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...

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?

Describing India...

Came across a few punchlines which I feel, capture the essence of India -

1. Functional anarchy
2. Chaotic democracy
3. Lumbering elephant
4. 21st century mind, 19th century body

I found "functional anarchy" really interesting...

India, a more equitable growth...

For a start, look at the map. Now, try and look at India and China. The glow of bright lights registers across the whole nation in India's case. Not the same for China as you can see. Three reasons to explain this.

One, China has all of its population clustered within the well-lit region. Not likely. Two, India's growth is more evenly spread across the whole country. Three, I fudged the map. You decide.

Why mobiles are India's PCs

In a poor country, which claims to be the IT capital (or atleast brains) of the world, the PC penetration is an abysmal 5%. Primarily because owning a PC and associated infrastructure for internet etc costs a bomb. Besides a PC is an in-home device. Within telecom, fixed line telephony has been a complete disaster all along because it involved last mile wire connectivity infrastructure. That is something which the private sector will not do and the government cannot do. A mobile, however is a different take. First, its cheaper than owning a PC. Two, a young population which is bound to be out of the house a lot would definitely be better served by the mobile than a fixed line or a PC. Three, technically a mobile is always connected. And since all new technology (WIFI, Wimax) does not involve laying cable, it will continue to be effective. Now that is something worth thinking about. But how is mobile uptake among Indians? Exploring this reveals that India adds 6 million new mobile customers each month. Yes, each month. Yes 6 million. And the prime reason for that is the pre-paid card, which can be activated and renewed through a 16 digit number bought from any mom and pop store around town...

Why India's tourism traffic will plateau out....

Its holiday time in London (August is the school break month here). And an ideal time for the Incredible India campaign to be around. Surprisingly, I don't see much of it around. I believe it is money well saved.

Tourism is something that I am not really convinced about. Consider this, the largest markets for outbound tourism and travel, logically, should be the USA and the EU? Now only 20% of US citizens have a passport. (I am not kidding here). Two, US citizens do not need a visa to travel to the EU, unlike travel to India. Three, EU passport holders do not need a visa for travelling within the EU. Four, given the sheer width of locations available within the US and the EU, which citizen from these parts, who can afford a decent holiday will even think about acquiring a visa to travel to a country so far away when he can get all he wants within the confines of these regions with minimum hassles?? Only three types of people would still be interested in visiting India. One, the real budget traveller who cannot afford a holiday in these parts will think about India. Two, somebody who already knows about India and has some knowledge about the place (parents visited India, studied about India, fascinated about cultures) would risk the trouble to make the trip. Three, the poor little business traveller who cannot avoid coming over.

Historically, India has not been able to attract its potential of ones and twos. And once these two pots run out, I believe that tourism traffic will plateau out in the years to come...

India's sunrise sectors

Ok, this article did originate with a very selfish motive. This month, I have some spare cash to invest in the stock market. The fact that its just taken a beating also helps. So trying to figure out which sector/area I should invest in set me thinking. Now I am a long-term & completely risk-averse player who would like to invest and sit back for 5 years before I am reminded that I own some shares. This means that I need to incorporate future potential into the stocks I buy as well. Logically, stocks are about businesses who need funding from the market for their business plans. Business plans involve providing a service/product/piece of information required by consumers today and in the future. Therefore, a logical conclusion from this hypothesis is that if you correctly identify potentially large and profitable future needs, you identify the companies ramping up to meet those needs and therefore those are the ones to invest in.

So I asked around for what could be the right companies/sectors to invest in and I was duly informed that I should identify India's "sunrise" sectors - e.g. pharma, IT, tourism.

Now pharma and IT are the ones which are most likely to face the wrath of the rising rupee. Besides, pharma gestation periods are long and risky. And IT has competition sprouting all over the world. I have just been informed, that India's biggest threat in the IT sector is not China but a country called Estonia. Refer to http://www.msnbc.msn.com/id/20053078/ for more. But the real reason for my diffidence about these two sectors is that I find them too pricey for me at the moment...Having looked at my traditional "sunrise" sectors, I decided to start with the basics. Right, so what do the 1 billion Indian consumers really need? And what are the basics in the modern world - Food, Shelter, Clothing, Communications, Energy. This domestic market would certainly need food (and lots of it). That effectively means food companies would be a good bet any day. They would need shelter. That indicates the real estate sector. And we also know that where you have a shelter, you are bound to have a mortgage provider. So the banking sector is the third choice. Finally, clothing indicates retail for me. That is something worth looking at. And finally we come to communications. An absolute must for a service economy I would say. So need to examine it further. There are essentially two available routes to communications today. The telecom sector and the internet. And finally we come to power. Why are people not too excited about it? Because it involved last mile wire connectivity. Because people consume and do not pay their bills and because there is fixed line infrastructure, it leads to power theft. Also people cannot afford to pay the full rates. So its a no no at the moment.But how will the economy continue to grow without one of its five basic needs unfulfilled...Now fixed-line infrastructure is something we really cannot do much about until they invent wireless electricity. But how about attempting the sachet and pre-paid strategy to power? You buy a connection, they install a meter with an alphanumeric pad. They charge you in advance and give you a 16 digit alpha numeric code which you feed into the meter. Voila!! There is power. The moment your tab runs out, the connection is automatically disconnected until you renew. Technology could help ensure that it is impossible to renew connections without the 16 digit codes. If you have renewed regularly, you move to a monthly payment system. It can be done. Will need to give it some more thought, because it doesnt solve the problem of electricity as a birth right or theft.....

Mind the gap...

Just came across a fantastic website - http://www.gapminder.org/. Captures a global comparison of countries on various social & economic parameters. Definitely worth a look. An example attached. For India, it is indeed "mind the gap..."