A huge data scam: Forget about 2G and 3G, this is a whole different type of data scam. The shocking $9.4 billion dollar lapse in exports data presented by the commerce ministry defies all logic. How exactly does someone miss a $9.4 billion abyss? A computer crash? A statistical meltdown? Did they lose the invoices submitted to them by industry? This piece suggests that something more sinister could be the reason: serial overinvoicing by exporters. Soon after it was written, another lapse was uncovered, this time a $6.3 billion copper exports overestimate. The commerce ministry asserts that 781,000 tonnes of copper was exported in 2010-11: a truly fantastic figure, given that India’s entire production that year was 650,000 tonnes. This is one scam that deserves further investigation.

Runaway inflation: The big economic story through the first half of the year was rampant inflation in the Indian economy. The RBI has responded with aggressive interest rate hikes, which have been more successful in slowing down the economy than in curbing inflation. This isn’t very surprising when one considers that much of the rising inflation has been driven by supply side bottlenecks in agriculture and oil price rises. The collapse in the rupee hasn’t helped either. Food price inflation is at the heart of Subir Gokarn’s compelling speech at the RBI earlier this month. Another interesting take by a policy insider is this paper by Kaushik Basu. Finally, Arvind Subramanian wonders why there isn’t more outrage at seemingly outrageous inflation levels.

Widening fiscal deficit: Even as we bask in schadenfreude at Europe’s misfortunes, India’s own fiscal situation looks increasingly precarious. A sound fiscal position is closely associated with high growth in India and the absence of the latter threatens the former. My own state, West Bengal, is flirting with near-shutdown, and the central government is floundering as well, caught between expansive social gestures and leakages through corruption and tax evasion. At least one interesting plan seems to have been mooted to raise funds in 2012. Here’s hoping for more innovative thinking.

Social security nets as sieves of waste: I was very moved by Jean Dreze’s passionate appeal for a right to food and an end to malnutrition. However, many commentators have suggested that the government can barely afford such a plan, especially given the present fiscal scenario. The government’s flagship social security programme – the National Rural Employment Guarantee scheme – became the centre of a storm when Rural Development minister, Jairam Ramesh, exploded about the endemic waste in the programme.  Naturally, there are concerns that the Food Security Bill will head in a similar direction.

Infrastructure slowdown: Two years ago, there were huge hopes for infrastructure investment in the country, spearheaded by a dynamic government and supported by enthusiastic foreign investor support. The sector has bitterly disappointed. A dysfunctional government and Parliament has put paid to hopes of quick decision-making. This article examines how fast-growing Indian cities have had to put together their own infrastructure in the absence of government support. But is the rise of the likes of Gurgaon based on a fundamental private sector growth story or is it a mirage built on the shaking sands of hyperinvestment in real estate? A candidate for article of the year delves into the story behind real estate development in Noida and Gurgaon.

Chaos over FDI: The rollback of the decision to allow FDI in multi-brand retail epitomizes the chaotic policy-making that has been a hallmark of this government for the last two years. The disavowal by its allies and even its own ministers of a Cabinet-sanctioned decision was a bitter reminder to the Congress of how much the rest of its term in office is going to be dominated by various elections. I’ve already written on the FDI issue and can only add that irrespective of your personal stand on the merits of FDI in retail, the debacle around its introduction is symptomatic of a government in crisis.

An absentee leader: At the centre of a government in crisis is a man whose personal stature has crashed in the last two years. One of my favourite articles of the year is a piece by Caravan on Dr. Manmohan Singh.

Where do we go from here: Finally, I conclude with two very different perspectives on development in India. S.S. Aiyar writes a baffling paper on how growth in India in the last twenty years has actually surged upward from the grassroots, beginning with the poorest Indians, rather than trickled down. What worries me is that many people uncritically buy into this type of feel-good, India-Shining story. A great piece that, in my opinion, sets the record straight is by Amartya Sen and Jean Dreze, highlighting India’s terrible performance on human development indicators and questioning the very aims of economic growth.

]]> http://www.criticaltwenties.in/economicsocialpolicy/2011-a-forgettable-year/feed 1 http://www.criticaltwenties.in/economicsocialpolicy/two-weeks-to-christmas-can-the-euro-summit-deal-hold-things-together http://www.criticaltwenties.in/economicsocialpolicy/two-weeks-to-christmas-can-the-euro-summit-deal-hold-things-together#comments Sun, 11 Dec 2011 12:09:42 +0000 Anisha http://www.criticaltwenties.in/?p=4029 I wrote, last Monday, of a week of reckoning that lay ahead for the Eurozone. At the end of a dramatic week, we have a remarkable resolution by 23 member countries and a potentially profound split in the European Union. Most of the ink spilt on the summit has devoted itself to the discussion of the veto by the United Kingdom of any attempt to alter the Lisbon treaty on which the EU is based; this veto subsequently led to the formation of a union-within-a-union comprising 23 countries, with three others considering support, and the firm exclusion of only the UK.

Quite what David Cameron was thinking when he took this call is a intriguing but very mysterious question, which has been dealt with in some detail in a series of posts in Bagehot, the European affairs blog of The Economist. I can do no better than to direct you there. In sum, it would seem that the UK took the dire step of brandishing a veto, while earning very little in return. In particular, by stepping out of the new resolution, the UK has diminished its political influence on any further European deliberations on economic growth, the regulation of financial services and the management of a common internal market, perhaps even at the cost of protecting its financial sector – ostensibly the reason for the veto in the first place.

Even as Britain contemplates life outside the core EU-within-the-EU, what becomes of the immediate Eurozone crisis? Before we start whining and complaining about the inadequacy of the latest Euro discussions (and we will get there, don’t worry), let’s take a minute to marvel at the scale of the change. A group of 23 European countries have agreed, in principle, to a treaty, which binds each one of them to one another in the form of a fiscal union. The union with a view to preventing fiscal profligacy will vet budgets and debt-issuance plans by individual members. Strict penalties will apply to those who fail to comply (of course, how the sanctions will actually be applied is another question). These countries will meet as often as once a month (non-members such as the UK will be excluded from these meetings). The signatories to the resolution aim to have a formal agreement in place by March.

The fiscal compact focuses on the long-term solvency of European governments and has long been considered by many commentators to be the natural counterpart of a monetary union. A decade-long error has finally been set right and should Europe survive the present crisis, the compact is surely a step towards greater European strength. Unfortunately, the agreement has little to say on the short-term resolution of the crisis.

Serious concerns remain about the solvency of both national governments as well as many European banks, particularly those with large exposure to the bonds of the peripheral European economies. The European Central Bank (ECB) has agreed to stand as lender of the resort to potentially stricken banks. This week, a raft of measures were announced to reduce financial pressures on banks; for instance, the ECB will now accept lower-quality collateral from banks in exchange for providing emergency finance. However, ECB Governor, Mario Draghi, has drawn the line at assisting governments with finance. Investors believe, and rightly so, that the solvency of banks is inextricably linked with the fate of the governments whose bonds they hold; the ECB’s ability to bail out banks will not count for much in the face of, say, Italian insolvency.

In terms of crisis funding arrangements, €200 billion has been provided to the IMF to deal with the crisis, a strengthened European Stability Mechanism should be in place by July 2012 and may even be able to borrow from the ECB.  However, any plan to issue a joint Euro bond remains a non-starter and is firmly opposed by Germany.

Matters could come to head as soon as next week if Standard and Poor’s follows through on its threat to downgrade European sovereign ratings, including France’s AAA. A downgrade of Europe might make more sense than its terribly-argued downgrade of the U.S., but S&P’s appalling timing is about as disastrous as Ricky Ponting’s right now. There’s a very good chance that this sort of report could could do just enough to push already-panicked sovereign bond markets over the edge. The ECB’s resolve may soon be tested, as will the German insistence on denying Europe a jointly issued sovereign bond.

Finally, the fiscal compact imposes a German view of government on the rest of Europe. Budgets must be balanced as far as possible and an annual structural deficit of over 0.5 per cent of GDP will not be tolerated. This is all very well for countries with higher growth prospects but implies continued austerity for the rest. There is very little substance in the summit statement on promoting growth or addressing the recession. Greece and the others remain doomed to years of pain, with severe austerity and inevitable economic stagnation.

Today marks the start of a very important week for the Eurozone. The world is looking to western Europe as it attempts to comprehensively solve all of its existential problems rather than simply kick the Euro can just a little further down a dark road. Italian Prime Minister Mario Monti announced a €30 billion package of austerity and growth measures yesterday. Today, France and Germany hold talks at the very highest level over how to keep the Eurozone going. As a measure of US concern, Secretary of State, Tim Geithner, will also be floating around on the periphery of these and other talks in Europe all week. On Thursday, the European Central Bank has a monetary policy meeting, which will reveal whether there is broad agreement over the way forward between Euro leaders – Angela Merkel, Nicolas Sarkozy and Mario Draghi, the president of the ECB. On Friday, the European summit begins at Brussels to thrash out permanent solutions to the sovereign debt crisis, even as its constituent countries seem headed for economic recession. Talk is even floating around of a fundamental amendment of the EU treaty to establish a fiscal union in addition to the existing monetary union.

Can the Euro be saved in a week? In this article in the Financial Times, Wolfgang Munchau is typically downbeat over the prospects of significant change over the next week. We can only hope that European leaders are a little more sensible than he suggests.

Is financial sector efficiency a myth?

The Occupy movement has motivated a debate on the importance of a financial sector as protesters refuse to buy the line that the world would be a horrible place if banks weren’t allowed to earn enormous profits. In an interesting debate over just how badly the world needs a financial sector that is taking place on Vox, Thomas Philippon writes a fascinating little article arguing that the financial system today is barely as efficient as that of 1910. The cost of intermediating funds from savers to borrowers is no less than the equivalent cost one hundred years ago, suggesting that a decade of financial innovation has not reduced inefficiency. Trading, however, is significantly cheaper today and volumes traded have soared to very high levels since 1910. Philippon leaves us with absorbing questions: why is financial trading so important, and does it really improve social welfare?

A hysterical catfight between the history boys

A fiery battle is taking place in the pages of the London Review of Books between roving intellectual, Pankaj Mishra, and the polemical pop-historian, self-proclaimed financial expert, and television pundit, Niall Ferguson. In this strongly worded, yet coherently argued book review, Mishra criticizes Ferguson’s book, Civilisation: The West and the Rest, for being patronizing, packed with outdated ideas and just plain deceitful in many regards. Ferguson is no stranger to controversy, having scrapped viciously with Paul Krugman and Jeffrey Sachs, both of whom have unsubtly reminded the Scotsman that he is less Renaissance Man and more dilettante in the fields of economics and financial regulation.

Frankly, I don’t know quite what sort of response Ferguson expected from reviewers (particularly the LRB) to a book with a name that includes “the West and the Rest”. He certainly pretends to be outraged by the tone of Mishra’s review and the allegation of racism, which he claims Mishra has leveled at him. The battle has raged for a month with the latest salvos being fired last week. Elsewhere, Ferguson has threatened to sue Mishra and the LRB and has assured at least some writers that he will “hound [Mishra] in print” in a way he has never been hounded before. Much excitement awaits us all.

As usual, the media coverage on the issue has veered from shrill to shriller. The commerce minister, Anand Sharma, seems to believe that FDI will create 10 million jobs (that’s more than the population of Bangalore). The anti-FDI brigade is so eager to damn the idea that, according to them, supermarkets will not only gouge Indian consumers but also simultaneously decimate all kirana shops.

Consumer is king?

The long-term potential winners from such a move are undoubtedly the consumers. Supermarkets are likely to compete on lower prices, consistent (if not higher) quality and on the platform of providing a broad and inclusive one-stop shopping experience. If they fail to deliver on these counts, they will only be as successful as domestic multi-brand retailers such as Reliance Fresh (if personal experience counts for anything, I’ve seen at least one RF outlet in south Delhi which retails a lot of low-quality produce, in various stages of rot, at no real price benefit). The idea that supermarkets will collude and bully the consumer with overpriced rubbish is totally inconsistent with the international experience of supermarkets competing aggressively on price. If anything, it is the suppliers of the supermarkets who will be gouged.

Green revolution part 2?

Which brings us to the other big winner – apparently the agricultural sector, which, if government is to be believed, will soon witness a revolution in productivity on account of FDI inflows. Government has introduced a requirement that at least 50% of the total FDI must be invested in ‘back-end’ infrastructure, particularly in developing supply chain management systems (including the ubiquitous “cold storage”) that source agricultural products from rural areas and supply them to cities. A further requirement is that the retailers source a minimum of 30% of processed products from small industries (most of which is to be Indian, it is hoped). This creates the opportunity for some much-needed investment in rural and agricultural infrastructure, which the government presently doesn’t seem to be able to afford.

Improved infrastructure will lead to better supply, less waste and lower inflation. Retailers may switch to contract farming through upfront payments to agricultural farmers and producers to guarantee supply through better-developed transport and storage infrastructure. So far, so good. But then comes the idea that poor farmers will potentially receive an income boost through higher prices for their products. Unfortunately, the Indian (and global) experience of bargaining between corporate giants and impoverished farmers suggests that poor farmers are rarely the ones to win out. There are likely to be significant shifts in cropping patterns, moving towards high-revenue products for which demand is steadily increasing, particularly fruits and vegetables, which may further work against farmers with fewer resources. Retailers are most likely to source first from the largest farms and then subsequently from medium and small-sized farms. Until demand expands sufficiently, I suspect smaller (and desperately poor) farmers will be left out of the party.

Mass unemployment?

A big question mark hangs over employment. Kirana shops are certain to lose out (even though they are unlikely to be instantly vapourised, as some doomsday-prophets insist). The much-maligned middleman in agriculture might be out of a job, though perhaps immediately re-employed by the big stores to manage their own sourcing requirements. Stores will, of course, generate employment as well, and one can hope that the net change will be marginally positive but it certainly isn’t obvious that it will be.

The restriction of FDI to large cities initially struck me as slightly bizarre. Are rural consumers not sufficiently deserving of lower prices? Are urban kirana employees not sufficiently deserving of job protection? Perhaps the government believes the rural economy is more dependent on the retail sector, so dislocations in this sector will be associated with much higher costs in rural areas than in urban areas. Perhaps big retailers will find it easier to rent land in central locations in rural and semi-rural areas at lower costs, giving them a bigger opportunity to dominate the retail market and destroy the competition.

What happens now?

This host of restrictions suggests to me that there isn’t very much to worry about – as yet. Limited to a handful of large cities, facing high rents in inconvenient locations and struggling to contend with a thousand logistical problems, foreign retailer margins will be too high to put the current system out of work. The global supermarket model of locating megastores 15-20 kilometres outside cities doesn’t work in the Indian context and the new entrants will either have to adopt a smaller, more flexible strategy in terms of retailing products or will learn to live beside the kirana stores.

So why are they so keen to enter? In a decade or so, the Indian market will be the big catch that global players will not want to miss out on. They’re looking to prise themselves into the domestic market and hang in there through a period of high costs and little joy, helped in no small way by their deep pockets. As regulations are gradually relaxed and as the domestic consumption market expands over the next decade, these players will slowly begin to reap the rewards of patience and consolidate their hold on the domestic retail market.

And that’s when everybody should be worried.

The application of network theory to finance has gained steam after the contagion that followed the collapse of Lehman Brothers in September 2008. The central idea is the analysis of the networks formed between different financial institutions both within and across jurisdictions to better understand systemic risk – or aggregate risk that affects the entire financial sector as a whole.

As the little graph in the NYT shows, a basic sketch of the networks (here illustrated through contractual relationships) between different economies gives us a powerful image of the extent of contagion that could ensue if one (or more) of the peripheral European Union economies fails to make good on its debt. A more substantial network analysis would require the links between individual financial institutions so that central banks and financial regulators can identify the banks and other institutions that are most at risk from the bankruptcy of any one economy.

Of course, contractual relationships aren’t the only determinants of networks between financial entities: interlinkages may exist in the absence of a financial contract as well. For instance, the negligible financial relationship between Greece and Spain will not particularly help the Spanish economy in the event of the Greek economy declaring bankruptcy. The perceived links between the two economies (particularly via the common currency) may prove to be just as strong.

Nonetheless, central banks are turning to network analysis to arm themselves with the information to spot a potential crisis before it arrives. A crucial question, though, is what does a financial regulator do if it identifies a concentration of risk between a number of financial institutions? Is the regulator to formulate a set of rules according to which a set of networks may be deemed too complicated and can the regulator act to dismantle these links? Given that network analysis is typically based on information supplied by banks themselves, and at a bit of a lag, it will likely not be useful when contagion has actually occurred and the financial sector is distressed.

In any case, a full-fledged network analysis will allow the researcher to simulate a crisis and then plot the development of the crisis, as well as the build-up of contagion. By improving the quality of crisis simulation exercises, regulators can become more alert to the scale and extent of contagion and the potential for risks to increase across the financial system.

And, of course, it makes for pretty pictures.

]]> http://www.criticaltwenties.in/economicsocialpolicy/networking-the-euro-crisis/feed 0 http://www.criticaltwenties.in/economicsocialpolicy/the-end-of-the-euro-again http://www.criticaltwenties.in/economicsocialpolicy/the-end-of-the-euro-again#comments Wed, 21 Sep 2011 07:49:19 +0000 Anisha http://www.criticaltwenties.in/?p=3786

Doomsday scenarios abound

Another week and yet another unprecedented act of coordination by the European Central Bank saves the day! Last week, five of the world’s largest central banks stood together to pledge to provide dollar-financing of an unlimited amount to any bank with liquidity problems. This facility is provided in addition to existing ECB instruments, which allow for unlimited euro financing of struggling banks. The world steps back once more from the brink of financial disaster! At least until the next week.

It is truly exasperating to read about the European sovereign debt crisis because nothing in the news ever seems to change. Since the first emergency bail-out fund set up for Greece in May 2010, European countries have veered perilously close to sovereign default and European financial institutions have run out of liquidity on several occasions. Each time, the ECB and the wider Eurozone have come together in the eleventh hour to mount a short-term rescue of the struggling country or bank. This fire-fighting has been followed by much hand-wringing, finger-pointing, and fiery speech-making, particularly by the Germans, about how financial profligacy should not be tolerated, let alone enabled. Then comes the next crisis and the firemen rush to the rescue again.

Greece, Ireland, Portugal, Spain and now Italy: through each crisis loop, one gets the distinct impression of being stuck at the same level of a bad video game. Even so, one does get the point of the escalating fear – the fall-out of the default of any one European government could well eclipse the 2008 liquidity crisis.

Worst-case scenario

If Greece refuses to pay its debt, it would suffer, in the first place, all of the incumbent miseries of a default on sovereign debt. The country would be unable to raise any new funding, it would be forced to drastically reduce expenditure and fail to pay salaries to many employees. The economy would shrink, leading to a political crisis and a heightened state of civil unrest. The banking system would face huge losses since domestic banks are major holders of government debt and the lack of credit would wreck the economy further. A government desperate for cash may then be forced to exit the Eurozone and return to the drachma, which it can then print to pay its bills.

This sounds pretty bad but for the Greeks, but hardly Apocalyptic for the rest of the world. What makes the Greece default our problem is the prospect of crisis in the European banking system. Holders of Greek debt include institutions such as German insurance companies, French pension funds as well as the European Central Bank itself. Fear and uncertainty about the exposure of private financial institutions to worthless debt would lead to panic in European markets, extreme volatility and a funding crisis at those financial institutions, which are even remotely suspected to be in some sort of trouble. This very process repeats itself at the sovereign level. Even as Greece defaults on its debt, the attention shifts to those economies that could be next in line. Euros fly to safe havens putting more domestic financial institutions under extreme pressure and generating further solvency crises. The likely end is the break up of the euro.

The only possible circuit-breaker is concerted and coordinated effort by the rest of the Eurozone – including Germany – as well as by the ECB to change the current trajectory towards fiscal disaster. So far, this coordination has only come together to avert crises in the nick of time without being seen to have an impact that is sustainable beyond the next two years. Till this level of coordination takes place, Europe will continue to teeter from the brink of one collapse to another.

7.5 per cent growth might be very optimistic

Why do we in India care? The last crisis certainly dented growth and required fiscal stimulus programmes that grew a fiscal deficit that was, at the time, fairly modest. There is less scope for increasing that deficit now. Growth is already faltering on account of higher interest rates to check inflation as well as the economic slowdown in the United States and Europe. A fresh crisis would probably change the path of Indian economic growth to a decidedly lower one over the next three years. Foreign investment and exports will suffer, the rupee will decline dramatically and the government’s hands will be largely tied on account of the high levels of inflation.

In India, there is a lot of concern over the fact that growth forecasts are being revised downward to 7.5 per cent. A crisis in Europe would make any growth above 7 per cent look astoundingly good.

Dhoni hits the demons out of the park

Sport has this ability to generate special moments that swell to occupy the popular consciousness, often distorting reality: moments that capture the imagination and form moorings in a sea of hazily remembered scorecards. One such mooring is the dismissal of Sachin Tendulkar for 136 against Pakistan in 1999, leading to a 12-run loss for India. Two months later, Brian Lara struck an unbeaten 153 against Australia, earning his team a one-wicket win. Tendulkar was written off as lacking big-match temperament, while Lara was declared the ultimate saviour. For years, these two moments engulfed any statistics that made claims to the contrary.

A similar moment was the India-Sri Lanka semi-final at the 1996 World Cup. I watched as Tendulkar fell for 65, followed by a dreadful batting collapse, and, along with millions of fans, I came to two conclusions. India could not stand the pressure of chasing. India could not survive without Sachin.

This belief was vindicated in 1999 when Tendulkar left the tournament midway after the death of his father. In the one game he missed, the wheels fell off the team’s chase of 252 against Zimbabwe – a loss which proved to be critical.

In 2003, Sachin was on song and so were we. Come the final, however, several million hearts sank the moment Ganguly inexplicably opted to field. Chase? Us?? The moment Tendulkar got out, TV sets were switched off, including MS Dhoni’s.

By 2007, the tide had apparently begun to turn. Tendulkar seemed a spent force in a Team India that seemed to be doing just fine without his contributions. Come the World Cup, however, and India sank to two characterless defeats.

The twin demons have long since been banished in all forms of the game but it was only in 2011 that they were finally laid to rest in the World Cup. I was actually pleased when Dhoni lost the toss because I thought we would pace our innings better if we batted second. My heart definitely skipped a beat when Tendulkar got out but it never occurred to me to write off the match. And even as the celebrations began with all-too familiar paeans of praise for Tendulkar, I could only think – we’ve come a very long way, indeed.

To the manner born: ICC CEO, Haroon Lorgat

Update (April 19): Sharad Pawar requested the ICC to reconsider the World Cup format in end-June. There is hope yet for some more dynamism in the top tier of world cricket. 

I landed in South Africa 36 hours after Mahendra Singh Dhoni deposited Nuwan Kulasekara several rows over the long on boundary at the Wankhede Stadium in Mumbai. The mad frenzy that ensued after that sweet, sweet shot was struck swept up millions of people, irrespective of whether they were Indian or even fans of cricket. I received messages from the unlikeliest friends – French, Belgian and American. Newspapers and channels around the world were carrying scenes of revelry at Marine Drive in Mumbai and India Gate in Delhi. The ICC had transformed its flagship tournament from that swamp of a wash-out in the Caribbean to the colourful carnivale it was always intended to be. In doing so, they rescued the fifty-over format of cricket from what some considered a near-certain death. After struggling with hard criticism over all sorts of issues – poor governance structures, shocking event management, rampant cronyism, and soulless capitalism – the ICC could now bask in the glory of a hard-fought success, where cricket was the greatest winner. 

Instead, the first news story that whacked me in the face as I settled down to some obligatory cricket-surfing and time-wasting at the office on Monday was this: ‘An Absolute Black Day for the Sport’. The evening after the World Cup final, the ICC sat down to decide that the 2015 format of the game would comprise 10 teams only, and that all these teams would be the full members of the body. The Associates would be shut out of the tournament entirely, at least until 2019. 

The responses from the Associates have varied from rage to bitter cynicism and deep disappointment. Most of the anger has emerged, unsurprisingly, from Ireland – the plucky giant-killers, who managed to test quite a few of the full members and completed an unforgettable victory over England. Irish captain, William Porterfield, called the decision a joke. Their coach, former West Indies all-rounder, Phil Simmons, described the ICC as despicable. It’s argued that the new format will effectively destroy support for the fifty-over version of the game in the Associate members, and end the careers (for Ireland, at any rate) of many of the outstanding performers for the team in this World Cup. Not for the first time, the ICC stands accused of unbridled greed and cronyism as well as actively moving to destroy the future of the sport we all love so much. 

My first response to the article was one of some shock: surely the ICC didn’t have to make this announcement just hours after the great success of the 2011 edition? Are they entirely staffed with miserable masochists who love to be flogged by an ever-obliging media? The only open support for ten-team format has come from Ricky Ponting, which gives you an inkling of the majoritarian response to the decision. There had also been some talk in the press that the ICC would shift to the 12-team format of 1996, in recognition of the contribution of countries like Ireland. Clearly that was never a serious option. 

This World Cup ended up being a lot more entertaining in the league stages than most people, including this author, had expected. Group B, in particular, went right down to the wire after inspiring defeats of England by Bangladesh and Ireland. Yet, what the viewers saw as inspiration clearly struck fear into the hearts of the Big Money Interests that dominate cricket – primarily the broadcasters and key tournament sponsors. If even this sheltered format of the tournament couldn’t protect the big guns till at least the quarterfinals, then another format would be necessary – one that guarantees that India and co play at least 9 games before facing elimination. A 12-team format – with two groups of 6 teams each – would only guarantee 6 games (assuming the top guns qualify for the quarters). 

Even as this kind of blatant commercialism sickens the average cricket fan, let’s create no illusions about the cricketing might of the Associates. This World Cup featured only ten teams that stood up to be counted. Kenya, Canada, the Netherlands and Zimbabwe only managed to generate three wins between them, and all of them were in matches featuring each other. The closest margins of defeat in games between Associates and non-Associates were 46 runs (Pakistan v Canada) and 6 wickets (England v Netherlands). 

The ICC has also countered criticism of creating a dull and boring pre-knock out phase; the ten-team format, while seemingly cumbersome, will generate some thrilling match-ups between the top ranked teams fighting for survival. Winning such a World Cup would be a top achievement for any cricketing side. 

What does rankle considerably, however, is the free pass given by the ICC to full members who play pretty shoddy cricket and display remarkable inconsistency, despite having access to all the benefits of full membership. Bangladesh scored two of the three lowest totals of the tournament – 78 and 58, Zimbabwe failed to compete against any of the other members and the West Indies lumbered along in its usual farcical fashion, with only a few flashes of brilliance to interrupt an otherwise characterless campaign. Ireland is, in fact, ranked number ten on the ODI list, ahead of Zimbabwe and certainly put up a more inspiring performance on the field. Ireland also runs a far more efficient local cricket system than Zimbabwe, which is mired in shocking corruption and appalling incompetence, and is closely linked to a tyrannical government. 

Moreover, most cricket-viewers probably don’t give a damn but there was, in fact, an extensive qualification process for the Associates to get to the World Cup through the ICC World Cricket League. This process threw up epic encounters such as this one, which causes goosebumps just reading about it. With a World Cup place to fight for, the World Cricket League has a point. In football, teams in lower divisions are motivated to fight for promotion to a higher league. In a static system, there is no motivation for improvement among the worst teams of the top league and best of the rest. 

The ICC must protect against this dangerously comfortable status quo by abandoning such rigidity. This isn’t hard to manage at all; perhaps the top 8 ranked teams can automatically qualify for the Cup while the others fight for the last two spots. But surely the likes of Zimbabwe, Bangladesh and maybe even the West Indies need to earn their place in the final tournament rather than receive it on account of historical privilege. 

The one truth that has emerged from the ICC’s decision is this: cricket has certainly not succeeded in shrugging off its imperial origins. Pity that the long-colonised bully of the ICC, India, cannot provide better leadership.

World Cup 2011 mascot Stumpy arrives at the opening ceremony

The 2011 Cricket World Cup is starting soon and, quite honestly, the excitement is overwhelming me. It’s been eight years since the last World Cup (yes, it has) and, frankly, that’s far too long a wait.

Yet, even as I will descend into bouts of nostalgia and fevered build-up elsewhere, my reflections here are sobering. “Write a piece on Economics and cricket”, he says. Gee. What could they possibly have to do with one another?

I’ve already raved enough about the IPL and the limited spillover of economic benefits from big-ticket sporting events to the wider economy. Since it’s the World Cup, however, it must be time to collectively beat our heads against yet another logic-defying, time-warp of a schedule thrown up the ICC. The phantom 2007 World Cup (which everyone except Australia has endeavoured to wipe clean off the memory slate) must surely be in the running for the award for Most Poorly Organised Sports Event Ever. Yet, am I alone in thinking that it might have thrown up more relevant matches than the 2011 cup will be likely to?

In 2007, the tournament’s carcass was dragged along for 47 days through 51 matches involving 16 teams. This time, the cup has been “compressed” to 49 matches played in 42 days, even though it involves two fewer teams. As weight loss exercises go, this is the equivalent of sitting in the steam room for 30 minutes. Moreover, unlike in 2007, the first three quarters of the tournament will consist of little excitement other than betting on who will hit the most sixes in the qualifying stages of the tournament. Group B is particularly galling: Australia, Pakistan, Sri Lanka and New Zealand face the immense task of knocking out Canada, Kenya and Zimbabwe en route to the quarters.

Why, then, didn’t the powers-that-be organize the world cup in a more competitive format? How about fewer associates? How about retaining the current group structure but eliminating the quarterfinal stage and moving straight to the semis (imagine how exciting that would be!)?

The most important factor driving the design of the present format was undoubtedly the need to ensure that India plays as many games as possible. India’s early exit from the 2007 edition dealt a sucker punch to global corporate interests in the World Cup and led to the tournament dropping off the media map somewhere into the third week. Light-bulbs flashed in the minds of the ICC powers-that-be even as they were extinguished during the 2007 final: financial salvation lies in India and India alone. In fact, Ashok Malik argues that it was India’s early exit in 2007 that led to the birth of the IPL: a tournament guaranteeing television broadcasters and corporate sponsors a predetermined dose of Indian cricket stars for the Indian cricket-watching public. The introduction of the TRP-guarantee model – where sponsors and advertisers pay television channels on the basis of the TRP ratings achieved during their slots – ensured that the value of the broadcast deals are now very closely tied in with India’s progress through any major tournament.

No surprises there, of course: India accounts for over 70 per cent of the sport’s global revenues. But would the tournament really suffer if it was redesigned to move straight from the group stages to the semi-final? The long suffering Indian fan would only be cheated of (spared?) one single match, and, instead, would be treated to the delight of 38 potential humdingers (excluding associate-associate matches).

There is more, of course. Sponsorship and broadcast deals are signed on the basis of a given number of matches involving certain teams (cue the IPL franchise war when the BCCI threatened to throw out a bunch of teams). Corporations make bids based on financial projections that depend on the number of matches played and the teams involved in the game. No India is bad news for a sponsor, of course, but equally bad would be the decision by the ICC to turn the World Cup into a knock-out tournament overnight.

ESPNStar signed an eight year broadcast deal with the ICC in 2006 for the coverage of two ODI world cups, two T-20 world cups and three champions trophies. The deal was reportedly worth a sensational US$1.1 billion and almost certainly gave ESPN executives sleepless nights in the summer of 2007. They signed up for the tournament on the basis of a (presumably) predetermined number of games.

Would four games have made such a difference, though? Would those cash-flow projections have imploded if we threw in a number of highly competitive matches involving at least 6 top-flight teams?

Apparently, they would. Ad slots leap from a modest Rs 4 lakh per ten seconds in the group stages to R 24 lakhs in the QFs. So, assuming 30 second ad breaks between overs, 3 minutes for drinks breaks, 30 seconds for every wicket, 12 minutes during the innings break and 8 minutes before and after the match in two thirty minute segments brings us to 94 minutes of ads (assuming the fall of 14 wickets) worth Rs 135 crores. This doesn’t even include those exasperating ads that jump out at you from the screen while the game is on. This Rs 135 crore haul compares rather favourably with Rs 23 crore from the group stages. Seems pretty hard to think beyond the seven knock-out games.

(I hear a whisper. Maybe the first-round match ad slots would cost a bit more if the matches weren’t so pointless. But why bother with being inventive when there’s so much money to be made?).

Despite all these rumblings, I really am very excited about the World Cup. I’ve taken leave, booked plane tickets, organized the right sports channels on the right TV – I can’t wait till March 22!

Sachin on his way to 90 against Australia during the 1996 World Cup

The first World Cup I ever watched was in 1996. I had only started watching cricket in the October of the previous year, and, unlike boys my age (I was nine), my first introduction to the sport was on a television set. India played New Zealand at home in three dreary tests starring a lot of rainfall and an ODI series that was probably a lot less exciting than the score line suggests (3-2 to India). But I, like many Indians before and after me, was hooked to the game: within two months I had graduated from asking my father every ten minutes if we were “winning” the test match to rattling off the ten ways in which a batsman can be dismissed.

So I was thrilled when I learned that the World Cup would soon be coming to our shores. Being the odd, obsessive child that I was, I cut out every cricket-related article I could find on the different teams, past world cup performances, key players to watch and other random bits of trivia and pasted them into a scrapbook. Armed with this weapon of mass geekiness, I found a big cushion and settled down for a month of cricket.

Two things happened in that spring of 1996: I became a (probably lifelong) cricket tragic, and I had my first and only brush with the phenomenon of crazed hero-worship. Except, it wasn’t so much a brush as it was a dunking: I emerged from the World Cup as a firm believer in the cult of Sachin Ramesh Tendulkar.

SRT was already a star leading into the World Cup, though I had yet to fully appreciate his magic live (his top score in 6 ODIs and 3 tests against New Zealand in 1995 had been 65). Promoted to open the batting in an ODI in Auckland in 1994 after Sidhu was forced out by a neck sprain, SRT demolished the Kiwi attack with a scintillating, and match-winning, 82 off 49 balls and effectively rubberstamped his own selection as opener. Entering the 1996 World Cup, he had scored over 3000 runs in 102 games at an average of 36, but as an opener in 32 games since 1994, he already averaged 48 and had scored all his four centuries in that cherished number two spot.

During that World Cup, though, his form was elevated to a level that till then was unprecedented, and he scored 523 runs in 7 games at an astonishing average of 87. He was playing some of the most uninhibited cricket of his career, yet already carrying the ODI team batting as he would become accustomed to doing for the next few years. Unfortunately, as Arghya recounts, it’s hard to forget that till he got out for a steady 65 leaving India at 98/2, none of the demons of the Eden pitch had reared their ugly heads.

Tendulkar’s World Cup record is remarkable: in 5 editions of the Cup he has scored 1796 runs in 36 matches at an average of 58 (against a career average of 45), more than anybody else. Most of these runs were accumulated in two sensational Cups – 1996 and 2003, when he scored 673 runs at an average of 61 – a record for the most runs in a single World Cup (and I don’t think it’s a coincidence that his big-scoring World Cups were the only ones in which he consistently opened the innings).

More than the statistical numbers, however, SRT dominates my consciousness of the World Cup tournament like no other player. One of the finest developments of Indian cricket in the last decade has been the emergence of outstanding players that aren’t called Sachin. Yet, even as we thrill at our many Test, ODI and even T20 heroes, the World Cup has refused to unlink itself in my mind from SRT. He is the World Cup. Some of the finest Team India moments of the last four Cups have featured him; my personal favourites include a devastating slog-overs attack in a run-a-ball 137 against Sri Lanka in 1996, a tremendous 140 not out off 101 balls against Kenya, just days after his father passed away, and the innings featuring that upper cut six against Shoaib Akhtar (not to mention the less epic but extremely satisfying six off Andy Caddick after the Englishman claimed to have worked him out).

Yet, his glorious form in the 1996 World Cup will always remain special for me. Suhrith writes evocatively about the razor-sharp intensity with which children watch and remember cricket matches featuring their heroes. And so I remember my favourite knock by SRT in World Cup cricket: a sparkling innings of 90 against the eventual finalists, Australia, in the group stages of the 1996 cup. He reserved special treatment for Glenn McGrath, flaying him through covers, swatting the ball back over his head and, most memorably, slogging him for a six over midwicket. His wicket in that game – stumped to a hideously wide ball by Mark Waugh – has been entrenched in the public memory through numerous highlights packages but the innings that went before was my first look at sublime batting domination.

Tendulkar will now be playing his sixth World Cup (no doubt, a page of my scrapbook will have documented that Javed Miandad was playing his sixth in 1996). I don’t know whether he will retire from one-day international cricket after this – honestly, I suspect he might – but this will surely be his last World Cup. And that will truly be the end of an era. World Cups will never be the same again, not for me and, I suspect, not for a lot of Indian fans my age.