To Leave Or Not To Leave?

Consequences of a Greek Exit from the Euro-Zone

In the midst of renewed calls for Greece to step out of the Euro-Zone over the past few days, several vantage situations have been contemplated and cited. Analysts have argued that a Greek Exit is a matter of ‘When’, rather than ‘Whether’. But while these arguments are legitimate and reasoned, they exhibit only one side of the coin.

The consequences of a Greek exit from the Euro-Zone can be catastrophic not just for Europe, but the entire global economy. It can, and probably will lead to a break-up of the Euro-Zone, and its consequences will be grave.

Setting the Clock a couple of Decades back

The Thumbs Down to the Euro-Zone!

When we do consider a disintegration of the Euro-Zone, one needs to go back in history and look at the reasons as to why it was established in the first place. A congregation of a number of countries, and economic integration without political integration, it’s a concept which has been questioned time and again. Deemed flawed by more than a few analysts, it seems more and more likely that they were right. The vision of an empowered block of countries, rejuvenated by common market policies, brought all the major economies together to  institute a shared currency in 2000. The dream was shared and lived for almost a decade, until it turned into a nightmare. Analysing the concept itself, the idea of economic integration and common market dynamics, coupled with political incoherence and policy diversion, is a recipe for disaster.

Together We Rise, Together We Fall

But this concept, even though flawed, was realised for more than a decade.  And the Euro-Zone is, and shall remain to be, the largest economy in terms of GDP, if we were to consider it as an economic block as a whole. 

A Greek exit will lead to many more countries contemplating the same, and countries like Ireland, Spain, Portugal and Italy may follow suit. A Euro-Zone Break-Up will taken a region a couple of decades back, as far as international geo-politics is concerned. And Europe’s might, in an increasingly multi-polar world, will be considerably diluted, something which no country or leader wants.

The Economic Fall-Out

Whatever the geo-political consequences might be, the economic aftermath is bound to be a Pandora ’s Box. As and when Greece leaves the Euro-Zone, it is expected to revert back to its domestic currency, The Drachma, which would be relatively devalued. Now the good part is that reverting back to your domestic economy will help wipe off the enormous public debt. The bad part is that it will cause erosion in the bank deposits and savings of millions of people in Europe. That then will lead to a credit crunch, and lack of liquidity in the markets. The anticipation and the speculation around such a situation is another nightmare. All this will affect the global economy adversely, and contagion to other major economies would be inevitable.

So, while Greece goes to elections on June 17, and while Euro-Bonds are seriously considered, and while the ECB and the IMF firefight this sovereign debt crisis in the best way possible, it would be wise to excogitate a worst-case scenario for a Greek exit, rather than a best case scenario, which is projected by the proponents of a Greek exit.

For a Euro-Zone Exit is a path traversed never before, and no one is sure what lays ahead, not even those who are at the helm in Europe. 

Budget 2012 - The Wait for Economic Reforms Continues!

"I must be cruel only to be kind." – Pranab Mukherjee

So, Pranab Mukherjee has spoken. And spoken rather well. Hamlet was quoted, philosophy was preached. And another non-reformist/status quo budget presented before the Parliament. All this after the soap opera, which the Railway Budget turned out to be.

To be pragmatic, this budget, 7th by Pranab Mukherjee, turned out to be yet another damp squib, a disappointment, for all those who were hoping to see the sun rise over the

horizon, the sun of economic reforms.

Instead, all we got was some light at the end of the tunnel!

Some light because there seems to be a subtle effort to move towards a uniform tax regime, the GST. The gradual shift can be considered a positive sign, but its clearly not enough. Income Tax slabs, as always, have been adroitly shuffled around. Quite astutely, Pranab da has given some from one hand, while taken a bit more from the other. The expansion of the Service Tax base, and the consequent increase of 2% is just an example.

We can talk at length about the positives and negatives, for both the common man and India Inc. But there is one underlying statement in this budget - The fact that no big ticket reforms have been introduced. And that it will have to wait till 2014 now.

Economic Implications

The second wave of Economic reforms, popularly termed as Reforms 2.0, is not something which we desperately need right now in 2012-13. In an ideal world, where good economics meant good politics, we desperately need it at least 5 years ago!

A fiscal deficit of 5.6%, and a GDP growth of less than 7%, is not the kind

of numbers any government would be proud of. And those numbers are what they tell you. Look at the books closely, and its worse.

A consolidated fiscal deficit of 8%, as against an average of 2% in the rest of the emerging economies,

and a Debt to GDP ratio of 70%.

That ain't sound very sweet, right?

The fact is that you can fool the people by comparing yourself with the world economy. 7% against 3% . But cannot fool the science, the science called economics!..

This country need a >8% GDP growth rate to sustain the shameless policy of populist schemes and the never ending saga of subsidies. The moment you slip below 8% over a considerable period of time, you end up disturbing the fiscal equilibrium of the economy. That is precisely what has happened over the last 4 years.

And to achieve a >8% GDP growth, the economy needs some big-ticket reforms. And since its unlikely that we'll have that before 2014 now, as the 2013 budget will be the last one for this dysfunctional government, the wait seems to be perpetual.

Political Implications

This May will mark 8 years of the UPA rule. 8 years of a stable and contiguous coalition government. 8 years for a person in office who was known as the architect of the 1991 economic reforms. The script could not have been better for Manmohan Singh. And the deviation from that script could not have been worse either. For these 8 years has been a massive opportunity lost, a disappointment of gigantic proportions.

Manmohan Singh, in 2004, had a great opportunity to continue what he left off in 1995-96. The tars had aligned, almost mercurially, to hand him the post which matter

s the most. He was the cynosure of all eyes. The Left was vilified, for more than 4 years, for being regressive and acting like a virtual opposition. The nation went to polls in 2009, and the people empathized with Dr.Singh.

2009 was probably THE most decisive and definitive mandate for an incumbent government in more than two and a half decades.

What has followed since then has been even more historic! .. A facade in the name of politics, a farce in the name of governance, a travesty in the name of government.

"Power Corrupts. And Absolute Power corrupts Absolutely."

The policy paralysis at all levels over the past 3 years has been remarkable, considering the caliber of the people in office. As far as Manmohan Singh is concerned, the last 8 years might just have transformed his legacy, from one of that of a reformist to one of that of a dormant and passive leader.

He, most probably, will continue in office till 2014, much in the same vein. But when he leaves office in 2014, he might just realize that he has left the Indian Economy exactly where he took it in 1991. Therein lies the Rub!

Even after two terms as Prime Minister, the economic reforms of 1991 might just turn out to be Manmohan Singh's most prolific achievement.

And that will be his biggest failure.

Mohit Dayal

The Great Indian Education System!!!

This year,We have been able to achieve something which, most probably , no other educational institution in any country in the rest of the world has been able to achieve. Yes, a 100% cut-off! As unprecedented and weird as it may sound , its a bit of an achievement for our great education system! Only we could manage manage such a feat!

Blame me for being Sarcastic, but what else do you expect ? A brief look at the Brobdingnagian effort which successive governments have made in the education sector since independence , and you'll know what i'm talking about!

We have set up universities when we needed schools, given reservation to the underprivileged when they needed books and pencils , and we have let our brightest minds desert us when we needed them to give back something to the society!

For more than 40 years after independence, we set up a few elite universities and colleges , boasted about the quality of education in these institutions , and forgot about the rest of the country! We forgot the underprivileged, the children in the villages,the youth on the streets. We were happy with just a handful of IITs and IIMs.

By the time the 80s arrived, we had to give them something! Somebody had to make up for the 40 years of ignorance and inaction. Somebody had to pay for the 40 years of incompetence and absurdness. When we looked outside our windows, we saw them but pretended not to , they were helpless , with stones in their hands, and flames on their bodies! So, we sat around a table. And we came up with "The Mandal".

It would be wrong to say that merit committed suicide the day Mandal came up. It was actually hung up the barn!


Suddenly, The great economic reforms arrived , and everyone else other than those who were meant to, which is the government, started building walls and ceilings , and we were told that these were modern day colleges and universities! We believed! Almost simultaneously, some of those people started building walls and ceilings which would make it easier for us to get into those colleges! They called it coaching institutes! We believed again!


Then came The Arjun! And just like Arjun , the mythological character in the Mahabharata, he too had an accurate and perfect aim. The irony being that the target was 'The Great Indian Education System'! Rest is modern History!

We played saviour to the underprivileged and the uneducated, but that would have been possible only when more and more people would be deprived of education. Its like keeping people in poverty, so that we can play Robin Hood!


The percentage of reservation increased instead of the number of colleges and universities. The percentages of cut-off increased , instead of the number of seats and courses.

And then came a day when a student was denied admission into an institution because he did not have more than 100% marks! The precipice had been breached. Our Education System did not die that fateful day.
It died a silent death a long time ago! What we are hearing today is the echo of its requiem. And the question which stares us in the face is.. What Next?


P.S.- I have used the word "WE" instead of "Our Government" deliberately. We the elite have chosen and rejected governments and policies over the past half a century and more in this country. Its about time we stopped blaming the government for everything , and owned up to a few mistakes we have made along the way!

Are we headed for a Financial Apocalypse?

As The White House and The Congress play a terrifying game of chicken over the US government debt ceiling , the 2nd day of August 2011 seems to be the D-Day.If President Obama and the Republican right in Congress are not able to cut a deal to raise the legal limit of US borrowing – which will otherwise reach its ceiling on 2 August – then a financial tsunami will hit the system with consequences which are impossible to predict.

For the past few months there have been om

inous warnings of a new financial crisis in the United States that would likely have global repercussions if the US Congress doesn't wake up and raise the government debt ceiling, or legal borrowing limit, now set at US$14.3 trillion.But why this hue and cry over a routine exercise? Raising the debt ceiling is a normal legislative exercise in the United States of America. It has been done 39 times since 1980 - including 17 times under Ronald Reagan, seven times under George W Bush , 4 times under Bill Clinton,and three previous times under Barack Obama as well.This time however, with a new Republican majority in the House of Representatives, it has become a hot partisan issue, with the Republicans determined to display their fiscal responsibility by demanding that a plan to balance the budget be approved before a deal on raising the debt ceiling is approved.

The grave predicament is that Lawmakers fear a big drop investor confidence in U.S. stocks and bonds, which could start in Asia and sweep towards Europe and the Americas, causing U.S. stock values to plunge.

Barring action by Aug. 2, the Treasury will run out of the money needed to pay all its bills, triggering a possible default that could seriously damage the domestic economy and send damaging waves across the globe.

Ireland's debt got downgraded to "junk" status last week and people believe that President Obama and his Republican foes will cut a last-minute deal to solve this Debt crisis. But don't bank on it. It's election year in 2012, many of them would be happy to see Obama defeated over rising unemployment – it's still above the lethal 9% — and don't understand what might happen if the world's reserve currency went wobbly. After all, they didn't get the consequences of letting Lehman Brothers go bust in September 2008.

So the second phase of the bank crisis of 2007-09 might now turn into a major sovereign debt crisis for the Western world, thus following the pattern of 1929 when recovery from the crash seemed to be underway before Britain – and others – plunged back down in 1931.

And if the United States of America does default on the morning of the 3rd day of August 2011 , the consequences would be nothing less than a financial apocalypse.

The War which we are losing... Everyday.

Mumbai 1993 . Mumbai 2003. Mumbai 2006 . Mumbai 2008. And now, Mumbai 2011. Five times in the last 18 years. Yes , 5 times. Mumbai has had to bear the brunt of terrorist attacks more than any other major city in the world over the past two decades. And its not just Mumbai which has been scarred and bruised over the past two decades. Pretty much the whole of India has the same story to tell. Every major city , be it New Delhi, Ahmedabad, Bangalore or Jaipur , has been targeted in the recent past.

And what do we always do? . We always end up blaming the forces from across the border. Some Jehadist organistaion is first cursed , then our government is abused , and then we pity on our secirity forces. End of story. Life back to normal. Have we ever had an honest introspection about the reasons for this terror? Have we ever wondered as to what has gone wrong with the security apparatus of this country over the last 20 years?. Sadly , the answer is an emphatic No.

The main reason behind this painful ordeal is our nonchalant attitude towards security. Just take a glance into our daily lives , and you will know what i'm talking about. For example , we have metal detectors installed at most railway stations and shopping malls. But how many of us bother to go through them? The answer is Very few! Our police force is generally equipped with arms and ammunition which , honestly speaking, is obsolete and useless. Our coastal secutiry is a shambles. Our investigative agencies lack the technical expertise to counter new age terrorism.

We expect hawaldars , who are generally 12th pass or just mere graduates , to prevent, counter and thwart highly trained terrorists, that too with obsolete arms and ammunition. And after a terror attack , we expect the same people to collect evidence forensically and crack the case.

If we expect a police force trained and armed from the 1970's era , with counter terror laws framed more than half a century ago , to fight modern age terrorism , we are just fooling ourselves.

There needs to be a debate in this country about the larger role of the people in the fight against terror. We need to discuss the real issues which are ailing us. Just hanging Kasab and Afzal Guru won't do. We'll have to hang our cavalier attitude and perfunctory approach as well.

Is Congress the Only Option?

We are less than three years away from General Elections 2014. And more than sven years after the UPA came to power in 2004 , it seems that mantra of "Congress ka haath, Aam Aadmi ke saath" is no longer refulgant. But in a parliamentary democracy , the opposition and its strength is as much of a presursor , as anti-incumbency. And this is what makes us wonder... IS CONGRESS THE ONLY OPTION?


The main opposition force in this country happens to be the NDA. And its performance as the principal opposition party has been disappointing to say the least. But lets leave the qualitative analysis for some other day. Rather , lets have a psephological analysis in this post.

Starting from the north , BJP looks vulnerable in Haryana and it has never performed well in Jammu and Kashmir. In the other states though , it will give a tough fight to the Congress.


The Western and the Centre states do not seem to be a problem , atleast till Narendra Modi is at the helm in Gujarat. But Maharastra is fast becoming a sinking ship for the NDA. Its alliance partner Shiv Sena looks a vague form of itself , and it is fast being obscured by Raj Thackeray's MNS. The BJP , on the other hand , suffers from internal conflict and poor organisational management. All this , even after more than a decade of Congress-NCP rule.

The East seems to be an opportunity lost for the BJP. With no major allies in West Bengal and Orissa , the BJP would draw a null from more than 60 seats in these two states. The decision to go alone in the recently concluded Assam polls has not yielded desirable results , and even a coalition with the AGP seems to be a weak force when compared to the Congress.

But the real problem lies down South. Apart from Karnataka , the BJP has nothing to show for as far as electoral arithmetic is concerned. With no major allies in Tamil Nadu and Andhra Pradesh , its credentials as a national party becomes dubious. Add Kerala to the whole scenario, and we have got around 100 Lok Sabha seats where even the mere presence of the NDA is debatable.

All these accumulate to roughly 180 seats , which is close to one-third of the Lok Sabha. And to add to the woes of the NDA , it is locked in a four way battle in Uttar Pradesh , which the is the most important state , as far as the road to Delhi is concerned. Even if we refrain from speculating about the purmutations and possibilities in Uttar Pradesh , its difficult to see the NDA bringing home the bacon in 2014 in its present form.


There might be a lot of anger and discontent with the performance of this Manmohan Singh led UPA Government , but the people of this country need a viable option to effect any change. In a parliamentary democracy , numbers matter as much as policies. And despite the pathetic performance of this government , the Numbers tell a different tale.

Come 2014, we might end up with only one option for a stable government which would last its whole term. And that option might turn out to be The Congress, again!.Wake up NDA!

When the People Spoke -Analysing Elections 2011

With the results of the State elections out last week, the political landscape of the country looks as different as ever. With the thumping win for the Trinamool Congress in West Bengal and Congress itself in Assam, the UPA has gained some ground, which it lost after the Bihar and Jharkhand assembly elections last year. At the same time , the South looks anti-UPA as never before.

With the crushing defeat in Tamil-Nadu and Puducherry, the UPA looks to be struggling in the whole region. Even the win in Kerala was unimpressive and feeble to say the least.Come 2014,the UPA will be facing a 10 year anti-incumbency wave in Andhra Pradesh, the phenomenon called Jagan Reddy, and the discontent over the Telangana issue as well. If we were to consider classical psephology, the UPA is all set to lose a chunk of their Lok Sabha seats in the South in 2014.

However , The scenario in the East is remarkably different. The Left looks jaded and tired, and TMC is going ahead all guns blazing. And with Assam proving to be a Congress bastion,the East looks to be secure for the UPA. But the point to ponder upon is that whether The Congress has just rode on TMC's back in West Bengal, and whether change was so inevitable that policies did not matter? Maybe 34 years proved to be a bit too much for everybody in Bengal.








But what did these results bring for the BJP? Sadly nothing.
The NDA still continues to be a pale shadow of what it used to be. Unless and until it expands and brings in more regional parties into its fold, its sadly going to be a story of an opposition which never opposed , a challenger which never challenged.

The NDA desperately needs AIADMK and TDP in the south, and the BJD and the AGP in the East. Without more regional parties as its allies, The BJP wouldn't stand a chance in 2014. And the people of India will be left with only one choice for a stable government that could last 5 years.

With the illusion of the Third Front well and truly gone, lets hope that common sense prevails, and that these regional parties join hands with the BJP to give the Congress a tough fight, and a viable option to the people of India.

As Far as Mayawati's concerned, she can build her own statues all across Uttar Pradesh for 8 more months. The people of UP will take care of her next year. And to think that she was considered a Prime-Ministerial candidate just 3 years ago (July 2008, Nuclear Deal Confidence Motion).

Democracy truly has a way of surprising us more often than not.