China needs to play a bigger role in global affair

China Must Actively Support The Palestinian Cause

2011-05-05T02:29:00.000-07:00

Even before the smell of napalm could get completely wafted away from the vicinity of Abbottabad, since this Monday early-morning incident, which, in hindsight, probably had to happen as the continuum of the devastating sense of napalm since 9/11; one more ongoing development is going to drive significant Muslim sensitivity and passion around the world.

And this time, probably, and justifiably so.

It is all about the cause of Palestine, and Palestinians, and Israel policies with its brazen and emboldened occupation of Palestine territories as the world pretends looking otherway, over the last half of the century (or from 1967, to be precise).

As they say, God help those who help themselves. Unfortunately, a significant and large part of the world, more so in the Middle-East and particularly within the cause of Palestine and its leaders, probably have not yet learnt this dictum, even though the vast majority of the Palestinians suffered silently, or by throwing occassional tantrums, as helpless kids do, due to the double-standards of the Western Civilizations, as has been observed in innumerable instances in global history; none of which probably is as starkly naked and as defining as the cause of Palestine and that of the Palestinian people.

All that the Palestinian people have learnt, over more than the last fifty years, is that they learnt practically nothing; even when the common vested and one-sided interests of the united Western Civilizations behind Israel lay bare in front of their eyes.

But those eyes heard no evil, spoke no evil and not even witnessed any evil. As observed with low-level nations and national leaders, most of the nations and regions which were part of Colonial rules until the middle of the last century, we should blame ourselves for the prophecy of this (disputed) Churchill-quote:

‘Power will go to the hands of rascals, rogues and freebooters. All Indian leaders will be of low calibre and men of straw. They will have sweet tongues and silly hearts. They will fight amongst themselves for power and India will be lost in political squabbles.’

Time to congratulate Mahmoud Abbas as he finally realized who the bigger enemy to the cause of Palestine is. He might have never been a rascal or a rogue or a freebooter, but he was Pollyannaish in his expectations from the U.S., from the U.N and from Obama too. President Obama may be enjoying a surge in his domestic approval rating for killing Osama bin Laden; however his global stature would surely get affected by this decision of Mahmoud Abbas, leader of the Fatah movement, and a genuine representative of the Palestine cause.

Palestine may not have been India or their leaders may not have been like that of Indians, neither did they face similar types of challenges. But what most of these leaders, freed from Colonial rules after the second world war, lacked is a basic sense in telling them when to follow and support your (mostly democratic) opponent for the bigger cause of the nation. They simply didn’t understand anything beyond their own beliefs, ideologies and interests.

Most of these leaders of these new-born nations, which at times resemble ‘failed state’ as Pakistan looks like one right now, truly fought amongst themselves for power, from the Indian sub-continent to the Middle-East. It makes one wonder whether these nations were indeed ready to govern themselves; or what poison did the Colonial rulers left behind that we, residents and citizens of these nations, have not been able to overcome yet, even over the last half-century.

The only poison one can think of is that of the ‘divide and rule’ philosophy. And yes, historically this region had much more diversity than observed anywhere else - be in the U.S. or in Europe - in religious lines and sects, in languages, and in tribal manners and cultures, and in their respective numbers, etc.

But as they say, bad times don’t last for ever. Apparently, after the grand fiasco of Obama-led attempt to find a solution to the long-standing Palestine dispute led nowhere where history repeated itself with such failed attempts from predecessors of Obama; Hamas and Fatah have signed a historical accord to end their rift. This job was long overdue from the Arab League, or influential Middle-East players (Saudi Arab or Iran - whoever aspires to be in that position, for the bigger benefit of Shia-Sunni-other factions of the region, and not merely for any regime or sect per se).

But they were either puppet of the West, or pariahs. Arab revolution has been changing that.

Surely the Arab Revolution, of which Israel was worried about, more for ouster of Hosni Mubarak (and its impact on Israel-Egypt Peace Treaty) has started delivering. One must congratulate Egypt, and the leaders of Palestine - irrespective of their permissible different ideologies, to come together for a bigger and better cause. Palestine has its only hope in its own unity, and not in the doors of the White House or the United Nations.

Rather than welcoming this development, a brief observation of BBC’s HARDtalk this morning, of Stephen Sackur with Ghazi Hamad, spokesman for Hamas, alerted me on what is likely to come now. Both the U.S. and the EU members have warned how Hamas idealogy comes in the way of genuine Palestinian aspirations (‘playing the old gramophone’ in the age of YouTube and WikiLeaks), and threatened to cut aid to Palestine, in this pretext.

I am not sure how much of that shortfall can be made-up by the oil and cash rich Arab governments. And aid is just one small part. Any genuine aspirations that can provide Palestinian people their legitimate and justified rights, surely would be met with all types of overt and covert derailing plans.

(This author have had one such experience recently, within Indian political establishment, media and big business groups, regarding Jan Lokpal Bill. The stakes and interests for Palestine are much bigger).

So here comes the role of China. Irrespective of the laudable task achieved so far and so early by a changing Arab World and changing Middle-East, the legitimate aspirations of Palestine and Palestinian people would be lost without the backing of a powerful voice, be it in the UNSC or elsewhere. And the problem is, other than China and Russia, rest three UNP5 members stand united in their definition of human rights and freedom and what not, with their obvious double standards.

And high time that the rest of the voices across the world also back legitimate and justified demand of Palestine people this time, when they look for:

‘We will have one authority and one decision. We need to achieve the common goal: a Palestinian state with full sovereignty on the 1967 borders with Jerusalem as the capital, no settlers, and we will not give up the right of return’. There are times to examine the speaker and not the content, and there are times to examine the content and not the speaker (Mr. Khaled Meshal, leader of Hamas) or his/her or even the group s/he represents - their ideologies, in the past or in present times, whatever.

Let the diplomats of the world stop playing the old battle of words which have become not only archaic, but also a time-wasting tactics when real people suffer in real time.

Over the last few years, many have been advocating for China’s need to play a bigger role in global affairs. Monopoly, anywhere, is bad. At the same time, China has steadfastly refused to be drawn into these distracting affairs, probably believing still that it is better to ‘hide one’s capacities & bide ones time’ as Deng Xiaoping might have stated.

There is reason for China to do so. It has very clear priorities, and the priority of the 1.34 billion Chinese people as a collective body come on top of everything else.

Rest of the world must respect same, at the same time, rest of the world would look for someone with the ability to counter the overt and covert means to derail Palestine getting its aspirations met, by standing-up for their rights and aspirations, with the maturity of a state power having a veto in the UNSC, and thereby not allowing these unified Palestine aspirations to be hijacked by vested interests again, as it has happened umpteen times in history.

A careful analysis may represent that China, if they really engage with Palestine for their legitimate aspirations, would not only do it for Palestine or a global cause; but it would also create a tremendous direct and indirect benefit for China as well, starting with tremendous good will for China, to the opportunity of being a close ally at the heart of the oil-reserves of the world, making China popular amongst the people of the Middle-East and Arab World.

By doing so, China (along with Russia particularly, with rest of BRICS and rest of the world) will not be against the West or Israel - rather they would be rallying behind a right and a just cause, that somehow the West has mastered to hijack without any real intention or resolve, in the pretext of attempting to find ‘a just and fair’ solution for one party only.

So, contrary to what many would love to see, China has not yet taken up the task of fighting the Fed., when the actions of the Fed., as the supplier of the currency of the world, has not been at the best interest of the world, more so for the poorest people of the world, who have been affected the most by the rising food inflation everywhere. China has not been an exception from that rising inflation challenge, derailing its own growth prospects.

There are times when a nation must stand for its priorities and principles, beyond its national agenda, and may even find easy solution to those problems through global discourses at global platforms. Remaining aloof in all other developments that does not directly provoke China may not best serve China’s domestic interests for the longer term.

Much of the developing world and its people would love China to stand up for the just and fair cause of Palestine, beyond diplomatic exchanges alone. Let China not ‘bide for its time’, when the cause is global, justified, legitimate and long-overdue. It did offer Greece bail-out money or business deals, which Greece didn’y need as much as Palestine now needs aid, in view of the first line of retaliation from the West. China offered its heavy weight behind euro when there were doubts for euro’s survival not long ago. However China realized euro is needed to counter the dollar, for China’s own interests, and as much as for the world economy.

Similarly, same Chinese and developing world interests tell us that China needs to be more involved in global affairs, probably with Palestine, starting today.

I invite you to visit my blog, Wondering Man (or take a look at my book,Wondering Man, Money & Go(l)d that rightly predicted many of the economic and geopolitical crises, to the gold prices and the currency disputes). You are also invited to join me on twitter.

Dollarization vs. Globalization

2010-11-07T20:49:00.000-08:00

Back in 2006, when I wrote Wondering Man, Money and Go(l)d, I used the term dollarization for the first time. Subsequently I used the term in few of my articles, however always to convey a different meaning than what's usually meant by it. I used the term as opposed to globalization in its objective and spirit, with a sharp negative connotation.

There was reference to dollarization by others, as in Wikipedia, however my usage of the term had a different meaning, more similar to dollar hegemony in the context of the increasing globalization.

The traditional meaning of the term, as followed by most others, globalization has resulted in dollarization. They think globalization is the objective, dollarization is a by-product of globalization. I see dollarization as the sole objective, globalization has been a pretext to achieve it.

My objective of using 'dollarization' in the book was to highlight the differences that exist between true globalization and free capital flows. I wanted to mean that compared to the degree of globalization in free trade and services (which naturally should have created a sort of equilibrium for employment market and employee salaries globally), what we have effectively seen is dollarization, meaning flooding the global economy with dollars (or other global currencies) in the name of liberalizing or reforming capital flows, and thereby creating equilibrium in asset prices. Wages of people if developing nations are not comparable to wages of people in developed nations, however real estate prices are increasingly becoming comparable - thanks to the free capital flows sans free trade in goods or services.

I used the term to show how a form of skewed globalization has effectively resulted in a severe form of dollarization. Equilibrium of employment market has remained where it was decades ago, as one can see through daily wage rates in India against hourly regulated wage rates in the U.S.

I use the term dollarization not to mean its standard meaning, that is when a nation officially and willingly uses dollar (or currency of another nation's central bank) as its official currency. I use the term dollarization to convey the moral wrongs done by it when a poor nation's wealth gets legally stolen due to free flow of capital from richer and more indebted nations, having global currencies, to poorer but less indebted nations.

Global policy used above sense partly when it covered dollarization. It stated 'The United States derives great economic and political power from this dollar hegemony...Dollar-denominated notes, especially $100 bills, grew in popularity with individuals as well as criminal networks, becoming the US's largest export.'

I want the earth plus 5% is an important article that I came across while researching to write my book 'Wondering Man' which effectively wanders on describing money, gold, human beings and our societies in the 21st century, and in perceiving God and Nature.

In that article on 'earth + 5%', the lead character Fabian, who eventually designed and developed present versions of monetary policies that all nations of the world has been following, boasted: "Let me control the nation's money and I care not who makes its laws."

Since then, I got interested to find out the global money supply and how much of it has been in dollars along with growth of global money supply and growth in dollar supply. However I found this piece of information to be as unfathomable as finding God himself. I am not sure whether I missed this piece of information on the web or not, presented in a simple format. The web practically has all information, however when I last researched this area, I didn't find any simple fact-based answer to this apparently simple but important question.

The answer of above question has remained elusive, however the answer to another such question is likely to be equally explosive. Basic research on the question, which nation has benefited the most from the globalization, is likely to elicit different answers. Many may say it is China, many may talk about other exporting economies or even the broader developing group of nations. However my answer to this question would be the U.S., because they achieved dollarization through globalization. Global Policy has been right when it noted that 'Dollar-denominated notes... (became) the US's largest export.'

However surrogate measures on growth in Indian money supply over last few years gave an indicative figure of 10%, that is due to dollar (or speculative capital) inflows, and over the years - it has been growing. RBI effectively has no control over it. The 10% figure may sound small, but its impact can be gauged by the dancing of global asset class prices (and thereby inflation) in line with the Federal Reserves.
This is not surprising as global financial markets now dance to the whispers of the Federal Reserves. Commodity prices move in same line as Fed. policies indicate and real estate prices follow the same. Thirty years back if one traded in markets in India, one probably did not even know the name of the central banker in the U.S. and who its chairman was. It did not matter.

Now one may trade in Indian markets and can make money without knowing the name of Indian Central Bank or its chief and their policies. It is even better to ignore RBI and its policies, whatever loud there voices should be due to local presence. Following local central banks may lead to confusion in trading calls, and thereby the trader may not be able to make enough money or may even make losses if the trader takes positions in derivatives following what central banks of these nations probably recommend.

The efforts of the Federal Reserves in "Let me control the world's money and I care not who makes its national laws" so far has been hugely successful. There apparently is no law or objective in the global sense that examines the role of the Federal Reserves in its global role, unlike its twin objectives of employment and inflation in the U.S. context.

As a citizen of the world and as a citizen of India, however I am concerned that an agency has been getting disproportionate power in controlling the world's money, without any accountability to the world's populace of 6.5 billions, barring only 300 million odd Americans. As Fabian realized, I also believe that it does not matter who makes the national laws as long as the power of making money rests with someone else.

I understand that this concern of mine is shared by quite a few more. Many others share this concern, many without realizing the profound nature of control that comes with controlling money, as Fabian realized. Global policy-makers or national policy-makers however seem less concerned, or rather feel helpless. So people sharing my opinion belong to the minority section, or probably under extreme minority section.
The concerns however are not minor ones. Individually or nationally, we may feel helpless against the ongoing system of dollarization from the U.S. Collectively, as many trade-groups have been thinking now with the latest wave of dollarization, we can create a significant force to slow down this dollarization effort. China has started making voices (or noises, whatever) against it, however the time to provide lip-service concerns on this serious area is probably over.

The time has now come to act - collectively, firmly and fast. Dollarization of the world, under the pretext of globalization must stop, not only to stop wealth stealing, but more importantly to ensure no unaccountable agency like the Fed. can boast of saying "Let me control the world's money and I care not who makes its national laws".

Once the Fed. completely succeeds in controlling the money of the world, we all would lose the power to make laws against it. That's why Fabian settled for "Let me control the nation's money and I care not who makes its laws" than trying to make laws as a government.

I invite you to take a look at my book, Wondering Man, Money & Go(l)d that rightly predicted the housing-led economic crisis of 2008, rise of gold prices to the currency war being played now. You are also invited to join me on Twitter.

Time for China to fight the Fed., for stability

2010-10-13T19:53:00.000-07:00

There’s an old saying in the Wall Street that advises its participants not to fight the Fed. The axiom makes a fundamental assumption that there may be times when the Wall Street finds it appropriate to fight the Federal Reserves (Fed.).

Over last many years, since Greenspan ‘put’ era and now with Bernanke’s super-easy monetary policies; many see that the Wall Street has rather been well protected by the Fed. In the present context, Greenspan said that the best economic stimulus is rising market. Bernanke et al. obliged, overtly and/or covertly. Bernanke may not get an ‘A’ when it comes to employment generation or its protection; however he would surely get one if the objective of the Fed. would have been protecting the Wall Street.

So obvious question is - why should the Wall Street ever think about fighting the Fed.? A rising market, at all times, even beyond the bubbles, is in obvious interest of the Wall Street. Unless, of course, one has been having contrarian views like being a short-seller in a mad bull market, or an optimist in times of crash by going long. Problem here too is, markets can remain irrational (‘irrationally exuberant’ as Greenspan put it) for much longer to drive this minority contrarian views out of the market.

There is now ample credible literature that proves that markets are not rational. People however expected that Central Bankers would behave rationally and would thereby try to bring some rationality to the irrational markets. However, when the mother of all Central Bankers, the Federal Reserves itself aided by the BOJ and alike start aiding the Wall Street irrationally; it is polyannish to expect rationality to return in global financial markets due to more rational actions from the Central Bankers from the BRIC community, or from the rest.

In this era of higher degree of financial globalization than physical globalization (for trade or services), the Fed. therefore exerts a significant influence in global financial markets, beyond the borders of the U.S.

We no longer live in a free market, we rather live in a ‘Fed.’ market. And main street globally is fed-up with it.

It essentially devalues currency and drives the price of other assets higher, creating a speculative atmosphere. Gold has been a classic example of it. It also fosters inflation. Problem with inflation is, there isn’t a single measure of inflation as with cost of capital, that is interest rate. Coming from India, it has been hard for me to believe that Japan had negative inflation for majority of the time over the last decade or the U.S. is now worried about same deflation hitting it.

It took me some time to realize that unlike developing nations like China, Brazil or India where food prices may have a significant weigh in the inflation figure; it is not so in the U.S. or Japan. It goes also true for energy related prices. Studies show that a significant majority of people around the world spend a significant part of their earning on these two components (energy inclusive of transportation costs as well).

So inflation is there, felt by many of us, but is not measured due to reasons best known to developed nations Central Bankers. And although inflation may be a single word, it does not mean a single thing across people from different income groups. Literature also explains how inflation act as a tax to the poor.

So what is it that the Fed. is trying to achieve?

A look at global media highlights the confusion analysts and economists have on the road-map taken by the Fed. in dealing with the crisis so far. Many may even think that they actually have no road-map due to their repeated misreadings of the economy, documented from past meetings. If there was a road-map in 2008, one would have by now exited the stimulus and headed for higher interest rates.

That view may have its limitations as road-map is not something static. One may argue that the Fed. is rather following a ’sense-and-response’ strategy.

My biggest concern here too is - what has been the response so far to the various unprecedented Fed. actions since 2008? The few answers I can offer is S&P 500 at 1180 level, unemployment at nearly 10%, and dollar index at 77 or so. Growth is practically insignificant. I accept the employment figure as a better indicator for growth than the GDP figures.

One may argue that the success lies with unemployment figure itself as unemployment is not yet up to levels seen by many European counterparts. The critics of the Fed. would accede this point. However the concern now is, where would one see S&P 500 going forward, if at all employment level improves to normal? So either it is priced in or not priced in? Isn’t the market running ahead and creating other asset bubbles? What about commodities or gold? What about economic stability in emerging nations? What about the interest of the people who save and don’t speculate? What about a stable investment horizon to investors who can sense where dollar is likely to be over the next years with what likely interest rates?

China could create factories because investors knew the value of Yuan is not likely to go down over the years. Yuan appreciated by 25% or so since 2005 against dollar. Can the U.S. provide this stability to an investor with ongoing unstable environment?

A higher interest rate may offer more money to the consumers in a sustainable manner than zero interest rate which act as a viagra to the Wall Street. Main Street benefits are more and sustainable when one has a stable interest rate policy and stable currencies. Bringing down cost of capital to zero or negative is like insulting capital, an essential economic resource. Printing more capital with zero interest rates will not serve the desired purpose but create undesired consequences. It may at most shift the problem from the U.S. to the rest of the world, and dilute it a bit within the U.S.

And that’s where China needs to be concerned. Because it has the ability to affect stability of inflation and asset price outlook in China as well. Even if China is able to isolate itself, many of its trading partners may get affected, leading to loss of further stability.

Essentially that’s what China has been asking since ages. China wants stability in values of global currencies. This will lead to stability in asset prices globally, stability in planning horizon for investors to create real assets and not paper assets, stability in employment and finally stability in growth.

It is time to chose one between series of shock-therapies that lead to a plethora of uncertainties globally to one that leads to stability. It is time to prioritize the interest of the main street than that of the Wall Street. Stability helps everyone, without repeated creation of asset bubbles and bursts and economic slow downs. Japan paid a severe price as stability in currency prices were disturbed. The rising population of old people in developed nations get more sound sleep with stable return of their life’s savings in stable financial products with stable interest rate.

Let us all give a chance to China as we have given to the U.S. over the last seven decades, when it comes to economic policies. Let us not write down economic policies originating from China because of our individual bias. China is not evil. There may be bad policies in China in other areas as we have seen with Google or now with Liu Xiaobo, as we have seen same for the U.S. with Iraq. However China is the only country that achieved what the West preached in terms of removal of poverty and bringing properity to a populace more than that of the U.S., Europe and Japan put together, in barely two decades. And they did it in spite of all the odds.

The Fed. is now acting to destabilize that growth in China by creating an unstable currency value era leading to currency war like situations.

No one can fight the Fed., the old saying goes. China has proved many such beliefs wrong. It is time that China takes on the Fed. in the interest of stability, within China and also for the rest of the world. Europe realizes a strong dollar is in the interest of the world, but would not chastise Fed. (or treasury) openly for making a joke about a strong dollar. Japan seems to be in an endless pit of unstable currency values leading to zero interest rates.

China so far remains the exception. Stability is not a bad word afterall, excessive volatility is. It is indeed time to chose between a stable dollar or another stable global currency. It is time for China to accept it and work on it, with ‘Chinese’ speed of implementation.

I invite you to take a look at my book, Wondering Man, Money & Go(l)d. You are also invited to join me on Twitter.

Beijing Consensus – where it stands? (Part II)

2010-05-18T01:18:00.000-07:00

Part - II: Emergence of ‘Beijing Consensus’ as an alternative

Part I of the article can be found here

‘Beijing Consensus’ as a term evolved due to the failures of ‘Washington Consensus’ back in 2004, and gained popularity in the aftermath of 2008. It’s gaining further attention now again in 2010 as the debt crisis of the Euro-region unfolds. The 1st mention (by Joshua Cooper Ramo) of the term explains the difference in approach: ‘if you wanted to understand how the sky worked, you should be more concerned about the motion of heavenly bodies than their destination.’ The difference is in ‘one solution fits all mentality’, which was explicit again during the Bush-doctrine that assumed one can sow the seeds of democracy across nations, irrespective of local issues and challenges or even effectiveness of democracy in local societies.

Ramo reiterated back in 2004 what I started realizing in 2007. By 2010, it was much more evident (without reading Ramo on both those occasions). Ramo stated ‘To measure Chinese power based on the tired rules of how many aircraft carriers she has or on per-capita GDP leads to devastating mis-measurement.’ Till date, the world (including its policy-makers, people from media, to academicians and economists) largely has not come out of that ‘Washington Consensus Mentality’ of measuring economic well-being of citizens of a nation or the economic might of a nation (albeit this was not something introduced by John Williamson). All these were driven by the obsession of measuring and growing GDP that led to the GDP-cult, as evident all over in media and in academics of economics.

Taking example of Soviet Economy before its collapse, its GDP literally got decimated until 1999 but not its debt, more so the external ones. In that context, all these noises on amount of sustainable deficit as a per cent of GDP remain questionable (‘Russia’s external debt stood at $143.9 billion at the beginning of 1999, nearly $100 billion of which was inherited from the Soviet era’ Startfor, 1999).

So how is Beijing Consensus fundamentally different from the erstwhile Washington Consensus? Other than the two areas already implied ((‘Commitment to innovation and constant experimentation’) in terms of economic policy-making by Government – unfortunately which can be seen more in the Wall Street and not in corridors of policy-making in Washington; and in measures of economic growth (‘sustainability of the economic system and an even distribution of wealth, along with GDP, are important indicators of progress’)), China emphasized ‘geo-politics and geo-economics’ to be fundamentally linked.

‘Beijing Consensus’, if something by that name at all exists in Beijing because, by definition itself, it is contextual, and therefore is unique to the problem, is also not free of its challenges or criticism. Income inequality in China has already been higher than that in the U.S. Now the question is, whether Beijing allowed that to happen to acquire the economic muscle necessary before addressing it effectively. China now has the resources to handle income inequality more effectively than it had in 1989. The rest of the world will watch with immense interest whether China has the willingness to tackle the income divide or it too succumbs to the demands of Shanghai stock exchange or to the real estate companies in Beijing.

Both Washington and China have shown their ability to tackle economic problems, irrespective of the different policies they have followed. In case of Washington, it has been at the cost of ‘shoot first think later’ mentality of having GDP back in track (in order to have associated world leadership at any cost) that further escalates the problem to be reckoned with at a future date. In case of China, Beijing has shown highest level of policy-maturity in implementing sustainable policies even while solving immediate economic crises in hand. If the U.S. has been burdened by its leadership and thereby been myopic in its policy-making; China has been innovative.

Communist China didn’t feel any stigma while adopting capitalistic rules (‘socialism with Chinese characteristics’) selectively in developing itself from 1978 onwards, since Deng Xiaoping started opening China up to the external world. On the other hand, U.S. felt stigma in nationalizing its major financial institutes and auto-makers during the collapse of the market economy in 2008.

There was a period in the world history when capitalism delivered more to the main street than communism or socialism did, however the last word on that might not be the same. There may be a period again when communism, socialism or a different form composite government and policy-making may deliver more to the average citizen than capitalism alone can deliver. There should not be any stigma in adopting the new approach. The day we do that, it means that days of experimentations or improvements are over. Fixing Wall Street within ‘Washington Consensus’ is one thing; exploring newer streets with ‘Beijing Consensus’ is altogether different.

Beijing is exploring these new streets. Beijing doesn’t seem to have all the answers that ‘Washington Consensus’ apparently had for all situations. What deserves credit is the perseverance of policy-makers in Beijing in exploring an alternative to the ‘Washington Consensus’, against all odds since 1989. This perseverance may help the world in having some light of ideology in the darkness of failures of ‘Washington Consensus’. ‘Beijing Consensus’ is more management oriented where the context of the problem defines the solution than being driven by economic ideologies or hypotheses alone (as in the U.S.). ‘Beijing Consensus’ is more of a ‘sense and respond’ strategy than having a uniform prescription of economic cure as in its erstwhile era of the ‘Washington Consensus’.

Ranjit Goswami is a Professor at Indian Institute of Foreign Trade, Kolkata; and is the author of Wondering Man, Money & Go(l)d. Ranjit is also on Twitter.

Beijing Consensus – where it stands? (Part I)

2010-05-18T01:07:00.000-07:00

Part I: The failures of so-called ‘Washington Consensus’ School

Back in 1989, in the backdrop of a disintegrating Soviet Union, ‘Washington Consensus’ as a term was coined. It tried to offer a solution to the chronic indebtedness problem of the developing world, particularly that of Latin America.

The prescription of John Williamson included tax reform (‘broad tax base with moderate marginal tax rates’ that naturally aids more income inequality); liberalizing interest rates (read low interest rates); liberalization of inward FDIs (read free flow of capital); privatization (as a panacea); and deregulation (market knows the best). It actually had a ten-point agenda, out of which I highlighted the five that increasingly have come under attack due to their contributions to the ongoing economic crises since 2008 in the developed world. The history of the destructive role, played by ‘Washington Consensus’ in developing economies, is older.

While reviewing the history of ‘Washington Consensus’, its creator talked about ‘saving’ only once while looking at the successes of the NICs like Hong Kong, Taiwan or South Korea. It didn’t address the conflict between desired saving rates and low interest rates (or the financial speculations that result out of low interest rate regimes). ‘Washington Consensus’ essentially originated from the mindset that less government is good as observed in developed societies where inequality didn’t rise to the levels where quality human lives became unsustainable for the ‘have nots’.

Back in 1989, the core problem of developing nations was poverty affecting a significant part of their populace and not stagnating GDP per se (or mounting external debts, those were symptoms), whatever close their relationships may be. Reducing poverty (or generating employment in the developed world) is not same as having higher and higher GDP growth. Marginal tax rates of the few who could afford it, privatization as a panacea, deregulation, etc. didn’t suit the need of the large backward sections of people living below the so-called $1-dollar-a-day in those developing societies.

Against mounting criticism, John Williamson in 2004 (A Short History of Washington Consensus) admitted:‘When I invented the term (Washington Consensus) I was not thinking of making propaganda for economic reform (insofar as I was contemplating making propaganda, it was propaganda for debt relief in Washington, not propaganda for policy reform in Latin America). From the standpoint of making propaganda for policy reform in Latin America, Moisés Naím (2000) has argued that in fact it was a good term in 1989, the year the coalition led by the United States emerged victorious in the Cold War, when people were searching for a new ideology and the ideology of the victors looked rather appealing. But it was a questionable choice in more normal times…’

As the United States remained an unchallenged single superpower in the world over the next decade, more debate on ‘Washington Consensus’ naturally led to different schools of thoughts as its importance grew. Many felt it to be synonymous with the phrase ‘neoliberal policies.’ Wikipedia explains ‘Washington Consensus’ as the term ‘to describe a set of ten specific economic policy prescriptions that John Williamson considered should constitute the ‘standard’ reform package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank, and the US Treasury Department (the so-called International Financial Institutes (IFIs) that can create liquidity in the face of flight of capital from developing nations).

Unfortunately the prescription of cure as formulated by the World Bank or the IMF, under the supervision of the US Treasury, often looked like setting the bond to a pound of flesh from the poor Antonio (indebted nation) in a typical Shylock style.

Naturally there were criticisms due to the ‘standard’ nature of the solution where the problems were all unique. Combining the reputation that economists have in society when it comes to building consensus, people talked of ‘Washington Confusion’ as such policies looked as frivolous as ad-hoc fashion statements for the season. Subsequent attempts to ‘Augment Washington Consensus’ resulted in generating more confusion. Ten more dictums were added, but what were amiss again were the insights of priorities that different situations demanded when one of these recommended dictums clashed with another prescribed one.

From 1989 to 2010, the world has gone through significant changes; and has faced quite a few global crises. Majority of these crises originated from wrong economic policies (partly a result of Washington Consensus?) than misplaced military priorities, as it had been in the past. If global opinion is sought on identifying a country (or a single policy) that has done the best amidst these challenges on the overall front (in inducing growth in its economy that has helped a large section of poor people to come out of poverty and simultaneously have a relatively sustainable domestic economy); the name of China is bound to emerge as a contender.

Surprisingly China didn’t follow many of these dictums of the ‘Washington Consensus’ policies; and it didn’t affect its growth adversely. The vulnerabilities of its economies (over-capacity, bubble in real-estate prices) are a result of the noises in the interface of the economic integration of domestic China with the rest of the world largely following ‘Washington Consensus’ policies.

Part II of the article (The emergence of the ‘Beijing Consensus’) can be found here.

Ranjit Goswami is a Professor at Indian Institute of Foreign Trade, Kolkata; and is the author of Wondering Man, Money & Go(l)d. Ranjit is also on Twitter.

The Disruptive Force called China

2010-01-31T07:08:00.000-08:00

The title of the article could well be ‘China’s arrival as a superpower’ to ‘When did China arrive as a superpower’ if that actually has already happened, catching many of us (including global journalists and policy-makers) napping.

‘Well, it was sort of expected but we never thought it could happen so fast’ is the usual response they must be muttering to themselves, more so if this outcome is something neither desired nor sought after by them.

Couple of days back, while reading an article in The Wall Street Journal on World Economic Forum at Davos; one particular paragraph, or the last part of it (from Marcus Walker and Andrew Batson) caught my attention. And it was:

‘The global financial crisis and the stumbling efforts to tackle climate change have highlighted the mounting evidence that China is becoming the world's second-most influential country after the U.S’

In twitter, I commented: ‘I differ. China got it long back; Western media & Govt. realized it late.’ Alternatively; if China hasn’t yet been the de facto 2nd influencing country; who is it?

There are times when we tend to look at insignificant evidences to pre-conclude a much-desired and sought after outcome; there are times when we also to tend to ignore and look otherwise if the outcome tends to disrupt existing global order, much against the desire of shapers and reporters of same.

A look at how rest of the world is viewing the Google-China dispute proves the point (here’s from Arab News; Middle-East’s leading English daily). Googling Google News (English) for keywords like the US, Russia, UK, EU or India also provides a crude indicator on a larger sample base on how these countries figure in in shaping up (local and) global matters. The US comes in around 650,000 news-articles in Google News whereas China scores nearly 300000; UK comes at 290000, EU at 20000, India at 177000 and Russia gets mentioned in 80000 articles. One needs to keep in mind the native language of these countries and that of its local medium to estimate how much of that content is likely in matters of global or regional issues (assuming search results bring in English language content only).

Sometime back, browsing on an altogether different topic on Innovation, Black Swans, & Disruptions; I liked one particular observation on nature of forecasts we make in general. And it read:

‘We tend to overestimate the impact of technology in the short run and underestimate the same in the long run.’

Can something similar be happening for China as well as rise of China doesn’t come as an often-repeated pattern in historical outcome; but more of following a disruptive trend with it? Because all long term forecasts on China (where China is likely to be in 2010?) have probably fallen flat as they did for disruptive innovations like Internet or the mobile phones?

Historically, there’s been two essential components needed to acquire the status of a global superpower. One has been the economic part of it and the other has been the military component of it. Lately importance of softpower has emerged as another important component in today’s complex inter-dependent global eco-system of nation-states.

At the same time the concept and therefore the applicability of concepts like superpower is not static. Superpower was a term first used in 1944 and probably its usage declined with the fall of the USSR and its symbolic Berlin Wall in describing real conflicts. Walker and Batson in that WSJ article were careful in using ‘second most influential nation’ to describe China; after the US in same ranking. Therefore reading how Wikipedia defines of the term ‘Superpower’ may help as we tend to overplay outdated and old mindsets in explaining new-age phenomena of rising China.

Going by that definition of Superpower, if one has to form necessary and sufficient capabilities a nation must possess to qualify as a superpower, it would be (1) ability to be in a (relatively) sustainable leading position (comprising economic, military & softpower might) in the international system; (2) ability to influence global events to protect/manipulates its own interests against that of the world (which again needs those three components of power); and (3) ability to project (executable real) power in a worldwide scale (primarily economic and military).

Coming back to the components of superpower, I have been following GDP figures. Since long I felt that the GDP numbers are not adequate in measuring true economic might of diverse nations around the world, due to the way GDP accounting is done, even for PPP.

In 1989, USSR was the 2nd largest economy (GDP of nearly $2.7 trillion against GDP of US being $5.2 trillion that time). However post 1989, it plummeted until 1999 (to nearly $300 billion). True the two sources were different and their figures for 1989 don’t exactly match.

That’s my problem in accepting GDP figures. True ‘civilizations die from suicide, not from murder’ as Arnold Tonybee stated. So without a bomb being dropped on any of the USSR economic activities, they crumbled. It’s a valid argument for believers of GDP to state that in a controlled economy, such a collapse is possible; but not in a market-economy.

Huntington subsequently dwelled on the idea on how cultural or religious believes might lead to post cold-war era conflicts. With global war on terror since 9/11, a large part of the world witnessed conflicts fundamentally originating from religious and cultural mindsets. As the cold war took its toll on the USSR economies; the global war on terror has taken its toll on the US economies.

Coming back to the collapse of controlled economy of the USSR post-1989; we also witnessed efficacy of market-determined economic activities. It could have been a nightmare of economic hypothesis had those unprecedented bail-outs and unforeseen government interventions in a so-called market economy had not happened.

So unless the whole of the USSR was another Enron story, it’s difficult to justify why its economy shrank by nearly 90% post 1989 over the next ten years.

So the economic projections made by various researchers and mentioned in mainstream media from time to time on when BRIC (read particularly China) is likely to dethrone the existing economic orders is more of an elementary line filling syndrome following historical analysis of forecasts. They more often get it wrong than right. It tends to remind how we tend to overestimate disruptive technology in the short run and underestimate same in the long run. It also highlights the complexities involved in long-term forecasting dealing with disruptive forces where past is no longer the indicator of the future.

Because no researcher or journalist from the mainstream has ever given less than a decade's time in forecasting that China's economy would be bigger than that of the US. This may again sound out of the acceptable arguments; however I viewed China as the largest economic superpower couple of years back. In terms of capacity of consumption or production (demand or supply); other than petroleum, airline industry (and military); I don’t see any other major industry where China ranks second to the US (many may look at banking; however in China, banking and trading adds to real economy whereas in the US it’s more of a speculative economy). Leave aside early adopter sales indicators of technology products; sooner or later China would catch up and beat those numbers.

Going by that economic might and prevalent global scenario that occupies the US; the disruptive force of China has suddenly changed itself internally from downplaying its influential might (following ‘hide one’s capacities & bide ones time’ of Deng Xiaoping as the WSJ pointed out) to being more assertive; traditionally more common in the West. Probably there’s been a shift in Chinese policies. For bigger issues (more so internally due to patriotic sentiments of a rising educated middle class); it’s no longer possible for China to wait for further developments and remain aloof on conflicting issues. An article in the Forbes by Shaun Rein (‘Let’s not forget that the Pew Center has found that 86% of Chinese are happy with the direction the government is taking the country’) and another belligerent posturing by Han Dongping in the China Daily are testimonial to this.

This disruptive force of China is true both within China and beyond it. Reading many of the comments on issues of such recent conflicts show how paranoid the Chinese feel (reaching near-dangerous levels) about the double standards of the US. Chinese policy-makers may be forced to act on that wave than wait further to consolidate its influences.

Unfortunately, that may not ultimately lead to a peaceful rise of China!

(C)Ranjit Goswami is an Associate Professor at Indian Institute of Foreign Trade, & the author of the book, Wondering Man, Money & Go(l)d

The debate on valuation of Chinese Yuan

2009-11-12T23:16:00.000-08:00

Global economics is a dynamic subject, unfortunately without any reference.

The only reference one has is the market. The reference system of something tangible was closed down with the closing of the Bretton Woods system when the gold window was closed by the Nixon-administration (Nixon-Shock) back in 1971, unilaterally.

Back then every other currency was re-evaluated with the dollar on a periodic basis, and the dollar was pegged with gold at a constant rate. It is another matter that works of economists showed why such a system was designed to fail, without devaluing dollar (Triffin dilemma) or affecting the domestic economy.

Leaving things at the hands of markets has its shortcomings, as very recently the world witnessed how wrong the markets can be. My personal opinion is not so although, I still believe in markets and market forces. However systematical rigging by central bankers and institutional investors have left markets at the mercy of a few, mostly from the Wall Street and from the Federal Reserve, and their counterparts from other countries. So what I would like to believe by market and market forces is much different from what the (financial) world believes as market (the Wall Street, Fed and their equivalent).

The biggest difference is on supply and cost of money itself, by which markets are all measured. In my definition of market, one must have some certainties on these two, more so when there is no constant reference. The only floating references we have is few major global currencies.

Asset classes has lately been moving not based on fundamentals of the asset class demand and supply, but on supply and its cost of major global currencies. So if Zimbabwe prints a lot of money (increase money supply), that does not affect global asset prices barring that in Zimbabwe; but when same is done by the Fed., the Bank of Japan or by the ECB; it affects global asset prices. And when they all do it together with most other central bankers; it’s party time for asset classes.

At the same time, all over the world, without any referencing system for exchange, money is all relative. When someone says that the temperature is so much, or the distance is so much, one understands that figure. It remains same without matters of interpretation, in the US or in China. But when one says that manufacturing cost of steel pipes in the US is around $1500/ton whereas same in China is $1200 or around (assuming this is true under certain accepted conditions), one obviously does not lead to the conclusion that Chinese steel pipe producers have cost competitiveness. The reason of the price difference can be manifold: major of which are (1) there is hidden subsidies in China’s cost and/or (2) China’s currency is undervalued, meaning if the cost in China is $1200/ton and $:Yuan is at 6.80; in China, actually the cost is 8160 Chinese Yuan. Now assuming Yuan is undervalued and a better valuation will be 5:1 to the US dollar, 8160 Yuan translates into $1632/ton of steel pipes. And thereby China loses the cost competitiveness.

Question thereby remains: what’s the right value of Chinese yuan?

And that’s been the most important debate in economics lately. It even attracted views from Krugman and Mohamed El-Erian and Ramin Toloui of PIMCO.

Unlike major other countries, who have sort of a market-determined exchange rate – China follows a pegged exchange rate. At times they allow a predetermined band-movement, and there are times when not even that small band movement is allowed. Chinese currency is effectively pegged with the dollar. The dollar strengthens, Yuan strengthens (that’s what happened at the peak of crisis in 2008); and when dollar weakens – Yuan also weakens by same degree – relative to all other currency. When one compares Yuan with other currencies like Korean Won or Indian Rupee over last two years, one finds Yuan to have appreciated more against dollar. In spite of that, the cries to allow faster appreciation of Yuan get louder by the day.

But lately dollar is declining, and it’s declining fast. It’s yet to reach its bottom when one euro could get 1.5990 dollar in July last year, however that point is probably getting nearer. The trigger no doubt is the unemployment figures in the US.

The majority view has lately and surprisingly been to allow Yuan to appreciate against dollar. This school of thought believes that by doing so we can help (1) the world economy in self-correcting much of the economic imbalances, (2) would help the US to recover faster, and (3) would help China too by increasing its domestic demand than relying on exports for the much needed growth in GDP or employment generation or poverty reduction.

However I remain confused in understanding how exactly it helps. And what should be the priority – the world fast (and again what part of the world – reducing poverty or increasing global GDP). It could have been easier if someone could form an objective function, satisfying all stakeholders around the world, with orders of priorities with maximization/minimization goals with realistic constraints. If one recollects the story of Japan and how its’ been struggling when yen was allowed to appreciate against 350 or more to a dollar to less than a hundred, one understands the gravity of the problem.

Let’s consider impact on global GDP. If Yuan is allowed to appreciate, dollar devalues further and faster. China loses its valuation of dollar reserves and its export competitiveness as we saw with the example of steel pipes. Chinese GDP itself soars when measured in $, and so does for other nations. So the global GDP increases – because dollar goes down and everything else is measured in dollar. But if same GDP was measured in Yuan (or Euro), we might not have seen significant change (rather it may go down as US GDP shrinks more when measures against appreciated Yuan). So the net gain is only in terms of units of measure and nothing much in reality.

My top priority being poverty reduction and employment generation - globally, how does Yuan appreciation impact these two?

To address above, there is no denying that in the longer term, Yuan will appreciate. However present question is how fast that should be. China wants to do it at a much slower rate than what the US would love to see.

So if Yuan is allowed to appreciate faster, following scenarios may happen:

1. As global experts suggest, domestic demand picks up in China at same rate to offset loss in exports, thereby no tangible loss in employment or in poverty reduction. Or is it? China losses its rate of increase of forex reserves; thereby reducing Chinese government power to spend money on developmental goals. So employment may remain same, however on poverty in China, it is likely to have a negative impact. True, Chinese people – when traveling abroad, would feel richer.
2. At the same time, there is more job creation (and poverty reduction) in the US and in other exporting countries. It essentially means a win-win situation as overall demand grows globally.
3. The environment suffers.

So under this scenario, there is little loss to China, but overall rest of the world gains. Surely, the gains look likely to be more than the losses.

However what’s the probability that domestic demand in China indeed moves at an equal rate to offset the loss in exports, when Yuan is allowed to appreciate at a rate that would please the Obama-administration.

In the longer term, I see it possible; however gauging the expectations of rate of Yuan appreciation that policy-makers in the US would love to see, I see potential problems in China.

China will not be able to increase its domestic demand fast enough to allow faster Yuan appreciation to please the west. And if that happens once; it may take back China by years.

I am sure if it was any other country under same circumstances, they would have done the same as China’s been doing. It’s the only prudent decision they can take, keeping in mind the journey that they had over the last decade.

Much of China story today looks so bright because of their management of the currency. If something has been working well for them for long, why disturb it at a critical moment? At the same time, as China tests global acceptance of Yuan as a currency for settling bilateral trade, or for trade on crude oil; it will eventually be bound to allow Yuan to appreciate.

Unfortunately the same medicine is no longer working well for the US as it sees Wall-Street recovery without jobs recovery.

The all important question remains when and how the issue gets settled. In between China would claim that duties imposed on Chinese tyres or steel pipes would force US consumer to spend $400 more on each car and similar amount on steel pipes. And the US would claim otherwise.

Truth will be hidden somewhere in between.

Copyright: Ranjit Goswami is the author of the book, Wondering Man, Money & Go(l)d, and can be followed at Twitter.

Comparing China today with 1949

2009-10-06T23:57:00.001-07:00

Here are few statistics:

60 yrs ago at present
GDP $51 $2770 Incease of 550%
Lifeexpectecy 36.5 yrs 73.2 yrs over 100%
Students in higher edu 117,000 20.2 milloins
Maternal mortality per100000 1500 34.2

More than 350 million Chinese jumped from poor to middle class.

Saluting China

2009-09-30T01:47:00.000-07:00

That, in a nutshell, should be the message the world should send to China as it prepares for its 60th Anniversary of the party, Communism and the founding of the country as it is known today.

The people of China, its policy-makers and the Communist Party that’s behind sort of everything in China deserve this salute. They have earned it against all odds. The peaceful rise of China is in everybody’s radar now although many took time to (deliberately) ignore it for a long time. China deserves the salute from the world for the unbelievable achievements they accomplished during the last half of these sixty years. And that benefited a vast majority of China’s nearly 1.3 billion people, and probably a significant number of the nearly 5.4 billion global non-Chinese as well. Until now.

That does in no way mean things happened in a ‘Hunky dory’ manner over the sixty years or over the last half of it. There were casualties – starting from environment to human rights to human beings. It is hard to imagine any country that today boasts of highest Internet users and usages with strict control on the ‘freedom of opinion’ – the gene of Internet. Surely the two could not have co-existed had it not been the People’s Republic of China.

Another country would have banned Internet (progress); China allowed Internet and communication technologies, and other tools of progress to flourish. And they could still maintain the control they wanted.

That would not be possible had the policies not met with the basic expectations of the Chinese people.

The benefits far outweigh the casualties (barring environmental where time has the answer). The problem with the western media at times is their pedigree. Western media still is the best in its class without any doubt; however the same cannot be said any more about western governance or policies. They may still be, but they get increasingly questioned. Therefore media in west, though critical of its own governments and policies, cannot yet fathom that a far eastern country from the occident can achieve so much against all odds – internal and external - against so much gainsays, with communism, without human rights and freedom of speech, without transparency, with government owned business entities, etc. China probably was the text-book opposite (to the extent possible) of what the west preached. And therefore it is hard for the media in the developed world to accept whole-heartedly that they did it better. Full stop.

It’s one thing to criticize oneself, and it’s another to praise the other for doing better. Mirroring probably the sentiments of its significant populace which increasingly are frustrated with the forms of democracy and free-market economies; main stream media in the west now speak more about main-streets than the glamorous casino-led Wall Street or of interest groups, although the change started with alternate new-age media. Institutes affiliated with the west always watched China with a degree of suspicion, whereas the views of the western-citizens were that of disbelief. Following that tradition, views of the western mainstream media on China, though changed significantly over last two years, still remain mired in suspicion and incredulity, always looking for symptoms that could lead to a disruptive end of the China growth story.

Rise of China is not an isolated event; it must be seen with changing geo-political and economic might that individual major powers from the rest of the world enjoy. It is Utopian to think rest all would remain as it was when the dragon raises its head higher and higher. However so long it’s been for good, be it economically, politically, and even probably militarily (for global peace), barring environmentally. The question remains whether the next few decades would be extended trend line of the last three decades. What’s on top of everyone’s mind is to know whether in near future too, along with the Chinese people, whether the rest of the world would also enjoy more benefits and suffer even lesser casualties from further rise of China. It is challenging because the expectation of Chinese people (and its minorities), the expectation of the Communist Party of China from its people and defense, and even the expectation of the rest of the world, particularly its close neighbors are changing.

Getting firm answer under those changing circumstances would surely be difficult; however experienced historians and China-watchers would doubt that the trend-line would continue.

Happy 60th Anniversary to China - From the rest of the world, for the time being.

Building Brand India amidst Disharmonious Brand China

2008-06-24T23:51:00.000-07:00

(I worked on this area in the end of 2007, however as I don't intend to work further on it in near future...felt best way to make it useful was to publish it here. An earlier version of the paper was presented as a conference paper in Yale-Great Lakes 2 conference, however they don't host it online).

Building Brand India amidst Disharmonious Brand China

Author Details:
Author 1: Ranjit Goswami, Associate Professor, Indian Institute of Foreign Trade, Kolkata. Ranjit.goswami@gmail.com,.

Working Paper on
Building Brand India amidst Disharmonious Brand China

Anybody can make history. Only a great man can write it
Oscar Wilde

Abstract

Aspirations of nations and brand-nations are inevitably linked with rise of nations, its economic power, its military muscle and also on its influence on regional and global geopolitics. Brand India has been a young concept, younger than the growth story of India which in 2008 would be five years old. This paper tracks Brand India from both historical perspective as well as recent developments perspectives to analyze the roadmap of Brand India. We examined the complexities of Brand India exercise by examining global literature, particularly that of Brand China. We didn’t come across any credible survey on India’s image overseas over last few years. We conducted a qualitative survey on India’s image amongst a group of International Citizen Journalists, looked at famous quotes on India and listed a few that summarized historical India from present perspectives. A critical review of Brand India campaigns showed its ad hoc characteristics, and based on the findings of our survey and the quotes, we concluded India increasingly looks to be in a stage of ‘midlife’ ‘crisis’ in its search for an identity. A list of paradoxes associated with India is presented in this context.

Key words: Brand India, Historical Perspectives, Paradoxes, ‘Mid-life’ ‘Crisis’, Spiritualism

Introduction

We started ‘Brand India’ exercise with a degree of cynicism, more due to the various diverse topics of similar interest that simultaneously started with the one-dimensional relatively higher economic growth rate that India, observed since last four years. From the beginning, we felt branding nations, that too large diverse ones like India, to be a complex exercise that needs structured approach. We retain that belief in this working paper till the end, as we found it difficult to do justice to ‘Brand India’ holistically within given word-limits for this conference. With a holistic view of nations branding, we formulate research questions, examine various literature and learning that a structured ‘Brand India’ exercise can take from similar branding exercises of large, complex nations (or entity) like that of China, Europe or the need of re-branding exercise for the US. We also look at various views on ‘Brand India’ perceptions through a primary survey of International Citizen Journalists as well as from views from Indian researchers, and find the 2nd category to be mostly shortsighted or one-dimensional (harping on recent economic growth rates alone) than being multidimensional. In the end we strongly recommend on the need for branding India in a structured manner; and concede that it demands lot more focused approach than the present laissez faire diverse ad-hoc discussions on ‘Brand India’.

We admit that ongoing ad-hoc discussions do contribute and is a prerequisite for the structured policy on framing Brand India, but they are neither decisive nor conclusive. We highlight various quotable quotes on India to showcase again the rich past of India over couple of millennia, its decay over last two hundred odd years or so and a very recent upsurge with economic uprising. Through our survey and the insightful quotes on India, we bring out both the diversity and the paradoxes of India, of this large complex ancient nation of a billion-plus people. We conclude that present perception of Brand India resembles the ‘mid-life’ ‘crisis’ (and not ‘mid-life crisis’) phase due to the rich past India had followed by its drastic fall followed by the very recent upsurge in economy. We highlight how and why India indeed is in dire need of one holistic Brand India perception that’s not as diverse as India is, and neither is full of paradoxes and diversities with which India is synonymous. However for size limitation, we have not tried to answer the research questions we identified, or worked out the detailed methodology which can be followed to build and nurture a structured, focused evolving ‘Brand India’ exercise; and therefore this paper remains a working paper.

Drawing from history, rise and fall of nations, societies, and civilizations are common in the records of human civilization. Rise and fall of firms and brands, even nation brands or state brands are no different. Historians and brand managers work with different objectives. One takes a longer time view, of millenniums, centuries and decades or even of one-off events or shorter-term developments of historical significance in recording history. Unbiased interpretations are of absolute priority in recording history, which apparently is most difficult as Oscar Wilde noted. The brand managers or broader management professionals, dealing with brands specifically or of general management profession on the other hand, work in more subjective perception matters that deal with brands, or on numbers with quarterly sales and with economic growth rates of at most years. Longer term social or historical implications of how those perceptions are built, how sales are achieved or even how broader economic growth rates are achieved for quarters to years to decades and beyond for better understanding; and the implications of these numbers on the broader society at large (and vice-versa, which is of more interest to historians) are of less importance to management professionals. Taking lead from Oscar Wilde and looking at the proliferation of Brand India discussions in India, and abroad; it won’t be absolutely wrong to state ‘Anybody can write about Brand India. Only the government of India collectively or a great marketing guru or a team of researchers with detailed discussions and debates can truly do justice to it.’

Since the Industrial Revolution, and more since the World War II (WWII), all around us, we have seen few nations rising whereas many stagnate and few even fell from their earlier comparative global stature due to the various local and global developments and actions (it happened before WWII as well). Many went through all the three phases within these few decades. Rate of change is on an acceleration path. India, increasingly an important nation in global economics and geopolitics in the 21st century, is no exception, and she has been passing through many of those transitions. A nation, that was the undisputed world leader for millenniums in global economy (on another important parameter, global trade, historians suggest that India always had open trading platforms which further escalated starting with the dynasty of the Mauryas if not earlier, and very much till Cholas and the Palas in the 7th to 10th centuries and later) for most part of the human civilization on earth that was recorded in the annals of history . During the height of Mughal rule (1526–1707 C.E.) artisans and entrepreneurs made India what one economic historian has called the “industrial workshop of the world” . However India performed ignominiously post the industrial revolution, for couple of centuries under colonial rules, that later gave birth to present day independent India with more than a quarter of global poor , and one-third of global illiterates being Indians, if not more, even after sixty years of independence. And with the 3rd evolution of knowledge economy (Agriculture since beginning of civilization and Industrial Revolution being the 1st two) unfolding, the country makes some efforts to regain the lost ground with ‘Brand India’ identity amidst paradoxes of being the ‘information and knowledge outsourcing hub’ of the world with widespread illiteracy all over it.

A glorious past of millenniums followed by centuries of decay, and now an uncertain present lately accompanied with resurging economy of only years, yet to be decades old even, with lack of well-structured policies for the future, drives present euphoria of ‘Brand India’. We took a holistic view of ‘Brand India’ in comparison to ‘Brand China’ , the only possible comparative element that makes sense, but on deeper analogies, even China does not offer the complexity of Indian diversity.

We started by questioning the need (and even audacity!) of branding India (or for that matter, large nations with diversity), and found most studies on ‘Brand India’ to be one-dimensional with ‘it’s the economy, stupid’ approach of less than a decade old economic developments. We agree with that dimension, but we also note that brand, like economy, is something on the transition all the time. Geographically too India that we know today or more since her independence back in 1947 is not the same India for last couple of millenniums when we identify Indus Valley civilization with India. However, we found excellent literature with ‘Brand Nations’ of other leading nations and it threw lot many insightful approaches.

This working paper is essentially a summary of the literature review, identification of research questions on nation brands and brand India, understanding how India is currently perceived globally through a primary survey, understanding how great scholars have viewed India over last couple of hundreds of years. The views are indeed mixed, diverse and deeper scrutiny of these reveals the underlying paradoxes. We also highlight few of these paradoxes that affect India, and hit media headlines on a regular basis. We reach our conclusions with present status of ‘Brand India’ being equivalent a country full of paradoxes in its ‘mid-life’ ‘crisis’.

We further plan to work on how brand India exercise should be structured before the taglines emerge. Spiritualism , an undercurrent of India since ages, is something, which is often missed out in economic races. Many of our survey findings and wise sayings do focus on that spiritual dimension on which India does have unique advantages. The spiritualism dimension should not be in conflict with broader economic developments; it rather can complement it. Global developments also highlight this need where India can position itself uniquely by helping itself and helping the world as well by being the spiritual capital of the world rather than trying desperately to be termed as the knowledge capital of the world with nearly one-third of its citizen being illiterate officially, and many more unofficially.

Structure and methodology

The paper is divided in three sections; the 1st section essentially identifies the research questions that we plan to address subsequently (not covered in this paper due to word limits). Starting with fundamental questions about brands and need for branding nation-states, we see what all these mean for brand India. We approach this section with certain degree of caution, due to our subjective bias and skepticism . We felt as researchers, it’s better to admit such biases upfront to avoid any misunderstanding to any reader. We went through extensive literature review in this section starting with brands, need for brands, need for branding nation-states, challenges in managing image perceptions for brand ‘nation-states’ with examples from the US, Europe, China, England, Latvia or even India. We also came out with few interesting suggestions from the learning curves of other nations on how brand ‘nation-states’ should be managed better; though looking at these literatures we also felt that no perfect solution for this complex task of managing brand India probably exists. India can learn from others experiences, but the path that India charts out for herself should be unique due to unique Indian characteristics, and that should be the USP of ‘Brand India’.

In the 2nd section, we see where ‘Brand India’ presently stands in addressing these research questions. In-spite of certain realities and hypes, discussions, industry-lobbies, academic interests and even various sections of Indian government at various times making certain fragmented statements about it; we felt no ‘Brand India’ strategies has yet been “engineered” into the strategic planning process of policy-making in India. ‘Brand India’ so far has been dealt in an ad-hoc manner, and it’s also a young concept. Therefore when we explore the needs and definitions of brands, we take this structured and engineered approach as one of the characteristics of any brand. So whatever we discuss about Brand India in present times, it essentially augurs from that ‘argumentative Indian’ mindset where there’s no accountability of ‘Brand India’, and probably same holds true for its ownership. An argument that all Indians own Brand India would not hold ground because that’s what is increasingly happening with Indian law and order, democracy, judiciary and all other civil amenities leading to confusions, and probably worsening of overall governance in this largest democracy of the world. Much of it needs urgent attention. Everybody’s baby is essentially nobody’s baby. Lack of accountability in most spheres is one of the fundamental characteristics of Indian society today; and if we allow ‘Brand India’ to follow same path, we believe we will have lots of discussions on ‘Brand India’, but in the end, achieve very little out of it. Still we take a critical look on how present perception of ‘Brand India’ overseas is through a primary survey. This is to know better where we stand today, and a predominantly large group of citizen journalists as sample here could throw good insights.

To do so, we took a survey. We essentially surveyed external world on their simple one-two liner opinions on 'How India is currently perceived?' The sample group consisted of 28 international citizen journalists, and one single academician (convenient sampling was followed based on authors’ acquaintances). Here we are not making a case on merits and demerits of picking up international citizen journalists, however summarily we felt that international journalists are one section whose perception of ‘Brand India’ matters the most in influencing the rest of the world, and this group is also likely to be neutral on the realities or hypes that Indians go through frequently on ‘Brand India’, due to their sensibilities. And in terms of credibility, neutrality and amateurish views, citizen journalists again have their merits over professional journalists. Citizen journalists essentially comprise people from all sections of life, and not limited to journalism alone. So we view the sample group of international citizen journalists to be a plus point. One single academician voice definitely won’t stand any chance of research scrutiny; however before expanding the sample base; we wanted to ensure a fair presentation of global opinion in our survey. And the size of the paper prohibited us at this stage to look for even more opinions (global or local ones). And we admit that’s a limitation of this working paper. The survey needs further strengthening, but indicative directions have been received.

We will again not discuss merits and demerits of a detailed questionnaire, or of a quantitative model with many questions and different weighs assigned to those in our survey methodology. Not underplaying the importance of quantitative surveys in this regard, we felt simple qualitative surveys would be more interesting and insightful, at least as a starting point.

We received eleven responses out of our e-mailed survey questionnaire, ten from international citizen journalists and one from the academician category. These findings are presented in Annexure – I of this paper.

In this same section, we also wanted to take a deeper understanding of ‘India’ – what it historically meant and what it means now in present globalize world in terms of economics, geopolitics and other socio-economic issues. This, we felt to be of utmost importance because India historically meant different things at different points of time, even on the map. On global maps, India in 2007 may be more or less same with India of 1947, the year it became free from almost 200 years of colonial British rule. However there was partition in 1947, and even going beyond 1947 in the past; India broadly stood for the whole of Indian subcontinent.

We aren’t sure about the root and origin of the name of ‘India’, one view is ‘Indica; by Megasthenes (ca. 350 BC - 290 BC) is the earliest documented western reference of India ; the other being ‘Indus Valley Civilization’, which is much older, (c. 3300–1700 BCE, flourished during 2600–1900 BCE). That is from the name of the river , Indus again. The 1st paradox is here itself, the Ganges as a river is central to India today compared to any other river. Why we stress on this is because whatever we read in history about India, more so prior to 1947, may no longer be integral parts of present day India. We believe that a conscience decision, on whether to continue on the same historical path, or to look for new roots with original roots being in that rich past legacy of Indian subcontinent, are needed in a structured, engineered ‘Brand India’ exercise. Brand India needs to address the root of India.

However we also acknowledge that India, like any other country name, actually is not merely a piece of land on global map. It’s much more – about its history, culture, people, places, values, socio-political and economic environment and lot more, all of which are transient in nature. Annexure – II comprises our selection of few noteworthy quotes on India – from past to present times. We believe these insightful quotes help the readers to understand the rich past India had, and also the decay India have been going through lately in more recent past. What amazes us as researchers is the diversity of these quotes, and as researchers we see qualitative reflections of this in our survey (Annexure – I) as well. And our interpretation of this is more than just diversity, as diversity is the common explanation that strikes as explanation to most Indians first. But deep inside, it’s more than diversity as we identify certain facts about present-day India in Annexure – III. And that is: India is a land of paradoxes amidst obvious diversities. We list it as ‘mid-life’ ‘crisis’.

India is the eternal land of paradoxes, eternal land of diversity that led to the popular saying known as ‘What's not in India is nowhere in the world’ (in the Mahabharat?). For our working paper, we found the definition of paradox as given in Wikipedia to be acceptable, though there were scholarly definitions as well (Rappaport, 1981) . And that is: ‘A paradox is an apparently true statement or group of statements that leads to a contradiction or a situation, which defies intuition. Typically, the statements in question do not really imply the contradiction, the puzzling result is not really a contradiction, or the premises themselves are not all really true or cannot all be true together.’ Present day India, as we see from our limited survey and various scholarly understanding, is an epitome of that.

Going beyond the usual explanation of diversity, we therefore see paradoxes. Diversity is in the very image of India and even in the image of an Indian, in person or in place because of the wide variety in both. Imagine visualizing an Indian – would it be the turban-clad sardarjee , or some one from the south with a V or U-shaped clay mark (tilak) that again may denote a follower of Vishnu, or even a Tilak consisting of three horizontal white lines that denotes a worshipper of Shiva. Some one from Northeast India comes out with clearly distinguishable physical features again, and even a Barqua-clad Muslim women is quite a common site on Indian roads. It can be many of these with the transition of the modern attire of a young executive. The rugged mountains to fertile plains to desert – India is indeed diverse. And there are no paradoxes here.

Diversity can be in appearances, not in opinions and systems and standards or in values that India stand for. Differences of opinions are healthy in a democracy, but when government or majority feels something to be good for the country and still acts otherwise; that’s the Indian paradox. That’s how we define Indian paradox. Any country needs uniform rules, policies, and systems – not merely in rulebooks or in the constitution, but in ground level, i.e during implementation stage. A simple look at the various issues and incidents in India reveal that India is pulled at different directions, at times in opposite ones, by these paradoxes, which incidentally may or may not be linked with the diversities.

Globalization and developments within India have in one side reduced diversity in recent years, expectedly; however what have gone up are many of these paradoxes. Few of these paradoxes have been listed in Annexure – III. These paradoxes also strongly emerge from our survey findings (Annexure – I) and also from few of the historically important scholarly revelations about India (Annexure – II), which we explored to have a better insight of India – from past to present, in order to get the rightful future direction.

And from all these three Annexure, we reach our analysis and conclusions (albeit not final due to the working status of our paper) that various present forms of ad-hoc Brand India resembles ‘mid-life’ ‘crisis’. We stress on the point that we don’t mean ‘mid-life crisis’, but ‘mid-life’ ‘crisis’. This distinction is to be carefully noted and is explained further in the concluding sections of this working paper.

We plan to take a more structured and detailed view of ‘Brand India’ next in this working paper, and plan to suggest a structured methodology on how we should be going about it, if India is serious about ‘Brand India’. In the next phase, we plan to address the research questions that we raised here in this working paper. We again admit that ‘Brand India’ is indeed a complex exercise, and simplifying that without diluting on the topic is the need of the hour.

The findings, analysis, suggestions and conclusions are therefore neither exhaustive nor conclusive; without a detailed policy-framework of debates and discussions they can’t be. However what we have attempted here is to provide very basic guidelines on how we plan to approach ‘Brand India’ in the 2nd phase of our research. In this working paper, we have raised few relevant questions but have not attempted to answer those exhaustively. We feel that within the flux of system where Brand India presently exists, formally or informally, it is very difficult to do justice at ‘Brand India’ in a holistic way, going beyond the recent economic dimension and also having a global view of it rather than local one, in the form of a short conference paper. Therefore what we have tried is to explore various structured approaches and raised few research queries that any structured Brand India exercise must address, based on our survey results and historical findings on India.

Research Questions: The need for brands, and the debate over branding nation-states

Image and progress unfailingly go hand in hand, and although it is usually true that image is the consequence of progress, rather than vice versa, it is equally true that when both are carefully managed in tandem, they help each other along and create accelerated change.
Simon Anholt in Brand New Justice

As authors, we admitted in the beginning of our initial bias against Brand India hype or on the very need of nation branding for a country that’s as old as human civilization with the blinkers-on attitude of economic growth of less than a half-a-decade. However our subjective bias reduced by a great extent as we moved ahead with our research by exploring literature on how China, or even Europe, or the superpower US or for that matter less known smaller entities of Central European Economies like Latvia have gone about building their brand perceptions or even changing their plans of nation-brands due to certain negative brand images getting perceived in these nation-brands as felt by many for the US (freewheeling capitalism raising global inequality within the US or lack of human rights in China, etc.).

We conclude that there exists no prescription for Brand India. It’s as complex and as unique as Brand China, Brand Europe, or Brand USA, if not more complex, and it’s an evolutionary journey. From certain aspects, it’s probably equivalent to the sum of the complexities that’s present in all these three large nations (and entity, for Europe) – Europe from its rich history and diversity, and strong national identity within itself resembling Indian states and its various languages therein; China from the scale of population, size, and stature of economy; and the US from the free speech, entrepreneurship and its tolerance point of views. However India still has many more internal unique characteristics, probably more than her average share of complexities. ‘Incredible India’, the theme India has been promoting for tourism stands tall in managing India’s overall theme for branding as well, and highlights the incredible challenges India thereby faces in managing these diversities and complexities.

Amazed by these complexities, at times we also felt that as human soul can be sensed, but can probably never be defined scientifically, ‘Brand India’ also can be sensed but never can be explicitly stated. Here comes the spiritualism angle of brand India that we touched upon loosely. The only parameters of some permanence that otherwise get associated with ‘Brand India’ we found, other than the paradoxes that we already mentioned, is about spiritualism. And they still remain in the 21st century competitive economic landscape of our world. India and spiritualism still remains inseparable. True, at this stage it remains more of our perceptions than a research-based argument. We plan to address this gap in the next stage of our ongoing research.

Raison d'être for Brand Nations

Brand Nations are a mind-game, as apparent from a single visit to any global travel agent’s office. The different advertisements and posters project different images and culture in order to ‘sell’ the respective country as a tourist destination in our minds. For different target audience, the campaigns can be different. Highlighting the geopolitics, Van Ham (2001) simplified both brands and brand nations as ‘brand is best described as a customer's idea about a product; the "brand state" comprises the outside world's ideas about a particular country.’ Frasher et al got influenced by brand identity and stated it to be the “the essential” prerequisite of effective brand management. Following Kapferer , a brand is ultimately something that resides in the minds of the consumer, but its identity is synonymous with the associations that the owner of the brand wishes to build. A brand’s ‘identity’ can be thought of as its charter, its manifesto, the identity card that describes its core values and associations. David Aaker describes it as "a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise"’ .

Mootree in an interesting presentation talked about demystifying branding and loyalty. In-spite of skepticism of branding states, or even branding large, complex states like India; when we had a look at these strong arguments, we found that our skepticism to be rather similar with the views of supporters of brand states group who take a holistic view of brand. Branding, as per this definition, is a ‘strategic point of view and not merely a select set of marketing activities. Branding is central to creating customer value, not just sound bites and images.’ However we immediately faced a question, which we will try to answer later, and that is: for Brand India – who is this customer? Isn’t ‘customer’ too broad-based an idea for ‘Brand India, both from within India or for the rest of the world?

We take many of these views, and examine what we need to define to ensure that Brand India exercise does not remain as sound bites or images alone; rather it should translate to creating sustainable customer values. So with few of these views, we see what we need to clearly address and define from the starting point on where ‘Brand India’ stands at present (in the end of 2007). These essentially lead us to the research questions that we try to address in subsequent sections of our ongoing research where we look at the drivers of ‘Brand India’ perceptions. We found interesting leads through our survey and plan to suggest a roadmap about how it’s to be done by answering following research questions in subsequent phases of our research:

‘Branding is a key tool for creating and sustaining competitive advantages.’

What should be the competitive advantages that Brand India wants to create and sustain? Are we moving in the right direction, with whatever structured or unstructured efforts have sunk in, in Branding India exercises so far?

‘Brand strategies must be “engineered” into the strategic planning process.’

What is the strategic planning process for India in brand India exercise, and who all are responsible for that? Is the existing ‘Brand India’ exercise in synchronization with this Strategic Planning Process? Who is responsible and accountable for the Strategic Planning Process in Brand India; and is there an assurance of uniformity in it over time? The last question is relevant in Indian context as team or institution responsible for one task gets changed assignments over time, or with the next government coming in power.

‘Brands get their identity from meanings. Products and services are the blood of a brand, whereas organizational culture and standards for action are the heartbeat.’

For Brand India, what are the products and services we have in mind; and what Indian culture, standards and values are we talking about?

Taking a cue from the following matrix (Figure – 1) that highlights the product-function dependency of brands; most would agree on one thing. That if ‘Brand India’ or ‘Brand Nation’ is to succeed for any large nation, we need to focus on the 1st quadrant – that is independent of specific product/product groups and also independent of function, relying more on meanings and values.

Mootee again presented the justification for brands for non-marketing professionals nicely. In his view, ‘to plan for one year, grow SALES. To plan for three years, grow CHANNEL. To plan for decades, grow BRAND’ summarizes brand, and justifies nation branding. And by looking at present effort of brand India exercises that aim at selling India as an attractive investment destination to the overseas investors, we realize the shortsightedness by planning at best for year or years. Moreover, if countries, that too of sizes of India with nearly one-sixth of global population, aren’t taking a long-term view of decades, who would? True, there’s an increasing debate (and belief now) that firms from the Wall Street to any other bourses in financially integrated global world are increasingly planning for quarterly results and stock prices, leaving aside the fundamental ideas. Indian politicians and policy-makers also increasingly eye on next round of votes to stay in power at any costs. And here come the other paradoxes of ‘mid-life’ ‘crisis’ of Brand India. Brand India in the policy-making stage is tinkered with eyes on various polls, whereas to the urban elite, brand India is another debatable topic associated with the recent economic boom.

Frasher et al (2003) suggested similar views that branding a nation should not be guided by short-term advertising campaigns; rather, it is a project whose vision must span decades if it is to succeed. Brand India is a newborn idea, just years and probably yet to reach even half-a-decade. While addressing this critical question, ‘why brand a nation?’ Ramo (2007) stated that the uses of positive national image lead to maximum power at minimum cost. In ‘Brand China’ (2007) , he stressed on ‘Reputational Capital’, while he highlighted the downside of it as well as China’s image of herself and the world’s (west’s) image of China had become disharmonious. That is and will be the challenge for ‘Brand India’ as well, more so as India moves away from the ‘Washington Consensus’ policy-making to independent policy-making (we agree it may be debatable again, but that’s how we see it!) at some stage in its growth-cycle if India indeed has to find its rightful place in present world.

However while justifying the needs of brands or branding nation states, Mootee was cautious while stating that brands get worn-off from overuse. As brand manuals get thicker and heavier, it gives the signal that the brand manager is in trouble. And when instructions replace imaginations, brands are supposed to have lost their mystique. Increasingly, consumers understand how marketing works and they are becoming more and more brand savvy. So obviously, one and all need to be careful not to over-market a brand. Otherwise brand marketing would become synonymous with ‘Weapons of Mass Disillusion’ (WMD). ‘Brand nations’ therefore needs to be handled even more cautiously.

To achieve the objectives of branding, Mootee suggested that brands must be build with 360 degrees perspectives. It’s not just about advertising or visual identity. The ‘360 degrees perspectives’ is probably more relevant for nation branding. Branding essentially attaches collateral information to the brand, comprising essentially two core components: the label and the fable of the brand. The term label refers to all visual elements, packaging and taglines. For nation branding, this is nearly impossible to control in the age of Internet and information flow. Fables are the extrinsic aspect of branding, and they are attached from the outside, most often from customer experiences, advertising, corporate trust and customer relationships. (Spiritualism can be the fable of ‘Brand India’). The brand thereby becomes the ‘totality’ of what the customer experiences. And for brand India, the customer can be any global citizen, which should first start with resident Indians, as they themselves first need to behave the way Brand India demands, and have belief in it. Being Indians and resident of India ourselves, our understanding of India and rest of world’s perception about India (from the survey in Annexure – I) leads us to the intuition (for which at this stage we are not presenting any research evidence, we plan to do so in the next phase) that spiritualism may score higher as a theme for Brand India than any other themes, in a sustainable manner. Part of it is anyway evident from Annexure I & II findings as spiritualism runs through both as a common thread.

We also strongly feel the need to examine the changing perspective of media with Internet and Web 2.0 revolution. Media is getting decentralized with every passing day, and brands have traditionally been built with the reach of traditional media outlets, due to the influential powers they enjoyed. Talking about Internet and information flow and their impact on brand building and perceptions in the 21st century, it is vital to keep in mind on how influential Web 2.0 has become over traditional media. Credibility of traditional media, or management information (what a firm says about itself or what a country claims about itself, and has matter of fact least credibility. We saw this gap from the case of Brand China) ranks lower than User Generated Contents in Figure – 2, cited in an MRPA study (2007) for Germany. Therefore the accounts of a foreign tourists’ perception about India, or a blog of an Indian without any role with mainstream media or in Government may have more influence and credibility than what government of India or Indian policy-makers project about India. One can therefore imagine the challenges in meeting synergy in brand perceptions about complex nations like India in this era of open information and Internet.

Brand India and notions about other comparable nation-brands

Indian researchers like Panda (2004) or Gupta & Singh (2007) in their Brand India research argued for generic country identification with certain characteristics or competencies – like Germany for automobiles (or precision engineering), Japan for technologies (or micro-technologies/miniaturization), South Africa for racialism, Pakistan for terrorism, USA for youthfulness, Britain for heritage, Italy for sexy, France for chic and so forth and so on. We feel it to be a bit archaic, or at best an effort of oversimplification of branding a nation that may miss out on other vital insights. No evidences for these generic country characteristics were anyway cited. Going beyond this, Panda also talked about perception images, which according to us, made better sense. USA was perceived to be a nation of prosperity, Germany with efficiency, UK with conservativeness, France with artistic, Japan being technology driven and Singapore with discipline. Though we had more consensus with this view compared to the earlier one; we also feel that all these at best describe one dimension of the brand; out of many dimensions that any country normally has. USA is also perceived as the home of freewheeling capitalism; and 9/11 showed that the attack was on symbolic level, against capitalism than on the free-speech loving American citizens or of its interest, which also happens to be prosperous like few other developed nations. If Japan is only viewed with technology dimension leaving aside its unique oriental cultural values, a large part of Japan can be viewed as western society leaving aside its unique deep-rooted oriental identity (take for example Sumo wrestling, and many other unique Japanese social customs) in western world. Most of these are outcome of oversimplifications of nation branding when viewed solely from economic and business (or of certain sectors of economy/business) perspectives, which may be an important component of brand states, but never can be the ‘be-all-end-all’ perspective about state brands. Other deep-rooted country-specific characteristics from social, cultural, historical are also an integral dimension of brand states.

Nation branding, anyway, isn’t a simple act. Panda provided objectives of branding India, which we found to be more focused only from economic and political angles; missing the social dimension altogether. His arguments on objectivity of branding India stemmed from economic gains from tourism, exports and investments with the larger political goal of having larger say in world affairs, and attracting and retaining best talents. However this probably holds true for most developing nations, or even for the developed ones that already enjoy UNP5 status. Uniqueness of nation branding may be missed with this approach as ‘nation-brands’ increasingly vie for and become copycats of other economically successful nations. The evolutionary journey, along with uniqueness, both may get lost.

Under such ‘me too’ crowds of nation brands, even the sole objective of attracting economic benefits may take a beating, as Quelch and Katherine (2005) found that having a clear, differentiated positioning gives a country an advantage in attracting investment, business and tourism, and in building markets for its exports. At the same time, we don’t deny that one of the significant objectives of branding nations is to gain competitive economic and geo-political advantages. At the same time, it must be sustainable due to the uniqueness, build on the socio-economic and cultural root of the nation. And therefore it must have credibility, and needs to be done differently than beating the usual drums, where consumer skepticism is on the rise. Though we have not yet covered the positioning aspect of Brand India, Quelch & Katherine did provide certain guidelines on how sustainable, clear, differentiated positioning can be built on a frank global appraisal of perceptions and national perceptions of realities.

In this context, we agreed with few insightful suggestions of Panda on how the journey should begin, and milestones be decided. One of these are on the ‘Brand Ascendancy’ framework which recommended Brand India to be first positioned as an influential brand within the region, then within the continent and then globally. However going by India’s record of influence within South Asia itself (SAARC), or larger ASEAN front; Brand India has so far created more domestic noises amongst certain sections of Indians, but has not been able to cross the very first hurdle till now even within South Asia itself. In comparison to China’s ascendancy within South Asia, ascendancy of Brand India rather is on the decline. And without following this brand ascendancy path of gradual and incremental rise of India, slogans of ‘India Superpower’, as we see later (which hits mainstream domestic media often), sound baseless.

Brand India and Brand China – similarities, differences and challenges
The fundamental question we started with was: ‘would the orient and the occident ever meet, rather than supercede?’ Brand is more of a western notion, more so when extended to branding of nations as ancient, as large and as complex and diverse as India or few others (like China) are. There is a lot India needs to learn for building the evolutionary Brand India, which started as a recent ad-hoc phenomenon, from the structured, focused ‘Brand China’ exercise of last decade or more (there also exist other examples). Other than being oriental, both have a lot in common.

China indulged in the debate of ‘Brand China’ almost a decade after near double-digit growth; whereas in India, a very, very small section of its populace indulged in ‘Brand India’, ‘Superpower India’ and all those irrelevant discussions within four years of moderate to high growth rates . It’s something like putting the cart before the horse when one examines the existing challenges, and forthcoming challenges that would challenge India provided India can sustain this growth rate for a decade or so. Growth does not bring prosperities alone; it also brings new challenges.

To keep a long, interesting and complex issue short due to word-limits, the Chinese theory of the “The Peaceful Rise of China” which China saw as a message for the world that was reasonable, logical and relatively free of any taint of historical anger or arrogance didn’t gel well with the West’s perception of China. Operational problems like translating “Peaceful Rise” from the original Chinese version (the Chinese word was “jueqi”), was a response to a school of thought among few policy-makers in China, came as poles apart from what Western scholars and policy makers did think of China, i.e. “China Threat Theory”, comparing China with German’s rise under Hitler in the last century. The image associated with “The Peaceful Rise of China”, depicting an earthquake, lead to even more confusion. It was literally like trying to convince western policy-makers that they were about to experience a ‘peaceful’ earthquake . And describing this and much more, Ramo stated:

‘What sort of strange physics of international power meant that a given input produced exactly the opposite output you expected?... “Peaceful development,”… “Harmonious World” and others followed… (in India, campaigns like ‘Shining India’, ‘India rising’, ‘India everywhere’ ‘India Poised’ are comparable, though Indian effort was not structured, planned or even cohesive; and was not under central government accountability and responsibility for the longer term, barring at times with election in mind where brand India and poll campaign were through same advertisement, or Brand India campaign was owned by industry lobby groups with tacit government support). In the end, what China thought about itself didn’t matter much. What mattered was what the rest of the world (the west) thought of China. It looked like the repeat of history with Lin’s letter to Queen Victoria that preceded the Opium War (1839) back in 1838. China’s image of herself and other nations’ (again read west’s) views of her are out of alignment. This is no surprise. In the last twenty-five years China has changed faster than any nation in history…’

That change is visible in India now (2007). Starting with Snake Charmer’s land to the land of IT prowess (true, like China got ‘branded’ with low-priced and low quality products , India’s stand here is similar: much of the IT and BPO wave is spearheaded by English speaking manpower doing low-end IT/voice jobs, lacking innovations and mostly in the low-end of value chain) . To gauge the perception of India in rest of the world, more so to the west, we looked at universal comics like Asterix, (‘Asterix and the magic carpet’), Tintin (fictional land in India of administrative region name ‘Gajapajama’ in The Blue Lotus. 'Gaipajama'— would literally mean, in Hindi and allied dialects, 'Elephant's Pyjamas'!), or the James Bond series. True, the change has been so phenomenal over last couple of decades that even present day urban Indians kids would probably wonder whether these perceptions were based on realities or purely comical imaginations as realities have changed drastically. But that’s in urban India, to be noted again. In Bond movies (The making of the James Bond movie Octopussy (released in 1983) in Udaipur, India during 1982) project, India was depicted with dirty crowded lanes full of bovines with traitor-like characters, which have been the standard perceptions of India in western media for decades, before the economic boom started hitting news-headlines.

Whatever hype goes in India about India, be it India overtaking the US to be the largest economy of the world or India as a superpower , there’s no denying that with widespread poverty and illiteracy, drastic urban-rural divide, caste divide, corruption at all levels of governance and criminalization of Indian politics and failure of Indian judiciary to deliver justice within desired timeframe; India hits global headlines more for wrong reasons. And this leads to the misalignment between urban Indian opinion on India from the both the holistic domestic opinion and global opinion of India. Riding on the global growth wave and money inflows, a ‘Nouveau-riche’ like mentality have engulfed certain sections of marginal Indians who have placed the proverbial cart before the horse in ‘Brand India’ exercise by misplacing Indian priorities when the focus should have been more on building India to a minimum acceptable global level in socio-economic parameters. And as long as policy-makers in the West don’t perceive any strategic threat from India, they would be happy to play the 2nd fiddle in ‘Brand India’, just to contain rising China, geopolitically in Asia.

As per Ramo , China, a nation obsessed about territorial sovereignty, may have let its “image sovereignty” slip out of its control. India too faces a similar “image sovereignty” crisis within India and outside from the opposite dimension. ‘Brand India’ for the small number of believers of ‘India Shining’, ‘India Everywhere’ or ‘India Rising’ section is ‘out of sync’ with rural farmers, the tribal Indians and the illiterate Indians, and they comprise a significant section, more than the majority in the 1.1 billion Indian populace. And rest of the world hears these themes of ‘India Shining’, ‘India Everywhere’, ‘India Rising’ in global events of significance, which, in essence, is out of sync with the images of ground realities of Indian societies to foreign journalists and tourists visiting India.

The hardest reality, which we anticipate, could be that barring 1% of Indians residing in areas like the South Mumbai, parts of Bangalore, or New Delhi or similar pockets of metros; to rest these themes probably sound familiar like slogans of ‘Garibi Hotao’ (abolish poverty) campaign of 1970s. In case of Brand India, the elite Indians have paid lots of attention and sloganeering without any centralized policy-intervention (at times, the centralized policy-intervention was actually aimed at immediate elections or hijacked by lobby groups). And we believe much of the decay in India and much of the rising inequality in India during the economic boom of last four years are contributed by this dangerous trend where policy-making increasingly gets hijacked by a non-significant minor group of elites, working in the interest of this elite group alone but with the name of democracy that project whole of India to be the beneficiary of this growth. Policy-making in India thus shifts from the obvious needs of infrastructure like education, healthcare, or power; and thereby India suffers in building a sustainable, credible brand for India, both within India and outside India.

Ramo also noted that China’s view of herself often teeters between self-confidence and insecurity, between caution and arrogance. We see similar views in Indian media as well. In one dimension, there is tremendous optimism over the economic growth rates (or in rising Sensex, the leading stock-market index in India) of more than 8% of last four years, rising income levels of urban middle-class families, the Indian billionaires club, already on top in Asia and challenging the richest globally , IT/BPO boom, etc. And then there is hopeless despair over status of India infrastructure, poverty, illiteracy, Human Development Index, terrorism, law and order issues, failure of public administration and unparalleled delay in judiciary systems, corruption and criminalization of Indian politics, etc. Just as Chinese officials and intellectuals struggle to project a clear image of what the country is and what it hopes to become; similar message is radiated about India both within India and outside India. In case of China, the conflict in perception is external whereas in case of India, it’s both internal and external.

We also must understand that similar unique challenges of branding nations like India or China is also due to the unique characteristics of these two nations. And it’s the size. We firmly believe that western views can’t comprehend the complexity of managing a single nation with population more than whole of Europe and North America . To make things worse, both India and China also face the other challenges that developed nations don’t face in the 21st century (like poverty, illiteracy, etc.).

As we end this section, we would like to highlight lack of relevant literature/survey on India’s image overseas in last couple of years (at least we didn’t find any credible one). We attempted a very limited qualitative survey. In-spite of all the global focus being on China, a BBC survey (2005) found China’s image overseas declined in that year . Call it fact, western prejudice or even sampling error (where western opinions got more than their due share?); in the end country branding in global geopolitics is a war game where lines have been clearly demarcated by existing powers that must be respected by new-entrants. Otherwise, conflicts are bound to arise. Unlike Japan or Germany, it’s unexpected that a China, or India or even Russia will become a strong global economic (combined with geopolitical/military influence) power with matching brand identity without drawing ire from existing economic and military superpowers from the west.

And the great Indian paradoxes emerge here again. Ramo noted that China's top leaders, diplomats and bureaucrats have a clear framework from which they view the United States, the single superpower since last one-and-a-half-decade or more, and they are focused and are unified in formulating and implementing their policies toward the US (and the broader west). It must be kept in mind that much of the phenomenal rise of China (and off late of India) is taking place in this era of sole super-power driven world. In India, it’s totally opposite – a look at the ‘123 Agreement’ and its aftermath reveals apparently the same diversity, which in essence is nothing but paradoxes. Indian foreign policy similarly lacks any consistency under different governments – today China has more influence in Indian neighborhood (With Bangladesh, Pakistan, Nepal and Myanmar) than India has over them. And thereby India failed to achieve the Brand Ascendancy that Panda talked about, whereas China’s influence in all of Indian neighborhood is on the rise.

Gupta and Singh mentioned a popular concept on brand India - India is like an onion, which contains several layers. We belief it to be a very apt and insightful analogy; however, these layers mean different things and have different impacts. In an onion, the layers are in unison, each in synchronization leading or originating to the other layer whereas in the case of India; many of these diversities in opinions and policy-decisions don’t help India moving forward; they rather act as hurdles and paradoxes that India must get rid of. Aaker suggested that brand identity “represents the timeless essence of the brand. It is the centre that remains after you peel away the layers of an onion”. In case of India, one would wonder on what’s left behind once the onion is peeled off.

Analysis, Implementation and Conclusions
Our analysis of present brand India perceptions (Annexure – I) and few of the short listed quotes (Annexure – II) led us to believe that India currently faces a ‘mid-life’ ‘crisis’ in its image problem. ‘Mid-life crisis’, in-spite of being a popular concept, is not well supported by research. And for that reason, we don’t compare current status of ‘ad-hoc’ campaigns of ‘Brand India’ exercise with ‘mid-life crises’. We rather focus on ‘mid-life’ crisis in a different sense. ‘Researchers have found that midlife is often a time for reflection and reassessment, but this is not always accompanied by the psychological upheaval popularly associated with "midlife crisis"’ . Our stress is on that mid-life when reflection and reassessment on one’s life on values, purpose, and objectives take place. India has taken a full circle of being in pinnacle of global economy, trade, development for millenniams to drastic decays for couple of centuries post industrial revolution to revival of hope and growth in last few odd years. That’s ‘mid-life’ meaning having gone through most of the obvious phases in life (childhood, adolescent and youth in the perspective of global civilization), India now needs to reinvent and refocus its energy in identifying the right goals and objectives, again for the 21st century world.

The ‘crisis’ part, essentially, is linked with these paradoxes. India was and is full of diversity, but there can be unity in its values, purpose, objectives within that diversity when it comes to moving forward in competitive global world as a single country. However we see, as it’s popularly stated, that other than cricket and Indian railways, nothing as such unites the country whole heartedly. Even while talking about most popular Indian sport of cricket, many see a question mark of communal angle in India’s supporter base when India takes on its arch-rival Pakistan. Therefore we argue that current discussions of Brand India signifying what India stands for collectively to Indians as well as to the rest of the world in terms of values, purpose, objectives lead to a complex, confusing status where no clear picture emerges. We identify that as ‘Crisis’. And thus we get ‘mid-life’ ‘ crisis’ and not ‘mid-life crisis’, because the later increasingly has less research support and evidence, whereas India indeed stands in the crossroads of ‘time for reflection and reassessment’ in its search for a new brand identity .

We haven’t discussed implementation issues at length, as ours been an ongoing study. As researchers, we have our strong objection to any ‘Brand India’ that’s devoid of two-third or more Indians. It can at best be a temporary illusion, and can never lead to any sustainable competitive advantages that true India can achieve by focusing on its objectives right. What India on the other hand needs is something what the European Union is trying to achieve as a brand all-across leading European nations of cultural and linguistic diversity. In case of India, these diversities are even more. However what Victor Hugo stated for Europe ‘A day will come when all the nations of this continent, without losing their distinct qualities or their glorious individuality, will fuse together in a higher unity and form the European brotherhood. A day will come when there will be no other battlefields than those of the mind — open marketplaces for ideas’ is something that India badly needs to achieve, too for its various diverse stakeholders (read states) by not losing their diversity, but by being truly united in its diversity that manifests itself in all walks of Indian society than being another slogan in Indian politics and democracy.

Regarding implementation of Brand India, a basic clue can be taken from Frasher et al in achieving three overarching objectives of branding India, i.e. by raising awareness about India (it’s values, policies, people, diversities, etc.), overcoming stereotypes (poverty, illiteracy, lack of hardwill, infrastructural bottlenecks, for which the work indeed will be challenging as many of these actually are correct, many may be wrong as well), and finally by differentiating India from competitors (of other emerging nations, growth destinations like China, Brazil or Russia, or for that matter from other leading nations of the world - due to India’s size and uniqueness).

We have limited conclusions as of now in this working paper. However we increasingly feel certain about the paradoxes within India which effectively pose a challenge in establishing common understanding of any Brand India exercise. We also see lack of any USPs in many of these one-dimensional Brand India efforts, which we believe neither represent India correctly to the world, nor it is sustainable or even credible. We see a common linkage of spirituality by our understanding of Indian society and history, which is also visible in our survey findings. We plan to explore spiritual dimension of brand India as well going forward along with answering the identified research questions that Brand India must address first before a cohesive policy towards it can emerge. We end this working conference paper with following:

“All countries communicate all the time. They send out millions of messages every day through political action or inaction, through popular culture, through products, services, sport, behaviour, arts and architecture. Collectively, all these millions of messages represent an idea of what the nation as a whole is up to, what it feels, what it wants, what it believes in. It should be the task of government – with a very light touch – to set the tone for these messages, and to lead by example where appropriate so that something credible, coherent and realistic can emerge.”
Wally Olins

Above summarizes the roadmap that brand India needs to follow.

Annexure – I: Our e-mail survey finding of 'How India is currently perceived?'
Survey Methodology:
A limited survey was done within a group of International Citizen Journalists from various nations. The group consisted of people who gathered in the International Citizen Journalists’ Forum in 2007 in Seoul, organized by OhmyNews, a global leader in Citizen Journalism (CJ). We need to keep in mind that people who contribute in English in International Citizen Journalism are people who follow global and local events closely, at least for recent past to present times. This was the group with whom the author had met as a participant in the same CJ event, and mode of survey was e-mail questionnaire.
What we essentially asked our participants is a simple question: 'How India is currently perceived', and asked participants (28 International Citizen Journalists & one academician) to answer that with simple one-two liners. We also provided examples conducted by a similar survey for a different nation (on Latvia, Frasher et al, 2003). The answers we received (10+1) are interesting, insightful and are given below:
The second half of the 21st Century will belong to Brand India—and Brand China!
From a 50-year-old journalist, blogger (on Media) and documentary filmmaker, based in the US. Visited Indian sub-continent few times
India is colourful, full of people and smells of spices.
30 year-old, MA journalism student based in London.

The first thing come out (about India) is yoga and then Indian English, and Mohandas Karamchand Gandhi, Bollywood. To be more vivid, have you seen the TV series Heroes? It satisfied my picture of India image.

24 year-old Chinese journalist (as authors, we acknowledge we haven’t seen Heroes, and don’t know how to interpret that part).

India - The fast growing, but still the most mysterious country in the world

26 year-old, South- Korean Ph.D. student, studying journalism in Russia.

India is a big country with long and beautiful history. For 10,000 years, it didn't wage not a single war outside its borders. India is a motherland of Yoga culture. India has a lot of elephants, which Indians use like taxi some time. It's quite dangerous to travel around India without vaccination against diseases. India became independent from the UK in 1947 thanks to Mahatma Gandhi's concept of non-cooperation and peaceful resistance.

22 years-old chief editor of citizen journalism site, from Ukraine.

India, no doubt, has made a lot of progress on economic and political fronts over the previous few years, and emerged as a prospective power in the region. But the most gruesome thing is its human rights record and the status of minorities which is denting its image as the largest democracy of the world.
34-year-old Pakistani Journalist, based in Afghanistan, yet to visit India.

What comes to my mind about India: A large country with a fast growing population to exceed China's in maybe 10 years. Low income with a lot of poor peasants in the countryside. Also fast developing, especially strong in the software industry. Having trouble with its neighbor Pakistan left behind by the British, also feeling somewhat insecure about its bigger neighbor China which is really unnecessary.

55-year old Chinese academician who earlier visited India in 1992, sent by the World Bank for a workshop to explain China's telecom development experiences.

India: A multi-faceted, multi-cultural nation. A country that is currently in an advanced state of development. A split nation. A battle between progressives in favour of democracy/capitalism and those who do not. A country in a fierce battle with Pakistan.

30-year old Australian working as Head of Media/Strategy of a User Generated Content (UGC or User Created Content – UCC Site).

My perception of the people of India fed by the media is that of a culture that can become obsessive and overreact to things of let's say nation pride. The nation's obsession with cricket for example, the national side can win a match by one run and they are the pride of the nation, lose the next day and they (become) traitors - a severe overreaction in both cases. Strange though I get none of that from Indian people that I know here in Australia, they're good hardworking, well educated people. Is it that my perceptions are wrong or is that the great extremes of India? Economically it's a well known fact that India (is a) big developing economy not only in Asia but (for) the world; but (India) still seems to lag well behind in the eyes of many in the western world to China. Dare I say it but China seems to have sold itself better.
27-years old Australian, working as a Customer Service Officer in a Gold-refining unit; and a Citizen Journalist; primarily covering sports.

As a country that is specialized in Software development. Where there are great social problems and people don't eat meat.
46-year old Brazilian Teacher

India is the second most populated country after China with magnificent monuments and dazzling landscapes. But its masses live in appalling poverty while its rich elites aspire to Great Power influence and confidently ride on the waves of the global economy.
62 year-old Israeli foreign correspondent, visited West and South India in 1996

We note that most of these respondents are from journalism and media background, having some sort of multi-country background. However when we talk about ‘State Branding’, this group is the most influential, as journalists, bloggers and media professionals. It’s also important to state here that only three of the above respondents did visit India (stated against the comments).

Annexure – II: Few noteworthy quotes on India (to get an insight of India)

This is indeed India!

The land of dreams and romance, of fabulous wealth and fabulous poverty, of splendour and rags, of palaces and hovels, of famine and pestilence, of genii and giants and Aladdin lamps, of tigers and elephants, the cobra and the jungle, the country of hundred nations and a hundred tongues, of a thousand religions and two million gods, cradle of the human race, birthplace of human speech, mother of history, grandmother of legend, great-grandmother of traditions, whose yesterday's bear date with the modering antiquities for the rest of nations-the one sole country under the sun that is endowed with an imperishable interest for alien prince and alien peasant, for lettered and ignorant, wise and fool, rich and poor, bond and free, the one land that all men desire to see, and having seen once, by even a glimpse, would not give that glimpse for the shows of all the rest of the world combined…Our most valuable and most instructive materials in the history of man are treasured up in India.
- Mark Twain, American Writer (1835-1910)

We, of all nations of the world, have never been a conquering race, and that blessing is on our head, and therefore we live....!
Swami Vivekananda, Indian Philosopher (1863-1902)

India – The land of Vedas, the remarkable works contain not only religious ideas for a perfect life, but also facts which science has proved true. Electricity, radium, electronics, airship, all were known to the seers who founded the Vedas… When I read the Bhagavad-Gita and reflect about how God created this universe everything else seems so superfluous.
Albert Einstein, Scentist (1879-1955)

After the conversations about Indian philosophy, some of the ideas of Quantum Physics that had seemed so crazy suddenly made much more sense.

W. Heisenberg, German Physicist, founder of Quantum Mechanics (1901 – 1976)

In India, I found a race of mortals living upon the Earth, but not adhering to it, inhabiting cities, but not being fixed to them, possessing everything, but possessed by nothing.
Apollonius Tyanaeus quotes (Neo-Pythagorean), born around 4 BC.

India was the mother of our race and Sanskrit the mother of Europe's languages. She was the mother of our philosophy, mother through the Arabs, of much of our mathematics, mother through Buddha, of the ideals embodied in Christianity, mother through village communities of self-government and democracy. Mother India is in many ways the mother of us all.
Will Durant (1885-1981), Author of ‘The Story of Civilization’ and ‘The Story of Philosophy’.

I don’t want India to be an economic superpower. I want it to be a happy country…Even when I go up, I’ll come back to see what is going on in India.
J R D Tata, Indian Industrialist known for CSR, and philanthropy, and other qualities (1904 – 1993)

If I were asked under what sky the human mind has most fully developed some of its choicest gifts, has most deeply pondered on the greatest problems of life, and has found solutions, I should point to India.
Max Mueller, German Scholar (1823-1900)

As the line between people, places and preferences begin to blur to include a new global reality, stereotypes about India and Indian culture are beginning to break to form a mosaic of intriguing patterns.
Brand India http://ibef.org/brandindia/, accessed on 29th September, 2007

In 1830, India accounted for 17.6% of global industrial production against Britain's 9.5%, but by 1900 India's share was down to 1.7% against Britain's 18.5%. (The change in industrial production per capita is even more extreme due to Indian population growth).
From Wikipedia, http://en.wikipedia.org/wiki/Poverty_in_India, taken from ‘Faulty colonial theory, faulty remedy’ http://www.swaminomics.org/articles/19970817_colonialtheory.htm accessed on 3rd October, 2007
Our note: India’s share in global trade even today remains less than 2%.

The ancient Greeks located the end of the world in India as the very East of Asia. Philosophers like Aristotle wrote that there was nothing behind this frontier anymore but the okeanos, the great sea that surrounded the whole world (Hahn 2000, 11). So, unknown India became in the eyes of the Greeks an enchanted fairyland, an adventurous place where strange creatures, exotic plants and legendary animals existed…

Sabine Müller (Giessen) in Alexander's India: terra incognita as propaganda, http://www.atopia.tk/index.php?option=com_content&task=view&id=16&Itemid=57

Despite this, India currently adds 40 million people to its middle class every year…Analysts such as the founder of "Forecasting International", Marvin J. Cetron writes that an estimated 300 million Indians now belong to the middle class; one-third of them have emerged from poverty in the last ten years. At the current rate of growth, a majority of Indians will be middle-class by 2025. Literacy rates have risen from 52 percent to 65 percent in the same period.
http://en.wikipedia.org/wiki/Poverty_in_India

India was once called the golden bird. At the end of the sixteenth century, South Asia generated the largest share of world’s GDP.
Angus Maddison (1926- ), Author of The World Economy: A Millennial Perspective, OECD.
India is not an underdeveloped country, but rather, in the context of its history and cultural heritage, a highly developed one in an advanced state of decay.
Shashi Tharoor (1956 - ), Indian author, in his ‘The Great Indian Novel’
Tell me, why is the media here so negative? Why are we in India so embarrassed to recognise our own strengths, our achievements? We are such a great nation. We have so many amazing success stories but we refuse to acknowledge them. Why?
Prof. Abdul Kalam (1931 - ), ex-President of India
Indians are a peculiar race. India ignores and forgets.
V.A. Smith – Early History of India, p. 426 (commenting on views of Indian historians on Alexander the Great, taken from Skanda: The Alexander Romance in India, http://www.murugan.org/research/gopalapillai.htm)
Brand India is essentially a cluster of heterogeneous brands
Jairam Ramesh, From Defining Brand India, in The Hindu Businessline

True, Selucus! How strange this nation (India) is…
Quote from a drama, Chandragupta Maurya, by D L Roy, attributed to Alexander the Great (on India).

Annexure – III: India – Land of Paradoxes (with examples)
We highlight a few of the apparently endless paradoxes that India faces everyday. And we believe these needs to be examined not with the traditional diversity angle alone, but with paradoxes perspectives, deliberately created and nurtured or reflecting genuine conflicts.
The urban cosmopolitan Traditional conservative rural farmer/communities
IT Prowess/KPO hub Widespread illiteracy, poor quality primary education
Unity in diversity Paradox of diversity – regionalism (in Assam or in Maharashtra), Gujjar vs. Meena conflict (caste based, to go down for reservation benefits), religion-based conflicts, Inter-state conflicts (common resources like water in south)
Asia’s largest billionaires wealth, highest as a % of tax revenue Largest number of poor, illiterates and hungry people with HDI below much of Sub-Saharan Africa or other neighboring nations
Biological diversity Morphological, genetic, cultural, and linguistic characteristics – due to indigenous reasons and also due to immigrations . It becomes problematic with 3rd point above.
Diversity in Brand India theme ‘India Shining’, ‘India Rising’, ‘India Poised’, or ‘India Everywhere’ to ‘Fastest growing free-market democracy’. No agreement even here either.
CII lobbies and welcomes relief (subsidy/aid) to exporters due to global depreciation of US $ And CII drives ‘Fastest growing free-market democracy’ theme for Brand India, without realizing rising rupee is a free market phenomenon.
Political diversity Emergence of Coalition politics sans value, or on principles
Gandhi’s non-violence and historically, a land of tolerance 2nd highest terrorism-torn country for 10-15 years (and 1st on a sustained basis as Iraq is only four years old)
Motto of India - "Satyameva Jayate" (Sanskrit) meaning "Truth Alone Triumphs Criminalization of politics and corruption and lack of timely justice showcase double standards in democracy – one for ‘Aam admi’ – the common man and one for the influential
World’s largest democracy Without any accountability as centre blames state for critical issues and vice-versa; for all civil matters like justice, law and order, and even for infrastructure
US – India Nuclear Agreement (123 agreement), which many saw as positive for India had its strong effective opposition. And the confusion after signing of the agreement in its implementation stage – where the government faced trial of survival for weeks, and continues.

(Source: Mootee, ‘Demystifying branding and loyalty’ (2003) in highintensitymarketing.com

Figure 1: Product-function dependency of brands

Figure 2: Credibility of Web 2.0 scores higher than many; and is closing in with mainstream media. It has an impact on brand building and perceptions, for brand-states as well.

“Overheating”: more of a social phenomenon in China and India

2007-03-19T22:50:00.000-07:00

A lot of talk is going on in all economic and market circles on “overheating” of global economy, Chinese economy, Indian economy and probably on lot more other similar high-growth markets. These are further fueled by talks on slow-down in the largest consuming economy, in the U.S. because of retail sector slow down to recession, and more recently by sub-prime rate lending to the riskier borrowers.

A definition of the term “overheating” goes hand-in-hand with broader generic economic sense. “Overheating of an economy occurs when its productive capacity is unable to keep pace with growing aggregate demand” states Wikipedia.

Many, without a formal background in economics or sociology, fail to understand why “overheating” is expected in large markets like China or India, where domestic consumption can potentially sustain not only the existing capacities, but even the capacities in the pipeline. Because a simple look at the consumption level of goods like energy, cement, steel, cars or even when takes services sector; the service sector (that dominates overwhelmingly by 80% in U.S. economy).

That was on the demand side. Similarly, on the supply side, there is apparently no dearth of employees (or call it ‘labors’ in an orthodox manner). Well, there may be shortage of capital and other natural resources; however with global liquidity showing no sign of tiring; the 1st one is also unlikely in immediate future. And for most commodities, so long supply could keep pace with demand, true prices have gone up; but may not be to the extent in which demand have shot up. And even if tightening happens on supply side globally, doing business in these two countries purely from business and demand potential may still be attractive because of the present level of consumption, and growth potential.

Probably, true chances of that probability being remote, it may be possible that traditional economic sense of “overheating” that’s so far have stood the test of time with economies of at most 1/3rd to 1/4th the population of these two countries and that too with much higher initial consumption level compared to where consumption level is in these two countries; “overheating” may not be applicable to these two potential giant economies in a pure economic sense.

Irrespective of “overheating” possibility coming true in its economic sense in these two nations, another kind of “overheating” is already happening in these two giant economies. It’s very much in the radar of these two countries chief, President Hu Jintao for China (and also general secretary of the Central Committee of the Communist Party of China) and Prime Minister Dr. Manmohan Singh (and an economist) for India. And if one closely observes some of the latest comments of these two leaders from these two neighboring nations that’s been consistently growing at nearly double-digit numbers (one for couple of decades and one for four years), one increasingly senses this concern even more than the economic “overheating” concern.

Since last year, reforming and standardizing income distribution system has been in the limelight of Chinese policymakers. Frequent voices emerged, to phase out the disparity, and bring semblance of equality, Hu often referred to policies being compatible to the full consideration of the needs of the grass-roots, remote and poverty-stricken areas; more from western provinces of China. And in a historic move towards that, Communist China passed its first law recognizing private ownership last week. Gini-coefficient, a measure of income inequality in a society, happens to be marginally higher in China than in the U.S. Every person in urban China has nearly three times income level compared to his rural counterpart, which was around 1.7 back in 1985.

And along with the words to tackle these menace of inequality, there’s been huge monetary support in China in its last budget in rural and social sectors, more targeted at those left-behinds.

India faces a similar problem; however the problem is all over India with higher intensity again in central and eastern Indian states. The latest Forbes billionaire list showcased pointed out this inequality as billionaires’ wealth in % of GDP turned out to be one of the highest (approximately 25% against 7% global value), along with another dangerous signal of billionaires’ wealth when measured to overall tax revenue again topping the list (approximately nearly 3, world average being 1/3). Along with that, there’s been a consistent flow of media reports, thanks to better media freedom in India compared to China, on farmers’ suicides due to single-digit low agricultural growth with non-existent financial opportunities for leveraging their only asset. Maoists terrorism, having members primarily from Indian tribal-communities, is spread over 1/4th of Indian districts strikes India routinely at its inaccessible parts. Indian Prime Minister therefore talks more about “inclusive growth” more often than growth.

Here too, along with words of ”inclusive growth” came the Indian budget last month with highest allocation in social and agricultural sectors, with a year-on-year rise of more than 30% in few cases.

Finally looking at latest reports of incidents leading to violent protests emerging from both these two nations; by angry, significant sections of the population who are yet to get significant benefits of this high-growth rates; one clearly sees a clear sign of “overheating” happening in the social fabric of these two nations, with nearly 35% of total world population. Nandigram, the latest incident in India point to that overheating where to ensure supply side constraints in its economic sense are met, the basic prerequisite land supply itself becomes a problem for which farmers are ready to die. Media reports indicated that thousands of apparently unreported clashes have occurred in China too between state authorities and poor farmers, where its authorities have moved by overcoming the hurdles in its authoritarian style, and they happen to be growing by the day.

Going by the experience of these two nations with billion+ people, one is forced to wonder whether “overheating” for these two nations mean another economic terminology only; or something that’s better covered in sociology. Well, the reason for this social “overheating” may be deep rooted in fast economic growth rates, that’s what traditional “overheating” may be linked to.

This time, Capital market in China Sneezes

2007-02-28T23:07:00.000-08:00

Viewing the referenceless global financial markets, one can rightfully wonder whether Einstein received his Nobel Prize for physics or for economics. True, that most (including the writer here) of us don’t understand his famous Theory of Relativity in the context of Physical Universe, however there is no need to look further from our own financial markets now and mentally travel billions of light years away to make sense of that theory.

A plain simple look at what’s happening in global economy and in our 24X7 financial markets would help us make better sense of the Theory of Relativity. And once the clarity is established, one can legitimately state the genius in Einstein legitimately deserved another Nobel Prize for economics, probably even more than for physics.

Sad that the judges for economics didn’t understand its importance as the theory was much ahead of its time, more so in the period when Bretton Woods system tried to maintain a reference system that badly failed in 1971.

The basic premise of the Theory of Relativity is what we observe around us, in time and space, is not absolute and varies from our own reference system and its inherent bias. Now ask any man on the street whether Dollar is overvalued, and the question comes ‘against what reference system’– you can have a basket of forex measures (as in Dollar Index), you can have non-currency based measure like crude, gold, real estate. So unless you define your reference system, it’s all relative, floating in the air in the referenceless monetary world where one often gets confused on what’s the measure and what’s being measured.

Answers to all the billion-dollar questions that hound us – be it is China witnessing a bubble in its stock market, is Chinese economy heating up, is the U.S. likely to face a recession within this year as stated by legendary Greenspan, has the real estate bubble been busted adequately in the U.S. or more to come, are the high asset prices in emerging nations likely to have a correction – you name it, and one can be reasonably sure that none of these are better answered by any economic theory other than an extension of Einstein’s Theory of Relativity in its pure economic sense. And that simple answer is same for all the questions, answers of which even elude present fed-chief Bernanke ‘It depends on your reference system’. And that reference system happens to be a dynamic one.

Or why go that far? Just asking simple questions to ourselves whether we are rich or poor gets a similar response. Majority of us are filthy poor when compared to the filthy few rich billionaires, however changing the reference system again; we can feel happy that we are filthy rich compared to the large majority of filthy poor people we have in this very world.

In physics, in-spite of accepting the Theory of Relativity like the words of the Bible, scientists still believe that everything isn’t indeed relative, there exists few absolute things as well. There exist few constants like the speed of light in the space, and many more. In our number driven global economics and financial world, there exists no constant and no concept of something absolute. It’s all relative. Economies of nation-states are compared without any absolute measure, stock-prices are compared with peers without any absolute reference system, true – there exists historical trend lines; however history proves that we never learn enough from past history (mistakes) and it also states that history gets created all the time.

And only this week, there’s been one more casualty to this Theory of Relativity. Majority of us grew up with sort-of universal economic statements like ‘when the US sneezes, rest of the world catches cold’. The volatility, started from Shanghai markets on 27th of February when its index dropped by closed to 9%, ensured that the rest of the world also sneezed, if not caught cold. Markets in the U.S. dropped by more than 3%, and that reference system triggered a tsunami wave all over, from Japan to India to the European markets.

Chinese markets account for a bare 2% of global market capitalization, the U.S. accounts for nearly 40%. So a drop of 9% over 2% was a meager 0.18% drop, in value terms it was little more than $100 billions, whereas the drop of the U.S. markets wiped off, well albeit for a day, closed to $700 billion of investors’ wealth.

Newton, the other known physicists stated in his famous laws that every action has an equal and opposite reaction. However an action of the value of $100 billion should not necessarily evoke response of trillions of dollars from the rest of the world, unless there is leverage that provides the delicate balance within our global financial imbalances.

China, with its nominal GDP and market-cap may still be the 4th largest GDP accounting for 5-6% of global GDP; and in market-cap, may even rank lower. However when one visualizes a global economic picture like Atlas bearing the world with hundred pillars instead of his two powerful hands, each pillar on book supporting 1% of the earth’s weight; China merely accounts for 5-6 of those pillars in economic sense and measures. However try removing even one of those pillars that China provides, and we see an earthquake in global financial world. And if one mischievously removes 3-4 from that of Japan, the U.S. or the European Union; one barely notices that until the number grows reasonably large.

That’s the Theory of Relativity of the China impact. In a world of full of relative measures, starting from the GDP to the value of currency by which everything gets measured; the old adage, taken to be absolute for a while that when the U.S. sneezes, rest of the world catches cold is also undergoing a change. True, it may be that China caught cold for a day and rest of the world sneezed (in % terms), and China recovered fast the next day (and falls again today, 1st March as of now) whereas the rest of the world didn’t have it easy as of now. The sneezes from China, triggered by the comments of Greenspan or by wishful thinking of the Chinese Government who (insensibly) wanted the markets to be sensible, forced the U.S. Government and Bernanke to comment on status of U.S. economy to comfort their own market.

Lately people talked about China for its impact in commodity markets – whenever commodity Chine sneezed, global commodity markets caught cold. The incidents of present week make its mark in global financial world as it threatens that status that the U.S. economy enjoyed in global economy since World War II.

Is it a new beginning? Only last week, the U.S. vice-president Cheney showed his concerns over rise of China’s military power in the Asia-Pacific region, still incomparable compared to the strength of the U.S. military. Market forces are strong, and getting stronger by the day; at the same time markets can be exuberant and be unreasonable. One thing the policy-makers in the U.S. won’t be comfortable about is this response of the market. It would take them some time to accept that sooner or later, whenever China would sneeze; rest of the world would literally catch cold.

Well, they may at most hope that with this change of reference system; the U.S. too gets a promotion and that be ‘whenever the U.S. sneezes, rest of the world would catch influenza’.

Following the Theory of Relativity, we can only explain that better when our reference system takes us there. Only wish we would like to have is it should not be a chain reaction – China sneezes, rest of the world, including the U.S. catches cold, and that in turn causes global economy to have recessionary influenza.

One can be reasonably certain that the Theory of Relativity would hold true for that hypothetical nightmarish scenario as well.
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© Ranjit Goswami. Ranjit is a research scholar with IIT Kharagpur and the author of the book Wondering Man, Money & Go(l)d.

China's forex reserves beat 'internet growth'

2006-11-10T06:14:00.000-08:00

Late nineties, early 2000 – dot-coms faced the trough of disillusionment in a bust. Then came the slope of enlightenment for the select few who survived the onslaught and starting from 2003 onwards, dot-com companies became familiar with the word called profit.

Before that, there still were high-double digit growths, but in different measures. The measures were non-financials like page views, eyeballs, etc. And to explain the high growth rate in those measures and subsequently in profits, industry analysts coined a word called internet growth.

The internet growth rate resulted in more than a billion internet user base globally in ten years from 16 million users back in 1995. But as the base grows, growth slows, more so in macro-economic global parameters.

As exceptions increasingly become the norm amongst global imbalances, we see the rich increasingly borrows, to sustain and consume more, from the poor as if that’s the right of being rich and powerful; and the poor is too happy to extend that debt to the rich by postponing its consumption to future by saving more.

China’s forex reserves back in 2001 stood at $216 million. Now it too expectedly crossed $ trillion. Back in 2001, the world had an internet user base of 513 million which now is nearing 1.1 billion.

Chinese Forex reserves grew at double that internet user growth rate from 2001.

Simply amazing! Mind-boggling. And now it’s expected that China would add another $trillion reserves by 2010.

How to explain and what to explain about this phenomenon called Chinese economy! Quite a lot is written from western analysts and economists on how this is unsustainable – simple because while buying dollar, the central bank floods the economy with Yuan, that in turn spurs the investment-driven growth that further increases the exports. On top of that Chinese savings rate, at phenomenal close to 50% of the GDP ensures there is no dearth of Yuan for investments in the market

The only catch line is the linkage of Yuan with dollar. If US could sustain growth year after year by flodding dollar in global economy, why can’t China achieve sustainable growth by flooding Yuan in its own economy. Inflation is at control (1.8% as per 2005 figure, marginally up from 0.7% back in 2001 as per PRCNBS); domestic market size is large and still far from its potential, and as people get more and more disposable income, a possibility that the export-dependence economy can always land on demand driven domestic growth. Domestic and foreign debt in China is much less compared to some economies like Japan or US, and therefore looks manageable.
US flood the world with dollar and buy goods – without much of value addition in terms of economic activities. China merely exchanges that paper currency from dollar to Yuan and creates and sustains value, for itself and for rest of the world and thereby maintains the balance in the imbalances.

So what’s wrong with Chinese policy here?

The root cause of flooding of Yuan in Chinese economy is driven by US policy imbalances. China is merely exploiting the opportunity presented. China can sustain it as long as the Yuan:dollar linkage is maintained which they have done so far steadfastly against global pressure yielding an inch at most here and there. By doing so, China is not only helping the world sustain these imbalances longer; but also providing the critical support to dollar and thereby to US economy. On a PPP basis, close to 40% of global economy now directly adopts and accounts thro’ dollar standard as China’s $9.4 trillion strong economy backs up with US $12.4 trillion fragile economy.

One is strong and expected to remain strong – the other isn’t too certain where it’s heading. But the strong props up the weak as they both grow. The taller can’t give sustainable support to the shorter from higher level; but Chinese economy provides the excellent support to US economy so far following a bottom-up approach.

It’s US economy who faces the consequences of these imbalances more. China should ideally continue this policy as long as it suits them, increasingly getting the control of an economic bomb that has the potential to destabilize US economy. It only grows bigger with time. So long and even today, it’s US armed with its global investment bankers who hold that economic bomb that has the potential to destabilize most other economies thro’ currency attacks or otherwise.

Private portfolios and money with world’s private banking institutions were over $10 trillion back in 2000 even, and was growing at 30%; majority of that ownership is known to be in US dollars by groups/individuals having US interest along with financial interest on top of their investments. Combined open interest valuation of all derivatives in Over The Counter (OTC) derivatives in 2005 were at $285 trillion, as per BIS Quarterly Review, September 2006. Compare that with global economy of $45 trillion. And savings rate of hardly $2 trillion. Much of that money is at work at freely floating global financial markets, most in interest rate contracts ($215 trillion open interest) followed by in forex ($31 trillion open interest) contracts. And it’s the global investment bankers like Citi, Goldman Sachs, Merryl Lynch, J P Morgan, and that US-led group who work like US economic army with their potential financial power to destabilize any economy at the signal of Fed and US policy-makers; and make handsome profits too.

Citi alone controls whopping $1.4 trillions of assets, more than the forex reserves of China today. Acknowledging that importance of China, Economist in an article titled ‘The Alternative Engine’ stated it no longer looks like the world may catch cold if US economy slumps; however if Wall Street shivers, global tremors will still be widely felt.

So as China is in the process of building up its fractional reserves of dollar against available US-controlled assets, to be used at any opportunate moment by de-linking Yuan from dollar and also having the possibility of selling these huge dollar reserves to put a blow to US economy and its inflated purchasing power through the paper currency called dollar.

In all comparative measures, China is no where close to be compared to the only superpower. But as it increasingly looks forward to making such a claim going forward, and to do that successfully, it needs to be equipped with financial arsenal as well. And develop a Chinese fire wall to protect it from any potential slump of The Wall Street.

Before that happens, China needs to play it cool, because the amount of money available with the world is just too much, and it’s concentrated with too few. The differentiating point would be balancing the stakes that hold economic and military power.

As long as US hedges its risk with Chinese economy and as long as China hedges its risks with US economy as both presents the two ends of the same delicate balance that so far maintained and sustained the growing imbalances, it would work fine for global economy. The day China, who as of now is having the responsibility of maintaining that delicate balance as the inferior economic power, takes away that responsibility with right support from others; we may see the long pending balancing, but painful reactions.

China is playing it safe and sound as of now. For China to succeed, as the situation stands today, it may even have to take on the combined power of US allies, like that of Europe to an extent, and more of Japan and South Korea. That’s a different geopolitical story and to achieve that; China may have to play its diplomatic card of acceptance amongst other global economic powers, starting with gaining a strong foothold first in its own region.

That’s a long-drawn warfare strategy that SunTzu talked about more than two thousand three hundred years ago in his masterpiece, The Art of War. Till that warfare gets real, it explains why more money flows into China as an FDI (expected to be more than $100 billion for every year during China’s 11th five year period starting from 2006) destinations than all the money that’s chasing potential high-growth internet ventures (little more than $20 billion has been flowing into it since last couple of years after new-found interest emerged from 2004, post the dot-com bust).

Because China simply offers double the growth rate than even internet economy does in all broad measures. And that too without the potential high-risks of failures that any new ventures, more so internet ventures present.

© Ranjit Goswami. Ranjit is a research scholar with IIT Kharagpur, and is the author of the book Wondering Man, and the Internet

Socialist China Recreates Capitalist History

2006-10-23T09:59:00.000-07:00

Come this Friday – the 27th October, a lot many taxi-drivers and housewives across
Mainland China and Hong Kong would be a happy lot. Well, the retail investors could
have been even happier had the Industrial and Commercial Bank of China (ICBC) Initial
Public Offer (IPO) been fixed at the middle of its indicated range.

But the huge demand, an almost 30 times over subscription (and in Hong Kong retail
category over subscriptions were 76 times, and in China by more than 266 times) now
sort of ensures the prices to be in the top of the indicated range, as indicated by sources in
ICBC – curtailing magnitude of appreciation on debut from earlier anticipated 15% and
more to a realistic level of 10-15% now.

With record subscriptions from both Institutional and retail side, ICBC is likely to price
its H-shares in Hong Kong at HK$3.07 and A-shares on the mainland at 3.11 yuan. H-
shares are stocks of mainland companies listed in Hong Kong exchange whereas A-
shares are priced in Chinese currency and available only to mainlanders (and selected
foreign investors). Both the A- shares and the H-shares will be priced finally on Friday,
and both H- and A- category shares would start trading on same day – another first time
in China's capital market. That too with its derivatives and warrants in Hong Kong
exchange.

And for the same reason, a lot of retail allottees are likely to sell-off on listing. Volatility
is expected to be high as history gets created and recorded. How many get any allotment
is also another matter of speculation now as the month long craze reaches the crescendo.
If earlier models (Bank of China Ltd. raised $11.2 billion in IPO in this May, and China
Construction Bank Corporation raised $9.2 billion in 2005) are followed, all applicants
are expected to receive proportionately fewer lots, whereas economic senses suggest
otherwise.

However any retail sales on listing are expected to be gobbled up by institutional buyers
as their appetite was not met, here it received 23 times over subscriptions.

And another funny thing of the 21st century world is Socialist China creates capitalist
history in many fronts through this ICBC IPO. One – that of raising highest capital in
IPO till date and placing China as the top country in top-ten list of funds raised through
IPOs, that too all the three from China coming from the banking fraternity and all listing
in last two years. ICBC now has the option of raising $22 billion from this IPO, more
than twice than any raised from Capitalistic USA ($10.6 billion by AT & T Wireless in
2000) and thereby also overtaking NTT DoCoMo in its frenzied telecom days back in
1998 ($18.4 billion).

And there were voices about perils in China's banking industry not too long ago due to
unsustainable Non-Performing Loans (NPLs) coupled with directional state controlled
lending norms in an overheated economy.

The bank had earlier given a range of HK$2.56-3.07 for the Hong Kong offerings for its
35.39 billion H-shares, with an option to offer 5.31 billion more shares, and 2.60-3.12 yuan for
the mainland share sale for 13 billion A-shares, with an option to add 1.95 billion more here.
Lower range of this price band equals 33 US cents.

More than $81.5 billion of demand came from retail investors of Mainland China, and
Institutional investors chipped in another $16.3 billion. Individuals from Hong Kong
ordered $54 billion whereas overseas investors – lately who are on a buying spree in
China ordered a phenomenal $345 billion.

Overall subscription to the offer was closed to or even in excess of $500 billion, against
offered 14.8 percent of ICBC's enlarged share capital where only holdings of Ministry of
Finance and Central Huijin Investment Co., a state-owned holding company are in double
digits (36.2% each post IPO). In all likelihood, this may be the largest subscription of any
IPO

That's an awesome money – twice the market-cap of world's largest financial Institute
(Citigroup Inc) chased ICBC, and more than the GDP of 164 nations individually,
including that of banking heaven Switzerland (which is at $367 billion). At listing and
with greenshoe option likely to be exercised, ICBC is expected to rank as the fifth most
valuable financial Institute in the world – at more than $135 billions. Its price to Book at
listing is expected to be around 2.23, following that of its predecessors in the range of
2.3-2.6.

And ICBC would also be one of the most valuable firm from Asia – headed by Toyota (around
$185 billion). ICBC would overtake Samsung, that touched at $100 billion in January 2006. And these are excluding
Russian energy giant Gazprom whose market-cap soared to more than $300 billion and
ranked third back in May 2006.

ICBC would be closed to another growing star – Google – the darling of the internet world – in terms of market-capitalization.

A little bit more on this giant that's going public – with an employee base of close to
three hundred and sixty thousand, this largest bank of China with its network of 18,000
branches serves 153 million retail customers (that incidentally is more than Russia's
population, and barring only six nations – i.e host China, India, USA, Indonesia, Brazil
and Pakistan no other country has so many citizens) and 2.5 million corporate clients,
owns $800 billion in assets and recorded net profit of to $4.13 billion in last financial year.
Expected net profit for current year is $12.5 billion. Non-performing loans (NPL) totaled RMB
154.4 billion, a significant reduction as the bank last year received a $15 billion rescue
package from the government that helped it reduce bad loans although the figures are
widely regarded as being somewhat higher than officially stated. It has an NPL ratio of
4.69% and a capital adequacy ratio of 9.89%, which would go up with this offer.

Citi, incidentally world's largest Financial Institute has a market value of $ 249
billion, and manages an asset base of $1494 billions with price to book value at 2.16. In
US, only Citi, Bank of America and J P Morgan Chase has higher market-capitalization
than ICBC. And then there is London-based HSBC Holding Plc amongst top five.

Any any China story now remain incomplete with a complementary Indian story. Whole
Indian banking industry market-cap stands at close to $70 billions which is almost half of
this Chinese giant alone, and nearly same as value as China spent on its three biggest
government-owned banks. These three banks received $60 billion in bailouts since 2003
as part of the industry cleanup. India's largest bank – State Bank of India in turn holds
assets of $106 billion, has a market-cap of close to $12 billion. Its price to book value is
around 2, whereas couple of Indian financial institutes trade at more than 5 price to book
ratios. Unlike China, India's banking sector is fragmented with 27 private sector banks,
30 private banks and many more foreign banks, regional rural banks and co-operative
banks.

India in turn is looking for Chinese size and scale in all its industries barring IT sector –
and in banking sector India hopes to create fewer larger entities through mergers and
acquisitions of its public sector banks.

But for India, it's miles to go before it can think of creating a bank of $130 billion+ in
market-capitalization. That's almost one-fifth of entire Indian market-value. All over the
world, it's Chinese goods and all things Chinese are talked about. And in money-matters,
Chinese banks seem to be catching up even faster where it matters the most – in creating
capitalistic value in socialist China.

Middle-East crisis: war against terror or war against falling dollar?

2006-07-22T00:48:00.000-07:00

I was happy in my own internal world in Kolkata and in IIT Kharagpur, in India amidst all global imbalances. Then the crash in Indian equity market took place in May 2006. I had leveraged long positions; that too un-hedged. Weaker hands are always eliminated by natural forces or by market forces. I was eliminated by market forces. True, I played adventurously with my small money. This huge financial loss prompted me into stock taking of my life; and that of my surrounding world.

Sine the end of 2nd world war, the world has been broadly unipolar economically and also in terms of media. Soviet Russia did try to emerge as an alternate global power militarily, but since the collapse of Soviet Russia, present world is unipolar in all three important measures – economic, media and in military power.

And since last few years, it’s been discussed about the emergence about China as another alternate global power, be it economically, militarily or in terms of global mind share through media.

In terms of present developments like war against terror and also in terms of burgeoning financial indiscipline by US economy misusing its de-facto ‘fiat’ right to print and produce global currency called Dollar; Chinese policies still have been more internal driven that external driven. I wonder on the timing when China would wield its power on the external world with its new found status, and whenever it does that, would the consequences would be better for an average global citizen.

I wondered whether this game played by Hezbollah in Lebanon would be another similar adventurous game that I played with my weak hand in global financial markets? This article examines that from financial angles. And there should be an obvious interest of China in the developments in the Middle-East.

I was long in the Indian derivatives market because I felt present US economy is not sustainable. I am sure about over-valuation of US dollar in global economy. There are many who feel so. The answer of dollar still being high, unfortunately or fortunately rest with Middle-East broadly, and also with economies like China and Japan due to their export dependence. And unfortunately it’s the citizens of middle-east, who safeguard the credibility of dollar in global financial markets, directly or indirectly pay a huge humanitarian price. And the citizens of China suffer in terms of lower pay and holding US dollar against their savings, when US does not save and borrows more than $ 2 billion daily from poorer countries globally[1].

This article is a feedback that Chinese media and Government need to take up more of global responsibility because of the imbalances that exist globally demand that from this country, and its citizens. Here I focus on Middle-East crisis.

There are terrorism (and root causes of terrorism) elsewhere in the world too – in CIS countries, in India, and even in Africa. No other country ever have suffered as much from terrorism as India has been suffering since ages from this social evil. And India never took any unilateral actions against anybody; and Hinduism and Indians are considered globally as most tolerants. However US attention and war planes never bombed those terrorists elsewhere, barring Afghanistan. And Afghanistan is not far off from middle-east. There was reported usage of banned DU weapons, which falls under Weapons of Mass Destruction as per US Federal code definition in 2 out of 3 categories in various Middle-east conflicts. As these DU weapons are radioactive and chemically toxic, it fits the definition of poisonous weapons banned under the Hague convention too[2].

I am against human killing human beings; more so innocent civilians and children getting killed in the name or war against terror or in the real war against falling dollar. And I am against organized marketing campaign and propaganda of using civilian killings to justify more innocent killing. Any human being ought to be. I was watching the proceedings UN Security Council over middle-east crisis in BBC and CNN yesterday (on 20th July, 2006) evening as Indian news channels are yet to achieve that global scale. We don’t get Aljazeera in Kolkata in India. So we only get West’s view on war through West’s media. Any view on any war is expected to be biased. An opposite view helps people watching the events neutrally, empathetically. So I browse Aljazeera and try to get another view. I found an article of interest that highlighted the differences of human perception in Aljazeera yesterday. ‘Watching American TV in Beirut’[3] highlighted many of these perceptions and misrepresentations. In any war, it’s never known who is right and who is wrong. It’s in the perceptions; and more so in the presentations to build those perceptions.

And I am against such propaganda; or call it organized marketing campaign. We must desist using human and civilian death tolls as marketing ploy to justify killing more innocents and children – many children who even don’t comprehend why s/he is a Lebanese and why another one is an Israeli. Let’s stop playing the game of adulthood with our children.

Truths always get distorted between lies and damned lies. After the Security Council meet Mr. Dan Gillerman, Israeli Ambassador to the UN, expectedly tried for his nation, in marketing the death of two Israeli-Arabs boys in Nazarath to justify Israeli killing of innocent Lebanese civilians and children. I saw it live in BBC. There was intermittent censoring as screen blacked out for fractions of a second in BBC. And few minutes later, CNN stated that the father of those two Israeli-Arab boys blamed Israel for his sons’ death.

My humanity and that of global humanity took another massive blow under the mask of UN, and Western human rights that effectively control UN Security Council.

I said that I am against human killings; more so against the killing of the children and innocent ones in the battle of self-righteous rights. However I never saw two developed western country ever fighting each other (broadly true in post WWII). Before any of the nuclear missiles could be used, Russia bowed down to Perestroika. But, we the people from developing world and more from Asia and Africa keep on fighting each other. I get surprised at Sunni militants killing Shia militia and vice-versa regularly in Iraq where the body count crossed 39000 Iraqis.

It’s happening in India, Pakistan and in other developing countries too. Asia with 4 billion population globally does not unfortunately have any global say.

At times I get a feeling that few nation-states enjoy this world fully and another 5%; and rest of the world as hungry dogs fight for another few odd % of this world. The world is anyway getting exploited beyond its sustainable limits. The ‘have nots’ remain ‘have nots’ and the ‘haves’ have it all.

What we don’t realize in developing world is that we are not fighting against any human beings. What we don’t realize that we should be actually fighting the oppression by dollar as the only global currency with ‘seignorage’ right with Fed, and thereby with US Government. Rest of the world today is in a mad race to the bottom to get few scrambles of that dollar.

Only Middle-East and China can change that; and can change that fast enough. For China, changing that would lead to slowdown of domestic economy, and turning its credit to US Government into bad debts. So China decides to invest good money after bad money, knowing fully well that it’s eventually is not sustainable.

US know it too well too. And that’s why we have a proxy war against terror in the Middle East behind the real war against falling dollar. And this war in some pretext or other would continue as long as America knows Dollar is too weak purely on numbers of economics. And the support of the petro-dollar alone can make it survive for some more time. It’s a tactics to buy time hoping that in between US fiscal and trade deficits may improve; war has always been good for the US economy. Or some other developments elsewhere in the world would again put the strength back in dollar to its 1945 level. Dollar was gold before 1971; Nixon changed the rule by converting gold to dollar. And now with crude is dollar game; US knows that it’s economic and military power is in the hands of those very region and religion that produces black-gold. US and west's reliance on black-gold is not for their imports and energy security alone; but more to maintain their currency valuations; and thereby acceptance of dollar throughout the world.

I am sure that a lot of wars can be averted and a lot of financial imbalances can be corrected if we go back to the gold standard. It would happen some day, question is when. It’s reported and speculated that Central Bank of China too are accumulating gold. But as long as that gold is traded as paper-gold and in paper-currency dollar, no quick changes can be expected.

© Ranjit Goswami. Ranjit is a Research Scholar with Indian Institute of Technology, Kharagpur, India; and is the author of the book ‘Wondering Man & The Internet’. He can be reached at ranjit.goswami@gmail.com

[1] Save More, Uncle Sam’ The Shanghai Daily http://www.shanghaidaily.com/art/2006/05/23/278759/Save_more__Uncle_Sam.htm dated 23rd May 2006
[2] Source: NucNews.Net…archives, for research, and Education http://nucnews.net/nucnews/2006nn/0601nn/060111nn.txt
[3] By Habib Battah, 20th July 2006, http://english.aljazeera.net/NR/exeres/AEEFA95C-1ED7-4BD0-9CE5-7FEEC2613B68.htm