Political Debates in India?

During the past three weeks, I had the opportunity of watching the US presidential debates for the first time in my life. What struck me first, was obviously how different the system in the US works as compared with India.

Be it Obama or McCain, both the candidates have very commanding personalities. While McCain has an unbelievable track record, with serving 20 odd years in the Navy, Obama makes up with his razor sharp focus and amazing eloquence and clarity. Even though I would love to see a debate of the Indian prime ministerial candidates in the coming elections, u, it does not seem likely in the near future.Rajdeep Sardesai, a journalist from CNN-IBN whom I admire a lot, has been trying to initiate this culture in India requesting for the same but thus far these has been unsuccessful.

And unsuccessful he has been for obvious reasons. While India boasts about being a secular country, everyone knows that the primary propaganda of all parties is to reach out separately to different communities on the basis of religion. While with the BJP it is the Hindu’s, the Congress uses the idea of equality amongst religions to primarily target the Muslims and other religions. Hence, the absence of a candidate being partial to a particular sect at a debate aired throughout the nation would be catastrophic for its base voters.

The basic problem that is cited is that even when people are uneducated in the USA, there is a common language everyone understands– English. Hence, everyone can follow the debate and arrive at a decision. In India, of the educated, the people in the north speak in Hindi and are primarily weak in English. In the south it is even more divided as every state’s language is different from the others. Of course, there is the obvious solution of translating the debates in various regional languages, but somehow it is simply not considered.

Another aspect that I admire about the system followed in the USA is the focus on the topics to be discussed. The questions put forth by the press are clear, concise and cutthroat, leaving no room for error, while the answers by the candidates are equally eloquent. One of the questions which was put forth in the third debate (Obama vs. McCain) was – “Given the nature and effect of the present economic crisis, by how many years do you think the government can balance its budget with respect to debt?”.When the candidate did not give a number, the moderator quickly pressed, “Are you willing to give a specific timeframe or not?”.The beauty of the discussion was that the entire episode was extremely polite but equally firm and demanding. Is this not democracy at its best?

However, I do not think that having a prime ministerial debate would be of much help in our country just yet. The primary target audience of the debates like these is the educated middle class. The upper classes (who primarily consist of the business class) would already have decided whom they would support as they would have to be associated with politicians in order to thrive in their businesses (as these factors are of utmost importance while being in the business sector in India. For Example: The latest Tata Nano episode).T he problem is that the majority of the people who vote live in these rural areas and are uneducated. And most of the middle class in India do not vote. Hence, the political parties are just taking a logical decision when they use regional influence to obtain the votes of the uneducated. Because it works, and because they are the ones who finally go and vote!

But though the debates will not be feasible for the present elections, conducting them now may be the reason why it will be in the later ones.Debates such as these will be a investment to changing the culture of politics in India. Since the policies towards globalization and liberalization in 1991, the percentage of people shifting from the poor to the middle class is increasing at such a phenomenal rate that one can expect nearly half of India to be in the middle class bracket by 2050. The middle class would vote only on the basis of what they perceive is best for them and the country and would not buy any of the ideologies that are presently part of the political parties. Hence, the political parties will have to change their strategy as well.

But the question is, why not change NOW? The truth is that with the phenomenal growth of the middle class in the past decade, the parties should be implementing the changes right now! But they are not doing so only because the middle class is simply not voting. Ask any college undergrad about his favourite movie and most of them would inevitably name Rang De Basanti. In case of a war (for example: The Kargil War), millions of the youth will line up to stand up for our motherland. But the most important part is standing up not in times of catastrophe and radical change but ensuring that we cause the consistent and gradual improvement that our country always seem to lack. This is the primary difference between our country and developed nations and the Asian tigers. In terms of consistent growth, we have a terrible track record. We so love Sachin Tendulkar and adore the unbelievable hundreds after the 10 ducks but find the ever consistent Rahul Dravid boring (Note: I am referring to the Dravid of the 90’s).We loved the idea of massive reform is 1991 when we were at the brink of the economy’s collapse and had to pledge our gold but were mum for 50 years prior to it when the growth rate was dismal.

I think the press will have a huge role to play to bring about this change. Beautiful ideas like Lead India are definitely good initiatives in this direction. I find it hard to believe that given the number of public and private institutions coming up why has it not been made mandatory for every college undergraduate to compulsorily obtain a voter ID card yet. If discussions on politics are not encouraged at this age then it is very unlikely that one is going to take interest in the development of the nation in the future. Some of the talk shows like “We the People” and “The Big Fight” are amazing ideas but are watched avidly by people in their late 20’s and 30’s.If these shows are held in different colleges with students as part of the audience, different city halls of those cities that have been earmarked by the government to be the metros of the future it would slowly and steadily cause a change.

We are at a very interesting stage in our country’s history. Dr.Abdul Kalam’s dream – Vision 2020 could be satisfied only if decisions like these are taken on the nationwide level. No matter who is the next president of America, there are going to be huge negative impacts on the Indian economy due to the economic crises in the USA (more so if Obama becomes the president, as his plans include taxing huge companies – those that primarily are driving the IT boom in India by outsourcing to us and provide companies with tax reliefs if they employ US citizens).I think this is the kind of climate our country actually needed. With the US and other country’s trying to stabilize their economies, we will have to reduce our dependence on them and start looking at our fundamentals and improve job opportunities and conditions in India to provide for the ever growing Indian workforce. If done properly, I am convinced that this would be the deciding factor on how fast we develop into a superpower.

The Sub Prime Crisis

In the recent past there has been a huge cry about the sub-prime crisis and its effect, how a number of companies have made huge losses, companies firing employees and the threat of global economic recession looming. What exactly is it? This article is an attempt at giving a basic overview of the Sub-Prime crises.

When a customer avails a loan from a bank, the bank may or may not give the customer the loan on the basis of whether they think he/she can repay the loan or not. This is done by evaluating the credit-rating of the customer, which depends on his/her salary, other loans, credit history etc. A higher credit rating signifies a better probability the payment of the loan and hence people are classified into prime (higher credit rating) and sub-prime (relatively lower credit rating) customers respectively.

As the credit rating of the person decreases, the rate of interest at which he/she has to repay the loan increases as the risk borne by the bank is more. However, if the credit rating is lesser than a particular range, banks do not sanction the loan as the risk is too great to take by the banks.Credit Rating Agencies carry out the task of rating customers. For example, in India it is done by the Credit Rating Agency of India (CRAI).

In the scenario in which the Sub-Prime Crisis took place, real estate in America was booming. The fed rate (the rate at which the federal bank gives money to banks) was low. This was primarily due to the laissez-faire approach followed by the government. As a result, the rate at which the banks were offering loans to the customers was also low.
The American culture involves a number of immigrants coming to America in order to realize the “American Dream”. No matter what place in the world, living in one’s own house is a symbol of wealth and economic improvement. These conditions provided the lower middle class a perfect and safe opportunity to acquire loans to buy homes. The general psychology prevailing in the masses was that even if they couldn’t pay the loan they had taken they could come up with alternative solutions like -:
1) Sell the house at a greater price because by then the price of the house would have gone up),repay the loan and walk away with a clean profit.

2) Use the new present increased value of the house as leverage for an extension on the loan.
3) Use the new present increased value of the house for a loan fro another bank to pay back the original loan.

Hence, a lot of Americans started availing loans, which included a lot of sub-prime customers. The banks acted on the notion that with the soaring real estate prices, even if anything goes wrong, they could keep the house as collateral and hence make a tidy profit as the value of the house would increase with time. So, they started sanctioning loans to a number of sub-prime customers. The credit rating agencies also have been accused of not rating customers correctly.

Meanwhile, as the customers were too many, the banks did not have enough funds to provide for these loans. Hence the idea of Mortgage Based securities was floated.Loosely put, financial institutions started offering securities to people in the market on the basis of getting returns on the customers paying back the loans. The people investing in these markets include people of all sections of society. Hence, the country as a whole got exposed to financing the sub prime loans.

With the financing of these loans, as demand for real estate started exponentially increasing, so did the real estate value. This had a number of indirect consequences.
As people bought houses, they started buying commodities for their homes. A new home also meant a rise in social status. Hence, by psychology, they started spending more too(especially as they thought their net worth was anyway increasing with the soaring real estate prices).This spiked up the inflation rate in the country.

As the inflation rate shot up, the government increased the fed rate in order to reduce the banks from giving loans and in turn reduce spending. But this resulted in the people seeking extension for on their loans started being offered an interest rate much higher than before. The burden of this rate being too much to bear, the customers started defaulting on the loans. As the new interest rates were more, the number of new loans financed also reduced, which meant less demand for real estate. In any case, the real estate market was booming for many years and the prices where much higher than the actual value reflected by the growth rate of the country. Hence, the prices of real estate started spiralling. This started widespread panic.

The number of people defaulting on loans mushroomed. The real estate prices fell. When banks took custody of the houses that were bought, the value of the real estate was low. In fact, in many cases it was much lower than the value at which the loan was financed, which meant huge losses for the banks. As the banks started losing money, the value of the Mortgage Based Securities catapulted. Hence the investors also started losing money. As banks lost huge amounts of money, to make up for it and straighten their balance sheets, they had to cut back on costs which resulted in a lot of employees getting fired. This topped with the growing depression in the people due to loss of their home’s started having an impact on growth.

With the losses in jobs and people losing their homes, spending reduced. This caused the growth to reduce and this is the stage at which the economy is today.

Current events regarding the crises:

• Lehman Brothers, one of the largest global banks went bankrupt.
• Two huge financing institutions Fannie Mae and Freddie Mac went bankrupt.
• Citibank, one the premier global banks posted huge losses which led to the resignation of their chairman. Currently, Vikram Pandit, an Indian is leading the bank.
• The US government announced a 700 billion dollar bailout plan to deal with the crises.