Thought-Provoking Diary

Basic Principles for Successful Financial Life

2018-05-29T04:23:00.002-07:00

2017-11-29T23:19:00.002-08:00

Four levers that create wealth for you

2015-10-28T00:39:00.000-07:00

Most of us feel that increasing our income will make us wealthy, and that is why we focus most of our energy on getting a higher salary or getting more profitability of our organisation. We forget that increasing our income is just one of the levers to wealth creation, and NOT a very significant one. Ignore the other three levers at your own peril...read on...

It was 9 AM right now. Vinay was anxiously waiting for the phone call. His supervisor was supposed to call him up at 11 AM. Today. He made sure that he reached office an hour earlier, out of sheer excitement and curiosity of the upcoming promotion declaration. After 2 hours, he would be the Vice-President of the company - a dream he had cherished over the last few years. His mind started venturing to the kind of hard work that he has been doing over the last 12 months for this promotion. Out station trips to get new contracts, sitting late in office and at client sites to make sure that nothing can go against the deal, working over weekends to stay ahead of his competition, spending time and effort on building a great relationship with his supervisor - in and outside the office. And then, once the promotion goes through, he can spend some time with his family and on his fitness, and all the other important things that he neglected over the last few years. Everything was going as per the plan, he thought.

His train of thoughts were interrupted by the telephone ring. He picked it up with childish excitement. It was his supervisor on the other side. Vinay listened on, as his face played all possible emotions from exuberance to maturity to anger to depression. He kept the phone down after 3 minutes, and kept looking at the telephone instrument for a long time.

Sneha, his colleague in office, had just arrived at her desk. She saw an unusually depressed Vinay and asked him to join her for tea. Vinay obliged. Over tea, Vinay shared the entire event with Sneha, and how depressed he feels right now, after 20 years of hard work with this company.

Sneha consoled him, and said

“Vinay, that is the problem with most of us who are in this race to earn more money and strive for better positions. We think this is the only way to get wealthy.”

“What do you mean? I mean how else can you get wealthy if you don't get promoted and earn more money?”

“I had exactly the same mindset till 6 months back. Then, I met an author in one of the workshops I attended and he explained me something that changed my entire outlook towards wealth building. Let me help you with some of that.”

“Please do that Sneha. I would be so thankful if you can give me some alternatives.”

“Sure, here we go. There are four (4) levers that catapult our wealth in the long run, and increasing our income is just the first of them. Also, this lever, does not have the biggest impact on our wealth.”

“Are you saying that, while staying in a job, I have other ways to increase my wealth than to just focus on increasing my income?”

“Yes Vinay, you are absolutely correct, and those levers are equally powerful, if not more, vis-a-vis just increasing your income. Hold on and let me explain you all the levers”

Vinay was back this childish excitement, as he listened on to Priya.

Lever 1 (Increase your income)

This is where most of us are focussed on. Probably, this is the only lever most of us are aware of. While this is a good lever to increase your wealth, the impact of this lever on your overall wealth is just ‘Medium’. So, while we must pay attention to this lever, but only to its fair share. We should not be burning all our energies on this lever.

Lever 2 (Increase your net income)

Most of us struggle for a 5-10% increment every year and we conveniently forget or ignore the fact that we pay close to 30% of our income to the government via taxes. The money that we take home is far less than what the company gives us. On the top of that, most of us feel that we do whatever we can do about taxes, but the fact is that a vast majority of us do not spend enough time to understand the nuances of smart investing which can save us good amount of our taxes. If we invest some of our time in getting smarter about taxes and how to reduce some of those, it is very easy to contribute the same amount of money to our corpus, as we get in our annual increment. This lever also has a medium impact on our wealth, but needs much lesser effort than Lever 1. It is worth spending a fair portion of our time on this lever.

Lever 3 (Reduce your expenses)

Do not get me wrong here. No where, I am saying that you must lead a saintly life and stop spending money. What I am only saying here is that we should eliminate the unwanted expenses and get wiser about spending. One of the techniques that has worked for me here is tracking my expenses on a daily basis. Did you know that just getting into this habit of spending 2 minutes every evening and tracking your family expenses can reduce your expenses by as much as 15-18%? Yes, this is scientifically proven. And do not underestimate the power of this 15-18%, remember that one rupee saved is equivalent to five rupees earned because typically you save only 20% of your earnings. The contribution of reduced expenses to your wealth corpus can be humongous in the long run, much much more than your increased income. What we need is to inculcate good habits and discipline of tracking our family expenses every day.

Lever 4 (Get your money to work hard for you)

This is where most of us get it wrong. And this lever has the biggest impact on your wealth. Let me explain you. Over the last 20 years, you must have earned and saved a lot of money. Do you know how your saved or invested money has been performing year on year? Don't only consider the real estate that you invested 5 years back and got decent returns on. I am talking about your entire portfolio comprising FDs, RDs, Mutual Funds, Equity Stocks, PPF, EPF, Gold, Real Estate, Insurance and every other investment that you have done until now. Do you have a documented list of how much money is invested where? What is the performance of each of your investment? What are your returns from each of your investments and your overall portfolio last year, and a year before that? If you do not know the answers to all these questions, you are missing out on the biggest lever in your hand. Look at it this way. You are the CEO of your life, and each invested asset is your employee. You got to monitor the performance of each of your employees, and make them work hard for you. If some of them are not giving great results, you must replace them with more productive assets - employees that can get you better returns. All this will happen if you invest some time on this lever, and start tracking the performance. A 2% increase in your portfolio returns by getting smarter about your portfolio can far exceed the impact of 20% increase in annual income.

“So, what do you say Vinay?”

“To be frank Sneha, I had never ever looked beyond Lever 1 in my life. I think you are right. Can you help me get started?”

“Of course I can Vinay. Getting aware of these 4 levers, and getting smarter about using these 4 levers in my life has, in fact, helped me earn back time in my life, while increasing my overall wealth. I have more time now to spend on my relationships and myself. I spend more time with my kids. I know what they study in school. I am also able to spend time on my fitness and health. I also have some time to help you. Lets get on to this today itself.”

Source: http://elevate-your-life.blogspot.in/2015/03/four-levers-that-create-wealth-for-you.html (Author: Mr. Manoj Arora)

High Dividend Stocks as an Investment Strategy

2015-10-28T00:36:00.001-07:00

Champion investors love dividend paying stocks. They love the feel of passive income and positive cash flow. What about you? Do you love the feeling of tax free dividend income making its way right into your bank account while your stocks continue to do well?

Investing in high dividend stocks is a great long term investment strategy, but it is always better to understand its pros and cons.

Ready to invest? Then find out what are the best high dividend stocks to invest in...
Read on..

What is Dividend?

A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property. Since it is shared from the company's cash reserves or profits, it generally indicates a healthy stock that you are holding.

Tax on Dividends

Dividends is a 100% tax free income in the hands of the shareholder. However, Dividend Distribution Tax (DDT) is usually paid by the company when they declare the dividends. As far as you, as an investor is concerned., you are not liable to pay any taxes on dividends. Your dividend income is 100% exempt fromincome tax. Read more about DDT (Dividend Distribution Tax) by clicking here.

Div Yield Vs Dividend %

As an investor, you should be usually focused on the Dividend Yield. Dividend Yield essentially tells you the % return on your investment (at the current stock price). Do not get confused with the Dividend % that the companies usually declare - which can be higher than 100% also in some cases.

As an example, if a stock's Face Value was Rs. 10 when it was introduced, maybe 10 years back, and now the stock price has reached Rs. 1,000/-, and the company declares 100% dividend, then this means a dividend of Rs. 10/- per stock (100% of the face value of stock price). But if you have purchased the stock for Rs. 1,000/-, your Dividend Yield would be only 1%. This is the actual Return on your investment, and this is what matters for an investor. This also means that your Dividend Yield may vary depending on the price at which you buy the stock. So, the yield could be different for 2 different investors buying the stock of a same company on two adjacent days.

4 Sure Shot Tips to Remove Fear of Anything

2015-10-28T00:34:00.001-07:00

f your child is afraid of anything at school or at home, if you are afraid of any situation in your personal life or at workplace, here are 4 sure shot tips that can reduce your fear instantly. Try it out and let me know how it worked for you. It is a true story and has worked for me just last week..yet again...Read on..

Sunday morning, 8:30am, I was back after my daily morning fitness drill and was just relaxing on my bed. Lying upside down on my stomach, with my face staring the bedroom wall, I was thinking about the important tasks of this beautiful weekend day.

Just when I was about to get up to get going on my To Do list for the day, my daughter came by the side of the bed and also lay down along side me, in the same upside down straight pose - staring at the wall. After a few seconds, both of us looked at each other and smiled. She is used to getting up early even on a weekend, unlike her younger sibling, who sounded us yesterday night itself that no disturbance till 11 am today. Each child is so beautifully different. Enjoy every difference --> http://elevate-your-life.blogspot.in/2015/06/enjoy-differences.html

"Yes dear, how can I help you?" I knew it instantly that she has a situation at hand else she will not usually come and lie down relaxed.

"I have a question." She asked, with both of us still facing the wall in front of our bed.

"Go ahead please."

"Dad, I have a speech to deliver on Monday morning. Though I have prepared for it well, I am not sure why I am still tensed?"

"That's just so normal. Everyone has an element of fear at some stage of our life. However there are a few things you can ponder on - which can make you feel a bit more relaxed. These fundamental principles of life are relevant not only to eliminate the fear of speech but any kind of fear in life."

"Wow, what are those?"

"Here you go:

1. Action Will Remove Fear.

The biggest antidote to fear is action because the first thing action does is, that it kills procrastination.

Action..action..action.

Rigorous action will remove any kind of fear. If you are afraid of going to the doctor, just pick up the phone and book your appointment. This simple act will result in instant fear reduction. Go and meet the doctor at the prescribed time, take the medicine - your fear is all gone. Try it out. It is simple, yet we make it complicated by thinking too much about it. If you are afraid of your exam, pick up your toughest subject and start practising that. If you are afraid of entering into a meeting with the client, just get to know more about the subject of the meeting or the background of the client and participants. Here is why action works so well against fear.

Our mind needs to focus somewhere.

By taking action, you are directing your mind to focus on the solution, else it is natural for the mind to continue to focus on the problem. And mind is a very faithful slave. Wherever it focusses, it enlarges the situation. If it is focussed on the problem, the problem may sound too big, much bigger than what it actually is. Similarly, if you make it focus on the solution, it can come up with awesome ideas, which you never thought possible earlier.

So, if you are afraid of going to the stage and speak in front of a large audience, just start writing your speech script, just start practising your speech in front of me, your sister, your teacher, friends - who so ever - Every action that you take in the context of your situation will remove fear - almost instantly.
"Isolate your fear. Know exactly what you are afraid of, and then take immediate remedial action." ~ Dream On

2. Practise Being in the Present

This is a golden rule to eliminate all your worries, stress and anxiety. This is one of the keys to Happiness Unlimited - a state of endless joy where nothing external can snatch away your beloved happiness.

Life, and time, as they say, is only right now. Yesterday is dead and tomorrow is not even born. Make the best use of this very moment.
We suffer from anxiety when someone dear is hospitalised because we tend to rush our thoughts to the future, trying to imagine unforeseen circumstances. We suffer from frustration when we remember our past school and college life, and start comparing it with our life today. Past and Future will hold all the negativity, never your present. So, practise as much being in the present and you will enjoy and love every moment of life, as it unfolds in front of you.
When you are practising for your speech tomorrow, don't bother about the things that happened during the last speech. Also, try and insulate yourself from what is likely to happen in the future if you are unable to deliver a great speech. Such negative thoughts are all in the future or in the past. Happiness resides in the present. Fear resides in past and future.

It is the same with all other aspects of life too !! Try dragging your thoughts from past and future, back into the present.
"Today is your whole life and you must make sure that you live well today" ~Happiness Unlimited

3. Focus on Effort and not on Results

In spite of our best intent, technique, skill and hard work, it is only the effort that is in our control and never the result. A mundane activity like reaching office in time may not always bear a positive outcome in spite of the same effort being put in. Result, since it is not in our hand, should never be the focus of our attention. Much against the popular norm, Result should never be a criteria of celebration. It should always be the effort, because that is the only thing you control.
Remember your school exams wherein we always go out and celebrate your efforts rather than your results - much before your results are even announced.
If you focus on the effort, and not the result, the fear will just vanish -in a flash. Fear grows from the unknown and uncertainty. Result has all the uncertainty. Effort is more certain, more sure, more known - so bears less fear.
For your speech, therefore, focus on your effort that is required to give the best speech in the world, get equipped, get trained, practise hard and then be satisfied with your effort and celebrate it too - even before you actually deliver the speech. What is the final result should not be your botheration. Best speech or worst speech or anything in between is all relative, and not in your control.

More abour Results Vs Effort here --> http://elevate-your-life.blogspot.in/2015/03/is-it-celebration-time.html

4. Believe that Everything will happen for the good only

There is nothing that happens in this world for no reason. Even if your speech is a fiasco, remember that it was a good result. It was the intended result. HE wants to teach you something. Learn from it. Move forward.

"Every setback is a little nudge from HIM for us to Dream On" ~ Dream On

HE does not have the time to do casual things in HIS world. Everything is planned in this universe. HE is giving his evidence as a teacher to come and personally guide you in your journey of life. Take his teachings and make the best use of them.
As long as you truly believe that the end result is always for the good, there is no question of any fear.

If you follow the above 4 tips and apply them in your area of fear, I can assure you of positive outcomes. Do let me know how your speech went about.

After 5 days of these tips

My daughter proudly came home and announced that she won the 1st prize in the Speech that she delivered at school.

"That's just awesome. We are all so happy for you dear. When will we see your trophy?"

"Very soon Dad, but I now realise that 1st prize or not, it was my effort which was worth the celebration."She smiled.

Not that she was not excited about winning the 1st prize, but she had learnt a very subtle life skill on conquering fear.

Source: http://elevate-your-life.blogspot.in/2015/10/4-sure-shot-tips-to-remove-fear-of.html (Author: Mr. Manoj Arora)

Off-grid solar power is gathering steam in Africa, what's next?

2015-10-27T01:53:00.000-07:00

For years solar seemed like a potential solution for millions without access to electricity in Africa, but high costs and slow technology left it largely out of reach.

In the past few years, however, that has changed. With increased investment, cheaper products and innovative business models, solar is not only on the rise, but could transform the way the continent is powered.

It will be used to boost economic activity as businesses stay open late and students are able to study after dark, but it may also be used for unexpected purposes such as lighting a goat hut to keep prized animals safe from predators. And this growth is being driven by private companies who look at the 600 million people in Africa, or the 1.3 billion people in the world who lack access to power and see the vast market opportunity.

“Energy access and infrastructure are fundamental to eliminating poverty and improving people’s lives,” said Russell Sturm, global head for energy access at International Finance Corp. Advisory Solutions. “Building an electric grid and having centralized power is untenable for much of the world — particularly Africa.”

It’s a sentiment that seems to be echoed more widely these days. And there are examples across the spectrum — from inexpensive solar lanterns, to home solar systems, to microgrids or commercial-scale projects. Just in the past week the U.S. government announced millions of dollars in new commitment to off-grid solar and the U.K.’s Department for International Development launched a new Energy Africa initiative. And this week the off-grid solar industry is gathered for the 4th International Off-Grid Lighting Conference, organized by the Global Off-Grid Lighting Association.

Incredible progress

What’s helped create this progress is a mix of factors: technology costs have dropped making pricing more competitive, investment has increased and, in some cases, governments have created favorable environments for progress.

When IFC first began working to explore solar technology 15 or 20 years ago, home solar systems cost $500 to $1,000, which even with the most creating leasing model was still unaffordable to those living on less than $2 a day.

But between 2000 and 2013 the efficiency of these systems improved by about 10,000 percent and the costs of batteries, LED lights, and photovoltaic cells, all dropped more than 80 percent, according to Sturm.

LED lights, along with an an emerging set of appliances, are also dramatically more efficient. This means the same 40 watt solar panel that 10 years ago could power one 25 watt light bulb can today power four LED lights, a color tv, a phone charger and a radio.

As those prices went down and efficiency went up, a market opportunity emerged. If only those products could be marketed in a way that competed with products people were using (which in most cases were kerosene or battery-powered flashlights). That’s where some early funding from the development industry helped — IFC started working on setting quality standards, providing market intelligence, business assistance and education programs for consumers.

Dynamic developments

Several years ago innovation really started around solar lanterns and donor darlings like d.light drew attention and funding. While some might dismiss these solar lanterns — Sturm describes them as “underappreciated” — they are an important “first rung on the energy ladder,” he said.

From solar lanterns, consumers can step up to home solar panels or to microgrids, though their set up has proven more complex.

“What we see is governments slowly picking up that there is more to access than grid extension,” said Koen Peters, executive director of the Global Off-Grid Lighting Association. “The market is developing in a very dynamic way.”

And this shift on the part of local governments — perhaps too for donor governments — has led to a slew of recent announcements and commitments designed to bring more funding and attention to the industry.

Several of these new investments by the U.S. government fall under the Power Africa Initiative, which with these announcements and other funding, is clearly now going to support solar, off-grid power. That’s a big of a departure from the early days of the initiative. While the launch of Power Africa included included both megawatt and access targets, many of the early announcements focused on large-scale, grid-connected generation.

“What I think has happened is there has been a maturity of business models for OPIC to credibly finance,” said John Morton, the Overseas Private Investment Corp’s chief operating officer. “We want to grow the access piece of our portfolio.”

Business models

While all those advancements in technology and plunging costs have opened up the market, what’s making it possible and leading to exponential growth for some companies is the innovation around business models.

Companies like M-KOPA Solar, which installs home solar systems and hit 250,000 sales in September, uses a pay-as-you-go system integrated with the M-pesa mobile money platform. This allows customers to sell solar power on a monthly, daily, weekly or even hourly basis.

The model seems to be working — the company had 60,000 customers in April 2014 — so there is a fast pace of growth.

In Tanzania, Off Grid Electric — which guarantees service for the lifetime of the product and operates a 24/7 call center to respond to customer needs — has deployed a leasing model and is adding 10,000 customers a month. The company estimates that 80 percent of the Tanzanian population could be potential customers and that their pricing is not only competitive with kerosene and phone charging, but is possible even for those living on less than $2 a day.

The company is now in its 10th cohort and recently expanded to a large new office building in Arusha, Tanzania. This was in part to house the Off Grid Academy: as they started building their workforce they recognized a need for more skilled employees, so they built one in-house and around 500 people have been hired through the training program.

“We’re hoping gather support around that, because it’s quite new to business,” said Jessica Eastling, business development manager at Off Grid Electric, adding that they are still working to improve it and get it right.

There are also many others, though most of the early success stories are coming from East Africa, which according to Peters is in part due to demographics but also as a result of market conditions. The pervasiveness of mobile money systems has made business models easier to develop.

Nova Lumos, which just received a $15 million loan from OPIC to finance its expansion, is one of the companies testing the waters in West Africa. The company works in Nigeria for a fairly simple reason — it’s the largest market in Africa. But what’s needed in the Nigerian market is somewhat different than the smaller home solar systems that have been succeeding in East Africa. Many potential consumers in Nigeria use diesel-powered generators instead of kerosene and have greater power needs. The Nova Lumos system provides the added capacity — it uses bigger panels — and the company has set up a unique arrangement with the country’s largest mobile network operator MTN. The systems are shipped directly to MTN storefronts and are sold through its existing distribution networks, with marketing also done by MTN.

In a country where mobile payments aren’t often used, Nova Lumos is allowing consumers to use phone credit to pay for electricity.

Looking forward

The industry is still young and the market opportunity is massive. That means that issues of financing, ensuring quality standards, developing metrics and enabling scale all need to be on the agenda.

And they are at the GOGLA conference.

Financing, particularly debt financing and working capital financing will be important. Many of the companies operating today need to reinvent their business models repeatedly in order to grow. “This sector is growing but is not fully commercial yet … [they] still need public sector support,” Peters said. “They don’t necessarily need subsidies anymore but they do need the public sector to help mobilize investment and build capacity.”

Nir Marom, Nova Lumos co-founder, said that the OPIC investment is important, not just for the money but as a commitment to prove that debt investments in the space can be successful. “Estimates are that the market is millions, you can’t do that without debt,” he said.

Similarly, companies — particularly in the solar lantern sector — are hamstrung by their ability to get access to working capital, Sturm said. In fact, sales of quality-verified solar products were flat based on a June year-on-year comparison.

So what’s the problem?

It’s not growth. There is money out there from investors, especially for the frontrunners who have shown they can deliver returns, but what’s been lagging is working capital. For companies that rely on cash sales and are selling devices to retailers it’s a critical component to operating and growing business. Companies have told Sturm they expect they could continue on the path they were on a year ago with 100 percent year-on-year growth if they had working capital.

IFC is working to help leverage additional financing, in part through its $10 million investment in ResponsAbility’s Energy Access working capital debt fund. The World Bank Group member would like to invest more in this area, according to Sturm, and is interested in working with local banks to create new types of financing to support customers who want to buy these products.

Government regulations can have a big impact on market growth. Countries that are not corrupt, have supportive business environments, don’t have a high kerosene subsidy, generally have low tariffs and import fees, and decent infrastructure will be the most appealing. Working with countries to change bad policies and encourage favorable ones will help future industry growth.

As an industry association GOGLA is also working to identify minimum quality standards and will look for ways to hold those not in compliance accountable. IFC has been working on quality assurance for years and has worked to build its quality-verified system, which can be and is used as a benchmark, particularly for products like solar lanterns.

Having standardized measurement, particularly of social impact, will help get all companies on the same page when it comes to reporting. It’s an issue also likely to be discussed at this week’s meeting. And while innovation may happen at a slower place, there’s plenty of room for more — particularly in products and appliances like low-watt televisions and fans that consumers are demanding.

Because as people gain access to electricity they tend to want to move up the energy access ladder pretty quickly. So making that affordable, and providing the finance and the business models to make it happen, will be important.

Source: Devex

Foreign investment push into renewable energy segment

2015-09-30T00:04:00.000-07:00

Investments of up to Rs 40,000 crore expected in next 2 years; however, implementation challenges need to be addressed, caution many

There seems a rush of foreign investors in India’s renewable energy (RE) sector, following the government’s stated ambition to add 175 Gw of capacity in this segment by 2022, to the existing 36.3 Gw.

Italian energy renewables entity ENEL Green’s $33 million buy-out of a majority stake in BLP Energy has followed US-based SunEdison acquiring Continuum Wind Energy for $650 mn three months earlier.

Ambit Corporate Finance, which is advising foreign strategic and institutional investors to invest in the sector, says Rs 40,000 crore of investments are expected in the next two years. This will be to build 7-8 Gw annually, at an average cost of Rs 4-5 a Mw.

"What is attracting investors is that rates are fixed for the useful life of an RE plant, usually 25 years," says Rahul Mody, managing director of Ambit.

UBS Investment Bank, financial advisor to BLP Energy for the investment from ENEL Green, is also expecting a surge. “We have already seen a significant fall in cost of power generation from RE sources,” says Sawan Kumar, executive director. “As the technology improves, economy of scale comes and efficiency improves. The hope is that cost of renewable power will become equivalent to that of conventional power in the next two to three years. It would also depend, he cautioned, on the behaviour of coal prices.

“Risk is not being appropriately considered right now. People are assuming the government is going to deliver on the challenges plaguing the power industry for long. if they do not, there will be a similar situation to that on the conventional side,” says Sumant Sinha, founder and chief executive officer at Goldman Sachs-backed ReNew Power. This entity claims to be the largest Indian player in the space, with 1,000 Mw in construction and operational wind and solar energy projects.

”There are concerns such as grid evacuation and financial health of distribution companies. If these are not addressed simultaneously to the expected capacity addition, then perhaps the payment issues will start,” says Sinha.

The rush of foreign investors is also because India is attractive for large companies in the segment looking to diversify geographically into Asia. The Indian market is considered easier to enter than the Chinese one.

Renewable	Current Capacity (MW)	Target by 2022 (MW)
Wind Power	23,763	60,000
Solar Power	4,061	1,00,000
Small Hydro Power	4,102	5,000
Biomass power	4,419	10,000
Total	36,344	1,75,000
Source: Care Ratings

"Currently, the Indian energy generation market is considered risky, considering almost all of the Indian utilities are severely in debt; paying developers on time can make or break the market,''says Raj Prabhu, head of Mercom Capital Group, a global clean technology communications and research entity.

Source: http://www.business-standard.com/article/companies/foreign-investment-push-into-renewable-energy-segment-115092800464_1.html

Water sector - Privatisation or Remunicipalisation

2015-09-28T23:01:00.000-07:00

Privatisation of urban water supply: The muddy picture

The municipal body’s financial losses from water works has reportedly increased by Rs 60 crore per annum, leading to demands, from both opposition parties and the local community, for the ouster of the private player.

As the government pushes for more private sector investments in urban infrastructure and basic service provision, it has chosen to showcase Nagpur as its model for water supply privatisation. At Smart City conferences in Delhi, officials have been hailing the Nagpur model as worthy of emulation. But the situation on ground is different. In 2012, the BJP-led municipal body in Nagpur handed over its water supply to a subsidiary of the French water corporation, Veolia, for 25 years. Since then, the project has seen allegations of corruption, four increases in water tariffs, cost overruns, and delays in plugging leaks. The municipal body’s financial losses from water works has reportedly increased by Rs 60 crore per annum, leading to demands, from both opposition parties and the local community, for the ouster of the private player. Nagpur was the first large city in India to hand over its entire water service to a private firm. Smaller experiments in privatisation in Khandwa, Mysore, and Aurangabad, among others, have followed similar trajectories. Social mobilisation against the introduction of PPP (Public-Private Partnership) projects in metros such as Mumbai, Delhi and Bangalore have led to the plans being aborted. Although water is a state subject, the Centre’s proposed model concession agreement for PPP in water distribution will likely receive a leg-up from the emphasis on private funding in the flagship urban missions, Smart Cities and AMRUT. This will create an enabling environment for private participation in the urban water supply and distribution sector, which until now has remained the most essential of public services. The government’s move, however, runs counter to an accelerating global trend towards remunicipalisation of water supply. A 2014 study by the Transnational Institute lists 180 case studies in the last 15 years of public authorities wresting back control from private players — including in capital cities such as Paris, Berlin, Buenos Aires, Budapest, Kuala Lumpur and Bogota. 75% of these cases have been in high-income countries. The US has seen the largest number of cases — 59 — followed by France (49), home to the world’s largest water corporations, Veolia and Suez, and the country with the longest history of water privatisation. Forty-four cases were recorded in middle- and low-income countries. The smaller number has been attributed to the fact that these countries are more likely to be subject to conditionalities of multilateral lenders. Also, the transaction cost of remunicipalising often involves paying huge compensation to the private operators for lost profits. And yet, there have been instances such as Johannesburg, where the introduction of prepaid meters that stopped dispensing water until further water credit was purchased, triggered massive unrest in the slums; and Cochabamba and La Paz-El Alto in Bolivia, where intense water wars led to remunicipalisation. Closer home, the former Congress Chief Minister, Vilasrao Deshmukh, had handed over water services in his hometown of Latur to a private operator — but within a few years, the Maharashtra water supply department had to take back control after high tariffs without any improvement in water quality triggered strong protests. In all 180 cases, contracts were not renewed, or terminated abruptly, as private operators failed to fulfill obligations in terms of holding tariff lines, improving coverage and quality, reducing water losses, and ensuring financial transparency. Even Manila, which is claimed to be a success, has witnessed complaints of a 7- to 10-time increase in water tariff post-privatisation. The basic premise of the PPP model, promoted in the global South by the World Bank’s International Finance Corporation, is that water should be treated as an economic commodity whose full costs must be recovered from users, so as to ensure efficiency in service provision. Of all the arguments against treating water as anything other than a basic right, the most compelling has been its repercussions on the health of populations. In rural Ontario, immediately after water-testing was taken over by a private company, there was an E. coli outbreak that killed seven people. The company said that it had detected the contamination early on, but the test results were not made public as they were “confidential intellectual property”. Similarly, in South Africa’s rural KwaZulu Natal, where a couple of hundred died following a cholera outbreak in the early part of the last decade, studies showed the epidemic to be the direct outcome of private companies stopping free water supply from communal standpipes. This was replaced by a system of prepaid water meters, forcing the poor to use unsafe water sources. However, merely remunicipalising, or continuing public operators, will not necessarily help in plugging leakages or expanding coverage. In most successful models of remunicipalisation in France, Argentina and Spain, public operators significantly increased their investment in water systems, and kept charges low for the poor. An emerging alternative to the World Bank’s Public-Private Partnership model is Public-Public Partnership, which encourages global partnerships between public water operators in knowledge and technology sharing, as well as in capacity-building measures. The idea is supported by the UN Secretary General’s Advisory Board on Water and Sanitation. India is currently on track in terms of the Millennium Development Goals target for sustainable access to clean drinking water. Under a system of publicly owned and controlled water utilities, the proportion of urban households with access to clean water sources has increased from 87% in 1990 to 95.3% in 2012. A staggering 65 million people live in urban slums in India, and any reversal of gains made so far in terms of access to water will also hit the modest gains in health, education and gender parity among the urban poor.

- See more at: http://indianexpress.com/article/explained/privatisation-of-urban-water-supply-the-muddy-picture/#sthash.z5bjROrt.dpuf

Huawei’s Culture Is the Key to Its Success

2015-06-12T01:29:00.000-07:00

Today, Huawei is the only Chinese company – out of the 91 mainland Chinese companies listed on the Fortune Global 500 list – earning more revenue abroad than in China. Huawei’s revenue from overseas markets exceeded that from the Chinese market for the first time in 2005. In 2012, Huawei surpassed Ericsson – at that time the world leader in telecommunications and networks – in terms of sales revenue and net profit, and this trend continued in the fiscal year of 2014 when Huawei reached an all-time high sales revenue of $46.5 billion and net profits of $4.49 billion.

Customer-First Attitude

Strong leaders provide a sense of purpose to their people, and Ren Zhengfei is no exception. His first and foremost concern is the customer. Many companies adopt a customer-focused attitude, but how many of them truly live it? Huawei distinguishes itself from the competition in this regard. In our conversation, Ren Zhengfei mentioned repeatedly how in the early years of Huawei everyone in the company had to turn their eyes to the customers and their backs to the bosses.

Another example of this customer-first attitude comes from another early episode in their history that’s since become something of a company legend. In desert and rural areas in China, rats often gnawed the telecom wires, severing customers’ connections. The multinational telecom companies providing service at that time did not consider this to be their problem, but rather that of the customer. Huawei, in contrast, viewed the rat problem as one the company had the responsibility to solve. In doing so, they acquired extensive experience in developing sturdier equipment and materials – such as chew-proof wires — which helped them later on to gain several big business accounts in the Middle East, where similar problems stymied the multinational firms.

Since then, there have been other projects where Huawei experienced severe climate challenges, such as building the highest wireless communication base station in the world (6,500 meters high on Mount Everest) and building the first GSM network within the Arctic circle. These, too, have helped acquire useful knowledge. For example, when Huawei expanded their 3G market in Europe, they noticed that European carriers expected base stations to be more compact, easier to install, greener, and more energy efficient, while offering wider coverage. Based on these customer needs, Huawei became the first company to launch the concept of distributed base stations that enables radio access for large to small private networks. This innovation made it cheaper for carriers to deploy base stations, and was popular with European carriers.

Employee Dedication

Huawei emphasizes that the only way to obtain opportunities is through hard work. For example, in the early years of the company, every new employee was given a blanket and a mattress. Many of them would work late into the night, then sleep in their offices, perhaps taking a catnap during lunch again the next day. As one Huawei employee said: “The pads were to us a representation of hard work in the old days and this idea has now been translated into the spirit of being dedicated to do the best in anything we do”.

Knowing that a dedicated and committed work force makes companies more competitive is not a too difficult concept to understand. The way to promote dedication and make it accepted by its employees – as it is the case in Huawei – is, however, a more difficult nut to crack. Huawei does it in part with the type of incentive performance system the company employs. Huawei is not a public company, and is in fact owned by the employees. Ren Zhengfei’s shares account for nearly 1.4% of the company’s total, and 82,471 employees hold the rest (as stated in Huawei’s 2014 Annual report). This employee shareholding system is referred to within Huawei as the “silver handcuff.” It is a system that is different from the more common stock option arrangement, which is often termed the “golden handcuff.” The idea underlying this scheme is that Ren Zhengfei wants to share both responsibilities and benefits with his colleagues. As he puts it, he wants everyone to act like the boss. Important to note, however, is that that only those who perform well enough qualify to participate.

There’s a shared belief within the company that an IPO would result in only a few people getting very rich, and the majority losing their motivation. Ren Zhengfei has emphasized that avoiding an IPO and hewing to the current employee-ownership structure is what helps the company maintain a strong collective fighting spirit.

Long-Term Thinking

The employee-ownership arrangement not only helps Huawei attract and retain dedicated employees, but also allows the company to plan for the long term. Ren Zhengfei has also credited it with allowing them to stay close to their goals and long-term vision. For example, Huawei plans the development of the company by decade, whereas most of their competitors such as Ericsson and Motorola plan it by financial quarter or year. Being privately held has allowed Huawei to work on its 10-year plans, while its competitors struggle to follow near-term fluctuations of the capital market.

For example, Huawei has introduced the use of a rotating CEO system in which three deputy chairmen take turns acting as CEO for six months each. At the same, time Ren Zhengfei maintains his oversight role, acting as a mentor and coach for the acting CEO. This innovative management structure is inspired by a book on new leadership calledFlight of the Buffalo (authors James Belasco and Ralph Stayer). While it will make the company less vulnerable if one chief fails or derails, it’s hard to imagine a publicly held company getting away with such an unusual plan.

Gradual Decision-Making

Ren Zhengfei is known for avoiding quick decisions and forcing himself to take time to reflect. His company reflects these traits. Again, he ties this in part back to their ownership structure: it keeps the decision-making power under company control – no outside investor will gain relative control over Huawei. As we’ve seen, they have much more freedom and less pressure from the market to consider their next steps to take. Their system of rotating CEOs helps support a gradual, more democratic decision-making process. It also helps Ren Zhengfei make a gradual decision about his ultimate successor.

Huawei also emphasizes what they call “the power of thinking.” The company philosophy is that the most valuable thing is the power to think. For example, efforts are made to ensure that intellectual exchange happens as a matter of routine. Executives are urged to read books outside their area of expertise and books have to be present in each office. Furthermore, ideas are communicated frequently to every employee by both senior executives and Ren Zhengfei. Importantly, however, and demonstrating the international character of a once-Chinese company, feedback is always invited across the company to improve those ideas that will ultimately feed the future vision of the company.

As many people know, Ren Zhengfei is a man with an army background – he served in the People’s Liberation Army – an experience he credits for his drive to fight and survive, qualities that are reflected in one of his favorite slogans in the early days of Huawei: We shall drink to our heart’s content to celebrate our success (ren sheng de yi xu jin huan), but if we should fail let’s fight to our utmost until we all die (ju gong jin cui, si er hou yi). So far, Huawei has had many successes to celebrate.

Source: Harvard Business Review, June 11, 2015

Will AIIB Change Asia's Multilateral Financing Landscape?

2015-05-25T01:02:00.002-07:00

It is a well-known fact that for any country to achieve sustainable economic growth a strong infrastructure is a key foundation, both in terms of quantity and quality. Asia, the giant who has led the tremendous economic growth since last decade (6.7% annually from 2000-2012) and increasingly assuming central role in world economy, is under severe pressure to improve its infrastructure needs and scale up to meet the global standards if it were to sustain its remarkable economic growth rates.

The changing demographics, the distinct shift of population from rural to urban areas, the rising economic power status and the growing inter-connectivity and dependence with the developed regions has led to immense pressure on creating a world class infrastructure in Asia. Currently, the inadequacies in infrastructure is proving to be a bottleneck in Asia's rapid economic growth, a threat to competitiveness and an impediment to reduction in poverty. And, the major challenge in bridging the infrastructure gap (normally defined as the difference between country's development goals and its actual capability to achieve those goals), is the lack of investment financing. The lack of public investment in infrastructure due to fear of adding to fiscal burden, the dearth of private-sector participation and deficiency of long-term capital market financing has enlarged the existing infrastructure gap.

According to the 2014 WB report, Reducing Poverty by Closing South Asia's Infrastructure Gap South Asian countries will have to invest as much as $2.5 trillion over the next ten years: one-third to be spent on transport, one-third on electricity, and the remainder on water supply and sanitation, solid waste management, telecommunications, and irrigation. And according to the Asian Development Bank (ADB), infrastructure investment needs in Asia could reach $750 billion annually during the period 2010-2020; while ADB's estimated lending approval each year is just around $13 billion!

Thus, realizing the importance of fulfilling Asia's infrastructure financing needs, China, in October 2014, announced the launching of Asian Infrastructure Investment Bank (AIIB) backed by an initial paid- up capital of $50 billion and with authorized capital of $100 billion. The AIIB has approved 57 countries as founding members as on March 2015. The 57 founding members cover five continents, including Asia, Oceania, Europe, Latin America and Africa.

The AIIB's main focus is to provide funding exclusively for infrastructure projects such as roads, ports, dams, bridges, railways in underdeveloped Asian countries, which differentiates it from the ADB's broader mission of reducing poverty. Besides, with the rise of trade in value-added and production networks in the Asian region, contributing to industrial upgrading and competitiveness for many countries, it becomes essential to move beyond the national projects and create a steadfast network of cross-border infrastructure. And AIIB intends to also move in this direction by developing and financing the cross-border regional connectivity infrastructure projects like road systems, ports and telecommunications network.

Though AIIB has been able to garner initial attention, it remains to be seen how far the bank will be able to deliver in terms of good governance, flexibility, transparency, predictability, which will, in the long-run determine its eventual success!

Source: www.guizzetti.org

One year of Modi govt: A glass half full

2015-05-25T00:48:00.001-07:00

In the run-up to the 16th general election, opinion on Narendra Modi was polarized. Once again, as Prime Minister Modi prepares to celebrate his government’s first year in office, the view is split down the middle.

Constant critics, like Congress vice-president Rahul Gandhi who gave Modi a zero rating, would have us believe that this is a nowhere regime which has belied the electoral expectations aroused during the campaign. Supporters, on the other hand, would equally belligerently argue: the new regime is off to a good start and that the best is yet to come.

Obviously both are extreme views and the truth is somewhere in between. Here again the assessment would differ: whether the glass is half empty or half full. It is my argument that the glass is half full. Here is why:

First off, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) inherited a severely damaged economy along with a nation severely traumatized by allegations of corruption in public office. If this was not enough, within a few weeks it was apparent that not only was the annual monsoon projected likely to be deficient, there were also fears of the onset of a drought (both of which actually panned out). However, there were offsetting factors too. The global commodity super cycle had ended and along with it came the fall in crude oil prices.

In response, the government undertook several measures, some of which were pure fire-fighting efforts. To a large extent the NDA’s majority win—the first in 30 years—worked to calm nerves all around. It also provided a certitude to decision-making in government, something that was totally absent from the previous regime. The oil price fall cushion was used wisely—unlike in other countries, the government did not pass on the benefits to consumers in the form of reduced prices; instead it burnished its green credentials by increasing the indirect taxes on fuel prices and the exchequer pocketed the extra returns to fund the fiscal deficit burden.

Even better, growth is on the mend and inflation is on the wane—hopefully it will convince the Reserve Bank of India to cut interest rates and set the ball rolling afresh on investments, especially in manufacturing and infrastructure.

Second, it very early showcased its ability to think out of the box and willingness to back politically risky initiatives, presumably something that exudes from the sense of power the BJP draws from having 282 elected members in the Lok Sabha. Among the earliest decisions which Modi undertook—actually within the first 18 hours after taking office—was to invite the leaders of neighbouring countries for the swearing-in ceremony. In one stroke he demonstrated vision, as well as the fact that foreign policy would be a key element of his administration. It is another matter that subsequent events have not panned out to script, but nonetheless, India conveyed its desire to reset relations in South Asia.

Third, it has rewritten the lexicon of governance in Delhi—previously defined by a cosy self-serving cabal of politicians, bureaucrats, middlemen and journalists—and undertaken initiatives to transition the country to a rules-based regime. The successful conduct of the auction of coal mines is a perfect example, where discretion in policy implementation was given a quiet burial.

Fourth, it has ensured continuity in policy, even while pursuing its own version of change, and more importantly, not allowed churlishness to define its policy choices. It has therefore retained good ideas promoted by the preceding Congress-led United Progressive Alliance (UPA). Aadhaar, the plan to equip every resident of India with a unique identity number, spearheaded by Infosys co-founder Nandan Nilekani, is a good example of continuity with change. Similarly, it brought forward the financial inclusion agenda proposed by the UPA, rechristened it the Jan Dhan Yojana and put the entire political might of the government behind it.

Fifth, the NDA has hit the reset button on the fiscal polity of this country by accepting the recommendations of the Fourteenth Finance Commission. Not only has the share of states in the centre’s tax receipts been raised to 42%, they have also been given the power to customize their expenditure—as opposed to the previous one-size-fits-all policy pursued by centrally sponsored schemes. In short, the NDA believes that the states no longer need hand-holding.

Sixth, the government has eschewed any doublespeak on business. Traditionally, most politicians and governments shy away from any overt claims (something that has invited the sobriquet of suit-boot ki sarkaar). It discovered ideological justification in its slogan: pro-poor and pro-rich. Accordingly, it has worked towards improving the ease of doing business, including repealing nearly 1,000 redundant laws.

A lot of reform initiatives in this context so far have been incremental in nature. Largely aimed at improving the plumbing, these have been panned by several critics as a waste of social capital. But then think of the consequences of a clogged drain and the objectives will be clear. Yes, it may still be a halfway house, but the improved plumbing will ensure less wastage and consequently a bigger bang for the buck.

Seventh, this government has taken the first steps toward creating a social security infrastructure for all. The idea of financial inclusion is that eventually every household will be part of the economic mainstream. Similarly, the pension and accident insurance schemes introduced in the Union budget go a long way towards strengthening the social safety net.

The idea of Swachh Bharat, which is yet to acquire a concrete blueprint, will be crucial if the country has to turn the corner on common diseases like diarrhoea; most Indians in lower income groups are considered to be just a disease away from falling back into poverty.

These initiatives are consistent with rapidly growing aspirations in society. Unlike in the past, the preference is no longer for entitlements. People would rather be taught how to fish than be given a fish—exactly why initiatives like the skills programme (again an inheritance from the UPA) are key to empowerment across classes.

By now you must be wondering why the glass should only be half full. I would argue that it is also a fact that the NDA has been wanting on some fronts.

First, it seems to have misread the rural distress. It is one thing to firefight to mitigate the damage to the farmer due to unseasonal weather. But it has failed to gauge the structural fault lines in the agrarian sector and as a result,its response has been underwhelming (in an interview to Mint on Page 5, BJP president Amit Shah maintains that a long-term response is being debated within the government).

The current crisis in agriculture has been triggered by the drought last year, the collapse of the global commodity super cycle and fears of another bad monsoon this year. The shrinking spending on social sector programmes—or death by neglect, as in the case of the Mahatma Gandhi Rural Employment Guarantee Scheme—has only compounded the problem.

In addition, the nature of farming has undergone a major overhaul. For example, horticulture has emerged as the dominant segment of the agrarian economy. Horticulture production (268.9 million tonnes) surpassed foodgrain output (257 million tonnes) for the first time in 2012-13. Given its perishable nature and link to the price cycle, it is prone to volatile risk behaviour—and this can’t be addressed by short-term fiscal sops.

Second, the BJP has been unable to shut out the distractions served up by fringe groups of the party. Not only are they fodder for their political opponents, they tend to take the sheen off the progressive image that the party seeks to project. Uncontrolled, they can undermine the best efforts.

Third, it is one thing to launch a great initiative, quite another to guarantee implementation. To be fair to the NDA, though, one year is too short a time to gauge its ability to deliver. Just like the opposition is judging it by the electoral promises that were made, the NDA will be assessed on how it delivers on all the initiatives in the next four years.

In the final analysis, it is clear then that taken together, the glass is half full. A complete verdict—when India heads into its 17th general election—will, however, take another four years.

Author: Anil Padmanabhan

Source: Live Mint, May 24, 2015

How can Europe deal with its debt?

2015-04-23T06:33:00.000-07:00

For a while, the storm seemed to have passed and the Eurozone entered a welcome tranquil period. Now, Greece has once again triggered the alarm and, while the financial and economic resilience of many member countries has improved, their political resilience has not. Greece is special in many ways and will have to be dealt with in a different way from the other member countries, but the renewed turbulence it has caused once again has highlighted that the construction of the monetary union remains incomplete.

In the inaugural report in CEPR’s new Monitoring the Eurozone series (Corsetti et al. 2015), the authors1 call for a reconsideration of the Eurozone’s architecture. The report is available to download here.

Important institutional steps have certainly been taken, but the weight of crisis-fighting has fallen heavily on the ECB, which increasingly faces the danger of becoming overburdened – while being criticised simultaneously by those who think it is doing too much and those who wish for more.

While the ECB is not the only central bank in danger of being overburdened, the political and institutional structure of the Eurozone makes the problem more complex and potentially divisive. Meanwhile, reforms at the European level have come to a standstill and all debates on increasing fiscal and political integration have remained moot. Some countries have implemented significant fiscal consolidation and structural reforms, but others have lagged.

Slow growth and the debt overhang

Fundamentally, the Eurozone remains vulnerable because growth is anaemic. A key reason behind this is a debt overhang, which discourages investment and consumption growth. Several countries are currently caught in a low-activity equilibrium involving weak demand, high unemployment and rising nonperforming loans. With a high outstanding debt stock, a new shock – whether external or within the Eurozone – could easily set off a new crisis.

The Eurosystem remains vulnerable to fiscal shocks since there is no room left for fiscal manoeuvre in a number of countries. In addition, the diabolic loop between banks and sovereigns is alive and well. While the Single Supervisory Mechanism and the Single Resolution Mechanism are critical to reversing financial fragmentation, they are not sufficient, particularly in the near and medium terms. High borrowing costs of banks and – by extension – corporates and households in peripheral countries are still related to continued sovereign risk.

In this setting, attempts to implement necessary reforms of the fiscal governance in the Eurozone are stillborn. The existing rules did not prevent countries from issuing too much debt, nor providing liberally excessive lending, as both private agents and the governments correctly anticipated that the Treaty was too weak to make the no-bailout clause credible. Under a credible no-bailout clause, correct pricing of risk should have deterred excessive debt accumulation ex ante.

This did not happen. By now, all the potential beneficial effects of deterrence are long gone. In the present situation, with debt levels already very large and a still developing and untested institutional framework to protect countries from adverse spillovers, debt restructuring involving the private sector is not an attractive option. All that is left are the adverse ex post consequences of overly large stocks of private, but especially public, debt, including the vulnerability to runs. This is why, in the present circumstances, the difficult inheritance of the recent past is bound to frustrate and undermine fiscal governance reform capable of reining in moral hazard. Any hope of proceeding from here will necessarily require a change in the initial condition, to be brought about with a courageous and convincing Eurozone political initiative, to back a technically well-designed, sizeable reduction in existing debt levels.

Three proposals

The report, A New Start for the Eurozone: Dealing with Debt, focus on three issues because they are important and they can be addressed without a fully-fledged fiscal federation or changes to the Treaty:

A one-time debt stock operation to rapidly reduce sovereign debt, particularly in the highly indebted peripheral countries. The authors offer a menu of options, one of which is a debt buyback through the commitment of future revenues, which could include seigniorage, VAT or a wealth (transfer) tax. This does not involve any redistribution across members of the currency union, but it would not be sufficient to eliminate the overhang. Therefore, they discuss a number of other choices, including a European solidarity tax with some limited redistribution across countries and ‘debt-equity’ exchange with GDP-indexed bonds.
A strengthened sovereign lending framework for the ESM, which both creates strong market-based incentives to avoid excessive debt levels in the future and makes future debt restructuring – should it become necessary – less painful than is currently the case.
A set of regulatory changes that discourage and limit the exposure of banks to sovereign debt, particularly that of their own sovereign. This should be complemented by the creation of a European synthetic bond that does not require mutualisation, but would constitute a safe asset and could facilitate unconventional monetary policies by the ECB.

Certainly, the goal is ambitious. The proposals aim to kill, with one stone, the three birds of enforcing long-run fiscal discipline, dealing with the legacy debt overhang and breaking the sovereign bank loop.

This would require a concerted effort and significant investment of political capital, which may only become available if the fragility of the present situation becomes apparent. However, the solutions to these three problems are strongly complementary and would generate large welfare improvements for Eurozone citizens if implemented jointly. Indeed, the authors stress that the package proposed should not be unbundled and nor should the implementation be partial.

Source: Article by Richard Baldwin, World Economic Forum (April 16 2015)

Times of India: Farming the farmer: By tying peasants to land, political parties propagate an insidious new caste system

2015-04-22T23:10:00.001-07:00

The moment a budget is presented in Parliament or assemblies, it’s standard theatre for opposition members to rush out and denounce it as anti-poor or anti-farmer. They paint the government to be representing corporates, intent only on selling farmers’ land to industries at a throwaway price. They demand imposition of more and more taxes on the rich and distribution of these to the poor.

The government also comes forward with the claim of presenting a pro-poor, pro-farmer budget followed by a laundry list of freebies provided for the poor. The opposition claims ‘rich are getting richer and poor poorer’.

All these suggest that budgets should be prepared solely for the poor. The middle class or rich do not exist, even if they do nothing need be done for them. Everything must be done for the poor because they vote in large numbers.

So, is poverty a virtue? Does one commit a crime by earning well? ‘Industry’ is presented as a dirty word. The overwhelming perception is that any industrialist sets up industry for the exploitation of labour, society and farmers. He is therefore undeserving of any mercy. The more merciless the government can be towards the corporate, the more popular it supposedly becomes.

‘Profit’ too is a dirty word, but unless the industrialist earns a good profit why should he set up any industry? There is no need for him to make the effort, overcoming a myriad governmental and societal obstacles.

There is not a single chief minister or prime minister in independent India who has not made untiring efforts to draw industry to his domain. Even the very pro-poor, pro-farmer Left Front government in West Bengal had to do so, at the risk of losing power. And they all do it to eradicate poverty. To create jobs and employment. To increase per capita income. To improve people’s standard of living.

Most farmers approach politicians, MPs, MLAs, ministers to get a job for their wards in industry, not in the farming sector. Because there is no profit in agriculture. While this is the reality on one side, on the other farmers are incited to resist when industry comes.

By improvement of the standard of living of the poor we mean converting an earthen house to pucca, provisioning a washing machine, a refrigerator or even an air conditioner and a two wheeler.

These rescue the women from the drudgery of washing clothes; prevent wastage of vegetables and other food items; provide more comfort leading to increase in efficiency and some leisure. And we require electricity to run them. Without industry who would provide the cement, steel, pipes, power needed for all these accessories to a decent standard of living?

Land acquisition is now encountering stiff resistance even for roads, irrigation, power generation, atomic energy and defence projects. But during the 67 years of Independence, all the cities and towns of India have expanded enormously all around, essentially on farmland. And farmers have often willingly sold their land for a good price.

Around Sanand in Gujarat, where the Tatas set up their Nano car manufacturing facility after being booted out from Singur in Bengal, international automobile companies such as Peugeot of France, the US General Motors and Suzuki of Japan have developed their factories by purchasing farmlands. The farmers losing land have told media that they haven’t seen as much money in generations as they are doing now, enabling them to get rid of indebtedness for the first time. Other land owners demand their land be sold.

So, should a farmer remain tied to farming for generations? Can’t he be allowed to shift occupation to get rid of poverty?

It sounds satisfying to say that while the rich are getting richer the poor are getting poorer. But are the poor really getting poorer in a liberalised economy? Planning Commission estimates show 22% to be below the poverty line two years back, compared to 37.2% a decade back. In most states the actual land owner has shifted to urban areas for a better lifestyle, farm labourers and share croppers are the real land owners now. They, too, have raised their standard of living to an extent.

In today’s globalised world merit is the main criterion. The more efficient or skilled one is, the more prosperous one grows. Today’s liberal democracies provide equal opportunity to all, which hasn’t happened in history before. Therefore, ‘capitalist’ and ‘industry’ should not be dirty words.

All capitalist states have turned into welfare states. They make the poor more competitive through capacity building, teaching them to fish rather than simply distributing fish. The Indian government should not aim to be ‘mai-baap’, infantilising people and making them depend on it for everything. The citizen must not be rendered a passive fatalist.

Rather, he must be taught to dream so that the dream can materialise one day. He must think, poverty is a curse. He must make every effort to get rid of it. He must not remain a beggar for government doles. Instead, the state should remove all hurdles to his becoming competitive in today’s economy.

Source: M A Kharabela Swain (The writer is a former MP from Odisha) - Times of India, April 23rd, 2015

What makes a good and sustainable procurement system

2015-04-22T23:04:00.001-07:00

One of the most important phases in the implementation of public works and development programs is procurement — or the acquisition of good and services to deliver project objectives and results.

International development institutions, private organizations, national governments and corporations need a reliable procurement process to ensure timely delivery of services to their stakeholders. Disaster victims, for instance, could starve or die from diseases if the procurement of food and medicine is delayed or not done right. The quality of education, meanwhile, may not improve if school supplies, books and teaching materials are not delivered in rural areas.

But how can you make procurement better and more sustainable?

While there isn’t one strategy that can apply to all contexts, Steve Schooner, co-director of George Washington University’s government procurement law program, explained that a sustainable procurement system will only be possible if the legal and institutional environment allows for it.

“Anybody can come up with a very good procurement legislation, but it’s another if we can apply it and implement it well with transparency, integrity, accountability, efficiency and effectiveness,” the professor said in a procurement conference attended by Devex, adding that governments — as the main proponents of public procurement — should always engage the private sector and other stakeholders in the process.

Eveline Venanzoni, head of the ecological procurement service of the Swiss Federal Office for the Environment, agreed, saying that sustainable procurement systems take into account the environmental, social and economic effects of the process.

She explained that modern procurement systems should integrate objectives into larger development goals and aspirations — a move away from the detached view that procurement had been put under over the past couple of decades, as an industry of winning contracts and delivering them.

Some governments, such as that of the Philippines, and even multilateral institutions like theWorld Bank and the Asian Development Bank have recognized the benefits of aligning procurement processes with national and international interests. Doing so, according to Venanzoni, is “good for the whole procurement process” as it cuts costs and improves efficiencies.

Process should be clear and stable

The whole procurement process should also be clear and stable, with each stakeholder fully aware of their specific roles and the general objectives of the project — everyone is a vital piece of a huge puzzle.

Felipe Estefan, an open government strategist at the World Bank, shared that in the whole procurement process, “everyone should be aware of the goals, objectives and their responsibilities so people and other stakeholders are aware of what’s happening and what is expected. This helps in managing expectations.”

The World Bank official added that being engaged and fully aware of the process, objectives and expected outcomes of the whole project also empowers stakeholders and beneficiaries to hold contractors and funders accountable if a certain key result is not achieved or a certain good or service is not delivered — making the whole process sustainable and more effective.

Procurement should also be more outcome-oriented with a view of delivering quality results, instead of just being process-oriented. Schooner shared that “having goals is better in making procurement outcome-oriented” because it is a “double-edged sword” that always targets policy goals and value for money.

By focusing just on the process, Jose Tomas Syquia, executive director for procurement at the Philippine budget department, shared that the whole system runs the risk of becoming a checklist where stakeholders just do what is written without any “discretion.”

“Procurement is not just about having a checklist and crossing them out. There should be discretion to be able to exercise judgment,” the Philippine official said. “If there’s nothing like that, there’s no growth or no room for improvement. Crossing out everything in the checklist does not necessarily suggest and ensure success, effectiveness and efficiency.”

Having a standard is important

The implementation of standards as a way to make procurement sustainable is also key. Schooner shared that the maturity of a procurement process is the presence of standards or benchmarks where all stakeholders are required to follow.

“Think about your procurement regime and think inwardly and ask if there are things that need to be improved,” he said.

The GWU professor added that stakeholders should also be aware that awarding of the contract is not the end of the procurement process. It is rather the “first contact of business” because it is “not an assurance that you will get results every single time.”

Monitoring and evaluation of goods and services delivered from the start of the contract to the delivery of the last ones should be done to ensure that beneficiaries are getting what they deserve and expect.

These standards should be streamlined — or even centralized — in all procurement services and programs as it allows for “buying in volume, competitive pricing and coherent implementation,” among others, Venanzoni shared. “Make things measurable and set up a standard so you can assess progress and improvement easily.”

“Countries tend to measure what’s easy to measure and not what’s important,” Schooner concluded. “We shouldn’t just train [stakeholders], but we should empower them.”

Source: Devex, April 22, 2015

Anjuli Bhargava: Forget smart, make cities livable

2015-04-22T23:01:00.002-07:00

Here's what the government should do to make our cities better - work out a plan to manage the traffic situation and make public transport more attractive

All of last month, newspapers have been full of news aboutpollution levels in Delhi and how we are losing years of our lives due to the air we breathe. The expats in India have been warned, sales of air purifiers are on the rise and I'm sure hardship allowances of diplomats in India will go up. Even the early morning walks at Lodi Garden - as one of our columnists has informed us - are no longer as fresh as they felt before.

If the Cabinet looked beyond its noses and Lutyens' Delhi, it would quickly see what a menace the traffic in the city has become - this despite the Metro taking a huge load off the roads. Start at 9 a m from Gurgaon and try and reach Noida or Greater Noida. It is easier and faster to reach Mumbai, which is 1,433 km away - aerially, of course. Senior government officials need to take a ride crossing south Delhi during peak hours for a reality check on what can happen and how long and frustrating it can be.

Driving within Gurgaon - the Millennium City - has become a challenge. As the city tries to regulate its ever-increasing traffic, roads are made one way and back the other way without any warning. Cybercity - the hub of corporate Gurgaon - resembles a large construction site, with uneven large craters (akin to the moon, I suspect) on the road. There are forks and U-turns that everyone regularly misses. Cars are often backing up into a steady stream of traffic as they realise they have missed some turn or the other - they are so poorly sign-posted, if at all.

The traffic situation in several other cities - be it Bengaluru, Pune, Hyderabad or Kolkata - is steadily deteriorating as well. Traffic peak hours in all these cities are dreaded and cases of road rage are no longer unheard of even in these relatively less aggressive cities.

I have a few suggestions that focus on Delhi but can easily be extended to other cities. First; make it more attractive for people like us - who own the majority of the cars - to minimise the use of personal vehicles and increase the use of public transport. As things stand, road space is hogged by car owners, leaving little room for cyclists and pedestrians.

I know public buses and taxis are not an option for the relatively better off but the metro is a very viable option if one plans and sticks to non-peak hours. Of course, it won't take all the cars off the roads right away (since most of the work and meetings will happen during peak times) but it will be a start.

For this to work, two things need to happen. One, you need a Metro station within one km of most locations. The Metro network - which is currently around 200 km - needs to go up at least threefold.

Second - and this is key - car owners have to change the way they think. The Metro is not only for people like "them". As someone wisely said, a society is wealthy not when rich people travel in cars but when they use public transport. If Cherie Blair - former British prime minister Tony Blair's wife - could use the London Underground to commute in the city, there is no reason affluent Indians - and indeed Indian politicians' wives to begin with - cannot do the same and lead by example.

Once the metro coverage expands, the authorities can limit access to certain areas by making it prohibitively expensive, like cities such as London do. This works like a congestion tax for cars that move into the city at peak hours.

There are other methods that cities have adopted - enforcement will remain the challenge - like designated days for even and odd number-plates. This forces citizens into some kind of car-pooling even if they have cars with both even- and odd-numbered plates.

While what I mention is just common sense, there is no dearth of expert advice on better management if someone has the will to implement it. So, even as the Cabinet and our ministers sit down to put the final touches to their plan for smart cities, I have a request. Forget smart, just make them livable.

Source: Anjuli Bhargava: Business Standard (April 23rd)

Bangalore - India's leading realty market

2012-06-20T23:20:00.000-07:00

Wide range, stable prices give the city an edge over its peers

With a good range of properties, stable prices and a vibrant workforce, the city’s real estate sector has performed far better than peers like Mumbai and Delhi. Real estate markets around India have been getting a hammering since last year and home sales across the board have suffered.

In the last quarter of the financial year 2012, the Mumbai Metropolitan Region (MMR) saw a drop of 58 per cent in unit home sales, while the National Capital Region (NCR) experienced a similar 57 per cent plunge, compared to the same quarter a year ago, according to realty research firm PropEquity.

However, the one star performer amid this gloom was Bangalore, which saw a drop of just 18 per cent in the quarter, when the numbers were down significantly elsewhere. Moreover, the city has already beaten other property markets in home sales last calendar year, when it absorbed 49 million square feet (sq ft) of residential properties — more than any Indian city — according to Kotak Institutional Equities. Bangalore was followed by NCR, with 46.88 million sq ft of offtake, and MMR, with 35 million sq ft.

"Home sales have been much, much stronger in Bangalore than other cities," says Anuj Puri, chairman and country head, Jones Lang LaSalle, a global property consultant.

So, it's not surprising that Bangalore ranks tenth this year in the list of top global investment destinations, brought out by Urban Land Institute and PricewaterhouseCoopers. Meanwhile, Mumbai and New Delhi fell from third and fifth place in 2011 to 15th and 12th in 2012.

It's not just in the residential market that Bangalore is on top. The city has also experienced the highest absorption in office space among major cities. In the fourth quarter of financial year 2012, Bangalore sold 3.4 million sq ft of office space, which is 89 per cent higher than in the corresponding quarter of the previous year. By comparison, NCR's office absorption has come down from 1.3 million sq ft in Q4 of 2011 to 0.9 million sq ft in Q4 of 2012, according to data culled by Knight Frank, a global realty consultant. In Mumbai, it has risen from 0.9 million sq ft in Q4 of 2011 to just 1.3 million sq ft in Q4 of 2012.

Why is Bangalore performing better than other Indian markets?

A good range of products, seems to be one reason. "There are good products available at various price points," says S Bhaskaran, chief financial officer at Sobha Developers, one of the largest property developers based in Bangalore. "You can buy a house at any price between Rs 20 lakh and Rs 1 crore or more," he adds.

The absence of big price spikes seems to be another reason. "Prices increase in Bangalore by 10-15 per cent in a year, unlike Mumbai or NCR, where prices go up like crazy. Besides, execution of properties is also much better here," says Sameer Jasuja, chief executive of realty research firm PropEquity.

According to data culled by PropEquity, Bangalore has seen a rise of 18 per cent in home prices since the first quarter of 2009. In comparison, other markets such as Chennai, NCR and Mumbai have seen increase of 22 per cent, 48 per cent and 26 per cent, respectively.

Even the recent data released by National Housing Bank Residex, an index that signals property prices across key cities in India, indicate this. Bangalore saw a rise of 4.5 per cent in residential properties in January to March 2012, compared to the same period last year. Mumbai saw a nine per cent and Delhi a 33 per cent increase during the last quarter of financial year 2012.

Many argue that robust hiring by IT companies and stable tech incomes have also fuelled home sales in Bangalore. "Many IT companies such as HP, IBM and Texas Instruments have large bases in Bangalore. Whenever they win global contracts, the local markets in which they are located benefit, as the firms shift work here," says Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield, an international property consultant.

Adds K Madhusudan, co-chief investment officer, Azure Capital, a Bangalore-based realty fund manager : "Both global IT majors such as IBM, Oracle and Cisco and domestic companies are hiring aggressively. That is driving the growth of residential and office markets in the city,"

For instance, TCS, the country's largest software exporter, has a hiring target of 50,000 for 2012-13. It has already made job offers to 37,800 students. Another IT major, Infosys, recently announced that it would hire 35,000 in 2012-13. It had made 26,000 campus offers the previous year.

Akshit Shah of SBICAP Securities, however, reminds people that the numbers are looking good, possibly because of low absorption in 2009-10, when both supply and demand were low in Bangalore.

How long will the garden city be able to sustain its good run?

"I believe Bangalore will be able to maintain a good sales momentum. I expect land costs to remain stable and we will be able to offer good products at reasonable rates," says Irfan Razack, chairman and managing director of Prestige Estates, a Bangalore-based developer that has done a sales of Rs 2,200 crore in 2011-12 and is expecting similar numbers in 2012-13.

Adds Jasuja of PropEquity: "I think the trend (Bangalore leading the markets) is likely to continue for the next three-six months. Beyond that, we have to see how the markets pan out."

If the economy improves, rates climb down and developers come out with aggressive prices, things could look up for Mumbai and NCR, adds Jasuja.

SBICAP’s Shah says, given the high inventories, absorption in Bangalore may not continue to keep pace with supply going ahead. He believes Mumbai will overtake Bangalore in absorption of properties in the coming quarters. "At 3.5 million sq ft to four million sq ft a month, the absorption is stable. I do not see further growth from here," he adds.

One big factor distorting the picture so far is that there have been no major approvals given out by Brihanmumbai Muncipal Corporation (BMC). That has changed now, with BMC’s green light to as many as 78 skyscrapers, positioning Mumbai for a construction boom. If that happens, Bangalore's reign on top of the real estate charts may end.

Business Standard, June 21, 2012

Real estate recovering from the bottom

2012-06-19T04:32:00.000-07:00

India’s real estate sector, which has been seeing a prolonged slowing in sales and huge pile-up in property companies’ debts over the last few years, seems to have started recovering from the bottom, says a new report.

Robust demand across micro markets, stabilising debt of realty companies, continued strength in underlying demand in Mumbai and a sharp reduction in exposure of the banking sector to retail home loans are auguring well for the sector, says Aashiesh Agarwal, real estate analyst at Edelweiss Securities, in a report released today. Edelweiss has maintained an ‘overweight’ stance on the sector.

Quoting realty research firm Liases Foras, Agarwal said sales volumes remained robust, except in Hyderabad. The National Capital Region (NCR) and Chennai led the pack among major cities, driven by resolution of the land row in Noida and a pick-up in approval process, respectively. Pune saw an increase in volumes, while Mumbai remained sluggish, he said.

For instance, NCR saw a 14.8 per cent jump in volumes on a year-on-year (y-o-y) basis in the March quarter, while Chennai saw a jump of 29 per cent. Pune saw 34 per cent increase in volume offtake.

Led by strong revival in sales reported by real estate developer DLF, sales volume across the 11 major real estate companies increased 28 per cent quarter-on-quarter and 29 per cent y-o-y in the three months ended on March 31. DLF accounted for 42 per cent of the sector volumes.

The report further said aggregate net debt of top the 11 companies declined marginally to Rs 41,400 crore in the March quarter against Rs 41,700 crore at the end of the previous quarter, driven by a reduction in debt by Sobha Developers Ltd and Godrej Properties Ltd which went in for an institutional placement programme to bring down the promoter stake and reduce its leverage.

Pointing out that “bright spots are emerging” in Mumbai, the report said the pace of percentage decline in property registrations has been losing momentum, indicating signs of bottoming out.

“Property registrations for March and April were 5,830 and 5,150, respectively, well above the January-February numbers of 4,100-4,300, indicating an uptrend in registrations,” it said.

The Maharashtra government’s recent move to introduce amended development control rules for Mumbai is a positive and will spur new launches in city, the report said. Further, exposure of the banking sector to retail home loans has reached an eight-year low, which lessens potential concerns of a credit-led bubble in real estate, while also providing headroom for future growth.

Business Standard, June 14, 2012

IIP dip may prompt rate cuts

2012-06-12T23:41:00.000-07:00

But will not revive growth as demand conditions are not very supportive

India’s industrial sector has nearly come to a halt, going by the 0.1 per cent factory output growth data for April. Exasperated economists with large conglomerates say since the government has not been able to resolve the structural supply-side issues, the central bank had to curtail demand through rate rises. Demand is weak and there are few triggers which can revive sentiment adequately to improve growth. Moody’s Analytics says, “Soft business investment is now both a cause and an effect of India’s weak economic environment. The reasons for the weak economic environment have been detailed many times before — centred on a weak national government and declining investor confidence — and this is now the new status quo in India.”

While most believe the high cost of capital is a big reason for the weakness in industrial output, Richard Iley, chief Asia economist at BNP Paribas, believes sluggish export markets, lagged impact of the previous rupee real overvaluation, policy (and demand) uncertainty and high cost of capital, exacerbated by excessively loose fiscal policy settings, have contributed to the weak index of industrial production (IIP) print.

At this point in time, it doesn’t really matter which of these factors is more debilitating. But such a slowdown in industrial production means economic growth in the first quarter of FY13 will mimic the 5.3 per cent seen in Q4 of FY12. Siddhartha Roy, chief economist at Tata Sons, is expecting a 50 basis points rate cut, without which nothing will move. Both, availability and cost of money are problems, he explains.

Weak IIP data, cheaper crude oil and a precarious global situation may push the Reserve Bank of India to cut rates by 25-50 basis points. But it is no magic pill, which will reverse sluggish economic growth and even slower investments. Given the slowdown in global growth and Europe’s unending woes, any pullback will not be easy. Also, transmission of a rate cut will take time, as deposit growth has been slowing in the past few months and banks will not want to cut rates aggressively.

Leif Eskesen, chief economist for India and Asean, HSBC, says this is the wrong medicine to boost growth. “Instead, the right prescription is a heavy dose of supply-side reform. Moreover, the room for aggressive policy rate cuts is limited by the persistent inflation pressures, which are partly the residue of the supply-led slowdown in growth and the sizable twin deficits. The continued struggles of the exchange rate also limit the room for rate cuts

Business Standard, Wednesday, June 13, 2012

Rajeev Malik: Monetary policy isn't a popularity contest

2012-06-12T23:26:00.002-07:00

If the RBI cuts interest rates now, it will prolong the much-needed macro adjustment

A lot has changed since the last monetary policy announcement from the Reserve Bank of India in April, in which it unexpectedly cut the repo rate by a bigger-than-expected 50 basis points, to eight per cent. However, it tactically balanced that aggressive signal – the actual transmission was much weaker – with an equally unexpected guidance of limited room for further easing. Since then, however, a sense of urgency in government actions remains missing (forget words, as they are cheap); global uncertainties have increased; and international commodity prices have declined, but India’s headline inflation has risen — and is poised to rise further. The rupee collapsed as the overall balance of payments will likely be in deficit for the third straight quarter, and GDP growth plunged to a pathetic 5.3 per cent in the January-March quarter. The RBI’s approach of not being wedded to a particular rupee level and sensibly avoiding its senseless defence by running down foreign exchange reserves has saved us so far from a bigger disaster. I know it is difficult for people, including some economists, to think of massive exchange rate depreciation as being positive, but in the kind of the macro cross-currents India finds itself, currency weakness is part of the solution, not part of the problem.

The poor GDP data (which will probably be revised up, but with a long lag) have raised the decibel level of cries for rate cuts by the RBI. Amazingly, India is the only country in Asia where consumer price inflation is almost double the pace of real GDP growth. And there are calls for interest rate cuts, despite government inaction being a much more important factor than interest rates for the precipitous drop in economic growth.

As with faulty currency analysis – as a result of which almost all analysts missed the warning signals about the rupee debacle and the slump in growth – the clamour for rate cuts to boost growth mistakenly assumes a normal economic cycle response function. It is time to wake up: India is experiencing an abnormal economic cycle in which inflation, thanks to the government, has become more entrenched. Consequently, it is less sensitive to slower growth.

India’s economic cycle continues to have a lopsided fiscal-monetary mix that has resulted in consumption being boosted at the expense of investment, and inflation becoming more entrenched because of the government’s populist policies. Essentially, the government in recent years boosted aggregate demand via consumption without facilitating higher aggregate supply.

The fact is conveniently overlooked that inflation has been higher than real GDP growth for several quarters. Boosting aggregate demand via interest rate cuts rather than enhancing aggregate supply will only worsen the inflationary pressures in the near term. Even if an investment upturn adds to aggregate supply, it does so with a lag. In any case, boosting aggregate demand from, say, higher investment should be matched by shrinking the fiscal overhang and moderating consumption growth. In the absence of such finely balanced recalibration – itself a challenge – India will suffer a more protracted macro adjustment.

Trend GDP growth has been decelerating because of government policy inaction and the fallout of the corruption scandals. Trend growth is probably around 6.5 per cent, well below the RBI’s guidance of 7.6 per cent. Higher trend growth needs government action to create a more enabling environment for investment recovery, and undertake supply-side measures and reforms that will result in a lasting decline in inflation. That will then facilitate a significant and sustained decline in interest rates. Until then, India will have to live with a combination of below-trend growth and still-high inflation.

A critical issue is whether the current level of the repo rate is too high. Now, just because GDP growth has decelerated and investment is on hold doesn’t necessarily mean that interest rates are too high, especially if the government’s policy paralysis has worsened the downturn. Also, the appropriate policy rate should balance the returns to depositors with the cost of borrowers. Given the uncertain global capital inflows, it is critical to encourage domestic resource mobilisation.

However, even the current repo rate is well below CPI-new inflation. The RBI is questionably married to WPI-core, but consumer price inflation matters more for depositors. Perversely, the RBI focuses on WPI-core (April: 4.9 per cent year-on-year) while depositors deal with consumer price inflation (April: 10.4 per cent with core at a mindboggling 10.3 per cent). With still-high inflation, further interest rate cuts will increase the tightness in domestic liquidity as depositors will not find interest rates attractive especially at a time when foreign capital inflows are weak and remain uncertain. Indeed, it is striking that the deceleration in GDP growth in recent quarters has been accompanied by rising loan-deposit ratio.

Perhaps the most convincing evidence of firmly entrenched inflation and inflation expectations is the talk of rate cuts despite double-digit consumer price inflation. The decline in the prices of global commodities, especially crude oil, eases multiple pressure points, such as the twin deficits and inflation, without the government undertaking any meaningful corrective action. However, the government’s myopic approach is not ensuring greater macro stability, especially since it does not provide a long-term fix for supply-side drivers of inflation and for a backlog of overdue price adjustments.

Interest rate cuts are not the near-term panacea for India’s growth problem. It is surprisingly overlooked that rupee depreciation has already significantly eased monetary conditions. Further, rate cuts may not necessarily boost growth: Brazil has slashed the policy rate by 400 basis points since mid-2011, but its GDP growth continues to slide, hitting 0.8 per cent year-on-year in the March quarter.

Finance ministry mandarins don’t seem to realise that it is high inflation that has become inimical to growth. We need to ensure greater confidence towards sustained low inflation rather than a quick fix. It is helpful that central banks have a longer time horizon than governments and self-serving financial markets. Also, the RBI should seriously benchmark India’s inflation relative to that of its trading partners. That is important as India’s higher relative inflation threatens to return us to the almost forgotten days of annual rupee depreciation. Everyone thinks of currency movements impacting inflation but few realise that inflation also affects the currency, as has been the case with the rupee.

Politicians, bureaucrats, pop macroeconomists, columnists lobbying for businesses and some market participants talking their own book conveniently – and myopically – argue for a quick fix of cutting interest rates. India definitely needs a policy response but it has to come from the government, not the RBI right away, especially after the bigger-than-expected rate cut in April.

Frankly, the RBI should not be in the business of doctoring financial markets’ mood to make up for the government’s inaction and incompetence by ignoring the over 10 per cent consumer inflation just before an uncertain monsoon. If it attempts to do that by responding under political pressure, or as if in a popularity contest, or as a prisoner of market expectations, it’ll only be contributing to the very macro instability due to entrenched inflation it is trying to address.

Business Standard - Wednesday, June 13, 2012

For businesses, it's ad-vantage point on social platform

2012-06-12T23:22:00.000-07:00

For companies trying to reach out to more of their audience, creating a page on social networking sites has become vital to connecting and communicating with fans

Pranshu Diwan, who runs Travel Another India, a tourism outfit, found that his company could tap a wider set of travellers looking for offbeat destinations on the largest social networking platform Facebook. By creating a page on Facebook, the business now interacts with an audience of about 50,000 followers who share their experience on the social platform. With over 50 million users from India, networking, sharing and recommending restaurants to holiday destinations to their friends, Diwan and many other small business owners have found Facebook as the new-age means to promote their businesses.

In turn, Facebook, too, has upped its offering. The social networking major has launched a series of webinars designed to help small and mid-sized businesses understand and use the new Facebook product offerings, such as Timeline, Offers, Sponsored Stories and real-time Page Insights. Kirthiga Reddy, director (online operations and head of office), Facebook India, says, “Timeline has been rolled out to all brands and in India most of the companies have done a great job of moving to Timeline. The success of SMBs on Facebook can be judged on the basis of the popularity of the page and how much business/inquiries does the brand generate through its Facebook page. As of end-March 2012, there are more than 42 million pages with ten or more Likes.” Diwan of Travel Another India reflects on the changes, “While it is too soon to determine the effects of the new marketing features on FB platform, nevertheless we have seen an increase in interest on our page. The new timeline view allows people to better scroll through posts and enables better highlighting and tagging of key stories. Facebook platform and metrics help us quantify which stories, photographs, posts are more effective.”

Earlier this year, Facebook also announced a partnership with Federation of Indian Chambers of Commerce & Industry (FICCI) to enable micro, small and medium enterprises to learn how to use social media. The partnership is aimed to expand Facebook’s global SMB Boost programme in India and provide Indian SMEs with educational resources and free advertising to help them get started and grow their businesses online.

For companies trying to reach more of their audience, creating a Facebook page has become central hub for connecting and communicating with fans. It makes sense for home business owner, Bhadra Shah, an Iyengar yoga teacher in Mumbai, who chose voluntary retirement from a leading insurance company to pursue yoga. While he started with friends on Facebook and how Yoga could help them. Shah then got requests for private classes and small-group yoga sessions from friends on the social networking site. Today after 15 months, Shah runs seven private yoga sessions for high flying executives and has regular yoga training camps.

It was a similar experience for Ashwin Menda, a mumbai based caterer, who today spends 6-8 hours on his Facebook Page to connect with prospective clients every day. Word of mouth publicity on Facebook worked for Menda, especially when it came from clients. Better still, when people post pictures of food items cooked and served by the caterer, it further helped Menda’s business. On average, Facebook enquiries generate close to half of his business and the repeat customer base comprises mostly of clients who came to Menda via Facebook.

“Marketing is much flatter now," notes social media expert Guy Kawasaki in a webinar. "Word of mouth is now what makes products tip.” Social media websites, he argues, present personalized customer service and thus are the quickest way to communicate with your consumers.

While Facebook is the de la creme of social networking sites, there’s no denying that Google+ is close on its heels. With over 100 million users on Google+, it is time small businesses start channelising the social platform as part of their marketing game plan, list experts. A big reason, they claim, to be active on Google+ is the boost it gives small businesses’ online presence through Google search popularity and page ranking. Jason Hennessey, CEO of EverSpark Interactive, a search engine optimisation company explains in a blog post why Google+ is not to be ignored. “The more frequently you add content to your page, the more frequently Google will ‘crawl’ your site, and the higher you will rank in searches. Adding more contacts to your Google+ circle will also help to push your content higher and connect their blogs and sites with yours,” he noted. In other words, the more you become engaged with Google+ and the more people you havefollowing you on Google+, the more promotion your content will get acrossthe Web.

Prabhu Ram, general manager (research and consulting), Cybermedia Research, reasons, “A majority of the established social networking platforms have developed a unique positioning for themselves among users. For instance, while Linkedin is used for professional networking and lead generation, Facebook is preferred for social networking. As per our survey results, a ‘new generation’ tool like Google+ is being used in both professional and personal settings within a short span of its launch.”

Meanwhile, Facebook is already out with engaging marketing tools that can be deployed by business owners easily. For example, the new Pages for businesses have features that allow business users to express what their brand stands for. Another new feature, Real-time Page Insights presents data that is now more actionable, so businesses now have a better window into what’s working and what’s not on their Page, and how to optimise quickly. The effectiveness of Timeline and the marketing tools can be measured by increased engagement and the number of likes on the brand pages. Additionally the new ‘insights’ feature also helps brands to understand and connect with their fans better.

For now small business owners and social media experts conclude that while Google+ has its benefits, it just
doesn't match up to Facebook today. Unless you have the time to spare to run a Google+ page, it's likely not worth the effort because the ability to engage consumers is so limited, and the breadth of audience is too. But they also don’t deny the fact that Google+ could close that gap over time.

Business Standard - Monday, June 11, 2012

Bold move in challenging market conditions

2012-02-02T02:13:00.000-08:00

I have always associated the name "Dabur" or "Burmans" with the FMCG / consumer goods sector and specifically with products such a Meswak, Dabur Lal, Hajmola, Dabur Vatika, Dabur Chyawanprash and the like. While reading an article in Outlook Business magazine, it was really interesting to know that the Burman family - the promoters of Dabur also have significant interests in the finance sector, especially the insurance sector.

Just to provide a brief overview: The Burmans first ventured into the insurance sector through their joint venture with ABN Amro Bank in 2001 to market the bank's life insurance products, then they also partnered with Fidelity International (Fidelity eventually acquired the Burman family's stake) & Aviva Life Insurance (holds a significant 74% stake) and introduced them to the Indian markets. And moreover, the Burman family's investments in the insurance sector is close to INR 2,000 crore - a fascinating figure considering Dabur India Ltd.'s revenue of over INR 4,000 crore today.

What surprised me the most was not that they have a presence in the finance/insurance sector........but the Burman family's decision to buy a 25% stake in Espirito Santo Securities, the Indian unit of the Portuguese Banco Espirito Santo with a view to enter the "highly" competitive and difficult equity broking business. Well you would ask me - "What's so surprising then? Its just another investment for a big group!" Yes, it is.

But the surprising thing is not the investment,

What's surprising is: the timing of the investment (equity broking business in India is currently in deep trouble given the current market scenario; incumbent players are looking at other revenue streams to survive, low trading volumes and increasing costs are forcing broking houses to shut operations or downsize or looking to sell, historically foreign brokerages have chosen to leave India during times of turmoil) - rationale behind the investment seems to be buying/entering into a beaten down segment, taking a contrarian view and coming up trumps when the tide turns.
What's surprising is: neither the Burman's nor their JV partner have extensive experience of equity broking in a difficult market as India.

Although Dabur claims that financial services is their second largest focus area after consumer goods; and their JV partner states that by entering into a partnership at this difficult juncture in the equity market when consolidation is the norm of the day, the Burman-Espirito Santo JV shall have the advantage of building market share before the industry consolidates & the good old days return to the Indian equity markets;

Only time will tell whether the Burman's will succeed in this extremely risky endeavour or shall history prevail and the Burman's will exit this financial services venture too as in the past!

Indian government's double standards

2012-02-01T02:13:00.000-08:00

Today morning's newspaper article came as a big surprise to me. Most of you would be asking "WHY?"....It was surprising to read an article titled "Ajmal Kasab not given a fair trial". Fair trial, what is this advocate appointed by the apex court to defend Kasab talking about? This ruthless terrorist came into India with the objective of waging a war against Hindustan and his aim was "to kill" irrespective of who the people were - the children, the oldies, the innocent common man, the police and anyone & everyone those came in his way. And today even after 3 long years of wait, these victims of Kasab and his accomplices have not got justice against such a heinous crime and we are still trying to defend Kasab by stating that he was not given a fair trial.

Later as I was traveling, I read another article which is currently making the news: "the Antrix-Devas deal controversy". For those who are unaware, let me provide you with a brief background on this controversy. The controversy pertains to the Antrix-Devas agreement of January 2005. Antrix is the commercial arm of the state-run ISRO (Indian Space Research Organization), whose primary objective is to develop space technology for its application to various national tasks. Devas is an Indian company in the arena of satellite communications and technologies to establish a next-generation national satellite system that provides vital services to the masses and government agencies across India. The former ISRO chief along with three other scientists have been accused of violating rules while awarding the contract. The government which is currently grappling against numerous graft charges, after six long years has suddenly awakened and decided to scrap the deal given the accusation and wrongdoings in the deal. I am not against scrapping of the deal given the huge losses caused to the exchequer (approx. Rs. 2 lakh crore) as mentioned by the Comptroller & Auditor General (CAG). However, the government has banned the accused 4 scientists from further government jobs without giving them an opportunity to a "Fair Trial" and putting up a defence seems uncalled for. The entire scientist fraternity including the Prime Minister's chief scientific advisor has condemned this ban.

"Natural justice demands that people should be punished after they are found guilty. In this case, the punishment has come before the accused have had a chance to hear the charges and put up a defence. - Excerpt from a financial newspaper"

Given that the advocate appointed by the apex court is seeking a "Fair Trial" for Kasab who committed the most heinous crime of waging a war against India, I believe these 4 valuable intellectuals (scientists) of India should atleast be allowed a "Fair Trial". In fact, one of these 4 scientists was also awarded a "Padma Vibhushan" in 2009. The Padma Vibhushan is the second highest civilian award in the Republic of India. It consists of a medal and a citation and is awarded by the President of India.

Hope the government takes necessary steps of withdrawing the ban, investigating the wrongdoings in the deal and trying the suspects in a court of law.