An Indian newspaper baron once said no one owns a newspaper to make money. This may be an extreme view but every media baron and journalist will understand the sentiment. But that was before Rupert Murdoch became a force on the global media scene and radically re-set the business on its current amoral course. Suddenly it was possible to view media as a money-making business just like soap or steel and openly schmooze with the political powers to gain favours.

Nemesis of Murdochism?

Business Standard

The latest controversy in the British media, triggered by unethical professional practices by journalists at Rupert Murdoch&rsquo;s News of the World, holds important lessons for the Indian media, and not just because Mr Murdoch has a significant presence in India and seeks more. The most important lesson is that public policy must prevent the emergence of all powerful media moguls like Mr Murdoch.

Managing the Murdochs

Relief has come to the Indian economy from an unexpected quarter. Thanks to a cooling down of Asia&rsquo;s fast-growing economies and persistent low growth in developed economies, world commodity prices have softened. The medium-term trend witnessed in the past decade of a firming up of commodity prices may not have been reversed yet, but there is a thaw. The last quarter witnessed a decline in the prices of several key industrial commodities like oil, nickel, tin, steel, rubber and cotton. This comes against the background of a 30 per cent rise in commodity prices earlier in the year. Rising commodity prices were squeezing profit margins in the industrial sector, even as some manufacturers managed to pass this on to the consumer, and also exerted pressure on food prices. The G20 expressed serious concern over soaring commodity prices and the Food and Agriculture Organisation went a step further to advocate curbs on speculation in commodities.

Some commodities ease

If Prime Minister Manmohan Singh had not used the term &ldquo;expansive&rdquo; to describe the kind of reshuffle he would attempt after the Budget session of Parliament, expectations about what he is likely to do at this stage in the government&rsquo;s tenure may have been more subdued. After all, he has done one round of reshuffle at the beginning of the year and he can afford to wait for some more time before reinventing and revitalising his government. Despite the lingering bad odour of the second United Progressive Alliance (UPA) government, it remains stable and enjoys adequate support in the Lok Sabha. Moreover, the Opposition, Bharatiya Janata Party, is still unable to create a new platform for itself even when the government is offering so many opportunities, and the so-called Third Front is in disarray.

Reconstitute, not reshuffle

India&rsquo;s railways are in a mess, in terms of both finances and safety. A series of recent accidents draws attention to the decline of the Indian Railways compared to its Asian counterparts, thanks to more than a decade of political interference, populism, corruption and inadequate investment. The appointment of a new railway minister should provide an opportunity for a turnaround if the new minister decides to be a modern, forward-looking manager rather than a political hanger-on fulfilling the bidding of various vested interests. Of all the Cabinet appointments the prime minister is going to make this week, the more important ones will be in the railways. Hopefully, he will find an able leader who can first give it some oxygen and then put it on a health regimen to regain financial muscle and energetic performance. In a way the finances and safety record are related.

Accident-prone railways

As already stated in these columns, Prime Minister Manmohan Singh and United Progressive Alliance (UPA) Chairperson Sonia Gandhi could easily have taken the view that this was not the opportune time for the kind of &ldquo;expansive&rdquo; reshuffle the prime minister had promised earlier this year (&ldquo;Reconstitute, not reshuffle&rdquo;, July 12). Moreover, given the inability to meet the Dravida Munnetra Kazhagam&rsquo;s demands, the exercise had to appear tentative. Judged against the expectation of a major shake-up aimed at lifting the sagging image of the government, the exercise undertaken on Tuesday would be regarded as disappointing. It does not fundamentally alter the current image of the government. On the contrary, it gives the impression that the ruling coalition is paralysed and either unable or unwilling to undertake fundamental reform.

Not so 'expansive'

One of the first issues that the new Union minister for law and justice, Salman Khurshid, will have to deal with would be the resignation submitted by Union government&rsquo;s Solicitor General Gopal Subramanium. On Saturday last week, Mr Subramanium shot off his resignation letter, apparently in protest against the move to hire Rohinton Nariman to argue for the government in a Supreme Court case against Communications Minister Kapil Sibal. Mr Nariman is a senior advocate, but his name does not figure on the government&rsquo;s panel of law officers. Presumably, Mr Subramanium may have also felt offended by the government&rsquo;s move to hire Mr Nariman without prior consultation with him. Also adding to his pique must have been his disappointment over the manner in which the Supreme Court has been making critical observations about his client, the Government of India.

Freedom in justice

The Index of Industrial Production (IIP) numbers for May 2011 will further dampen investor sentiment and put at risk the growth projections for the year. The IIP growth number of 5.6 per cent in May 2011 over May last year is the lowest in nine months. A downward trend in IIP has been seen since December 2010, with brief interludes of good news. The slowdown in industry is a fact and needs to be tackled head-on. Of the three major components of the index, only electricity (10.3 per cent versus 6.1 per cent) has done better year on year. For the corresponding period, mining (1.4 per cent versus 7.9 per cent) and manufacturing (5.6 per cent versus 8.9 per cent), which comprise approximately 87 per cent of the weighted index, have declined sharply. Within manufacturing, the lower year-on-year growth numbers for both capital and intermediate goods indicate declining investment and manufacturing activity.

Environment for growth

For a country whose cuisine uses so much edible oil, India&rsquo;s dependence on imported cooking oil is as economically debilitating as its dependence on imported energy. Barring a short spell in the late eighties, when the country was nearly self-sufficient in edible oil production, the bulk of the cooking oil needs have been met through imports for decades. Even today, domestic oilseed production does not meet even half of the Indian consumers&rsquo; requirement. Since palm oil constitutes 80 per cent of all vegetable oil imports, India has come to become dependent on the handful of countries that have exportable surplus of edible oil. Any disruption in supplies from these limited sources can cause mayhem in the domestic edible oil sector. This problem gains greater importance against the backdrop of a deceleration in domestic oilseed production.

The other oil problem

Terrorists and extremists who kill Indians seek to divide the people of India. Every terror attack is an attempt to sow the seeds of sectional hatred and insecurity. Terrorists do not aim to kill people as an end, they do that as a means to divide people along communal or other sectional lines. While the mature response of ordinary Indian people to such provocations has been inspiring, many politicians and mediapersons have sought to exploit a national tragedy for sectional gains.

Mumbai's message

The draft Bill on microfinance regulation put out by the government has the virtue of being unambiguous. It seeks to put the Reserve Bank of India (RBI) unequivocally in charge of this sector and end the regulatory ambiguity that was exposed when the crisis in the sector blew up last year. This gap and crisis, which centred around Andhra Pradesh, prompted the state government to come up with its own regulation for the sector to contain the political fallout of suicides induced by coercive recovery practices. Those regulations were draconian and, if left to define the future regulation of the sector, would have seriously impaired its growth. Plus, there would have been total confusion if other states had followed suit and drafted their own regulatory frameworks. That would have been calamitous since microfinance is one of the key weapons, though not the only one, to fight poverty and every effort is needed to make it sustainable and self-financing.

Draft ends drift

No one still quite knows the final value of the gold, silver, jewelry and other valuable offerings locked up in the vaults of the Sri Padmanabhaswamy temple in Thiruvananthapuram. One estimate puts the value of whatever has been accessed so far at Rs five trillion. The government and the courts have quite correctly focused first on the safety and security of the discovered treasure. Nothing is more important right now than the assurance of foolproof security systems and total transparency in the organisational methods being employed to ensure proper accounting of the material found. Avoidable controversy can needlessly cast a shadow on what is very clearly a great discovery, an exhilarating find and a historic moment for the great temple, from whose deity the city in which it is housed derives its name. Historians believe that these treasures and offerings to the almighty might have been collected and placed in these vaults by the great Maharaja, Marthanda Varma.

In God we trust

Next week the Reserve Bank of India (RBI) will come forward with its quarterly review of the economy and of monetary policy. In less than two months, the tenure of the incumbent RBI governor, Duvvuri Subbarao, comes to an end. Those who have built India&rsquo;s great institutions have believed for a long time that decisions pertaining to appointment to high offices should always be taken several months ahead of the actual appointment.

Double mint

Better late than never. Australia, the world&rsquo;s biggest per capita polluter, and yet a hesitant signatory to the Kyoto protocol on climate change, has now mooted a domestic carbon pricing regime that can put the country on the track to clean development.

New climate in Australia

The challenge of &ldquo;managing the Murdochs&rdquo; (Business Standard, July 11) is less daunting than that of managing &ldquo;Murdochism&rdquo; &mdash; the idea that the media is not just a &ldquo;fourth estate&rdquo; but also a means of securing power in the pursuit of profit and securing profit in the pursuit of power, with no regard to professionalism and professional values. That is the beast that the British government and Parliament have been trying to slay this past week. Britain&rsquo;s Deputy Prime Minister and Leader of the Liberal Democrats Nick Clegg reportedly said the phone-hacking allegations against News of the World, a newspaper owned by Rupert Murdoch, have led to &ldquo;a major crisis in public confidence in yet another pillar of the establishment&rdquo;.

Murdochism and media

Last week&rsquo;s successful launch of the GSAT-12 communication satellite using the Polar Satellite Launch Vehicle (PSLV) was more than a routine event. It is the first time (second if the &ldquo;Chandrayaan&rdquo; launch of 2008 is considered) the PSLV has been used to position a satellite in a geostationary orbit, 36,000 kms above the equator. With the GSAT-12 entering service, India now has 175 active transponders that help support rapidly increasing communication services within the country. Two more launches are planned for 2011, which is clearly a step in the right direction given the increasingly communication-centric nature of the Indian economy. The successful launch should help the Indian Space Research Organisation (Isro) come out of the shadows of last year&rsquo;s controversies and failures and move forward. India&rsquo;s space programme is lagging seriously behind China&rsquo;s and the time has come for Isro to give up its pretence of being a purely civilian programme.

Back to the future

The choice of Bihar&rsquo;s Finance Minister Sushil Modi to chair the Empowered Group of State Ministers on the Goods and Services Tax (GST) has been praised as an astute move by the Union government. Mr Modi&rsquo;s assent should also be viewed as a mature move by the main national opposition party, the Bharatiya Janata Party, which is a party of government in many states and hopes to return in that capacity to New Delhi. Mr Modi has the opportunity and challenge to take forward the good work of his predecessor, West Bengal&rsquo;s former finance minister Asim Dasgupta, in getting all state governments to agree to the principle of introducing GST via a dual rate &ndash; one for the Centre (CGST) and one for the states (SGST) &ndash; to allay fears that states would lose their taxing powers.

A new bipartisanship

In less than two months after she came to power, West Bengal Chief Minister Mamata Banerjee has signed a major agreement with the Gorkha Janmukti Morcha to end the regional agitation in the Darjeeling hills which sought to alter the future shape of the state. The fact that the Left Front government was unable to deliver something that promised peace by ending the long agitation that grew with the collapse of the 1988 agreement signed with the Gorkha National Liberation Front underlines both Ms Banerjee&rsquo;s political sagacity and the leftists&rsquo; inflexibility. The new agreement has implications that go beyond the state&rsquo;s borders and offer a way in which regional agitations, like the one for Telangana, which are tearing apart parts of the country&rsquo;s polity can be ended. Ms Banerjee appears to have succeeded because her offer has an emotional and a material content.

Peace in Darjeeling

More than 80 per cent of India&rsquo;s 4,700-odd dams are over 20 years old and suffer from structural and mechanical deficiencies. They are in urgent need of repair and maintenance. The risk of dam failures in India is far greater than elsewhere because of a monsoon-driven seasonal heavy water inflow into the reservoirs. The increased frequency of weather extremes owing to climate change has added to the problem. The threat of earthquakes hangs like the sword of Damocles over many of these dams. The country has already gone through at least 18 dreadful instances of dam collapse in the past, the recent ones being those of Jamunia dam in Madhya Pradesh in 2002 and the Lawa-ka-bas dam in Rajasthan in 2003. These apart, the memories of devastation in Bihar owing to a breach in the Kosi embankment near Indo-Nepal border (at Kusha in Nepal) in 2008 are still fresh.

Securing dam safety

To pause or not to pause? That is the question the Reserve Bank of India (RBI) faces in the run-up to next week&rsquo;s monetary policy statement. While professional opinion is sharply divided, and not just between the traditional monetary policy sceptics and loyalists but also across a wider spectrum of professional opinion, business opinion is united in its opposition to a rate increase at this time. Business persons in the manufacturing and services sectors, including the financial and banking sector, are urging a pause on the grounds that further hike in interest rates would have a debilitating impact on an already slowing growth rate. While the government&rsquo;s macroeconomic authorities still hope to see fiscal 2011-12 deliver a growth rate of eight to 8.5 per cent, many others see growth slipping well below eight per cent.

No time to pause

One of the most important ideas in economics of the last century that we owe to John Maynard Keynes is that expectations play a central role in shaping the animal spirits of enterprise and decisions about investment and consumption by households and firms. Expectations are often shaped more by sentiment than by hard facts. Herd mentality, a phenomenon with which investors are all too familiar, is nothing more than shared sentiment, but it has tangible consequences for the economy. The sentiment in and on India at the moment is more bearish than bullish, and is being shaped by the view that in the realm of economic policy the Union government is rudderless and leaderless. It is, therefore, reassuring that Finance Minister Pranab Mukherjee chose to take the bull by the horns and respond to such a perception by engaging financial journalists.

The tangible intangibles

Incisive columns and editorial comment by top opinion leaders

Page 536 - Editorial Comment