63 years of India's Union Territories

At the southern tip of Kannur, just before you cross to Kozhikode district, there is tiny town called Mahe. Known today for its duty free liquor and breezy beaches; this tiny enclave was known as a powerful French settlement during the British rule. So much so that Mahe river which separated the British-ruled Cannanore and French-ruled Mahe was known as the English channel in India. Today, Mahe which is geographically in Kerala, is an administrative section of the Pondicherry union territory which is 600+ km from the town. Unlike the logic of linguistics which governed Indian states' integration, the consolidation and integration of India's union territories is not something which followed much of logic. One can compare the creation of our 7 union territories to the countries of African continents- cartographed with a stroke of pen by colonial bosses.

Inline with what we all have learned in our junior classes, India has 7 union territories: Delhi, Chandigarh, Pondicherry (now Puducherry), Daman and Dui, Dadra and Nagar Haveli, Lakshadweep and Andaman and Nicobar Islands. Let's look at the story of how each of them came into being.

Pondicherry was created in 1954 after the transfer of French ruled Indian territories to the Republic of India. The districts of Pondicherry, Karaikal in TN, Mahe in Kerala & Yanaon in AP which were ruled by a French governor continued being a single administrative unit and started getting called Pondicherry union territory. Later it was given partial statehood and allowed to have an elected CM and a council of ministers who will rule the 4 districts hidden away in 3 big states around them.

Similar to Puducherry which was a segregation of French Indian territories, Goa-Daman & Diu-Dadra & Nagar Haveli were Portuguese territories. Unlike the sensible French who read the writing on the wall and transferred French India to Republic of India, Portuguese were adamant and refused any such transfer of territories. In 1954, 15 revolutionaries from United front of Goa liberated Dadra & Nagar Haveli after over powering a sleepy resistance and hoisted tricolour. Portuguese strongholds of Goa, Daman and Diu which they had ruled for almost 450 years was annexed by the Indian army in 1961. The territories were maintained as 2 separate union territories- Goa Daman Diu and Dadra & Nagar Haveli till 1984 when Goa attained statehood leaving 3 districts on the western coast as 2 union territories.

Chandigarh, the dream city of Nehru, was created for Punjab which lost Lahore in partition. The city was designed to be a crown jewel of India and Chandigarh till this date is a city par excellence. It's well planned roads, streets and greenery is an aberration in India. When East Punjab was trifurcated in 1966 into Punjab, Haryana and Himachal, Chandigarh was declared a union territory and the shared capital of Punjab and Haryana. It's anybody's guess as to why? Who would want to part with the crown jewel!

The union territories of Lakshadweep and Andaman & Nicobar islands were created since they were islands, far from the mainland and though large in size, there seemed to be nobody in the ruling provincial government and INC then who would argue for creation of states with electorate in these islands. In short, these were set aside as union territories temporarily as nobody cared and government had far more pressing issues to sort out.

I don't need to say much about Delhi. The seat of the Federal government can't be ruled by a state government, the logic was used to first make Delhi a union territory and then subsequently call it National Capital Region. The logic prevails in most of the seats of Federal governments across the world like Canberra, DC etc. Delhi was also allowed to have an elected state government of its own though the control of key administrative units like Municipal Corporation Delhi, Delhi Police are with the Union Ministry of Home Affairs, GoI.

When the youngest state in India today, Telangana was getting created, there was a discussion of Hyderabad being made a union territory so that it can be made the shared capital of AP and TS. Unlike Chandigarh, Hyderabad is not located at the border of 2 states and the plan sounded like one which was cooked up to appease everyone. The story of India's union territories also seem to follow the same tone: "cook up a solution to pass the problem". These territories seem to be decisions which were set aside for future because when the decision was made, the decision maker didn't know what to do or there was no pressing need. I guess, it was assumed that over a period of time, these territories will find their political voice and appeal for elected representative and local governments, quite like Puducherry, Himachal, Goa and Delhi did, first attaining partial statehood followed by full statehood. May be, some may amalgamate into their neighbouring state. However, as of now, these territories have established themselves as comfortable sweet spots within these states like Mahe as a haven for duty free alcohol in heavily taxed Kerala and Daman as a heaven for alcohol in the dry Gujarat. Their wait for an elected government will continue till they find their political voice; may be through someone like K Chandrashekhar Rao who decides to be the CM of one of these provinces.


 

Operation Demonetisation

At the onset, let me clear that I have been an "almost cashless" citizen ever since digital wallets were invented. Since the "dramatic" night of Nov 8th, I am absolutely cashless without even one rupee in my Titan wallet. Government of India subsidised my engineering and management education at NIT and IIM with the hope that I will pay back as a tax payer, an obligation which I think I have lived up to in my life.

According to finance ministry data of 2014-15, 48 million Indians or 3.81% of population pays taxes and bank rolls this country. This number has gone up from 1% in 2012 after government started tightening the noose with a mix of policy and technology interventions. The number is this low not because we have got 97% poor people in country, it is because a large majority of Indians don't pay taxes and accumulate wealth as what we know today as black money or unaccounted money or tax unpaid money. Like most of the 3.81%, I also feel bad when I see a large majority who makes manifold times money than me pay nothing in taxes and happily blame their behaviour on the poor public services and inefficient bureaucracy which are not worth paying for. Honestly any tax paying Indian today will be happy to evade taxes if given an opportunity seeing how easy it is to have black money and still lead a "respectful" life. The black economy has become so ubiquitous that it's taken as a given today. Try buying a property in any leading city of the country and you will see people blatantly quote you 2 different rates when paid in cash and when paid through bank instruments. Today, people paying their taxes correctly is the most ill-treated minority of this nation- they work hard, they bank roll this country, they pay tolls at the toll booths, they stand in queues for a government certificate and a good majority of them don't even enjoy post retirement benefits. So like the PM, I think it's high time that the scrouge of black money is removed from the system.

Now let's understand a bit more about these 'black' money hoarders. There are a lot of different estimates for black money. If I follow what RBI estimates, there is 2.5 lac crore worth black money hoarded by Indians. Out of this, 65000 crore was declared during the recent window for declaring tax unpaid money. Another estimate by government says 1.2 lac crore is stashed abroad. That leaves us with 65000 crores of money available still in the domestic market currently. If we assume that all this money is stashed under the bed, inside the walls and below the floor of hoarder's homes which is extremely unlikely as black economy is a highly developed parallel channel in India and these individuals have figured out mechanisms to convert unaccounted money into appreciating assets. So the chance is that most of this money is invested in property, stored as dollars or share certificates or advanced as loans to small businesses which don't have access to modern banking. Anyway, let's assume 65K crore is under the carpet as cash. That means to recover 65000 crore, we just junked 14 lacs crore worth 500 and 1000 notes. So to fix 0.45% of the 14 lac crore, we just burned the entire hoard. No wonder Raghuram Rajan left without pushing for a second term (assuming RBI governor along with Economic advisor were the 2 people aware of the move 6-8 months ago). Reminds of a adage in Malayalam "Eliye pedich Illam chuttu" ie to fix the rat problem at home, I burned my house.

The notion that black money will be stored as cash by people who have been taking the government for a ride for last 60 years is naive. Naive part was the exact word used by RBI governor IG Patel when Janata Party moved to demonetise currency in 1978. The Modi demonetisation of Nov 8th however is just not a fight against black money as it is made out to now, it is also targeted at counterfeit currency and terror/corruption network which provides a mechanism to use the black money and get returns. With one shift move, government has starved these networks for at least an year providing the security forces and administration with a golden chance to nip it off. Will the administration be able to do it, is something only time will tell. The move now being made out to be a fight against black money is nothing more than a PR blitz to save the face after the disastrous implementation of the process.

However well intentioned the move, if the execution is a disaster, the outcome leaves a sour taste. If anyone has been put at inconvenience through this move that is the common man and businesses which all runs on cash. Even a new age business like e-commerce came to a standstill since almost 70% of the orders are CoD. Just imagine what would have happened with factories and small enterprises and their workers who were given daily or weekly wages. On top of all this, only Rs 2000 notes were given to people who queued in front of banks to exchange money; an usable denomination in an economy starved for smaller denomination notes. I don't understand what difference it could have made if announcement was made giving 2 weeks window when old notes are usable. In these 2 weeks:
1. ATMs would have got recaliberated to dispense new Rs 500 and 2000 notes
2. Exchanges of notes would have happened without effecting daily livelihood and businesses
3. Banks would have got enough time to exchange notes preventing people from wasting their office time to queue in front of banks

Also don't understand why Rs 2000 was launched before Rs 500. Government's explanation is that it is find people who have changed a lot of notes. I fail to understand how they will track Rs 2000 notes now if they have not been able to track Rs 1000 notes earlier.

The dramatic nature of the move is supported by saying black money hoarders would have found a way to hide their wealth if a window was given. This is the most ridiculous argument I have ever heard. The government claims it will find out people who have deposited large wealth in banks till Dec 30th and charge them 200% fine. Why is it that the same government would not have been able to monitor and find out who were moving their wealth out from cash to some other instruments or abroad in the window of conversion given. Every possible mechanism of moving money outside is controlled and monitored by government. The way GoI has gone about such an important activity seems to be ill planned from the word go.

Interestingly this move was done by a PM unilaterally whose party was against demonetisation of all currency issued before 2005 proposed by RBI in 2014. If Congress had done anything like that, BJP would have brought the country to a standstill. Protests all over the country would have forced the government to backtrack the operation. Thanks to the state of opposition or should I say lack of opposition, the idea has just sailed through and every voice against it is being stifled.

I want to reiterate that the idea to make all money in the economy accounted for is great and the use of electronic currency for everything is inline with the fantastic vision for our future but such poorly planned authoritarian decisions are only going to hurt the law abiding citizens. If decisions effecting the entire nation is going to made by 2 or 3 people at the top, dissolve the overpaid policy makers and think tanks and save some money of the honest taxpayer. After the demonetisation move, our finance minister came on TV proclaiming that such moves can't bring down tax since we are still a 5% deficit economy. When companies make losses, we look at cost cutting, why can't the nation do the same? Go for retrenchment and reduce the government expenditure by dissolving the policy makers/think tanks who are anyway not consulted on anything.

Parsi Elite of Bombay Part 1: Jinnah in love

He was 41 when he fell in love madly with the 16-year-old daughter of his friend Sir Dinshaw Petit. It is said that lover-lawyer argued his case with Dinshaw by first asking him innocuously his view on inter-community marriages. Once the liberal Parsi Dinshaw had gushed proclaiming inter-community marriages were the best way to solve the spreading communal hatred in India, his friend pleaded his case "Give me your daughter Ratanbhai's hand in marriage and live by your words on inter-community marriages". Dinshaw was aghast and refused the proposal tooth and nail. So the lovers decided to wait. Ratanbhai was from one of the most respected Parsi families in India and was the only daughter of Dinshaw Petit (scion of the cotton mill empire) and Sylla Tata (sister of JRD). 

Two years later, the day Ratanbhai aka Ruttie turned 18, she packed her bags and left her dad's house to marry Mohammed Ali Jinnah. It is said that those were the days Jinnah laughed a lot and was a romantic in love with his life. However, his first love- power soon returned to take Ratanbhai's place and he was once again fighting Nehru for the position of the supreme leader of India. Initially, the fight was within Congress. The liberal-secular Jinnah gelled in well and was soon one of the leading leaders of Indian National Congress. His tough schedule and obsession for power took the toll on his relationship with is wife and in the course of time, Ratanbhai left his side and his home.

Chroniclers of Taj Mahal Palace Mumbai will tell you that every day Jinnah climbed the central staircase to reach the top floor suite room to visit his beloved Ruttie when she was on her death bed. She stayed in the hotel since she had left both her father's and her husband's homes and was too proud to go back. The first ever attached bathroom of Taj Mahal Palace hotel was built for Ruttie since she couldn't walk to the bathroom area.

Ratanbhai died at an age of 29 leaving Jinnah with their daughter Dina. Jinnah soon came out of the grief of losing his wife and busied himself with political work and his successful legal practice. However, he soon realised that he did not have any future in INC with Nehru in his way. A devastated Jinnah went on a political sabbatical. He moved to London with his daughter and soon established a successful legal practice there.

Political power was his first love and it was impossible for Jinnah to keep away from it. He returned but this time as the orthodox head of a religious party: Muslim league. The ideals of the party he now represented were at 180 degrees to what Jinnah the individual believed in. That didn't matter to him; he saw an opportunity to be the supreme leader through Muslim league and that's all that mattered to him. He dusted out the idea of creation of a state for Muslim community covering 5 Northern Indian provinces: Punjab-NWFP(Afghan)-KashmIr-Sindh-BalochisTAN, a thesis put forward to him by a Cambridge student Rahmat Ali earlier; an idea he himself had rejected in his secular days. The thesis suddenly presented to him an opportunity to be the supreme leader of a state.

While Jinnah was trying to create history, history was repeating itself in his life. His daughter Dina fell in love with a Parsi Neville Wadia. The father by then was deep into the act of proving himself as a pious Muslim and won't let the inter-community marriage come in his way. Dina, like her mother, left her father and packed off with Wadia. Neville Wadia had then just started a trading firm called Bombay Burmah trading company. The company did well and soon metamorphosed into a clutch of enterprises. The Wadia group today is chaired by Dina's son Nusli Wadia and owns Britannia, Bombay Dyeing, GoAir among others. 

When India became independent, Jinnah flew to Islamabad alone leaving Bombay and his daughter's family forever. It is said that he visited his beloved Ruttie's grave in Mumbai with her favorite red roses on the day he flew out to the country he created leaving everything he had.

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Next: Parsi Elite of Bombay Part 2: The Phantom of Bombay House

Savvy, Suave & Sharp Time Readers

Once upon a time, I met a drunk consultant who defined consulting in the coolest possible way I have ever heard “Consulting is all about borrowing your watch and telling you the time by it”. It was a remarkably candid explanation summing up a lot of things consultants do (alcohol can work wonders on you).

The consultants are curious creatures- they walk into your organization, the same place you have been working for donkey number of years, find problems which were always glaring at you for all these years, package them nicely and charge a bomb from you for their gyan. I am very tempted to say what most people who fail to make it to big consulting firms on campus say “Ah those blood sucking buggers who just gas around and charge big monies for it”. But let us not jump into that and look at things little deeper.

A few facts are true: consulting firms use kids, fresh out of B-schools with no real experience to help companies solve monumental business issues; the problems these firms find in the organization are not the ones which company is not aware about and they do charge a bomb. That’s quite obvious, they pay young, and smart champs fresh out of B-schools well; so they have to charge a bomb to run the system. But you cannot dismiss them as people who do nothing useful; if that was the case the profession would not have survived the tides of time. Let us look at a few scenarios where these time tellers are indispensible.

“I know that my watch shows the right time but I want a credible name to certify that my watch reads the right time”. When in college, we worked with a SMU which was into footwear manufacturing. The SMU asked us to make a 5 year strategy plan for them. The SMU also had E&Y working on the same project. The CEO of the SMU told us that they planned to apply for a big loan for their expansion and they wanted a globally reputed brand like E&Y to give them a detailed report adding credibility to their plans. He said that such a report will play a very important role in getting the loan sanctioned. Names like McKinsey, BCG, E&Y etc can really swing the decision in favor of you.

“I know that my watch reads the right time but my colleagues refuse to believe the time and keep reading a different time”. The CEO of the organization understands the problems of the company and wants to implement changes but the employees are against the changes, especially the top management. Generally the other power centers like the CFO, CIO etc gangs together and try to scuttle the changes. The CEO in need of a powerful backer brings an external agency to bring credibility to his arguments. The agency is generally a hot shot consulting name like McKinsey. This especially happens when the CEO is an outsider who has been inducted to get things right in an organization which is on its decline. When Louis V Gerstner arrived at IBM in 1993, his ideas were at 180 degrees to the existing wisdom at IBM. The IBM top management was after the “baby blue plan” which aimed at breaking down IBM into separate operational units and hiving them into separate companies which will have their own brands and a sleek cost structure. Gerstner on the other hand believed that the whole of IBM was greater than the sum of its babies. He also realized that IBM was wasting time on hardware and OS contradicting the strategic direction IBM was then taking. To take on the IBM racket, he brought an army of consultants from his previous organization (McKinsey). McKinsey, in its recommendation, provided the support Gerstner wanted backing the decisions with enough data and analysis which IBM syndicate found tough to argue against. This worked wonders at IBM and Gerstner eventually “made the elephant to dance”. But such interventions were always not successful. Jeffrey Skilling did the same thing in Enron and managed to mow the company down into dust and ended himself in prison.

“I am so busy cleaning my watch that I have no time to look at the time”. In most cases, company executives get so busy with their daily work that all the strategic aspects of their work take the back seat. In the war between the operational and strategic tasks, the operational tasks always take the precedence as it is most overbearing on your KRAs. So getting things done is much more important than doing the thing in the best possible way. To get things back in perspective and stay recent, it becomes imperative to have someone from outside to come and take a look at your business from a totally unbiased angle time to time. As the process requires a lot of comparison with the industry standards and competition; it is doubly good if the “unbiased” analyst is someone with worldwide knowledge base and network and has access to competitor actions.

Next time someone asks you for time, think about those “poor” consultants who make a living reading time J

A Brief History of India

Cash yielding Opinions

It is said that Media is the fourth pillar of democracy. Though an informal pillar, the power of this institution in our lives is felt the most when the other three pillars ie Legislature, Executive and Judiciary loses credibility in the eyes of the people. This is exactly what is happening in our country now. Indian media especially the Jain family controlled papers and channels (ToI, Times Now etc) have metamorphosed from opinion reporters to opinion makers. Till recently their economic daily Economic Times was free from this ethics flexible Jain syndrome. But looks like even ET has caught hold of the disease of manufacturing news.
Today's(19th Aug 2013) ET front page screams of a large number of Indian stocks trading below their book value ie the price of their assets and hence the ET reporter advises his readers to pick and choose these companies whose fundamentals are "strong". Though he mentions fleetingly that one of the reasons why the companies are devalued is the debt they have on books, the article conveniently forgets to mention the effect the debt have on assets and valuations of the company.
To understand more, let us explore the idea of "sitting ducks". A public listed company is classified as a sitting duck if the stock valuation of the company is lesser than the book value ie the total assets of the company. The underlying idea is that if some corporate raider can buy the shares at a lesser value, tear down the firm and then sell off its assets, he can make a killer profit. But the problem here is that a raider can pocket the profits of the sales only after he pays off the debts the company owes. Debt owners have the first right on the company assets followed by preferential share holders and then only can a common shareholders (the ones who buys from stock market) profit. Take for instance, Reliance communication which is presently at Rs 118.75 and the book value is Rs 159.47. The difference is nothing but the huge debt of Rs 35,185 crores loan they are struggling with and to reduce which Mr Anil Ambani is doing exactly what a corporate raider would have done- selling his assets piece by piece. But the fact remains that nobody wants to buy and so he is turning towards his brother for help now.
Now let us look at the issue from a different angle. As a result of this article, almost every stock (with the exception of some really badly effected ones) shot up by 2.5% to 7% today with intra-day figures touching even 10%. Analyse this spurt in the context that the sensex over all fell by 291 point today due to the continuing rupee meltdown. If a person who was privy to this information had invested 1 crore in some of these stocks yesterday, he would have made around 5 lacs in a single day today. So a few might have profited from the brilliant ET analysis. But who lost? To understand that, let us first look at a famous stock market theory.
The Greater fool theory states that stock markets are able to give a return greater than the corporate profits because everyone who trades on stocks behaves like fools. A fool buys stock only because he/she believes that there will be another fool who will be willing to pay more for the same stock. So fools keep selling to each other and the valuation goes up. But in case of an oligocracy like India (sadly we are getting there, the country is ruled by a few powerful people across politics, business, media, bureaucracy etc), we will have to modify the theory a bit. We will have to say that there are two categories of fools here: Powerful fools and really foolish fools ;). The first category runs this country and so knows when to buy and when to sell. They know when the government is going to free import duty on petroleum and when petrochemicals will be curtailed and so we cannot even call them fools. They are able to manufacture the right environment needed to breed a million fools who will buy from them. So all the fools in the second category who read the first page of ET diligently and went to buy the "assets" of PSUs at a deep discount will be the proud owners of these shares for next few months to come.
I guess that was too much of economics and stock market theories, let me close this article on a lighter note. Americans extended the greater fools theory and surmised that if you want to make money in the market, then you need to be a lesser fool. So how will you remain a lesser fool? Simple, by withdrawing from the market when you see too many fools who does not understand anything about stocks around. There were a lot of veteran fools who successfully used this tactic and made money at the expense of bigger fools. Some say even American President Herbert Hoover was one of them. So, the story goes like this. President Hoover was interested in stocks and held a big portfolio and was making good money as the markets were on a upward surge in 1920s. Once, while in a lift, the lift operator started talking to him about the right stocks to invest in. The talk by a commoner with no understanding of stocks rang an alarm bell in Hoover's head. He, being a veteran fool, understood that the market is getting crowded with fools and time has come to sell. He immediately went to his broker and asked him to sell every stock he held. The grand presidential sale hit the headlines and the news spread in no time. When the other investors saw that the US President was selling, they panicked and there was a mad rush to sell stocks. The mad rush resulted in the crash of the NYSE on that Tuesday (October 29) of 1929. The black Tuesday as we know the day today marked the beginning of the Great Depression.....

Absurdity of "collective conscience"

In April 1959, KM Nanavati, a commander in Indian navy, shot dead his friend for 15 years Prem Ahuja. Ahuja was having an illicit relationship with Nanavati's wife while the commander was away on work. Nanavati surrendered after the act and was trialed by a jury of 9 members of Greater Bombay sessions court. Though it was clear from the beginning that Nanavati had killed Ahuja in cold blood, the commander acquired a hero image during the trial. Thousands used to gather in front of the court when the arguments happened and Nanavati used to be get an arousing welcome with slogans and clapping whenever he arrived at the court. A tabloid Blitz eulogized his act as a loving and wronged husband avenging the wrongs done against his family by a playboy. This version of the story became so popular that Blitz sold for Rs 2 per copy whenever it ran this story while its original price was 25 ps at that time. Rallies happened in Mumbai supporting Nanavati and finally the jury acquitted Nanavati with a 8-1 verdict.The "collective conscience" was obviously for setting Nanavati free (or at least it seemed so) though he committed a murder in cold blood. But 1959 was very different from 2005 and the honorable justice of the sessions court didn't think that the judgement was objective and impartial. He dismissed the jury's verdict and referred the case to the Bombay High court. Subsequently on retrial, the Bombay High court found Nanavati guilty of culpable homicide and sentenced him to life imprisonment; the judgement was upheld by the Supreme court later. Taking Nanavati's case as an example, government of India abolished jury trials stating that jury can get influenced/misled by media and public opinion and hence cannot provide justice without bias.

Fast forward 50 years, today we have an overdose of media and self proclaimed representatives of public doling out their outdated ideas in the name of public opinion. This "opinion" is taken to millions by loud, biased and TRP hungry news readers (or should I call them opinion makers) thus creating and propagating our "collective conscience". They shout and demand answers and provide adrenaline rush which rivals thriller movies or serials (with which basically they compete for viewer's time). The misleading of public opinion was always there but nowadays it has become torpedoing rather than simple biasing. Media can create heroes and make a villian out of the same person in a split second. They beatified the Defense minister Antony when he moved decisively against the corrupt defense deals. He suddenly became the beacon of hope among the corrupt ministers of the government. But when the cancellations came again and again, the saint was slowly brought down to human levels and is now in the process of moving into devilish boundaries.

There are many things our "collective conscience" represent. One of the most detrimental among them to our diverse nation is intolerance. When a unknown religious organisation claimed that Viswaroopam hurts their religious sentiments, every single news channel in the country ran prime time coverage on it. There were discussions and debates about the issue before the movie even released (and hence obviously none of the speakers knew what is really there in the movie). Seeing that one organisation is stealing all limelight, 20 more joined in a matter of days and the controversy blew over in no time. Ever since the Delhi rape case, our "collective conscience" has grown to include intolerance towards anything said against women. Though curiously, Bollywood is kept out of this intolerance category. I guess that may be because if the idea is applied on Bollywood  there will be hardly any movies coming out. With the idea hotting up, an old rape case called Suryanelli case has resurfaced and prominent politicians are finding themselves in the middle of the controversy. I agree that the comments made by justice Basant and Sudhakaran MP were insensitive but what surprises me is the reluctance to even consider the premise that the girl may have been used as a child prostitute when evidence does points to the same. The same aspect was highlighted when news channels made a ball out of the jocund comments made by Vayalar Ravi to a journalist who asked him about Suryanelli case. People who understand malayalam could easily make out that Ravi was trying to put the journalist in a spot for her open ended question but according to a popular news channel, the sexist comment severely traumatized the female journalist.

Though I borrowed the usage "collective conscience" from Afzal Guru verdict, I didn't write anything about the verdict itself because a lot have been already written and analysed about the same. Personally, I don't believe the true culprits of parliament case has been booked under law and lot of questions remain unanswered but as per the collective conscience of the nation, the culprit has been punished.

Piecemeal Reforms

"For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail"        
                                                                            -Benjamin Franklin

This adage speaks about how due to lack of attention to little things, disasters happen. This is also the story of Indian Reforms 2.0, the ones which were undertaken by a PM who as FM executed the opening up of Indian economy.
Let us look at how it all began in the 2nd innings. NDA before moving out enacted a bill to restructure the collapsing power sector of India called The Electricity Act 2003. When UPA got elected in 2004, the new PM understood that Indian Power sector needs a massive restructuring and in turn huge investments. This was made a priority in 11th five year plan and a target of 78000 MW of additional capacity was targeted. In a country where 8 hours load shedding is a norm even in mega cities like Gurgaon and Noida, power sector reform indeed is the need of the hour and the targeted capacity addition was estimated to take $164 billion of investment, $78 billion in generation and remaining in transmission. For a government with $194 billion revenues in 2011, it was obvious that the mega target cannot be achieved without the help of the private sector. So government opened up the electricity generation to private sector and the media chorused the "reform" as one which will change the country for good. The move also captured the fancy of the private sector which invested in a big way. Tata Power, Essar Group, Reliance Power bid and won contracts for establishing Ultra Mega Power Projects (UMPP) in various states. The plan looked simple. The private sector will generate power using the coal and gas provided by state owned monopolies like Coal India, GAIL, ONGC etc. The private companies will be given land by the state government to set up the plant and they will also be allowed to hold captive mines for fuel to generate electricity. The pvt players will then sell the power to the utility companies owned by the respective state government at the cost for which they won the bids. For instance, Tata Power won the bid to establish a UMPP at Mundra at Gujarat where it will generate power from coal (in this case, coal was imported from Tata's captive mines in Indonesia) and sell it to state government at Rs 2.20. The plan looked flawless and everyone seemed to be happy. But once tried to execute it, all hell broke loose. To start with, state governments took forever to do land acquisition and give the clearances for the project. Clearly, the state governments did not share the enthusiasm of the center to reform power. Next was the environmental ministry, which initially delayed the clearance for mining especially near the ecologically fragile zones. The usually subdued ministry suddenly became belligerent under Jairam Ramesh who in one instance blocked the approval of a project which he had pushed hard as the minister of state for power a few months ago. Again, ministries under the government failed to see the bigger picture and kept squabbling.
Next came the bigger problem, getting the fuel. While generation was simplified, the process of getting fuel was still under the monopoly of few players who were caught napping when ambitious plans were laid. For generating, 78000 MW, Coal India, ONGC and GAIL will have to tap the resources at a comparable rate. Something they were never able to do. The government attempted to speed up this part by allowing private players to do tap natural gas and Reliance won the KG basin contract. Unfortunately, Reliance ended up doing everything else other than tapping the gas from the basin and the output was pretty much like public sector. Government also allocated coal mines to these power generation companies and private players to work around the lethargy of public sector players. But this allocation went grievously wrong and supreme court stepped in to get the mines de-allocated as most of them were allocated to relatives of politicians. The scandal which became famous as Coalgate dried up the fuel lines of power plants in India. There were many more issues and players which came into play like the supreme court putting a full ban on coal mining in many areas due to illegal mining and encroachment into ecologically fragile zones. For the time being, let's ignore it and just understand that as a result, the power generation companies ended up with little fuel or no fuel and ended up running their plants at a capacities as low as 20%. This "precious power" which they generated after everything was "sold" to state electricity boards. Now SEB (electricity boards of state governments) which is responsible for transmission of power are treated like their personal possession by politicians. As electricity is a highly subsidized and politicized utility in India, the burden of all the free power doled out by state government is taken by the utterly loss making P&Ls of these companies. The companies were never used to paying for the power they got and hence in most cases did not pay the private companies for the power they "bought".
Basically what happened was, a piece meal reform. The reform which was undertaken to clean the power sector was executed badly with no support from state governments or its machinery. The Electricity Act 2003 clearly asks the state governments to convert the state electricity boards as individual transmission companies responsible for their revenue and expenses and hence reform the transmission part of the system. Even with multiple deadlines, this was ignored by the state governments and the so called reforms only happened in the power generation sector.
The story of piece meal reform continued on to FDI in retail this week when Indian parliaments opened up FDI in retail in 18 cities of India (if we take the number of cities which satisfy the conditions required to be satisfied to set up stores in the states which are going to allow FDI). We allowed FDI after seeing the experience of our neighbor. China allowed FDI in retail in 1992 and saw huge investment coming to the country, mostly in the form of MNCs setting up manufacturing facilities or giving contracts to Chinese manufacturers to make products for them. It helped a lot that China had a developing manufacturing sector which could seamlessly take these orders and in a few years develop into a global hub for all such orders. China's and later Indonesia's experience with FDI in retail also showed that Asian habits creates an Eco system where both large and small retailers can co-exist. The essence of this phenomenon is our eating habits. We like to eat fresh and hot food as against canned food. As a result, we generally shop at 2 levels- first in the beginning of the month for all basic supplies at a big retail center in the city and second daily for perishable items like milk, vegetables etc at a small retail shop in our neighborhood. Data shows the number of small shop owners have actually increased in China and Indonesia in last 10 years. So I don't buy the argument of Walmart killing all the Mom & Pop stores but like the Electricity Act, it is also a piece meal reform due to 2 key areas which are still not reformed. First one is our manufacturing structure which is in a bad shape thanks to our RBI governor's obsession with inflation and our poor power sector (yes its all bloody connected). The second one, something which even Mr Arun Jaitley carefully side stepped (I liked his "Indian sales boy and girls of US stores selling Chinese goods" which majorly touches the manufacturing problem) is that of Indian agricultural produce marketing laws. A vast majority of states governments in India don't allow retailers to buy directly from farmers. Instead they have to buy the produce from designated mandis or village wholesale markets from middle men who get the produce from farmers at very low rates due to their monopoly in the field. With these laws prevailing, middle men will continue to thrive. With Walmart and Tesco in, they will make more money with increased number of buyers. So the fundamental problem of farmers not getting enough compensation is not going to change. FDI in retail is just another case of piece meal reform and I don't expect anything to change with this so called reform.
That leaves you to think, then why did the government work so hard to get it passed. FDI in retail is a signal to the stagnant investors to kick start the investments because now the government has undergone a metamorphosis. It has got rid of a belligerent TMC and it's random leader and have got a duo of opponents from UP supporting it with the same old reasoning - protect secularism (read keep BJP out). It was the same trick for which the top corporate houses of India fell for when the government parted ways with the Left on atomic deal. Seeing the "commitment" of the government for getting country's power problem solved, private sector put forth bids in large number and won contracts for power plants expecting the government to show the same commitment in getting the entire power supply chain reformed. We have already seen how the hope got bellied against partisan interests of petty politicians all over the country. Will the investors, both domestic and foreign fall for the signal again this time, only time will show?

Marriage Economy

Some of my friends are going to hate this post because I have again done what they chide me for - connecting 'everything' with economy :)

Today morning, I came across a matrimonial ad in Times of India (actually a friend sent it to all of her mallu friends including me saying that there is a gold mine on offer). The 9cm x 9cm all India ad on the third page of TOI main edition asked for "extra brilliant, highly qualified, well cultured groom for a highly educated mallu girl" and must have cost  the "rich, international businessman" father (apparently ad gave this detail also :)) around 8 - 9 lacs to run it. The ad marks the beginning of a complicated operation called Arranged marriage. Next the "rich father" will have to set up an office to study and shortlist hordes of applicants who will send their resumes complete with Photoshop edited photographs. By the time the "rich father" comes out with a shortlist of entries who will be lucky enough to meet his daughter, he would have spent around 15 lacs. Add to it, the expense of marriage ceremony, reception and ofcourse gold, the father (who is not that rich anymore) would have spend a lot of effort, money and time on the operation.
Seeing the amount of money deployed and people employed, the practice called arranged marriages, which is now largely confined to the subcontinent and SE Asia is a heavy boost to our economy. If I take the case of South India especially, where dowry is masqueraded as gold and other gifts, the marriage triggers a heavy purchase of gold, silk and property. This happens irrespective of the price of the products. So one can see that gold at Rs 31000 is still in demand in southern state of Kerala and its no surprise that Malabar Gold, the gold largest player in Kerala is also World's third largest jewelers in terms of volume.
Let us now look at pre-nupital market, it starts with a search. With so many constraints like religion, region, caste, sub-caste, family background, education, profession, behavior and horoscope, the search mechanism for the right groom/bride is an industry in itself. The industry, run traditionally run by small time local brokers and high society match-makers is one of the latest to move online and have been segmented and specialized so much that there are companies which run separate websites for various sub-castes. The websites offer young men and women opportunity to do "blessed dating", a dating process which has the blessing of their families and society as the girl/boy satisfies most of the constraints put forward by them. These websites also has helped in removing "3 minute decision making", a phenomenon inherent to arranged marriage. A few years ago, I accompanied a friend when he went to meet a girl his parents have short listed for him. The meeting happened at the girl's home and the boy was given the girl's resume earlier itself. After the families spoke and liked each other (as our tradition goes, first the families like each other and then the bride and groom), my friend was allowed to speak to the girl. He was with her for approximately 3 minutes and the minute he came out, his parents asked him "Did you like the girl? Can we promise them?" To my surprise, my friend said yes and they were happily married in a month. Years later, I saw Deutsche Bank interviewing their candidates for 3 hours before giving them an offer. While DB took 3 hours to decide on a person who may stay with them for 2 or 3 years, a decision for life time was made in 3 minutes. This is a practice which is integral to arranged marriage. Intuitively, this may sound weird but most arranged marriages last for life time bearing testimony for the success of blitzkrieg decision making. I feel its because after the decision is made, the groom and bride accepts that there is no way back, a feeling that allows them to compromise and live on. The arrangement would have worked so far but with the new generation repealing the idea of compromise in anything, the system may find it doomsday soon. I remember a friend telling me that a guy whose proposal came to her home wanted a dating period of 3 months before deciding to go for her or not, a idea which horrified her parents :) So the new age matrimonial websites innovated and found a solution for the problem by functioning as quasi dating websites for people belonging to same community and within all the constraints their society asks for.
Another group of people who sustain themselves on marriage economy are private detectives. With extreme mobility and too much of money at too early an age, the new age youth is living a western way of life. It becomes important for the parents to check out if the bride's/groom's behavior conforms to the traditional ethos they follow. Hence the Sherlock Holmes and Watsons of this world profile the targets and certify their behavior.
If more and more young people start finding their partners on their own, a large number of organisations will be adversely affected sending tremors through the marriage economy. So before you propose your girl friend, think about the damage you are gonna make :)

Applying some Marketing concepts

I tried to apply some of the marketing ideas I learned and designed a brochure for Kairali resorts, Kannur :) Please check it out and give me some feedback-

https://docs.google.com/open?id=0B3hvyHkD8je7R2dtdmhBVnZVMGc

When tourists are packed off!

I recently took a package tour to Singapore by Akbar travels. I will strongly recommend against the tour package by this particular company because of the following reasons –

• ·         The tour package is advertised as Singapore tour but has 3 days in Malaysia, 2 days in Sri Lanka (during transit) and 3 days in Singapore.
• ·         To cut cost, the company booked our flight on Sri Lankan air. So we were forced to spend 1 day each at Colombo to and fro during the journey. The worst part was the pathetic treatment and delays at Colombo immigration. They kept us waiting for hours and ate up all the time which could have used for Colombo city tour otherwise. When a passenger complained to the immigration officer who was loitering around giving system error as the reason for delay, he got angry and told the passenger to go back to her home country if she had problems. Finally we got 2 hours to see the Colombo city
• ·         The food was arranged at cheap restaurants with no proper facilities to cater to the large groups of tourists. Only exception was an Indian restaurant in Malaysia called “Gateway of India”
• ·         The accommodation was arranged at hotels outside the city adding to the commutation time. In Malaysia, the hotel was in not so good locality which turned dangerous at night. The exception was the accommodation provided in Sri Lanka by Sri Lankan airways. Both ways, the resorts were exemplary sea side resorts – Jetwing blue and Club Dolphin. The staffs at club Dolphin were rude to us when we were trying to leave in hurry but Jetwing blue Negombo was a exemplary in every respect – property, service, food and staff. I will definitely like to go back there for a vacation.
• ·         The tour is very badly managed. In Malaysia, you are given just 2.5 hours at Genting highlands. By the time, you figure out which rides to try out, it was time to leave.
• ·         The remaining two days in Malaysia was spent on visiting chosen shopping outlets of the tour provider. Obviously the travel company should have got a good cut out of the chocolates and watches the tourists brought from these retail outlets.
• ·         In spite of having 3 days in Malaysia, we were not taken to the best destinations in KL like the aviary (Bird Park), National Museum, Islamic Museum etc. Basically every destination with an entry fee was kept away from. The tour package boasts of an experience where all the charges are taken care of. So to increase their margins, the tour operator takes care that only destinations with no entry fee are covered.
• ·         The worst was the way the ticketing was done. The return ticket for the group was not booked on the same flight and the representative of Akbar travels who was with us left with the first group leaving 15 passengers in Sri Lanka to take care of their own travel.

Akbar travels charges a premium for the ‘superior’ services they provide to the tourists. But the truth is that their tour is as bad as any other small time tour package provider. There were a lot of cases where the tour could be improved with good management and the operator Akbar travels didn’t even seem to realize this. So if you are planning to go on a package tour to South East Asia, Akbar travels is not a good choice.

Welcome to Genting Highlands……Now let me pick your pocket!

Malaysia looks like a developed country from every angle. Kuala Lampur airport is one of the biggest and best in the world; six lane highways take you from the airport to KL city. The route is covered on either sides with lush greenery of evergreen forests which is dotted intermittently only by skyscrapers and beautiful residential layouts. After the bad experience in Colombo of being stuck without money and phone, the first thing I did in KL was to get some Malaysian Ringgits and buy a local SIM with that money. The famous Maxis SIM cards were missing in the vicinity of the airport, so I bought a digi card offered by telenor.

We moved to our first destination in Malaysia – Genting Highlands, a theme resort and casino at a height of 6118 feet above sea level. The now famous Resorts World took birth on these highlands of Genting when a visionary Chinaman Lim Goh Tong concocted the project. Uncle Lim (as the Malaysian saying goes about his casino - "It's very tough to win money from uncle Lim"), one of the richest men in Malaysia (when he died) is said to have come to Malaysia from China with 1 ringgit in his pocket. He then worked hard and built an empire by converting a forested highland into a world class tourist destination. To attract people from every spending category, he built a theme park, a casino and large expanse of malls and shops. Anyone who comes to Genting will end up spending a lot. Every ride, shop and attraction in Genting is designed to encash your emotion. For instance, you will be snapped at various points during your amusement park ride and the pictures will be offered to you at 30 ringgits. Because the tourists feel the ride was once in a lifetime experience, they readily pay for the ride. The best part is that even after spending big, you feel happy about it. You feel that you just had a great time and you deserved this break and a spending spree after all the tough days of work.
Lim Goh Tong made money in construction and mining and investing everything he had in Genting. None of his wealthy friends were ready to invest in his 'crazy' venture because they thought his idea of building a resort at 6118 m was never going to be possible. So Lim did it alone. It took him 3 years to cut a road through the forest. He set up his own power plant and created a drainage system to make the highlands suitable for construction. His efforts bore fruit when the then Malaysian PM visited Genting and granted him the permission to operate the first casino of Malaysia as a reward to his single handed effort to attract tourists to Malaysia. Lim and Genting never looked back; the resort grew in strength and Lim added new attractions in a rope way, theme parks and new resorts. After Genting, Lim also created another integrated resort in the neighbouring Singapore. More about the Sentosa, Singapore resort in the post on Singapore.

Genting also has the world’s largest hotel in terms of the number of rooms. The first world hotel has 6118 rooms (same as the height of the hill in feets) and is a sight worth seeing in the evening with the large plumes of mist engulfing it. The skyway cable car taking tourists from the foot of the hill to the resort is the best attraction in Genting. The engineering marvel will take you on a ride over the lush evergreen forests giving you an experience that’s breath taking. Although the establishment with its mega hotels, fascinating rides (some of them only exist here in SE Asia) and the fastest ropeway in the world is an experience in itself, the service quality is terrible. Almost none of the theme park staff knows English and they are rude to the visitors. One could see the resort staff working without any interest in their jobs all throughout the day and showing maximum energy levels at 5:30 pm when the theme park closed for the day. Visitors were sent back although the scheduled closing time of the park was 7 pm. Lack of maintenance was also visible in most of the rides.

Resorts World is a huge establishment now and they have theme parks in Sentosa islands, Singapore, Manila, Philippines and New York, USA. With expansion into newer economies, seems that the Lim family’s focus has moved away from their first resort. Genting now is money making machine grossing around 3 million ringgits for the family every day. So everything at Genting is about fleecing people. Prices of articles are nearly 4 times the rate outside and the 28 storied One World hotel cram rooms at every possible nook to set the world record. The room will deny you of even basic facilities like room service, wi-fi and even drinking water. With all its positives and negatives, I feel that Resorts World, Genting Highlands Malaysia is an avoidable place. Most of the rides can be experience at Universal Kingdom Singapore under better service quality.

The Demon King’s Golden Kingdom

If you had slept through your trip from Kerala to Sri Lanka, you will not realize that you are in a different land. Sri Lanka resembles the God’s own country in many ways. Be it be the long rows of coconut trees that line up the tarred highways, houses with tiled roof tops or sound of the rumbling sea at a distance.

“Sri Lanka got independence from British in 1948” our guide quipped. “British did a lot of good work over the 140 years they were in Sri Lanka. They build our railways, 5 star hotels and a good road network. They would have continued their good work but unfortunately we got independence in 1948”. I was a little taken aback by the eulogy for colonists by the oppressed.  As we moved on seeing the city of Colombo and hearing more from our Sri Lankan guide, the similarity I had weaved in my mind started dissolving. The first difference I could see was the blatant disparity between rich and the poor. Our guide took care that our tour bus went through the rich localities of Lanka and we were all given a perception of a developed country. But the intermittent slums which littered the lands gave us the actual picture of the golden kingdom build for Ravanna by the mason of gods. The vehicles running on the roads were mostly imported from India. There were Altos, Swifts and Nanos. Tata Nano infact is a big hit in Sri Lanka and is extensively used as Nano taxis there. But I was surprised to hear that the prices of vehicles are very high. It seems Nano costs almost 10 lacs after the large import duty imposed by government. The price of nano is around 3 - 4 time more than it is in India and almost equal to the price of Alto, the market leader of Sri Lanka. Initially, I thought the high price of cars are a strategy used by the Lankan government is keeping its roads less congested. They cannot expand their city roads, so only way to keep the roads commutable is by reducing the vehicles- If you cannot solve the problem, delay the problem.Later I found out that the Lankan government had actually sliced the duty on cars but immediately rolled back the same after the large number of car imports drained all its foreign reserves.

Most of our tour concentrated in an area called Colombo 7 aka Cinnamon gardens. The tour showed us the freedom square first and moved on the famous buildings of the New Lanka – Bandaranayike convention centre, Cultural auditorium etc. Interestingly all these structures were build with Chinese money donated to the Lankans. The President of Lanka Mahindra Rajapaksa is getting abundant helping hand from the Chinese which is using to rebuild his country, he liberated from LTTE. Chinese money is also building the second international airport and port down south. Interestingly, Chinese is trying hard to impress the large Budhist community in Sri Lanka and trying to build a network around India. I have a feeling that this is a bit of paranoiac work from Chinese as we all very well know that India is no match for China with all its internal troubles. Whatever investments Chinese do for Sri Lanka, Budhists  world over are never going to support them against Dalai Lama, so the big brother of Asia may not reach anywhere with this strategy.

After the city tour, we returned back to our resort called Club Dolphin. The resort is well build and is one of the favorite destinations of European and American tourists. Because of the this same reason, the staff will treat you like shit. The welcome drink and initial ritual will work fine but when it comes to peak hours, they will quietly ignore you and will tell you to wait if you press your case.

We then moved to Colombo international airport for our flight. Everything in that airport is substandard. First you will face an uncontrollable mob at the entry terminal. People will all be rushing in and the security staff will just toss your baggage in and out the scanning machinery. Once you are through with the entrance, you reach a large line of shops selling "authentic" Lankan stuff in dollars. Next you will be faced with security check-in staff with outdated metal detectors. The system is so poor that they will ask you to remove every piece of metal from your body before getting yourself scanned. You will have to remove your shoes, belt and I was wondering what they will do about people with metal implants within their body. Finally, we boarded our Sri Lankan air flight at 11:35 pm in the night. Tired from the day long trip, I slept off immediately only to woken up by the air hostess at 1:30 am for dinner. Imagine, 1:30 am and dinner made up of noodles pushed towards you. After the “dinner”, I went back to sleep again; again to be woken up a smiling air hostess at 4 am. “You will have to go through security check at Singapore airport now” she said. “What? But I am going to KL, why will I get a security check here” I asked. “You will have to sir, as our flight is goes via Singapore” she replied. Now imagine the heights – You are woken up at 4 am in the morning to take a walk through an airport which you are not even getting down at. As we had no choice, we went through the turmoil of taking a walk through the legendary Singapore airport and getting ourselves scanned and checked. I never really understood why Singapore was doing this. Singapore airport is one the most crowded and successful airports in the world. Surely, they don’t need to take people though such jokes to show off their possession. May be Singapore knows the quality of security in Sri Lankan airports and so was being doubly sure.

All in all, I feel that Sri Lanka is a beautiful country, very similar to Kerala in its geography and topography. Its sun, beaches and food are lovely and worth a tour. The best thing about Sri Lankan tour is that after a tour, you realize that India is a great place after all.