Friday, May 29, 2009

The interesting story of Interest Rates...

Essentially, interest is nothing more than the cost someone pays for the use of someone else's money. Homeowners know this scenario quite intimately. They have to use a bank's money (through a mortgage) to purchase a home, and they have to pay the bank for the privilege.
Credit card users also know this scenario quite well - they borrow money for the short term in order to buy something right away. But when it comes to the stock market and the impact of interest rates, the term usually refers to something other than the above examples - although we will see that they are affected as well.
The interest rate that applies to investors is the US Federal Reserve's federal funds rate. This is the cost that banks are charged for borrowing money from Federal Reserve banks. Why is this number so important? It is the way the Federal Reserve (the "Fed") attempts to control inflation.
Inflation is caused by too much money chasing too few goods (or too much demand for too little supply), which causes prices to increase. By influencing the amount of money available for purchasing goods, the Fed can control inflation. Other countries' central banks do the same thing for the same reason.
Basically, by increasing the federal funds rate, the Fed attempts to lower the supply of money by making it more expensive to obtain.
Effects of an increase: When the Fed increases the federal funds rate, it does not have an immediate impact on the stock market. Instead, the increased federal funds rate has a single direct effect - it becomes more expensive for banks to borrow money from the Fed. However, increases in the discount rate also cause a ripple effect, and factors that influence both individuals and businesses are affected.
The first indirect effect of an increased federal funds rate is that banks increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if they carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend.
After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means that people will spend less discretionary money, which will affect businesses' top and bottom lines (that is, revenues and profits).
Therefore, businesses are also indirectly affected by an increase in the federal funds rate as a result of the actions of individual consumers. But businesses are affected in a more direct way as well. They, too, borrow money from banks to run and expand their operations.
When the banks make borrowing more expensive, companies might not borrow as much and will pay a higher rate of interest on their loans. Less business spending can slow down the growth of a company, resulting in decreases in profit.
Stock price effects: Clearly, changes in the federal funds rate affect the behavior of consumers and business, but the stock market is also affected. Remember that one method of valuing a company is to take the sum of all the expected future cash flows from that company discounted back to the present.
To arrive at a stock's price, take the sum of the future discounted cash flow and divide it by the number of shares available. This price fluctuates as a result of the different expectations that people have about the company at different times. Because of those differences, they are willing to buy or sell shares at different prices.
If a company is seen as cutting back on its growth spending or is making less profit - either through higher debt expenses or less revenue from consumers - then the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock.
If enough companies experience a decline in their stock prices, the whole market, or the indexes (like the Dow Jones Industrial Average or the S&P 500) that many people equate with the market, will go down.
Investment effects: For many investors, a declining market or stock price is not a desirable outcome. Investors wish to see their invested money increase in value. Such gains come from stock price appreciation, the payment of dividends - or both. With a lowered expectation in the growth and future cash flows of the company, investors will not get as much growth from stock price appreciation, making stock ownership less desirable.
Furthermore, investing in stocks can be viewed as too risky compared to other investments. When the Fed raises the federal funds rate, newly offered government securities, such Treasury bills and bonds, are often viewed as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the "risk-free" rate of return goes up, making these investments more desirable.
When people invest in stocks, they need to be compensated for taking on the additional risk involved in such an investment, or a premium above the risk-free rate. The desired return for investing in stocks is the sum of the risk-free rate and the risk premium.
Of course, different people have different risk premiums, depending on their own tolerance for risk and the company they are buying. However, in general, as the risk-free rate goes up, the total return required for investing in stocks also increases. Therefore, if the required risk premium decreases while the potential return remains the same or becomes lower, investors might feel that stocks have become too risky, and will put their money elsewhere.
Interest rates affect but don't determine the stock marketThe interest rate, commonly bandied about by the media, has a wide and varied impact upon the economy. When it is raised, the general effect is to lessen the amount of money in circulation, which works to keep inflation low. It also makes borrowing money more expensive, which affects how consumers and businesses spend their money; this increases expenses for companies, lowering earnings somewhat for those with debt to pay. Finally, it tends to make the stock market a slightly less attractive place to investment.
Keep in mind, however, that these factors and results are all interrelated. What we described above are very broad interactions, which can play out in innumerable ways. Interest rates are not the only determinant of stock prices and there are many considerations that go into stock prices and the general trend of the market - an increased interest rate is only one of them. Therefore, one can never say with confidence that an interest rate hike will have an overall negative effect on stock prices.

Monday, May 25, 2009

Qual's of a good L...

It's said that good leaders(L's) take chances and can succeed only if they take their teams with them.
L'ship is not about managing things but about developing people. L's need the 3Cs: Courage, Conviction and Communication to succeed. Other L'ship qualities that are essential are an abundance of humility, the ability to remain focussed and the capacity to dream boldly. L's take chances and grab opportunities. L's can succeed only if they take their teams with them and have a motivated set of employees. There is only one way to get everybody motivated — by making the other person want to do the job.True motivation comes from having a real sense of purpose, of working for one common goal and with the purpose to excel. Real motivation can never flow from financial inducements alone. Fear is a poor motivator. Show people that you trust, respect and genuinely care about them. Only then will you be surrounded by motivated people. Give people autonomy to decide how to get the job done but be there to guide and help them along the way.
Employees want to be respected and be included in a corporate vision that they can embrace. Success needs to be rewarded and celebrated, and failures need to be handled delicately. Motivation can never be forced. Let the people in your life know that you respect them.That you appreciate their work, that they are important to you and that you want them to learn, grow and reach their potential. Create effective mechanisms viz. money, recognition and training to motivate and retain. Finally, being a leader is not about winning a popularity contest - it is about doing what is right.

Confucius said give a man a fish and you feed him for a day.Teach a man to fish and you feed him for a lifetime. This perhaps is an important guiding principle for a good leader

Friday, May 22, 2009

US U-Turns again...

US secretary of state Hillary Clinton has astonished the world with her rare candour. She has described US policy towards Pakistan on the last 30 years as incoherent. She has bemoaned that, after accepting Pakistan's support in the Afghanistan war in the 1980s, the US imposed all kinds of sanctions on it. True, US policy was incoherent.

But Clinton should be cautioned against accepting an incoherent explanation for it and overlooking what led to US sanctions. It would also help if the US came clean on the Central Intelligence Agency's (CIA) relationship with notorious proliferator A Q Khan. According to former Dutch prime minister Rudd Lubbers, this relationship dated back to 1975. The CIA had intervened twice with Dutch authorities to let Khan go when he was detained by them. The US's role in Pakistan's nuclear proliferation was not exactly a passive one. The Pressler amendment was not meant to discourage Pakistan's nuclear weapons build-up but to outmanoeuvre the proposed Glenn-Cranston amendment imposing a 20 per cent limit on uranium enrichment. The Reagan administration enabled Pakistan to go up to building a weapon. The tacit agreement was that it would stop short of testing. The Pakistanis broke that understanding and got their weapon tested by the Chinese at their Lop Nor site on May 26, 1990. This has been disclosed in a book, The Nuclear Express, by two US scientists, Thomas Reed and Danny Stillman, associated with Lawrence Livermore and Los Alamos nuclear establishments. In the third week of May 1990, a US delegation headed by Robert Gates, currently defence secretary, rushed to Islamabad presumably to persuade Pakistan not to test. It failed. George Bush Sr was left with no alternative but to invoke the Pressler amendment. Clinton, therefore, need not feel guilty about the sanctions. Rather, it would do her and the world a lot of good if the US came clean on the events of 1990. That doesn't mean other aspects of US policy were not incoherent. The US helped promote the worst form of Wahhabi extremism among the mujahideen. It is now paying the price since Wahhabi conditioning spawned al-Qaeda and the Taliban. Pakistan's Inter-Services Intelligence (ISI) learnt the tricks it is displaying vis-a-vis the US from CIA trainers. In the years to follow, the CIA could not correctly assess what its former pupils would be up to.

Even after the Taliban's extremism became known, Bill Clinton's assistant secretary of state Robin Raphael tried to negotiate with it. Hillary Clinton would dismiss that as part of incoherent policy. But many who were responsible for it are still around her in the present administration. No doubt Barack Obama's policy has a certain coherence. It recognises the Taliban/al-Qaeda and their Wahhabi extremism as the enemy and no longer talks about the war on terror overlooking the fact terrorism was a strategy to spread an extremist cult. It also recognises the ISI's links with some extremist organisations. Clinton has spoken of Pakistan's government and civil society abdicating their responsibility to fight extremists posing an existential threat to them, and of Pakistan in its present state posing a mortal threat to the US. Yet she now talks approvingly of action against the Taliban by Pakistan's army and democratically elected government. Has she noticed that Pakistan's national assembly has not yet been able to pass a resolution by consensus endorsing army operations against the Taliban? A coherent policy would depend on assessing the nature of the threat Pakistan's situation poses to US and international security. The threat is not merely the Taliban and al-Qaeda, It is an extremist cult under which hundreds of thousands of children from age seven upwards are being robotised to become suicide bombers and cannon fodder in hundreds of madrassas. This did not happen in Iraq, Iran or Saudi Arabia. Even as the army, government and some sections of civil society in Pakistan have fallen in line with the US demand to fight the Taliban and al-Qaeda, significant sections of the population still view this as an American war. There is no evidence of the beginning of any ideological transformation against Wahhabi extremism. Policy incoherence arose from the US's inability to understand that Pakistan was a religious ideological state and had a conflict of interest with the US on that account. While both parties in pursuit of tactical gains tried out an opportunistic alliance, Pakistan emerged the gainer. Nuclear weapons made it immune to international punitive action. Plus it had an expansionist ideological cult from which the US now feels a threat. While the US is trying to use Pakistan's army and state apparatus to fight the most organised expression of the extremist cult in the form of the Taliban and al-Qaeda, the ideology pervading the madrassas remains untouched. No doubt a programme for building schools and reforming education exists on paper. If the US is not to make the mistake of leaving Pakistan once the anti-Taliban/al-Qaeda campaigns end, it must recognise that there is a fundamental ideological conflict with the prevalent extremist cult. There has to be a de-jihadisation of Pakistan and Afghanistan, just as once there was de-Nazification in Europe.

Thursday, May 21, 2009

Self-Introspection Time for the BJP

Despite having a plethora of issues to campaign against the ruling UPA coalition the BJP has suffered a poll debacle. Its paltry tally of 116 Lok Sabha Seats, as well as dip in national vote share by 4 to 5 percentage points compared to the last Lok Sabha elections, which it had also lost, should prompt rethinking in the party about its direction. If it wants to look once again like a contender for power, the first lesson it should draw is not to run a shrill and negative election campaign, full of grievance and vitriol, as it did this time. Terror, for example, can be a valid election campaign theme. But it's a serious issue. The BJP's approach, by contrast, came across as rancorous, personalised and superficial, hung on the three pegs of reviving the unpopular POTA, hanging a convicted terrorist and characterising Manmohan Singh as a weak leader. As Shivraj Singh Chouhan, one of the BJP's most successful chief ministers, has observed, the hanging of Afzal Guru can hardly be made into an attractive election issue. Internal criticisms within the BJP have brought out that it is losing popularity among youth as well as among the urban middle classes, two segments where it had been strong earlier and which represent the emergent India of the 21st century. To reconnect with these segments and devise a winning strategy, it needs to focus on the future rather than obsess with the past.

The BJP may still look at the Ram Janmabhoomi movement as a foundational moment, because that's how it came into prominence as a national party. But this is a new century, where destroying a mosque in order to establish a temple at the same spot hardly makes policy sense. India has changed dramatically between 1992 and 2009. The old ploy of provoking communal riots in order to polarise the electorate, a formula that BJP appears to have stuck to as late as 2008 in case of anti-Christian riots in Orissa, is subject to diminishing returns at the ballot box. If identity politics has played itself out by now, how can the BJP reorient itself? It could do so by identifying and filling a gaping lacuna in Indian politics, the lack of a centre-right party which speaks the language of reform and harnesses globalisation to expand the middle class. That would be incompatible with a Hindu Rashtra plank, but Hindu Rashtra could be substituted with a strong nationalist appeal which would have greater resonance across the country. If that requires the BJP to cut its ties with the far right, it should do so with the intention of occupying a moderate conservative space.

Wednesday, May 20, 2009

Nationalism and Hinduism redefined after Indian elections 2009

If Team Rahul gets so much support — and with radiant faces like Jyotiraditya, Sachin and Jitendra Singh — it is able to deliver in national interest, should we remain adamant and say: Hey, you are bad till you join our party? They are Indians and have been voted to power by an Indian electorate. Think what India needed at a time when external security was under strain and internally terrorism of various varieties continued unabated. Recession has put off lights in a hundred million homes and diplomacy has to show its best with confidence when China makes ADB stop an aid to Arunachal, Tamils are severely brutalized and Swat remains a difficult zone for Delhi, though Kathmandu has given signs of relief, which needs further restrengthening of the non-violent democratic forces. We wanted a stable government, led by a party with a national outlook, which is necessarily free in taking decisions and without any dependence on the Left and other fringe elements. And an opposition that’s pan-national in its policies, and strong enough to stop any wrong by the treasury benches. We got it. Should it make us sad, unhappy and remorseful? In any case the young, vibrant faces we see peopling parliament, with less caste consciousness and stronger on the merit lines, will do better than their predecessors and please don’t count if they make mistakes-they will shine even if they make some, which are bound to be there in the land of ‘angels’ who have nothing else to do except criticize and belittle others. India is passing through an ideological and programmatic transformation and the youth in the lead is bound to change the parliament’s body language and paradigms of behaviour. They are there in every party, though more glamorous and the powered will hog the headlines, thanks to the class conscious and politically correct media, the lesser souls will still be relevant and make their mark. An India, which is strong militarily, sound economically and leads the comity of nations for a peaceful coexistence, needs only one brand "Indian", and definitely not a religious or partisan identity. Those who couldn’t make it will have enough time to ponder and analyze why they got the drubbing. But those who have an unflinching faith in their ideology and are committed to their path of bliss will carry on working with a renewed vigour and confidence. If the conveyor belts are weak, you can’t blame the luggage for a failed delivery. Let them think and come to any conclusion that they find appropriate. To say that the issues raised by those who are otherwise known world over as Hindu nationalist group were wrong, will be unfair to India. After all, was the raising of the issue of Kashmiri Hindus wrong? Or demanding revocation of POTA and stringent measures against terrorists? Or the agitation for the Amarnath land and preservation of the unique world heritage and a symbol of faith like Ram Sethu? The nationalists opposed the divisive politics of Raj Thakcrey, who was propped up by the Congress to counter Shiv Sena. Was opposing Raj wrong? The nationalists did Pokaran 2 and were committed to preserve rights for Pokaran 3 if needed. Was that against national interest? On the eve of polls some said forget 1984 but remember Gujarat. What mentality did it show? The nationalists wanted Article 370 to go and Kashmir fully integrated with the rest of India. Was that against national integration? Should India be governed on religious fragmentation and parochial chauvinism or on the basis of egalitarianism, equal rights and privileges to all rising above communal lines? Let everyone ponder: Hindus have been continuously assaulted for the last twelve hundred years. Do they have a right to preserve their heritage and way of life after a partitioned independence or not? These are the existential questions before the nation and not the other way round.
True that most of the opposition was fragmented, filled up front pages of the newspapers with internal brick batting (Rampur, Lalu-Nitish-Paswan-Congress). But that doesn’t make a stark fact diminish that many of the media houses were seen to be working against a particular section of Indian polity. Some becoming an instrument to oppose Hindu assertions maligning them with celebrative enthusiasm for irrelevant happenings like we saw at Mangalore pub. Their (‘fair, objective and independent torch bearers of freedom of expression’) controllers, writing in newspaper columns and on their blogs, had nothing but a decisive opposition and acidic hate for a particular section of the Indians who asserted their dharma. These Hindus were demonized for their civil assertions and all the media space was given to the one-sided attacks on them like the Taliban did in Swat. How the owners of the channels, writing politically partisan columns in papers that blatantly support a particular political party, would allow a debate that can be closer to objectivity and does justice to the other viewpoint? So what? They could do what they did, not because they were too overpowering, but because the other side miss-stepped their plans. In the last eight decades, when did Hindutva get applause by this politically correct press and if their steps were strong, when was it able to stop the march? Prudence demands perseverance and a rational faith in what we have believed in to come up with new idioms and an inclusive appeal that does justice to the cause so dear to the followers. That’s the cause of India. Mother India needs the ideology that reflects the glory of our civilisational contours. The ideology that has been fortified by the martyrdoms and dedication of thousands of unknown and unsung foot soldiers led by Dr. Syama Prasad Mookerjee and Pt. Deendayal Upadhyaya. Both the great stalwarts were murdered mysteriously in their early fifties. They became leaders of a mass party when they were in their forties. And remember they initiated Bharatiya Janasangh, and not Hindu Janasangh, hence their vision was essentially all-inclusive. Trust in the ideology that is the only reason of organization’s birth and survival and don’t get besieged by the flood of assaults in this time of low tide is the message of this mandate for the vanquished. Hindutva is a way of life and not a political instrument like water supply and reservations. Its wrong, completely a falsehood if someone says it spreads hatred. It’s the only ideology that guarantees pluralism on equality. In fact the most hateful ideologies are those which stifle the other voices defining secularism as anything anti-Hindutva. Suresh Rao (Bhaiyyaji) Joshi, the sarkaryavah (Gen Secy.) of the RSS said in an interview with me that Hindutva is not a political subject or a parameter but a way of life. So don’t politicize it. Hindutva encompasses essentially good education, rural development and urban infrastructure. There is no alternative to good governance and a lifestyle that rhymes with the ideals that are espoused. Ram symbolizes material happiness too based on the righteous approach for all. Wherever they could show it, they won. The fact that the nationalist groups are running largest number of service projects, hospitals, blood banks, Thalasaemia care centres, cerebral palsy treatment centres and hundreds of thousands of schools, is overshadowed by political ups and downs. India still produces young, bright, meritorious people who work in remote areas of this land for the socio-economic development without ever caring whether they are mentioned in media reports or not. Five thousand bare foot doctors’ centres in the villages are being run. That’s the real core of Hindu organizational work. With undiluted love and amity for all. If India rises, who falls, is the touchstone of all their actions and utterances. Nationalism means India first without getting embarrassed or apologetic for our Hinduness. The situation demands a better solidarity and not further divisions. It requires an intellectual commitment to India.

We must prove ourselves worthy of it.

Tuesday, May 19, 2009

The Fall and Fall of Left...

The politician who has suffered a greater loss of face in the elections than anyone else is Prakash Karat. The manner in which the voters have busted his grandiose dreams shows that he hadn't a clue of the conditions at ground level. Driven by his dogma, he had bulldozed his way through a subservient politburo without realising that he was leading not only his own party, but the entire Left group into a dead end. The latter, too, was seemingly so mesmerised by Big Brother that it had no inkling of the approaching calamity.

Karat's journey towards disaster began with his championing the anti-imperialist cause which, he thought, had a wide measure of public support. Surrounded by like-minded 'followers', he presumed that opposition to America as in the days of the Vietnam War and castigation of neo-liberalism were sure-fire recipes for political success. He evidently had no idea that India had changed meantime and that he was 20 or 30 years behind time, as Rahul Gandhi later pointed out. Perhaps vaguely aware that the Left by itself would not have the requisite numbers to pose a serious challenge to the two national parties, Karat turned to some of the country's most unreliable politicos. He should have anticipated their fickleness when the Samajwadi Party, an old friend of the CPM from the days of Karat's predecessor as party general secretary, Harkishen Singh Surjeet, joining hands with the Congress on the eve of the trust vote in Parliament. Karat ignored Surjeet's earlier acceptance of the Congress as a lesser evil than the BJP. Though adept at stitching together unwieldy alliances, Surjeet's broad objective was to keep the BJP at bay. He would have been appalled by the sight of the Marxists voting along with the BJP against the government on the nuclear deal. Karat, however, had no such compunctions. To him, anti-Americanism was all. Since the government, according to him, was selling out the country to the Great Satan, his first objective was to pull it down even if it meant supping with the devil. His lack of foresight was also evident from the fact that he apparently never considered what would happen if the government really fell. Since Mayawati was waiting eagerly in the wings, he evidently thought that a replacement for the prime minister was at hand. But he never bothered about the consequences of helping someone into the prime minister's chair who had no experience of running a country of India's size and complexity and whose party had hardly any presence outside UP.

In the event, it was the Left that "lost its voice", as Amartya Sen said. Now, it has lost it altogether because of the steep drop in its numbers from 61 MPs to 24. What this dramatic fall means is that the comrades will not have the kind of clout they enjoyed at the Centre for four years from 2004. Karat's singular achievement, therefore, has been to take the Left down from the highest point it ever achieved to one of the lowest in recent years.

Monday, May 18, 2009

The Outcome of Indian Elections 2009: A new Crisis for the BJP and Left...

It may be difficult to deal with defeat, but the regret of a drowned dream is quickly overtaken by the compulsions of survival. Both the BJP and the Left now face an existential dilemma, and will require honesty to pare away that part of the dogma that has checked the growth of one and undermined the success of the other. The BJP might want to consider a fundamental fact about our country. India is not a secular nation because Indian Muslims want it to be secular. India is a secular nation because Indian Hindus want it to be secular. It would be wrong to dismiss everyone in the BJP as communal. But L K Advani's efforts to sustain the inclusive image fashioned by Atal Behari Vajpayee were constantly undermined by the rhetoric of leaders who did not understand that the language of conflict had passed its sell-by date. The turning point came with Varun Gandhi's immature speech. The BJP condemned it but did not disown it completely, for fear of losing the extreme in its search for the centre. What seems obvious now did not seem so clear then. Varun Gandhi should have been dropped as a candidate. Worse, Varun Gandhi fell in love with his new pseudo-aggressive image, and projected it in statements and pictures that went into every home through television. This young Gandhi even began to fantasise a future as chief minister of Uttar Pradesh. It is interesting that regional BJP leaders understood that this was toxic. The Madhya Pradesh party bluntly told Varun Gandhi he was not needed while the Bihar unit was relieved when Nitish Kumar refused hospitality to both Narendra Modi and Varun Gandhi. The national ethos is shaped by one predominant desire: the hunger for a better life. Prosperity is impossible without peace, so the passions of sectarian politics, whether based on community or caste, have been replaced by the clear understanding that peace is non-negotiable. Prosperity, on the other hand, has always been negotiable, since it has never been a universal fact. India remains a poor country with rich people rather than the other way around. The poor want to be part of the India Rising story. It is odd that the Marxists should have missed this. They lost the Muslim vote in rural Bengal, not because of Islam but because of poverty. The message from Nandigram and Singur was that land was being taken away from the poor in order to create jobs for the middle class. Nitish Kumar has won because he created peace, and took his promise of prosperity to those at the very bottom of the top-heavy caste ladder. He will be the envy of his peers at the next meeting of the nation's chief ministers. It might be even odder if one draws a potential parallel between Bengal and Gujarat, but Narendra Modi's industrialization just might become a problem if he does not take corrective action. Taking the Nano that Bengal lost is only one chapter of a more complicated story. The poor are sensing that this cosy relationship between politicians and industrialists is benefiting either the rich or the middle class. The landless and peasants could turn against Modi if he does not resurrect rural Gujarat with the high-profile vigour he has offered industry. The DMK survived in Tamil Nadu because it gave the poor cheap rice and free entertainment. Buy shares in television companies. Every political party is soon going to hand out free television sets to voters. The Berlin Wall has been breached in Kolkata. Is it only a matter of time before the Communist bloc collapses? Are Prakash Karat and Buddhadeb Bhattacharjee the problem or the solution? Is there any alternative chief minister in Bengal who can fashion correctives and implement them with a hammer ? The CPI(M) politburo meeting on May 18 was meant to be a celebratory event in the game of thrust and parry that was supposed to follow the results. It will now have the excitement of a dirge. Prakash Karat summed up this election pithily when he said, "We failed". It was not an individual's failure, since Marxist decisions are collective. It is easy to sneer at the defeated, but a paradox needs to be noted. The Left may not be missed in Kerala and Bengal, but it will be missed in Delhi, since it injected serious debate into economic and foreign policies. It is not important that the Left was right or wrong. What is important is that it generated a debate. It is obvious that governance is being rewarded, and Naveen Patnaik's vindication is sufficient evidence. But there is also a model profile for a politician that has emerged. The voter wants three qualities in his leader: honesty, competence and modesty. This is what he saw in Dr Manmohan Singh. Rahul Gandhi added the flavour of the future to the Congress offer. He has won his place in power through this election. In all likelihood there will be a transition within the foreseeable future, particularly since the Congress has silenced its allies as effectively as it has neutered the Opposition. Chief ministers like Nitish Kumar, Naveen Patnaik, Shivraj Singh Chauhan and Raman Singh delivered on all three qualities respected by the voter. Others got by on two, but they should not confuse reprieve with victory. The dangers of success are more dramatic than the perils of failure. Complacence is an easy trap. Arrogance is seductive. Dr Manmohan Singh has been given freedom to govern, but his first watch has to be on a slippage by colleagues. By giving him freedom, the Indian voter has denied him an excuse.

The Indian Democracy Votes: The tale of two Gandhi's

Continuity for change. Sounds paradoxical, but that may well be the message that India's electorate wants every one of us in the chattering and political classes to hear.

That seeming paradox becomes a clear statement if you reflect a moment on how an old man and a young man, working together yet separately, crafted a spectacular victory for the United Progressive Alliance, led by the Congress party, in the just-concluded general election. It becomes clearer, starkly so, if you contrast the public personalities and political approaches of two Gandhi's in the recent fray, Rahul and Varun. The stage of their contest was one state, Uttar Pradesh, but their sharply contrasting characters and styles encapsulated what was going on in the national mind as we voted our preferences. Obviously at one level, the verdict was for continuity. The Indian people chose not to change the cockpit crew at a time of high expectations soaring ever higher in the midst of severe economic and security turbulence. Manmohan Singh is that greybeard commander who quietly, and without bravado, guides those expectations towards potential fulfilment, warning all the while that it will be a long and difficult journey. He is the man who began a process of change in economic direction when he was finance minister nearly two decades ago; and he was prime minister during the last five years when India's economy, during much of the tenure, grew at around 9 per cent and the nation began to reach out to the world as an aspiring global player. The changes in our worldview necessary to achieve that aspiration were once again initiated by the good doctor, who firmly concluded a deal with the United States that enabled India to circumvent an international sanctions regime and rejoin the world community as a full member. Today, as a leading participant of the G-20 and a key player in the global fight against terrorism, India's status in the world as a power that must be included in any consultation over global crises is established, though it remains way behind China in projecting power perceptions as well as in economic achievement.

It was the contest in UP between the two Gandhi cousins that delivered an equally significant message. Varun was all saffron flame and brimstone; Rahul was mostly modesty and patience. Varun fired up crowds with hate-talk that even his party, the BJP, found disconcerting; Rahul, in consultation with key advisers, chose a go-it-alone campaign strategy that made his party whoop in delight when the results came in. Varun, though young, projects a mindset of an old India, in which people define their identities in ethnic, caste and community colours; hatred, suspicion and settling old scores come naturally to them. Rahul is more about getting on with the job, keeping a goal in steady focus and tolerating, even celebrating, differences; as a result, the Congress ended up with much more support, a lot of it apparently from minorities who had sailed away to other ports, while the BJP, which was expected to do relatively well, stayed where it was five years ago. OK, it wasn't just Varun and Rahul who determined the outcome in UP. But, in a sense, their respective mindsets symbolised the contrasting ideological positions that contested for mastery over the soul of India. In Varun's view, the majority must first define its group identity, keep the 'other' separate from 'us', and then build a muscular nation in which a monolithic majority rules, perhaps benevolently as in Ram's time, to make this country rise to a shining peak of success. Rahul, on the other hand, seems thoughtfully confused about any singular identity of a majority community which can resurrect Ram Rajya in this day and age. In this view, all citizens in a secular nation belong to a minority of one kind or the other; only Indians constitute a collective, widely diverse, majority. It's a salad bowl. Don't risk trying to make it a melting pot of steely identity.