?Ethics can be compromised even without a private treaties deal?

Raghav Bahl, founder and managing director of Network18, is the man behind a string of highly successful channels, among them CNBC-TV18, CNBC Awaaz, CNN-IBN and Colors. In this Idea Exchange moderated by Senior Editor (Media) Archna Shukla, Bahl speaks about his book, Superpower? The Amazing Race Between China?s Hare and India?s Tortoise, and ethics in the media business

Raghav Bahl: The book, Superpower, is an entirely new exercise. A journalistic look at the India and China across several parameters?say, even comparing their consumers, innate entrepreneurial ability and legal evolution?I thought, hadn?t been done; perhaps it needs to be done. That?s how the idea of the book was born. Also, 2008 was a swivel moment for these two countries. Because up to 2008, the conventional wisdom was that China was way ahead of India in everything. But the crisis of 2008 put a somewhat different light on the realities of the two countries. Economically speaking, India has performed better than China since the crisis of 2008. I don?t say this just because the sensex is back to the pre-2008 highs and that China?s is at a 50%discount to what it was in 2007. That is just one proof, but there are many to support the fact that India?s economy since 2008 has been far more dramatic, robust and resilient compared to China?s. China was growing at 13% when the crisis hit and then it came down to 6%, losing 50% of its economic momentum. Whereas India was growing at about 9.5% and during the crisis dropped to 6.7%.

China came back with a dramatic infusion of debt on their economy. In just the six months of early 2009, China infused over a trillion dollars of straight debt into their economy. To give you a sense of what that means, the entire bank credit outstanding in India is half a trillion dollars. And China is sitting on a mountain of bad debt. That may be a bit of an exaggeration, but the fact is that they grew unprecedented amounts of debt and government investments in infrastructure. While India turned around on much smaller amount of debt and reasonably fair inflation compared to China, which had actually gone into deflation. For about a year, China was deflated. So in nominal GDP terms, India was growing much faster than China through 2009 and early 2010. There are several of these pointers that seem to suggest that India?s economy has been far more robust than China?s. So that was another thing that interested me. Also, China?s consumption has depressed their economy. When you look at their consumer spending, it is nearly 17-18% per annum, which is the fastest. So, the level of consumption is falling not because China is consuming less?it is consuming at the fastest rate in human civilisation?but they are investing in a rate which is faster than any that the human civilisation has ever known. Also, China?s investments are not just in hard infrastructure, but also in the softer part of the economy, like education and healthcare.

C Rajamohan: Today, what India and China will do together may change the world. Is the timing something that struck you while you were writing the book?

Absolutely. When stimulus is talked about, to me it is a euphemism. The large amount of monetary printing that is happening in Europe is an index of the weakening of an economy and transfer of their wealth to the East. The value of assets in this part of the world is going up. So stimulus is a euphemistic word for saying that the West is losing wealth and the East is gaining, which is now visible and tangible. But within that, the balance of China and India has been lopsided. I think India desperately needs to catch up.

Sunil Jain: The point you were making earlier is that China?s bad loans will mean trouble for them and that India seems to be more efficient in using capital etc. But when we look at their manufacturing quality and scale of infrastructure, it seems difficult to imagine that Indian manufacturers will ever reach that league.

When you look at China and the balance-sheet of its government, it appears far more robust than the Indian government?s balance-sheet, because they are running hardly any deficit on their government financing and they have over a two-and-a-half trillion dollars of reserves, while we run a huge current account deficit. But the point is that the bad debt in China is the government deficit which is underwritten by the government, unlike India, where there are private sector banks. So when we say that there is bad debt on China?s balance-sheet, it is the equivalent of saying that the government of China has spent a trillion more than it has earned. It has taken a surplus from the economy, so much surplus that an democratic country like India can?t dream of doing. While their balance-sheet appears far more robust, if we look at it in a consolidated manner and put bad debts on their balance-sheet, a half-a-trillion dollar debt will come up. But you are right, they have a stronger balance-sheet and that is largely because of the dramatic use of surplus that they have made, including keeping a currency which is a tax on their consumers.

Rakesh Sinha: Does China?s growth have military repercussions? Should East Asia worry?

World history is witness to the fact that when countries become disproportionately successful economically, military ambitions follow. Whether it was the UK 200 years ago, other European powers, then America and now China. Because they are sitting on a very strong balance-sheet, even if you write away the trillion dollar debt, which is getting translated into military ambitions. It is fairly visible in what they have been saying. Look at the way they are talking in the standoff with Japan?it has been a bullying standoff.

Dhiraj Nayyar: Where does China stand in terms of ideas and ideals?

No, I think that is going to be the biggest weakness of China in its march forward. They may win or rather be far ahead in the battle for hard assets and manufacturing, but when it comes to the battle of ideas and innovations, they may not outdo the US. An article stated in 1991 that if China?s current growth rate continued, then it would overtake the US by 2010. Then China?s economy was 40% of the US?s and even today it is 40% of the US?s size, even after the US suffered the Great Recession. But don?t underestimate the Chinese because the strides that they are making even in importing knowledge and technology are huge.

Dhiraj Nayyar: Do you think we have an easier catch-up in the realm of ideas when compared to hard assets?

I would say we are ahead in several areas. Indians do not celebrate some of our achievements. For instance, a Chinese company spending $5 billion to buy 20% of an African bank makes headlines, whereas an Indian company spending $10 billion for buying an African company?s assets is not celebrated. When Tata bought Corus and JLR, it was not celebrated by India. It was celebrated in the corporate world and business papers. If something of that stature happened in China, it would have made world headlines. In the realm of ideas, we are far ahead.

Archna Shukla: The Chinese economy has been extremely regulated, whereas in India, after liberalisation, it has become free for all. So does China?s progress mean regulation is good?

China is far more decentralised than India is. China is state-owned but it is decentralised, whereas India is very centralised. There, a municipality can borrow overseas; here even a state cannot borrow overseas. China?s growth has been propelled by the municipality and local administration; the municipality here hardly has any power. China is a command economy; India is much better regulated. For instance, the telecom sector. In China, the key sectors are dominated by the state. Fifty per cent of China?s GDP is directly controlled by the government or the Communist party. The top 100 companies in China are either state-owned or run by the Communist party. Whereas in India, only 10% of the economy is in the hands of the public sector. If you define regulation in terms of the economy, India is much more regulated.

Amitabh Sinha: The demand for sanity on business channels is much more when compared to other channels. How do you maintain that and how do you avoid temptations?

I think the world of 24×7 television is tough because you have to shoot straight from your hip. The world of print journalism is slightly better because you have 24 hours to digest what you heard and then you file your late-night story. Television guys have to react immediately and in the world of business, it is even worse because you are handling things as they are breaking. So how do you handle this? It depends on the quality of people and the quality of guidelines you operate on. There is no magic formula for that. You just have to keep drilling into your people that if you are not sure of the facts, don?t say them. I think by and large accidents do get avoided if you ensure that more senior people are on air. But I think television is more prone to accidents than print by its own nature?because news breaks, you are on air and you have to say something.

Coomi Kapoor: When you started your television channel, what gave you the guts to do it because you had very little capital and you were playing against seasoned players?

When you have very little to lose, you get guts. I think the pivotal moment for us was in the late ?90s when we thought we will become a broadcast company and no longer be a content player. This was about 1997-98. There was only one news channel on air that time, NDTV 24×7 and that was a general news channel. We were partners with CNBC and we were doing a one-hour in the evening. And I remember telling them that one hour in India is a waste of time. You might as well pack up because this is not the Philippines or Malaysia where you can have 23 hours of international content and one hour of local content and expect to win over the audience. This is India, where domestic content is going to win us audience and will be far more important. So if you want to win in India, let?s go the whole hog and do 24-hour television news out of India. At that time, CNBC told us that their top estimates out of the Indian market was one million dollars. We were making about 2,50,000 dollars at that point of time, including advertising revenues. We said we have seen general news channels do well and believe a business news channel will do well. Then they said, ?If you have the guts, please go ahead and do it. We will give you our content and we will give you our franchise. You set up the infrastructure and you do what you need to.? That is when we took the leap of faith. We became from a content player to a broadcaster. That?s the time the markets were hitting their peak, in 2000, so we were able to raise a fortuitous IPO and that solved most of our capital problem. We raised Rs 70 crore, just on the promise to churn out a business news channel out of India.

Sunil Jain: The Sebi chief once spoke of ?anchor investors?. Also, how do you justify your getting into private treaties?

On ?anchor investors?, I never quite understood what Mr Damodaran was saying. It is easy to accuse. I went to the Sebi chairman and said, ?If there is an iota of evidence, please give it to me in confidence. I assure you, action will be taken.? But there was nothing. No evidence. On paid news, a business journalist is under suspicion ab initio. This is what I have learnt in 20 years. Because when you say something is good, the first inference is that this guy is on the take. It is a cross that a business journalist carries. But I don?t think that is true. At the end of the day, in my experience of 20 years, I don?t think anybody has ever produced anything tangible against any of our journalists. Errors, yes, they certainly happen. Do you get set-up by somebody?

Yes, you do. You can make a mistake but you correct it quickly.

Coming to private treaties, we did treaties of the value of Rs 30 to 40 crore. That?s all we did. We believe commercially, it is a loss-making model. Because 45% of your non-cash revenues are out of your pocket on Day 1?in service tax and income tax. So we believe it is a loss-making model. We stopped it.

Sunil Jain: What about the ethics of it?

Ethics can be compromised even without a treaties deal. Why will you do a treaty to compromise ethics? If you need to compromise ethics, why will you take your money in cheque, backed by 10 pages of an agreement? So I do not buy the ethics point at all. It?s a revenue earning mechanism, but is an extremely inefficient mechanism. I think it is a legitimate use of your editorial position.

Sunil Jain: How do you justify CNBC walking out of interviews if another channel gets them first?

I think it?s a legitimate use of your editorial position. Don?t you do it? If the prime minister is giving you an appointment, won?t you want it first? It is a legitimate effort by a journalist to get it first.

Ashish Sinha: As a broadcaster, are you happy with the current regulatory environment in the media? What is the scene in China for media companies?

On news, China is very clear. They allowed a little window when they allowed CNN and a couple of other channels to distribute in hotels and other diplomatic areas?even that has now been frozen. No new licences are being given. In entertainment too, you have to be on state-owned corporate channels or government channels. You cannot build franchises on your own. On the other hand, in India, if you take away news, we are the most liberal FDI regime in the world, you can come in and buy anything and anybody in the world of non-news content.

?Transcribed by Vivina Vishwanathan and Diksha Dutta

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