Arvind’s Newsletter

1.Sony calls off $10bn Zee merger in India after two years of talks, seeks $90m in termination fees

Sony has called off its merger with Zee Entertainment, ending its agreement with the Indian media group two years after striking an ambitious deal to create a $10bn entertainment powerhouse in the world’s fastest-growing large economy. The Japanese group said in a statement on Monday that it had sent a termination letter to Zee after a tense weekend of negotiations failed to salvage the deal.

The talks collapsed at the weekend following a stand-off between Sony and Zee over the Japanese group’s refusal to allow chief executive Punit Goenka to stay on after the merger. Sony’s issues with the merger included an investigation by India’s markets regulator into fraud allegations against Goenka, according to multiple people involved in the talks.

Sony was also concerned about Zee’s financial performance, which has been hit by rising streaming costs and a soft advertising market. Zee’s operating revenues fell in the 2023 fiscal year, while earnings before interest, tax, depreciation and amortisation fell 38 per cent because of higher content costs. In a statement, Sony said it was “extremely disappointed that the conditions to the merger were not satisfied” by the deadline, which had been set as January 21. The company added that it “remained committed to growing our presence” in India.

Zee said it had also received a demand from Sony for a $90mn termination fee over “alleged breaches” of the terms of the deal. The Indian company said it “categorically denies” Sony’s assertions and “will take all the necessary steps to protect the long-term interests of all its stakeholders, including by taking appropriate legal action” against Sony.

Global brokerage firm CLSA has downgraded Zee Entertainment to a 'sell' call from the earlier 'buy' following the termination of its $10 billion mega-merger with Sony Pictures Network.

"With Zee-Sony merger being terminated, we believe Zee’s PE will slump back to 12x levels, seen prior to the Sony merger announcement in August 2021," the firm stated.

2.Wanted Independent Directors by India Inc

India Inc. is going through a peculiar problem - there appears to be  a lack of qualified independent directors available as board members . Devina Sengupta writes that three out of five people surveyed by executive search firm Heidrick & Struggles said they were looking to reshuffle their boards, but more than half of them are unable to find suitable people. Additionally, companies  are seeking independent directors with niche talent in digital and consumer behaviour, and an understanding of generative artificial intelligence, or Gen AI. This problem doesn’t seem like it’ll be solved anytime soon.

3.Why Iran Is the Common Link in Conflicts From Gaza to Pakistan

Iran is truly the power in West Asia — no matter what the more wealthy nations in the neighbourhood may think. It has a finger in almost every pie in the region — and beyond. A cartoon in the latest issue of The Economist shows its supreme leader with a console, operating drones that, in turn, manage puppets — Houthis, says the legend on one; Hamas, says another; and Hizbullah and Syrian militias say a third and a fourth. “I prefer a hands-off approach,” the supreme leader is saying in the cartoon which is not really funny because Iran isn’t funny, and because it really is the truth.

Iran has worked hard at this.

As an explainer in the New York Times puts it: “Israel and Gaza. Yemen and the Red Sea. Lebanon, Syria, Iraq — and now Pakistan, too. At every flashpoint in a set of conflicts spanning 1,800 miles and involving a hodgepodge of unpredictable armed actors and interests, there’s been a common thread: Iran.”

The motivations are sometimes regional, although, this time, at least some of them would appear to be domestic. And there’s no telling how this will end (or even play out). This is bad news for the world, and also for India, which imports most of its oil from the region, and much of whose sea trade is carried out through the Red Sea.

4.It’s well established that we absorb less well when reading on screen. But why? And can we do something to improve it?

Professors at the Macquarie university in Sydney reviewed scientific research on the subject that shows there is indeed a ‘screen inferiority effect’ i.e, reading on screen is generally less effective than on paper. Whilst the authors concede that the reasons for this are still not clear, they present some possibilities:

“It might partially reflect the dry eyes and visual fatigue that sometimes result from reading on screens. But the effect could also be related to how readers control their thoughts and behaviours. According to this account, because most digital reading involves the rapid acquisition of information from social media posts, short online news articles and emails, readers fail to appreciate that the more superficial reading that is sufficient to understand the gist of these short, simple texts is insufficient to understand longer, more difficult texts.

By this account, the screen inferiority effect reflects the misapplication of one reading strategy (the skimming of short, simple texts) to another, inappropriate situation (the reading of longer, more complex texts). Readers who are skimming might, for instance, be ignoring the shorter function words (like ‘a’ and ‘the’) that mostly play grammatical roles, and instead focus their attention on the longer content words that tend to convey the most meaning. Although this skimming strategy might be sufficient to understand the gist of a short text, any information that is lost by ignoring function words would be expected to degrade understanding of longer, more complex texts, where grammatical roles are required to know ‘who did what to whom’.”

What can we do to get better at reading on screen?

“This could be done by actively slowing down your reading on a screen when the goal is to understand a difficult topic, or choosing formats with fewer visual distractions, such as advertising banners, that could result in split attention. To read optimally in the digital age, you must be mindful of your aims, and then select the reading approach – including the medium – that best supports them.”

5.Chinese firm unveils “ atomic battery”

A Chinese company unveiled an “atomic battery” with a reported 50-year lifespan. The Betavolt BV100 uses a radioactive nickel-63 isotope and new diamond semiconductor technology. It does not provide a great deal of power, but could outlast the life of the tech it is powering.

Its manufacturers envisage smartphones that never need charging or drones that can fly continuously. Nickel-63 decays to harmless copper, and Betavolt says that unlike old nuclear batteries, which were dangerous and expensive, its newly developed product would not leak harmful radiation even if damaged or destroyed. The company hopes to release a 10-times-higher-output successor next year.

6.Ukraine could soon run out of money to keep the government running if U.S. and European aid doesn’t arrive, The Wall Street Journal reports.

Ukraine will run out of money within months and be forced to take painful economic measures to keep the government running if aid from the U.S. or Europe doesn’t come through, according to economists and Ukrainian officials.

The U.S. and the European Union, Ukraine’s largest financial backers, have promised Kyiv billions of dollars in new financial and military aid. But pledges from both have been upended by infighting in Washington and in Brussels. While political leaders insist those aid packages will pass eventually, timing is critical for Ukraine.

The country faces a $40 billion-plus financial shortfall this year, slightly smaller than 2023’s gap. Funding from the U.S. and EU was expected to cover some $30 billion of that. The money is needed to keep the government running and is used to fund salaries, pensions and subsidies to the population.

Ukraine has introduced a windfall tax on banks, reallocated some tax revenues and ramped up domestic borrowing, which should cover budget spending through February, according to the Ukrainian Ministry of Finance.

“These measures are limited in their effect," said Olga Zykova, Ukraine’s deputy finance minister. “All our partners share the sense of urgency" for further funding, she said.

The government could be forced to take additional steps to preserve cash if aid doesn’t come quickly. Delays to military aid packages would also deal a blow to Ukraine’s battlefield effort, which has stalled out after a failed counteroffensive.

Kyiv could then buy itself a few more months by delaying salaries or borrowing even more from its own banks and domestic investors. Ultimately, Kyiv could be forced into printing money, a strategy that has fueled economic implosions in countries such as Venezuela.

Ukrainians fear that the recent setbacks signal more trouble ahead. Discussions with international partners have begun to focus on how Ukraine can attain financial self-sufficiency as the war drags into a third year.

Keeping the economy stable underpins Ukraine’s ability to keep fighting. Russia’s far-larger economy was battered by Western sanctions but has since rebounded, after Moscow found new buyers for its oil and focused domestic resources on military production.

Without economic stability, “fighting a country that is bigger than Ukraine and has much more manpower will be very tough," said Olena Bilan, chief economist at Dragon Capital, a Ukrainian investment bank. “If the budget is not sufficient just to pay pensions and salaries, where will it get the money to buy munitions?"

7.Ram and the strongman: Modi looks unstoppable in India’s election, opines the Economist in its briefing this week. Long Read.

The city of Ayodhya is central to the story of Ram, one of Hinduism’s most revered deities. It is also central to the fortunes of India’s ruling Bharatiya Janata Party (BJP) Starting in the late 1980s, the bjp agitated for the replacement of a 450-year-old mosque in Ayodhya with a temple, because it occupied the spot where Ram had supposedly been born. In 1992 a mob worked into a frenzy by fire-breathing speeches by the BJP’s leaders did indeed destroy the mosque, prompting riots across India in which some 2,000 people, mostly Muslims, were killed. Since then, despite the bloodshed, the bjp has pledged at election after election to get the temple built. It is therefore hard to imagine a more triumphant moment for Narendra Modi, the prime minister, than the ceremony he will lead on January 22nd, when the long-awaited temple will at last be consecrated.

Unofficially, the consecration will also serve as the launch of the bjp’s campaign for the next national election, expected to be held over several weeks in April and May. Mr Modi has asked all Indians to celebrate the temple’s inauguration by lighting lamps, much as Hindus do on Diwali, a holiday that commemorates Ram’s triumphant return to Ayodhya after slaying the king of the demons. But only 80% of Indians are Hindu, and not all of them see the construction of the temple as a victory, let alone the 14% who are Muslim. Business tycoons and Bollywood stars will attend the consecration, to flatter Mr Modi, but most opposition politicians—and some Hindu priests—are staying away.

To Mr Modi’s detractors, the fact that he would make the source of such bloodshed the centrepiece of his campaign is proof of his malign intentions. His blurring of religion, government and electioneering shows his disdain for India’s secular constitution and its strict campaign rules. Worse, they fear, if these abuses help propel the bjp to its third election victory in a row, as expected, Mr Modi will go further, and attempt to turn India into an authoritarian Hindu state.

But as true and troubling as it is that Mr Modi and his party deliberately stoke communal tensions and undermine institutions, Indian democracy is hardly a lost cause. The BJP is not as all-conquering as it first appears. Its vote share in a general election has never reached 40%, a mark its main rival, the Congress party, passed seven times in its heyday (see chart). Moreover, the bjp benefits as much from Mr Modi’s personal popularity and its superior electoral machine as from popular support for its ideology. And India’s institutions have survived worse abuses.

The BJP wants to create a national identity based on Hindutva, or Hindu-ness, that it says was suppressed for centuries by Muslim and British invaders. Hence the jamboree in Ayodhya, which is above all a rallying cry to the bjp’s electoral base. The guest list is dominated by leaders of the party and affiliated Hindu nationalist groups, including the Rashtriya Swayamsevak Sangh (rss), a sort of pious cadet corps, and the Vishva Hindu Parishad (vhp), which launched the temple-building campaign.

The ceremony concludes “500 years of continuous struggle for Hindus”, says Champat Rai, the vhp’s vice-president and general secretary of the trust building the temple. The event, he says, will send a clear message to Indian Muslims: “They should search for their roots: who were they four or five hundred years ago?” They were Hindus, he continues, and should “say that this land is our mother”.

But Hindutva is not the only thing the BJP cares about in Ayodhya. It is also boosting the local economy by pouring $9.6bn into development schemes, including a new airport and a new railway station. It has grand plans to turn the city into a tourist hotspot, with a Ram “experience centre”, a fountain park, some 60 hotels and “patriotic” wedding venues.

The city thus neatly captures the BJP’s sales pitch: that it is building a prosperous, confident new India by restoring Hinduism to its rightful place as the bedrock of society. The violence of 1992 was a “sad moment”, says Ayodhya’s bjp mayor, Girish Pati Tripathi. “But Indian civilisation has passed it. We’re moving forward. Why are Muslims worrying so much?”

This blend of economic development and Hindu revivalism is an appealing formula for many, especially in Hindi-speaking northern and central India. Pollsters believe it will win the bjp another majority in the Lok Sabha, the 543-seat lower house of Parliament, either on its own or as head of a coalition. That would make Mr Modi India’s only prime minister to win three consecutive terms since the first, Jawaharlal Nehru of Congress.

Mr Modi, who is 73, is another of the BJP’s strengths. The image he has cultivated—muscular, pious and avuncular—appeals across India. His humble origins as the son of a tea-seller strike a chord with poorer Indians. His nationalist rhetoric resonates with the aspirational middle class. His reputation as an adept, industrious administrator appeals to the wealthy. Many also applaud his efforts to raise India’s international status. Mr Modi’s popularity accounted for up to a third of the bjp’s votes in the most recent national election, surveys suggest.

Mr Modi has not earned this reputation by chance, of course. The bjpcarefully cultivates it, in part by strong-arming media to ensure positive coverage. In July a survey of Indian journalists showed that 82% thought their employers favoured the BJP. The party also enhances Mr Modi’s image by attaching his name and face to popular government programmes.

Above all, the bjp has a clear organisational edge. The party claims to be the world’s biggest, with over 180m members, including 100m “active” ones (China’s Communist Party has 98m). Verifying that is hard: a call to a toll-free number is all that is needed to join. Still, academics who study the bjp say it can mobilise vast cohorts of party workers and volunteers, many of whom also belong to other Hindu nationalist groups. Managing them using a dedicated website and smartphone app, it appoints several to oversee each of India’s million-odd polling stations, and even individual polling booths within them, with a party worker responsible for each page of the electoral roll.

Among them is Sachin Nahar, a 39-year-old Hindu farmer in the central state of Madhya Pradesh. Like his father and grandfather, he joined the rss as a child, attending weekly sessions of exercise and political discussion. He then volunteered as a bjp booth worker in 2013 and now oversees 30 voters. He regularly visits them in person, adds them to WhatsApp groups and ensures that they turn out to vote.

For Mr Nahar Hindutva is central to the BJP’s message. He reminds voters that Mr Modi has fulfilled many long-standing Hindu-nationalist demands, such as ending the special constitutional status of India’s only Muslim-majority state, Jammu & Kashmir, and getting the temple in Ayodhya built. He and other bjp supporters in his constituency, which is 11% Muslim, are celebrating the temple’s consecration with daily marches during which they chant, “Jai Shri Ram” (“Victory to Lord Ram”). As for the future, he hopes—and tells voters—that the bjp will replace more mosques with temples and scrap special laws for Muslims regarding inheritance, divorce and other family matters.

But the BJP arms him with more than talking points about communal disputes. It also provides a completely different means to target voters, by giving him a list of the beneficiaries in his district of various forms of government welfare. Under Mr Modi the government has rolled out new digital identification, payment and data-management platforms which allow most Indians to access public services and receive direct cash transfers from the state. Mr Nahar highlights this system in his outreach, crediting the prime minister.

The BJP is equally organised and efficient when it comes to social media. It claims only 20 people work in its National Digital Operation Centre, producing posts for its official accounts and trawling platforms for BJP-friendly content to promote. The heavy lifting is done by an army of volunteers (the party says it does not pay them), who help circulate official bjp content and create material of their own.

These digital campaigners often use WhatsApp, even after Meta, its parent company, tried to counter disinformation by restricting mass messages. “We invite like-minded people to the group, they invite their friends, they make separate groups and invite more people, and so it spreads,” says Rathan Ramesh Poojary, a BJP media co-ordinator in Karnataka. He denies responsibility when volunteers advocate violence against Muslims: “We don’t support killing.” Still, he admits, “These guys support our ideology.”

The popularity of the bjp’s Muslim-bashing puts opposition parties in a bind. Most are reluctant to denounce Hindutva policies for fear of irking Hindu voters. In fact, some Congress leaders have embraced “soft Hindutva”—visiting temples, building statues of Hindu deities and schmoozing with holy men. So far, that has annoyed secular and non-Hindu supporters without luring many votes from the BJP.

But Hindutva presents problems for the BJP as well. Its appeal is much more limited in south India, where Islam arrived not by conquest but with proselytising merchants. Hindu reformist movements have more influence in that part of the country and fewer people speak Hindi, in which the bjp’s leaders deliver their fiery speeches. The bjp no longer runs any of the region’s states, having lost an election in May in Karnataka to Congress. And of the 130 seats representing South India in the Lok Sabha, the BJP holds only 29.

That helps explain why the BJP is not really the overwhelming force it appears. Its share of the national vote in Mr Modi’s first election victory, in 2014, was only 31%. At the most recent national election, in 2019, it improved to 38%, still well short of a majority. If anything, Indian politics has become more competitive over the years, as Congress’s star has faded and other parties, including the bjp, have grown bigger. The bjp is just remarkably good at translating its plurality of the vote into thumping parliamentary majorities, aided by India’s first-past-the-post electoral system.

Were the opposition less divided and disorganised, the bjp would have much more of a fight on its hands. The most obvious problem is Congress’s ossified structure, epitomised by the dynasticism at the top. The party’s most prominent leader is the 53-year-old Rahul Gandhi, whose father, grandmother and great-grandfather all served as prime minister. He has recently become more confident, but has always seemed ambivalent about politics—not surprisingly, given that both his father and his grandmother were assassinated.

Yet Congress has hemmed and hawed about replacing him and, to the extent that it has done so, has plumped for an even less inspiring figure. In 2022 it chose a party veteran, Mallikarjun Kharge, as its first leader from outside the Gandhi family since 1998. He also heads the opposition’s 28-party Indian National Developmental Inclusive Alliance. At 81, though, he lacks the charisma and vigour to challenge Mr Modi. And both Mr Gandhi and his mother, Sonia, remain very much on the scene.

A similar dynamic plays out in the lower echelons of the party. Whereas the bjp is ruthless about sidelining unpopular veterans and picking candidates based on their electoral prospects, Congress is dominated by ageing stalwarts who resist both new blood and new tactics. That, in turn, causes bright young things to defect to the BJP where their prospects for advancement are much better.

When Congress does appoint younger, more charismatic leaders and uses modern election techniques, it can do well. It won state elections in December in Telangana, for instance, helped by both a fresh face as local party leader and by the number-crunching of Sunil Kanugolu, an election-data specialist. But the party lost two other state elections held at the same time, in which local party chiefs of long standing declined Mr Kanugolu’s help.

Congress is trying fitfully to reform. It has initiated a recruitment drive to expand its membership beyond the current 60m and launched an app for members, much like the bjp. It remains a contender, even in the Hindi-speaking heartland. Its average vote share in the three state elections there in December was 41%, not so far from the BJP’s 46%. In fact, it had led two of the three outgoing state governments, so could hardly be described as a long-spent force.

None of this, of course, excuses the underhanded methods Mr Modi uses to retain power. He has a troubling record of eroding democratic institutions. His government has harassed and jailed journalists and activists. It has undermined the independence of the judiciary and the Election Commission. Its investigative agencies have targeted opposition leaders. In December an astonishing 146 opposition mps were suspended from Parliament.

Opposition leaders are billing the coming election as a fight for the “soul of India” and a turning point in a global struggle between freedom and autocracy. They fear that Mr Modi wants to change the constitution to purge secular language and empower the executive. A revision of electoral boundaries, due in a couple of years, could facilitate that by expanding the Lok Sabha to around 750 seats, with most new ones going to the BJP’s strongholds in the north.

Opposition parties are attempting to fight back, in part by promoting themselves better. The digital id and payments system for which the bjptakes credit was in fact initiated under Congress; Mr Modi oversaw only the final stages of its roll-out but receives endless adulation for it. Schooled by such experiences, opposition parties are trumpeting welfare schemes run by state governments they control.

The opposition also decries Mr Modi’s failures, including the sudden withdrawal of most banknotes in 2016, the ditching of agricultural reforms after protests in 2021 and a botched response to the pandemic. Several of the bjp’s promises, to double farmers’ incomes, for example, and to boost manufacturing as a share of gdp, remain unmet. By some measures the economy has done worse under Mr Modi than under the previous Congress government.

Another potentially potent line of attack is Mr Modi’s close relationship with a handful of Indian tycoons, especially Gautam Adani, whose conglomerate was accused a year ago of fraud and insider trading by a short-selling firm based in New York (Mr Adani denied the allegations). Indian voters dislike cronyism and punished the previous Congress government after a series of corruption scandals.

Yet the opposition has not landed many punches. That is partly owing to Mr Modi’s reputation for probity. Mainly, however, the opposition has not united around a single message or, critically, a single slate of candidates. Such a seat-sharing agreement could dramatically alter the electoral arithmetic, turning the bjp from the favourite to the underdog in many districts. But it would require strong, decisive party leaders, able to impose unpopular choices on the lower ranks. In Congress’s case, neither Mr Kharge nor Mr Gandhi fits the bill.

Some opposition politicians have concluded that, after 25 years of messy coalition governments from 1989 to 2014, India has reverted to the “dominant party system” of the prior four decades. Back then, Congress won big majorities and ruled with few constraints. It often passed laws and constitutional changes to empower the central government and so get its way. It sometimes resorted to abject authoritarianism. Most notably, Indira Gandhi, Rahul’s grandmother, cancelled elections, jailed critics and suspended civil liberties during the Emergency of 1975-77.

The pessimists should remember, however, that India’s democracy managed to correct itself. Mrs Gandhi lifted the Emergency under pressure from courts, students and political allies. She lost the subsequent election, badly. And although Congress soon returned to power, it could not reverse a long-term decline caused largely by its over-reliance on charismatic, centralised leadership. That may be scant comfort for opposition parties facing another drubbing—but it should be food for thought for the BJP.