29 April 2009

Shaken, not blurred

Not only can terrorism lead to economic uncertainty, in a roundabout way, political, social and economic uncertainties – and, therefore, discontent – can give rise to terrorism. Some of this notion can brew and grow as movements of national liberation as well. The French and Russian revolutions are a case in point; not to mention the continuing insurgency in rural India by Maoist Naxalites.

There are ideological differences too, closely linked to this uncertainty and discontent, and perhaps as a result of it. These differences often motivate sections of people into challenging existing/ruling regimes, holding them responsible for racial/religious/ethnic discrimination, inequality in distribution of wealth and therefore polarisation of lifestyles, political exclusion, and obstructing civil rights.

In India, we have seen and experienced a variety of terrorist acts due to ideological differences. These include planned acts of terror by Islamic radicals who believe that their Allah is the only God and whose goal is to create an Islamic State not just in Kashmir, but across the globe. And, let’s not forget violence from Hindu extremists who wish to save our country from this Islamic challenge.

Like many others, we, too, have believed in national liberation and have freed our country from British Rule. And, on achieving Independence, we have declared our country as a secular State, where we believe that several points of view can coexist harmoniously and that no single view or dogma is likely to be entirely right for the welfare of our people.

Yes, it’s true that, specifically in the last ten years, we have been a target of terrorist attacks and have suffered at length. Still, I hope that, though our confidence may have been shaken, our sense of values and good judgement have not been blurred. As we go to exercise our constitutional rights on Election Day 2009, I hope we shall all continue to believe in the foundation of a secular State and not let our prejudices cloud our judgement.

25 April 2009


Does terrorism have a negative impact on our economy?

I simply don’t have the wherewithal to provide a quantitative response to that question. But I know, in most terror-hit places, economists and city planners have tried to assess the economic damage caused by terror attacks. For instance, the economic impact of the 9/11disaster in the United States is a case study among many scholars and governments. However, in India, research in this area is sadly neglected.

As a resident of Mumbai, I have been a silent witness to several terrorist attacks over the years. By ‘a silent witness’ I mean that, though I have not been ‘on the spot’, I have experienced the shock waves that have rocked the city immediately after the attacks, and those that have continued ever later. Moreover, my childhood memories of Marxist and Maoist insurgency in Calcutta still remain with me.

Apart from loss of life and injury to people (which is tragic enough), terror attacks leave a trail of fear, confusion and panic. Almost like a domino effect, people stop work, schools and colleges are closed, shops and offices shut down operations, factories and workshops stop production, and stock markets behave unpredictably, bringing down stock prices.

But, most important of all, terrorism creates uncertainty... uncertainty in the minds of people, and in the economy.

Specific industries are hit adversely: e.g. tourism and, therefore, travel and hospitality services. Foreign investment is reduced. Investments into, and plans to grow, local projects and industries are halted or delayed. There is loss of revenue due to drops in productivity in various sectors... and even in consumption.

How significant is this impact on the economy is difficult to tell. But there is no denying the fact that acts of terrorism have negative influences on a country’s economy.

21 April 2009

India is no stranger to terror attacks

India is no stranger to terror attacks. Our history is replete with instances of invaders and marauders attacking our country and terrorising our people: from the (controversial) Aryan Invasion to the Greeks, the Sakas, the Huns, the Pathans, the Moghuls, the Portuguese, the British... and now the Pakistanis.

Regrettably, not all terror attacks have been from foreign invaders. Some of it has been internal. I remember growing up in Calcutta during the late sixties and early seventies when anti-establishment Marxists and Maoists killed many policemen, government officials, teachers and innocent people over ideological differences with the government.

Then there were terrors of the separatist movements – the Sikhs, the ULFA, the GNLF, the Bodos, the Mizos – and retribution by the Indian government thereafter.

Since Independence, we’ve lost three national leaders to assassinations by fellow countrymen – Mahatma Gandhi, Indira Gandhi and Rajiv Gandhi – and thousands of others from terror attacks by insurgents like the recent Maoist attacks to disrupt elections, or violent civil riots under State supervision like the infamous Gujarat riots in 2002.

17 April 2009

Election terror

It’s one thing to blame Pakistan for striking terror into India’s heart from across the border. It’s another to resolve terror within the country’s borders – much of which, at least recently, is not from Islamic dissidents or due to Islamic influence. For, if we are to go by yesterday’s Naxalite attacks at polling stations, India has a lot to worry about managing terror from within.

Here’s the scene:

As India goes to polls in certain parts of the country, Naxalites or Maoist insurgent groups are coming out of their hideouts to strike terror on unsuspecting Indians. No one seems to be spared: from election officials to security personnel to ordinary citizens. Their methods are simple: bombs, landmines and guns to kill and injure people… setting polling booths on fire, blocking roads by felling trees and with boulders. Even electronic voting machines are reported to have been looted.

Since these insurgents are nestled within a few states/territories in India, one hopes that their terror strikes will be contained within these territories. If not, we have a lot to worry about in the next two weeks.

13 April 2009

The question of terrorism

From an economic perspective, India surviving the global economic recession in the coming years seems plausible. In fact, as I’ve tried to explain in my previous post, it seems almost assured. However, there is the question of terrorism.

Everyday there is some report or the other on terrorist activities disrupting – or threatening to disrupt – life in India. Terrorism has become so commonplace that I worry that the people of my country may accept it as they accept the beleaguered traffic on the roads, the power cuts in their homes and offices, or the coming of the monsoons every year. Soon, I fear, terrorism may become a part of the fabric of normal Indian life.

What’s dangerous about terrorism in India is that it is not just an ideological or a political viewpoint, but one that combines the worst of these two with strong religious and ethnic lineage and feelings. Indeed, we have a history to prove it. Since Independence, and much earlier, these feelings and differences have been hard-wired into us – and into Pakistanis – and it’s unlikely that they will be expunged soon.

How much economic disruption and damage can this terrorism cause? I have no answer to that.

10 April 2009

Can India live through the recession?

“What is the truth behind the fitful hints which reach us intimating that there exists in India an old wisdom that promises the most extraordinary development of mental powers to those who practise it.”
– Paul Brunton, spiritual seeker, in his book A Search In Secret India (Chapter 1)

With job cuts in certain sectors, a drop in demand and in production, no doubt the global recession has hit India. Interest rates have fallen, the stock market is idling, and the government is reconsidering its estimate for the country’s growth in GDP. Most likely it’s going to be far below last year’s projection of 9%. Indeed, the figure will be half as attractive as that. Still, in all probability, India will be one of the very few countries around the globe to end the year with a positive growth in her GDP.

Current market reports indicate that FMCG, retail, automotive and pharma sectors will do well... not just in the usual urban areas, perhaps less so, but by exploring markets in smaller towns and in rural India. For instance, the FMCG industry, estimated at $40 billion, is expected to have huge wins in rural markets with large populations from India’s over-600,000 villages asking for and buying branded consumer goods. Most other industries are likely to follow suit in order to grow their businesses or sustain them.

Of course, there will be some set-backs. Industries dependent on foreign markets for their customers and foreign investments will suffer. But, thanks to local demand from a large population (over a billion people with varied needs), a conservative banking system (no toxic debts to worry about), adequate resources of her own to channelise towards growth (only 20% of India’s GDP is dependent on external trade), management prowess of her industry leaders (competing with the world’s best), and an educated and skilled workforce, India is likely to live through the global recession without a great scare.

09 April 2009

India’s selflessness

At the G20 Summit’s trillion dollar global recovery plan announced in London last week, although Eastern Europe had been singled out as the region in dire need of financial aid and assistance, no help has reached it yet. Mexico alone seems to have secured a $47 billion credit line by the IMF.

Perhaps it’s because the IMF has already pledged $60 billion in loans to Hungary, Latvia, Romania, Serbia and Ukraine ahead of (and in spite of) the G20 Summit, and are a little skeptical of making further investments in the region without due diligence. However, the IMF has other requests to worry about. Turkey, Brazil, Indonesia, South Africa and South Korea have already queued up behind Mexico.

But, what about India? Wouldn’t India benefit from a little IMF funding?

According to various media sources, Prime Minister Manmohan Singh has been quoted as: “India does not need IMF funding but we have been in favour of expanding IMF resources as this will help developing countries that need assistance. It will restore confidence about emerging markets.”

Adding that, “We have agreed in favour of greater resources for the world’s developing countries, because developing countries who are not responsible for this crisis are yet major victims of the crisis.”

What explains India’s selflessness is difficult to tell. One hopes India will prosper on her own inner strength.

[Citation: India for 3-Fold Increase in IMF Equity, Outlook magazine, 7 April 2009; India helps secure G20 deal for developing countries, Thaindian News, 3 April 2009]

07 April 2009

No quick fixes

UK’s Prime Minister Gordon Brown has put it succinctly at the G20 Summit in London recently: there are no quick fixes to resolving the world economic meltdown. So, will the $1.1 trillion dollar deal help?

If anything, the financial markets around the world have responded marginally positively to the G20 trillion dollar news. But the greatest gain, certainly, has accrued to the IMF – which, I thought, had fallen out of the world economic radar in the recent past – bringing it back into prominence after years of anonymity.

It looks like, at the moment, the IMF funding and the credit lines are to be extended to smaller/poorer/fiscally-immobile/developing countries. Eastern Europe has been mentioned often, but there’s no news of Africa. Mexico’s got lucky with a $47 billion credit line; so, perhaps, names of other countries will be announced soon.

The trillion dollar deal is expected to improve trade flows, raise world output, increase demand, save people’s jobs, save several ‘poorer’ economies, and shorten the recession. To me, this certainly doesn’t sound like a quick fix; but rather, a grand plan. The question is: can all this be achieved?

The good news is, if the G20 leaders can rustle up a trillion dollars in a single day, there’s probably more money available for funding, should there be a need for another rescue operation. The bad news is, the plan doesn’t seem to account for key Western economies which are still weighed down by the debts of their banks, businesses and individual consumers. After all, that’s where the trouble started!

04 April 2009

Fend for yourself

President Barack Obama’s declaration, at the G20 Summit in London on 2 April 2009, that the United States (or rather, the American consumer) can no longer be viewed nor accepted as the role model for driving global growth is a fascinating submission.

Fascinating from two perspectives: one, that, perhaps, the age-old (American) belief of hardworking risk-takers being rewarded meritoriously now stands under scrutiny; and two, after years of following the American economic model, most countries are now left to fend for themselves.

For many developing countries, like India, this is rather sudden. For, these countries had been emulating the American capitalist model for many years and had become heavily dependent on exports to the US and other developed nations, reaping the benefits of trade, investment and currency exchange. Now, that very foundation is shaken.

What should these countries do to face this new reality? Well, no doubt, fending for oneself should be high on their agenda… looking inward, protecting jobs and businesses, increasing demand and consumer spending, and reducing overall debt. Locally, within the countries’ boundaries.

With a little blessing, things should look up in a couple of years.

01 April 2009

These are uncertain times

“The consequences of our actions are always so complicated, so diverse, that predicting the future is a very difficult business indeed.”
– Professor Albus Dumbledore, speaking to Harry Potter about the Time-Turner at the end of J K Rowling’s book Harry Potter and the Prisoner of Azkaban

While President Obama has been busy trying to revive the failing US economy, I’ve been busy dodging in and out of various corporate ‘measures’ which my company is taking in order to meet the needs of the future. Restructuring, reorganising and rationalising have been in full swing for the past few months, and some results are already in view: my CEO loses his job, my head of digital strategy is appropriated by my corporate office, and my restructured pay comes into effect today.

As I stepped into a new financial year this morning, a friend in a senior position in a leading telecom company in India called to reiterate the fact that the economic downturn has come down hard on his company and the telecom industry in general. Apparently, in his business, existing clients have delayed their renewals or renewed their contracts at substantially lower fees; prospects have either walked away or are delaying their decisions to purchase; and a few projects have been abandoned under a credit squeeze.

These scenarios are probably true for most businesses and countries around the world. But, the heartbreak for most people is the fact that nobody seems to be able to predict an accurate picture of what lies ahead.

Globally, it seems, the demand for, and hence the value of, every type of asset (including intellectual property) is falling and it is uncertain if this trend will be reversed soon. This fall in demand is creating a downward pressure on incomes from those assets, leading to losses in businesses, jobs and demand for talent (an artist I met recently is selling his paintings at one-third of what similar paintings have fetched him last year)… which, in turn, are steering economies towards a world of unhappy minds and empty stomachs.