How will Indian economy and markets fare in 2018?

The Indian economy and the markets are poised at a very interesting point. Throughout 2017, the markets were on steroids supported mainly by the huge influx of domestic money coming into SIP. The economy was a different story – there were structural reforms such as GST carried out but our growth was decidedly sluggish and the improved earning many had thought was just around the corner did not materialise. Will this change in 2018? What are the contributing factors and how are they likely to play out over the course of next year?

To begin with, the GDP growth fared a tad better last quarter as compared to the prior one. However, if one looks at the subsequent IIP numbers and the exports data, it is evident that there is not a great deal to be enthused about as yet. Agriculture too is a big concern at this point of time. If you add inflation and fiscal deficit to this mix then a growth rate of 7 % will not be easy to achieve, though it is probably still possible. From a revenue perspective the GST implementation is getting better and it can be hoped to achieve stability by the end of the fiscal year. The recapitalisation of banks, bankruptcy laws and reduction in subsidies are all steps that will stand the economy well in the medium term. However, in the short term these can all cause a fair deal of pain.

In the above backdrop, there has been some positive signs of earning growth. With the monsoons having been normal largely, rural growth has revived to some extent. At the same time agrarian distress is also a fact of life. Farmers are not getting the right MSP and are unable to service their loans. While loan waivers cannot be a solution at all situations, there is a need to manage this in some manner. Consumer goods and Auto sector have largely been buoyed up by increased demand and this is also reflected in their stock prices. Infrastructure spends and affordable housing are two great growth stories that will play out in the next year. If the overall earning growth revives in 2018 it will obviously lead to sustained growth in the markets.

One critical factor in India is always the budget and this is determined, more often than not, by the political context. As of now, the BJP is quite wary of the opposition getting together to thwart their relentless march. Given that this is likely to be the last full budget, there is a good chance of some cheer being spread. On the taxation side this may mean some relaxation of the rates on both personal and corporate income tax. This will put more money in the pockets of the people, thereby boosting consumption. Increased spending in infrastructure, education, healthcare, housing are likely to take place. All of the above should have a positive impact on the GDP figures, assuming that inflation is contained and there are no negative news on the monsoon front.

Assuming the above plays out what will be the impact on the markets? Well, for one, the markets can very easily get spooked if the BJP loses any of the important elections of 2018. The smaller north eastern states will not matter too much but if the BJP loses in Karnataka, Rajasthan or MP then the markets may well correct fairly deep. We all saw what happened when BJP trailed in the initial counting of Gujarat votes. One key assumption in the markets is that the current initiatives will continue and that is possible only if the BJP remains in power. Businesses are very clear that any alternate party coming to power is going to be largely detrimental for the economy. Now rationally BJP cannot win all elections but any elections that it loses will see deep correction.

Given the significant rise of all our indices in 2017 and the above complex scenario, it is safe to assume that the growth will not be as spectacular. However, it is still likely for the Nifty to be at a level of 11000 to 11500 by the end of 2018. The path to it may be tortuous though and Nifty may well test levels of 9500 or even lower, should something unexpected happens. Individual stocks may see greater purchase and it will therefore be important to look at these too in addition to the MF route. The downside protection of indices is fairly robust, given the overall strength of the economy as well as the huge amount of money being pumped in through the SIP route in MF.

If this holds true, how should you be investing in 2018? I will cover that in the next post.

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India in 2018 – the fault lines run wide and deep

There are moments in the nation’s history which can be termed as watershed moments. For our country independence/partition, Chinese war, Green revolution, Bangladesh war, Emergency and aftermath, liberalisation of economy, Babri masjid demolition, BJP coming to power and losing it, UPA winning against all odds and then making a hash of it are all such moments. These have had serious impact on India, but what we see today over the past few years is more of a path breaking phenomenon.

Let me explain – since independence till 2014, the overall Indian state was run along the lines of a socialist democratic state with some capitalist overtones. Yes, in 1991 we were forced to liberalise the economy which created a number of ultra rich people and a rather well off middle class. Also the BJP government between 1998 and 2004 was of a different quality in terms of doing things better than it’s Congress counterparts. However, UPA won the 2004 elections and India went back to the norm. If we look candidly as to how things were largely defined in India they were as follows :-

  • Majority of the people were living poorly, if they were Muslims or backward castes their conditions were even worse.
  • Most people were engaged in farming and poor again, though there were some farmers who were well off and a few who were really rich.
  • Infrastructure was poor – electricity, good roads and drinking water were still off for many living in villages.
  • Corruption was a way of life from lowly government clerks to high places such as the courts. It affected poor the most as they could not pay through it to get things done. The better off kind of accepted it as a way of life.
  • The nexus between politicians, crony capitalists, media houses with committed journalists was well established. If you were part of the system you benefited from it , if not you would simply have a rather hard time.
  • Tax collection was poor as most people who could avoid it did so, with the flawed logic that even if they paid taxes nothing much would happen anyway.
  • The ruling dispensation thrived by keeping people satisfied through various means – the poor through subsidies and MNREGA type programs, the industrialists through deeply discounted land and loans, the journalists through free foreign junkets, the minorities through Haj subsidies and allowing them to continue their regressive policies, the SC/ST and OBC through reservations  and the middle class through a vastly better lifestyle as compared to their earlier generation.
  • Corruption and black money were the hallmark of the economy. Both were needed for election funding which got more expensive over time. It was a secret all knew well but no one wanted to do anything about it.
  • While the Congress and other political parties largely perpetuated this state of affairs, we as citizens were equally responsible for allowing it to happen and taking part in it actively through avoiding taxes and black money of our own at times.

However, winds of change have been blowing through the country. Factors such as relative prosperity of one part of India driving up overall aspirations, brazen scams shaking up the placid Indian populace, the left liberal hypocrite narrative having run it’s course, the majority community getting tired of being used as punching bags for living their own faith, the proliferation of electronic and social media all contributed to this change. BJP would have done well in 2014 in any case but two factors stood it in great stead – Congress was clearly seen as the fountainhead of corruption, it’s leadership spineless and devoid of authority to do anything about it. On the other hand BJP did look like the relatively cleaner party and Modi a leader who would be able to turn things around in an effective manner.

To put it mildly, the last 3 1/2 years have been interesting for the society and polity of India. On the one hand several Hindu fringe outfits and their practitioners got emboldened with their own part coming to power and started acting like loose cannons. This resulted in the unnecessary controversies about Gau rakshaks and other stuff. The media hyped it up fully in collusion with the opposition. They needed to do it desperately as it was as though they were losing all relevance in contemporary India after having controlled the narrative for several decades. So you had attacks on Churches played up as Hindu intolerance with intellectuals returning awards over it and other issues. BJP too fell for it by bringing ordinances like cow slaughter ban without explaining it properly. Lies became the order of the day, facts did not matter any more. Through 2014 BJP won elections in Maharashtra, Jharkhand, Haryana to really spook the opposition.

The opposition did get back briefly in 2015 in Delhi and Bihar, the first through BJP’s stupidity of not calling elections immediately after winning all lok sabha seats in Delhi, the second through a completely unprincipled tie up between Nitish Kumar and Lalu Yadav. These losses were good for the BJP though as they were able to focus on a lot of economic fundamentals in 2016. The framework that has been put for opening bank accounts, insurance for the poor, Aadhaar linking of bank accounts and other financial instruments are seminal changes. With the help of data analytics available with CBDT and the GST framework being in place now, it is possible to hope for a quantum jump in tax revenues in the next few years. Focus on the infrastructure and better conditions for doing business will also create a positive environment. In 2017 the stellar performance of our stock markets indicate the confidence in this direction.

At the same time there are serious fault lines that are emerging in our society and polity. These will be exploited by the opposition and hyped up by the section of the media unfriendly to the BJP. Both of them are clear that a return to power for the BJP in 2019 will give it enough time to complete the unfinished tasks of the legal cases as well as dealing with black money and tax compliance. Once that takes place, it will be almost impossible to challenge the BJP hegemony in future elections. Already they control most of India and unless the trend reverses quickly, it may well be over for the Congress.

What are the fault lines? Let me try and outline them below :-

  • Weak governance by the BJP in Rajasthan and Maharashtra in addition to the poor handling of Vyapam scam in MP has taken some sheen off the BJP.
  • No matter what explanation BJP gives, jobs are an issue with so many youth being without jobs. While good work has been done through Mudra schemes etc, much more needs to be done on both skill development and start up facilitation.
  • Agrarian distress is again a reality and the government has to be accountable. It is not enough to say that the situation was bad earlier, the onus is on BJP to make it better. Losing rural votes will mean losing the elections.
  • Social tensions are on the rise. The incidents are not many but each one will be blown up and some unfortunate comments by unthinking party men mean serious image issue for the BJP.
  • While BJP is still seen as largely clean and Modi’s popularity remains high, it is true that no real movement is seen on the UPA corruption cases. The 2G case was a fiasco for the government and it cannot afford a repeat of it.
  • The Ram temple is an issue again. If there is no substantive movement on this in 2018, the BJP runs the risk of going into a general election with large parts of the population thinking it has not been able to fulfil any major promise.
  • Traditional support base of the BJP is miffed with the short term issues of GST and unless this settles down soon they will continue to be a factor in elections.
  • It is not easy to carry out disruptive changes, people who have never paid taxes but are expected to do so now will obviously have major negative feelings about it.
  • Any serious corruption scandal surfacing will be detrimental to the BJP.
  • The opposition, media houses, some parts of industry, Muslim and Christian organisations as well as some judges of courts will try and make things difficult for the BJP every step of the way. For them it is a battle for their existence.

It is important to understand that though the BJP has good support, there are many who are opposed to it too. The battle of perception is an important one over the next 18 months and it will be to the finish. In this period both parties will not cede an inch and try their best to trade punches. The Gujarat elections were replete with verbal skirmishes that were bitter and below the belt at times – it is very likely that we will have similar or worse in the days to come.

The unfortunate part in such an acrimonious battle is that, whoever wins, the loser will feel bitter about the loss and the winner may well gloat. It will be important as a mature democracy that both parties accept the verdict and move on. For the sake of the country as well as my own inclination I hope it is the BJP.

Why was demonetisation and GST an imperative for India?

If you are thinking as to why I am writing yet another post on demonetisation and GST, you will not be wrong in your thinking. I have already written about the first here and here. Also, there has been a lot written about GST by all and sundry. However, I have been looking at some data lately and it has become crystal clear to me that not only these steps were needed but that we need a lot more to fix the tax compliance issue.

It is a well known fact that our tax compliance is really poor. In a country of 130 crore people less than 3 % pay any kind of income tax which is ridiculous. I had written earlier about our poor tax compliance and also on the need for paying taxes and filing returns. But just how bad was the situation when these steps were contemplated by the government? Let us take a look at some actual data from CBDT on the Income tax statistics from the financial year 2014-2015.

  • 4.1 crore Indians filed IT returns for this year out of which 2 crores showed Zero taxable income.
  • Only 1 crore Indians paid income tax of more than 1 lac.
  • Taxable income in that year can be seen from these numbers :
    • Between 0 to 5 lacs were 2 crore people
    • Between 5 to 10 lacs were 3.7 lac people
    • Between 10 to 25 lacs were 1.8 lac people
    • Between 25 lac to 1 crore were 62,919 people

From the above, it is very easy to see that the declared incomes of people are very different from the factual situation. If I just take the IT and ITES industry in India, it will easily have people having more than 10 lacs income at more than 1 lac. So, it is safe to say that only people who are drawing a salary and do not have any way to avoid reporting their income correctly are doing so. I am not saying this out of a wild guess – in my financial blog I get queries from several Doctors, Lawyers and other professionals all of whom earn more than 25 lacs as taxable income. Apart from this there are several businesses which do not declare income properly. In the same year only 16000 companies had a taxable income of more than 1 crore – again quite absurd !!

What is the key reason for this? Well, for one our IT authorities need to be way better than what they are. However, the main issue is that transactions are mostly done in cash and there is often no record of it at all. In such a situation, it is easy to avoid taxes almost completely. Let me give a personal example. I am doing some consultancy practice for which I invoice my Clients every month. As long as I show the invoice, pay Service tax or GST on it and my Clients pay it through my bank account, there is a record. Tax gets deducted at source and I pay the rest of the tax on my own. Fairly straightforward if you want to do things in an honest manner. On the other hand, it is also possible to arrive at an arrangement with the Client, take less money in cash and avoid taxes. Unfortunately, in our country today, this is a great problem.

How will GST help? By getting all businesses under a regime of simple tax, it will be far easier to monitor than it is today. Yes, people will still try to avoid invoices and deal in cash but now that GST is all pervasive in the supply chain this will become more and more difficult to do. Over a period of time avoidance of taxes will grow less and this will result in more revenue for the government and therefore more resources for developmental agenda in the economy.

Why was demonetisation needed? While GST deals with the future, something had to be done to get all the cash lying around into the banking system. Now that it has been done it is far easier to trace the money flows than ever before. If the economy had a lot of unaccounted cash, sectors such as the real estate would continue to deal in cash.  At the same time, the real issue will be to tax the money available through the bank deposits. If this is not done properly and taken to the logical conclusion we will gain very little.

Could we have achieved the same without demonetisation, that definitely had an adverse effect on most people and small businesses? Note that a lot of things were tried over several years. Amnesty schemes were announced repeatedly, MAT was introduced so that small businesses had to pay very less taxes, compliance related procedures were simplified greatly. Unfortunately, none of these worked in any real sense and drove us to a situation where the government just had to bite the bullet.

What about Aadhaar and why is it an important piece of the puzzle? That is a different story, though a related one. I will cover it in my next post.

Retirement planning – dynamics of time and activities

Of late, I have been doing a lot of reading on the topic of retirement planning. I must say that, while there has been a certain level of interest about retirement issues in India now, much of the good inputs come from the US, where this has been a topic of great interest over several decades. One of the areas most of the financial community there agree on is the need to structure your decades of retirement by activity levels. In this post I will try to suggest a framework, we can adopt to our context in India.

One of the important differences between US and India that we need to keep in mind is the age of retirement and life expectancy. Many people in the US work till the age of 65 and consider they will live till 90. In the Indian context, it will make sense to look at these figures at 55 and 85 respectively. Yes, I know many people retire at 60, but with the focus on shorter career spans along with many wanting to look at doing other things, 55 will be a good age to aim for. Moreover, with the passage of time, more people are going to have non-traditional careers where the working in regular jobs will have shorter life span. The other aspect is life expectancy – I feel with the current state of medical advances, it will be logical to take 85 as the figure. Again, it is possible to live beyond that and you must factor that into your plan. In the end however, a 30 year retirement period which you need to plan for and fund will probably do the trick.

Ok having established the above, let us now turn to a framework of the 3 decades. I will follow the terminology from an US blogger. He calls the first decade to be the Go-Go decade, where you are going to be quite active. This is the time to catch up on all the family visits, travel the world, organise your monetary and other affairs, spend time with your adult children and to indulge in the hobbies and interests for which you may not have had much time during your working life. The second decade is termed as the Slow-Go decade, where you still do much of the earlier stuff, health permitting, but there is a palpable slowing down in both the numbers and frequency of activities. The final decade is termed as the No-Go decade where you will mostly be indoors with limited activities.

If we adopt this framework to the Indian context, how will things look? I can think of the following for the first decade, in terms of the situation and the activities:-

  • You will still be actively engaged in some professional activities but not a regular job any more.
  • Your income will mainly come from passive category with some active income.
  • It is likely that your children are into their careers now or at least finishing up their post graduate education. 
  • They will also possibly get married in this decade of your life.
  • With time and hopefully money in your hands, you can look at travelling much more than you have done earlier.
  • You may want to replace some assets such as cars or white goods.
  • You can also indulge in your hobbies and interests in a more significant manner. If these are outdoor in nature, this is obviously the best decade to do so.
  • You will settle down in your home town or your place of retirement during this decade. Catching up with friends and family there will be a good part of leisure.

In the second decade, the professional activities will probably cease. Your outdoor aspects such as travel or any active sports will also taper off gradually. While you will still be healthy ( hopefully ), you will not be too inclined to venture out of home. This will probably be a time to view movies in home theatre as opposed to the cinemas and to order food in as opposed to driving out to a restaurant.

In the third decade when you are 75 plus, it is very unlikely that you will engage in a lot of activities that require a lot of physical exertion. Yes, it will still be important to do regular exercises, but your travels and other outings reduce drastically. Visits to the doctor are, unfortunately, going to increase in frequency. We can look at this decade as the winding down phase, where you should take care of your affairs, rest as much as you need to and hope that the passing away, when it happens, is a relatively smooth affair.

What happens if you live longer than you have estimated? We need to understand that this is possible, given that many people are living well into their 90’s nowadays. While you will either be almost inactive, if not in some long term care facility, there is clearly a need to plan for this financially. The last thing you need at this stage of life is to worry about money or being dependent on your children when you are at your most vulnerable. Any financial plan should include a final 5 years for you and your spouse.

Once you have chalked up your road map, we can start to put a financial dimension to it. This should be done in a bottom up manner, by understanding your lifestyle and then working out the relevant cash flows needed in the 3 decades. This is conceptually a little difficult and I will explain with a personal example in the next post.

Revisiting my life plan

The end of the year is normally a good time to assess how your life is going on and how is it likely to look in the future. In the last few days, I have given some thought to it and have decided that there may be a few changes to what I had considered 3 years back, when I had started in my Financially independent ( FI ) state. Let me share it in this post.

As you would have read in several posts, I am in an FI state, thereby not really needing any active income to take care of my expenditure. However, I have a Management Consultancy practice and earn active income out of it. Much of it currently goes into investments. While I can continue with my consultancy practice for the next few years, I am thinking of a few other areas where I can spend my time professionally. The first of these is a business venture, which I have thought of seriously over the last year. It is a fairly interesting concept and does not need too much funding. However, it needs a group of founding investors as anchor and I am thinking of some active work in this area from now on. It will probably take another 1-2 years to take off but the effort of getting the team together and kicking it off has to start. The second area is to invest actively in the stock market in a serious manner. Now, while my stock and MF portfolio is of fair value, I do not actively buy and sell in the market. With more time in my hands this is something I plan to look at. The third area will be to monetise the blog or write on topics which are of interest to me.

Depending on how the above things go, I am probably looking at being actively involved  in work, as we know it, for the next 5-7 years or so. Beyond that, my own estimate is that I will live for another 25 years, where I do not have any vocation, only my hobbies and interests to keep me busy. Not that I have ignored my hobbies or interests otherwise, in fact I have generally been happy about the work life balance I have been able to achieve.

One important factor to consider is where will we be living. As of now, we are in Hyderabad and there are really two options that I am considering. The first, is to continue being here for the next 2-3 years. The other option is to look at a shift to Kolkata in the next calendar year. The flip side to that may be the opportunities available for my consultancy, should I decide to continue it. Long term plan will be to shift to Kolkata anyway. Even though we have an apartment in Chennai, we do not plan to go there as the climate does not really suit us. Of course, another consideration in Kolkata will be whether we should own a place or rent it. More of this in another post, but if long term rent options are available, I will prefer it to buying a place.

All Indian families have their children as a key consideration and we are no different in this regard. Fortunately for us, both our children are well on their way to getting settled in life. My daughter Rinki is an Engineer from BITS Hyderabad and is presently pursuing her MBA from XLRI. She will complete her course in March 2018 and is likely to get a job of her liking in some company. My son Ronju is doing a dual degree course in Msc Maths and BE Computer Science from BITS Goa. He will complete his course work in May 2018, though there will be mandatory internships of 1 year. Of course, he may decide to do a PG course later on but that is a future issue. In the meantime, it is unlikely that our children will stay in the same city as us. As far as their marriages go, we will live it to them for deciding the time and partner. We will fund the wedding expenses and I am keeping a separate track of it.

What will be the key activities that we will engage in? Well, travel within and outside India is a passion that both Lipi and I share and in the next 10 years we will do that a lot. Our other interests in movies, cultural events, dining, sports etc are also likely to keep us busy in the first decade. Over the next decade, it is very likely that our going out will reduce considerably and we will have more indoor activities such as reading, tv and hopefully some family time with our children. Health is something we are reasonably all right with so far and hopefully we will not have any major mishaps along the way.

So far so good – what will be the cash inflows required to get these funded? Do I have the requisite financial assets to take care of this life plan? I will attempt to answer these questions in the next post.

 

The Ram Janambhoomi Babri Masjid saga – the beginnings of politics

The order by the Faizabad district court, permitting worship of the idols was seen by the Hindus as a vindication of their stand and by the Muslims as yet another betrayal of their cause in practising their religious freedom. Even before the locks to the structure could be opened as per court protocol, they were broken and people started to flock in. The resultant tension and bitterness between the communities manifested itself in severe rioting and violence throughout north India. Muslims observed 14th February as a Black day, stating that not only the government but even the judiciary had failed them.

However, in order to understand the issue completely we will need to get back to the politics of it. Over the years, Jan Sangh had tried to mobilise the Hindu populace to get some political dividends but they had only limited success at an electoral level. Though RSS had impressive membership and reach as a social and cultural organisation, Jan Sangh were unable to reap the direct benefits of it. They also did not want political alignments with other parties like the left or Janta dal variants. The Emergency proclaimed by Indira Gandhi changed all of that and kind of forced the opposition parties to get together. Jan sangh went with the Janta Party, who won the elections in a handsome manner and had their first taste of being part of government. They were also one of the reasons for the unravelling of the Janta party, courtesy the dual membership issue with the RSS. After uncertainty of about a year when the elections were held in 1980, Indira Gandhi stormed back to power.

Jan Sangh had been rendered defunct in 1977 and the leaders found it senseless to be part of Janata party any more. This led to the formation of Bharatiya Janata Party. The philosophy it adopted as a theme was Gandhian socialism and the core Jan Sangh issues of Ram mandir, cow slaughter, article 370 and Uniform civil code were very much part of it’s agenda. It was still just finding it’s feet when the assassination of Indira Gandhi in 1984 October, saw elections being called for January 1985. In the wake of a massive sympathy vote, Rajiv Gandhi and the Congress swept the elections nationally. The BJP did abysmally and was written off by most political pundits. They got only 2 seats and even their talisman Atal Bihari Vajpayee, a parliamentarian since 1957 could not get elected.

The BJP floundered for the next few years as the politics in the country went through a turmoil. Rajiv Gandhi had a great start to his prime minister’s innings but soon Bofors, Sri lankan misadventure and other issues started to undermine his popularity and authority. VP Singh was the major challenger and to counter him, Rajiv Gandhi agreed to the persistent VHP demands of Shilanyas of the Ram temple. Little was he to know that he was literally releasing a genie from the bottle, which could never again be put back.

Rajiv Gandhi did not benefit from the Hindu votes in the 1989 elections and was forced to concede power to the Janata Dal government led by VP Singh. BJP raised their tally to 85 seats, mostly from North India, and supported the government from outside. Indian politics would change forever, in the next few years and Ram mandir and Ayodhya were very much the centre point of it.

The Ram Janambhoomi , Babri Masjid saga – the genesis

Few controversies have whipped up as much as passion and frenzy as the Ram Janamboomi / Babri Masjid issue. Everyone in the country seems to have an opinion on it and there has been nothing else that can probably be claimed to be so divisive. The politics of the country, certainly the post 1986 period, has been very strongly influenced by it – so much so that the ascent of the BJP as a political force has been widely attributed to this issue. However, even with all of these, it is really surprising that very few people happen to know the facts accurately. This post is an attempt to correct that by documenting a timeline of this fascinating saga.

Well, where does one begin? If you are one of the so called liberals, singing praises of Islam and Christianity, while taking special pleasure in denigrating Hinduism then you obviously think Lord Ram was a myth. However, to millions of people, not only in this country but worldwide, Ram did exist and was born in the city of modern day Ayodhya. There was definitely a temple existing in Ayodhya, built in the place Ram was born. If your idea is to say that he was not a recorded historical figure then that is true for all founders of religion. More importantly, the sheer amount of literature, music and temples associated with Ram bears testimony to the fact that he was living at some point in time. The crux of the issue though is the temple – people who say today that there is no proof that a temple existed at the site are either ignorant or liars. The Allahabad high court had commissioned the Archaeological Survey of India ( ASI ) to find out if the temple did exist prior to the masjid being put up. Within a few months ASI submitted their report with incontrovertible proof that there was a grand temple, which was razed to the ground before the Babri Masjid came up.

With that basic premise in place, let us get back to the story. The structure called the Babri Masjid was ordered to be built by Babar and his trusted lieutenant, Mir Banki, constructed it in 1528. As this was done by razing an existing Ram temple to the ground, there was a lot of consternation among the population in Ayodhya, who were mostly Hindu by religion. However, during the centuries of Mughal rule, there was an uneasy calm though there was always simmering tension threatening to erupt. This emotive issue found strong voices and traction once the Mughals lost out to the British. Nirmohi Akhada which was a wresting club of sorts but had strong religious and spiritual overtones was at the thick of such efforts. There was an armed attempt by them to attack the Masjid, which was thwarted before much damage could be done.

This alarmed the British and they wanted to play the divide and rule strategy that they were famous for. Their administrative solution was to divide the area into two and allow the Hindus to put their idols and conduct worship in one part. This did not satisfy the Ram devotees as their contention was that the birthplace of Ram was on the spot where the Babri Masjid stood and the sanctum sanctorum of their temple should be that place. Over the years there were attempts to construct a temple in the area designated for the Hindus but the Muslims opposed it vehemently. The most strident confrontation took place in 1883 and it was somehow managed by the British and some sane voices.

Between 1883 and 1934 there was sporadic violence related to the site and the bad blood caused by this was one of the factors why the two communities substituted amity for hatred and mutual suspicion. Matters came to a head in 1934 when there was widespread violence in Ayodhya and adjoining areas of UP. The British administration tried to contain it as best they could but by then they had their hands full with the ongoing freedom struggle. The positions of the two communities got entrenched in the period 1934 till independence in 1947. The formation of Pakistan had diametrically opposite effects on the two communities. While the Hindus felt betrayed by partition and the associated violence and thought that they should now have the temple in a country where they were the majority community, Muslims wanted to feel secure in the fact that their religious rights would be protected as a minority in India.

What happened next is fairly dramatic and can be interpreted with different angles, based on which side of the divide you put yourself. On 22nd December 1949, a group of hardcore Hindu fanatics entered the Masjid and put the idols inside. From the next day there was a huge uproar in the country from both communities who indulged in blame games. Hindus saw this as a miracle and a sign that the Ram temple must be built. The Muslims played the victim card and cited how they were betrayed by the majority community and wanted status quo to be restored. The central government headed by Nehru acted swiftly in the matter by locking up the place. This was good for the Muslims – though they publicly stated that the Masjid should be open for prayers etc, the reality was that prayers were never held there for long. The Muslim game plan was not to allow the Hindus to get the satisfaction of a grand Ram temple there.

The Hindus were livid with Nehru’s decision and saw it as an example of them being second class citizen’s in their own country. The rise of Hindu nationalist parties of all kinds and the growth of cultural organisation’s like the RSS, owed in no small part to this treatment. Over the years, Jan Sangh grew in popularity, albeit not having  critical mass to win many Lok Sabha seats. Though the issue always figured in the public discourse, the communities moved on with other aspects of life and a developing nation had a lot to look forward to.

This however, did not mean that the Ram temple was forgotten. There were legal and political efforts ongoing to make the Hindus worship their idols, which were now under lock and key. Out of all these efforts, some legal success came in the year 1986. On February 1st the Faizabad district court ordered the locks to be opened and gave right of worship to the Hindus. At long last, they seemed to be getting somewhere with their aspirations of building a grand temple at the birthplace of Lord Ram.

However, this started the next part of the saga which I will write about in the next post.