are self-aggrandizement and material prosperity.
There is no doubt that material prosperity is rewarding, and fulfilling. I just bought myself a new set of clothes, a new wallet and a new pair of glasses. I was quite pleased with my new purchases. But the question is, how long will they last, before they become old; before I want to buy something else to make me feel good. There is also no doubt that the pursuit of prosperity is a great incentive to better things. The relentless pursuit of prosperity has given the west the lifestyles that people are enjoying there, even as many of the cradles of civilization: Africa, Mesopotamia (Iran and Iraq) and India languish in poverty, and more often than not, are plagued by poor government delivery mechanisms. Individualism has also given people a sense of liberty, a greater amount of choice and the responsibility to take charge of their lives. In a society where everyone is free to make their choices, and treated equally before the law, each person has a greater opportunity to fulfil his / her full potential and rise up the social strata.
But as Mark Tully, the legendary BBC correspondent for India points out in his thought-provoking book India’s Unending Journey, a soul-less meritocracy creates a Darwinian society where the ‘losers’ are treated with contempt and made to feel inferior. He refers to his own school, where a great premium was placed on academic excellence; I see this phenomenon playing out in most modern corporations, and I find it very inhuman. Can we really call ourselves civilized if we go back to ‘Survival of the fittest’ ? By no means am I saying that rewarding on the basis of merit is bad; anything else is definitely worse. Neither am I advocating a socialistic society---we’ve tried implementing that, and we know it doesn’t work. So the question is what is the best way forward ? I think individual choice is paramount. The choice to be what I would like to be, and to a large extent, to say what I would like to say, as long as I don’t hurt others or denigrate or ridicule them. But so is training to ensure that at least the majority of us use this choice responsibly. To give an example, a friend recently told me that he preferred to use a hand-dryer and not paper tissue since it was more eco-friendly. To wipe a wet face, I would still prefer to use paper tissue (hot air can’t be too comfortable for the eyes, and moreover, will entail some expert gymnastic manoeuvres with the hand dryer), but at least to dry my hands, I have started to use the dryer. So we need the paper, but let us use it responsibly. Again to go back to Tully’s book, the trick is to find the right balance. The balance between a meritocratic market-driven economy on the one hand and looking after those whom the market ignores (i.e. people who cannot avail those choices because of their limited abilities or resources). In most cases, the state should chip in; but it cannot only be the responsibility of the state. Each of us, in our daily lives, have to strive to maintain this balance, because without it, we will become dehumanised. In a meeting that I had attended, His Holiness the Dalai Lama said that contrary to popular perception, he did not consider superior intelligence to be man’s defining characteristic; it was just an additional gift. What made us human was compassion. Animals do show compassion at times, but rarely. We have been blessed with a much bigger sensibility and the ability to show compassion. Though he defined it as how we treat strangers, I say even that isn’t necessary – how we treat our own, the weak in our own family – our aged parents and our children, can define our compassion. And this is where I will go back to the point about balance: whereas I cannot advocate returning to repressive, Orwellian or feudalistic social systems where decisions affecting our lives are taken by a Samaaj (समाज) or Panchayat or ‘wise men of the village’ (as is still the case in most of rural India), I do advocate a balance between the individualism of Western societies and the cohesiveness and social obligations of Oriental societies. This should be voluntary and not mandatory, like the use of paper towels in the toilets. We need to take care of our parents, physically, economically and emotionally; likewise our children, especially in countries like India, where social security systems are poor or non-existent. But even in Western societies, where better social security systems exist, I feel this is an area which would gain from the adoption of ‘best practices’ from the East. Old people are often opiniated and inflexible. But we are where we are today, because they chose to bring us up. Many of our values are imbibed from them. How can we forsake them when they are old and helpless ? And they pass on their greatest inheritance - the wealth of their experience, the lessons that they have learnt in life’s hard classrooms, to those that need them the most: their grandchildren, and our children, providing a line of tradition and thought that we may not have the time to pass on, or the knowledge, given the mad rush to keep body and soul together.
There is no doubt that material prosperity is rewarding, and fulfilling. I just bought myself a new set of clothes, a new wallet and a new pair of glasses. I was quite pleased with my new purchases. But the question is, how long will they last, before they become old; before I want to buy something else to make me feel good. There is also no doubt that the pursuit of prosperity is a great incentive to better things. The relentless pursuit of prosperity has given the west the lifestyles that people are enjoying there, even as many of the cradles of civilization: Africa, Mesopotamia (Iran and Iraq) and India languish in poverty, and more often than not, are plagued by poor government delivery mechanisms. Individualism has also given people a sense of liberty, a greater amount of choice and the responsibility to take charge of their lives. In a society where everyone is free to make their choices, and treated equally before the law, each person has a greater opportunity to fulfil his / her full potential and rise up the social strata.
But as Mark Tully, the legendary BBC correspondent for India points out in his thought-provoking book India’s Unending Journey, a soul-less meritocracy creates a Darwinian society where the ‘losers’ are treated with contempt and made to feel inferior. He refers to his own school, where a great premium was placed on academic excellence; I see this phenomenon playing out in most modern corporations, and I find it very inhuman. Can we really call ourselves civilized if we go back to ‘Survival of the fittest’ ? By no means am I saying that rewarding on the basis of merit is bad; anything else is definitely worse. Neither am I advocating a socialistic society---we’ve tried implementing that, and we know it doesn’t work. So the question is what is the best way forward ? I think individual choice is paramount. The choice to be what I would like to be, and to a large extent, to say what I would like to say, as long as I don’t hurt others or denigrate or ridicule them. But so is training to ensure that at least the majority of us use this choice responsibly. To give an example, a friend recently told me that he preferred to use a hand-dryer and not paper tissue since it was more eco-friendly. To wipe a wet face, I would still prefer to use paper tissue (hot air can’t be too comfortable for the eyes, and moreover, will entail some expert gymnastic manoeuvres with the hand dryer), but at least to dry my hands, I have started to use the dryer. So we need the paper, but let us use it responsibly. Again to go back to Tully’s book, the trick is to find the right balance. The balance between a meritocratic market-driven economy on the one hand and looking after those whom the market ignores (i.e. people who cannot avail those choices because of their limited abilities or resources). In most cases, the state should chip in; but it cannot only be the responsibility of the state. Each of us, in our daily lives, have to strive to maintain this balance, because without it, we will become dehumanised. In a meeting that I had attended, His Holiness the Dalai Lama said that contrary to popular perception, he did not consider superior intelligence to be man’s defining characteristic; it was just an additional gift. What made us human was compassion. Animals do show compassion at times, but rarely. We have been blessed with a much bigger sensibility and the ability to show compassion. Though he defined it as how we treat strangers, I say even that isn’t necessary – how we treat our own, the weak in our own family – our aged parents and our children, can define our compassion. And this is where I will go back to the point about balance: whereas I cannot advocate returning to repressive, Orwellian or feudalistic social systems where decisions affecting our lives are taken by a Samaaj (समाज) or Panchayat or ‘wise men of the village’ (as is still the case in most of rural India), I do advocate a balance between the individualism of Western societies and the cohesiveness and social obligations of Oriental societies. This should be voluntary and not mandatory, like the use of paper towels in the toilets. We need to take care of our parents, physically, economically and emotionally; likewise our children, especially in countries like India, where social security systems are poor or non-existent. But even in Western societies, where better social security systems exist, I feel this is an area which would gain from the adoption of ‘best practices’ from the East. Old people are often opiniated and inflexible. But we are where we are today, because they chose to bring us up. Many of our values are imbibed from them. How can we forsake them when they are old and helpless ? And they pass on their greatest inheritance - the wealth of their experience, the lessons that they have learnt in life’s hard classrooms, to those that need them the most: their grandchildren, and our children, providing a line of tradition and thought that we may not have the time to pass on, or the knowledge, given the mad rush to keep body and soul together.
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