The stupidity of mathematical predictions...

The world will hit a population of 9 billion from its current 6.5 Billion in 2050. This will largely be an older population which coupled with widespread environmental degradation will cause immense hardships in 2050.

Now this statement is absolutely factually correct but still stupid. It assumes that the world will suddenly wake up to this problem in 2050 and the issues will all come to roost in that year. The changes propsed in the piece are not going to be true one fine morning - they will instead build up from 2009 - 2050. And the homo sapiens will adapt to it and influence it in ways which may render the predictions completely false. This fact is completely ignored in predictions such as this one - which are mathematically built without considering the changes which would happen as a gradual build up of the facts being predicted in the INTERVENING period. And thats why they are stupid - they ignore the intervening period. And that is why all dire predictions made in the past about our today too have never come true.

Smaller Banks, Local Connect...

Reading through an article in the Economist which talks about how local, smaller, geographically spread banks serve populations better than large conglomerated banks -

"Governments in low-income countries should recognise the strategic importance of small, private domestic banks. They should also carry out some fundamental reforms. On the demand side of the equation, entrepreneurs in developing economies need to be able to signal more easily that they are creditworthy. Sustained efforts to improve credit and collateral registries offer large pay-offs. Credit registries enable first-time entrepreneurs to document their personal credit histories and share them with lenders. Collateral registries enable lenders to verify that assets such as property and vehicles have not already been pledged by the borrower to secure past loans. Transparent and efficient court procedures allow lenders to seize collateral in the event of loan defaults. "

Really vouch for the second item on the list. Being able to show your credit worthiness is such an important part of the whole equation for that small farmer in rayalseema...What the article seems to miss is the whole online nature of banking transactions these days as it cites historical examples to support these points. But then again the spread and degree of comfort with online/mobile banking are entirely different matters where again the authors theory would stand ground...

Story-Link-http://www.economist.com/businessfinance/displaystory.cfm?story_id=13986299

Rein in the banks...Link Capital requirement norms to size of their books...

Well, the subject pretty much says everything I want to say in this article. Short point, as we seek the global recovery, need to have higher capital requirment norms for the banks. My humble suggestion would be to link the %age required to the size of the bank..i.e 4% if the size of your books is $1 Billion - 8% if its between $1 billion to $2 billion, 12% beyond $2 Billion etc... What say?

Delhi Metro...Looking Good

Its looking good...

Line Scheduled time of opening Total Length

Line 1 - Dilshad Garden Extension June 2008 25.15

Line 2 - Jahangirpuri Extension Jan 2009

Line 2 - Gurgaon Extension Jan 2010 44.65

Line 2 - Qutub Minar Extension Jul 2010

Line 3 - Noida Sec21 Extension Jul 2009

Line 3 - Dwarka Sector 21 Extension Dec 2009 53.43

New Lines:

Line 4 - Yamuna Bank-Anand Vihar ISBT Sept 2009 8.74

Line 5 - Inderlok-Mundka June 2010 18.46

Line 6 - Central Secretariat-Badarpur border Sept 2010 20.04

Airport Express line Aug 2010 22.40

(IGI Airport - New Delhi Railway Station)

Total = 192.87 kms

Boy...little is now left uncovered....

Tourism

I had written an article quite some time back on the growth potential of Indian tourism - http://suvidblog.blogspot.com/2007/08/why-indias-tourism-traffic-will-plateau.html. And then came across another piece today - http://economictimes.indiatimes.com/News/News-By-Industry/Holiday-traffic-expected-to-fall-30/articleshow/4363913.cms. And am saddened that tourism's luck has finally run out. Would agree that most of it could also be driven by 26/11 and the global recession (Stay-cation guys!) but there was always minimal headroom for tourism to grow in India and dont see the growth of yester years repeated moving on...

Welcome to 2009 - I see a good year...

Well good for India really...and thank the elections for this. Its the year when the black economy returns to become white...All the accumulations in the hands of politicians and parties get handed out across the country to the poorest of the poor - Direct cash in the hands of the people - The most efficient PDS scheme in the world!! And this money then would stand invested, consumed and saved....Yippee!!! All companies focusing on rural would stand to gain. Aint the dance of democracy interesting?

BRIC is now IC...

Well finally the demographic dividend has come back to aid the India growth story - The only two economies which continue to grow are India & China...Both Brazil and Russia continuing to languish and I am told that the old days of barter are back in Moscow...Hmmm...

Sorry folks...Have been busy earning a living...

So now that the title explains partial blame for the delay in updates, the articles to follow would be an update on the telecom sector and the biggie - The Nuclear Deal. A deal where the most short-term thinking members of India's leadership were exploited to achieve the most long term achievement of our country's history...Do Shibu Soren, Lalu Yadav and Mulayam Singh even know the long term impact of their wheeling dealing - the ends justifying the means here folks...

I hate to tell you that I told you so but I told you so...

Just completed a routine go-through of http://www.swaminomics.org/. And guess what I found. An article about SEZs - available at http://www.swaminomics.org/articles/20071202.htm

The article says and I quote -

Policies for SEZs should be such that -

1. First, every SEZ promoter had to be an industrialist, not a builder, ensuring that this was an industrial project and not real estate in disguise.
2. Second, the promoter had to have an anchor project of his own in the SEZ. This ensured provision of high-class infrastructure, which a builder might neglect.
3. Third, the promoter had to buy land voluntarily from farmers and not expect state acquisition on his behalf. This avoided the heart-burning seen in Orissa and West Bengal.

And most importantly - "The Gulf of Kutch is the only coastal area in India with low rainfall. Farming is tough, so farmers are willing to sell their land"

I promise I wrote my article about Rajasthan before reading this. Wake up Rajasthan...

To read the "Rajasthan Article" - click here.

http://suvidblog.blogspot.com/2007/12/perfect-state-rajasthan.html

India's progress - A myth

A great article, given that it is posted on rediff it is quite unlike that website to post articles of such profoundity.

http://www.rediff.com/money/2007/dec/06utop.htm

Looks at all the negatives of the so-called demographic dividend. This article exposes the crisis we also call "demographic dividend". A few quotes from the article to elucidate the point -

Who will create the jobs to absorb the net increase of 71m young people of working age over the next five years? Most are poorly educated and only a fraction will find regular work. Who will feed them and supply them with water and fuel? India has 18 per cent of the world's population but only 4 per cent of its fresh water and just over 2 per cent of its land area. Many of the country's groundwater aquifers are already in critical condition. Available per capita water supply has declined since 1975 and water demand is set to exceed all usable sources of supply by 2050. The bulge of young people today, furthermore, will in time become a bulge of pensioners in a country where only 11 per cent of the working-age population have formal pension arrangements. India will thus face the same problems of ageing and high dependency ratios as Japan and Europe today, only on a larger scale.

India does not have much time to shape up....

The perfect state - Rajasthan...

Why is the going so slow on such a large number of infrastructure projects in the country. The much maligned babudom is a convenient scapegoat. It also deserves the title actually. But the issue is not as simple as that. A big issue in developing anything is availability of land.

India suffers from a variety of issues hampering land use for infrastructure growth - be it SEZ, airports, metros, power plants etc etc...I propose to list them out and elaborate on them in this blog.

1. India faces legacy issues. Its a country where development was preceeded by growth in people who are already living there and occupying the land. Any development therefore must be preceeded by a people relocation exercise. Further, states have poor or weak land records. This means that the tillers of the land have no legal right to the land and hence they are not entitled to any compensation for loss of their land. The result - Nandigram.
2. Available land in India is dual use. India pays the price for being a fertile land which is good for agriculture and necessary for urban centres at the same time.
3. India, to some extent and rightfully so, is paying the price for democracy. See China for a contrast.

A good corollary for all the three points is Dubai. India today can spend almost as much as Dubai can, but in Dubai, development is preceeding people. Dubai has negligible agriculture so the land can be fully committed to urban infrastructure. There are no legacy issues and no people to relocate. Finally, there is no democracy and so there are few conflicts of interest.

So what is the solution to all this. Most fortunately, there is a state in the country with huge land area unoccupied by people. It faces no legacy issues, no ownership rights transfers as its largely desert. The state is Rajasthan (and to some extent Gujarat). Imagine the scope for developing transport hubs, SEZs, power plants and other infrastructure in the heart of the desert linked by a express tube to Jaipur which in turn is linked to the Delhi airport. Its time to go for a desert safari.It can be done...

Delhi Airport - 2020

I have finally managed to crack it!! Given the plethora of coverage it was receiving, it had become simply impossible to determine the final picture on the status of the Delhi airport. But finally its all been checked.

Status 2008

Ok so here is the status - Mission 2008. New terminal 1 between current terminal 1A & 1B. This will cater to all domestic airlines. This is just an interim terminal. Also we will get a spruced up terminal 2 for international connections. Unfortunately not much else will change, other than one additional runway in Delhi.

Status 2010

Now here is the big one. A new terminal 3 (thats the video on the GMR website). This is an integrated terminal (both domestic & international) which will be linked by metro to CP (the dedicated connection on which work began recently). Further, the domestic interim terminal will be connected to the metro via the dwarka line which will be extended. The interim terminal will be converted to a low cost carrier terminal. Apparently the current terminal 2 will be razed to the ground (Yahoo!!!) for further expansion of the new Terminal 3.

Beyond 2020

Expanding the terminal 3 complex to form a huge U shaped complex. Looks really nice.

Other Projects

1. The CP-Badarpur metro line is facing unnecessary controversy. Rest of the work appears to be on track.
2. Bangalore and Hyderabad airports ready for launch by around March-2008 but are mired with connectivity problems between the new airports and the city.
3. Mumbai metro and airports facing land acquisition issues and on hold at the moment.

The only projects going great guns are in Delhi. And its hilarious to see that the one project which has led to all infrastructure projects in Delhi is facing trouble - The commonwealth games village is hopelessly behind schedule. I pray that the committee withdraws the games from Delhi just before 2010 so that we can finish all the other ones and ditch further embarassment during the games.

Shanghai - Public Transport

Came across a very interesting pic recently. It shows the length and breadth of the Shanghai metro network in 2020. Its one hell of a badass. The total length of the track is expected to be 960 Kms within the city. Compare (contrast) this with the length of the London tube at around 450 Kms today and the New York subway at around 400 Kms. Makes the Delhi system (expected to be around 350 Kms as per current plans) in 2020 look puny doesnt it. Given that both the cities have the same population today.....

India@Risk 2007

Came across a recent report online by the World Economic Forum which lists out some of the risks facing India as she tries to sustain a record breaking streak of 9% GDP growth year on year.

The risks listed out for the country (apart from the obvious one of infrastructure) are

• Economic Impact of demographics - Will we really be able to cash in on the so-called demographic dividend. This will require a huge investment into education (some articles envisage around 10%-12% of GDP). This invesment will have to be largely focused on primary education (say around 6% of GDP), followed by vocational education (say another 3% of GDP) and finally around higher education (Engg, Medicine, MBA, Other degrees - another 2%-3% of GDP). Unfortunately the current education minister is more interested in the least important of these three aspects of education. This also implies a quick change to India's current labour laws. India's antiquated labour laws, if re-written can even solve our terrorism issues and maoist worries (more on this in a related article).
• Loss of fresh water sources - I envisage this to be the single-largest issue in the coming 5-10 years. With global warming, the snow isnt falling in the high mountains. What makes it worse is that the available snow is melting faster too. With a population which continues to grow at 1.5% this remains an unaddressed issue.
• Economic crisis/Oil Price shocks - A perfect opportunity to quickly ramp up any investment in public transport infrastructure within urban agglomerations and roads infrastructure connecting the urban centres with the rural areas.
• The negative impacts of globalisation in the developed world - will protectionism be back? I dont think this is likely to impact India in the short-to-medium term. Protectionism will do more harm to the developed world than to India. Besides growing south-south trade should solve this issue to a large extent.
• Climate change - Huge impact, perhaps the single largest threat to India's potential. I dont see much possible here given the huge population pressure on the limited resources. I envisage huge strife here for the country.
• Infectious diseases - Fairly substantial risk from threats like AIDS given India's huge (700 million under 30 yrs) youth population. Again not sure what governance can do in this regard. There must be some awareness of the issue, but is it preventable? I feel, providing gainful employment to the youth, giving a meaning to their lives, is a possible solution of engaging with them in this as well.

All in all, a fairly credible list with 3 very key ones in it. Something I feel has been missed out in this list is the fact that the demographic dividend comes with a time limit. The 700 million strong under 30yrs population of India will be approaching 50 in 25 yrs time. What then? I also feel that the birth rates will decline dramatically as more and more of these youth commit themselves heavily into building something for themselves and getting ahead. No children will be a small price to pay for this achievement. The only caveat here is that this decline in birth rates is expected to be fairly uneven in India - likely to be higher in states with better performances on education and gender equality (read south) and insignificant in poor, male dominant, uneducated states (read north). This would lead to the northern states becoming India's own version of eastern Europe continuing to provide labour to the better developed south of the country.

Labour Laws and Electricity Theft

India has over 12 million retail stores. Dhaka, the Bangladeshi capital has over 400,000 rickshaws. How are these two facts related? These numbers are a symbol of an inherent malice in the system which is the lack of good employment opportunities in these two countries for the unskilled. Consider the Indian example in this, why does the shop owner put up his "dukaan"? Because mostly, he has tried his hand at education and the employment exchange and has failed to get the results. So with no other option left open to him, he decides to raise whatever limited capital he can afford and sets up a small shop. Unfortunately, there are many, many more like him. The net result - a huge number of dilapidated, poor quality retail stores which are an eyesore for organised urban development and hardly generate enough returns on their meagre investments. Such employment opportunities are also highly inefficient ways to utilise labour.

And the reason for this inefficient use of both labour and capital is redundant, "labour-friendly" labour laws. In India, you can hire but you just cant fire. As a result, they simply dont hire. Most business units try and stay below the legal limits of 20 employees beyond which labour laws become applicable for the firm. As a result, not only do the employees suffer, even the enterprenuers do since they are denied the benefits of economies of scale.

Now, given that there are so many of these dukaan wallas - none of them manage to make any decent sums of money - hence the need to cut corners - hire children, not pay electricity bills, flout norms etc etc. See how its all related?

Working in India

Was recently asked by colleagues in office to share how my London experience has been. The more time I spend thinking about it, the longer the list gets. So what really is different?

Differences abound. But can be categorised along the following lines

1. Differences in the market
2. Different work practises
3. Different culture
4. Different organisational emphasis
5. Different clients

Starting with the first point, the market is different. Britain is a far more homogenous market than India. The sheer width of the market is astounding in India when you compare it to how the rest of the world looks.

Two - the work practises are far more evolved. Largely a result of the different clients which our company has in India and the UK. India projects are a bottom up exercise. You deal with the implementers of strategy, the marketing teams. In the UK, projects take a top-down approach. Your clients are the strategic planning & research teams within organisations, usually at the most senior global positions in the company. Since strategic planning and research teams are not the implementers of projects, this adds an additional layer of work within the project - the job of communicating the output of projects to the implementers (read marketing teams) on behalf of the client. There are also greater chances of a project not seeing the light of day and being implemented once it is complete. So, UK projects lay a far greater emphasis on the communication of the outputs, visible in fancy output, use of graphics and advanced presentation formats and workshops are the point of sale for all this work.

Its not looking good...

Recently came across the following info around a project I am working on.
Its a comparison of India with China, Thailand and India. Check out the education figures. Makes me wonder and feel that all perhaps may not be well going forward...

Risk & Consumer Behaviour

A lot is being written these days about the "global credit crunch". A result of financiers' ability to create complicated financial assets out of consumer debt and trade debt as an asset on the global market. The advantages of doing this were that risky consumer debt instead of lying on banks' books could be sold as a rent providing asset on the global market and would therefore spread the risk across the entire financial food chain.

So what happened? Where did it all go wrong? Well, frankly, if you minimise your risk, what usually happens? You end up taking more and more of it. And this is exactly what happened in the mortgage market. Since the risk of mortgage takers defaulting was supposed to get passed around the world as a rent providing asset, the original mortgage provider had no qualms in offering more and more risky mortgage since it was not going to be on his books anyways. It ended up being an orgy of mortgage being doled out with people with no income proofs being offered loans for houses. The most safe form of lending backed by a person's own dwelling became more risky than the personal loan being offered around. Whats more, it was available at much lower interest rates than personal loans. A crisis which was waiting to happen...

A blog a month...

Have been really indisciplined about writing on the blog. Hopefully should be able to correct it a bit this month. So what all has happened since the last time I wrote here.

Well, India won the T20 world cup, lost a ODI series to Australia, won the solitary T20 against them and the leftists finally lived up to their tag of being the appendix of India. A useless piece of evolutionary history which has lingered well beyond its time, is of no constructive use to the body but boy...what a racket it causes if inflamed!!

Another strange quirk of India's destiny - why do leaders who are basically divisive at heart simply refuse to die - harkishen singh surjeet, VP singh etc etc. These guys just live on and on. The ones who die are the dynamic varieties - Pramod Mahajan, Rajesh Pilot, Madhavrao Scindia..

Another cross the country bears...

How Retailers can survive?

Much has been written and said about how organised retail is not the right way forward for India's retailing community.

For the uninitiated, India has 12 million retail stores with retail providing the second largest number of jobs in the country after agriculture. Organised retail is expected to drive down costs, manage supply chain better, develop economies of scale and therefore would drive out the small retailer.

A lot of what is being said just might happen. But the great bit missing in news headlines is that the small retailer can survive. There is evidence of this in developed markets as well. The small retailer is not being driven out. He is just being moved up the value chain. So instead of selling packed food, he moves upto running a small takeaway. From running a stationery shop, he moves to running a courier/photostate shop. Get the picture?