Covid-19 in the world and Comvid-20 in India!

Since the advent of Social media, “Going Viral” is considered the ultimate thing! As we speak, the world in general and India in particular are reeling from something that literally went viral. The Corona virus pandemic which is now being called by WHO as Covid-19 which started from the Wuhan region in China, has now been spreading rapidly across the globe.

In China where it all started, we understand that things are getting under control. The new cases are reportedly fewer which is a key indication of the virus not spreading further. The Chinese government has been swift in taking tough decisions including shutting down towns and cities in a bid to arrest the spread very early.

As one can expect in a globalised world as it is today, while the situation is getting better in the origin (China), there are other countries where Covid-19 is taking a huge toll. First Italy, then Iran and now Korea have been under the onslaught of the Corona virus in the last couple of weeks. And those who have visited the affected places like Italy and those who came as tourists from these countries into other cities have become silent carriers of the virus. So, countries like America and India have also come under the affected list. Though the numbers are low at this point in time relatively, considering the population in these counties and the viral nature of the contagion, the risks associated cannot be dismissed away.

The approach of the countries to the pandemic is also a reflection of these societies. In highly disciplined and if I may add, regimented countries like China, Korea and Japan for example, the governments moved fast, enacted tough strictures and the public fell in line. The results are there to see. On the other hand, in flexible and If I may say, slack societies like Italy, the government has been slow in action and reaction. It’s only today that we read of Italy taking a call to shut down parts of the country which have been affected. The damage is already done.

From the perspective of economy, it’s already been well documented as to how the global supply chains with its epicenter in China and in particular Wuhan have been disrupted globally. It is believed that Covid-19 will impact global GDP by over 2% negatively in 2020 and this is huge.  As the Corona virus signalled the first decline in demand of oil, Saudi and Russia decided to pump more oil in a battle of market share! Result – Price crash to the extent not seen in 25 years! The chain of events have led to the carnage in the stock markets worldwide. After a long while, we saw the circuit breaker being triggered at NYSE yesterday!

Apart from manufacturing industries affected by Covid-19, the other worst industries are those that deal with people. Travel, Hospitality, Tourism and Events sectors will see an impact worse than the Lehman crisis time! It would be sad if the next summer Olympics being planned in Tokyo in July 2020 is called off due to the Corona virus. As can be only expected, Japan has been super ready for the event for a  few months now and will be a pity if all those efforts go down the Corona drain!

After the Lehman shock of 2008, Covid-19 is the next best example of a globalised world rising and perishing together in ironic harmony. There are very few countries which are immune to this today. The synchronised interest rate cuts by the Central banks a few days ago, I am not sure will help. Because what we are seeing is a supply side disruption and constraints arresting human movement. This is a not a demand problem or a capacity building issue where capital infusion could do the immediate trick. Of course any softening of interest rates is welcome! While the world struggles to get into terms with the aftershocks, I do believe that China from where it all started, may recover faster than expected. Already people have started going to offices after a long break since Chinese New Year and factories have started brimming with activity from last week. Again, at the risk of being repetitive, being a disciplined and a regimented society which China is, we should not be surprised if China gets back to normal by June while other affected countries still continue to struggle to get back to their feet!

Coming to India, along with Corona virus, we had another thing which has been going viral in the past many weeks – the “communal” virus” or Comvid-20! Ever since the Citizenship Amendment Bill got passed and became an Act followed by the government’s “chronological” intent to take up NRC (National Register for Citizens) all over India, the country has been on the edge.

The CAA protests also took almost the same route as a virus spread.  What started off as peaceful protests in different parts of the country essentially college campuses, soon spilled over to the streets. A hitherto unknown entity to those outside Delhi – Shaheen Bagh, entered the daily vocabulary and a subject of Prime time loud debates. And finally culminated with full blown communal riots in Delhi in the 1st week of March.

For Modi Sarkar which prided itself of not facing a communal riot in the country for 6 years since 2014, the Delhi riots have come as a huge blot on its image. That the riots happened in the first place, that too in Delhi which is the capital of India with its heavy security apparatus and when a big diplomatic event that of the US President Donald Trump’s visit was in progress, is an embarrassment. The coverage of the Trump visit therefore turned “split screen” globally with beaming faces of leaders and burning streets of Delhi, side by side!

That today, Social media has a huge role to play in spreading this communal virus is unmistakable!  Images and counter images, Videos and counter videos were just going viral in what I call as a battle of narratives! In sum, even today, we are yet to get a final answer as to who lit the spark first. And in spite of all the media and social media explosion, we may never get it, in our lives! Everything that went viral finally did their bit to mobilise mobs, fuel frenzy and finally celebrate madness.

Covid-19, with the world putting its might behind it may soon get a vaccine and a cure! However, Comvid-20 with its epicenter in India and to do with the majority community Vs minority community wrangle ingrained in our minds for decades, may not get a vaccine soon. Unless, we become a truly secular society where religion is personal and ceases to be a vote bank. Welcome to Utopia!

Time to bid good bye to the Budget!

Just yesterday, Finance Minister of India, Nirmala Sitharaman presented the Union Budget for the upcoming fiscal year 2020-21 in what was a very long speech. The length notwithstanding, it was short on material required to  lift the sagging mood in the country with respect to the economy. The markets tanked big time by the end of the day. If one goes by the commentaries in the media and expert opinions in social media, it seems that the budget has disappointed one and all.  As one expert on TV put it, the reaction was about what could have been done rather than what has been done.

The reaction to the last budget by the same minister in July 2019 was almost similar. Right after the big victory and into a second consecutive term, everyone expected a bolder budget with a road map for tough reforms from the Modi Sarkar. That didn’t happen.

If you go back further to the last few budgets, the story is similar.  In the pre-budget season the air is thick with expectations of all kind. Expectations of big bang reforms, of new big ideas, of a vision for the country and of course of income tax rate cuts! And post the budget speech, the reactions have been similar. “What is the one big idea in the budget?” “Where are the big bang reforms?” “There is no vision in the budget!” and so on.

The last time the media hailed the budget generously was P. Chidambaram’s way back in 1997. It was termed as the “Dream Budget” when it presented a road map for economic reforms in India and included lowering income tax rates, removal of the surcharge on corporate taxes and reduced corporate tax rates. But ever since the budget presentation became a media spectacle post the explosion of 24*7 News media, I don’t recall any budget (of any government) being hailed as a visionary budget or a great budget. Most of the times, the budgets have only disappointed people.

Today, there is a big disconnect between the expectations from the budget speech and what it can deliver. And increasingly, the scope of what the budget speech can deliver is reducing day by day thanks to reforms and change in governance models.

I am of the view that it’s high time we do away with this annual over hyped British era relic of a budget speech which focuses on outlays for the following reasons:

  • Leaving aside the Aam admi who doesn’t follow or understand the language of the budget, increasingly everyone expects the budget speech to actually lay out the “Governance vision and strategy” rather than increase or decrease of allocations. Essentially people are expecting the government to talk the corporate language. Of Vision, Mission and Strategy for the coming year/years.
  • For the budget speech, the FM takes inputs from other ministries on their key initiatives for the coming year and then announces outlays for the same. In a sense the FM is talking on behalf of her/his colleagues. There is little review of outcomes of the past outlays and the focus is more on the future outlays.
  • In the past, one of the areas of interest for the common man from the budget is to know what gets costlier and what gets cheaper. The finance ministry adjusted the tax and excise rates to balance revenue collections for the budget. In the present GST regime, the GST rates are decided by the GST council. The GST council meets as per their charter and decides the change in rates when required. Ergo, the budget speech doesn’t have details of prices going up and down. The exception being any reduction or increase in basic customs duty for imported goods. As we have seen in the recent past, the finance ministry has taken to these announcements whenever they want.
  • Coming back to yesterday’s budget speech, the common feeling was that there was no big announcement that would assuage the struggling economy. If one remembers, the same Finance Minister Sitharaman, had announced an unexpected corporate tax rate cut in September 2019. One must remember that this was not done in the budget speech of July 2019.  This was announced out of the blue, in an out of turn announcement as a counter measure to prop up the economy, then. So my point is, measures that are required to be taken can be and should be taken and announced when needed. One doesn’t have to wait for the budget speech to actually make such announcements.
  • Again if one closely analysed the budget speech, many of the initiatives announced by the Finance Minister can reach its logical conclusion only with last mile delivery by the states. In the sense, these are more like nudges to the state to perform better to get more outlays.
  • Till 2016, there was another media spectacle called the Railway budget. The Modi government took a wise call to do away with this ritual and merged with the Union budget. Except for the reason that it was a British era custom that was followed, it seemed there was no reason for just one of the many departments of the Government of India to have a separate budget presentation day! We don’t have any empirical evidence of any deterioration in the ministry’s performance since then.
  • As I see, there are just a handful of countries in the world who still follow this Annual budget presentation ritual!

Considering all of the above, my submission is, it’s time to bid Good Bye to this all-encompassing Annual Budget Speech by the Finance Minister. Instead, this should be replaced by an address by the Prime Minister in the lines of the State of the Union Address (SOTU) in the US. In this address, the PM should take stock of the situation in the country, the issues on hand and present a vision, road map and the priorities for the coming year. This should be followed by debates in the parliament to understand the views of the other parties and opposition. In the same session, key ministries must present the outcomes of the previous year against the outlays and the plan, initiatives for the coming year in line with the vision, priorities outlined in the PM’s speech. By this, along with the Prime Minister the entire cabinet will be made responsible for their achievements and misses in their ministries, every year.

Narendra Modi, who has a penchant for leaving a legacy has a golden opportunity here. By replacing the budget speech ritual with PM’s Annual Vision Address!

Pic Courtesy: Bloomberg

A New Decade Resolution for India – Moving on from being WIP!

When you are neither here nor there, you are Work In Progress (WIP). As a country, India has been that. A Work in Progress. Now for a long while!

Since Independence, we probably had the tag of an “Under developed” country till the 80’s. From then on, we moved on to be called as a “Developing” country. Since then, it is now 5 decades but, we still continue to be a developing country. An emerging market. A Work in Progress.

Personally for me, from the time I started my career in 1991, India has been a developing country. Even today it continues to be. After close to 30 years.

Just look around and you can notice that almost everything around us is Work In Progress.

Our public transportation in all cities is still evolving.

Roads and highways are perennially under construction.

Health care is floundering but getting better day by day slowly and is Work in Progress.

To just cite a few areas.

In all these years, one thing constant has been that we hold promise. Promise of future potential.

We have had goal posts by way of Vision 2020 etc. in the beginning of this century. In the many versions of those vision documents, by 2020, India was supposed to be an economic Super power.  Supposed to be the 3rd largest economy ahead of Japan or some such thing. As we speak we are still the 7th.

For India in the last few decades, it’s been a case of missed opportunities. We never miss to miss an opportunity. Once missed, it’s a question of living in futuristic hope. If one thing that has kept this country going in the last many years, it is hope. Hope others have on us. More than what we have on ourselves.

In the past, whenever we seemed to have caught the economic growth train, we have quickly derailed it ourselves.

Beginning of every decade is touted to be India’s decade. And we have belied that systematically.

As we step into another new decade, can we actually turn it into being India’s?

What is stopping us from realising our potential? Is it “We the people”? Is it the Government? Is it the politics? Is it the bureaucracy? Is it our attitude? Is it our capability? Is it the population? Is it our chosen path of democracy? Probably it is a combination of all these. And so the answer is complex.

I think the first and foremost need is to put “Economic growth” at the centre of our National discourse and put everything else in the back burner for the next ten years.  For the government, for the media and for the citizenry. There could be and probably there are other unfinished businesses. But it is time to prioritise. And prioritising Economic growth over everything else has obvious beneficial effects on peoples’ quality of life. Has a direct effect on many social issues. It also promises a placebo effect on issues.

It’s not that governments have not been focussing on economy in the past decades. They have, but only intermittently. The question is – was it or is it a single minded focus? As people, did we make Economic growth the single issue while voting?  Politics is driven by electoral results. If parties get the message that if they don’t deliver on economic growth, they cannot win, there will be difference. Today, this is not the case.

A new year is always a time for personal resolutions. This is not just a new year. A new decade beckons. Hope on India is still high. At least as of now. So time for a new decade resolution for India as a country. A resolve to put the Economy first.  Not just first. Just that. For the next ten years.

And move on from being a Work In Progress, come 2030!

On that note, here’s wishing you a busy and exciting decade. Working to Progress.

Image courtesy: Yourstory.com

 

 

Turning the GDP (Gross Disappointing Product) tide!

Many years ago on my visit to China, I found most of the newspapers there giving a lot of attention in their front pages to decline in GDP, tapering of FDI into China and other such economic issues. In a blog post that visit, I rued that in India, our media doesn’t still focus on economic Roti, Rozgaar issues but spend disproportionate amount of columns on mundane political news and views. For the past few months, it has been good to see in India too, the media at last waking up to the slow down blues in the economy.  For more than a year or so, the entire country was pre-occupied with the Modi re-election issue and everything else did not matter.

Since the re-election of Narendra Modi and his government that too with a majority better than last time, the euphoria and the resultant expectations have been very high.  However, the party has been cut short by the bad news coming in on the economic front, day in and day out. There was a great opportunity for this Government with a new face as the Finance minister to have seized the opportunity when she presented the Union budget on the 5th of July and fire the economy. The budget was a decent one but one that was devoid of Out of box, bold ideas which would set the economy on fire. In doing away with the brown brief case and opting for the bahi kaatha, Nirmala Sitharaman’s budget was a ritual breaker but, was not a path breaker! Hence, ever since the budget, there has been quite a few negative reactions as manifested in the tanking of the markets, depreciation of the rupee and a massive FPI pull out!

The initial reaction of the Government to these reactions were in expected lines that our economy was still resilient, one of the fastest growing and hence no need to panic. However soon enough, with bad news emerging on the Automotive sector first and then even on FMCG, the Government was forced into action and from then on we have been seeing a slew of measures, cabinet decisions and sops to revive the economy. Q1 GDP at 5% turned out to be the last straw.  Coinciding with the Q1 GDP results, the Government announced the merger of PSU Banks as a way forward in banking reforms. Economy was finally on top of the news cycle and the Government’s attention, Kashmir notwithstanding!

It was widely expected and hoped that some of the important initiatives of the Modi Sarkar in the 1st term like the thrust on Highways construction, massive investments in improving Railways infrastructure, improving air connectivity to the smaller towns, making electricity available to the last village and so on would start yielding results in terms of improving economic activity and fuel growth in the country. Added to this, Modi Sarkar has been constantly increasing outlays on MGNREGA in every budget. Why these measures have not started yielding results on the ground both in terms of economic growth and job creation is mysterious. It may be a good idea for the Chief Economic Advisor to come out with a White paper on the outcomes achieved for the massive outlays in Modi Sarkar 1.0.

In the back of all these, the question becomes, are the measures so far announced by the Government enough to resuscitate the economy? The reversal of some of the proposals in the budget are certainly welcome moves but those just contain the damage.  And the other measures like opening up of FDI and so on are necessary but not sufficient to get us back to where we were last year (8%) and then hit our dream goal of 10% GDP growth which increasingly is becoming a pipedream.

During Modi Sarkar 1.0, the Government leveraged well on the windfall it had from the crude prices and not passing on the entire benefit to the consumer to “manage” the economy with heavy public investments. The hope was that gradually the private investments will pick up once the sentiments change. But unfortunately, due to the NPA and the overall banking crises, it did not fire up the economy so much but, just kept the wheels of the economy going. Now, under the current circumstances however, continuing of public expenditure alone may not be sufficient. The recent red herring on the increasing debt of NHAI may in fact become a dampener here. For India as a country, the next few months are supposed to be very high on economic activity with the impending festival season. And the fact that the monsoons have been bountiful for most parts of the country notwithstanding the floods in some parts, there is still hope even for this year.

So, in order for the economy to fire up, ways and means have to be found for increasing private investments and individual spending/consumption. I am no economist but here are some thoughts:

To get private corporate investments going:

  • Modi Sarkar should bite the bullet and announce 100% FDI in Multi Brand Retail. Though India as a country missed the retail bus 10 years ago, it is still not late. Some of the global retail majors may not be as bullish today as they were a decade ago on India due to our policy flip flops and the current industry shift to E-Commerce. But still considering the country’s size and the potential it offers, India is still an exciting market for say specialised vertical retail stores. In announcing this, we should do away with the myriad sourcing conditions and allow the retail water to find its own level. Retail gives fillip to low end jobs, manufacturing industries as well as commercial real estate.
  • Copy the STPI (Software Technology Parks of India) strategy that helped in boosting the software industry in India in the 90s and come up with a similar framework for boosting Electronic hardware manufacturing in India. This will help India in becoming a preferred country for those who are looking at alternatives to China. Again we are late in this game and today Vietnam has emerged as an alternative to China for low cost manufacturing. But still considering the long term view, I believe we still have opportunities here.
  • Every Government recognises the potential of Tourism as an industry to provide jobs and improve economic growth. However, to unleash and unlock the true potential of India, we need massive capacity building in hotels, recreation facilities, connectivity and infrastructure. Government should provide time bound tax cuts for investments to private sector in this area to targeted locations in India which need infrastructural boost. The tax cuts must be linked to time bound completion of projects.
  • As a purely short term stimulus, any capacity building in manufacturing industry by way of new factories, expansion of plants,.. should be provided with tax relief.

To improve consumption and spending:

  • Holiday season is upon us. Provide relief on Income tax to individuals for money spent on holiday travel and stay in select locations in India which require boost on tourism (Uttaranchal, North East, Leh for example) with a cap of say Rs. 1 Lac. This will motivate public to take vacations and boost tourism in certain locations which have potential, decent infrastructure and connectivity but are untapped. Usually this has a spiral effect. When more people throng these places, automatically investments start pouring in for development.  For every 3 years, the locations can be changed in order to make it widely spread.
  • On the real estate front, today the supply is high and the demand low. This is mainly because the property rates are artificially pegged high and the home loans still high. This jinx needs to be broken. Though I have seen the Government announcing a slew of measures in the past few years, the housing market has not taken off. Considering the fact that the private real estate lobby is not going to cut prices ever, there is a need for the Government to intervene and disrupt the market. Like in countries like Singapore, Malaysia,.. Government must float either own companies or joint ventures to construct affordable housing in a massive scale and allot to citizens who do not own a single house in a transparent manner. The Government can offload its equity and then exit after say 20 years from these companies once the overarching objectives are reached. This will also disrupt the existing real estate industry and make it fall in line in terms of pricing and best practices, both of which are found wanting in the current scheme of things.

To revive the “animal spirits” in the Indian economy. Animal spirits are related to the points mentioned above i.e. both consumer and business confidence. I have put this separately as there are some low hanging fruits here which can be taken:

  • Sell Air India as of day before yesterday!
  • Get going on “Actual” disinvestment of Public Sector units already identified as non-strategic. Identify another Arun Shourie to make this happen in this term!
  • It is not enough to merge PSU Banks but to offload equity, get professional management and turn them to “HDFC Banks”!
  • Today many of the Government’s grand projects are stuck or going slow due to land acquisition issues. Identify the issues and fix them by bringing about the necessary changes in the Land bill!
  • Use the current crisis of job loss to build consensus around Labour reforms. Adopt the “GST council” approach for labour reforms. Today all state governments will eagerly come on board considering the pressure all states have on generating jobs.

As I write this blog, I am seeing that the Finance Minister is addressing a press conference. This is her 3rd one in the last 2 weeks. Glad to see the Government demonstrating the needed sensitivity to the economic situation and willingness to take steps. Our only urge is that instead of incremental small steps, we need big leaps.

Only that will ensure we turn the tide over Gross Disappointing Product and achieve real Gross Domestic Product rates quickly!

Calling it a Day!

It’s sad when someone takes his own life.

It’s sadder when the person is relatively young!

And even more sad when he is known to be a successful entrepreneur, a role model and founder of an iconic home grown brand!

As news started trickling in on Tuesday of the missing of Café Coffee Day’s (CCD) founder VG Siddhartha, leaving behind a letter purportedly written by him, a sense of foreboding loomed large.  When news of his death by suicide was confirmed the next morning, there was a pall of gloom, even among those who didn’t know him personally. That the brand he created touched many a lives across the country was enough to trigger a wave of emotions in the media, social media in particular.

In general, people who have interacted with Siddhartha talked high of him as a gentleman who knew his moorings well. And who didn’t have an air of himself even after reaching a reasonable peak in his career quite early in life.  In his interviews which surfaced after this tragedy, he can be seen talking passionately of taking his brand to the high streets of the world. There is no much evidence of him being a corporate bully or as a person who grew too much for his shoes or as one who wanted to grow by hook or crook!

In the letter which surfaced on Tuesday, Siddhartha basically talks of three reasons which sort of forced him to call it a day! Pressure from investors, high debt and finally bullying by tax authorities. The narrative that followed this unfortunate incident had two extreme tones mostly picking up threads from the letter and joining the dots. One painted Siddhartha as a victim. In this version, people slammed the Government of the terror it unleashed on hapless businessmen like Siddhartha in the name of Tax compliance. “Tax Terrorism must stop” was the clarion call.  The other narrative painted Siddhartha as a businessman who took advantage of his political lineage and used it to grow while crushing others.  This narrative sort of led to the conclusion that he was no more a crook in a nice pinstripe suit.

Like in most situations these days, the truth could be somewhere in between.  I don’t know of Siddhartha personally.  So, I don’t have personal likes or dislikes of him. I don’t own CCD shares either. Though, I like some of the CCD outlets, as a once upon time filter coffee connoisseur, regret to say, I am not a fan of the CCD coffee!! Ergo, I do believe that I can have a very detached view of this situation.

First up, I do not want to buy the victimhood argument which is being bandied about. In his own admission, Siddhartha has admitted to some financial misdealing. It is the tax sleuth’s job to go after suspects in the way they have been trained to. There is no record of this particular IT officer having singled out Siddhartha for harassment without evidence. On the other hand, what would have been the reaction if the story was slightly different? Had Siddhartha not taken his life but taken a flight out to Cayman Islands under the cloud of debt, tax evasions and investigation trail, what would have happened?  The same commentators would be today slamming the Government and the authorities concerned of letting go of Siddhartha just like Nirav Modis and Vijay Mallyas of the world! Here the angle of Siddhartha’s Father in law, S.M.Krishna being a BJP sympathiser now will be put to use to flog the argument further.

Secondly, that he built an iconic brand that employs 30,000 people cannot be brought forward again to defend his omissions and commissions. Any entrepreneur as far as I know, doesn’t start out with a mission of giving jobs to people. Most probably the larger objective is to build a successful business. When the business grows, people are obviously employed to attain or manage that growth.  So this argument is a non-starter.

Thirdly, the overwhelming victimhood narrative is also because the brand Café Coffee Day touched the lives of many people all over the country and so many had their own CCD stories to share. Of businesses that were “started up” over coffee meetings, over jobs that were landed, over romances that blossomed, over handsome deals that were stuck and so on. My question is, what if Siddhartha did not build Café Coffee Day chain but, a nondescript but equally successful business that supplies components to a global car manufacturer that employed 30,000 people in his factories?  I bet the emotional outbursts in favour of this Siddhartha would be far lower!  It must be also remembered that apart from CCD, Siddhartha ran a slew of businesses from Coffee Estates to Hotels to real estates to being an angel investor!

My point is that in the absence of clear details, it is too early to curse the tax authorities or the Government of pushing Siddhartha literally over the brink!

At the same time, in the absence of full facts, it is also not correct to paint Siddhartha as a villain! In the aftermath of the tragedy, WhatsApp University started spreading unnamed posts of how Siddhartha evaded tax through a complex web of dubious transactions. As they say, there is no smoke without fire or in this case there is no coffee without the bean!  In fact, activists like SR Hiremath have been raising noise about Siddhartha’s dealings as early as Aug 2015!

Be that as it may, it could very well be that as Siddhartha himself admits in the letter, he committed grave mistakes. The point is, if at the end of the day his assets outweigh his liabilities, what was the need to take such an extreme step? He could have very well faced the law, paid up his dues and still walked tall. This is where there seems to be more than that meets the eye, certainly.

In life, Siddhartha imparted many lessons for wannabe entrepreneurs on how to build a successful and adorable brand in such a short time. In his unnatural “Calling it a day” as well, he has imparted a few key lessons!

In Sanskrit the word Siddharth means “One who is in possession of all desirable things”! Yes, VG Siddhartha also was in possession of all desirable things except peace of mind. Most likely.  May his soul find that peace in this journey!

Image Courtesy: TheNewsMinute

Agenda for Modi 2.0!

Dear Mrs. Sitharaman,

First things first. Congratulations on becoming the finance minister of the country. Ever since you have taken over, there has been a flurry of unabated, unsolicited advice on what you should do and should not, in the upcoming budget. I was extremely reluctant to add to that already long list. But then your extremely gracious and earnest tweet the other day, welcoming all suggestions and inputs changed my mind.  Being from Trichy as well, I could see the “Trichy Tehzeeb” in that request!  Hence this piece, with my wish list not just from the budget but overall from the Modi Sarkar 2.0 from an economic agenda point of view.

I am not an Economist. I am just a keen and informed observer of Indian politics and a well-wisher of our country. So, my points may or may not stand the scrutiny of economists but hopefully will pass muster with the readers of this post.   I promise that I am not going to repeat a lot of stuff which has already been suggested by the erudite in their pieces.  So, here we go:

  • First up, the positive effects of implementation of GST and the kicking off of several infrastructural projects from the 1st term will start bearing fruits in the coming 2/3 years. So, I suggest that the 5 year term till May 2024 be divided into 2 parts – First 3 years till 2022 and the second 2 years till 2024. Take all the tough decisions in the 1st part and use the 2nd to stabilise things.
  • Second, in Modi 1.0, there have been quite a few hits but some misses too. In the 2nd term, on the back of a solid mandate, Team Modi should play on the front foot with confidence, while at the same time leaving alone deliveries outside the stumps and negotiating short pitched deliveries and bouncers with alacrity. In governance parlance, this means implementing even the not so populist decisions with confidence and not getting muddled in unwanted distractions.
  • Third, please request the economic ministries to come up with a list of things to be done to rev up the economy which is stuttering. Divide this list into 3.
    • 1 – Low hanging fruits which don’t need legislative backing
    • 2 – Which need bills to be amended, passed in the parliament
    • 3 – which need the states to take action

Get going on this list systematically. Have a target of 60 days to accomplish everything in the 1st list. This will give a clear message to all stake holders that this government is not the one to rest in its electoral success laurels!

  • Fourth, you are now in Japan and there is a lot we could learn from the Japanese in terms of going about things. One of the things I learnt from working in a Japanese company is “Prioritisation”! As Indians, we tend to focus on 100 things at the same time and spreading ourselves extremely thin. This was one grudge I had on Modi 1.0 which embarked upon so many projects simultaneously like Make in India, Skill India, Stand up India, Digital India, Smart City project, Ujwala programme and so on. If you closely measure the success, it is only the programmes which had focus like Ujwala, Rural electrification, Rural housing that met with success. In Modi 2.0, I would suggest that the Government takes up a maximum of 2 or 3 projects at a time, focus on the delivery with finite timelines and then move on to the next set of 2/3 ideas. This is what Japanese do.
  • Fifth, in India we have been talking of linking outcomes to outlays. But seldom has the same been acted upon. So, in the coming budget presentation on the 5th of July, please do not announce plain outlays but outlays that can be linked to quantifiable  outcomes.
  • Sixth, we usually see that in the budget, there are many outlays which are just carried forward year after year with a % increment or a % cut. For example, since 2013, money from Central Budget has been allocated to Nirbhaya fund to support initiatives towards ensuring women safety. One really doesn’t know how this fund is being utilised and after 5 years what this fund has achieved. This is just one example. In every budget, there are many sundry allocations like this. Please review item-wise outlays in the last 3 budgets,  respective outcomes achieved and allocate outlays in the coming budgets only if they make sense.
  • Seventh, considering the state of the economy, there is a need to mobilise resources to generate income and keep fiscal deficit under check. As Prime Minister Modi has been talking of “Minimum Government and Maximum Governance” one way of mobilising resources is by Government exiting many businesses that are no longer strategic in nature and monetising those assets. In Modi 1.0, in every budget, we had an item called “Proceeds from disinvestment” and this was achieved by making some PSUs like LIC pick up shares from the disinvested PSUs. During NDA-1 under Vajpayee, there was a clear focus on “Real” Disinvestment with a full-fledged ministry and a determined minister like Arun Shourie doggedly pursuing it. UPA did away with this and since then Modi 1.0 included, there has been no serious disinvestment in the country. I suggest that Modi 2.0 take this up seriously. A functional ministry named as “Monetisation of PSU Assets” (since disinvestment is seen as a bad word) should be formed. I also add that the proceeds from this monetisation be parked in a separate account and used for welfare schemes. By this, any criticism of the move can be countered by demonstrating that the proceeds of the same are being used for social welfare. A creative way needs to be found for accounting like this.
  • Eighth, in Modi 1.0, there was a big push towards infrastructure projects like highways and roads which was really commendable. The same should be continued with additional vigour. However, as admitted by Nitin Gadkari the pace of the projects could have been faster but for complex land acquisition issues. This is a big issue even today. In the 1st term, after initial belligerence, the government chickened out of the much needed amendments on the Land Acquisition bill. I remember Modi taking this up with rigour in 2014 basically because all the states identified certain provisions in the existing Land Acquisition bill as impediments for timely closure of infra projects.  Since the states are equal stake holders in this issue, please have discussions with a fresh outlook, strike a consensus and pass the amendments to the bill smoothly in both houses of the parliament. Renaming this as “Land Partnership bill” or something like that instead of the negative sounding Land Acquisition bill will help too to remove the negative connotation around this!
  • Ninth, taxation in India is still complex. GST implementation was a landmark Tax reform. I am sure there is a road map towards further simplifying the same with reduced tax slabs and simplifying procedures. Now, in this term please focus on Direct taxes. I hope that the panel working on overhaul of this will submit their recommendations quickly and your government should adopt the same ASAP. In simple terms, the mantra should be lower tax rates with no or very few genuine exemptions. Some of the exemption clauses we have are weird and defy all logic. For example the current clauses we have for LTA exemptions for salaried. Applicable for 2 years in a block of 4 that being calculated from the year 1986 and so on!!! Someone needs to do a Zero based hard look at all the existing exemptions for personal and corporate taxation and do away with most of them which don’t make sense in this day and age!
  • Tenth and the last one. On the 5th July when you leave your office for the parliament to present the budget, your team will hand over a brand new brown brief case which will have the budget speech. You and your team will pose with that brief case for the cameras and then you will read out the budget speech from the bunch of documents. And here’s what I suggest. Please, please do away with this brief case and the papers. Instead, amble along in style, pose for cameras with your hands “free” and as you rise to present the budget in the parliament hall, download the speech from the ministry’s secure server and project it in a large screen. Doing away with the rambling, long speech that would be just uber cool, while at the same time giving a push towards Prime Minister’s “Digital India” dream!

Pic Courtesy: Livemint

Jet Airways – Positioning lessons from its crash landing!

On Wednesday last week, as I was queuing up to board an Air India flight to Delhi, I could see the tarmac at the Mumbai airport lined up with idling aircraft of Jet Airways, whose operations was being cut down by the hour. Eventually, by evening the airlines shut down its operations completely, albeit “temporarily” as per the company’s statement. And in a twinge of irony, the last flight was a Jet Connect flight from Amritsar to Delhi that landed in Mumbai in the wee hours of Thursday.  I say “in a twinge of irony” because one of the reasons for the airline to get caught in turbulent weather, was its many experiments in positioning wrongly so, trying to compete with budget/low-cost airlines with Jetlite, Jet Connect and so on, when it hit financial air pockets way back in 2009 and later.

Unlike this generation, people born before the pre-liberalisation took their 1st flights when they started working! So did I. Way back in the early 1990’s for the initial few years, it was all Indian Airlines for work related trips. Though Indian Airlines in that period wasn’t bad, when Jet Airways burst into the scene, post opening of the sky along with other private airlines like East-West, Damania, Modiluft and so on, it brought in a whiff of fresh air. I remember vividly those times. The airports with inadequate infrastructure to handle the explosion of airlines and traffic, by and large resembled railway terminus’s and bus stations with multiple loud announcements of arrivals, departures and boarding calls.  “Chaotic” was an oft-repeated description of airports, then.

Amidst all the initial slew of private players, only Jet survived. It is clear that Naresh Goyal, the original promoter of Jet Airways had mastered the one core competency that mattered to excel in business in India – that is of “managing the environment”! But, I must admit that apart from managing the environment, Goyal could get another aspect of business right. That is of managing customer needs and experience well.

In those initial days, –  I am referring to the mid 90’s, Jet Airways experience was really out of the world,  particularly for frequent flyers. You could tele-check in and get your favourite leg space seats without much of an issue. Upgrade vouchers could actually be used to upgrade to business class even at the airport while checking in. There was a wide variety of meal options apart from just Veg and Non Veg. In fact for breakfast, in Vegetarian, they used to have South Indian and North Indian choices!  Dinners were 3 course meals. Hot and cold towels were provided even to Economy passengers! You could redeem your award tickets without much fuss and disappointment. In the initial few years, one needn’t pay even the taxes for award tickets (That changed pretty soon). With fares almost same as of other airlines, there was no reason unless otherwise the flight was full, to look at alternative airlines! I can say that from a user perspective, it was truly a golden era for Jet Airways!

The golden run for the airline continued in the 1st decade of this century, but with conditions attached. This was when it became a market leader by way of market share and leadership pangs started catching up. But still, due to its superior service and its On-time record, it was business travellers’ first resort.

The advent of low cost or budget airlines in the scene in India somewhere around 2006, must be one watershed moment in the history of Jet Airways. Captain Gopinath, the founder of Air Deccan redefined airline business in India with his no frills, low-cost offering exemplified by R.K.Laxman’s “common man” as the brand mascot. By lowering air fares to the extent of making it cheaper than train fare, Gopinath ushered in a whole set of middle class travellers into flying. In doing so, Gopinath with Air Deccan became of subjects of case studies in B-schools. The whole landscape of air traffic changed so fast in that period that, Air Deccan with its mindless pricing strategy, ended up disrupting itself and few other airlines on the way.

The global recession of 2008 and the cost consciousness that ensued among corporates world over, brought the curtains down on the party of the expensive, premium priced, full service airlines. In India, it meant Jet and Kingfisher who were truly premium, full service airlines at that time. This is where, I feel Jet was caught in the wrong foot. When it started losing market share to low-cost air lines and new entrants like Indigo, Go Air, Spicejet… Jet decided to pursue its own “budget airline” strategy which in my mind was a big mistake. Extending the brand is a trap which many companies fall into, with their eyes wide open.  Here, Jet Airways, hither to a market leader with a full service offering and impeccable service reputation, decided to extend its brand and launch a budget airline called Jetlite and then later Jet Connect. At the outset, it seemed like a smart strategy to prevent losing market share to the newly launched low-cost carriers, that too in those prevalent muted global economic conditions.

In the process, what happened was a systematic dilution of the brand equity of Jet Airways and all it stood for. In the name of cutting costs, service offerings were trimmed. It was no longer a frequent flyer’s delight. Service started falling apart. I started seeing the writing on the wall sometime in 2011/12. You could never get a seat of your choice even when you web checked in early! Choice of food became limited. For a flight taking off at 7.30 pm, instead of dinner, a snack meal was beginning to be served! Even the After mint (post meal mouth freshener) which was served in Jet Airways in the beginning, which became so popular that it was sold in super markets and stores as Jet Mukhwas suddenly disappeared from the in-flight meal. Here, I must add that I have seen many passengers asking for extra sachets of the same and hoarding them to their homes!  Award ticket redemption process now online, became a farce. There were just few seats for award tickets in a flight and you would never get them. If you redeem award tickets for your family, seldom you will get confirmation of the same while you book. Upgrade vouchers became just pieces of paper because upgrades were limited to few fares.

In the midst of all this, Jet’s financial woes only multiplied. A mistimed acquisition of Sahara Airlines only worsened the situation. Few quarters back, realising its original mistake of taking the budget airline route, Jet jettisoned its low-cost brands and decided to stick to just its full service offering. Considering the fact that global economy had revived, I thought that it was a wise move and hoped that Jet will soon be back to its glory!  Well, it did not. The low-cost hangover continued. The pricing was of full service. But the service was of budget airline! Can you imagine as recently as in Feb, on a 5 and a half hour flight from Mumbai to Singapore, there were no personal screens and one had really sleep through to kill time? And my co-passenger who requested for a glass of water got it after reminding the crew for the same at least 3 times! And of late dinner served in Jet Airways resembled more like junk street food! And I can only say that Jet’s frequent flyer programme – Jet Privilege which was once upon a time really world-class, is a pale shadow of its former self! Jet Privilege was such a strong brand that Goyal hived that off as a separate entity and monetised it. Even that infusion didn’t help to improve the user experience, though. Keeping the financial troubles aside, I was of the opinion that Jet was sinking as a brand anyway! And the culprit was its positioning! Was it a full service airline with offerings of a budget airline or was it a budget airline that was overpriced??

What if, had Jet continued to stay the course of a full service airline?

What if, in that period when low-cost airlines were mindlessly cutting prices, had Jet focused on “business value flyers” and on superior service?

What if, had Jet went after bottom line instead of preserving market share in that turbulent economic period?

So many what ifs! As I said, in hindsight, pontification is easy. But this hold lessons for companies for the future. After all, business cycles repeat themselves.

Having said that, singling out Jet is also a tad unfair. Airline business globally is a tough business to wade through. One that requires continuous infusion of Capex and which sucks up huge Opex. Only airlines that have thrived are those protected by state monopolies or those who have got their positioning and cost efficiencies correct. In India, the woes of Airline industry have been compounded by high taxes, fluctuating fuel prices, high interest rates and crony capitalist policies. In the history of Airline Industry, Jet is only the latest to bite the dust. Before, we had East-West, Modiluft, Damania, Air Deccan, Sahara, Kingfisher, Alliance Air and myriad other smaller airlines which all exited the scene in one pretext or the other! And we all know how Air India has managed to pull through while being in ICU for so many years.  And it is also clear that the other airlines are all clutching at straws and managing to stay afloat. That must really beg some critical policy related questions among the policy makers in India. While on the one hand trying to expand air travel to smaller towns in India, is the current Aviation policy regime really business friendly?

Seeing an Indian brand, which was once upon a time close to world-class fold up, is really unfortunate. Hope wisdom and luck prevails and we soon see Jet get its Jetwings of yore!

Image courtesy: https://www.thenational.ae