The Maahaul of India Shining!

If you are an avid watcher or reader of global commentary, you cannot miss the ongoing spotlight on India and mostly for good reasons.  India seems to be the shining star in what otherwise seems to be a global economy that is still coming to terms with post-Covid recovery and the spiralling effects of the Russia – Ukraine war. The past few weeks have seen a downpour of bad news on the economic front globally. And it is not just from the US which is a prime mover in the global economy but other developed nations as well.

India though seems to be a lonely planet in the universe. The stock markets are on a historic high as we approach the end of this calendar year and despite the global demand situation, the Q2 GDP numbers at 6.3% demonstrate that India is tiding over the global headwinds reasonably well. Therefore, on cue, we have been seeing many opinion pieces, commentaries, and encomiums of late not just within India but globally, saying that this could be India’s decade and so on. I am calling this the “India Shining” sentiment for easy understanding! The point to note is the maahaul of India Shining keeps visiting us every 5-6 years and ebbs off after a while.

The phrase “India Shining” was of course used for the first time by the Vajpayee-led NDA government to project a positive outlook of the country to foreign investors back in 2003-04. The campaign was envisaged by Jaswant Singh as the finance minister. Later on, it took shape of a political campaign for NDA in the 2004 polls. Many expert commentators till today opine that the India Shining campaign was the main reason for its defeat in the 2004 Lok Sabha elections. If one does a fine toothcomb analysis of the results, it will be clear as daylight that NDA was defeated due to other issues. We will keep that for another day, another blog.

The campaign did help to improve the image of India worldwide in that period. India was part of the BRICS coinage, a commentary that would have done countries like India, China, Russia, etc more good than any global PR campaign ever did. I remember in that period wherever I went, the BRICS story dominated discussions in board rooms and what followed was a long period of India Shining till the Global Financial Crisis in the form of Lehman shock struck in 2008.  If you recall, the period 2003 – 2008 saw huge investments in real estate and retail with the free flow of “Hot money” to India, all thanks to the positive India Shining sentiment.

The next brief and passive wave of India Shining started in 2014 after Narendra Modi took over as the Prime Minister of a full majority government after 1989. India was the flavour of the world then and this lasted for a few years till 2017.  The stock markets saw new highs with a heavy inflow of FII in this period.

What we are seeing now is the return of the BRICS type hype. The difference is, three of the constituents of BRICS namely Brazil, Russia, and China are no longer in the good books of the world while India continues to be. There are a few things that are going well for India overall now. A politically stable government that is confident in itself and no longer suffering from coalition compulsions.  A government led by a leader whose popularity and credibility among the masses is unprecedented in a long while which helps take decisions without looking over one’s shoulders.  Introduction of structural financial reforms like the GST and IBC that have stabilized and yielding results. India coming out of Covid relatively better off with life and business back to normal. The swift post-pandemic recovery in the economy despite the global headwinds due to the ongoing war. A nuanced management of the economy in the past few years and in a sense better than what the minders of the economy are being credited for, in my opinion.

Countries and Corporations who had conceived the China+1 strategy back in 2013 to de-risk from China are actually getting serious about executing the strategy now by shifting part of production elsewhere. The Covid pandemic and the way China has been handling the pandemic has now morphed the China +1 strategy into ABC (Anything but China) strategy.  These have certainly helped the cause of manufacturing in India as we can see in the exports of Mobile phones out of India now. We are still scratching the surface here and still miles to go before we become a credible +1 in manufacturing.

There is a visible infrastructural transformation that is happening in India as we speak. Highways, Railways, Airports, and seaports are all getting upgraded or added at a speed not seen before. Again, the pandemic derailed the progress for two years otherwise, many would have seen completion by now.

There is credence therefore to the India Shining sentiment that we are witnessing at the moment. Here is where I would like to add a caveat. Developed countries like the US, Western Europe, Japan, and so on look at other countries when their internal situations are not good. That is how China got the benefit of a huge benevolence from the US in the 90’s when the US outsourced almost its entire manufacturing to China.  Similarly, the US Economy is going through a trough presently with the spectre of a recession looming large. The economy is indeed resilient but there are lots of ifs and buts. Commentators call this the “Yes and But” situation.

If you look at India, I would say we are in a “No and But” situation. Living in India, one cannot resonate easily with the India Shining maahaul. Our cities are in a state of perennial under-construction.  Projects, whether they are flyovers or Metros just don’t seem to finish.  Interest rates have become so high that have pushed EMIs over the roof.  IBC has not helped to resolve quickly the issue of bankrupt companies. In Mumbai, bankrupt builders have ditched projects midway spoiling the aspirations of so many middle-class families and filling the skyline with incomplete towers. Jobs and Unemployment data point to a very grim situation for the youth.

But the economy is indeed growing. GST collections have been on a healthy trend. People are travelling and holidaying like there is no tomorrow. Just look at the long queues for check-in and security checks in big airports like Mumbai and Delhi in the early morning hours. Festival and marriage shopping crowds have been unprecedented of late in shopping areas in all cities. Cheap data and bandwidth have transformed our day-to-day lives in more ways than one. The “India stack” is a global case study. Amidst all the negative sentiments globally, there is an air of positivity in India. We have to move to a “Yes and no But” scenario that too as early as possible.

As Shekhar Gupta says in one of his columns, we have a habit of flashing victory signs early.  India as we speak is still a WIP and a lot of work is yet to be done.  From here, what we need is an uninterrupted home run where the economy keeps clocking 7-8% if not more on a year-on-year basis for 20 years.  If that happens, we will not be talking of just a maahaul but an actual India shining!

Pic credits: Alex Fine in The Economist dated 13th May, 2022.

Where is the “India Story” headed?

  • World over, inflation is at an all-time high.
  • Oil prices are shooting up.
  • There is a shortage of Wheat and other food items.
  • China has shut down its major cities in pursuit of its “Zero Covid Policy”.
  • Experts expect China to be in some kind of a lock down till 2023.
  • Supply chain disruption which started with Covid in 2020 is still on.
  • US GDP growth rate this year is likely to surpass China’s after four decades.
  • The World’s love affair with China is over.
  • Russia’s Ukraine war is dragging on without an endgame in sight.
  • US companies have pulled out or shut operations in Russia.
  • Affinity for Globalisation is now fraught with “Conditions apply”.
  • Almost all nations are seeking “Atmanirbharta” in some form or other without saying so explicitly.
  • A Unipolar world with US as its vertex that existed for two decades since the end of Cold War has now withered.

So, if one looks around, the picture is not very rosy. Where does that leave with the much touted “India Story”?

I think that this phase of 2/3 years is most crucial for India that can make or break the India Story. And the reasons are as follows:

  • Globally companies who had invested heavily in manufacturing in China are looking at de-risking from China. As a country with a huge population and therefore a source for cheap labour, India can fill in, if we get our act together quickly.
  • We are largely English speaking in business and our systems are integrated with the world unlike China which has strong firewalls in place for integrating all systems.
  • India has already proven its prowess in IT and IT services worldwide.
  • We have a functioning democracy that provides inherent checks and balances where transfer of power happens smoothly as per the will of the people.
  • We have a stable government in place now for the past 8 years at the Centre with a leader who is acknowledged and regarded worldwide.
  • India is back on its feet after two years of Covid.
  • With a large consuming domestic population, it is an attractive market for many corporations.
  • India can be the magnet for attracting manufacturing investments in areas where we have core competency like Auto, Pharma etc.
  • India maintains friendship and strategic relationships with big powers like US, Japan, UK etc…

In short, reasons which are all obvious and which we are all mostly familiar with.

For a world that is looking at options, India can be that next best choice if we get our act together quickly. And that is a big IF. Why is it so?  History of India is replete with missed opportunities. Opportunities missed at times due to external geopolitical reasons but largely thanks to internal politics.  Can this time be different?

I believe keeping aside what happened in the past, as an eternal optimist, things can be different if we played our cards differently.  Towards this, I am suggesting a three-point agenda:

  • Put economic prosperity and therefore growth at the top of the country’s agenda. Think, breathe, and act basis the same.
  • This means that at the Centre, States and local level including WhatsApp groups, we must put a stop to all divisive agenda items. The country must focus single minded on issues related to economic growth. Today, at these crucial times, we are spending our time and attention on issues like origins of temples and mosques. I think we all know the origins of the temples and we don’t need to further spend time and resources to establish the facts.  This is a needless distraction at this point of time for us.
  • Centre and states must work towards this goal of economic prosperity as a team. Unfortunately, today, there is an atmosphere of Centre-state friction for which I believe both the Centre and States are responsible. On the other hand, if Centre and states co-operate and work together, I am sure the pace of growth can be fastened. Let me cite two examples to demonstrate my point:
    • In Mumbai, one of the crucial Metro line projects is now in limbo because of the tussle between Centre and State over the location of the Metro car shed/depot. This is clearly unfortunate and there seems to be no sign of a solution to break the impasse.
    • Last week, at the World Economic Forum at Davos, many of the states from India had individual booths along with a strong contingent to pitch for investments. This is indeed appreciable. But, what if, instead of states fighting among each other to attract investments, the Centre and states had worked a joint plan? What if we had a common India pavilion at a much larger scale with separate booths sector wise with participation from concerned states? I feel this would have made a much larger impact and will also ensure joint ownership in execution once a project is landed.
      • Labour is indeed a state subject. But it is high time a common acceptable labour code is thrashed out between Centre and states and implemented asap. A GST council type labour council be set up asap to arrive at a consensus on this. I believe that such a labour council will also help to wade off local political opposition to changes in labour laws for all political parties.
      • One of the key issues for attracting investments for manufacturing is making available land at reasonable prices. Again, a consensus among states and Centre needs to be arrived at for changes in the current land acquisition bill and implemented asap.
    • In essence between the Centre and State what is needed is Co-opted federalism and not Competitive federalism. Dwelling too much on semantics like “Union Government” Vs “Central government” is just a sheer waste of time.

Author and Columnist T.N.Ninan in a recent piece in The Print says, “For India, economic disorder is a reality to be reckoned with, but it also presents an opportunity” and I agree completely.  If we blow this opportunity, I am afraid that the India story will turn to be a Saas-Bahu type soap where the end doesn’t matter as long as there is some drama every day.

Annual Budgets and Annual Reactions!

In the days following the Annual budget last week, I saw a clip going viral on WhatsApp which had Uddhav Thackeray, the Shiv Sena Chief and Chief Minister of Maharashtra speaking in a CNBC function to felicitate Finance Minister Nirmala Sitharaman. This clip (watch here) must be couple of years old. In the clip, Thackeray in a very self-deprecating manner, talks about his tryst with giving budget reactions. He says that for few years he tried to understand what’s in a budget but by the time he could do so, it was time for the next budget! But, since as the party chief he had to give some reaction to the budget, he developed a template response which was “This is a budget which will make poor poorer and rich richer” and more often this response for every budget landed well with his constituency. You would notice that even today, this response has a lot of owners among politicians! In today’s article in the Times of India, columnist and now a MP Swapan Das Gupta has mentioned that Vajpayee while in opposition had a stock reaction to any budget which was “Garib ke pet lat” (Kick in the stomach for the poor)!

If there are Annual budgets, there are equal and opposite Annual reactions! It’s therefore clear that one cannot go by the reactions of politicians on the budget to conclude how the budget has been. If leaders of parties and politicians cannot figure out what’s there in the budget how can we expect the common man to understand how it is going to impact him? While we all know that provisions in the budget have a huge impact on the livelihood of millions of people in the country who remain below the poverty line, during the budget week what we hear is only responses of people to whom budgets don’t matter. Those who are impacted by the budget are not in a position to comment because it is beyond their comprehension.

Here’s where I feel that the Budget presentation and the speech needs to be simplified if we want the common man to fully appreciate the implications of announcements being made by the FM on behalf of the government of the day. And here is my wish list on some of the changes I would like to see in my lifetime (I might have articulated some of this before also):

  • Articulation of what matters: In the run up to this year’s budget, the buzz was on jobs. We all know that in the last two years of the pandemic jobs got hit badly. In a double whammy, the pandemic led to a cut in existing jobs and slow addition of new jobs. Human/Contact facing service industry faced the worst hit. So, the expectation was that there will be clear actions to revive the job market. However in the budget speech, there was no explicit mention of job creation. In the post budget interactions, the FM and her team took pains to explain that the government has taken the route of propping up growth by spending which will lead to job creation. For example, they said that the huge 35% increase in outlay towards infrastructure and capital expenditure is a step towards reviving consumption in sectors like steel, cement etc. and jobs. This is logical.  Yet commentators continue to mention about the lack of focus on jobs in the budget.  And Aam Admi obviously feels the same.
    • Now considering that there was an overall anxiety and expectations about jobs among common people particularly those below the poverty line, what if the speech mentioned the estimated number of jobs that would be created due to the outlay? For example, “National Highways network to be expanded by 25000 km in 22-23 resulting in an estimated number of “X” jobs during the year”! 100 PM Gati Shakti Cargo terminals for multimodal logistics facilities which is expected to create “Y” number of jobs!
    • The same outlay but with a clear articulation of what matters like “jobs” this year, I think would generate a lot of confidence and comfort to the people for whom these announcements matter.
  • Putting out Outcomes of last year outlay before announcement of new outlays: During the entire budget speech the FM keeps announcing crores and lakhs of Rupees as outlays for different initiatives much to the loud cheers of the party MPs. But as public, we don’t get to know what was achieved with previous year outlays for the same initiatives to appreciate the new outlay.
    • For example, the health sector has been allocated a 16% higher outlay of Rs. 86200 Crore in this budget compared to last year outlay of Rs. 72931 crores. Now we don’t get to understand details of how the outlay of RS 72931 crores was spent and what was achieved. Another example – During the UPA regime, after the horrific Nirbhaya incident, an announcement was made of a “Nirbhaya fund”. I have no idea if that fund still exists and how the same is being put to use.
    • If we understand that, then we will be in a better position to appreciate the increased outlay for the next year.
  • Articulation of what went wrong: In the budget speech we never get to hear of anything that went wrong on the outlays or the outcomes in the previous year.
    • For example, the targets for disinvestment have been missed for few years now. But we don’t get to understand what went wrong and why those numbers were missed. It could be the procedural delays or timing issues (Bull Vs Bear market) or it could be pandemic related delays. This could be a very utopian thought but if the government of the day articulates the reasons for the miss, it will go in a long way building credibility in the budget process.
  • Articulation of how taxes work: Present a summary of how the taxes that have been collected have been put to use in the current year.
    • Many years ago, on a trip to Colombo, I saw at the heart of the city, some major repair work was going on with the roads and traffic was diverted. There I saw a board which said “Take Diversion. Your Tax money at work”! This was in the early 90’s. The fact that I still remember it and recall it here says about the impact of such earnest disclosures from the government side. What if at the beginning of the speech the FM says, “With the taxes collected last year, we could lay X kms. of roads, build Y number of new hospitals, open Z number of Colleges and schools and so on just focussing on the physical assets created with the taxes this year? Don’t you think that this kind of commentary will once for all remove the clamour for income tax reduction or slab changes or rants for paying taxes year after year?
    • I firmly believe that the common people who earn and can afford to pay the taxes must be co-opted in the nation building process. Such small gestures of earnest disclosures, I believe will go a long way in this.
  • Keep the jargons for The Economic Survey: The speech and announcements are supposed to pick up threads from the Annual Economic Survey. My suggestion is that Economic Survey being a reference document prepared by economists can and should use jargons like “Crowding in”, “Virtuous cycle”, “Animal Spirits of the economy” and “JAM Trinity” etc. while the budget speech should be left simple free of lofty jargons and acronyms.

This is the ace cartoonist R.K.Laxman’s cartoon way back in 1989 post the budget!

This could very well play out the same way even today. The only way to change the same is to simplify the budget speech and ensure that the common people are co-opted into the budget comprehension process.

HNY to HNQ??

As I sit to pen my first blog for this year in the early days of another New Year, I am reminded of my first post for the last year which was titled “Thank God it’s a New Year”! That time (1st week of 2021) we were just coming off what appeared like a terrible year. The entire world was disrupted by the global pandemic in a scale not seen or heard in many, many decades.  But then by January, we already were recovering and started gradually getting back to pre-Covid way of living. Lockdowns were over, travel started and so on. So, the theme of my piece then was that the worst was behind us and we must thank God that we are in a New Year and raring to go.

In the year 2021, we did finish the first quarter on a high. There was optimism all-around of a sharp turn around. But then, just in a few weeks, the world in general and India in particular was mauled by the 2nd wave.  I shudder to recount the horrifying things which were happening around us in the months of April/May/June/July. Enough to say that the cursed tentacles of the virus were still spreading all over spelling doom on all recovery predictions.  Drawing room conversations were all around the availability of vaccines and the time when vaccines will provide an eventual shield for the virus.

If we recall, by the third Quarter of 2021 however, things on the ground started changing rapidly. The vaccination pace picked up dramatically with better availability of vaccines by August. And we were talking about flattening the curve for the second time. Through the festival season in the months of October/November the mood was upbeat and we could start seeing the recovery even in “Contact sensitive sectors” like travel, tourism and so on.

Things started dramatically changing again with the discovery of the Omicron variant in South Africa in early December. And towards the end of December and as we speak now, we are witnessing another rapid spike in cases and preparing ourselves for the inevitable third wave!  If you have been following the IMF predictions for the global economy and specific countries through the pandemic, you will realise that they have been changing their forecasts every quarter up and down. Now, what am I trying to drive at here?

With such an uncertainty in the world triggered by a virus and its variants today and it could be something else tomorrow what does it leave for long range planning for a country /company /household etc.?  It is tough. To elucidate this point let me talk about the way Indian government handled the economic support during the pandemic versus some of the larger well to do countries. When the pandemic struck in March 2020, big economies like the US, Canada and European countries who could afford, opted for cash transfer to its people to pump prime the demand and therefore the economy. Some of the Non-resident Economists of Indian origin of the likes of Dr. Raghuram Rajan, Dr. Kaushik Basu and Dr. Abhijit Banerjee also advocated this route for India and were extremely critical of the Narendra Modi government for not going the whole hog and opting for a more calibrated “Drip support” approach.

In this approach, instead of direct cash transfer, the government opted for free supply of rations to the needy and generous support of working capital to ensure that the businesses stay afloat. There were also moratoriums on loan repayments for most part of the year 2020. The logic of the economic think tank that included the likes of Dr. Bibek Debroy (Chairman – PM’s Economic Council) , Sanjeev Sanyal (Principal Economic advisor in the Finance Ministry) and Dr Krishnamurthy Subramanian (Chief Economic Advisor) was to take one step at a time when how the virus situation will pan out was uncertain, uncertainty being the key word. The time period for which any support was to be provided was not clear. Also another important thing, during the pandemic induced lockdowns, the issue was in the supply side largely. People stopped going to salons during the pandemic not because they didn’t have money. The same logic can be extrapolated to other service sectors as well. So, the idea was to keep the powder dry for eventualities in the future. As per IMF’s Dr. Gita Gopinath, large economies including the US have no more leg room left to keep supporting the economy and hence are facing an imminent challenge if the virus continues to hold sway. I must say therefore that the Indian think tank certainly stand vindicated on this account when we had to contend with the second wave and now the third wave.

My point therefore is, are long term planning or Annual plans relevant anymore? Things on the ground change so dramatically and drastically these days that any assumption for the better or worse of the future happenings is proved wrong very quickly. Since in India we understand similes from Bollywood easily, let me give an example. RRR is the next film after Bahubali from the ace director Rajamouli. This is also a magnum opus that has been made in multiple languages. Obviously due to the huge budget involved, it had to opt for a theatrical release and was planned for a release in January. The entire team was seen doing mega roadshows in different cities as part of the promotion for whole of December. But then, I see today that they have taken a call to postpose the release due to the like increase of restrictions in many cities due to the Covid surge of late! So it is a matter of few weeks for things to change for the fate of a film that was on the works for five years!

Even in the context of business in the pre-Covid times, I have not been a big fan of rigorous annual planning as, over a period of time, I have seen that assumptions and market conditions change drastically leaving the annual plans as an academic exercise. Now in the post Covid New normal, I feel that time has come to focus on QSQT (Quarter Se Quarter Tak).  While an overall Annual plan can be made for directional purposes, the drilling down of everything to quarters and months and weeks is a wasteful exercise in my opinion. In the sense does it make sense to assume that Omicron is not going to impact the economy so much and plan expenses accordingly for the coming fiscal year? Or we in any position to comment the recurrence of any new waves in the future? Instead in the current situation, whether it is the country or corporation or housing society or our own house hold we may be better off to keep the horizon of three months and take it from one quarter to another. On that note, wishing you all a Happy and contented New Year or should I say Happy New Quarter (HNQ)?

Image courtesy: Kat Millar.com

When Farm laws became Former laws and the lessons therein!

Guru Nanak Jayanti henceforth, will have an additional reason for celebration for many. Apart from celebrating the revered Sikh Guru on his birthday, the day will be also be remembered and celebrated for bringing Narendra Modi’s strong government down on his knees. This week on the day of Gurpurab, the Prime Minister chose to announce the repealing of the three farm laws which were meant to reform agriculture. This after almost 18 months of relentless protests by farmers mainly in Punjab, Haryana and Western UP. That the government had to finally relent and nullify the laws is unfortunate.  From here on, it is going to be tougher for this government to push through reforms of any nature. The opposition and the other adversaries have smelt blood and have found the soft underbelly of this government and hence a template for pressurising this government.

Farmers celebrate after India’s Prime Minister announced to repeal three agricultural reform laws that sparked almost a year of huge protests by farmers across the country in Singhu on November 19, 2021. (Photo by Xavier Galiana / AFP) (Photo by XAVIER GALIANA/AFP via Getty Images)

This means that moving forward, the Government needs to be inventive and creative in pushing through contentious reforms and bills so that the same fiasco is not repeated. And here are some unsolicited, practical ideas to the government to help push path breaking but contentious reform bills:

  1. Say No to Ordinance: The word “Ordinance” immediately raises the antenna of the opposition and commentators in civil society who deride anything that is an ordinance. Even if it’s a legitimate cause, pushing it through the ordinance route, unnecessarily gives it a colour of conspiracy.  If the Government opted for the Ordinance route to save time, then it is ill intentioned. In India, in matters of reforms, we are used to passing laws after 10 years of debates and discussions. So, trying to cut a few months of time by opting for the ordinance route is not worthwhile. And as we have seen in the Land acquisition bill and now in the farm laws, ordinance route has not helped at all. Considering the fact that the government has a comfortable majority on its own in the lower house and can manage a majority in the upper house, it is wiser to table the laws in both the houses, do some discussion and pass them as laws legitimately.
  2. Roll the red carpet to “Select Committees”: Opposition parties have egos. And egos need to be massaged often. What’s the other better option for this than rolling out the red carpet to “Select Committees”? In your planning cycle for tabling a bill that is reformist in nature and which will attract the ire of the opposition, buffer in certain time for sending the bill to “Select Committees”. It is usually said that “When a government cannot commit, it committees!” I would say that even when a government is clear in its mind and can commit, it should “committee” so that the opposition feels that they have been consulted and the law has been passed after due process. Now the flip side of this is possible dilution of certain provisions which may distort the intent of the law itself as we saw in the case of the “Land Acquisition bill” which the UPA government passed.  Ultimately it has become an ineffective piece of legislation that is the reason for delays in many of the infrastructure projects that are underway. But here again, I would say that with the numbers on its side, the opinions and recommendations of the Select committees can be managed in its favour by the government and in case there are some genuine provisions that need correction, that is welcome.
  3. Head hunt key opposition leaders to be ambassadors: Most of the reforms that are being brought about by the government are long pending once that have been talked about for a long time now. So, in public domain we can always check if any key opposition leader had a favourable view on the subject. It is important to head hunt such leaders and co-opt them as ambassadors for the law by reaching out to them before the law is tabled in parliament. This will not only divide the opposition but will also help in influencing public opinion in favour of the intended reforms. For example, in the case of farm laws, it is known to all that Sharad Pawar when he was the Minister of Agriculture had talked in favour of some of the provisions in these laws. So when Pawar expressed his reservations on the farm bills, the first attempt of the ruling party leaders was to expose his hypocrisy. Instead of that, the government should have reached out to him and sought his support before the bills were tabled. He could also have been used to influence other parties and fence sitters could have been won over. This approach needs a bit of deft floor management and handling of the opposition which I feel is lacking with the Modi government presently.
  4. Cherry pick opinion leaders to influence opinion: During UPA-1, the nuclear bill which Manmohan Singh was personally championing got into rough weather when its own allies from the Left were opposing the bill tooth and nail. The principal opposition party then which was the BJP, also took an opposing view though it was NDA under Vajpayee rule that had sown the seeds for engagement with the US on the nuclear front. In a masterstroke that set the cat among the pigeons in the BJP camp, Sanjaya Baru the media advisor to Manmohan Singh then, reached out to Brajesh Mishra, who was the National Security Advisor to Vajpayee and a vocal supporter of the nuclear bill. Brajesh Mishra came out openly in the press to support the nuclear bill which took the sting out of the BJP attack in the parliament and outside. The present government can take a page out of this play book and cherry pick opinion leaders from civil society to come out in the open to support the proposed reforms. While on this I must add here that many commentators who were in some point of time votaries of the farm bills turned their back and changed their opinion just because the reforms were brought by the Modi government.  This sort of exposed the intellectual dishonesty of such commentators and this is another reason why I advocate that it is important to cherry pick and co-opt some of these commentators who can influence public opinion.
  5. Debate and Debate: I have been reading that the farm laws were passed by the Modi government without any debate or discussions with the stake holders. A lie repeated often becomes the truth. This government might not have debated the bill in the floor of the house during this regime but the subject of agri reforms and the need to reform the APMC act have been discussed and debated enough since 2000. One has to just read this finely detailed paper titled “An intellectual biography of India’s new farm laws” by Gautam Chikarmane to understand the chronology and the journey of these laws. My proposal is, for future even if the need for a reform has been discussed many times, provision a few weeks for repeating the same in the parliament in your regime. Because in India, carrying out the debate in the floor of the parliament is supreme, notwithstanding the quality and the purpose it serves.

The government has its plate full in terms of the reforms agenda in the months to come.  Opposition parties and other interested parties can and will try to follow the SOP of the farm bills in derailing these reforms in the remainder of this term of the government. Therefore it is important that hard lessons are learnt to ensure that this government under Modi is not seen just as a harbinger of “former laws”!

Pic Courtesy: Forbes India

Tata…, Air India!

The last time I flew Air India was before the pandemic to Shanghai from Delhi and return. The reason to fly Air India was obvious. There were no direct flights from Mumbai to Shanghai (Yes, surprise of surprise, after Jet Airways stopped flying this sector) and to save time on transit, it made better sense to fly to Delhi and take the direct flight to Shanghai. For most of us, the reason to opt for Air India for international flights, particularly when travelling for business/work would be this.  In the absence of a better option and not necessarily being the first choice.

The other set of non-business travelers from India (Students, Senior Citizens, vacationers) opt for Air India for cheaper fares or the extra baggage allowance which comes handy.  In the past one or two decades, rarely I have seen or heard anyone opting to fly Air India for its superior service or for the flying experience.  And herein lies the sad and sordid tale of Air India as a National carrier of India. If this is the situation with Indians, one can imagine where Air India would stack up in the minds of foreigners.

The situation was not so bad all along for Air India. During my MBA days, way back in 1990, we did a survey of air travelers in Mumbai as part of a marketing project. International travel was not common those days as it is now. I vividly remember that Air India fared very well in terms of perception and I guess those were the heady days for the Maharaja. But in the subsequent years as International air travel picked up and when the market was actually exploding in India post liberalisation, Air India was imploding.

The reasons for the rot in Air India have been chronicled well in Jitender Bhargava’s (Former Executive Director of Air India) book – The Descent of Air India. In a deadly cocktail of an indifferent and unaccountable Top management, political interference and string pulling and a demotivated and tired staff, there was only one direction the airline was heading – southwards. Of course, he argues that the descent was accelerated by ill-timed and ill-advised decisions including purchase of new fleet at uncompetitive prices and signing of non-profitable bilateral agreements during the UPA regime.  Irrespective of the political regime, it is a known fact that PSUs like Air India and ITDC were treated like personal fiefdoms by both the executive and the bureaucracy to further their own personal interests.

Now and then, different governments have tried to revive Air India by blowing money on marketing campaigns and taking advantage of exclusive route agreements.  The Air India marketing campaigns have always been top notch. But as I have said before, the best marketing campaigns cannot save a floundering product. Some of the attractive routes, Delhi-San Francisco for example, are profitable and well sought after by Indians but such far and few successes in between cannot sustain a full airline.

The present sad state of affairs at Air India, the losses it has accumulated, the capital it guzzles on a monthly basis, the struggles of the staff in getting salaries on time etc. have been documented well overall and hence not repeating those points here. Enough to say that if there was any company which the Government of India should disinvest and exit in a hurry, it was Air India. So after a few attempts in that direction right from the first time under the Vajpayee’s regime to Modi’s current run, finally the disinvestment of Air India is a reality.

 

Air India is Ghar Wapsi for the Tatas. The story of how Tata Airlines became Air India by a forced nationalisation is also well documented. It will be interesting to observe how the Tatas embrace Air India and more importantly turn it around quickly. For Ratan Tata, there is an emotional connect with Air India. But then, we know how just having emotional connect doesn’t help in business. It calls for a Himalayan effort to start from scratch, change the culture, compete and build a world class airline. Tatas of course is not new to the airline business. They have been running Vistara in a joint venture with Singapore Airlines for some time now. Tatas also have investments going in Air Asia – a regional airline. But then, taking over a fledgling Airline like Air India and turning it around is another cup of Tetley tea!

Airline business is one business which is CAPEX intensive and OPEX intensive at the same time. There are businesses which are highly CAPEX intensive but once done, do not incur high operational costs (Like the mobile telephony business). There are businesses that don’t require high CAPEX investments but need working capital and operational efficiencies to remain afloat and profitable (Like trading businesses). Airline business is one which demands very high CAPEX investments (Planes, slots, infrastructure etc…), high operational costs on a daily basis (fuel, high salaries, marketing etc.) and require operational efficiencies of the highest order in order to be profitable. The moving parts are so many that with one wrong move, the business can get into a crisis mode. Ask Vijay Mallya or Naresh Goyal. This is one of the reasons why we have seen so many airlines folding up in India itself ever since the skies were opened up to private players.

In Airline parlance, there are this headwinds and tailwinds. Tailwinds propel the flights and headwinds have the opposite effect. In he history of Air India as a business though, it has seen only headwinds.

I am certain that Tatas would have obviously done their homework that too extensively, before bidding for Air India. Now that they have won, they have their task cut out. There are many things going for them, on top being the good will of Indians in general towards Tatas. That’s why we didn’t see much of opposition to the announcement of Air India being sold to the Tatas. With “revenge travel” post Covid expected to take off, the timing is just right for Tatas to soar into the Indian skies with Air India N.0! I am personally looking forward to the day when I would opt for Tata-Air India as my first and only choice when I fly abroad. For now, it’s Tata, Air India from GOI and as Amul says, a “Good Buy for Tata”!

Post Script: Interestingly, the Air India Staff Union expressed its happiness over Tatas winning the Air India bid! When was the last time a staff union was happy over privatisation in India? And when was the last time we saw no noise from the Left over privatisation?  Acche Din are here, guys!

Catching up on the Economic Agenda!

Social Media is an ongoing battlefield for the IT Cells of political parties. There, you routinely find claims and counter claims by BJP and the Congress, which get forwarded and go viral.  Among the regular updates from the BJP side, the ones which are popular are those where Narendra Modi era (Post 2014) and Manmohan Singh era (2004-2014) are compared which show how the country has progressed rapidly in the last 7 years whether it is Highways construction, Rural Electrification, Toilet construction, Clean water supply etc. etc. However, one thing on which the BJP IT cell is put on the back foot by the Congress is the Economic growth. This is a graphic which is popular among the Congress supporters and rightly so where in comparison, the Singh era shows higher average GDP growth than the Modi era, so far.

I am certain that if there is one thing Modi as a person, who likes to leave behind a legacy in whatever he does, would like to correct, it would be this. Frankly, I had high hopes from this government in its first term on its economic agenda. I thought that with a clear majority, it will pursue bold and long pending reforms with a much higher vigour than the reformist Vajpayee Government which was always bogged down by coalition pressures.  It turned out that, but for the introduction of GST (a landmark and very important reform, in my opinion) and Demonetisation (in which the costs outweighed the benefits), the 1st term was lack lustre and was more or less on “Maintenance mode” as far as pursuing a bold economic agenda was concerned.

It is my opinion that lawyers do not make good Finance ministers. P.Chidambaram, a fine lawyer, who is regarded as one of the most reformist Finance ministers the country had, always use to come up with one nit picking thing in his every budget, which cast a dark shadow on all the other good reforms he came up with. We all know what happened with Pranab Mukherjee, another Finance minister with a legal background. His retrospective taxation idea much against the wishes of even the economist Prime Minister Singh, punctured the “India Story” then and our economy went into a tailspin. So, that’s what happened with the Modi Sarkar in its first term. Arun Jaitley, another fine legal eagle was picked as the finance minister but, even during his regime the retrospective taxation was not rolled back! With no much economic traction, the 1st term of Modi ended on a disappointing low economic growth path.

In 2019, when Nirmala Sitharaman was made the Finance minister in a very surprise move (not Piyush Goyal who was touted as the favourite), expectations were quite low. But, I had mentioned that time, that she could surprise the critics at the end of the day. I felt that considering her background and her studious nature, she can be expected to meticulously follow the agenda as laid out in the manifesto. Not just that, but also follow through methodically in terms of execution.  You can see that this is what is happening now.  In her 1st budget in 2019, when corporate taxes were cut – a bold economic move to boost private investments and sentiment, it appeared that the Modi Government in its second term had got its intentions right in pursuing its economic agenda to boost growth which faltered in the 1st term.

 

The pandemic though, which hit all economies hard including India in Feb/Mar 2020 put a spoke all further bold moves. Economic management during a pandemic is a double edged sword. The government needs to focus on lives on one hand and livelihood on the other and that too when its income is crippled.  But, I thought that the team managing the economy in this government weathered the Covid storm very well and managed to tide over the crisis very well, under the circumstances.

In the midst of the pandemic last year and perhaps even now, top economists of the likes of Dr. Abhijit Banerjee, Dr. Raghuram Rajan and Dr. Kaushik Basu have been of the opinion that the Central government should not worry about fiscal deficit, agency ratings and all. Among other things like increased spending on health, they maintained that it should just do cash transfers through DBT mode to the needy. However, the government took a more cautious and calibrated approach of support by providing free ration to the needy, extending loan support to businesses etc. instead of cash transfers.  This has been a clash of ideas between the economists in the government and economists commentating from outside.  Frankly, I felt that what our government did is a better approach for a country like India.

Unlike the West, in India, people are more conservative financially. So, when a person gets free cash during a pandemic his first instincts will be to save it for spending on essential goods rather than on non-essential stuff to boost demand. Secondly, thanks to the lock down, there were supply restrictions. It is not logical that people will spend money just because they have been provided with cash support. So, the Government’s calibrated approach of providing free rations to the needy serves the purpose of protecting livelihoods during the pandemic. The salaried upper middle class and above were anyway not so affected as they were getting the salaries and even they spent only on essential stuff basically due to lockdown restrictions. So, the argument that Direct cash transfer would have boosted demand in the times of a pandemic doesn’t seem logical at all.  If not all, a few economists like Swaminathan Aiyar finally admitted that this approach worked better for India.

It is in this context of understanding the thought process of this government on handling economic issues during the pandemic that I bumped on this video. In this speech, Sanjeev Sanyal, Economist and Principal Adviser in the Ministry of Finance, articulates brilliantly the approach of the government in managing the pandemic from an economic stand point. If you haven’t watched it, please do so.  It answers quite a few questions which are routinely thrown at this government at the way it has been responding to the pandemic.  Its clear from the speech that there is a “method” in the thinking of the government while there is “madness” in the newsrooms that feed us information.  I wish that the government articulates the thinking behind their decisions more regularly for the benefit of all.

Now if you see the last few months, it is clear that the government is dead serious in reviving the economic growth. Some of the decisions since March have been bold and commendable. The rolling back finally of the retrospective taxation is one.  The Asset Monetisation program is another.  Taking a call to relieve the stress on the balance sheets of the banks by forming a “Bad Bank” is also another one.  Again, addressing sector specific long pending issues like in Telecom is yet another.  So, there has been a slew of bold decisions recently that gives a hope that in this term, with the pandemic hopefully behind us, the Modi Sarkar is pushing aggressively on its economic agenda.

As an economy, I believe we are at an interesting and crucial point. The pandemic is ebbing (or so we believe). Vaccination is progressing at a rapid pace. Economic activity is getting back to normal. These should bring the economy soon to pre-Covid levels. Now, if the bold reforms that have been unleashed this year has the desired effect, the growth only can be higher from here. For the Modi Sarkar which is finally catching up on the economic agenda, it will be a lasting legacy to demonstrate a higher average economic growth than the Singh era. And for the IT cell of the ruling party, few memes less to counter!

Debate around the Growth of the Indian Economy!

Few weeks ago, the GDP numbers for the 1st quarter of this fiscal year for India were published. As per that, the Indian economy grew by 20.1%. In the following days, there were columns, Op-Eds and Social media commentary on whether it was a good quarter or not. Since “Neutral media” is an Oxymoron, depending upon the leanings of the media, the economic performance was either branded “historic” or “pathetic”. There are no surprises here and we have now learnt to live with the media spin on all issues.

Along with the media, the tribe of “Neutral Economists” is also on the wane.  Depending upon their political affiliation, the first quarter performance was touted to be “record breaking/highest ever” or “worst/shocking” in decades by reputed economists.  Therefore for an Aam Admi, it is difficult to judge what actually the situation is. And the truth as in many situations may be somewhere in between.

I am no economist but as an ardent follower of the Indian economy, I tried to make sense of the numbers and the trends thereof and this is what I find. I would like to hear the opinion of the readers as well on my hypothesis.

In isolation, a GDP growth of 20.1% is of course very good. But, we should not forget that this is at the back of a low base of -24.4% same Quarter last year. In that sense, some of the commentary from pro Government circles that this growth is massive and is earth shattering etc. is immature.  At the same time, commentary from the opposition side comparing this with GDP rate pre-Covid and claiming that actually it is lower than what it was two years ago is equally immature. And this is why.

First, the reality is, on a trend line after a massive negative growth of 24.4% in Q1 last year and growing marginally by 1.6% in Q4, a growth of 20.1 in Q1 this year shows that the economy is indeed recovering and the recovery is V-shaped to be precise. This is certainly to be happy about.

Second, we must keep in mind that during Q1 this year, we got caught by a massive second wave which again put several curbs on the functioning of the economy, which was as such firing at much lower levels than before. So, among the eight buckets which contribute to the GDP namely Manufacturing, Construction, Agriculture/forestry & fishing, Mining & Quarrying, Electricity/Gas/ Water & other utilities, Trade/Hotels/Travel & Communication, Finance & Real Estate and Public administration, Defence & other services, it is obvious that a couple of engines are not firing at all. It is therefore natural that when you compare with the pre-Covid situation, the GDP in absolute numbers will be lower. This however does not take away the fact that with the easing of restrictions, the economy is obviously recovering.

Third, let us take a look at the monthly GST collection numbers for the past couple of years.  The average monthly GST collection figure in 2018-19 was Rs. 98,114 Cr. and the average in the 1st four months of 2021-22 is Rs.113,333 Cr. 2018-19 was pre-Covid, normal times and these four months are right in the midst of Covid. And compared to Rs. 101,818 Cr. monthly average last year. So just a cursory glance shows that the economy is on the mend clearly this year.

Here, I would like to dwell into a larger point and thereafter a question.

I would presume that GST collections represent transactional activity in the economy with respect to both goods and services. We are all aware that post the pandemic all “Contact” based sectors have been severely affected. This includes the likes of Travel, hospitality, Wining and Dining (all these for business and pleasure), impulse shopping, recreation and entertainment of all sorts and other human touch related services (salons, spas…). While the Software industry per se has not got affected due to Covid with “Work from Home” filling in well, the ecosystem around it has been significantly disrupted. This includes transportation, catering, real estate, utilities, other discretionary spending and stuff.

As common public, our shopping is mostly restricted to what is required. We travel only when it is utmost required.  The “Festival economy” which is big in India has been crippled since last April.  So my question is, when transactions around goods and services have been curtailed, how is it that the monthly GST collections have shown a growth over 2018-19? (Pre-pandemic period)

There are can be two inferences from this trend:

First, if the monthly GST collection is showing such a robust 15% growth (over 2018-19) even during the pandemic times, once we are done with the pandemic and when all the cylinders start firing, we are looking at an exponential growth in monthly GST collection figures. (Even adjusting for inflation)

Second take away is, either with whatever limited avenues left to us, we are consuming much more than average or there is a significant shift towards formalisation of the economy. I would like to believe in the latter. I don’t think we are consuming more than what is required. However, certainly our purchasing patterns have changed. Due to the pandemic imposed curbs, it is possible that our dependence on the neighbourhood mom and pop stores have come down and we have got used to the convenience of door delivery for everything.

As a personal example, pre-Covid, we used to buy vegetables and fruits from our neighbourhood bhaiya. Once lock down struck, this shifted to a vegetable vendor who was arranged by our apartment complex for door delivery. Here, payment was through G-pay/PayTm etc. Now in the past few weeks, the same vendor is now part of an E-Commerce aggregator called Bhajiwala.com! Bhajiwala.com, I am sure is within the ambit of GST and hence clearly part of the formal economy! My view therefore is, the benefits of GST implementation which we were all looking forward to is beginning to accrue and will be more visible when we are out of the pandemic.

It was widely believed that once GST is implemented, it will add 1-2% to the annual GDP. I now believe that once the pandemic is over and when economy starts firing in all cylinders like before, the bump due to GST could be in excess of 2% because of the increased formalisation of the economy is the last 2/3 years. This I am talking about even after the pent up demand effect.  That should put the naysayers of the GST to rest.

Though we cannot take the stock markets as a real indicator of the state of the economy thanks to its fickle and speculative nature, probably the markets are seeing into the future as above which others are not.  Which is why the markets have been on fire since the last few months even in the midst of the pandemic.

In conclusion, I would like to say that yes, the high growth in Q1 is due to the low base effect.  Yet, it is a significant milestone and pointer towards a robust economic recovery. It is certainly one to be cheered upon if not celebrated upon as yet.  Acche Din are around the corner!

Pic Courtesy: The Economic Times

Olympics and Sports as a great Unifier!

The Tokyo Olympics 2020 which got delayed by a year due to Covid, finally got over today. The Indian effort at the Olympics culminated in a flourish with Neeraj Chopra winning the Gold in Javelin throw. All these years, after every Olympics, the commentary has been about how a country of 1.3 billon cannot win even one Gold.  Or for that matter how small countries like Kenya and Spain can win more medals than India. This time, we will be spared of the usual diatribe or so I hope. For, we won a Gold that too in a track and field event for the 1st time. With a total tally of seven medals that included two Silvers and four bronzes, this is our best outing in an Olympics. Not just that, we missed a handful of bronzes by a whisker.

At a time when the whole country has been going through a challenging phase for more than one year tackling Covid and its spiralling after effects, the encouraging performance of our contingent at the Tokyo games came as a whiff of fresh air. We almost forgot to track the everyday Covid statistics of daily new infections, number of deaths and the R-Factor etc.  The media as well, which is what steers our attention usually on a day to day basis, gave more coverage to the games rather than the usual stories.  For a change, WhatsApp groups were buzzing with forwards related to the lives of the winners at the Olympics. And for once a Javelin throw was being watched by many Indians when a Test match was going on in parallel!

I have not seen this kind of frenzy for following Olympics as we saw this time, ever before. This kind of excitement and passion is usually reserved for Cricket in India. With Cricket of course, the craze and following have been for a long while.  For instance, an Indo-Pak Cricket encounter at any level can bring India to a grinding halt. Cutting across geographies, religion, caste, creed, language, gender and social strata, a World Cup Cricket match and that too if between India and Pakistan unifies India like no other.

What we have seen in the last few days with Olympics has shown that the Indian passion for Cricket need not be exclusive. People’s passion will follow wherever we win or succeed. For long, it has been ingrained in our minds that “Jo Jeeta Wohi Sikandar”. But the other part is the question of National Pride. The number of times the clip of Neeraj Chopra on the podium with the National Anthem being played in the background, got shared on Social Media since yesterday is a testimony to this.

The general commentary or narrative has been that we Indians only support or cheer Cricket and that is the cause for other sports not flourishing. While this could be true, it is only partly true if at all. I am of the opinion that as Aam Admi, what we chase is not Cricket, but National Pride. For a long time that National Pride has been bestowed upon us by our repeated success in Cricket. So, we became a Cricket crazy country.

Make no mistake. If our Indian Hockey takes off from what we have achieved at the Tokyo Olympics, fan following, attention and of course money will chase Indian Hockey too. Same is the case with other sports as well.  Well, defending India’s craze for Cricket versus other sports is not the purpose of this blog. But trying to articulate that any sport or for that matter any event that arouses National Pride can be a great Unifier in a diverse country like India, is.

That is why I find questions often raised on why India should spend its money and resources on the Chandrayaan and Mangalyaan missions while millions languish in poverty, to be ill founded. We have seen how landing its men on the moon first successfully with the Apollo mission tilted the scales of National pride in the US during the Cold war period.

Similarly, I saw some questions being raised as to why Orissa state should spend its money on sponsoring the Indian Hockey Team instead of focussing on its own state’s players. If by spending that money, Orissa has enabled the revival of India’s fortunes on the world stage as how we saw in the Olympics, it is certainly worth it.  The National Pride that got aroused thanks to the performances of the men’s and women’s Hockey at the Olympics is priceless. For everything else there could be a MasterCard. And Naveen Patnaik the shrewd politician he is, has understood this well and took a call to back the Indian Hockey teams when no one else did.

As I had written in my 2016 piece post Rio Olympics (Read here), availability of financial resources is a key factor in winning more medals.  So, with the backing of sponsors, talented sportsmen can get access to the best – whether it is coaching staff or equipment or infrastructure. We have seen this in the flourishing of a Neeraj or a Sindhu or a Saina! What Orissa has done or a few other brands have done is an eye opener for many including other States, Centre and Corporations to pick up a sport or sportsmen and back them to the hilt. The returns on this investment by way of National Pride and the associated brand recall is beyond comprehension in a spreadsheet.

And no one else understands the power of National Pride than Narendra Modi. Each and every phone call he makes to a winner is because of this understanding, the after effect of it, we will see in 2024.

Postscript: The next Olympics is in 2024 😃😃

Wanted – Reforms on “Kaizen” Mode!

In the last few days, newspapers and online portals have been filled with nostalgic Op-Ed pieces on how the 1991 reforms happened as we celebrate 30 years of the reforms. These pieces by some of them who were part of “reforms team” then and other commentators often talk about the circumstances in which the reforms were unleashed, how the then Prime Minister Narasimha Rao weathered the political storm in taking some bold steps and how the then Finance minister Manmohan Singh and his team went about implementing them finally.

Yes, the “1991 reforms” was a significant event in our post Independent political history and in terms of impact on the ground, probably the most significant. Though it was not realised then, the reforms package helped to change gears of the country which was stuttering at a modest pace of growth all along, while the rest of the world was galloping.  It also helped lift millions of Indians out of poverty in the next 20 years.  So, it is apt that we give due recognition to the process and the people behind it and celebrate with much enthusiasm.

As a country, we are in a phase where we need the next reforms momentum. One that will define our growth trajectory for the next 30 years. In that sense, we need to now move on from living in past glory of what the 1991 reforms delivered and initiate the next cycle of reforms. So, what could they be? A reform is defined as a change brought in an existing system to make it better. Therefore there are reforms that result in incremental changes, thereby incremental benefits and there are reforms that are big which result in monumental changes and thereby impact. 1991 reforms can be grouped in the latter category.

 In the last 20 years, since the Vajpayee regime till now, it’s not that there have not been reforms of the big impact category in our country. But they have been few and far between. In the issue of reforms, I would like to see the glass as half empty. What we need is the next bust of reforms one shot that will change the course of our country forever and for the better. And if at all there is an opportune ‘muhurat’ for the same, it is this. Because when we come out of Covid hopefully very soon, we need to not just recoup the lost two years but get back to an irreversible high growth trajectory.  And for that, we need a whole set of big bang reforms that need to be unleashed ASAP. And I will group them in the following critical areas:

  1. Ease Of Doing Business: While we continue to say that we have improved our ranking on the Ease Of Doing Business front from before, those of us on the ground very well know that India continues to be a complex country to do business in and with. And the issue of “Central” subjects and “State” subjects adds complexity to the whole thing.  To put this in perspective, we have 1536 Acts, 69233 Compliances and 6618 filings to comply with for our businesses in our present regulatory environment.  There have been bits and pieces effort in states to remove/amend rules and regulations in the last few years. But these are just incremental changes and do not move the dial. What we need is a complete review of the existing rules and regulations across all states that include Central laws and state laws and a wholesale repeal of all the frivolous ones.
  1. Labour: This is connected to the “Ease Of Doing Business” but has scope beyond that as well in terms of ensuring competitiveness and achieving productivity as well. A paper I read on Labour Reforms mentioned that labour laws in India constitute 30% in terms of acts and 47% in terms of compliances in our regulatory framework! In terms of numbers, it is 463 labour Acts, 32542 labour Compliances and 3048 labour filings! Not that the existing regulatory environment has benefited the labour so far. The current labour laws cover only 9% of India’s employee base! So, there is an express need for simplified labour laws that will help the industry to grow while remaining competitive, will be fair to the employees while empowering them while bringing a majority of the labour force in its ambit.
  1. Infrastructure: It is undisputable that the general infrastructure in India has grown leaps and bounds in the last 20 years. There are two ways of looking at this. If we compare with where we were in the past, then of course, things are certainly better. If we look outwards and compare with our peers, then we will realise that we have still a long way to go in basic infrastructure. It is also a fact that with respect to infrastructure we are always in a perennial “catch up” and “Work in Progress” mode. And I will explain this with an example. In 2005, in the Nagoya city of Japan, a new airport was thrown open just to coincide with the World Expo that happened in that city. When I visited Nagoya in that year, I was appalled to find the new airport almost empty though, it was witnessing almost 4-5 times the normal traffic on account of the Expo. Compared to the old airport, the new one was huge and I was told then that this airport was now built forecasting for next 30 years of traffic growth so that they don’t have to meddle with this for a long time. Now, this is the approach required for infrastructure projects. However in India, we build projects based on today’s situation and by the time the project is completed, it is already bursting at its seams. The new Bengaluru Airport is an example of this. Inaugurated in 2008, it had to launch its expansion by 2011 within just three years! Most of our highway projects are planned like this. That’s why I say that the grudge towards the bullet train project in India based on today’s situation is ill informed. By now, we should have kicked off at least eight bullet train projects, not one.  Unlike in the past, financing for infrastructure projects is no longer a concern. There are global multi-lateral agencies backed by developed countries willing and waiting to fund viable infrastructure projects in a country like in India which offers potential and returns.  In the area of Infrastructure, we need drastic reforms in our planning method and execution. And that brings me to the next critical area.
  1. Land: Most of our infrastructure projects get stuck or go through inordinate delays due to the issue of land availability aka land acquisition. This is an indeed complex issue but we need to study best practices in other developing nations and come up with a new method that is fair to all and makes the process easy and less time consuming. The present Land Acquisition bill in its form needs urgent reform.

There are other areas too where reforms are the need of the hour and I will continue with those in Part – 2 of my blog next week.  But my focus remain on areas related to economic growth. To part conclude this piece, I would like to say that “Reforms” are a continuous process. And so continuous improvement of what we do is required. Going back to the Japanese way, they call it the “Kaizen” approach in management.  In India, we need Reforms on “Kaizen mode”!

To be continued.