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Govindraj Ethiraj
Govindraj Ethiraj

At a media conference last week, Finance Minister P Chidambaram snapped at a journalist who asked him about the government’s rationale behind slapping a ban on duty-free import of colour television sets as a move to correct a Current Account Deficit (CAD) and save foreign exchange. The ban kicks in today.

“Don’t confuse the trivial with the serious,” he retorted (or words to that effect) and then proceeded to explain that the move was really aimed at targeting ‘couriers’ who carried LCD television sets with them, mostly from countries in the neighbourhood.

He added that you could still bring TV sets as part of hand baggage as long you paid your import duty. Which sounds like a weak revenue-boosting move and not a CAD-fixing move, but that’s a different issue. He didn’t quite explain why then this move was announced now, at a time when the nation was expecting something far more substantive and a desperate sign that its economic masters were actually at the helm.

The theme of this hurriedly called media meet, the FM said, was to communicate the real picture coupled with an exhortation to media to not present distorted views–a much loaded statement aimed at various constituencies including media itself.

Nevertheless, it’s useful that the FM reiterated the point about communication because that’s perhaps the only issue that’s worth debating here.

Lets return to the matter of imported LCD television sets. How would this idea have originated? And how did it get precedence over other, potentially more sensible, ones? I did a quick search and couldn’t find imports of any appliances in the top 10 list of categories earning revenue from customs. Of course, it could be argued that the exchequer is losing money precisely because LCD TVs are slipping in insidiously.

But against imports of capital goods, steel, gold, chemicals, medical equipment, petroleum products and so on? Highly unlikely.

I can almost picture a hurriedly called meeting of the top brass of the Central Board of Excise & Customs (CBEC) and someone piping up, “Sir, we’ve been saying this for years, we are losing crores  because of these TVs being brought in as hand baggage. We should ban them.”

Not to be unkind but I would place the vintage of this person at around 50 years. The person would obviously have had some exposure to liberalisation but also strong (and fond) memories of controls and the on-ground powers it conferred to the now listless Customs officials prowling India’s many international airport arrivals halls.

But you can’t blame this person alone. It’s the dominant voice from the government side of the discourse; we don’t need this, we don’t need that, why are we importing mobile phones, surely we can manufacture all of this here. Can we? How far is our manufacturing policy on execution? And for the electronics industry?

But you can surely blame the finance minister or his cohorts for, first, not plumbing the system to see if someone had a really new, sensible set of ideas to fix the problem. And second, not realising the miscommunication a move like this would result in. At this time. I would place more emphasis on the latter.

Its quite likely the FM had no hand in this announcement and he might have well stopped it had it come to his notice first. But we don’t know. On the other hand, if the government is really itching to crack down on TV couriers, surely there can be a later time to address it. It’s not like the LCDs started arriving en masse last month.

At the same meet, Mr Chidambaram said repeatedly that the government had no intention of controlling capital outflow. In response, the rupee–on Friday 23 August–jumped 135 paise and ended at 63.20 against the US dollar. Stocks hit a one-week high.

It would appear that at times like these, calm inaction might appear more reassuring than panicked reactions which give away more than you think. Worse, I thought we learnt these lessons years ago after seeing all those re-runs.

Of course, this is only the beginning of the battle for which the fronts are elsewhere and maybe not in monetary and fiscal management steps, knee-jerk or otherwise. Meanwhile, for now, lets stick to careful communication.

CCTV - Closed circuit televisionTwo weeks ago, a speeding car with four teenagers crashed into a truck-trailor crossing at a four-way junction in Belapur, Navi Mumbai, around 30 km north of Mumbai. The car was going so fast that its roof sheared off as it went under the trailor. Three youngsters including the driver died, perhaps instantly. One survived because he was lying down in the backseat.

Whose fault was it ? The driver, quite evidently, whose eyes were either shut or was gazing skywards as the car slammed into the truck-trailor sideways. How do we know that? Well, you can see it yourself, on YouTube, thanks to closed-circuit television (CCTV) footage telecast by a news channel; and from two different angles. Open and shut. No way can  you blame the driver of the truck-trailor.

For the last two weeks, India has been gripped by the gruesome gang-rape of a 23-year-old para medical student. The girl – who died 12 days later – was molested and assaulted in a moving bus in Delhi and then dumped, along with her male friend who was also beaten up. How did the police find the bus so quickly? The quick clue apparently came from CCTV footage of a hotel in south Delhi which showed the bus passing by.

There have been many more cases, including a shooting at a toll plaza in Gurgaon on the Delhi border where the culprits were apprehended in good time, thanks to images of the licence plates and perpetrators.

A newspaper editor recently said how he was offered CCTV footage by the Central Industrial Security Force (CISF) showing senior journalists resisting security checks at some airports. The CISF manages security in India’s airports. I have not seen any report on this though.

Our deeds, and indeed misdeeds, are not so private anymore. The United Kingdom is already touted as the most spied upon country in the world. One estimate says there are more than 1.85 million CCTV cameras, or one camera per 32 residents. Another (disputed) study put the total number of CCTV cameras at 4.2 million. The London tube network itself is covered by some 11,000 cameras. There is an amazing statistic arising from this. The average person in a city centre is likely to be spotted 300 times in a day.

Estimates on this number – how many times spotted – vary but are high nonetheless. That can be worrying or comforting depending on your view or more appropriately, your intentions. Indications are that India will get somewhere there, soon, particularly for crowded public spaces. But Britain is an equally good example of where the CCTV world can or maybe should not go.

A study released three months ago claimed that more than 200 schools across Britain had installed CCTVs in students’ toilets and changing rooms. And a total of 825 cameras were found from a survey of 2,000 schools. In all, one estimate says, there are 106,710 CCTV cameras in secondary schools and academies across England, Wales and Scotland. The study has obviously generated some public angst. But note that this is a country that vehemently opposed bio-metric identities on the grounds of invasion of privacy.

There are several questions that arise in the Indian context. One, are CCTV cameras a bigger invasion of privacy than let’s say the data you share with an organisation when you consume a product or service? Or the Government itself? What can someone do with your CCTV images? Second, are they the solution to larger challenges of security that we face in an increasingly insecure world? And finally, will this cause the police force to become more alienated from the people it serves?

The jury for the first question is too far out right now. While there are public debates on the issue of invasion of privacy, the benefits have far outweighed the negatives. Britain itself has had success in nabbing criminals, notably the July 2005 suicide bombers (7/7 bombings). So has India, going by the earlier mentioned examples. This in some ways answers the second question too. In dense, urban environments, CCTV can act as a better deterrent then a policeman or guard who may or may not be there.

The concern of course is whether monitoring of this nature will prevent crime or a misdemeanour from happening. Anecdotal evidence seems to suggest yes and no.

It’s fair to say that video monitoring cannot be a substitute for physical policing nor will it prevent crimes beyond a point. Importantly, the perception that you are being watched in order to deter you from doing something needs to spread too.

Next, what can someone do with your images ? Not sure, but blackmail is an obvious thought, given what you were seen doing. And it’s the very thought of your daily life actions being frozen for near posterity on some hard disc can be discomforting.

The last question: Will the police force become more alienated now that it knows every square foot is being watched, either by them or by some private agency whose footage it can access? The cynical response is that India’s police, designed more to protect politicians, ‘rulers’ and sundry VIPs was hardly close to the people anyway. So what difference does it make? Be that as it may, this would be a concern to be addressed at a later date.

For now, several Indian states and agencies are stepping up the coverage. Jharkhand announced last week that it would install CCTV cameras all over the state to keep an eye on “incidents of sexual harassment in public places”. The Bangalore police asked all bus operators to install CCTV cameras. This also followed a case of misbehaviour with two women passengers. Panjim city in Goa is planning 28 points of coverage for traffic and security. It’s quite clear that most big cities and towns will see a sharp ramp-up in CCTV coverage.

There is always the issue of whether CCTV footage will stand up in the court of law. Or whether it is being used ethically. In several sting operations, one or the other party has claimed doctoring of footage. But as empirical evidence shows, the footage helps in clinching the final evidence even if its not the evidence itself; like in the Delhi rape case. The ethical question – like filming amorous couples in a park – on the face of it is an invasion of privacy. Though the authorities might claim otherwise.

Fact is that CCTV systems are a low-cost technology today with a fairly high degree of reliability. Nor can they be easily tampered with, unless it’s a well-choreographed attack. It is logical that most public places in India could benefit from monitoring. Particularly buses and the like. Most private establishments, including residential apartments, are already well-covered. Sweeping ‘coverage’ also tends to catch incidents other than they are designed to; like the hotel CCTV coverage which captured images of the bus in the Delhi gang rape case.

2013 is likely to be an eventful year when it comes to the structure and application of laws for better governance and citizen response. It is also going to be the year where you will be watched by someone, most of the time, everywhere.

Ratan TataTata Group Chairman Ratan Tata retired last week to make way for a younger Cyrus Mistry who will now lead the $100 billion empire. Some 58% of group revenues now come from outside India, in itself a Ratan Tata legacy, thanks to his dogged focus on creating a  global footprint. Keeping the growth and profit focus in difficult times will be a key challenge for the Tata group in coming years.

But Tata has been more than a business leader who multiplied revenue 20 times in 20 years. He is also a dreamer who envisioned products that no peer would dare attempt. His desire to build the first indigenous Indian car with native engineering skills and capabilities was a dreamer’s project. And entrepreneurs and managers alike would do good to take heed of this facet of Ratan Tata. Particularly the times in which he pursued his dreams.

If you walked into Bombay House in the early 1990s, you could not be faulted for comparing the general ambience to that prevailing in the offices of the Bombay Municipal Corporation (BMC), Mumbai city’s imposing neo-gothic civic headquarters barely a 15 minute walk away.

Time stood still here. Staffers stared blankly at piles of files as they sat on their desks or scribbled listlessly on paper. A few that were animated were engaged in evidently non-official conversations. Remember this was before the advent of the ubiquitous desktop monitor which would afford cover or a convenient distraction. Even the air smelt musty.

Truth be told, this was the case not just in the house of the Tatas but several leading private sector corporations across India, including multi-nationals. Real change was still some time away.

It was this world that Ratan Tata stepped into in 1991 after being anointed successor by the legendary JRD Tata. As it turned out, his first years were spent grappling more with JRD’s trusted aides and satraps who ruled Tata Steel (Russy Mody), Indian Hotels Company (Ajit Kerkar) and Tata Chemicals (Darbari Seth) rather than the brute forces of economic liberalisation.

It was only past the mid 1990s that Tata’s vision for the group began to be heard and felt, at least from the outside. Principal among them was the need to build environments and corporations that were globally competitive. Incidentally, this was also around the time that the group took a hard look at the portfolio of businesses to see if they fit in the liberalised world. One management consultant even suggested getting rid of Tata Steel, a suggestion that was evidently ignored.

It soon became clear that Ratan Tata wanted to do more than just wake up a sleeping giant. By the early 1990s, Tata watchers realised that they were looking at a dreamer whose thoughts went beyond just increasing revenue and profits. He dreamt, for starters, of an indigenous car that (famously) “Would have the Maruti Zen’s size, the Ambassador’s internal dimensions, the price of a Maruti 800 and with the running cost of a diesel.” Yes, quite possibly even Tata would be surprised with these benchmarks today.

Selling it internally must have been a battle. Remember, the Tata Group was largely an iron & steel, trucks, chemicals, software services and hotels conglomerate. No products, almost all services. Even TCS, despite being India’s largest software services company, has had no real product to speak of. Except an early but limited attempt to launch a accounting software product. Looking back, to plan building a car in such an environment must have been intimidating.

Tata’s desire to build an indigenous car was met with scepticism from outside too, including Dalal Street. The common refrain those days: Tata Motors (then called Telco) should stick to trucks. Ratan Tata responded by spending time in the Tata Motors design studios in Pimpri near Pune and then subsequently testing the car himself at the captive test track. He was determined to show that he could bring his dreams to life.

The Indica was finally launched in 1998 January. But it was not a smooth drive. The Indica faltered and spluttered for long. Its trials (literally) and tribulations caused much embarrassment to Tata. He admitted in interviews that he hesitated to take his morning walks in south Mumbai because customers would seek him out to complain. The Indica settled down and soon, Tata was dreaming again, this time to produce a Rs 1 lakh car. But the Nano, for all the media sensation it created globally, is still not out of the woods.

Tata’s passions, ranging from piloting aircraft to driving fast cars, fit with his persona of a dreamer. Unlike most CEOs I’ve met, Tata seems to fly aircraft for the love and personal thrill of it and not because it places him a notch higher in the swish set, at least that’s not the impression one has got. Similarly with cars where its not uncommon to see him driving a open sports car in south Mumbai, with a friend or two.

Looking back two decades, it’s a long journey in a fairly short time. A lumbering truck company metamorphoses into a car company that serendipitiously ends up, a decade later, owning two of the most iconic auto brands – Jaguar & Land Rover.

Many Indian business leaders  achieved similar or greater accolades in the last decade. In growth and scale. But few have felt so strongly about India’s engineering skills and product capabilities. And that India could build cars too. At least in that generation. That’s the stuff dreams are made of.

This is a favourite question of mine; among the domestic help you might have at home (including a chauffeur for definitional purposes), what are the chances they all have a bank account ?

The answer, in most cases, will be none. In some cases, one of two or three domestic help will have a bank account. Now, if this is the case in urban India, imagine what banking coverage would be like in rural India ? I’ll come to the figures in a moment but most Indians, as we can safely assume, depend on and subsist in a cash economy all their lives. And many of us (individually or institutionally) contribute to this state of affairs by dispensing cash.

In his August 2012 Independence Day speech, Indian Prime Minister Manmohan Singh provided a series of status reports on ongoing Government schemes, like the Mahatma Gandhi National Rural Guarantee Scheme (MNRGS) which provided employment to 80 million in the last year and  the National Rural Health Mission (NRHM) now to be converted into a National Health Mission and cover all towns and cities.

He also spoke of the National Skill Development Council (a separate blog on this coming up later) which will train 80 million people in the next 5 years. And schooling; almost all children in the 6-14 year age group are being admitted into schools, from 93% five years ago. Some 51,000 schools were opened in the last 2 years and 0.7 million teachers appointed.

But the one specific target he announced concerned bank accounts. “It will be our endeavour to ensure all households benefit from bank accounts in the next 2 years,” he said. Putting aside the usual scepticism reserved for politically-motivated claims, is this target feasible? At current pace of bank account growth, the answer is a possible yes.

But this is not about the claim or the dream of total coverage in two years. Its about the fact that the ongoing efforts to open bank accounts will have far reaching consequences for hundreds of millions of savers, savings and the economy at large.

India’s central bank, the Reserve Bank of India (RBI) says only about 40% of the country’s population has access to banking facilities. 2011 Census figures put the number of households having access to banking at 58.7%. The PM in his speech said just 10 years ago, only 3 of every 10 households benefited from banking services. Today, more than half of rural households do.  But whichever way the figures criss-cross, the gap is huge.

It’s been clear to most policy makers that the lack of bank accounts – and thus financial identities – is one of the biggest reasons for leakages in government subsidies and benefits. But perhaps what has not been that clear is that the RBI and the Government have been pushing hard to achieve universal banking coverage in the last three or four years, via a multitude of ‘financial inclusion’ initiatives.

Make no mistake about it. Banks, including the Government-owned lot, are not exactly the most willing partners. Most of them fail to see the value in opening millions of bank accounts which tend to lie dormant. Or see bursts of activity when funds get remitted or transferred and then instantly withdrawn. Not very profitable. And a matter of vociferous debate in India’s Ministry of Finance in the last two or three years.

As if in response to the prevailing antagonistic mood, the RBI tightened the screws further two weeks ago when it issued a circular saying that “with a view to doing away with the stigma associated with the nomenclature “no-frills’ account” it was rechristening the facility and calling it a Basic Savings Bank Deposit Account”. Moreover, holders of such accounts would be given and be able to access ATMs free of cost.

But like it it or not, the banks have fallen in line. In just two years, as of March 2012, Indian banks had added 49.3 million no frill accounts (now Basic Savings Account) taking the total to 103.2 million. It would be safe to assume that this figure is closer to 120 million new accounts now. If you were now to extrapolate this figure to households, the number is significant.

I have argued in the past that a bank account is only the first step in a financial identity for hundreds of millions of Indians. In coming months and years, insurance and social security benefits can be tied to these millions through their bank accounts. With the right product and technology linkages – all of which is totally feasible – migratory workers, for instance, can have a lifelong buildup of pensions, social security and the like. Wherever they come from and wherever they go.

I also believe that utility of open bank accounts – the banking industry’s biggest concern – will increase only when there are a plethora of product and services surrounding them. Though, to be fair to all, it is a classic chick and egg situation.

RBI Deputy Governor K C Chakrabarty in a speech three weeks ago pointed out, for instance, how the proportion of people having any kind of life insurance cover was as low as 10% and proportion having non-life cover was an ‘abysmal 0.6%’. Moreover, he said, only 13% of the population has debit cards and 2% has credit cards. And finally, he quoted National Sample Survey data to say that nearly 51% of farmer households in India do not seek credit from either institutional or non-institutional sources of any kind.

The common thread for these seemingly disparate trends is a bank account or the lack of it. The benefits for banking for all are multi-fold. One is obviously to start plugging glaring leakages in hundreds of thousands of crores (hundreds of billions of dollars) subsidies and benefits delivered by both the Centre and states. Second, more importantly, is the sheer opportunity for bottom-of-the-pyramind financial innovation. Much less has been discussed or written in this context.

I go back to the original example, think how your domestic helps’ lives would improve if you could pay their salary electronically, open a small pension or insurance scheme for them. And they have life-long mobility with these services. And now think of the whole country.

I was participating in a somewhat fiery debate on healthcare (helped by the presence of journalist S Gurumurthy) in Chennai a few weeks ago. The venue was Chennai’s eye hospital Sankara Nethralaya and on the panel, among others were Star Insurance (former United India Assurance Chairman) V Jagannathan and Sankara Founder Dr S S Badrinath.

The discussion was about evolving models of healthcare delivery. A key question was: can the Sankara Nethralaya not-for-profit, donor-based model be replicated? If so, how? If you want a one-line conclusion to that question, the answer is yes, but in a severely limited way. The Sankara Nethralayas of the world are driven by powerfully committed, talented people and teams and it’s statistically improbable to find so many of them around.

The debate was more on how it can be done and not on why it can’t be. But as the debate heated up, Jagannathan of Star made an interesting and perhaps moot point on the reason for Sankara’s success; it just felt different right from the point one walked in: “When I come to this hospital, I feel like I’m entering a temple,” he said, definitively. That statement got me thinking.

Now I’ve heard the temple or sacred space reference only on a handful of occasions in all the years  I’ve reported as a financial journalist. And I’ve visited many hospitals too, including a private one recently where the corporate office could have belonged to a private equity firm or a consumer products company. And no other visual references to the trade whatsoever. I reckon deliberately.

Much as I would like to expound freely on the kinds of organisations whose work spaces could resemble or radiate the energy that one associates with sacred spaces or temples, I will desist. Instead, let me take the safe route and pose some questions and thoughts which might spur a discussion in that direction.

First, a hospital is obviously performing a `sacred’ duty of saving lives, eyes or hearts as the case may be. But the range of feelings you encounter as a patient (visiting or resident) may not necessarily touch upon that. You could surely say a hospital or nursing home is either professional, caring, loving, friendly, attentive, efficient and responsive to your needs.  Or you might have a totally opposing view, depending on your experience.

Leading from that, the concept of a sacred space is not restricted to healthcare ? The next logical stop could be education. Do educational institutions feel like temples ? Most would say you do feel something different (as opposed to a factory) when you walk into one. Particularly if it has age and grandeur on its side. And yet, an old building alone will not necessarily impart that feeling. And many educational institutions surely don’t. Let me not say what some of them do remind me of.

Another point, maybe somewhat unique to India. Many organisations, including hospitals, have a religious figure either in the form of a statue or a portrait at the enterance. Typically, this is garlanded and prayers offered every morning. Would this give visitors a sense that they were walking into a `temple’ or a `temple-like’ environment. My sense is the answer is no.

So there is education. There might be other pursuits which have a `public service’ or even public utility element to it. But once again, they may or may not fit.

So what then are the forces (visible and perceived) that combine to create that powerful feeling that Star’s Jagannathan referred to ?

Here are my guesses: To start with, the organisation must be doing something which is genuinely touching, affecting or changing people’s lives. It could be a medical institution but may not.

Second and more importantly, the people. Each or all of them (from bottom to top) must convey the distinct impression they are engaged in a pursuit that to them is beyond the ordinary. They must look like they are giving this endeavour everything they’ve got, their every ounce of energy, their time, their lives. More often than not, it would appear they have sacrificed something else – for eg, family time, money, fame &  comfort – for this pursuit, willingly and happily.

Third, the organisational success. Doing all this but without perceived success and impact on the environment in some ways will negate the first two.  The visitor must know the work going on in a institution is making a fundamental difference not just to people’s lives in some way but also innovating and creating new ways of addressing some basic problems. With scale. In the case of Sankara, one factor could be taking affordable eye care to the masses backed with scale and operational efficiency.

I was, for instance, as impressed by Sankara’s smart information technology and processes that ran the walk-in, non-paying patient departments. The smoothness (and gentleness) with which walk-in patients were received, tagged, immediately inspected by a doctor if it was an emergency and then treated in large numbers is a testimony to not just passion but also a desire to serve at a larger level. Over 1,200 patients are treated daily at Sankara’s Chennai hospital. And many more in other Sankara hospitals all over the country.

There could be other factors too. But I’m reckoning these are the three important ones. Maybe there is a fourth force which makes the real difference. And I’m unable to describe it here while others might.

Now I also recognise it’s not every organisation’s burning ambition to be compared to a temple or a sacred space. Nor are shareholders going to pay a premium for this tag, if one were to get attached for some good (or not so good) reason. But for the few it matters, the social impact satisfaction would be very high.

I was also reminded of the original temple descriptor. By then Prime Minister Pandit Jawaharlal Nehru when he termed the public sector units (PSUs) the temples of modern India. He also referred to the Bhakra Nangal dam as a temple of modern India. Of course, the term ‘temple of modern India ‘ has been used liberally and in the most non-mystical contexts, like malls and multiplexes. And thus diluting much of its original meaning.

The question: how many of the Nehruvian references hold today, apt as they were in the 1950s and 60s when they were made ? Guess not many. Perhaps time is a better judge.

 

A recent Time magazine column on getting rid of money pointed in turn to an interesting article titled: “5 Ways That Jim Yong Kim Can Save The World Bank”. Of the 5 prescriptions, the one (for the new United Nations Secretary General) that caught my attention stressed on the need to get rid of cash.

The piece was written by Vishnu Sridharan of the New America Foundation’s Global Assets Project:  It argued that cash-based economies harm the poor by heightening the risks they face when carrying money and fuel government corruption and inefficiency.  Sridharan also said the World Bank had been slow to embrace the concept of transferring cash. Many of the bank’s programs relied heavily on physical currency, for instance, child support and education in Pakistan & Bangaladesh.

There are of course two types of cash economies in India. The first is the kind discovered inside suitcases during Income Tax raids. The second centers around hundreds of millions of India’s poor who typically stash their savings under pillows and mattresses. This cash might briefly be transferred electronically or through India’s postal system in a urban to rural hop.

The arguments for taking cash out of the system are well known. Apart from the sheer efficiency it provides, cash in banks can also be made to work in many other ways, providing immediate security of cash and long term effect of savings. Incidentally, cash is used for over 65% of all retail transactions in India.

Yet, relatively little effort has gone into exploiting the advantages that ought to accrue from offering financial products and services to the next half a billion citizens. The reasons are fairly simple. First, most folks can’t even cross the first stage – opening a bank account. Try moving cities in India and opening one. And then, think of what the other half goes through.

Second and more importantly, there is no incentive to keep the money in the bank. In most cases, the bank account remains a route to convert an electronic payment into the familiar bundle of cash. Which is also the reason the banks push back when it comes to opening more accounts, despite pressure from the Government of India to do so. Technology may make more bank accounts cheaper but it still costs.

Interestingly, the number of no-frills bank account holders have doubled from 49.3 million in March 2010 to 103.2 million in March 2012. Moreover, the total number of banking outlets has grown to 147,534 from 54,258, according to the India’s central bank, the Reserve Bank of India. The gains are largely due to the mandatory financial inclusion targets set by the Ministry of Finance on the banks.

The numbers suggest that for all their reluctance, the banks have plodded on. Can this 103 million number grow further ? The answer is yes. A recent study led by Professor Arun Sundararajan of the NYU Stern School of Business showed that almost 56% of the now 200 million enrolees of the Unique Identification Authority of India (UIDAI) programme did not have portable identities before.

A portable identity can act as an access gateway to many resident benefits in future. For one, the UID or Aadhaar is now an accepted KYC document for opening a no-frills bank account. Its not yet clear how many residents are using their Aadhaars to open bank accounts. But the fact is that increasing numbers of residents will get bank accounts, either top down – because subsidies & benefits will be linked to them – or bottom up – because residents will line up as they see the benefits of commerce.

Here is the good news and the bad news. The good news is India’s banking reach is growing. Remember that there is no clear statistic on how many people actually have bank accounts India. Some estimates put it at 500 million. So, if 600 million Aadhaars are issued by 2014, it stands to reason that the combined push will result in at least 300 million or so new accounts. Give or take.

The flip side is that all this banking infrastructure will lose its relevance if the right `bottom of the pyramid’ products do not get created quickly. Imagine if you could split your domestic help’s salary into three portions. First, the monthly salary. second, a Provident Fund (social security) account and third, a insurance contribution. So, Rs 4,000 for salary and Rs 100 for PF and Rs 100 for insurance contribution.

This is illustrative of course. Imagine further if some 300 million Indian migrant workers all had similar accounts which moved with them (and benefits) as they migrated from job to job or place to place. And they got life-long social security, insurance and similar benefits for the first time ever.

This sounds pipe-dreamish today because PF is not mobile and banks and insurance companies still have to create the linkages. The challenge however is the simple application of technology rather than anything else. This writer is convinced that with the right product offering, these new hundreds of millions of savers will increase the velocity of money flowing in the banking system as well as embark on new kinds of spending behaviour (which is a story for another post). And help part-fix other problems, like retail corruption.

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.”

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.

 
 
Govindraj Ethiraj
Govindraj Ethiraj is former Founder-Editor in Chief of Bloomberg UTV, a 24-hours business news service launched out of Mumbai in 2008. Prior that, he worked with Business Standard newspaper as Editor (New Media). Earlier, he spent five years with television channel CNBC-TV18 where he worked from near start-up point. Before CNBC-TV18, he worked with The Economic Times newspaper as Corporate Editor in Mumbai for five years, looking after the corporate and markets news bureau. He also worked with Business World for three years. He began his career with Business India magazine. He is a Fellow of The Aspen Institute, Colorado.

He is presently co-authoring a book on India’s efforts to give over a billion residents a unique, biometric identity - after concluding a short, voluntary stint with the Unique Identification Authority of India (UIDAI) - before returning to full-time journalism shortly.
 
 
 
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August 29, 2014 19:16 pm by ashok pandey
as i know & wish that every one know that shri Narendrabhai is biggest ever showman we had or we have, he very well know how to paint a house made by some one else to put that in his account.
August 19, 2014 10:14 am by karishma deshmukh
sir ratan tata u r my role model
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sir ratan tata , u r 1 among whom i respect a lot.... love u tata
April 08, 2014 18:16 pm by ramanujan
KYC must be simplified. The idea of KYC is to 'know your customer ' based on basic data of the customer.Afterall. it is us ,indians who are opening the accounts.In any case with audit trail, Itax watch and limits on daily transactions it is not difficult to track down the money launderers. Recently...
March 03, 2014 17:42 pm by Hardik Bavishi
Dear Mr. Dahiya, it is possible to have a basic savings account opened with very liberalised KYC. The employer aided savings account are also available. Refer to this path - www.sbi.co.in --> Personal Banking --> Deposit Schemes --> Savings Bank Account --> Small Account Even employer aided ...
 
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