Vijay Kumar Gaba

I travelled to the Agra, Aligarh and Bareilly divisions of the state of Uttar Pradesh last week. Holi being the principal festival of these regions, it was the peak season of festivities in these areas. Since, in the past two years, the Covid pandemic impacted the festivities to a great extent; this year’s celebrations were particularly enthusiastic. A good sugarcane and bumper wheat crop added to the farmers’ delight. Poor realization for potatoes was a little dampener.

The elections to the state assembly have just concluded and the new government is yet to be formed. Both the principal political parties, the BJP and SP, have performed well in the elections. So the political leaders and workers were also seen celebrating with fervor.

Broadly, the aerial socio-economic view of the region appeared quite ebullient and promising.

There are few observations that I would like to share with the readers. These observations are relevant for understanding some popular political narratives, and more important, understanding the (un) relationship of politics and economics.

I have been travelling to Bareilly from Delhi for the past 25years, at least 4 times a year. In late 1990s, the distance of 260kms used to take 8 to 9 hours by road and more than 7 hrs by train in normal course. The highway was a single road (without a divider) and the train route was not electric. We had to pass through cities like Hapur, Moradabd, and Rampur. Crossing Ghaziabad district was a nightmare even till a few years ago. There were five railway crossings on the way. On a bad day, each crossing could take 30-40 minutes to cross. Travelling in daytime would mean 30-60minutes of time to cross Hapur and Moradabad cities. On the way we had to cross the river Ganges at Garh Mukteshwar, which had a narrow bridge, barely sufficient for two buses to cross each other. One overladen truck, bullock cart or tractor trolley would mean one hour of jam. A vehicle breaking down on the bridge would mean 6 to 8hrs of traffic jam and a 30-50km detour through nearby villages using unpaved roads. In the Bareilly city 5-6hrs of power cut was considered normal. On bad days the power cuts would last 10-12hrs.

The highway being a single road, it was a constant struggle to save one-self from road transport bus drivers, who for some unknown reason were always in a tearing hurry, and enjoyed scaring the traffic coming from the opposite side. The trucks were mostly overloaded with sugar cane, fodder, food grains or perilously hanging steel rods. Almost every person driving a personal vehicle had the James Bond like driving skills, for dodging the cattle freely crossing the roads; transport buses swirling like missiles; bullock carts strolling in the middle of the road; and big potholes in the middle of the roads. Driving at night was particularly challenging.

Things started improving towards the end of the millennium. Construction of Moradabad bypass road obviated the need to cross the crowded city. An Inland Container Depot (ICD) in Moradabad was set up and the project to widen the highways to 4 lanes was undertaken. Bridges were made on numerous intersections on the highway. Then Hapur bypass was constructed. The rail route was electrified to increase the speed of trains. Then the highway was further widened to 6 lanes and rail over bridges were built over all railway crossings. A new wider bridge was built on Ganges to avert traffic jams. The Delhi Merrut Expressway has made the drive on Delhi-Hapur section a breeze.

The journey now is much safer and faster. The travel time now is about 5hrs, both by road and train. More importantly, this 5hr is highly predictable since there are very low chances of a traffic jam on railways crossing or bridge.

The power availability has improved significantly in past 25years with completion of plants like Rosa (1200MW), Anpara units 6 to 9 (2200MW). The availability of power also increased from the Tehri hydro project. The distribution of power was privatized in the region, resulting in better distribution infrastructure (fewer breakdowns) and lower losses.

Similarly, the Noida Agra expressway, Agra Lucknow expressway, Lucknow Faizabad Expressway and numerous other highways and infrastructure projects have been undertaken and completed in the state in the past 25years.

The most significant development project in the state has been the focus on girl education. Significant monetary and other incentives have been provided for the primary, secondary and higher education of girls, especially the girls from minority and backward communities. This has resulted in lower net fertility rate in the state and better labour participation in past one decade. We saw some glimpses of this in 2011 census data. The 2022 census data will definitely show a bigger picture.

It is pertinent to note that past 25yrs have seen BJP (1996-2002 and 2017-2022); SP (2002-2007 and 2012-2017); BSP (2002-2007) governments in the state and NDA (1998-2004 and 2014-2022) UPA (2004-2014) and United Front (1996-1998) governments at the center. The infrastructure improvement has been a consistent quotient during all regimes. No particular government can claim exclusivity in this context.

More than the highways, the roads built under the PMGSY scheme started by the NDA-1 government and consistently pursued by the subsequent governments have made a larger impact on the life of the predominantly rural population of the state. Because these roads have brought schools and hospitals within reach of the rural population.

The point I am trying to make is that the development in India has been a gradual process. It has gained momentum in the past 25yrs with increased participation of the private sector, improved regulatory and legal framework, and advancement in technology. For example, the change in land acquisition compensation policy (2013) has played a major role in faster execution of highway projects. Availability of better equipment, improved availability of essential raw material like steel and cement, and use of geospatial technology for mapping and monitoring etc. have also made execution efficient. The political parties have the right to lay claim on exclusivity of development in their regime, but the people, especially voters and investors must learn to believe what they see and experience, rather than what the political leaders tell them in their speeches.

The trajectory of economic development in India in present days is mostly a function of demand for infrastructure, availability of risk capital, and technology advancement. The political party in power usually has a minor role in the entire development process.

There are many things that have not changed in the state or worsened with each change in the regime. I would leave that discussion for some other time.

On the Monday, 7^th of March 2022, Nifty opened with a cut of ~380points (or 2.3%), and ended the trading session almost at the opening level. Not much new had happened over the weekend to warrant this kind of fall on Monday morning. The Russia-Ukraine conflict was intense throughout the previous week and the commodity prices were already rising. Many friends enquired what could be the reason for this sharp cut on Monday. I was not sure about it, so I started inquiring from various market participants whose numbers are stored in my phonebook. Unsurprisingly, none offered any convincing explanation. Some people however felt compelled to offer an explanation, for the fear of losing the “expert” status they enjoy in my opinion.

``The exit polls today evening may show the BJP losing UP elections”, was the most common explanation offered by the experts. When I asked, how do you know about exit polls, sitting far away from UP?, they indicated that they have “credible sources” reporting from the ground. Since, I myself had travelled to UP thrice to assess the people’s mood and my view was quite contrary to these sources, I decided to dig a little deeper. What came out was absolutely astonishing. Most of these “experts” were relying on a column published by Mr. S. A. Aiyar in the Sunday’s Times of India, and some studio experts who had “personally” witnessed an anti BJP wave in UP.

As an amateur politics enthusiast, I have been actively following elections for the past 3 decades. It has been my consistent view that economics in India is politics agnostic and as such has no direct correlation with the markets (for example see here and here). Therefore, learning that one column in a newspaper, based on prejudiced imaginary, could influence the markets so much is surprising to me. Anyways, the exit polls results that evening did not concur with Mr. Aiyar and most studio experts, and the markets recovered Monday's losses in the next couple of days. Thankfully, Mr. Aiyar also changed his opinion in his next column (Sunday, 13^th March 2022) and the studio experts have also offered a variety of explanations for the election's outcome.

Regardless of the opinions and views of experts and election outcome, I would like to reiterate that drawing economic and market inferences from the election outcome may not be useful. I continue to believe that the evolution of economic policy and hence the direction and trajectory of economic growth is incremental in India.

Since independence, all the political parties in India have pursued the same economic policies paradigm with incremental changes. Only twice a non-linear shift has occurred in the economic policy paradigm – First in 1991 when the economy was opened up to the global competition (presumably under the pressure of global agencies which bailed out India out of a balance of payment crisis); and in 1998-2000 when the government gave up many monopolies to seek larger private sector participation in the economic growth (presumably to counter the impact of global sanctions post 1998 nuclear test). In 1991 we had a Congress led minority government at the helm. In 1998-2000, we had a BJP led coalition government that comprised 27 regional parties of all shades.

Like all elections, the latest elections have also thrown some new jargon like Upyogi (UP+Yogi) and Labharthi (beneficiaries of government schemes) etc. A narrative is being created to imply that free ration, housing subsidy, LPG cylinder etc. have won the support of women voters for the incumbent government in UP; and the attempts of caste and religious polarization have been mostly rejected by the voters. I would like to draw the attention of readers to the following insight I gained from my numerous travels across the state of UP, Uttarakhand and Punjab.

1.    India is constitutionally a socialist country. No government in India can adopt an economic agenda that is against the principles of socialism. All governments in the country have pursued a socialist agenda and will continue to do so. The cash transfer schemes to farmers and urban poor, free LPG schemes, health insurance implemented by the incumbent governments are incremental improvements over the schemes being implemented since independence.

The factors like technology developments, financial inclusion, Aadhar and increased awareness due to social media, etc. have only made the delivery of schemes more efficient and transparent. This trend will continue in the foreseeable future. It may in fact accelerate as the citizens become more aware about the power of their franchise and become more demanding. Free internet data could be the next offering in this series.

2.    The development narrative of governments is mostly an appropriation of a consistent trend. The expressway construction program in UP started with the Golden Triangle 25yrs ago. Every government in the past 25years has taken the process forward. The pace was slower in the first decade due to multiple obstacles (mostly land acquisition). The implementation of new land acquisition policy (2x or 4x compensation and 80% acquisition prior to commencement of construction), and better technology and equipment has led to faster execution. Between the years 2012-17 the total installed electricity generation capacity in UP increased 81% from 13053MW to 23662MW. During 2017-21 it registered an increase of 18% from 23662 MW to 27896MW. The development of civil aviation infrastructure also started more than 2 decades ago when the NDA government decided to allow private airport operators. New airports and better air connectivity has been a consistent trend for the past two decades.

3.    The analysis of the latest elections has focused much on the emergence of “women vote bank”. It is being emphasized that the women have identified the PM with the benefit schemes of free ration, housing, LPG connection, health insurance etc. and therefore overwhelmingly voted for BJP. It is pertinent to note in this context:

(i)    Mrs. Indira Gandhi had successfully created a women vote bank with similar schemes. Charming Rajiv Gandhi had also attracted women votes in large chunks to make history in 1984 Lok Sabha elections.

(ii)   Punjabi women also got similar benefits as UP benefits, but did not vote for BJP.

I have highlighted this in many previous elections since 2014 that the women voters have become more assertive in the states like UP, Haryana, Punjab, Uttarakhand, Rajasthan and Bihar. Traditionally, in these states the women were seen to be voting as “directed” by the head of the family (usually husband or father) or community leaders (Khap, Maulvi, etc.)

The Anna Hazare movement in 2011-12 and subsequently Aam Aadmi Party campaign in 2013-14, brought the political discussion to the drawing rooms and kitchens of households, from the clubs and chaupals. The women of the house started asserting herself politically and rebelled against the dictates of their fathers and husbands. Losses suffered by the parties like INLD, RLD and BSP in the last decade are clear indications of women rebelling against the “male dictate” to vote.

It would be inappropriate to ignore the contribution of Ms. Mayawati in the area of girls education. I have been frequently highlighting how the rise in the number of girls going to school (walking or cycling for several kilometers daily) has been the most striking change in UP in the past 15years.

Last weekend I happened to attend couple of e-meetings. The participants were mostly financial market participants. Few business persons and professional also were present. The agenda was primarily to discuss the current economic scenario and the trends in financial markets. However, within few minutes, the discussion digressed to the current socio-political environment. The views of the participants rekindled the memories of 1993 in my mind.

It was summer of 1993. The country was in total turmoil at that time. The unprecedented balance of payment crisis in 1990-91 had forced the government to initiate significant economic reforms - some under pressure from IMF, some forced by the massive scam in financial markets, and some voluntarily. Many small and medium sized businesses - there were very few large businesses back then - were struggling for survival. Most of them would eventually become redundant over next one decade.

Financial markets were still reeling beneath the debris of the massive scam (popularly known as Harshad Mehta Scam); even though, the liberalization of capital markets had created a certain amount of excitement amongst businesses and market participants. The stocks markets were running far ahead of fundamentals on global buoyancy.

The global geo political situation was tense post the first Iraq war, the first war that was televised live on TV. Czech Republic had ceased to exist. Bill Clinton had just taken over as 42nd President of the United States and committed to widespread fiscal reforms in US. European Economic Community created a single market bringing European Union into existence. The global markets were buoyant though economy was not doing well. Few years later, the internet boom would start that will obliterate the memories of all previous stock market bubbles.

In India, the financial capital Mumbai was rocked by a series of bomb blasts killing hundreds of innocent people. The premier stocks exchange of the country (BSE) was also targeted by the terrorists. These blasts were reportedly carried out by hard line Muslim groups to avenge the demolition of a Mughal period disputed structure in Ayodhya. The decade old insurgency in Punjab had just peaked and was brought under control, while the situation in J&K had started to worsen.

So, while the country was struggling to revive from an economic debacle, it was also struggling with communal and sectarian violence. On political front, the killing of Rajiv Gandhi had weakened the Congress Party. It had started to lose significant ground in many states; in which it would get rendered irrelevant forever. 1991-1996 would be the last Congress Party government at the center, where it had ruled since independence, except for two short breaks during 1977-1980 and 1989-1991.

In these settings, I had a chance to interact with one of the most prominent politicians in the country at that time. The man was very enthusiastic about the Hindu renaissance in the country. He claimed that all the wrongs done to the country and its Hindu majority would be undone now and the aggressors would be put to their place. Being naive in the political and religious matters, I requested him, could I ask three questions. He was gracious enough to allow me the opportunity. I asked him the following three questions. Incidentally 27yrs later, I am still waiting for the answers.

1.         Does Ram belong to only Hindus or Indians?

2.    Does Brahma creates only Hindus; Vishnu nurtures and preserves only Hindus; and Mahadev destroys only Hindus? or they are lords of the universe and creator, preserver and destroyer of "life" per se.

3.    Does Vishnu incarnates to protect the rule of Dharma or rule of Hindus?

These days, my social media timeline is inundated with messages which claim Ram to be an Indian phenomenon. Incidentally, one Union Minister has recently mentioned Buddha also to be India's contribution to the global community.

As society we are moving away from Ram at accelerated pace. We are implying that Ram is capable of being insulted and respected by ordinary people; just like any other ordinary person. Even judiciary promptly admits complaints of insult to Ram. The judges fail to assimilate that their act of admitting such cases is equally hurtful to the sentiments of millions of devotees of Ram, as it seeks to trivialize Ram as ordinary citizen capable of being insulted.

Recently, some organizations have demanded Ayodhya like decision in cases of co-existing temple-mosques in Kashi and Mathura. I have still not heard any politician saying that these demands should be suppressed, lest they become more ardent and potentially violent.

In another development the elected Chief Minister of a State has declared that as "Yogi", he would not like to visit foundation laying ceremony of a mosque. My understanding of the term "Yogi" so far is based on what Lord Krishna narrated to Arjuna in Gita. For example-

sarva-bhūta-stham ātmānaṁ sarva-bhūtāni cātmani
īkṣate yoga-yuktātmā sarvatra sama-darśanaḥ

A true yogi always see’s God in all beings and he also see’s every being in God. A true transcendentalist see’s God everywhere.

ātmaupamyena sarvatra samaṁ paśyati yo ‘rjuna
sukhaṁ vā yadi vā duḥkhaṁ sa yogī paramo mataḥ

The person who is a true yogi never differentiates between any two persons. He see’s them equally both in happiness and distress.

Equanimity is thus the primary characteristics of a Yogi. But from the recent stance of the Chief Minister it appears that the color of robes is replacing equanimity as primary characteristics of a Yogi.

The short point is that we are likely to witness a fresh round of communal disharmony in the coming years. I am neither taking any sides nor would like to sit in judgment over the conduct of the government, judiciary and other organs of the society. I am just saying that like 1990s we are likely to witness political, economic, social and geopolitical turmoil in next couple of years.

My fellow investors though would be more interested in knowing whether we shall also see a dotcom like bubble in the stock markets also. Well, I believe that is already a work in progress. Just take care of your health and security.