Gaza conflict: where do we stand now?

Israel has announced that it is pulling out its troops from Khan Younis, the scene of bitter battles between the IDF and Hamas for several weeks. Some reports suggest that Israel has withdrawn all but one of its brigades from Gaza. Israel claims its job is substantially done. The claim has little credibility. Hamas is still standing and the remaining hostages are yet to be returned. So neither of the two objectives of the war set by the government of PM Netanyahu have been met. 

Two well-known blogs, A Son of the American Revolution, and Moon of Alabama, both known for their incisive military analysis, present interesting views here and here. .

Here is Larry Johnson of the first blog:

Israel is losing because it has failed, after six months of lopsided combat, to defeat Hamas and free the hostages. Israel has proved itself to be quite skilled in killing unarmed women, children and elderly. The Izzies sure know how to bomb hospitals, medical clinics, schools, churches, mosques, universities and UN refugee centers. Instead of fortifying the myth of Israel as David fighting the colossus Muslim Goliath, Israel’s military campaign has been an unmitigated public relations disaster. Early claims of beheaded children and mass rapes turned out to be fabrications by a determined Israeli psyops campaign. Public opinion around the world views Israel as a murderous thug. There was a time that Israel could count on having a majority of Western nations in its corner. That time is over.

And here goes Moon of Alabama:

International criticism of Israel has risen to unprecedented levels. Several UN resolutions have condemned it for its war crimes in Gaza. The International Court of Justice has ruled against it.

Only the support from the United States had allowed Israel to continue. But two recent incidents have jeopardized it.

The first was Israel's assassination of seven people who had been working for World Central Kitchen, a U.S. based charity with good connections to Congress. Forty members of Congress, including Nancy Pelosi, have since spoken out against further unconditional support for Israel. The U.S. government under Joe Biden had to acknowledge that. It finally threatened to end its support for the Israeli government.

Following U.S. threats Israel immediately increased the provision of food to the starving population in Gaza:

The Defense Ministry body that coordinates Israeli activity in Palestinian territories said that 322 aid trucks entered the Gaza Strip on Sunday, the highest one-day total since the beginning of the war.

The second game changing incident was the Israeli attack on an Iranian embassy building in Damascus. A hit on any embassy is a serious crime that concerns all governments in this world. Iran would be fully within its rights to retaliated for such a strike.

The U.S. was extremely concerned over this as any Iranian response might well hit the many U.S. installation in the Middle East and could escalate into a wider war with severe consequences for all sides.

This had to be averted. Iranian media report now that a deal has been made in negotiations between Iran and the U.S. Iran will refrain from a direct attack on Israel if the U.S. guarantees a ceasefire in Gaza.

But does Israel being on the defensive mean that peace will return to Gaza? It still seems unlikely. PM Netanyahu has every interest in continuing the war- the moment the war ends, his government will fall and he will have to face long-standing corruption charges. Hamas' chief in Gaza, Yahya Sinwar, will feel less of a compulsion to pursue peace talks now that Israeli military presence is considerably reduced. He has every incentive to play for higher stakes: the end of Israeli occupation of Gaza and the hand over of the strip back to Hamas.

The big imponderable is the Iranian response to the assassination of one of its generals in Syria, widely ascribed to Israel. Will a response provide the pretext for Israel to launch an assault on Hezbollah in Lebanon? 

 

McKinsey could use some advice- on strategy

 McKinsey has, for some years now, often been making news for quite the wrong reasons. It was in the news when its former partner, Rajat Gupta, went to jail on insider trading charges. It got mixed up with the wrong people in its business in South Africa. It was embroiled in the opiods scandal in the US. There are a few more items on the list.

Currently, it is in the news because it has offered paid leave of several months to those who would like to look for jobs outside the firm. Quite plainly, it wants to shrink. Nothing wrong with that, you would say, except that people expect experts in strategy to plan their growth to avoid hiccups such as largish layoffs. McKinsey's problems, columnist Schumpeter argued in the Economist, arise from having grown far too big to be manageable. It needs to shrink. 

There are other problems, some of which are spelt out in another article.  Strategy, which was the main business for McKinsey, accounts for 10 per cent of its business now. Other businesses, such as digitisation of businesses and ESG, are prone to ups and downs and this renders consultants' businesses cyclical. That means there will be both hiring and firing as in investment banks. A third problem is that, with globalisation in reverse gear, overseas businesses, notably the one in China, may come under stress. Finally, businesses have their own large complements of MBAs now and may not be so much in need of strategy. What they want is people who will implement strategy, produce improvements in operations and profits and help them stay one jump ahead of competition in technology.

McKinsey will have to manage growth hereafter at a pace that helps it preserve its culture and identity. It will have to reinvent itself in ways that help it to remain relevant. In short, it needs to think through its own strategy. 

Why is Mr Modi so popular with the electorate?

Prime Minister Narendra Modi took his party to a huge win in 2014 and repeated it in 2019. Going by most forecasts, he is set for a third consecutive win. Many have been puzzling over the amazing electoral success Mr Modi has had. Fund manager Ruchir Sharma provides his own explanation. He says Mr Modi has provided growth with relatively low inflation. For that reason, the electorate is willing to overlook things such as his alleged going after opposition parties on charges of corruption or the supposed curbing of civil liberties. The electorate has done a deal of the sort East Asian economies had done with their rulers earlier:

I think what we are seeing is a kind of tacit deal, in which swing voters accept a democratic recession under Modi, so long as he delivers economic progress. While the hardcore supporters of his Bharatiya Janata party were always going to stand by their leader and the party’s Hindutva ideology, Modi has significantly expanded its traditional base by offering a deal that appeals to an increasing number of young and new voters. This is reminiscent of east Asia after the second world war, when countries such as South Korea and Taiwan put together long runs of rapid growth with low inflation under autocratic leaders, who gave way to genuinely free elections only after their nations reached a middle-income level. Under Modi, India has witnessed relatively robust economic growth, with low and stable inflation — much like the early east Asian model. It also has enjoyed a booming stock market, the rollout of gleaming infrastructure projects and new digital platforms that facilitate the delivery of welfare benefits.

This sound more than a little glib. The UPA government produced simple average growth of 6.6 per cent in its second term on top of 7 per cent growth in its first term. These are both very healthy numbers, yet that could not save the government from defeat in 2014. The NDA government produced growth of 7.38 per cent in its first term, not vastly superior to what the UPA government produced in its second term. In its second term, however, it has produced growth of  4.5 per cent; evidently, that will suffice to get it elected.

It's not at all clear that the Modi government has won on the strength of economic growth alone. There are several other elements that must be factored in. The government has sought to redefine nationalism in very different terms through its projection of Hindutva; that appears to have resonated with large numbers of people, including young voters. It has been successful in reaching welfare benefits- food, cooking gas, health insurance etc- to large numbers of people. There is Mr Modi's personal charisma- he comes across as somebody who's incredibly hard-working and committed to the objective of making India a developed country by 2047.

Lastly, the electorate probably does not see the opposition as shining angels of the protection of civil liberties or tolerance of the opposition. The Indian state has never quite got out of the framework created by the British Raj to perpetuate its rule. No political party can really claim moral superiority on how the state treats its citizens. It is an important area crying out for future reform.

Dealing with inequality: are wealth and income caps the answer?

Inequality today, perhaps, draws more comment than poverty if only because extreme poverty has been successfully tackled in most parts of the world. There are many studies that document increases in inequality (notably the book by Thomas Picketty). Many of these findings are contested- some dispute the contention that inequality is rising. But the fact that there is substantial inequality is not disputed.

Now, we have two books that propose radical solutions. One wants a cap on wealth or savings of $ 10 million. Another argues that nobody should earn more than the current threshold for entering the top 1% of taxpayers ($330,000 in the US). The Economist argues that, whatever the theoretical arguments for limiting inequality, we do not have effective ways to place limits on income or wealth.

First, if we want to cap wealth  or income, it implies a 100% marginal income tax rate above a certain income. That is very difficult to enforce: there would be massive evasion or people would flee to friendlier tax regimes. And if all nations enforced such a marginal tax rate?  The effect on incentives would be devastating:

Imagine a world where any gain above £180,000 a year, or $10m over a lifetime, was forfeit. Highly productive people—such as surgeons and engineers, never mind word wizards like J.K. Rowling—would have no financial incentive to keep working after that point was passed. Perhaps some would carry on toiling out of altruism or for the love of the job. But many would be tempted to kick back, relax and deprive the world of their exceptional skills, drive and imagination.

Consider, too, the incentives such a system would create for entrepreneurs. You have an idea for a better mousetrap. Under the old system, you might mortgage your house to raise cash to build a mousetrap factory, in the hope of making a fortune. Under the new system, you must shoulder the same risks (such as losing your home), for a small fraction of the rewards.

Potentially big ideas would stay small. Even if your mousetrap is so good that the world might reasonably be expected to beat a path to your door, it would be irrational to borrow money to expand production. The financial risks of trying to build a global business fall on you. The rewards go to someone else. Only a mug would take such a bet.

Well, it's important that we steer clear of extreme solutions to inequality. Wherever inequality is rising, we need to fix a few things that Joseph Stiglitz has emphasised several times: the bargaining power of workers, the power of corporations and the way the elite frames rules to suit itself. People will accept even a high level of inequality in society provided they see a certain fairness to it. At the moment, it all seems like a game that is rigged by the rich and the powerful. 

Nuclear war: a close look at its horrors

All of understand that a nuclear war will wipe out much of the planet, that there are enough nuclear weapons with the US and Russia to kill the world's population several times over. But how exactly would a nuclear war unfold? 

The Economist reviews a couple of books that sketch out the nightmare. Let us say North Korea launches a nuclear attack on the USor a Russian submarine fires nuclear missiles off the West Coast of the US.Then, here is a possible sequence:

The American satellites which pick up the North Korean launch have sensors “so powerful they can see a single lighted match from 200 miles away”, she writes. Within 15 seconds radars can work out that the missile is headed for America. It will take just over half an hour to arrive. Once the president has been briefed he has six minutes to make a choice.

A Russian submarine off America’s west coast could launch its full complement of missiles at all 50 states at once in 80 seconds. Even if an American submarine was close behind it could not fire a torpedo in that time, notes one expert. That fact is said to have shocked America’s navy chief when it was revealed to him in 1981. Missiles launched from close to the American coastline would take little over seven minutes to hit their target.

American missiles bound for North Korea must overfly Russia by dint of geography. American leaders cannot get Russia’s president on the phone. Russia’s sub-par early-warning satellites, which have indeed been known to confuse clouds for plumes, mistakenly see hundreds of missiles incoming. The Kremlin attacks America. America responds. There are 100 “aimpoints”—jargon for targets—in the greater Moscow area alone.

Another book shows how deeply the scientific community is divided over the issue:

Some are gung-ho about the importance of nuclear deterrence, brandishing charts which show how deaths from major wars plummeted after the invention of the bomb. Others are equivocal, expressing opposition to nuclear weapons while insisting that someone has to ensure that the ones which exist remain safe and reliable. Still others seem deeply conflicted, preferring to emphasise the civilian applications of their research. “I wonder if the activists on the outside understand that there are those of us on the inside that share many of their goals,” says one scientist at Los Alamos, professing support for (eventual) disarmament. “That’s not an extreme position here at all.”

You could say mankind has carried on like this for over six decades and that deterrrence has worked. But the men who manage nuclear arsenals, it appears, continue to have sleepless nights. 

Conflict in Gaza: what does Israel want now?

It is three months now since the Gaza conflict erupted. The slaughter continues. We have had several developments over the past few days. One, the Israel Defence Forces (IDF) has announced a withdrawal of some of its forces stationed in Gaza. Two, the number two person in the Hamas leadership was assasinated in Beirut- nobody doubts that is the work of Israel. Three, an Israeli strike killed a senior Iranian commander in Syria. Four, the US has announced the withdrawal of its aircraft carrier, USS Gerald Ford, from the Mediterranean.

What do we make of all this? Well, the Israelis clearly want to scale down their operations in Gaza. They recognise that the complete elimination of Hamas, their stated goal, cannot be realised in quick time. They wish to move on to more focused operations that target the Hamas leadership instead of the all-out war we have seen thus far.

That much is clear enough. The two assasinations are a provocation. The killing of a Hamas leader in Beirut flouts the warning of Hezbollah chief Nasrallah that assasinations by Israel on Lebanese soil are a red line Israel should not cross. The assasination in Syria shows the red rag to the Iranian bull, the principal backer of Hezbollah. Israel knows it must expect a strong reaction and yet goes ahead- clearly, a strong reaction is what it wants. A strong reaction would mean that the managed conflict between Israel and Hezbollah would move to a higher level and draw in Iran, inevitably drawing in the US as well.

There are both strategic and political calculations involved in moving towards such a confronation. Israel views Hezbollah as a far bigger threat than Hamas and Iran an even bigger threat. An estimated 75,000 Israelis have been moved out of the border with Lebanon and relocated elsewhere. They refuse to go back until the Hezbollah threat on the border is removed. At the very least, Israel would like Hezbollah to move to the north of the Litani river with a buffer zone that is protected by, say an UN force. Israel cites an old UN resolution in support of that demand.

Hezbollah has never accepted that interpretation of the UN resolution and it is no mood to oblige. The Americans are using diplomatic channels to pressure Lebanon and Hezbollah into accepting Israel's demand. Israel has said that if diplomacy fails, it will have to do the job of evicting Hezbollah itself.

That would mean a serious escalation of the conflict in Gaza. But that is precisely what the present leadership in Israel seems to want- a confrontation with Iran that addresses this threat once and for all,of course, with the help of the US. 

There is a cold political calculation underlying all this. Israel's PM Benajmin Netanyahu knows that any end to the war will mean an enquiry into the lapses that resulted in the October 7 attack by Hamas and a demand for his ousted. Once ousted, he faces corruption charges and the prospect of jail. A prolongation of the war helps the PM avoid that unpleasantness. 

Alastair Crooke,  a former British diplomat with vast experience in the region, has been making some of these points for quite some time now. He argues that the Gaza quagmire for Israel is not what its leadership had expected- they had thought the mighty IDF would vanquish Hamas in next to no time. Crooke writes, "One man -- a retired Maj. General Brik, a highly respected military officer -- warned PM Netanyahu personally that a quagmire trap in Gaza was a true risk. The military establishment did not like hearing his warning.  Now it is clear; Major General Brik was right. He said a few days ago that ‘the number of Hamas casualties on the ground is much lower than what the IDF reports.’ 

Crooke quotes another retired general as saying 'I cannot see any signs of collapse of the military abilities of Hamas – nor in their political strength with in Gaza'." He goes on to suggest that Israel's getting involved in a prolonged war may have to do something beyond the Iran threat and PM Netanyahu's calculations. 

What has happened in Israel over the years is a pronounced shift towards the right and a progessive embrace of the idea of a Greater Israel. Crooke quotes an Israeli historian, Martin Zimmerman, on what has resulted from that idea:

"Jewish nationhood in the Land of Israel went through a process of nationalism, racialism and ethnocentrism. It created a situation of being unable to reach a modus vivendi with the neighbouring world.......And that is the problem: Once you have embarked on the path, it's difficult to leave it without undergoing another catastrophe."

What is unfolding in the Middle East now thus has the makings of a Greek tragedy, one that could plunge the world into turmoil through this year. Only one power on earth can prevent it from happening, the US. That helps us to connect the fourth dot mentioned at the outset, the departure of the US strike carrier group from the Mediterranean. The carrier group was sent in to reassure Israel after the Hamas attack of October 7. Can we hope that the removal of the carrier group is meant to convey to Israel: we are with you but don't push us too far? 

My views on the outlook for the Indian economy

 Financial Express carried an interview with me earlier in the week.

Gaza's plight: is there hope at all?

How will Israel's assault on Gaza pan out? Will it lead to the ethnic cleansing of vast portions of Gaza, a repetition of what happened when Israel came to be founded? Or will the world rouse itself to put an end to the suffering of a helpless people?

Here's  a somewhat bleak view penned by a former UN official:

To date, only Bolivia has severed diplomatic relations with Israel to protest against the ongoing war crimes perpetrated against the Palestinians. Unless Egypt, Jordan, UAE and Morocco sever their diplomatic relations with Tel Aviv as their people demand; unless countries such as Turkey, South Africa and Brazil, which have denounced Israel’s war crimes, align their diplomacy with their own pronouncements; unless these countries emulate Bolivia’s principled diplomatic move and put pressure on their Western partners; unless Saudi Arabia, UAE, Iran, Qatar, Azerbaijan and other large exporters of oil and natural gas use their economic leverage on Israel’s blinded backers, Gaza and its population will be destroyed, inch by inch, soul by soul. And no one would be able to say: “We didn’t know.”

The view from a South African who was witness to the end of the apartheid is more hopeful:

They will do well to learn from white South Africans who, after 300 years of minority rule, realised it was an impossible political project to continue to defend so violently, and still maintain any semblance of a moral high ground.There is a tipping point when even for the defenders of such a project, the faint question rings louder and louder in the collective conscience: how far is too far? There can be no going back to the promises of security based on what was before. There can be no going forward in peace if it means more and more blood of children and civilians haunting successive generations who will have to take responsibility for the actions unfolding before our eyes today.

The most astonishing thing about the ongong carnage is much of Western Europe (UK, France, Germany) is firmly with Israel with dissenting voices being heard from the smaller countries such as Belgium and Spain. 

Gaza conflict unlikely to derail world economy

 

When the Ukraine conflict erupted in February 2022, there were all sorts of apocalyptic forecasts. The war would escalate in terrible ways, the pundits said. NATO would increase its involvement until Russia felt obliged to retaliate with strikes against NATO countries. Russia and US would confront each other directly. World War III loomed. The world economy, already reeling under massive interest rate increases effected by central banks, would go into a tailspin.

Nothing of the sort happened. The world has not ended- yet. The world economy slowed down in 2022 but it did not collapse- the threatened recession in the US did not materialise. The reason: NATO and Russia both made sure the conflict did not escalate beyond a point. The conflict remained largely localised around the borders of Russia and Ukraine.

Today, the Ukraine conflict hardly figures in the news. We hear the same apocalyptic forecasts about the Israeli assault on Gaza. The Arab world, angered by the suffering inflicted on the people of Gaza, would band together in confronting Israel- and soon the US and Russia would be drawn into the rival sides.

The 50 nation summit hosted by Saudi Arabia recently should serve to quell any such misgivings. The Arab- Muslim world is willing to bark but afraid to bite. The summit steered clear of measures such as an oil embargo against Israel and the West and cutting off of diplomatic relations. Instead, we heard words of condemnation and pious platitudes. Nobody wants a full-blown conflagration. The World Bank’s Commodities Markets Outlook sees crude oil prices at $84 per barrel, 16 per cent below the $100 per barrel average of 2022. The world economy is unlikely to be derailed by the conflict in Gaza.

I explore these themes at greater length in my recent article below.

Geopolitical risk: After Ukraine, it's Gaza

“Geopolitical risk” has been a huge buzzword since the eruption of the Ukraine conflict in February 2022. It connotes  the potential for disruption to the world economy arising from armed conflict.    “Geopolitical risk” sounds more technical and impressive than “war”.  People use it for the same reason they prefer “mindset” to “attitude”. 

In 2022, the significant geopolitical risk was an escalation in the Ukraine conflict that would derail the world economy by causing crude oil prices to spiral well above $100 per barrel. That did not happen. Will it happen now with the conflict in Gaza? 

Let us first examine how oil prices came to be contained post-Ukraine.  Oil prices touched a peak of $140 per barrel in March 2022, a month after the conflict erupted. It is not as if the supply of oil was disrupted. The markets were merely reacting to the prospect of a major disruption. They feared that $140 was the price oil would touch if there was an escalation in the conflict.  

The conflict did escalate. Nato progressively chose to supply tanks, longer-range missiles and fighter aircraft to Ukraine after initially ruling out these items.   But the significant escalation, one that would draw Nato into direct confrontation with Russia, did not happen. Oil prices fell from the peak of March 2022 and averaged $100 per barrel in 2022. In 2023, oil prices declined further to a low of $72 per barrel. 

One factor has turned out to be crucial in putting a lid on oil prices: The imposition of a crude oil price cap by the G7 and the European Union (EU), referred to as the Coalition. The Coalition was keen to curtail the flow of oil revenues to Russia so that it lacked funds for its operations in Ukraine. 

The G7 countries decided to phase out and altogether ban oil imports for themselves. They then thought of prohibiting other economies from buying Russian oil through the threat of sanctions. However, they realised that if Russian oil supplies were removed from the oil market, the price of oil could shoot up to as high as $150 per barrel. That would have crippled several economies (including India) and dragged down the world economy.  How was the G-7 to keep Russian oil flowing into the world market while hurting Russian revenues? 

The answer was the oil price cap. The G7 insisted that nobody should purchase crude oil from Russia at above $60 per barrel. They hit upon a mechanism for ensuring this outcome. All companies in the Coalition that provided shipping, insurance or finance related to oil would have to observe the cap or face punitive action. 

Since the countries within the coalition provided 90 per cent of all maritime services related to oil, the price cap turned out to be largely effective. Russia continued to export oil to countries outside the Coalition. China and India increased their imports of oil from Russia. However, the use of Western maritime services meant that Russia had to sell oil at close to $60 per barrel. The OECD economies had been procuring roughly a third of their oil imports. They were able to shift to other sources of oil. The geopolitical risk from Ukraine did not materialise.  

What does Gaza now bode for the world economy? The first thing to note is that Opec and other oil producers announced cuts in production in October 2022. This was followed by further cuts in production through 2023. Oil prices have risen as a result.

Secondly, Russia has found ways to circumvent the oil price cap. It has developed its own “dark fleet” of oil tankers that can operate without Western maritime services such as insurance. The Financial Times (September 25, 2023) estimates that as much as three-quarters of Russian oil travelled without Western insurance last August. As a result of these two developments, oil prices currently hover around $80 per barrel. FT reports that virtually no Russian crude was sold at below $60 per barrel last October.

Will the conflict in Gaza make things worse? The World Bank is surprisingly sanguine about the prospects. After factoring in the Gaza conflict, the Bank’s Commodities Market Outlook (October 2023) sees oil prices at $84 per barrel in 2023 – or 16 per cent below the level in 2022- in its baseline scenario. It sees the commodities index as a whole at 24 per cent below the level in 2022. Oil at $84 per barrel will hurt the world economy, but it is not be  crippling.

Only if the conflict in Gaza morphs into a regional conflict does the World Bank see oil prices shooting up to $150 per barrel. Military analysts say that would be a conflict that draws in the Hezbollah group in Lebanon along with its backer Iran (and possibly Syria and Turkey). In that event, the US will weigh in on the side of Israel.  Such a prospect looks unlikely at the moment. 

As more than one commentator has pointed out, Israel’s responses to provocations in the neighbourhood typically involve a race between the clock and the casualties it can impose. The US will back Israel to the hilt for a certain length of time. Then the clock stops. Once it has exacted a certain price, Israel will be told to call off its offensive. Both sides will claim victory. 

There is every indication that the same script is being played out this time. The most recent utterances from the White House and the US Secretary of State suggest that time is running out for Israel. Other players are also adhering to this script. For all its belligerent noises, Iran is holding its proxy, the Hezbollah militia in Lebanon, on a tight leash. Prominent Muslim nations such as Egypt, Jordan, Turkey, and Saudi Arabia will not go beyond condemnation. Nobody wants a full-blown conflagration. 

That is what we have seen happen in the Ukraine conflict.  It is also what happened through much of the Cold War years that followed World War II. The great achievement of nuclear deterrence was that the world’s two leading military powers, the US and Russia, learnt to keep conflicts strictly local. They never got into a direct shoot-out. World War III was often predicted but it never happened. The world, it seems, has learnt to live with geopolitical risk. Financial crises and pandemics pose greater threats to the world economy than geopolitical risk.  

IIM Bill 2023- new rules notified

The government has notified new rules for the IIMs consequent to the IIM Bill 2023 being passed in Parliament last July, that is, within four months of the Bill having been passed.

That is quite striking. It is not common for bills to be passed or notified so quickly. In the case of IIMs, any changes to rules would take a fairly long time to happen. First, there would be consultations with the directors of the leading IIMs, if not all IIMs. Then a discussion paper would follow with the public invited to respond. After that changes would be negotiated with the IIMs.

Not so with the IIM Bill 2023. It was introduced in Parliament in July 2023. The next week, the Lok Sabha passed it. The following week the Rajya Sabha passed it. The changes were duly notified in the government gazette mid- August. No discussion, no negotiation, no waffling.

This is decisiveness of an order not seen in government. What could be the explanation? I believe the government sensed that a governance emergency had arisen in the IIM system, one that required a swift response if the IIM brand was not to suffer lasting damage.

Ever since the IIM Act came into force in January 2018, accountability in the IIM system had flown out of the window. Directors and boards at various places behaved as though they were accountable to none. At least two leading IIMs, IIMA and IIMC, witnessed turmoil of a sort not seen during the long years when government had better control over the IIMs.

In the new scheme of things, the government, through the Visitor (the President of India), can dissolve an IIM board on three grounds- if it was satisfied the board was not performing its duties, failed to carry out directions given by the Visitor or in the public interest. It can also remove any director without reference to the board. It will have the final say in the appointment of Chairmen and directors of IIMs.

I believe the government has grounds to proceed against several of the IIM boards under the powers it has assumed. The overwhelming majority of the IIM boards have failed to comply with the requirement under the IIM Act of having an independent review done within three years of the passing of the IIM Act. The couple of review reports I have seen are pathetic documents- they sound more like official brochures than an independent management audit. Many IIMs have been non-compliant with the Constitutional requirement of reservations for designated categories in faculty recruitment.

We have to wait and see. In the meantime, the ushering in of a modicum of accountability into the IIM system deserves three cheers.