Confusing roles, Mr Chidambaram

This week India’s finance minister, P Chidambaram, has got everyone confused. At least, about his role.

A day after the central bank gave out the names of applicants of new banking licenses, without saying how many new banks it would allow, the minister gave an answer. He said there was no ceiling on the number of new banks that should be allowed. He then went on to say, the governor (the governor of the central bank) has no number in mind. Interestingly, the Governor of the RBI, D Subbarao, has been mum on the number issue, except to say that not everyone who applied, would bag one.

More recently, Chidambaram, told India’s state banks, to slash rates. In both instances, he has over-stepped his brief.

India’s central bank, has a strong reputation and is know for its regulation. It no doubt , wants to keep its autonomy, even if there is a constant tussle between it and the Finance Ministry. If anyone, only the central bank should be issuing statements on new bank licenses or whether banks should cut rates. That’s their job and Chidambaram ought not to hijack that role.

As a finance minister his business really is more about managing India’s unwieldy fiscal deficit, which is set to soar as the government doles out tax payers money in popular social sector programs. That’s the ball that Chidambaram needs to keep his eye on.

To be fair a general election in 2014, must be playing the finance minister’s mind, whose role in government depends entirely on his party’s ability to win a third term. For that to happen, a lower cost of borrowing may appeal to the common man, and largesse with bank licenses may appeal to rich corporations. The need of the hour though, is neither. It’s about making sure the economy, sputtering as it is, doesn’t grind to a halt. Mr Chidambaram, no doubt, would hate to be tagged as the finance minister under whose watch India’s economy lost its shine.

Related articles

• No need to panic on rupee slide: Chidambaram (news.in.msn.com)
• Chidambaram asks banks to reduce Base Rate (thehindu.com)
• No ceiling on number of new bank licences: Chidambaram (thehindu.com)

India’s Impractical Telecom Regulator

Yesterday, India’s telecom regulator (TRAI) dashed the hopes of millions of mobile phone users who run scared of using their phones outside their home state, because of high roaming fees. It went back on an earlier plan to make roaming free anywhere in the country under a `One Nation, One Rate’ plan. The head of the regulatory authority justified the decision by saying it is `not practical.’  An argument that is misplaced at best.

India’s is one of the few, perhaps even the only country in the world, that imposes a roaming fee within the country from state to state.  That’s because historically phone companies bid for various circles, or regions, some 22 of them, which meant they were present in some parts of the country, but not others. Some opted for mostly metros, others smaller towns. That meant that when users moved from one state to another, they roamed, often on the network of another operator, sometimes their home network.

It seems telcos, threatened with the prospect of free roaming, told regulators they would increase the rates on local voice tariffs to compensate for the loss in roaming revenue. Some said they would not offer roaming at all. Roaming is used by perhaps 10 percent of the subscriber base in India. Effectively they threatened to get the great many to subsidise the privileged few.

That’s rubbish. Only a cowardly regulator should buy this argument. India’s hyper-competitive mobile phone market has the lowest voice-calling rates in the world. Mobile telephony has transformed the lives of nearly every Indian who was grossly under-serviced by a poor and scatty fixed line network. Mobile firms to stay competitive, have for decades, kept rates low. That’s how Indians consume telephony– in small, low-value pockets, topped up-as they go. So there is really no reason that  the government should worry about the threat of increased pricing. There aren’t too may takers  for that plan.

In a free market, the consumer decides how much he is willing to pay, and what service he will opt for. For every few telcos that threaten to increase rates, there will be some who will happily keep rates the same to lure consumers. So free market principles dictate that the one with the deepest pockets will stay in business. The government’s job is really to ensure that competition remains fierce and  fair. It is not, to succumb to a management strategy that may or may not play out in terms of higher pricing. Not is it for them to worry about a loss in revenue for phone companies. That’s for the market to figure.

By falling short of the promised reforms for consumers, the government has shown that it can’t really distance itself from the politics of  the mobile phone market. In the end it seems, the regulator’s plan was not practical for telcos. Consumers would have felt otherwise.

 

Vanaprastha, Mr Advani?

This week, the BJP has been more in the news than it could have hoped for. It nominated the deeply polarizing Narendra Modi, the chief minister of Gujarat, as its key man to lead the poll campaign ahead of the 2014 general elections.  Upending that announcement, the party’s most respected leader, LK Advani, who has been credited with reshaping the BJP in the 1990s, and bringing it to power, demurred and resigned from several key posts.

Advani, 85, in his resignation letter, said he was finding it“ difficult to reconcile’ with the  direction the party was taking, hinting no doubt to Modi’s elevation in the party, which has come at the cost of Advani’s own ambitions to be the country’s prime minister.  Modi’s three terms as chief minister of Gujarat, has been pockmarked by the Godhra riots in 2002 which happened under his watch when scores of Muslims and several Hindus were killed in communal riots. Modi has never really be exonerated in public memory for failing to stop the rioting.

If Advani’s outburst is on the grounds of Modi’s sullied record, then its seems hypocritical at best, because he is seen as the architect that first swept the BJP to power on pure communal grounds.

The big question then for Advani is that at 85, can he really be seen to lead the country? Most people would agree that the prime minister’s role requires enormous amounts of energy and acumen. While Advani can clearly lay claim to the latter, he is likely to have stiff competition when it comes to the former, from leaders, equally ambitious but younger.

Everywhere in the world, both governments and corporations set age limits for retirement. It is really based on the conventional wisdom, as echoed in the Vedas as vanprashtra, something that Advani must be all too familiar with. As we age, our faculties do weaken, mostly, and we start withdrawing from active work. So why then, should we not impose that rule when it comes to our leaders? Should they not be morally and physically at their peak to serve a nation the size of India? Surely running a nation is more serious a job, than running a company.

On those grounds alone, the Advani’s and the Murli Manohar Joshi’s of the world, should give up the desire to serve in the top post. This is not to say that Modi is the best man for the job, but at least, he is not past retirement age.

Money and politics

Money and politics

India’s cricketing fiasco reveals the moral corruption of the elite

The world’s richest cricketing body, the Board for Control of Cricket in India, or BCCI, has established its moral bankruptcy. Everyone on the current board should go.

Its president N Srinivasan , has managed to sidestep a  resignation, even though his son-in-law has been arrested on allegations of illegal betting in matches in the Indian Premier League, a format  owned and administered by the BCCI. Worse it is for a team funded and owned by Srinivasan’s business, albeit presided over by the son-in-law. http://www.livemint.com/Politics/BYMBx2uEZyqtp8zEHxG56K/N-Srinivasans-controversial-innings-at-BCCI.html

While so far, none of the members of the board have been implicated in the widening probe, the motley bunch of several full-time politicians, or those claiming proximity to politicians, who form the core of the sporting board have failed to exert enough influence to get Srinivasan to resign. It raises questions of their effectiveness to deal with a crisis of reputation and conduct.  Having failed, it also makes their roles redundant. Three members resigned last week to protest Srinivasan’s  refusal to give up his role. That though, wasn’t enough. 

For a start, there is really no reason India should allow its richest sports body to be run and managed by politicians, or affiliates. Sporting bodies really be managed by sportsmen, those who live and die by the game, and understand how the game can be manipulated, and those with  stellar reputations.

In India, politicians are no longer widely held as examples of probity in public life. That has played out in multi-billions dollar scams that have rocked not just the centre, but state governments as well. Politicians have refused to voluntarily step down even when central investigative authorities have found evidence of wrong doing.

So it comes as little surprise that Srinivasan is taking his cue from the vast majority of role models in power, who seem to cling to it despite being at the heart of allegations. Srinivasan’s own exaggerated sense of importance as president of the BCCI, has blinded his ability to see that his continued presence has smashed the reputation of Indian cricket. That mirrors the attitude of tainted politicians, some of who, are serving without honour or regret in government .

Next year, India will get a chance to vote them out of power. Unfortunately, for the BCCI, those who have the power to vote Srinivasan out, aren’t effective with their vote.

 

 

 

It’s hard to cut the cord, Mr Murthy

Barely two years after the founder of India’s best regarded IT firm Infosys, stepped aside, he’s back on top. Founder Narayana Murthy announced his return as Executive Chairman. There couldn’t be a worse signal for those aspiring to look at Infosys as an example of how professional companies in India should handle leadership challenges.

Murthy’s comeback harks back to the comment that one of its erstwhile directors Mohandas Pai made about the inability of Indian companies to bring in fresh, professional management to run firms. In interviews in 2011, his last term at Infosys after a 17-year stint, Pai resigned saying his time was up at Infosys. Pai’s sudden exit shook the markets, but what became the talking point was his comment that a more transparent process was needed for  CEO selection, that companies need to look at smart young professionals with great ideas and a vision to take them forward. Or, as they say, may the best man lead. 

Pai’s remarks, reflected the hoary tradition at Infosys where the top job has traditionally gone only to those who were part of the founding team.  Perhaps, it is the management’s way of rewarding loyalty in an industry notorious for high mapower turnover. For Infosys, which has almost all the hallmarks of a professionally-run firm, unlike India’s many family-run ones, that’s an itchy scab.  It been tricked into thinking that leadership is a role that sits well on everyone as long as they have been around long enough, and that outsiders won’t understand the company and can’t run it.

History shows that to be true for Steve’s Job’s remarkable return and turnaround of Apple for sure, but not so of many others. Meg Whitman, has proved otherwise at Hewlett Packard, after she moved from eBay. Rob Benmoshe has done it for AIG. So sometimes,  an outsider can see what’s wrong and sometimes, some people are just better leaders than others. In short, leadership is a desirable professional quality and many firms don’t always have a file of leaders in-house.

In Murthy’s two-year absence, Infosys has moved from being the pedigreed darling of the market, to a mongrel. It’s stock nosedived at the last earnings announcement in April. The reason was the lackluster earnings guidance for the full year.

To be fair, the current CEO, Shibulal, an old-timer and the third such at the top job, has had to struggle with attrition and shrinking market share, at a time when overseas markets are in an economic crisis.  For a firm that’s grown on business abroad, that’s a hard one to handle. His stint has though, has also been boring with Infosys failing to do much with its cash hoard.

Pai’s grim observation must haunt Murthy now, but what’s even more obvious is the firm’s clear signal that it doesn’t care to bring in an outside professional manager. In returning, Murthy has squandered away the golden rule that sometimes, it is important to cut the umbilical cord and let the best man take the job.  Worse, he’s also signalling a dearth of professional managers in India.