The unprecedented invocation of Section 7 is not in enlightened public interest – it is a brazen move to force the RBI to open bank funding to desperate corporates.
M K Venu in The Wire.In
Reserve Bank of India Governor Urjit Patel with former governor Raghuram Rajan in the background. Credit: Reuters/Danish Siddiqui
The business cronies of this government have done it again. And they manage such coups each time with unfailing precision. This time, the Centre has taken the unprecedented action of sending a direction to Reserve Bank of India (RBI) under Section 7 of the RBI Act, the first step in a process of virtually issuing a diktat that the central bank must do whatever is necessary to resolve the potential credit freeze in the non-banking finance sector and relax norms for lending to small business.
The RBI over the past year placed lending restrictions on weaker banks, where non-performing assets (NPAs) and other warning indicators were much higher than normal, consequently eroding much of their capital. You can be sure once these norms are relaxed by an RBI under duress, bank funds will start flowing again to the cronies directly or indirectly because moneys are essentially fungible.
I’m told that one celebrated big business promoter from Gujarat, who is known to travel with Prime Minister Narendra Modi on official trips abroad, is currently borrowing short-term money at over 18% to meet his past loan servicing needs.
But once RBI relaxes the current stringent lending norms for banks and adequate liquidity is provided to trapped NBFCs, select big business cronies – owing nearly Rs 4 lakh crore to banks – will continue to get access to funds. In any case, these powerful promoters have managed to avoid going into bankruptcy proceedings as mandated by the RBI’s circular of February 12, 2018. Some of the power projects of the Adani Group, Essar, the Tatas and so on, who have repayment overdues of over Rs 1 lakh crore, are currently being given a fresh lease of life.
So make no mistake, the unprecedented invocation of Section 7 of the RBI Act, never done since independence, not even during the financial crises of 1991 or 2008, is not guided by enlightened public interest as the finance ministry may claim.
It is a brazen move to force the RBI to open bank funding to desperate corporates who need to save themselves so that they are also in a position to give the necessary funds to political parties via anonymous electoral bonds.
Also read: Modi Government Invokes Never-Used Powers to Direct RBI Governor: Reports
These corporate groups and their promoters remain immortal and untouched through all regimes. They manage to get a share of juicy defence contracts even while they owe over Rs 1 lakh crore of overdue loans to banks. Modi will also have to answer why a select group of promoters are getting special treatment by avoiding the RBI circular of February 12, 2018. Is there pressure on the central bank to dilute its rule which mandates that all borrowers above a certain level have to enter bankruptcy proceedings? Is a special dispensation being created for cronies?
These questions will surely haunt the Modi regime in the run-up to the 2019 elections. The sheer power exercised by these business houses is now becoming more and more apparent and naked.
Earlier these powerful forces ran a campaign against Raghuram Rajan and ensured he didn’t get an extension because Rajan had sent a list to the prime minister’s office (PMO) of politically-connected promoters who may have fraudulently diverted bank loans for purposes others than the financing of their projects.
Rajan had asked for a multi-agency probe against these errant promoters because RBI felt it alone did not have the wherewithal to do it. An RTI application by The Wire confirms that the list was sent in 2015 and the PMO is refusing to part with it even to a parliamentary committee headed by BJP leader Murli Manohar Joshi after several reminders.
Also read: Exclusive: RTI Confirms Raghuram Rajan Sent Modi List of NPA Defaulters, Action Taken a Secret
So, it is clear the government is hiding something and is now feeling impelled to get rid of the RBI chief by initiating action under the never-before-used Section 7 provision.
RBI governor Urjit Patel cannot heed the Centre’s directive as it would lower the dignity of the institution and erode the integrity of some of the tough decisions that the central bank has taken to clean up the banks and bring errant promoters to their heels. If Patel quits, India will become a laughing stock among global investors and the money markets could see unprecedented volatility. Remember, in his speech last Friday, deputy governor Viral Acharya had invoked the 2010 Argentine example where the central bank governor there resigned in protest after the regime tried to force him to part with the institution’s reserves to fill the government’s fiscal gap. The markets went for a toss after that in Argentina.
There is a strong parallel here as the finance ministry is also coercing the RBI into parting with a part of its contingency reserves (over Rs. 2.5 lakh crore) to meet the Centre’s growing fiscal deficit in an election year. All this is happening under the shadows of high oil prices, a growing current account deficit and a weakening rupee.
If the RBI governor resigns in these circumstances there could be huge repercussions. The invocation of Section 7 of the RBI Act is, therefore, an act of desperation that is bound to boomerang on the Modi government.
Martin Kettle in The Guardian
Illustration by Mitch Blunt
According to WH Auden, all good dramas consist of two contrasting acts: “First, the making of a mistake; then, the discovery that it was a mistake.” A similar corrective arc often also applies in politics. On the issue of the progressive role of the state, the late-20th-century Conservative party made a historic mistake. Now it is struggling with the dawning of discovery.
The single most obvious thing to say about the Tory party in autumn 2018 is that it is split over Brexit. But the significance of the Tory divide on Brexit, and its tendency to dominate all aspects of domestic political coverage, masks another internal argument – one that is more important in terms of the party’s history, and may hold the key to its future too.
This second argument is about the necessary role of government in shaping economic and social policy. One way or another, this is an issue that has woven its way through Conservative history since the late 18th century. Tory leaders from William Pitt the Younger to Theresa May have confronted it. Philip Hammond’s budget this week was a striking embodiment of why the issue is both enduringly important and still politically unresolved.
His budget was not the end of austerity. But it was unquestionably a decisive move away from it. If the austerity doctrine of 2010-18 had still been in full force, the £68bn windfall in government receipts over the next five years announced this week would have been overwhelmingly used to get the finances back in the black by the mid 2020s as planned. Instead, the normally cautious Hammond chose to spend the lot, mainly on the NHS, but also in a cluster of short-term giveaways and to pump another £15bn into the economy next year.
This would not have happened in the previous eight years. It has happened because May is trying to reposition her party more centrally on domestic policy in the aftermath of the Brexit deal she hopes to secure. May herself would probably have gone further this week.
May and Hammond are not trying to “out-Corbyn Corbyn”, as former chancellor George Osborne put it this week in an interview in which he offered a mea culpa on the EU referendum but not on austerity. But they see the need to counter the Labour leader. This was in many respects a holding budget, but it placed anti-austerity options in tax and spending and in the role of government back on to the Tory agenda.
May and Hammond are a bit like a couple circling a roundabout in their car, debating which route to follow, but clear which one they should no longer take.
This is where Auden’s point comes in. Many times in its pre-1975 history, the Conservative party found its way, often against its supporters’ instincts and interests, towards strengthening the role of government in rebalancing the economy in favour of the poor and the moderately waged. From Robert Peel’s reintroduction of peacetime income tax in 1842 onwards, the one-nation tradition was the key to the party’s famous ability to reinvent itself.
The problem the modern Tory party faces is not confined to the unpopularity of austerity. Its roots lie in the period after 1975, when Margaret Thatcher – massively aided by the press – captured the party with her rejection of postwar Keynesianism in favour of an agenda of privatisation, small government, tax cuts and individualism. It won the Tories four successive elections. But it was also massively destructive and divisive.
The Conservatives have not won a decisive general election majority since Thatcher did so in 1987. John Major, David Cameron and May have all led weak governments. In spite of efforts by all three, the party seems unable to move decisively beyond Thatcherism or to reconnect fully with its one-nation past at a time when it is needed. As one senior Tory put it bluntly to me recently: “We will never win a clear majority while we remain in thrall to Margaret Thatcher.”
Harold Macmillan: many of today’s Conservative MPs relate to his approach. Photograph: Fox Photos/Getty Images
Brexit is tightly bound in to this problem. Most ardent Brexiteers are ardent Thatcherites, just as most Thatcherites are Brexiteers. Many of the most threadbare of the Brexit fantasies – those about easy free trade deals, a no-deal break with the EU, Singapore-style deregulation and Britain’s supposedly enhanced standing in the world – contain ghostly echoes of Thatcher.
But the central issue is political economy. In 1938, Harold Macmillan warned the Tory party: “Unless we can continue this peaceful evolution from a free capitalism to planned capitalism, or, it may be, a new synthesis of capitalist and socialist theory, there will be little hope of preserving the civil, democratic and cultural freedoms.” No Tory MP would write in such terms today. But the essence of this warning remains valid on many levels 80 years on.
Today’s party contains more MPs who relate to Macmillan’s approach than you would ever guess from the constant publicity given to the Brexiteers. The most prominent of these is May herself, with her repeated – but unfulfilled – commitment to the section in the 2017 manifesto that said “government can and should be a force for good – and its power should be put squarely at the service of this country’s working people”.
May is not alone. Justine Greening said this week that the Tories should “get into the centre ground” and that they had not properly connected with the public in more than 30 years. George Freeman wrote in September that aspirational professional voters under 45 are rejecting the old politics. “Unless the Conservative party reconnects with them, we risk becoming a rump party of nostalgic nationalists,” he claimed. Nicky Morgan wrote last month that “we cannot secure growth in the 21st century by following a 20th-century model”. Jesse Norman, in his recent book on Adam Smith, writes: “It is easy to forget the central importance of the state in his thought, as protector of the nation, adjudicator and enforcer of justice … provider of public works, infrastructure and local schools, and, yes, as regulator of markets.” Most of the 2010 and 2015 Tory intakes share these instincts.
These MPs do not have identical views. But they all share the crucial recognition that government is, as the US writer Garry Wills puts it, “a necessary good not a necessary evil”. If Labour people tend to be too starry-eyed about government, too many Tories, influenced by Thatcher’s aberrant period of power, tend to be unduly distrustful of it. The public, who depend on good government, do not share either view.
The most interesting current question in British politics is this: what comes after May’s Tories and Corbyn’s Labour? My guess is that a large part of the answer will depend on the road May and Hammond decide to take off the roundabout to which they have belatedly returned this week.
Alan Bull in The Guardian
If the ECB wants to demonstrate how serious it is about tackling spot-fixing there are better ways to do it than shouting down the people who are presenting the evidence.
Seems like it was Mark Wood’s bad luck to draw a short straw last week. The day after al-Jazeera released the second part of their investigation into spot-fixing in cricket Wood was put up to talk to the press. He said the accusations reminded him of “the boy who cried wolf”. Maybe Wood always used to fall asleep before his parents made it to the end of the book. Right now, five months after the first part of al-Jazeera’s expose, we are still waiting to see whether the danger they are shouting about really exists, but Wood, like everyone else in English cricket, will hope this story does not end with everyone looking the other way while the wolf eats up the sheep.
Al-Jazeera’s second film was more grounded than the first. It’s built around the fact that its source, Aneel Munawar, accurately forecast the score in 25 out of the 26 passages of play in 15 different international matches. Al-Jazeera says independent analysis shows the odds he could have done that by guesswork alone are 9.2m to one. The case is not perfect; the one big problem with it is al-Jazeera’s lawyers do not seem to trust it enough to let its journalists release the names of the players involved. But there is enough evidence there now that the story should not be swiftly dismissed.
Which, unfortunately, seems to be what some of the authorities want to do. The England and Wales Cricket Board said al-Jazeera’s information was “poorly prepared and lacks clarity and corroboration”. The tone of its response was all wrong. If the ECB wants to demonstrate how serious it is about tackling spot-fixing there are better ways to do it than shouting down the people who are presenting the evidence. The ECB’s statement seemed to put it on the other side of this problem to the journalists working to expose it. Since then the conversation around the investigation has turned into a slanging match about which side is more credible than the other.
Al-Jazeera did not help by throwing back blows of its own. “The ICC, together with certain national cricket boards and their supporters in the media, has reacted to our documentary with dismissals and attacks on the messenger,” it said. “We are particularly struck by what appears to be a refusal from certain quarters to even accept the possibility that players from Anglo-Saxon countries could have engaged in the activities exposed by our programme.” That attitude may have been common once and there may still be lingering hints of it around now. But anyone who holds it is a fool.The Spin: sign up and get our weekly cricket email.
At this point the question is not whether people are spot-fixing cricket matches but who is doing it and how often. In the last 10 years bowlers, batsmen, and captains, umpires, coaches, groundstaff and administrators have been caught and banned for fixing, and they have come from England, India, Pakistan, Bangladesh, South Africa, Sri Lanka, New Zealand and Zimbabwe. You should not need any more evidence that this is a universal problem. But, if you do, Cricinfo published some last week. It was the story of a corrupt approach made to the Canadian wicketkeeper Hamza Tariq at the 2011 World Cup.
Tariq explains how a friend of a friend invited him out for drinks. The man was a cricketer, which is how they got to know each other. When they went out a second time the man brought three more friends along. They bought Tariq dinner and drinks, and offered, later in the evening, to fix him up with a woman. It was only later, after an officer from the ICC’s Anti-Corruption Unit intervened, that Tariq realised they were grooming him. Tariq was a fringe player from an associate team but last I looked the weaknesses those fixers were trying to identify and exploit – fondness for drink, money, sex – are pretty common in countries where they play Test cricket, too.
That 2011 World Cup, it seems now, fell right in the middle of an era when spot-fixing was rife. Mohammad Amir, Salman Butt, Mohammad Asif, Mervyn Westfield, Lou Vincent, Danish Kaneria: all those cases happened in 2010 and 2011. It was also around that time, al-Jazeera says, that Munawar first became involved in fixing.
It also says the ICC has known about Munawar ever since, which is one reason why it is reluctant to hand over all the information it has but would prefer to give it to Interpol instead. “We have become increasingly concerned at the ICC’s ability and resolve to police the game.”
It is not the only one to say this. Remember, Brendon McCullum criticised the ACU’s “very casual approach” in 2016. The head of the ACU, Alex Marshall, argues the unit is much stronger now and the sport has never invested so many resources in fighting corruption. But then, at the same time Marshall is saying that, the Pakistan Cricket Board has appointed Wasim Akram to its new cricket committee. Akram, you may remember, was one of a number of cricketers investigated by the Qayyum report into fixing in the 1990s. The Qayyum report concluded he “cannot be said to be above suspicion”.
The PCB chairman, Ehsan Mani, was able to justify the appointment by arguing that other players who were named in the Qayyum report were allowed to carry on working in international cricket. And he is right. One of them, Mushtaq Ahmed, was England’s spin-bowling coach for years, even though Qayyum concluded “there are sufficient grounds to cast strong doubt” on him, too. At this point indignant words do not do much to demonstrate anyone’s commitment to taking the problem seriously enough.
Irfan Husain in The Dawn
SCHADENFREUDE is a wonderful German word used to express mirth at somebody else’s woes, just as Charlie Chaplin used to giggle when a passerby slipped on a banana peel and fell on his backside.
This is how the world currently feels towards Saudi Arabia’s Crown Prince Mohammed bin Salman (or, as he likes to be called, MBS) as he wriggles in the spotlight following Jamal Khashoggi’s brutal murder. Riyadh’s early denials caused only open derision and disbelief among even supporters of the kingdom.
The problem with one person wielding absolute power and control is that when something goes badly wrong, it becomes hard to pretend he knew nothing about it. So when all we got from Riyadh for the first fortnight were blanket denials about any knowledge or responsibility for the gruesome events in its consulate in Istanbul, we responded with hoots of open incredulity.
Recently, the Saudi government released a chilling photograph of Jamal Khashoggi’s son, Salah, shaking hands with MBS while King Salman stands beaming in the background. Salah is clearly grief-stricken, while MBS has a cold, hard expression. Khashoggi’s son had been under a travel ban for a year.
While Turkey’s President Erdogan has been piling on the pressure, few expect King Salman to sideline his favourite son anytime soon. The best that can be expected is for him to be relieved of some of the portfolios he has accumulated.
Ever since Khashoggi’s assassination made headlines around the world three weeks ago, the story has completely monopolised the 24/7 news cycle. Apart from the shock and horror over the sickening nature of the crime, journalists and politicians alike saw an opportunity to flay the ruling family of what is widely seen as a rotten kingdom.
Turkish intelligence sources have revealed that the audio tape they possess of the torture Khashoggi suffered includes a segment that indicates that his fingers were chopped off while he was still alive. This, apparently, was the reason a bone saw was part of the Saudi hit-squad’s kit, and this savage amputation was intended to send out a signal to other dissidents who dared to use their fingers to write against the crown prince. Apparently, in backward tribal societies, any offending organ is hacked off to teach everybody a lesson.
Given the massive fallout from the crime, why did the Saudis think they would get away with it? The bumbling antics of the killers to cover their tracks would not have fooled Inspector Clouseau of Pink Panther fame. We had a joker who pretended to be Khashoggi walk out of the consulate in the journalist’s clothing, but wearing joggers instead of the black leather shoes Khashoggi actually wore as he entered the consulate.
The reason MBS and his inner circle went ahead with their ham-fisted plot was that they didn’t think their cover-up would be questioned. Used to eliminating domestic opponents without having to justify themselves to anybody, they genuinely thought the rest of the world was an equally lawless zone. Also, MBS — and Saudi money — had been welcomed with open arms around the globe, so he probably thought his actions, no matter how grotesque, would be swallowed.
But three weeks later, the furore continues unabated despite the hundreds of millions of dollars the kingdom has spent on public relations. Even Republican senators who once supported Riyadh without reservations have been revolted at Khashoggi’s murder. One threatened to “sanction the hell out of Saudi Arabia”.
All this bad publicity has taken the sheen off the grand investment conference in Riyadh dubbed ‘Davos in the desert’. Many important political figures from the US, the UK and France bailed out, while key business leaders decided to stay at home. The reality is that MBS is currently toxic, and nobody wants to be associated with him.
It is ironic that tens of thousands of Yemeni lives failed to achieve what one journalist’s death did: call the world’s attention to a cruel, repressive regime that has no respect for human rights. In death, Khashoggi did what all his Washington Post columns could not: shine a revealing spotlight on MBS and his nasty, wilful ways.
But at the end of the day, money talks and bulls---t walks. Although Germany has blocked future arms sales, the US and the UK have no such sanctions in mind. In fact, Trump has clearly said that Saudi arms sales are too important to forego. Western greed is what MBS is counting on. For well over seven decades, US-Saudi relations have been built on the sale of oil and arms, and despite global revulsion over Khashoggi’s killing, politicians and arms manufacturers have little shame or morality.
So after a few weeks, it will probably be business as usual.
Owen Jones in The Guardian
Charity is a cold, grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at a whim.” It is a phrase commonly ascribed to Clement Attlee – the credit actually belongs to his biographer, Francis Beckett – but it elegantly sums up the case for progressive taxation. According to a report by the Swiss bank UBS, last year billionaires made more money than any other point in the history of human civilisation. Their wealth jumped by a fifth – a staggering $8.9tn – and 179 new billionaires joined an exclusive cabal of 2,158. Some have signed up to Giving Pledge, committing to leave half their wealth to charity. While the richest man on earth, Jeff Bezos – who has $146bn to his name – has not, he has committed £2bn to tackling homelessness and improving education.
Who can begrudge the generosity of the wealthy, you might say. Wherever you stand on the concentration of wealth and power in the hands of a tiny global elite, surely such charity should be applauded? But philanthropy is a dangerous substitution for progressive taxation. Consider Bono, a man who gained a reputation for ceaselessly campaigning for the world’s neediest. Except his band, U2, moved their tax affairs from Ireland to the Netherlandsin 2006 in order to avoid tax. Bono himself appeared in the Paradise Papers – a huge set of documents exposing offshore investments by the wealthy – after he invested in a company based in Malta that bought a Lithuanian firm. This behaviour is legal: Bono himself said of U2’s affairs it was “just some smart people we have … trying to be sensible about the way we’re taxed”.
And he’s right: rich people and major corporations have the means to legally avoid tax. It’s estimated that global losses from multinational corporations shifting their profits are about $500bn a year, while cash stashed in tax havens is worth at least 10% of the world’s economy. It is the world’s poorest who suffer the consequences. Philanthropy, then, is a means of making the uber rich look generous, while they save far more money through exploiting loopholes and using tax havens.
The trouble with charitable billionaires
There’s another issue, too. The decision on how philanthropic money is spent is made on the whims and personal interests of the wealthy, rather than what is best. In the US, for example, only 12% of philanthropic money went to human services: it was more likely be spent on arts and higher education. Those choosing where the money goes are often highly unrepresentative of the broader population, and thus more likely to be out of touch with their needs. In the US, 85% of charitable foundation board members are white, and just 7% are African Americans. Money raised by progressive taxation, on the other hand, is spent by democratically accountable governments that have to justify their priorities, which are far more likely to relate to social need.
What is striking is that even as the rich get richer, they are spending less on charity, while the poor give a higher percentage of their income to good causes. That the world’s eight richest people have as much wealth as the poorest half of humanity is a damning indictment of our entire social order. The answer to that is not self-serving philanthropy, which makes a wealthy elite determined to put vast fortunes out of reach of the authorities look good. We need global tax justice, not charitable scraps dictated by the fancies of the elite.