The Attitude Called Indian Democracy

Democracy had me stumped. I had been trying to figure out what it means for years together. My inability to do so had me read history, read dictionaries and even put out a poll to my friends with four options hoping that a consensus would lead me to my destination. Nothing helped and I kept thinking and searching till I realized that this seeming endless search was my answer. Democracy is the flexibility of adapting to the times in order to stay the course. It permits that we change gears, alter the pace and even change tracks. All it expects is that we stay the course.

In India we say we celebrate democracy and yet the country is in a flux. Is it because we are not flexible any longer or have we lost our course? I think it is a mix of both.

The politicos and the law makers are an elitist club that has grown accustomed to a comfort zone. With the experience of the most highly placed leaders comes a particular way of doing things. The age separates them from the desires of world’s youngest democratic population. Flexibility is restricted and vision blurred. With the privileges and the inheritance bestowed upon the younger political honchos there is a chasm between their ideas and reality. The course is thus awry but flexibility plentiful to reach the top. Every new idea that can help us as a nation needs to be shaped and implemented by this collective group that evidently is disconnected with majority of the population.

Those who can make a difference are the urban, educated and aware youth. But we seem to be weary already. Not many of us are flexible to join the services (IAS, IFS, IPS etc.) that connect with the common man and shape policy. We are fixated with the private sector, and rightly so, as we want to improve our standard of living. Consequently the services are being staffed with a majority that is there not by choice but by inevitability. We are hesitant in voting and do not believe in the slow process of weeding out the unwanted with our vote. We cry for our rights and demand that we be looked after and yet every day we forget that we have an obligation of honesty, opinion and productive expression to democracy. Thus the onus to shape the nation is on shoulders who are shirking the very responsibility of altering the future of this nation.

In the last few months the Anna Hazare campaign has taken the nation by a storm. He is being credited to the point of paralyzing government policy indecision. People’s emotions, their support and their expression and extrapolation are all first time events for India of this century. I do not support Anna Hazare but I endorse his spirit and salute him for demonstrating to the people of India that one man can indeed make a difference. He has rallied the rural, urban, young, old, rich and poor Indians across religions to gather together and voice their frustration. If he can do it, if Arvind Kejriwal could get us a new law,the why can the honest, educated, well meaning, hard working youth not? People coming together in support of Anna Hazare are from myriad backgrounds but with one desire, to see honest and transparent dealing in all actions of those who are sitting as our representative. All the young working professionals have too many daily triumphs and battles in common which bring us to a common base camp. All that we need to do from here is work hard and together to be able to summit the peak of change.

Every successful summit requires courage, perseverance, guidance and a little bit of luck. We are amongst the world’s youngest countries with the world paying attention to every economic political move that we make. We have an incredibly rich history replete with heroes and role models to provide for inspiration. If we find it within ourselves to learn from our ancestors and positively maneuver the world to focus on us, lady luck will be unable to run away from us. Founders of independent India have left us the incredible legacy of a constitution. A framework that upholds equality, freedom and justice for all; and provides us the guidance that we need to help govern a nation so diverse. Only if we took time to read through it would we know that new laws and agencies are not required. We only need to strengthen the constitution, tweak parts of the Indian penal code, assume responsibility to make the representatives more accountable and to start our climb. Once we find that courage to start and work diligently with perseverance, we will easily summit the change we so eagerly await.

This is a time for India to change. This is a time for Indians to change. This is a time to change our mindset and take responsibility for all actions. We are at the end of the day a 45 year old country. For how long can we keep blaming the 60 pluses in parliament for our woes? Surely if we are smart enough to create an Infosys, win the Grammy and the Oscars, go buy and run Western iconic companies and once in a while even win a cricket World Cup; surely we are able enough to learn the ropes and steer our own nation successfully in the direction of prosperity, peace and harmony. This is the time for the youth of India to awaken and realize that their time to create history has come. We need to show our might in hard work and affirmative action. We need to engage in and explore polity, debate and discuss policy, vote for and veto in twenty first century Indian democracy. We are a great nation and the time has come to prove it. If we cannot change our destiny no one else will.

THEORY OF TRUST AND A POSSIBLE IMPLICATION ON PREVALENCE OF CORRUPTION

Being corrupt implies destroying integrity by being dishonest and tainting the object in question. The object is generally a relationship between an institution (or an officer of an institution) and an individual (a customer or stakeholder of that institution) in most cases. However, corruption also extends to individual relationships and that is in the simple form of trust. Trust is the corner stone of all relationships in my view; be it a parent-child or sibling relationship, friendship, boss-subordinate or peer-peer liaising, a doctor-patient association, state-civilian relationship etc. The presence of trust provides confidence that the individuals/institutions related in the equation will conduct themselves in an expected fashion. When that expected behavioral pattern is altered, uncertainty increases and doubts creep in causing friction in an otherwise agreeable equation.

In my experience and discussions, such encounters of broken trust are becoming increasingly common and frequent across social set-ups. These instances are of also of varieties and intensities. I am told there once was an individual who feigned illness with one friend to be able to go out partying with another set of friends. All was well until the time the friend who was lied to spotted her friend all hale and hearty making merry. No big deal really, but this definitely corroded an otherwise solid friendship especially since the trust was broken for a trivial reason. There are innumerable stories of bosses filling in their own bonus kitties and not fulfilling promises made to subordinates or alternatively unwarranted promotions being granted out of partiality. At the end of the year not only does it lead to heartburn but increases churn rates of employees in an organization impacting the team morale and general foundation of the entity in question. Negligent and unconcerned doctors cause grave damage to lives and the medical profession alike. Spousal mistrust leading to violence and abuse is only on the increase if media is to be believed. The state and the representatives of the state not delivering on their promises is now sadly an accepted part of life in India.

Why the breakdown of trust at individual levels leads to societal and professional discord is quite interestingly illustrated by Roy J. Lewicki’s framework[1] of trust and distrust.

HIGH TRUST characterized by: Hope, Faith Confidence, Assurance Initiative	· High-value congruence · Interdependence promoted · Opportunities pursued · New initiatives	· Trust but verify · Relationships highly segmented & bounded ·Opportunities pursued & risks/vulnerabilities continually monitored
LOW TRUST characterized by: No Hope, No Faith No Confidence Passivity, Hesitance	· Casual acquaintances · Limited interdependence · Bounded, arms length transactions · Professional courtesy	·Undesirable eventualities expected & feared · Harmful motives assumed · Interdependence managed · Pre-emption, Best offense is good defense · Paranoia
	LOW DISTRUST characterized by: No fear, No Vigilance Absence of Skepticism Absence of Cynicism Low Monitoring	HIGH DISTRUST characterized by: Fear, Vigilance Skepticism, Cynicism Wariness Watchfulness

If we were to assume a starting point, it may be fair enough to say that most relationships start in the quadrant of Low Trust – Low Distrust(1). There is little expectation from the involved parties of one another. However, a society largely prevailing in this mode is prone to be inefficient given the limited interdependence.

From this quadrant, the relationship in the best case scenario moves to the quadrant with High Trust – Low Distrust (2). Entities and societies in this mode are more likely to be very proficient, cohesive and with a higher quotient of well being as they are most prone to resolving conflicts arising due to trust issues[2]. With a high trust factor and a low distrust factor there is a higher likelihood of people not wanting to destroy integrity. Once that integrity is broken the relationship moves into a place which has the presence of High Distrust. It will be unfair to assume that with one instance of broken trust the relationship cascades into the least desirable quadrant of Low Trust – High Distrust (4).

Taking the case of the friend sighted above and that of professional environments, it is likely that from quadrant 2, the relationship first transgresses to High Trust – High Distrust quadrant (3). If repeated interactions lead to situations where the expected behavioral patterns are altered and/or dishonesty pursues, then the relationship is doomed for quadrant 4. In this environment interactions are fairly guarded, conversations monitored, information exchange not optimal and there are significant inefficiencies in the system.

If I take the context of the urban Indian environment today we are in the High Distrust quadrants. With the state, the relationship of the civilians is in the least desirable quadrant 4. In the case of urban middle class amongst themselves, in my view we are in quadrant 3. There are too many expectations that are laid on people in personal contexts and when these are not met with, the situation is of quadrant 4. This partly explains, in my view, the rising spousal violence, killings of employers (unorganized sector) etc. In the true professional environment money is becoming a key motivating factor and that in the environment of recession if monetary payments are not met there is severe corrosion of trust. Thus at work we are shuttling between quadrants 3 and 4. There are fewer people who trust in the “goodness” of another individual or institution.

Thus, in my view, whether we eradicate corruption or not is dependent on whether we can restore trust and eradicate distrust. If we can at least lower the prevalence of distrust, we will be able to move towards creating an environment where dishonesty is lower. Lower dishonesty will promote trust. There is a chance then that we may be able to create an environment of existence are quadrants 2 and 3. Whether, the Jan Lokpal bill, can achieve this aim, I remain skeptical! Not because of lack of trust or dominance of distrust, but because I do not believe centralization of an issue is an efficient means of arriving at a resolution.

---

[1] Ref: A Cognitive Theory of Trust, Hill & O’Hara

[2] Lewicki et al., A Cognitive Theory of Trust, Hill & O’Hara

We Don't Need No Legislation

I was in London the last week and hence missed the hoopla in the country with Anna Hazare’s fast unto death. I was back in the country for a few hours on Saturday and all I could read and hear was how this one man had given the country some hope of seeing lower dishonesty. I was not convinced; not with Anna Hazare’s spirit but with the suggested course of action, the bill itself. Call me a skeptic, call me a cynic; I just do not believe that another law in this country will actually help reduce corruption. The only thing it will do is generate employment – first for those who help the committee research the draft and then for those who become a part of the Lokpal. In fact if the Lokpal is set up it will bejust another way of exploitation and influencing.

These thoughts were loitering in the corners of my brain cells on Saturday night as I queued outside the airport waiting to get in for my next international flight. Suddenly the lingering thoughts burst to the forefront. There were two youngsters praising Anna and cursing the politicians. It was not their chatter that got my sleepy thoughts to wake up and skip around. It was their actions. As they spoke of the rampant treachery in the nation, they were trying to jump the queue. I was amused with the hypocrisy. I encountered the duo yet again at the security check, scurrying around to see how they could move ahead of turn once more.

This attitude and insincerity is what makes me a believer that legislation will not be effective in reducing or ridding the country of corruption. The interest around Anna Hazare’s fast probably benefited the media the most and the telecom company as some attention has been diverted away, finally! The rest of us will talk of this for a while and then move on to being who we are – finding the quickest route possible to achieve our goals.

Aboard my flight I was fighting my time zone clash and decided to watch a movie. I stumbled across a Naomi Watts film, Fair Game. The film is based on the autobiography of an ex-CIA covert agent, Valerie Palmer, who at the time of the US attacking Iraq was almost about to prove that there were no WMD in Iraq. As the invasion started, her husband, an ex-ambassador to Niger started questioning the government’s motives. In order to divert attention away from the tough questions that were posed, the White House made the couple a pawn. Valerie’s cover was blown, her credibility and track record trashed and her husband was made to look like an anti-American. The world knows today that there were no WMD in Iraq but there is a lot of Oil. If the White House could stoop to abysmal levels only to safeguard the President’s ratings and cover up the lies; I am sure that less powerful people, hungrier for power could stoop to lower levels. With resources and might on their side, a legislation will only be a small hurdle. Yes, I was all along thinking of the Lokpal bill.

Corruption is prevalent world over. The difference in India is that we see it blatantly in our faces every single day. That does not mean that we condone it or do not work to rid society of this ill. However, legislation can never work in the absence of willingness. Valerie Palmer and her husband decided to take the challenge head on and speak the truth. They did not succumb to the might of the White House. Anna Hazare did not worry about himself or how would his actions be received by the government. He believed that it was his duty to bring attention to the rampant corruption in the country and the need to address it and so he fearlessly forged ahead with his mission. It is fortitude that got the system to pause and pay attention. It was his sincerity and courage that got the nation to support him, however, the spirit that he would probably like to see (in my view) is probably absent; my point in case being the duo at the airport.

Legislation can work when there is a need to enforce a right, for e.g. the right to vote or the right to religion. Legislation cannot replace ethics, moral conduct or righteousness. So there can be a legislation that provides citizens with the right to query processes and get information, however, then it is up to law and lawmakers to enforce justice. Giving powers to a centralized committee to enforce “justice” in case of corruption related issues only provides an opportunity for the influential to exert pressure on one body rather than fight their ills through the system. We need to acknowledge that in any form or shape, the center of power and influence will remain the same. To bring change we need to change that core. To strengthen and alter that foundation we as citizens need to speak fearlessly and acknowledge our duties. Our primary obligation and most powerful right is the right to vote. If we execute this duty sincerely and sensibly, in time we will be able to rid the system of the leeches it has come to harbor. Our right to free speech and expression is what we need to capitalize on and not rest till the guilty are brought to justice. Numerous examples exist where with the help of truth and media, the aggrieved have secured justice. Yes there is a cost attached to all this. The cost of giving up some of our own comforts, of acknowledging that the blame game needs to start with self and of respecting that the rights that are ours are equally those of the other billion citizens of the country.

It has become fashionable to blame the government for every difficulty that we face. It has equally become a fashion to heap praises on someone who speaks against the system (rightly or wrongly). Grumbling and washing our dirty linen in public has become second nature to us Indians. We need to stop that, pause, reflect and then take a steadier course where we are in not a hurry to reach our final destination. In pace will come sensibility and responsibility. In stride will come the innate ability to render obligations, shoulder responsibilities and apportion credits. It is our country and it is up to us to shape its future. We can either speed into chaos or walk into prosperity. The choice is ours. No legislation can give it or take it from us.

Has India Really Arrived?

The July 9th edition of the Economist carried an article with the title “Overconfident India”, claiming that “Indians are complacent about the perils of multi-lateral diplomacy, and much else”. The article which had a very condescending tone evoked a variety of responses from the Indian diaspora in London. There were some who felt that recently the Economist has taken a holier than thou approach towards emerging markets (recently the publication carried a similar article on Russia) which should soften. A few opined that the general judgemental nature of the bi-weekly magazine is on a rise and creating a bad taste in their mouths. Strangely some people I met were indifferent to this article as in their view it made no difference what the Economist had to say, India had arrived. And then there was a bunch, admittedly a minority, which did think the article was based on strong arguments and stating only the obvious albeit a little too abrasively.

After having read and re-read the article and having discussed it with a number of people, I have been trying to figure out where is it that I stand. I am not sure that the tone of the article is acceptable but then the truth of the content cannot be ignored either. As difficult as it is for me to admit, I have to be truthful and say that I do believe that we Indians have let the bull markets drive our confidence to a point where it is now bordering on arrogance. Like the group of indifferent Indians we would like to believe that India has arrived on the global map and we can demand the moon and the stars and the world should deliver.

However, is it really true that we can still tempt global investors to pump their money into our country which desperately needs foreign investment? Is FDI in India still as viable an opportunity? Will FII money get the same returns in India as opposed to say the Middle East? Has India Inc generated sufficient confidence with investors to back them in difficult times? Have our regulators worked with a larger view in mind? Is our legal framework strong enough to handout timely judicious decisions? These are questions that need some honest answers in order for us to be able to really review as to how truly India has arrived.

In the last few years, it is a fact; India has received a record amount of foreign investment. While lower than some other emerging markets, the capital inflow into India had been rising until the credit crunch started. However, if one inspects more closely, most of that investment came as all global investors wanted a piece of the action. The numbers also justify this. From April 2007 – March 2008, while the FDI in the country was c. USD 29.89bn, net FII into the country was also similar at c. USD 29.40bn. In fact this FII figure would have been higher had the market not tanked in 2008 when foreign investors were net sellers of c. USD 10.64bn in the months of February and March. Hence my conclusion that investors came into India to gain from an upward momentum in the stock market not with an intention to invest from a long term basis. This in itself should indicate that we as a country have not arrived. People are not buying into our long term strategy yet.

An infrastructure deficit country, representing a USD 500bn opportunity in the next four years, India should be able to attract a lot more FDI. What is rather interesting is that the highest FDI has come into the services sector (financial and non-financial) which is almost 2.5x that of infrastructure inflow. In fact the cumulative FDI figures from April 2000 – March 2008 indicate that the most attractive investment proposition has been the services sector with 22.64% (financial and non-financial) share of the entire pool, with infrastructure accounting only for 9.35%. There has to be a reason for foreign investors not putting money into Indian infrastructure. Yes, initially infrastructure was a closed sector; however, even with 100% ownership being permitted the sector is not attracting investors. Is it the absence of independent regulators? Is it the fear of governments not being able to fund annuities? Is it the absence of quality strategic partners? There needs to be a reason for this slow moving inflow. And we need to address this. In the absence of a domestic corporate debt market and limited availability of bank funding currently (both domestically and internationally) are we planning to fund the entire spend via equity markets, PE funds and sovereign reserves?

Well it can be proposed that infrastructure and FDI represent areas where interest is just beginning to develop and so over the coming years there is tremendous potential. I will buy that for a while. Let us turn our attention to India Inc in that case and see if we as a country have given the world enough confidence to invest in our propositions because that is the key to unlocking the dollar inflow. Indians are well known for their entrepreneurship and that has never been of any concern. However, corporate governance in India has questionable for quite some time now. To quote our premier Dr Singh from his recent (July 01, 2008) speech at the Jubilee year celebration of the Institute of Chartered Accountants of India, “….I do not find adequate attention being given to corporate governance. Unless Indian firms come to be recognized world wide for good corporate governance they will not be able to compete globally in an increasingly interdependent integrated world. In the era of protectionism few bothered about corporate governance and transparency in accounting and management. Such laxity, however, is no longer possible.” For the head of the nation to say this is publicly indicates that corporate governance is indeed an issue which needs to be addressed. The question is how are we addressing this.

Corporate governance depends on the commitment of managements towards integrity and transparency in business. The legal support provided by the judiciary also goes a long way in determining corporate governance standards in a county. Most of our businesses are promoter backed businesses with decision centres being at the helm of the family. While professionals are employed, in a number of cases, these individuals do not have the authority to make judgement calls. Why talk only about the corporates. Even Indian banks (public and private sector) which have offshore branches have a system where by all decisions are made by the same central committee in India. This decision making process behind closed doors does not suggest sufficient transparency. With a lack of autonomy and accountability it is difficult to retain talent which impairs management quality. With families owning majority of the voting rights in corporate India, sometimes via cross holdings, achieving an impartial vote is difficult. Concentrated shareholding also greys the area between generating shareholder value and creating personal wealth. It becomes even more critical, in countries like India, for the law of the land to protect rights of the shareholders. The English common law legal system, which India follows, could come to our rescue here. India in fact ranks highest in the shareholders’ rights index with a score of 5. However, the rule of law index which measures the implementation of written law shows a different picture. India ranks 41st out of 49 countries ahead only of Nigeria, Sri Lanka, Pakistan, Zimbabwe, Colombia, Indonesia, Peru and Philippines. In fact our judiciary has limited capacity to deal with securities cases. While High Courts of Delhi, Mumbai, Kolkatta and Chennai are equipped to deal with such cases, they can only deal with the cases that belong within their territorial jurisdiction and only if the claim is above a certain threshold.

India’s ranking in the global corruption perception index is not spectacular either. As a nation we rank 74th, down four positions from 2006. That does not sound like progress. In fact Transparency international reports that Indians below the poverty level cough up almost INR 9bn annually to pay for basic necessities such as electricity. In addition, recently the attitude of the Indian government toward the German government offering free information on un-accounted money belonging to Indians, lying in Liechtenstein, has raised eyebrows. While other nations have taken the information provided, Indian government has taken no action and only maintained silence. This does not speak well about our attitude towards transparency and curbing corruption.

Corruption can be cleansed with time and corporate governance can be developed with time. These arguments could be put forth. Well then let us see how our regulators stack up. As opposed to dealing with one or two regulators, Indian corporates need to deal with the government of India, the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI). While the government formulates big picture policies, the RBI and SEBI are responsible for implementation and execution. There is a clear lack of co-operation and co-ordination between the government and the regulatory bodies. Take for example the 2007 budget speech of the finance minister. He announced that post the February 2007 budget, short selling for institutional investors would be permitted. There was no action taken by SEBI until late 2007 when it was announced that short selling would come in effect on 21 February, 2008, however, there is still no sign of this being put into operation anytime soon. Similarly, the same budget spoke about exchangeable bond issuance being permitted. The RBI published the guidelines only in early 2008 and even then the execution framework has not been detailed. For a country that is looking to invite investors these delays just seems too long and irresponsible. And while these are just two instances, many more such examples exist. Investors do not wait for anyone but the right opportunity and if when the cash is available our policies are not, the country will lose out as it has in the past. In fact with multiple bodies governing inflows into India, it is already tedious to set up vehicles investing in the country.

When investigated closely, there is not a single stakeholder of the Indian economy totally developed and ready to take on responsibilities and accountabilities full on. There is still a long way to go for each party involved. How can we then claim that India has arrived?

India is indeed on a growth path, a path that will lead us towards prosperity. However, it is naïve to assume that we have arrived simply because we have been seeing witnessing inflows of capital. It is presumptuous and pretentious. Since the economy has only opened 16 years ago we have only started seeing the colour of money in the recent times. This does not illustrate our supremacy in any way. If we want to continue on the growth path then as a country we need to come out of the current very difficult environment. The global financial markets are in turmoil. Domestic inflation is increasing rapidly caused by the rally in oil prices. A net importer of oil, with subsidies on oil, Indian deficit is only widening. To curb the inflation we need to increase domestic rates which in turn will slow the growth. And a net import economy we have a weak rupee (the rupee depreciated c.9% since Jan 2008) which does not bode well again does it? Let us not forget that we also need to fund the rising food costs and an upcoming election which will eat into the exchequer’s reserves. These are difficult times. Times which call for prudence and perseverance. Times which call for collective measures to be taken. It is high time for India to wake up and smell the coffee!