You MBA Chaps Need a Dose of Political Science

The first Diwali party of the year, and guess who I find sitting right at the bar, nursing a single malt? Mr Powerful, in person, surveying the world with his supercilious gaze. (For more on Mr Powerful read The GreatestPolitician Ever).  I tried to beat the hasty, but he had already seen me.

“How are you young man?” he thundered. “Oh! Hello, Sir. Didn’t know you were here,” I said. “Of course, you did, young man. You just wanted to get away from the old bore, didn’t you?” he said fixing his beady eyes on me. “Ha, ha,” I chuckled nervously, “not at all, Sir, not at all.” I sat down next to the old codger, resigning myself to a night of conspiracy theories.

“So, how is your bank doing?” It was not meant to be a serious question, so I gave a satisfactorily meaningless answer. “We are doing pretty well, considering the economic mess the government has put us in.”

“Why? What has the government done differently from what it has been doing for the past 9 years?” he asked. It was a typical Mr Powerful question – any answer would be wrong. Therefore, I just smiled in lieu of an answer.

 “The problem with you young chaps is that you think the government was doing something great before 2009, and suddenly all of that has stopped. What do you people call it? Yes, Policy Paralysis!” The last two words carried all the weight of his contempt for – people like me, I guess.

“Let me tell you, what the truth is. While money was flowing in from the US till 2009, India was growing. It was entirely driven by credit and liquidity. On the one hand, companies were raising money from the stock markets and banks, like yours,” he said wagging a finger at me, “and on the other hand, you guys were giving easy credit to consumers to buy what was being produced.”

“The credit flow had created a wealth-effect – people actually believed they could borrow and spend more today because they were going to earn more tomorrow. Tell me, isn’t it true that you got massive raises and bonuses till 2009, and since then your salary hasn’t gone up that much?” I had, kind of spaced out, but this direct question brought me back to mother earth.

I had to admit, he was right. “Yes, that’s true. It is happening everywhere.” Like last time, Mr Powerful was using logic to draw me in.

“Nowadays, don’t you think twice before you spend?” I nodded. “See? That’s what happens when a credit bubble bursts. You get a poverty-effect. People spend and companies invest even less than what is warranted, because they are now pessimistic about the future.” Mr Powerful paused to ask for another single-malt.

“You see, till the credit-bubble lasted, the entire world of Indian business was earning money by the fistfuls. Old business, like the Tatas, Reliance, Birlas and the new upstarts, the real estate companies, the South Indian construction players, and the two Anils – Anil Ambani and Anil Agarwal. Old private banks became massive and new private banks were growing fast.”

“But, then came the collapse. If you remember, son, Manmohan and Chidambaram did a lot for industry in 2008. Tax rates were lowered, special exemptions were given, money was pumped in. And, don’t forget the pay commission arrears to government employees that kept demand stable for a couple of years.” I told him that I did remember. I mean, I have an MBA from a top American B-School. Who does he think he is talking to?

“As demand started to fall, the pie started shrinking. Now, India’s big business players – old and new – wanted bigger shares of the pie. This was the beginning of the big business battles that are being played out every day, hidden behind the so-called stories of policy paralysis.” And thus spake the conspiracy theorist.

 “You see, young man, India Incorporated has got split into various groups, operating on various axes. There are the Tatas and Mukesh Ambani, on one side, and they have two big banks with them – ICICI & HDFC. On the other side, there are the two Anils and, I supect, Kumarmangalam Birla and some smaller banks like Kotak. Depending on what battle for resources is being fought, other smaller players align themselves with these two large groups.” The man might have been talking fiction, but he did know how to spin a yarn.

“The truth is, that the government and the Congress party are also split along this divide,” he said, coming back to his favourite topic. “The Manmohan-Chidambaram duo, with their acolytes like Sibal and Anand Sharma, are on the side of the two Anils and Kumar Birla. Mukesh, Tatas and also DLF, to a certain extent, have been tied up with the Sonia Gandhi camp.”

“Try and recall how the Congress party has tried to block whatever Vedanta does and how the PMO has come to its rescue. Remember how fingers are being pointed at the PMO on both 2G where Anil Ambani gained and now the Coal Scam where CBI is trying to fix Kumar Birla. Recall how Reliance crony Murli Deora was pushed out of the oil ministry by the PM and almost immediately Jaipal came and began tightening the screws on Mukesh. Add them all up, and you will understand how this fight is taking place.” Complete hard-boiled conspiracy fiction. But, by now, I was completely hooked.

“You know, the big scams didn’t happen right now. They began in the first edition of the Manmohan Singh government, which you chaps think was fantastic. Take 2G, coal, anything. They are all old.” Well, he had me there. His logic was solid. “You see, no scam comes out unless someone spills the beans. The war at the top of India’s big business has resulted in these leaks. The media, too, is taking sides.”

“Even institutions like the CAG, need a weak or divided government to be able to expose it. Vinod (Rai? Ex-CAG?) got his strength from the internal divisions in the government.” Mr Powerful wasn’t doing a spot of name-dropping. He actually does know all these people on first name basis. Rahul Gandhi is Rahul, the PM is Manmohan: only Sonia Gandhi is Soniaji.  

“What you call policy paralysis is partly true. All senior bureaucrats are worried that they will become collateral damage in this fight. It’s a fight between two groups of businessmen being fought out as a battle between the Congress party and the government. Even when projects are cleared for one side, the other side gets them stalled.” Another pause, another single-malt.

“The big problem for the Gandhis is that Mukesh doesn’t trust them anymore. I think he is switching allegiance to Modi. Manmohan has nothing to lose, even if big business switches sides and backs Modi for PM. He doesn’t care if the Congress loses. He knows, even if the UPA wins, they won't make his PM again” he said with a wry smile. 

“You see, the problem is that this is pushing Rahul more and more to the left. He doesn’t trust India’s corporates and they don’t trust him."

“But, that is another story,” said Mr Powerful, leaning back on his chair and taking a long sip of his single-malt. His face had acquired that familiar vacant expression, which meant it was time for me to leave him alone.

“Very interesting,” I said as I stood up. He looked up sharply and said “you don’t believe me?”

“Well, there is a lot to digest,” I said. I wasn’t going to lie and say that I believed his fantastic stories. 

“Okay, whatever you want to believe. But, this is the real truth. Understand it. It will help you to become a better banker,” he said.

“You know what you MBA chaps need? You need a dose of political science,” he said looking at me with an amused expression on his face.

“Without that, you will always remain fools.”