India's New Payment Highways

One of India's leading mobile phone brands makes an average $2 per smartphone it retails. The company is clear about the fact that they won't make money on the hardware and caps its ambition at 5%. However, the company doesn't plan to keep its profitability capped and plans to make most of its money from the internet services they will sell to their customers who have become part of their hardware eco-system. This is easier said than done. Other than Apple, there is hardly any hardware company which has milked their customers on services. Then how will this particular firm make money? Of course they may try ads and make clients pay for the in-built apps.

One of the interesting avenues this mobile handset maker is exploring is super short term loans popularly known as payday lending. The idea is simple- before the end of the month; most youngsters today spend their salary out; so help them out for the last few days of month. These are typically loans which run for 10 days to 3 months. Let's see how it works. The mobile brand integrates the payday lending app in their firmware and takes necessary permissions from the users for reading SMS, apps, GPS etc. Using this information, it models the user's earning and spending behaviour and underwrites a loan; usually a micro-loan to start with, to minimise the risk. This is pushed to the user at the right time, typically the end of the month, when the user normally runs out of cash say 20th. The offer is for a Rs 5000 (amount it knows the user will spend in next 10 days based on his credit/debit transaction summary) & 10 days loan which can be paid back on 1st after getting the salary. Instead of Rs 5000, user needs to pay Rs 5100 plus a Rs 100 processing fee. Rs 200 is nothing for the user when someone is ready to lend him at the time of need and so he takes it without any issues. Now let's look at the actual rate of interest charged:

Rs 200 is 4% interest for a 10 day Rs 5000 loan

Monthly level, that works out to 12% interest

Annual level, that's 289% interest

Welcome to new age lending!

Obviously our user of mobile brand won't realise this since he is only paying Rs 200. The success of this model depends on the intelligence of the code to identify the correct users who will pay back and give them cash when they need it the most. The more turns they are able to do with their cash, higher the returns. The brand tried integrating a fin-tech company into their eco-system called Krazybee and have filed for a NBFC licence in India.

The mobile brand I spoke about, is just an example of a high speed runner on India's new payments highway who with the help of technology are doing what Indian banks have failed to do in past 70+ years- lend to the segments of the society who didn't have access to capital. These runners are mostly fin-tech companies, NBFCs, payment banks who are leveraging technology in a big way to reach, identify & filter out a prime borrower from sub-prime. The new age borrower they are catering could be a SME entrepreneur in Moradabad or a college kid in Bangalore. According to CIBIL, there are 220 million prime customers in India who are in the age range of 20-69 years and earn more than 2.5 lacs an annum. Of these 220 million, banks will only give retail loans to 72 million through their existing underwriting models. This leaves 150 million customers with these nimble footed runners hungry for business.

The revolution in access to capital to sectors traditionally considered risky started with the NBFCs. GE Capital's exit from India in 2013 and subsequent push by Bajaj into the white goods lending space, modelling itself the same way GE did in US in 60s, changed a lot of things for Indian market. Bajaj sourced their customers majorly through white goods purchase, a very emotional acquisition for Indians who normally does this when they buy or build a new house. Bajaj identified the emotion associated with the purchase and used it as the mechanism to acquire new customers who paid back in time. The rise of CIBIL as a bureau to identify someone's propensity to default helped the cause a lot. Bajaj, with the help of CIBIL, over time, developed very successful underwriting models and paved way for a zero cost EMI revolution covering the sector. Companies like Capital First, Capital Float, HDBFS replicated the same extending the idea to multiple new sectors like Education, Health, Services & even FMCG. Today your Bajaj card can be used just like a credit card to buy groceries on Big Bazaar & Amazon. The underlying idea is simple: Lend money when they need it at no interest and make the brands pay the subvention.

NBFCs didn't stop with this. The idea of lending to non traditional sectors which banks don't touch, was extended to working capital lending to SMEs and new age companies. Fin-techs like Capital Float took this to the next level by doing most of the loan processes online without physical interaction with the customer both in B2B & B2C spaces. Suddenly, there is a new genre of nimble footed entrepreneurs who had all India reach but hardly any work force. They sourced customers online or through partners effectively outsourcing the customer physical verification. In this, the fin-techs were ably supported by the multitude of innovations which happened in finance sector through Aadhaar and National Payments Corporation of India (NPCI). Aadhaar and NPCI were 2 "ahead of time" ideas pushed by Modi government to revolutionise India's financial sector. These could have supercharged India's payment highways to another level thus bringing a very large part of the financially non serviced out of their banking pariah state. Due to push from the Modi government, 89% large part of Indian society have Aadhaar numbers. These Aadhaar numbers provided fin-techs with a bio-metric based process to ascertain the identity of the borrower. It doesn't end there, again due to push from the government, 87 cr out of 110 cr bank accounts (80% of all accounts) were linked to Aadhaar and 60% of the mobile numbers were also linked to Aadhaar. So Aadhaar not only provided an opportunity to ascertain the identity of the borrower correctly, it also helped the fin-techs to set up a seamless process for repayment and communication using Aadhaar. With so much of data available on the customer, Aadhaar provided an option to fin-techs to lend to nearly half a billion population who didn't even have a CIBIL or other bureau scores by using surrogates.

Next question obviously is the supply side. Where does these NBFCs and fin-tech get money to lend to this "risky" customers? The answer is the market. Most NBFCs like Bajaj are AAA rated companies and are able to raise money from the market through commercial paper borrowings. This market is new in India and Mutual funds are one of the biggest buyers of these commercial papers. This eco-system works well as long as NBFCs do short term lending since the paper borrowing is generally for a short term. However, all NBFC don't do short term lending. There are ones active in real estate and infra sectors like IL&FS which do long term lending with these short term funds. To solve this dichotomy, they roll over the debt before the cashing date. This eco-system worked well and even thrived till end of 2018 when 2 events crashed it all. One was the Supreme court ruling which declared illegal the use of Aadhaar by private companies for identity verification and second the infamous default of IL& FS on his interest repayment. When the ruling constrained the ability of these companies to process loans since the process of KYC now needs to be manual and hence expensive and the fear psychosis which ruled the market after IL& FS crash drained the market out of cash.

The high speed highway suddenly seems to have hit a roadblock. While the government had worked hard and tried to bring cash back to market, the tech teams have tried to create alternate processes for KYC without Aadhaar. The last quarter of 2018 was a terrible time for these companies. 2019 promises to be exciting for these companies with investor interests back on fin-tech and a lot of mainstream tech, financial companies getting into fin-tech based products. Will all this, clear up our new payment highway? Only time will tell!

Dharti ka Lal

Dharti ka Lal loosely translates as the darling son of the soil, a epitaph often used fondly for Lal Bahadur Shastri, the 2nd Prime Minister of India. Shastri, who lead the nation for less than 2 years was in every way the son of the soil: as the martial son leading the country to victory in the 1965 Indo-Pak war and as the custodian son propelling the country towards self sufficiency in food generation through Green & White revolutions.

Shastri's style of governance is very well highlighted from the Kaira incident, when, he along with the CM of Gujarat Balwantrai Mehta, stayed at the home of Ramanbhai Punjabhai Patel, a small farmer from a village in Kaira for a night before the planned inauguration of the India's first modern cattle feed plant AMUL had just build in Kaira. It is said that the entire night, Shashtri moved around freely in the village of Ajarpura talking to farmers who were members of one of the first village cooperatives under AMUL, asking them questions about the yield of their buffalos, income earned, incentive structures for production etc. The leader of Indian democracy whose diminutive figure belied his gigantic thoughts and vision welcomed himself to the homes of farmers, Harijjans, Muslims quizzing them till 2 AM in the night about their way of life. I am reproducing the interaction Shashtri had with Varghese Kurian, the milkman of India and the general manager of AMUL the next day where he explained his behaviour of the previous night

‘Under the Second and Third Five Year Plans, we have built so many dairies. All of them owned and run by the government. All of them unmitigated disasters, running at a loss. But I heard Amul dairy and its products are liked throughout the country. It is available throughout the country and has an extremely high growth rate every year. I want to know why this particular dairy is a success when all the others have failed. That is why I decided that I would stay here and find out. And that is why I spent a night with the villagers, trying to fathom the reasons for the success of Anand’s Amul dairy. But I am sorry to say, Kurien, that I have failed.

‘I looked at the soil. Good soil, but not as good as the Indo-Gangetic plains. I asked about the climate here. Cold in winter, very hot in summer, I was told. So it is in most of India. Nothing special. I enquired about the rainfall. Thirty inches of rain for three months of the year during the monsoon – much like the rest of the country. I had expected to see the entire landscape green, with cattle grazing contentedly, but the whole place is brown, just like the rest of India. I did not find any abundant availability of fodder and feed here. I looked at your buffaloes and don’t mind my saying this, Kurien, but they are not as good as the buffaloes in my home state of Uttar Pradesh. Those buffaloes are certainly better and even give more milk. Lastly, I looked at your farmers. They’re good people – farmers are always good people – but they are not as hardworking as the farmers of Punjab. I can’t find a single reason why Anand is such a great success. Now, can you please tell me what is the secret of its success?’

Believe it or not, the PM was trying to understand the business model of AMUL and what makes it a success? He had come ready with a hypothesis which he tried to prove with data he collected on ground. In modern management lexicon, he did what a CEO does while trying to figure out how his competitor is making money when his enterprise is failing. A welcome change in the world of politicians with zero accountability.

Kurian answered the PM explaining the reason for AMUL's success is the corporative spirit of the organisation and the fact that it is run by a professional manager who is an employee of the farmers and his commitment to the enterprise was as strong as the trust he enjoyed from his employers: the farmers. 

The Prime Minister, who had been listening avidly, looked excited and said, ‘Kurien, this means that we can have many Anands. There are no special reasons to have an Anand only in Gujarat.’

‘So then, Kurien,’ he continued, ‘from tomorrow you shall make it your business to work not just for Anand, not just for Gujarat , but for the whole of India. The Government of India will give you a blank cheque, it will create any body, any structure you want, provided you will head it. Please replicate Anand throughout India. Make that your mission and whatever you need for it, the government will provide.’ 

The characteristic style of a leader is to find the right person for the right job and to make quick decisions without wasting time. He knew clearly from the way AMUL was managed that Kurien is frugal with investment and enjoys the trust of the farmers. In other words, whatever he learned the night before and during his conversation with Kurien, he put in action immediately resulting in the creation of National Dairy Development Board which then helped establishing corporative diary units across the country like Mother Dairy, Milma (Kerala), Nandini (Karnataka), Aavin (TN) etc and propelling India as the largest milk producer in the world soon (we have lost this title to US again few years ago and stand 2nd today). The series of events which Shastri and Kurien set in action on that day is known to us as the White Revolution.

Shastri's tenure as the Prime Minister was strenuous from the word go: from the insurrection in Kashmir and NE to the Naga problem to the South India's rebellion against imposition of Hindi and of course the biggest of all- the 1965 Indo-Pak war. Strangely, it was the attack of Pakistan army on that 1st Sept that really established Shastri as the "tall" leader of the nation. Unlike Nehru during the Chinese fiasco, he quickly decided to bring in IAF to support the infantry thus defeating the Pakistan army's attempt to isolate J&K from Punjab. He also decisively went by the army's recommendation to cross the border and attack Lahore thus forcing the Kashmir front forces of Pakistan army to rush back. Shastri, a Gandhian and a firm believer of peace and compromise rose to be the unlikely war hero who united the country with his slogan 'Jai Jawan, Jai Kisan'. When Pakistani army sang 'Has ke liya hai Pakistan, ladh ke lenge Hindustan' (We achieved Pakistan laughing, we will take Hindustan fighting), Shastri praised his country men: the brave soldiers fighting at the front and the humble kisan toiling the field to produce food for the nation. His call united the nation from Kashmir to Kerala and the Muslim brothers of Kashmir which Ayub Khan (Pakistan's dictator) and his forces had planned to free from India suddenly fought Pakistan side by side the Indian military.

Being a Congressman, Gandhian and Nehruvian, Shastri tried to continue with most of the socialist, democratic and secular principles established by his predecessor. However, he had a very practical and hands-on streak in his style which differentiated him from the occasionally fabian style of Nehru. Moving away from Nehru's India which was taught to admire hydroelectric dams and blast furnaces, Shastri increased budget allocation towards agriculture. Increasing food production and making the nation self sufficient in food supply was one of the primary objectives of his administration. He appointed C Subramaniam, one of the most able ministries from Nehru cabinet as the Agriculture minister (ironically Subramaniam was the Steel Minister under Nehru clearly showing the change in priority). Subramaniam with his 2 aides: B Sivaraman and M S Swaminathan put in action a series of reforms like introduction of mechanisation in farming, use of high yielding seeds etc cumulatively leading to large scale increase in grain production, the exercise which is famous today as the Green revolution.

When Shastri was elected the leader of Congress party and the Prime Minister, party President Kamaraj had said that the undisputed rule of a great man would now be replaced by collective leadership. However, Shastri had other plans; he had a mind of his own and everything he did as the PM was clearly his way and never the Syndicate's collective decisions. If there was anything collective in his times; it was his leadership which got the entire country into a collective under him. This could be clearly seen from the millions who thronged to see him in his final journey after the unfortunate death in Tashkent; a crowd, some say, which even rivalled the numbers who came to see his predecessor off 20 months ago. 

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

"The Phantom of Bombay House" or Pallonji Shapoorji Mistry is one of those unsung heroes of the Indian business who build an empire from nothing over generations. Like Tatas, the story of his family is one of dedication, hard work and razor sharp focus. It's a pity that very little is known about this reclusive billionaire and most of the details are based on the stories Bombay house old timers like to fondly share with anyone interested in the legendary history of Tata empire.

Mistry family's legendary story begins around the same time when Jamshedji Tata was starting off Tata & Sons along with his sons and nephew. That was when Pallonji Shapoorji Mistry (Cyrus' great grandfather) established Littlewood Pallonji Construction business in Mumbai. His son Shapoorji Pallonji Mistry (Cyrus' grandfather) grew the business taking advantage of the construction boom witnessed during the growth of Mumbai and grew the firm into one of the leading construction companies in the country rechristening it- Shapoorji Pallonji Constructions. His son Pallonji Shapoorji Mistry (Cyrus' father) gave the firm a global footprint by executing multiple projects in Middle East along with superior commercial and residential work in India. His son Shapoorji Pallonji Mistry (Cyrus' brother) and Cyrus Pallonji Mistry further expanded the footprint to Africa and diversified into more complex projects like ports. Quite like the phantoms, who are unrecognisable in their deeds and identity over generations; the Mistrys have also toiled with single minded focus in growing their empire. The family practice of giving first born sons their father's name and the Parsi practice of using father's name as their middle name ends up giving an impression that the generations of Mistrys is the same person, quite like the Phantom.




Mistry's association with Tatas goes back to the years when Tatas were metamorphosing into an industrial empire and implementing Jamshedji's vision of industrialising India. Shapoorji (Cyrus' grandfather) helped the Tatas build Taj Mahal Hotel, Tata Steel factories and Tata Hydel Power plants with their construction expertise. The association didn't stop there and this is where it get tricky. The onerous investments on Tata Steel and Tata Hydro nearly bankrupted the group and Dorabji Tata had to heavily borrow money from their main financier FE Dinshaw. FE Dinshaw, an old friend of Tatas were completely invested into the Tata vision of industrialisation and was part of the board. The borrowed money which was never paid back was converted to 12.5% equity of Tata Sons. FE Dinshaw later in his life became close to Shapoorji Mistry when he hired him to build his palatial home in Pune. It is believed that Shapoorji saw value in Dinshaw's holding in the group and thus acquired it from Dinshaw's heirs. Ironically, the mansion Shapoorji build for Dinshaw today is Tata Management Training Centre (TMTC), the LBS IAS Academy Mussorie fashioned training centre for the new TAS batches. Shapoorji continued his buying of Tata Sons shares from the disgruntled siblings of JRD and steadily took his shareholding to over 18% over a period of time. It is said that JRD was deeply incensed by this intrusions of Mistry into his family heirloom but was powerless then to do anything.

After the death of Shapoorji, Pallonji Shapoorji Mistry aka the Phantom of Bombay House chose to mend bridges with JRD and gave him a free hand to run the empire without any interference. Like a seasoned investor who just found the right CEO, Pallonji might have found the arrangement perfect- a capable captain in JRD growing his wealth manifold. He confined himself to one board seat knowing well that it will be impossible to challenge JRD. Rather he focused on his construction empire building it from strength to strength; some time at the expense of Tatas. All construction contracts of Tata factories were a monopoly of Shapoorji Pallonji Construction. Pallonji's firms even had the right to first refusal on businesses Tatas were disinvesting; Forbes India was taken over through this agreement. With his omnipresence in the background and boardroom and obsessive reclusiveness, Pallonji soon acquired the sobriquet of the Phantom of Bombay house. When JRD decided to step down and pass the mantle to RNT, Pallonji steadfastly supported the successor helping him immensely in his battle against the satraps Rusy Modi (Tata Steel), Durbari Seth (Tata Chemicals) etc who wanted one of them as the next chairman.

The Phantom's handiwork didn't end there; it is said that it was Pallonji who coerced RNT to take TCS publish. TCS being private would have given Tata chairman free hand on how to use its large profits while a listed TCS would have vastly increased the wealth of its holding company Tata Sons. It is said that RNT agreed to take TCS public only after Mistry agreed to participate in a share buyback deal of Tata Sons thus bringing his shareholding to 18% which exists even today.

"There are countless such incidents when Phantom's signature was visible in the monumental decisions taken by that Tata board and chairman" vouched a Bombay House old timer over a streaming cup of coffee during our days when the first Starbucks store was getting set up at Elphinstone building below my TRIL office. "But his finest hour was when his son Cyrus took over from RNT. I am sure he was coerced into it. Otherwise why will a person who was earlier entrusted to search for RNT's successor become the candidate all of sudden. Mistry's think the power is finally theirs but RNT is still the chairman of the Trusts and that is where the power truly rests." As we saw from the incidents which followed a few years later, true power was indeed with RNT and he exercised it when he felt it was needed. Is the Phantom lurking in the shadows, preparing for the next battle, only time will tell!

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