GlobalGyan Blog

General elections are expected to be announced within a couple of days. In the next 6-10 weeks over 700 million people in India will have to make up their minds about whom to vote as their representative to the Lok Sabha. That decision would surely impact India for the next five years (unless, God forbid, we end up with a situation that calls for a re-election even earlier; more on this later) and possibly set the direction for several years after that. We know how much havoc can be created in just five years, so we surely cannot afford another such five years. 

Over the course of a few posts, I would like to share some thoughts on the decision problem facing us. Those of you who engage with me on Twitter or Facebook probably know where my vote is headed, but nothing is written in stone. I hope that this process of discussion will also help me either confirm my choice or make a new one. It is always good to keep an open mind, even if you are extremely committed to a philosophy / ideology. The process of inquiry can only help: if there's no change, it will reinforce your commitment; if there's a change required, it will convince you to make the shift.

The first debate / issue / question: Do I vote for my MP or do I vote for a party at the national level? 

As a parliamentary democracy (following the British model), the system is that we should choose the best person to represent us at our constituency and the chosen MPs will essentially select the government / executive. Unlike the American presidential system, we do not vote for a Prime Minister or a national winning party. This is an issue that has vexed me the most. At a national level, I might support a party but when I look at their (or their ally's) candidate in my constituency, I am loathe to vote for such a person because of his/her record. I might find some other person on the ballot sheet more appealing as my MP; what should I do?

The idea of a representative democracy, unfortunately, was severely impacted by the 1985 52nd Constitutional Amendment, also known as the Anti-defection Law (see here for a good overview / analysis of the law; pdf). On all essential matters, an MP is just a representative of his/her party, with limited scope for truly representing the constituency. Therefore, when we vote for a candidate, we are actually voting for that candidate's party. Till this law is amended in some form giving MPs greater freedom in the creation of a government or the passage of laws, your vote is for a party.

So, I am going to choose a party that I support at the national level and will vote for that party's candidate in my constituency, irrespective of who he/she is. One, I hope that the party I choose will nominate a candidate that I will not mind supporting (the onus is now on that party). Two, the choice of the candidate has greater local impact in municipal and state elections; the direct impact of an MP on real micro issues is quite limited, I suspect.

PS. I wish I had (formally) studied more about politics, governance, the Constitution, etc. but I haven't... my knowledge is based on my limited, spare time readings and discussions I observe on Twitter. I am treating these blog posts as part of my learning process and look forward to comments from those who know better. 

Recently I realized that the number of Indian Institutes of Management (IIMs) has grown to 13 from about 6 at the turn of the century. And there have been discussions about creating more IIMs, one for every state (that will take the count to 29). I was at an IIM last week chatting with some faculty members and we felt that the biggest constraint (amongst several) in creating these new IIMs will be the absence of good quality faculty.

The number of management PhDs being awarded every year must be rather small, a few dozen I suspect, with probably just a dozen or so coming from the original, more established IIMs. So how do you staff all these new institutes, how do you attract good teachers to move to non-metro / smaller town locations across the country (where the new IIMs are likely to be set up)?

It would be unreasonable to believe that you could suddenly attract many young MBAs to take up a regular PhD program, particularly with its 4-6 year cycle time. At the same time, you cannot teach an MBA program with mostly (corporate) guest faculty who have not received any academic teaching skills. The middle ground could be as follows:

The (first 6) IIMs should create a new 1-year faculty development program aimed at professionals with at least 10 years managerial work experience. Like the Post-graduate Diploma (instead of MBA) that they offer at the graduate level, this could be called the Doctoral Diploma or something similar. This 1-year full time program could consist of a quick overview of the MBA program (like a 3-month management development program), learning and teaching skills (including case teaching methodology), basics of research methodology, a few electives in the chosen area of specialization and an internship (teaching an MBA elective as an under-study). 

Would many professionals be interested in such a program? I don't know for sure but it can be easily tested. It is anecdotal, but there are already many who are teaching on a part-time basis and may be willing to explore full-time teaching positions. Also, even those that are teaching as visiting / guest faculty could benefit significantly from such a program. 

Also, the Government (or the UGC or the IIMs, whoever makes those rules) should treat this Diploma as an entry-level equivalent of a PhD; subsequent promotions / raises should anyway be based on teaching, research and consulting performance.

The best researchers and academicians may still come from the (Indian & overseas) PhDs but this approach will ensure that we have adequate, good quality people standing up to teach the thousands of students who will be signing up at these new IIMs.

More thoughts about the management education space, as I spend more time understanding it, soon.

Not a day goes by on Twitter (or in the "real" world) without somebody complaining about the deteriorating traffic situation in <insert city name>. Mumbai is no exception; it is not just that getting from one place to another takes much longer but it has become rather unsafe to drive around. When we are busy e-mailing or tweeting in the backseat of our cars, we don't really realize the latter issue. It's only when you are at the wheel (like I have been in the last 12 months) that you see how blatantly traffic rules and safe driving norms are being violated. 

Often, we tend to blame the cab / auto / bus / truck drivers for rash driving, in a classic "us vs them" argument. However, just look around and you will see that drivers of luxury cars / SUVs are as much to blame for the situation as 'those' guys. I must admit, I was also part of that problem till recently - how does it matter if you jump a traffic light when there are no other vehicles around. One morning while dropping my kids to school, I stopped at a red signal wondering if I should just go ahead; it was still early and traffic was yet to build up. My daughter exclaimed, "Why are we waiting, let's go!" I was taken aback; it was only a year ago she was reciting, "Green means Go, Yellow means Slow, Red means Stop" and today she wanted me to break that rule. What lessons was she taking from my behavior?

The question that has since vexed me was, why did I / we break the rule? There are two major reasons, I believe.

Ego

Essentially - "My work is very important and I need to get to my destination quickly. That is more important than following the rules or giving way to the other vehicles on the road."

It starts as a trickle but slowly, competitive spirit catches up and everyone's trying to get ahead. This ego is usually accompanied by disdain. "I pay so much in taxes but look at the condition of the roads. Bah! Why should I follow their rules?"

Fearlessness

It might sound cynical but I have come to believe that most of us follow rules / social norms only because of the fear of opprobrium. When society fails to punish you for your "illegalities" then you have no fear of committing them. 

Take the traffic light violation. What is the penalty for jumping a signal - I don't know what the official fine is but I would imagine that a Rs 100 payment would be sufficient to let you off. But that's not the real penalty, because the chances of getting penalized are quite low, right? Only once in a while do you notice cops pulling aside violaters. The probability of getting caught are low, I'd say, no more than one in ten lights jumped. So, if you assign the probability factor, your daily penalty for committing an illegality is Rs 10. Compared to your daily fuel expenses of Rs 100 - 200, this penalty is a very small addition to your cost of travel.

What if the chances of getting caught increased dramatically, perhaps by the use of technology / traffic cameras, to 50% or even 100%? And the fine is now Rs 200 because you cannot bribe your way out. The cost of the illegality is now Rs 100 or even Rs 200 per day, a significant number that might deter many from jumping the light. 

While ego causes some people to violate rules, it is this fearlessness that prompts almost everyone to commit illegalities. And it does not just stop with traffic lights. Once we start getting away with our small 'crimes', what's stopping us from moving to the next bigger one? Our importance and our invincibility keeps getting reinforced till, of course, we are brought to the ground with a great thud!

Finally, we must, yes, speak about all the scams, corruption and crime out there, but the next time when the traffic light turns red, also think of the crime we are about to commit.

PS. It is not a valid excuse that your driver jumped the traffic light while you were busy reading this blog-post. It is your car; take responsibility.

Today's Swaminomics highlights the loss of India's competitiveness as a nation: 

GDP growth has halved to 4.5%. India has become uncompetitive in several ways. Worse, the Indian political class has stopped even trying to compete globally. It focuses on subsidies, reservations and special measures for sundry vote banks, regardless of the implications for competitiveness.

Why is this so important? Because, there are multiple options for resources (capital and labour) to be invested. Whether it is foreign investment or Indian money, if it becomes too difficult or unattractive to operate in India, poof, many other countries are waiting for that money. Similarly, the best talent will move in and out of markets. Just five years ago, I was hoping (confidently) that 30 Indian companies would be able to fulfill late Dr. Prahlad's vision of becoming part of the Fortune 100 by 2022. I wrote:

India will be the third largest economy by 2022 and will contribute nearly a billion people to the world's workforce. The market should provide adequate scale to create globally leading business models.

An additional challenge for India is to consolidate what are typically highly fragmented and unorganised markets. Leadership in the home market is essential to achieve the scale that the Indian market can provide.

Several markets, including the US and the UK, are facing an economic slowdown. Consequently, several multinational companies are seeking to get into India and other emerging markets, making these markets more competitive. We have to defend the home turf not by creating entry barriers, but by directly competing with global players.

We have already lost a third of the fifteen years, and only one company (IOC, Govt. PSU) has managed to enter the Fortune 100 (2013) and Reliance Industries is close-by at #107. Looking ahead, it appears difficult that another 28 Indian companies will be able to make that shift. As Mr. Aiyar concludes,

Neither the courts, NGOs nor the politicians seem to care. A profusion of new rules and regulations are constantly churned out without any cost-benefit exercise to judge the impact on competitiveness. The latest Doing Business 2013 report of the World Bank says India has slipped from 131st to 134th position in ease of doing business. It stands 177th in ease of starting a business, 183rd in getting a construction permit; and 186th in enforcing contracts. Yet this damning expose of our uncompetitiveness produces no political will to change. We have a deep structural problem that is not even recognized, let alone redressed. Will India have to go bust again to concentrate the minds of politicians?

Almost all the reviews of Krrish 3 that I read before watching the movie warned me against going anywhere close to it. But when has logic ever prevailed, particularly when it comes to kids. And I must admit, I had enjoyed the first two installments of this trilogy.

Since then I have been wondering if Krrish 3 (K3 henceforth; I cannot get myself to type that double-r again!) was a good movie or not. Most kids seem to enjoy it a lot and hardly anybody walked out of the theatre during the movie. It is now reported that K3 has crossed Rs 250 crore revenues in the two weeks since release, making it one of the most successful Bollywood movies ever.

This is not a review of the movie, although I must point out what I found most jarring. There is no conflict between the two personas of the super-hero. Only the mask and black raincoat separate Krishna and Krrish; in fact, you see Krishna dancing and singing around a statue of himself. Contrast that with other super-heros like Spiderman, Batman or Iron Man... they are all reluctant "heroes" often unable to reconcile between their 'split' personalities. Not just them, eventheir loved ones go through similar struggles. This, I believe, creates palpable tension in their stories, often stronger than their conflict with the villain. 

On the other hand, in Krrish's favor, his story is an emerging one. He does not have years of comic stories, back-stories, make-overs or reboots available. He is a super-hero created for movies (nay, Hrithik Roshan), one movie at a time. Maybe Marvel or better still, India Book House could adopt Krrish and make a real comic super-hero series out of him. 

Anyway... the other issue that caught my attention was the relatively small scale of Bollywood movies. A 250 crore collection has made K3 the 2nd most successful in the industry. The Avengers (similar genre, Hollywood's 3rd highest grosser ever) had a budget 5X of K3 and earnings were 37 times more! In India itself, The Avengers earned Rs 65 crore. As pointed out in this article, the pertinent question is why Indian film-makers have no apparent desire to tap the much larger movie markets overseas.

In many industries, Indian companies have globalized, even when the Indian market was big enough (& growing), so that they might become globally competitive. Recognizing that products and brands from overseas have access to Indian markets, we needed to be able to compete with them in our home turf. And of course, many industries enjoy economies of scale and increasing the addressable market is a means to improving margins. Very high fixed cost businesses like movies clearly lend themselves to 'market expansion'.

Of course, as with any cross-border expansion, you cannot just transport products across markets. With movies, it is indeed tough to "customize" the product for each culture / language that one targets; at most you can dub the movie and maybe, edit it slightly differently. At the same time, the success of Hollywood movies like The Avengers or The Avatar has shown that good quality entertainment and story-telling is universally accepted. 

So are Indian film-makers shortsighted, focusing on the 100-200 crore collections whereas much larger opportunities lie elsewhere. Will the increasing corporatisation of Bollywood lead to larger scale movies being made in India, by Indians for global movie markets? In fact, a Bollywood movie with pan-India appeal that can earn $1 from each of the so-called 100mn middle class Indias has a Rs 600 crore potential!

During my corporate career, mergers / acquisitions was an area of focus and interest. Even my first major initiative in the academic world was the IIMA course on Cross-border M&A and Integration. Whether it was in the practical realm or the "theoretical" world, it was clear that the concept of post-merger integration was critical to the success of an acquisition.

One of the best practices in this space is that you plan for integration almost at the same time as you start evaluating the acquisition deal. There are two major reasons: integration is tough and you need all the time you can to plan for it; but more importantly, how you intend to integrate has major implications for the value as well as structuring of the deal. Many deals which may be attractive on a stand-alone basis, fall apart when you consider all the implications of what needs to happen post-deal. Or unattractive deals become viable with the addition of integration benefits or synergies.

Just as the above concept is valid in the case of a merger, so is it if you intend to de-merge a business / entity. Splitting a part from the whole comes with a similar set of issues around people, infrastructure, laws / regulations, etc. You can articulate an intention to de-merge (or merge) but a decision should only be taken after the separation (or integration) issues are considered and resolved.

Imagine if this is the complexity in corporate M&A which might involve thousands of people, what it would take when millions are party to such restructuring actions. This theory (or gyan) is extremely relevant to the way the Andhra Pradesh / Telangana issue has been handled by the Indian government. Like many other decisions, the govt seems to have adopted the principle of Act (announce) Now; Think (analyse) Later.

(Disclaimer: I am not close enough to the situation to comment on the historical and current reasons for the proposed split. Nor do I have any direct stakes in whatever the outcome might be. I was born in Andhra Pradesh and spent a few childhood years there. I have family and friends in multiple cities in AP.)

There are several (recent) instances of new states being created for mostly economic and administrative reasons. I have read some articles on the historical promises made to people of the Telangana region which successive governments have failed to fulfil. So it is safe to say that there are compelling reasons to consider the creation of Telangana state.

But, before announcing the decision as fait accompli, the Government should have identified and listed the major "dis-integration" issues. A process of consultation with key stakeholders (MLAs, MPs, media, opinion influencers, etc.) from all regions would have led to some acceptable alternatives for all key issues. The cost - benefit of these 'solutions' would then have informed us if the original decision was still worth pursuing.

It appears that the Srikrishna Committee did some parts of what has just been suggested. Unfortunately, the govt seems to have either completely ignored the output of that work or failed to publicly share what its resultant dis-integration plan was. The recent setting up of a GoM without any representation from the "affected parties" re-affirms the govt's disdain towards local opinions.

In my view, the people of Seemandhra who are agitating for a united Andhra really don't care about a "united" state. What they care about is the future of their jobs / investments in Hyderabad. What they want to know is that water would be available to the downstream regions. What they want comfort is on the centre's economic support to their state. Similarly, people from Telangana should be concerned about the availability of electricity for their state. They should be eager to know the economic development plan / support for areas beyond Hyderabad. These are issues that a dis-integration plan should have covered. These are issues that can be solved with some give & take, if negotiated in an atmosphere of trust.

It is still not too late. For once, can the central govt give up its unilateral behaviour and embark on a conciliatory process of de-merger? If not the PM, maybe the putative future PM can embrace the statesmanly role that is required at this time. Else, what should have been a clean de-merger will take on the ugly tones of partition.

Recently, I was associated with the launch of India's first white-labeled ATM (Indicash)... these are ATMs that do not carry any bank branding and are owned/operated by non-banking companies. One of the questions that came up from several people was, does India need more ATMs? Shouldn't the country be leap-frogging towards e-payments and m-payments? Aren't ATMs / cash the legacy "technology" in payments and transaction processing?

I can use a lot of benchmarks to show how India lags all major developed economies and even several emerging economies when it comes to banking and ATM penetration. Even countries where many people carry no cash in their wallets have more ATMs than India does. But let me illustrate my point (and the serious problem we face) through a simple example.

One of my several monthly cash expenses is towards purchasing milk. The vendor delivers 2-litres of packaged milk every morning and I pay him about Rs 2000 every month. I estimate that he has at least 100 other similar deliveries in my society complex. Therefore, he collects over Rs 200,000 monthly or nearly Rs 25 Lakhs (2.5 million) annually. However, his margin is probably only about 3-4%, i.e. Rs 100,000 p.a. 

Imagine if all the society residents decided to pay him using m-payment or cheque or credit card -- any transaction mechanism other than cash. His collection would now get into a bank account and therefore, "accountable". He will have to figure out what his tax liabilities are. Maybe he will need a Chartered Accountant to track his business income and prepare his returns. It is likely that he will eventually have no income tax liabilities but does he want to take a chance? It is the paper-work, the fear of extra hassles and possible bribe demands that makes him prefer cash any day.

Now take your grocery vendor. And your fruit and vegetable vendor. And many other local service providers. Every month, you make thousands in cash payments because the recipients will not have it any other way. In turn, they spend on housing, food and transport only in cash. 

I am not ruling out the importance of electronic / mobile transactions in India - it's a huge opportunity. But as long as there is a very large black (cash) economy out there and most small businesses are vary of the bureaucracy involved in becoming "white", we will have to make the frequent trip to the neighbourhood ATM.

Disclosure: I am associated with some companies in the payments / transaction processing business as an Advisor / Director.

In spite of its increased marketing and distribution activity in India, I don't believe Apple cares much about India, or cannot change enough to be more successful in the market.

Yesterday, Sanjay Bafna, editor of TelecomTalk tweeted about the iPhone 5s "official" pricing for India (Nov 1 launch).

I was quite surprised when I saw the prices. At Rs 52,500, the 16GB iPhone would be amongst the most expensive smartphones in the country. Not only that, it reflects a 20+% premium to its price in USA.

The unlocked 16GB phone is priced at $649 in the US; add about $40 for tax (varies by state). At today's exchange rate, that's Rs 42,675. Some states in India like Maharashtra charge higher VAT (12.5%) for mobile phones, so adjusting for that, you would get Rs 45,150.

The rumoured price is therefore a 23% premium on what it would cost in the US and about 16% premium over what it should cost (logically) in India. (I am assuming that shipping from China to India is not more expensive than China - USA.)

Recently, there was a lot of discussion about how Apple is looking to rapidly expand its presence in India. I don't think that adding to its distribution chain in 50 smaller towns is going to help much at these price levels. Undoubtedly, there are many rich Indians who live in rural India and they seek the latest / premium products but there is also a value consciousness amongst most Indians. Those who can afford to spend Rs 50-60K on a phone will have someone get it for them from the US.

Also, take the 64GB iPhone, for instance. At Rs 72,500, it would be more expensive than the 128GB 11" Macbook Air (Rs 67,900)!  

I love Apple products and am fully invested in their eco-system. Yet, I would think hard before purchasing an iPhone in India. I understand that the iPhone positioning is that of a premium product and it doesn't seek to compete on price. Apple doesn't need to do special pricing for India - just offer it at the same price levels that it does in its home market.

Note: I am still hoping that the 5s will be launched at the same price as the 5 (Rs 45,500 for the 16GB) or at most, Rs 49,999 (to account for some forex fluctuations).

(Adapted from a Facebook note that I posted on August 19, 2011)

With millions of Indians supporting Anna Hazare (as per media or FB, at least), is it so difficult for IAC to find one MP who will introduce their version of the Lokpal bill in Parliament and then get a majority of the MPs to vote in favour?

If they can, they should pursue that path. If they cannot, they should continue to protest / debate till they can convince enough MPs. Threatening the Government with deadlines & fasts unto death is excessive and arbitrary. This Government may be discredited, but the institutions of Parliament & Executive needn't be. Also, if the Government / politicians are as bad as we imagine they are, do we think that getting them to agree to the JLP bill will end corruption? If they have delayed the Lokpal for so many years, they can delay effective implementation for a long time to come.

There is no denying that most Indians are fed up of corruption; they are also fed up with lethargy in decision making and reforms. India, in the 21st century, has failed to keep pace with our aspirations and expectations. The middle class that has tasted the benefits of superior economic growth and competitive choice has no patience for poor infrastructure or galloping inflation. This angst requires solutions; it requires leadership. Unfortunately, not one amongst the political class has stood up to be counted. The opposition, in particular, failed miserably to capitalize on a wonderful opportunity to grab the initiative. 

What you have is a motley crowd of activists, NGOs, godmen and others that have captured popular imagination. Ok, so they'll probably win this round. What happens next? We are back to the same old choices. You know what I'd love to see: Anna Hazare and his team should convert IAC into a political party, demand mid-term elections and seek to come to power, if not now, perhaps by 2014. Then, I might vote for IAC - if I agree with their politics and economics. 

A democracy requires politicians; whether they are good ones or bad ones is our choice.

(Disclosure: I disagree that Jan Lokpal Bill is the solution to the corruption problem that we are facing. I strongly believe that reducing government and related controls is the 'cure' to big ticket corruption that has characterized the last decade. For the daily corruption that all of us face, I think that this suggestion from Kaushik Basu is seriously worth evaluating.)

PS. I had an interesting discussion with my friend Mohan Kannegal in the comments of my FB note; offered without any further comment.

This iPad case has been custom designed and made in India... to be more specific, Dharavi, Mumbai.

The cover, made in good quality leather, is available in multiple colours from the vendor.

I am trying to see if I can help this manufacturer reach out to the demand that must exist for the iPad case in India and elsewhere.