April was a tumultuous month in the People’s Republic of China. Graft hit new peaks, seemingly untouchable politicians were busted, ousted and bizarre revelations of their activities surfaced. Fleeing dissidents sought protection in the US Embassy in Beijing and apparently got it, much to all-around embarrassment. Speculation about China’s political stability, direction and future reigned supreme.

In the midst of all of this, a California-based computer company called Apple Inc reported that sales in mainland China, Hong Kong & Taiwan tripled to $7.9 billion in the first quarter of 2012  – or 20% of total sales of $39.2 billion. It is now expected that Apple’s China sales will double in 2012 to around $26 billion (Rs 130,000 crore).

Now, of the $40 billion of sales for the last quarter, thanks largely to China, Asia Pacific contributed to $10.2 billion (in case you were wondering where India could possibly fit) This does exclude Japan where sales were $2.6 billion. Amazingly, Apple apparently did not even include Asia Pacific in its geographic breakdown till its results of December 2009.

In contrast, imagine any corporation, foreign or Indian, doing Rs 130,000 crore of sales in the India market not this year but in coming years. Surely not in consumer products. Energy perhaps. Either a state-owned monopoly or Reliance Industries, who in any case does not count India as its dominant market any more. (2011 full-year revenues are $66.8 billion, of which $40.9 billion are exports). Actually, most Indian business houses don’t.

There are two different perspectives on this. First, Apple has created an insatiable appetite for its products in China, so much so that millions are devouring iPhones, iPads and iPods. This mass Apple consumption frenzy – not limited to China – is evidently reflected in the Cupertino-headquartered company’s good fortunes. This may or may not last. After all, Korean giant Samsung is snapping at Apple’s heels and has already overtaken Nokia in mobile phone sales.

The other is that there is something fundamental that is changing about the emerging market consumption story. Jim O’Neill, the Goldman Sachs Vice-Chairman who coined the famous BRICS term, said the other day, “And now 20 percent of what [Apple is] getting is from China. How can you call that a traditional emerging market? It doesn’t make sense.” Goldman Sachs now calls these the Growth Markets.

So the big question (posed frequently) is whether consumers in India or for that matter China are behaving similarly or differently, regardless of what the perceived political climate of the day is? And to that extent whether businesses tied firmly to consumption story will be affected by this ambient noise ?

A Business Standard opinion piece two weeks ago effectively said the answer to the first (India) question was yes, consumers were not as down and out as maybe businessmen and others were. At least recently.

It pointed out that Hindustan Unilever, India’s largest consumer products company, grew 20.4% in consolidated sales for the quarter ended March 31. Of this, 9.6% came from volumes, rest from price increases. Dabur, which gets 70% of business from India saw sales going up 23%, more than half of that came from higher volumes. Ditto for Godrej which reported similar trends in numbers.

The stockmarkets concurred. The Bombay Stock Exchange (BSE) Fast Moving Consumer Goods or FMCG Index is up roughly 23% at a time when the Sensex has dipped 11%. And the anticipation of the future is strong. A Hindu Business Line article says the FMCG Index trades at a `trailing earnings’ multiple of 33 times, well above the Sensex and BSE 500 multiples of 16.6 and 17.8 times.

But its not just market optimism on companies whose sweep might be limited. The Business Standard piece also quoted Nielsen figures which said rural markets grew faster in the last quarter, actually growing between the last and the previous quarter to 17.2% while in the urban market it was 16.5%.

While in India large consumer product companies have strong rural focussed sales efforts now, the numbers would not have been good were demand or sentiment weak. To be fair, Government subsidies are also a contributor too but its unlikely to be the sole driver of demand.

A swallow or an Apple does not make a summer, in China or India. Not all of China’s consumption and/or political trends are ‘extrapolatable’ to India. And an Apple may not be the object of attention tomorrow. Though some other brand or service might.

But indications do suggest the macroeconomic gloom as perceived by some is not all pervasive.  And thus, at least in the Indian context, frustrations about political stasis might not immediately affect consumer desires, rural and urban.

More importantly, the Apple story also suggests some fundamental shifts in what consumers desire and who is best positioned to meet those desires. Remember, Apple creates one product that works uniformly everywhere. No `glocalisation’. Though that’s a story for another day.

For a fortnight or so in the run up to Union Budget 2012, presented to the nation on March 16, most analysts, big and small, focussed on that one burning question. Will Union Finance Minister Pranab Mukherjee bite the bullet ?

The reference was to what many of us (in perfect hindsight) had been mildly, though a trifle unintentionally, been brainwashed into focussing on – the state of the nation’s fisc. And that big question: will the Government keep pumping out subsidies to buy votes or cut back as was prudent at this stage ?

So the grand answer is the Government did hold back. Mr Mukherjee said in his Budget speech that the Government would endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over the next three years, this figure would be further brought down to 1.75 per cent of GDP. He did say that subsidies related to the Food Security Act would be provided for.

Sighs of relief followed. The Government was reining in profligacy. The Finance Minister had bitten the bullet, it appeared. Then the folks slowly began to note that while the Government had indeed slowed down the subsidy train, there were  more taxes for you and me. Ladies & gentlemen, please welcome again: Service Tax.

The Finance Minister said all services would be taxed, except for a negative list of 17 items. After all, we can’t keep boasting we are a predominantly service economy and not pay tax on transactions. But this has also meant a host of services, provided by private sector and by the Government would be under the net. Better still, the service tax rate itself went from 10 to 12%.

If only to quibble a little more on how pervasive a Service Tax is; toll on the majestic Bandra Worli Sea Link in Mumbai also faces one. So, from Rs 75 a round trip, its now Rs 82.5, Rs 7.50 over Rs 75. And I am sure several hundred if not thousands of car owners would join me in wondering whether the Rs 0.50 paise was indeed returned at the toll booth.

My contribution from a daily toll bridge will be approximately Rs 200 per month, Rs 2,400 a year. From various meals in restaurants and sundry other services, add Rs 1,000 – Rs 2,000 more a month or Rs 12,000 to Rs 24,000 a year. Am pretty sure most of us would be paying out similar sums if not more, depending on lifestyle and consumption. But the Finance Minister must be a happy man. He announced that proposals from Service Tax are expected to yield additional revenue of Rs 18,660 crore. I can see how.

So Service Tax is a squeeze. But is that all ? Not quite. What happens as we take into account the various State Budgets which starting coming out only after the Union Budget ? The answer actually is good and bad. Lets look at the good first.

Assume I drive around 40 km a day in a petrol car to work and back. My car will guzzle approximately 4 to 5 litres of petrol a day to ferry me to work and back. Further assuming a conservative 22 days of driving in a month, my monthly consumption is 110 litres. This at current Mumbai prices = Rs 7,700 per month.

Now, neighbour Goa’s Chief Minister Manohar Parrikar has slashed petrol rates to Rs 55 per litre. At Rs 55, my monthly bill there would be Rs 6,050 per month. So that’s a saving of Rs 1,650 per month. And multiplying into 11 months – even assuming a whole whole month of holidays – totals Rs 14,250.

Now, Rs 14,000 of savings annually pretty much balances any negative that the Union Budget 2012 might have done in terms of service tax or higher excise on some goods. For instance, if in the same year, I bought a Maruti Alto 800, I might pay Rs 6,000 or so more. But I’m benefiting because of lower fuel costs. And I already have a minor Income Tax Benefit.

But Goa is an exception. I do live in Maharashtra where things are different. Petrol prices are exactly as they were and the state will charge 2% to 4% more tax on cars sold within the state, depending on whether they are petrol or diesel. LPG cylinders will cost 3% more. Good news compared to the 5% initially proposed in the State budget and then rolled back. So still another Rs 15 per cylinder.

Bottomline: after you’ve taken all the Union Budget numbers, don’t forget to combine it with the State Budgets which only start trickling in later. Only then would you know whether you are really affected. How much and how bad.

So if I was in Goa (increasingly the magical solution to more and more problems in life), the Budget for me is still somewhat balancing out. Anywhere else in India, not quite so. As to who really bit the bullet. What do you think ?

During a television debate over the Mamata Banerjee–Dinesh Trivedi face-off over the fare hikes proposed in the Railway Budget 2012, I asked Communist Party of India (CPI) leader Gurudas Dasgupta whether he was advocating that rail fares should never be hiked, or held in perpetuity.

Dasgupta’s response in the Headlines Today debate was that he was not against fare hikes in principle. His point, he said, was that this was a bad time to do it because rising prices and high inflation had already put severe stress on India’s poor.

The Trinamool Congress (TC) led by West Bengal Chief Minister Mamata Banerjee on the other hand is arguing that they are against fare hikes in principle. This view was amply articulated by its party members Derek O’Brien and Sudip Bandopadhyay. The phrase used repeatedly: “It is against our party’s DNA to do so.â€�

O’ Brien later said he tweeted against the fare hikes within 5 or 6 minutes of the Railway Budget being presented in Parliament because he was so sure that a fare hike would cause a flutter within his party and with his party leader Ms Banerjee.

The Congress on the other hand, at least in the words of one party leader Mani Shankar Aiyar,  argued that a railway fare hike was an equitable distribution of burden. BJP leader Sudheendra Kulkarni dismissed the Congress position as intellectual arrogance. He felt the resource requirements were so large that a fare hike would not solve the problem. He did not directly address the question of equitable distribution.

Now, its quite likely that all the political parties and their representatives are variously posturing for their respective constituencies. A CPI saying it will allow fare hikes (at appropriate non-inflationary times) does not mean that it will. A BJP saying a fare hike is not the main issue does not mean it will not hike either, were its hands on the driving wheel. And finally, for all of Congress’ expostulations on equitable distributions, it’s one of the biggest freebie givers in history.

To be fair (mostly), the Trinamool Congress’ point about DNA is consistent. Ms Banerjee has raged a battle royale whenever there has have been fuel price hikes in the last five years. On one occasion she called for a bandh in Bengal. This was in April 2008 when she was protesting both the Centre and Bengal State Government’s `inability to check spiralling prices’. Incidentally, the BJP said it was against bandhs but would extend moral support to Ms Banerjee, rising prices ‘being such an important issue’.

Consistent or not, the positioning about a fixed price regime, even to poor voters, is worrying. To win elections on the premise that prices would not rise is fair, since every politician would potentially do that. To hold on to the argument and not educate voters subsequently seems counter intuitive and even unfair.

It’s not just about rail fares. The argument could extend to any public utility. A section of voters will always assume that they would either get things free (as in the case of power in many states) or will pay prices which belong to a different era.

This perpetuates already existing distortions in the economy. Including those created (to some extent) by schemes like the National Rural Employment Guarantee Act where assured employment and a Rs 100 daily dole has wreaked havoc on the job market.

Admittedly, a Rs 4,000 crore inflow from a fare hike (if allowed) will help fill some bits of a Rs 140,000 crore hole (cost of safety and modernisation) annually for the next 10 years. The Railways desperately need money to shore up safety. And this will surely not come from passengers. But that’s not an argument for a fixed-price world.

Moreover, many passengers themselves (at least in cities I’ve heard) are saying they are willing to pay more for better services. And the security of safety. Many farmers across the country are willing to accept that paid-for and assured power is better than unpaid, unpredictable power that makes life miserable for them and their crops.

This is not to say that the Government should not be attacked for spiralling prices. Indeed, the Government has spectacularly failed to manage the supply side, particularly on food, leading to skyrocketing prices and high inflation. The Government has also failed to bring about efficiency on the distribution side, in foodgrains and public distribution systems for example.

But by propounding an utopian world where prices remain fixed and nothing changes, except, presumably the colour of Kolkata’s buildings to blue, Ms Banerjee is being unfair not just to her coalition partners but worse, to her own voters. In the end, it is them who will pay the price. She is only buying political time and mileage by railing against these decisions.

I remember visiting Intel’s India Country Head some years ago and was somewhat surprised to note that he sat in a not so large cubicle. His assistant who came out to greet me sat in an identical one. And so did everyone else at the chip making giant’s offices worldwide, I was told.

Around that time, I also happened to interview Vikram Kirloskar, Vice-Chairman of Toyota Kirloskar Motors at the Bidadi works near Bangalore. To my surprise (remember, he is also a family business owner) he sat on a desk similar to other senior personnel and colleagues in a large, open hall. The hall itself was fairly typical of offices attached to manufacturing facilities.

Open seating is one way of ‘levelling’ with the workforce on a continuous basis. The other, exciting, way to do the same thing is to go a take a few more steps and become a ‘Undercover Boss’. I’ve watched some episodes of this television reality show where CEOs of large enterprises switch identities to join their own workforces for short spans of time.

This  television show has got much acclaim but also drawn a fair bit of criticism and sharp  views. Yet, I’m convinced of the merits of the approach at large. The question I would ask is: how many Indian CEOs, whether managers or owners, will or can go undercover ?

Bosses going undercover is not a new phenomenon. Centuries ago, kings did it to get to better know their subjects’ problems before hammering out solutions back in the palace. Many a folk tale has been spun around encounters between kings and queens travelling incognito and commoners. Mughal emperor Akbar (1542-1605) moved in disguise among his people and took some pride in his ability to do so.

The merits of going undercover are many-fold. Michael White, CEO of Direc TV did time as one recently and concluded his stint a changed man. “Its humbling, how hard frontline jobs are in this economy,� he began. And..“It grounds you in the reality of how tough the economy, jobs and the people are to the business. It helped me better understand the importance of touching consumers and making problems right.�

Kim Schaefer, CEO of Great Wolf Resorts, the world’s largest chain of indoor water parks, didn’t realise how tough it would be. “Even though I had waitressed in college and I thought I would slip in to the role, it was not as easy as I thought.� Moreover, she says, as do many others, not only did they learn a lot about their own company but also met some incredible people along the way.

For all the fascinating insights of being on the floor, not all CEOs evidently sign up. It sounds (and perhaps is) somewhat unproductive to star in a multi-episode, prime-time reality show, whatever be the context. Most companies who do sign up seem to be in the hospitality and service business. Which means its important to know what folks in distant outposts are doing. Equally, chances of chaps from HQ being recognised are remote. Arguably, some CEOs and division heads may well do it discreetly.

The larger question of course is: Do Indian CEOs have it in them to take the plunge? Or should they? And, between entrepreneurs/owners and managers, who could lead the way?

Well, anecdotally I would think that owners could grab an opportunity faster than the non-owners. The obvious reason being that a manager-CEO even if keen is not sure how the whole thing could pan out. And what if something to go wrong?

On the flip side, excepting for younger entrepreneurial companies, most owners of older firms (young and old) are deified in their organisations. So the chances of their executing an undercover operation might be limited. Assuming they are willing to do something like this in the first place.

Which brings me to the final point. Its about the nature of industry and employment that’s changed in the organised sector. Many companies have designed out unions over the last decade and are in much greater control over staffing. Where there is a concern of flab, they outsource. From processes to temporary staffing solutions, several secondary and tertiary industries have sprung up.

In important businesses like banking, telecom and airlines, many core functions are now driven by distant call centres. When you dial customer service, let’s say of an airline like Jet Airways, the call goes to an outsourced call centre. As a customer, I may spend more time on the phone with a Jet Airways call centre executive than at check-in or inflight. Or for that matter with a telebanker at ICICI or HDFC Bank rather than a branch teller who I rarely see. So most of my frustrations, if any, are bound to occur at this point.

Would the CEO of the airline spend a few days answering phone calls and hear what customers are saying?  And in turn understand the strain that the frontline staff are facing in resolving complex ticketing issues. And perhaps fix a problem ‘system-wide’. As opposed to looking at filtered Management Information Systems (MIS) reports – am not saying he or she does so but posing questions.

Or at a mobile phone customer service centre, where each executive must be handling at least a few irate callers a day. As Direc TV’s White said, “our effectiveness is in how effective they (the frontline staff) are.�

Perhps no one will. Admitted, a ‘Undercover Boss’ format in India is unlikely to find too many takers for reasons ranging from practical to cultural. Nevertheless, whichever way they do it, bosses would do good to spend quality time understanding the working conditions and lives of their front line staff better, on the shop-floor. Understanding their real stories and backgrounds might help too.

In a highly competitive environment, it might just give you an edge.

I think it was October 2011 when I first heard the “What if we run out of fuel mid-flight ?’ jokes about Kingfisher Airlines. A businessman I met at a gathering laughed at another prominent one: “Boss, think of your family, shareholders and company. Fly a proper airline.� The latter had just narrated how he boarded the 7 am Mumbai-Delhi Kingfisher with a newspaper that had a screaming headline about fuel supplies being aborted.

Kingfisher has been on a ‘cash and carry’ system for buying fuel for close to a year. In July 2011, the first signs of trouble surfaced when several Kingfisher flights were grounded after oil company HPCL apparently stopped supplying fuel over non-payment of dues. The airline had to, as reports have it, cough up sufficient funds for two days before supply was resumed.

The next round of news reports appeared in November 2011. This time, it was evident that the troubles were serious. The airline –  wisely in retrospect –  cancelled 175 of the 418 flights allotted to it for the Winter Schedule which came into operation on October 30 and lasts till March 31. Also came news that  130 of its pilots had quit.

Right now, which is mid-February, all hell appears to have broken loose. Reports say close to half of all flights are cancelled. In many cases, it appears passengers have been severely inconvenienced. Not to mention employees.

Last week, Kingfisher’s employees in Kolkata walked out protesting non-payment of salaries leaving several passengers and flights stranded. Two days before that, Kingfisher reported third quarter losses of Rs 444 crore. The Director General of Civil Aviation (DGCA) has said it is investigating the latest round of abrupt cancellations.

The Kingfisher situation raises some fundamental questions about customer-facing, service businesses. And whether there are lessons to be learnt from the way the airline has responded to its problems. And not so much about having them. Which many would understand.

It could be argued that there are precedents to such situations in the airline business. After all TWA owner Howard Hughes, the greatest aviator of them and Richard Branson of Virgin Airlines fought similar challenges.

But I’m not sure their financial trials & tribulations similarly inconvenienced their passengers. Or kept  them guessing every morning while running from pillar to post to solve a deep-rooted balance sheet mess.

And that’s why this is not about just Kingfisher. After all, five of India’s six airlines are reportedly in losses now, including rival Jet Airways which posted its fourth straight quarterly loss of Rs 101 crore last month.

This is about the nuances of running a customer-facing, service enterprise in a financially trying situation.  And recognising when and how to cut back. In the interest of the long term.

Look at it this way. Even the beer (parent brand Kingfisher is a spirits company) in lieu of fuel jokes are passé. Most frequent fliers have shifted loyalties, particularly the business kind who can’t take chances with the erratic schedules, or the perception of them, which is equally bad.

That brings us to the next question. Kingfisher has been struggling with its finances for close to a year now. It must have been evident to the airline’s management all this while that they cannot buy time (or fuel) on a daily basis. If that’s the case, why have they been not planned ahead ?

The cynical view would be that they don’t care. That’s possible but not very logical because that’s not how most businesses are set up to run, at least in post-liberalisation India.

The only answer is that Kingfisher has been extremely confident of its ability to find fixes on the fly. Whether in persuading the banks to lend overnight or cajoling the oil companies to open the taps ‘just this one time’. Or, the best Indian case, a phone call to the right person. To sum up, depend on jugaad to get the aircraft fuelled up and ready to push back on schedule at 7 am.

Which brings us to the next set of questions. Should service organisations run operations in such a touch and go manner? Or more fundamentally, how are service businesses run? Hint: not like manufacturing or trading operations. Second, would it not be better to take a ‘ego hit’ by proactively cutting back services to the bone and then restoring when the situation improves?

Had Kingfisher steadily phased down to a few dozen services a day which run well, most folks would understand. Particularly if they were informed in advance, tickets refunded or alternate bookings created.

But the current status only prompts greater concern, leading to question critical safety and engineering standards as well. Granted that a sharp pull back in capacity may trigger other problems but it surely can’t be worse than what it is.

It is also a fact that reputations so lost in this business can be salvaged with attractive incentives and schemes. Air-India offers them all the time. Kingfisher is too. Four weeks ago, it sent out a mailer to its frequent fliers offering one complimentary ticket to any destination for every three one-way tickets bought before 20 March 2012. I would admit that it’s tempting.

But betting a business on such strategies does not sound quite right.

Moreover, Kingfisher was created with much higher expectations. It was aimed at the swish set. Chairman Vijay Mallya’s video welcomes passengers over the aircraft’s inflight entertainment system. For someone who took passionate ownership of the product and service – when the airline’s CEO could and perhaps should have done so – he is remarkably distanced now.

The other lesson is that good service experiences boost not just the airline but the country image as well. The reverse is true as well. India’s private sector has distinguished itself by offering world class services in airlines or hotels across the world. Particularly after the hiccups of the mid-90s when many start-up airlines struggled similarly and collapsed.

Now it seems like India’s private airlines – and by extension companies –  can run an efficient operation on the front-end but fail badly on the back-end. Worse, they are willing to hold their customers hostage while they try to figure it all out. Kingfisher may well find a solution to its financial woes in coming days. But it would have to work harder to prove that it’s not running a Scotch-tape operation at HQ.

 “Hello & welcome to the Young Butcher Of The Year. Well done for getting here. You are one of the country’s top four young butchers. Now you have to compete to prove yourself to two of the industry’s finest..�

These  butchers formed part of BBC3’s Britain’s Young Talent Of The Year series. Now running for three years, the series has looked at different sets of professions. In 2011, it was carpenters, gardeners, bakers and tailors.

Indian television audiences are familiar with chefs displaying their culinary artillery amidst blazing lights and orchestrated music supervised by Boot camp-like instructors. But its yet to go beyond that. Just like MasterChef competitions, is there potential and need for similar competitions in other vocations, like plumbers and carpenters ?

Here’s why. The butcher and plumber hunts address two important skilling issues. First, it finds and encourage youngsters to take up jobs in areas where there are few available. The second: it makes the vocation more aspirational. BBC, for example, positions the series as a celebration of ‘young working heroes of Britain’.

“Its a question I ask everywhere,� Dilip Chenoy, Managing Director of the National Skills Development Corporation (NSDC) told me last week. “Would you want your son or daughter to become a chef ?� The answer, in many ways, determines how India’s massive skilling shortages will be addressed.

He should know. NSDC, a public-private partnership  is entrusted with the challenge of skilling 150 million workers in 10 years. Mostly by funding companies and initiatives for skilling .

There are strong reasons for broadbasing the skills debate. Estimates say close to 90% of Indian jobs are skills-based. On the other hand, some 250 million workers are presently `untrained and underemployed’. Another 240 million have to be effectively skilled in the next decade. If, among other things, India wants to see a GDP growth rate of 9% (or thereabouts).

On the supply side, India has around 7,500 Industrial Training Institutes (ITIs) and polytechnics, catering to just 2.5 million people. This is insufficient. Take the case of India’s exploding automotive industry. An industry body report says 5 million new automotive jobs will be created in the next three years, 60% of which will be skilled. And this figure is expected to touch 25 million by 2016.  (Source: NSDC/People Matters)

Some economists are already warning that this is where the famed demographic dividend can turn into a demographic disaster – remember more than 65% of India is under 35 years of age. The Government appears to be seized of the problem. The creation of the NSDC was one response. It also hired S Ramadorai, former CEO of IT giant TCS, as Skilling Advisor to the Prime Minister.

What’s needed is a big push. One way of doing it would be to add a glamour quotient, particularly in sectors where gaps are highest. And what better way to do it than a television reality show or public competition. Chenoy, who is plumbing for (pun not intended) vocational talent shows says talent hunts have always attracted more young people into the profession and added a much-needed aura.

Talent hunts also address the aspirational stumbling block. According to Chenoy, no carpenter really wants his son to become a carpenter. And similarly with other professions, unless forced to.

Whereas shows like Masterchef Australia have inspired more youngsters to take up cooking as a profession after wanting to compete in the shows. Thanks to which there are more chefs around.

Of course, thanks to the MasterChefs in general, food occupies much larger space of mind nowadays. There are more television shows, newspaper and magazine articles than ever. Travel magazines devote more space to food and the search for it with prominent references to the chefs.

Agreed that plumbers and carpenters may not become overnight stars or talking points. But the objective is basic awareness. Chenoy says he visited a major plumbing exhibition which had the latest in sanitaryware and sanitation technology. “I asked them, where are the plumbers ?� he recalls. Similarly, he spoke to paint maker Asian Paints to see if they could create a competitive platform for painters.

Britain’s Best Young Plumber show has the pizzazz (or is that for the bakers) of a chef hunt show. But its not just the lights and sound. The marketplace ought to be linked to the process. That year, Britain’s Young Plumber was sponsored by Better Bathrooms, a large hardware retailer in the UK. The `celebrity’ judge was Charlie Mullins, founder of Pimlico Plumbers, widely regarded as the plumber to the stars.

I’m quite sure we have our star plumbers too. Its only a matter of bringing them out.

For those who did not know (but want to) the term ‘financial inclusion’ was coined by former Reserve Bank of India (RBI) governor YV Reddy in 2005. It was over a chance conversation with him a few months ago that I discovered RBI’s original description for this effort was actually ‘financial exclusion’.

In a masterstroke of sorts, Reddy changed the phrase from ‘exclusion’ to ‘inclusion’. And it has stuck since. Seven years on, with some water under the bridge but much more to flow, I wonder if it’s a good time to revisit and relook at the term financial inclusion. And whether we could achieve much more by christening it ‘financial identity’.

Before I come to that, what’s happened so far? Since 2005, a host of initiatives have been launched by the Government and the RBI to ‘include’ more citizens into the financial system, particularly in rural India. The most recent being the Swabhiman initiative in 2011 which set banks a mandatory target of connecting 74,000 villages (with a population of over 2,000) by March 2012.

There is a reason for this and similar efforts globally. World Bank studies (among others) demonstrate clear linkages between improved financial access and higher income levels in countries, through bank branches and deposit accounts. Moreover, these very accounts provide stability within and to the banking system, particularly against crises.

But success has been limited. Total number of villages banked in India is around 107,000 as of June 2011, up from 54,258 as on March 2010. And Swabhiman has taken banking to some 42,079 villages (last available data). Note that the definition of banking is not confined to branches and extends to ‘business correspondents’ and mobile vans.

On the other hand, more than 480,000 villages are still unbanked. In contrast, the China Banking Regulatory Commission said last week (almost with some trepidation) that banking services were still absent in 1,696 remote townships in end-2011. China has around 1 million villages, compared to India’s 600,000.

Its entirely possible that China’s numbers do not quite add up or will invite scepticism. An Asian Development Bank study of October 2007, for instance, says only 36% of Chinese rural households had access to financial services. So the definitions of access to banking services, savings accounts and credit might vary. Or things are really moving fast on ground there.

But that’s besides the point. India faces a twin problem. First, of course is not enough bank accounts opened. Second, even for accounts opened (79 million ‘no-frill’ till mid-2011 with outstanding balances of Rs 5,944 crore) less than 20% are actually used.

You can also do the math to see that there is little money actually sitting in the accounts that are opened. Moreover, the ability to lead a ‘cashless’ existence is limited because there are fewer linkages at the bottom of the pyramid.

Incidentally, there are around 500 million bank accounts in India (that figure is a wildly moving target) presumably attached to around 250 to 300 million individuals. The figure extrapolates from several RBI statements which speak of half the country being banked.

The banking system is wary about inclusion efforts. It feels the investment in account creation at such scale does not pay back. Particularly when the volumes of money moving even in those active accounts is small. Even technology (databases) cost money, banks and insurance companies have told me repeatedly.

Things are changing though. Financial literacy, a pre-condition for inclusion is growing. Intra-country remittances between urban and rural areas are touching new highs. Some estimates put them at hundreds of crores a day now. And the debit card population continues to grow, crossing 200 million now, from a tenth of that a decade ago.

Now, why does financial identity make sense today? For two reasons. First, it makes clear to all concerned that a financial identity is a critical component of an individual’s existence. Remember that a savings bank account is often a proxy or proof of a real identity – “I exist because I have a bank account�.

Second, this identity link will get accentuated as financial transactions form one of the biggest interaction points between the state and citizen. For example, subsidies and benefits will increasingly get converted into cash or cash transfers and delivered through bank accounts.

States like Maharashtra have saved hundreds of crores (since last year) by insisting on transferring student scholarships to bank accounts as opposed to handing out cash. Yes, the money got saved because most of the earlier recipients were ghosts and never existed.

More importantly, a concept of financial identity pushes banks and insurance companies, among others, to create products and services that link to that identity. And of course think differently about the opportunity. Picure a bank or insurance firm setting financial identity targets as opposed to financial inclusion ones.

On the other side, think of a poor farmer or migratory construction worker who could access and then hitch a micro-insurance, micro-pension or even a provident fund account to his or her financial identity, ie a bank account. To be fair, the same could be done even if there was no concept of financial identity. But the opportunity and the incentive to build the `merged ecosystem’ may be less. Most of us who have access to the banking system but are saddled with multiple financial identities are also potential beneficiaries, in some sense.

On a related note, the Government itself is exploring bank account number portability, similar to mobile phones. So, I can take the same account I opened to whichever bank I want, presumably wherever. It reinforces the concept of a permanent financial identity.

Creating the linkages themselves is not difficult. Banks already do it within their system, offering a single view of savings, loans and depository accounts. This is despite, in some cases, reporting to multiple regulatory authorites. So you can’t transact your stockbroking account from your banking account but you can sure ‘see’ it.

Now let me be candid and admit that a nomenclature change is not going to cause some magical transformation. There is still the effort of opening physical accounts and the nightmarish efforts involved in the Know Your Customer (KYC) process.

But the Government is making it easier to do so by allowing first, the creation of no-frill accounts and then asking banks to accept National Rural Employment Guarantee Act (NREGA) job cards, Kisan Credit Cards & Aadhaars as proof of identity.

Hundreds of millions of citizens will benefit if they had a financial identity or a single bank account to which they could attach a host of lifelong services. And accelerate the move to a more cashless economy, which has benefits of its own.

Dr Reddy’s move to look at the problem of the unbanked as an opportunity for inclusion as opposed to the challenge of exclusion triggered a fundamental shift in approach. Inclusion to identity seems like logical progression. What would Dr Reddy think of this move ? I’m not sure. But sure intend to ask the next time I run into him.

Over a curated chat with a prominent Mumbai-based industrialist a few weeks ago, the conversation settled on management styles of older and younger generations. I asked him the one significant difference between him and his two children who had joined the business in recent years. “They are too process driven for my liking. Maybe it’s their Ivy League education and there are merits to it. But I find it extremely frustrating,� he said, somewhat bluntly.

Not surprisingly, the industrialist who is edging towards 60 plays a strong operational role in the family-owned businesses. His retort reminded me of several conversations I’ve been having with second generation ‘scions’ of business houses in recent weeks. As an aside, they are generally more optimistic about the economy than their parents. That apart, what they were not so optimistic about was their own future. Their major crib – their fathers (mostly) were just not letting go.

Several media reports in recent years have profiled the smart set of inheritors. Most have studied overseas, worked across industries in global and local roles, tested profit and non-profit pursuits and then joined the family business. Their levels of engagement vary. In some cases, the inheritors have firm roles where despite age, the line of succession is clear. In others, the roles are somewhat unclear and often lie on the fringe of the firm. And almost in all cases, most first generation entrepreneurs are not letting go, at least as much as the next one would like.

A well-networked management consultant told me last week that the situation can get bizarre. He narrated the case of a daughter seeking his help to get dad’s authorisation to buy a new German car. And she sat in the same office a few cabins away! Another young man who I thought had everything going for him in his mid-sized conglomerate confessed, “I am now in my 40s and it’s only now that I’m beginning to get some control. It’s been a frustrating uphill battle.�

I looked at the NSE Nifty set of 50 companies to see how parental equations could pan out. It’s interesting. Some 23 of 50 companies are family-owned and run. These include two where ownership has recently passed on; Ranbaxy and Ambuja Cement. Ranbaxy was inherited (effectively) by Malvinder & Shivinder Singh in 2006 who in turn sold it to Japanese drug major DaiiIchi Sankyo in 2008. Incidentally, their father Parvinder Singh who ran the company till 1999 ousted his father and founder Bhai Mohan Singh in a boardroom coup.

In the remaining 21 companies, only in Reliance (all companies), Jindal, Jaypee Group, Hero Motors, Grasim, Hindalco, Mahindra & Mahindra and Bajaj Auto has control passed on to the next generation. Again there are some variations. Rahul Bajaj, 74,  has clearly indicated his desire to step back from active management but continues to be executive chairman of two-wheeler giant Bajaj Auto.

With both Reliance and Birla (Aditya Birla Group) companies, the relatively early death of the founder accelerated the succession. Reliance founder Dhirubhai Ambani would have been 80 today and AV Birla Group founder Aditya Birla would have been just 67. Which makes it likely that they would have played an active role in their organisations had they been around, more so given their fairly powerful personalities.

As a benchmark, DLF Group founder K P Singh, 81 is an active chairman. The DLF corporate website has, somewhat unusually, a separate section for him as Chairman and no overt mention of the family members who are also involved in various roles. Jaiprakash Gaur of Jaypee at 80 stepped back in 2006 handing over to son Manoj Gaur, 46, as executive chairman. Though reports on the senior Gaur suggest he still spends four to five hours daily in the group’s Noida headquarters.

Hero Motor founder Brij Mohan Lall Munjal, now 89, is believed to have handed over to his son Raman Kant Munjal but stepped back when Raman died in 1991. And he subsequently groomed Pawan Kant Munjal, 57, now Managing Director & CEO. But the senior Munjal’s presence is still felt. Like DLF’s Singh, Brij Mohan is an executive chairman of Hero Motors.

And the hands of time move on. The second generation is getting old too and now  grooming (or grappling with) the third and next generation. Pawan Munjal is 57, Anand Mahindra is 57, Mukesh Ambani is 55 and Anil Ambani is 53. All have offspring reaching the point where they would want meaty corporate roles. It would have been interesting had the patriarchs been around. Particularly Birla Group where the father would be 67 and the son 44.

In the rest of the Nifty 50, Bharti Airtel (Sunil Mittal, 55), Sun Pharma (Dilip Shanghvi, 55), Sterlite (Anil Agarwal, 58), the founders are younger still active. The next generation will evidently have to wait a bit. The Nifty 50 also excludes other interesting cases of generational transitions, like in the GMR Group, GVK Group, Videocon and the TVS Group companies.

The reason for parents not giving up the reins early (where such a feeling resides among the next generation) are manifold. The obvious one is personality. The second is that many have seen their ventures really bloom in the post liberalised era going back 15 to 20 years, which ties with their late 30s to early 50s. Giving up at this point is not simple. Moreover, they’ve had to work hard and dirty and thus feel the second generation should not get it easy. Or need to learn little more.

How will it pan out? Azim Premji is 67, still an active chairman and CEO and while his sons Rishad, 34, and Tariq, 31, are in the company but not in hard, operational roles. Tariq works with Azim Premji’s foundation and Rishad is Chief Strategy Officer running the M&A strategy and fund. Knowing Premji and having heard some of his public utterances on the subject of succession, the sons will have to work very hard to earn a core, corporate role in Wipro. Though Premji himself took over Wipro in 1966 at 21 following the sudden demise of his father. Wipro was a vegetable oil maker then.

Let me end with a quote from a lunch talk by Carlyle Group Co-Founder David Rubenstein I was present at in the US two years ago. Carlyle is the world’s largest private equity firm with $150 billion in assets. Rubenstein who had very humble beginnings is also one of those American billionaires who has pledged to donate more than half his wealth to philanthropy. He said:

“I grew up in an advantaged environment. If I wanted anything I had to work for it. Whereas my children grew up in a disadvantaged environment. They have so much money that they don’t have to work.� 

We know all about the cool tech that’s coming our way in 2012. What about the uncool stuff? Despite many half-starts and failures, India has undertaken several technology-led, citizen-focussed initiatives that eventually came through. Many were without precedence, at least for the scale they were embarking on. The payback has been immense, in sheer convenience, time and money saved.

As we enter 2012 and beyond, my bet is that more and more Government-owned or managed networks will start talking to each other. Which allows me, in theory, to punt on what some big ‘uncool’ utility applications could be. Tempting as it might be to launch into a long dhobi’s list, let me stick to five.

Before that, lets look at a few examples of what’s worked so far. Looking back, a train journey has always been fun. Booking a ticket for it has not, at least until the last decade or so. Indian Railways’ computerisation efforts, initiated in 1985 and fully completed in 1999 brought about fundamental changes. Instead of single-point isolated booking centres, there is a connected network accessible through 4,000 terminals across 1,200 locations covering 3,000 train journeys. Over a million transactions, mostly bookings, happen daily.

Online bookings started only in 2002. The beginnings were modest with ticket sales rarely crossing a few hundreds in early days. Over time, traffic increased and the network was also opened up to outside travel commerce sites. Despite that, the unusually named (for the primary objective it serves) Indian Railway Catering & Tourism Corporation Ltd  is one of the most visited websites in India, reportedly drawing almost 45% of travel and 19% of total internet audiences. Some 97 million tickets were booked in the last year.

Bank computerisation is another big one. It began with baby steps inside standalone branches in the 1980s –  which itself did not help the consumer much. It began coming together when banks graduated to ‘core banking solutions’ (CBS) which allowed all branches to talk to a single network. Then all banks joined hands, ATM machines (estimated around 75,000) started popping up and finally in the last few years, we began experiencing the joy (and pain when it didn’t work) of transferring money online to each other through the National Electronic Fund Transfer (NEFT) system.

Another interesting application of technology in India has been the use of electronic voting machines (EVMs). The first machines were used in Kerala in 1982 for a bye-election across 50 polling stations. In the last parliamentary elections in 2009, some 1.4 million are believed to have been used. EVMs have been attacked by various experts around the world for lacking in security. And yet, the approach of treating them like a physical ballot box with appropriate security has helped ensure its efficacy. Note that for all its killer app like success in India, except for Bhutan and Nepal, no other country is known to use it.

If you think carefully, the next round of utilities in our hands could involve the creation of new networks or just linking some or many of the above. In some cases, you could create more ‘currencies’ thus reducing the flow of cash in the system and I will talk about this in a later post. Their success will however depend on the ability of different arms of government or functions to speak to each other.  Which mostly is a policy and not a technology challenge. Here is my 2012 wishlist.

1.  Provident Fund: We open and close Provident Fund (PF) accounts everytime we move jobs. Many people I know (including me) have opened several accounts because the pain of liasing and transferring from one organisation’s account to the other can be daunting. With bank account mobility, we should create a system that links Provident Funds to single accounts accessible (via the PF office) across the country.

But the big  opportunity is targeting some 300 million migrant workers. Imagine if they could link their bank account (already happening thanks to various financial inclusion initiatives) and then a PF account linked to it, regardless of where they go. They can get their contributions in and some sense of long term social security.

2. Seamless Voting: Voting is confined to constituencies and booths within that. There is no reason why there can’t be seamless voting across the country. The challenge is always identification.

But look at it this way, over a 180 million debit cards are used in India and hard cash is withdrawn from locations totally different from where the original accounts were held. So what if I could link the bank debit card authorisation system (which trusts me sufficienty to hand out thousands of rupees) to a Central Election Commission (CECs) polling booth network.

Remember, the important thing is facilities like these should be additional so as to provide an option for mobility and after having established aspects like citizenship. And a bank network is just one proxy.

3. The Complaint Box: Having glanced at some Lok Ayukta case files, many of them involve former government employees filing for pensions and the like. What if there is a system that starts electronically escalating any citizen complaint upwards over a period of time. So, if a complaint/issue is pending for more than let’s say six months, it automatically, lands in the inbox of an Ombudsman or the Chief Minister. If everyone down the line knows that, they will act.There are variations of this in existence in some states. The challenge is to create one uniform, country-wide system.

4.  Baksheesh Cum Tipping System:  India’s Chief Economic Advisor Kaushik C Basu & Infosys Founder N R Narayana Murthy have already supported a ‘protect the bribe giver’ policy. Why not take this forward?

What if I want to genuinely reward a Government department (not the individual) for processing my matter quickly. Guess what; I don’t mind rewarding someone if my driving license application is processed in an hour and I can be on my way. And what if I can pay to a consolidated fund per department as a donation?

The counter-factual to this is that your form is held back if you don’t pay. But isn’t that the case already!  All one is saying is that you can work out a mechanism where the department creates a collective incentive and benefit system. Something like waiters in a restaurant who pool tips and then share equally. You can also highlight employees whose performance resulted in the department benefiting.

Yes, the question of how the Government will reward the employee is a trickier one. But the rewards can be soft. And incentive-based performance structures have been attempted in rigid governmental structures as well. Try this as a pilot to replace the ‘speed money’ system at Mumbai’s JNPT Port, which comes pretty close in any case.

5. National Travel Ticket:  There have been several initiatives here but we are yet to create a solid, working coupon system which can then be used to pay for bus and train fares across a city or country. Imagine buying a coupon in let’s say Chennai and then using it in a bus in Mumbai when you travel. These can be real or virtual.

There could be more but the big challenge in coming years is to get more networks talking to each other, including  successful ones like Rashtriya Swasthya Bima Yojana, the world’s largest general insurance programme with over 100 million poor covered for health insurance.

I’m fairly convinced that the technical complexity is no more than lets say attempting a cash transfer of subsidies project for the entire country for which work is already on and pilots are being run in different parts of the country. The combined effect of networks integrating will mean a fundamental change in our life and lifestyles, for the better. And perhaps less pressure to implement Jan Lokpal like anti-corruption initiatives.