Geopolitical notes from India
M D Nalapat
The “Indian Express” was a newspaper known throughout India for its feisty reportage, even standing up to Indira Gandhi during the 1974-76 Emergency period, when almost all the freedoms enjoyed by the people of India got extinguished. However, subsequently the newspaper took on a new avatar, with outsize influence reportedly being wielded in its columns by individuals high up in the power elite such as Palaniappan Chdambaram, the Finance Minister of India during much of the period when Manmohan Singh was Prime Minister (2004-2014). Chidambaram is best known as the father of one of the most successful businesspersons in India, Karthi Chidambaram, who within a decade has joined the ranks of the super rich, being exceptionally proficient in discovering and making lucrative investments across the globe. The many trades of Karthi and the punters and brokers close to him need to be exhaustively studied by students of finance so as to discover the secrets behind the phenomenal success of the group in its trading activities, especially on the National Stock Exchange (NSE).
His unprecedented success has made the youthful Karthi talked about in hushed reverence by stockbrokers in Mumbai and Delhi, in particular for the unerring way in which he appears to have chosen winning positions on the spot market. His influence in Singapore, Dubai and Mauritius is known to be substantial. Of course, any link to his success and the fact that his father was Finance Minister must be taken as mere coincidence, and admirers of Karthi say that his success would have been on the same scale even if his father had been in a lesser position. Returning to the Indian Express, it would appear from its columns that the newspaper has recovered much of the élan of the past, with investigative reports appearing regularly, most recently on the writing off of loans amounting to Rs 1.14 lakh crores (2013-15) by public sector banks. Fortunately for the Union Ministry of Finance, the steep fall in oil prices from $ 140 to $ 28 a barrel has given the cushion needed to underwrite such massive write-offs, as less than a tenth of the benefit of the lower oil prices has thus far been passed on to the consumer, even though petrol and diesel prices were supposed to have been decontrolled and reflect market conditions.
There has been much tough talk about bank defaulters from Reserve Bank of India (RBI) Governor Raghuram Rajan, who is building up his resume by indulging in monetary experiments which will undoubtedly form the staple of classroom lectures when he returns to the US in a few years time. However, actual steps to punish the guilty within both corporates as well as the banking system seems to be modest. Instead, the RBI has thus far succeeded in keeping secret details of just who the big defaulters are, and the extent to which such depredators are still getting access to massive bank loans even while defaulting on old loans. Certainly there are companies that have had loans go sour because of factors beyond their control, but there are also companies whose managements have systematically siphoned off (shareholder and bank) funds by over-invoicing imports and under-invoicing exports.
Under a brilliant jurist, Chief Justice T S Thakur, the Supreme Court of India has ordered the Reserve Bank do reveal the names of the top defaulters,. and it is hoped that this order will be complied with, as the public have a right to know just who the individuals and corporates are who have denuded them of so much wealth, without any visible efforts by the RBI at holding them or the bank executives who are their accomplices accountable. Prime Minister Narendra Modi has several times talked of his determination to stamp out corruption, and it is expected that he will order the Union Finance Ministry to ensure that the assets of the principal defaulters be seized and sold rather than follow the traditional practice of having the taxpayer pick up the tab.
Fortunately for the major defaulters, they have as many friends in the Opposition benches as they have in the Ruling side, which is why there has been so little political blowback to the reportage of the massive write-off of bank loans in just a few years. However, these days Civil Society is slowly emerging as a force for change, and it is inevitable that the bank write-offs will become a staple of the public discourse in the coming months. Prime Minister Modi, who won millions of votes because of his reputation for honesty, will need to move swiftly and decisively in the matter, including taking action against those who have given too long a rope to the mega defaulters, as otherwise his government will get scalded by the heat over the Rs 1.14 lakh crore bank loan write-offs to individuals who live the lifestyles of maharajahs, mostly abroad, with personal yachts, ets and villas where they entertain VVIPs with the cash they have borrowed and never intend to repay. For the moment, the spotlight is on the RBI, especially its tough-talking Governor. Will Raghuram Rajan match his words with action or will he follow the example of so many of his predecessors and try and give a free pass to those who have looted public funds?
Under Rajan, bad debts of India’s banks has grown significantly even while manufacturing has slowed because of his tight money policy, a series of measures suited to the US (the country in which he has spent almost all his adult life and to which he is expected to return after his stint in India). The RBI needs to take the lead in ensuring that the taxpayer not be made to pay for the follies of the public sector banks, which have made loans that are demonstrably bad and continue to do so. Raghuram Rajan has to ensure that the assets of the big defaulters be taken over and sold to cover the immense liabilities they have piled up, and which are silently being written off by bank managements that need to be brought to account for this in the years to come.
—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.