To FDI or not to FDI in Retail is the Question

Summary:

In any issue such as FDI (Foreign Direct Investment) in Retail or in matters that concern the country and citizens, a policy should be framed with two objectives in mind:

1. Does it serve the National interest?

2. Does it serve the citizens in this case consumers?

There are bound to be impacts in between that have to be managed. This article addresses the following issues regarding FDI in multi-brand retail, namely; approval for the likes of WALMART and other multinational retail stores:

-         Consumer Benefits

-         Impact on Kirana Shops and small retailers - the “chota” capitalists

-         Employee Benefits

-         Supply Chain Issues

-         The competitive advantage

-         The darker side of FDI

-         The perils of FDI

-         Sovereignty and FDI

Consumer Benefits:

The track record has shown that the emergence of Big Bazaar, Reliance Fresh etc. resulted in FMCG (Fast Moving Consumer Goods) being sold at below MRP (Maximum Retail Price) and has forced the small retailers to adopt by providing better customer service and home delivery. It is an inarguable fact that the customer has benefited. They are voting everyday with their pockets. In India the policies tend to be supportive of the provider at the expense of the customer. The overall policy should promote customer winning and fairness to businesses, provided the National Interest is protected.

Impact on Kirana Shops and small retailers - the “chota” capitalists:

The major argument against “Big Box Outlets” and FDI in retail is the impact on the small Kirana shops. These Kirana shops are “capitalistic” ventures and it is interesting that the objections being voiced are arising from the Communists and Socialists, whose very dogma and agenda is “anti-capitalist”. Capitalist businesses thrive, survive or die based on market forces and how they adapt to it. In this matter it appears that the Left wishes to “protect” the “chota” capitalist from the “bada” capitalist even if it means at the expense of benefits to the customer.

Employee Benefits:

Kirana Shops in Urban Areas, exploit their workers, many of whom can be seen sleeping outside the shops. Big Box Retailers pay better and can be made to provide better assistance to their employees over a period of time. Policies could be enacted to have these enterprises provide housing. Big Box Retailers employ people on the floor to assist customers, janitors to keep the place clean and security staff. They provide uniforms, promote cleanliness and can be monitored to ensure better working conditions.

Supply Chain Issues:

In the case of FMCG, the direct connection between producer and seller has been effectively established by the large retailer. However when it comes to farm produce, the supply chain is mired with lack of storage facilities and the iron grip the mafia like middle men have over the farmer. The fact is that there is no money to be made in building out the required infrastructure unless the middle man is eliminated. This can only be done by enterprises that own the entire supply/distribution chain from procurement to retail/wholesale, either directly or through partnerships. Reliance Fresh has succeeded in doing this to a certain extent, and in the process faced the wrath of the goondas. eChoupal from ITC has resulted in some benefits to the farmer, but the forces against the farmer are vast and deeply entrenched. There are many parties in the supply chain starting with the buyer, the transporter, the manual labor etc. Each party protects its turf and vigourously fights anyone encroaching upon it; often with brute force. When it comes to perishable crops the farmers are always at the mercy of this mafia. What is needed is a Big Bang to shake up the vested interest.

Wheat is another story. The Food Corporation of India, buys the wheat at a premium, is unable to transport/sell all of it and as a result the loss due to rot is significant every year. Why would private parties or the farmers invest in storage facilities? It is already a losing proposition for the government and this situation has been the case for many years. With large retailers entering the wheat distribution chain, it is possible that the uptake could alleviate the surplus being wasted. If India cannot use it, rather than lose it, the wheat could be exported.

The Competitive Advantage:

The knee jerk Indian reaction is to strangle a competitor with regulatory obstacles and as mentioned earlier by resorting to goondagiri. The concept of beating the competition through “fair and square means” is an emerging attitude that has taken root in quite a few situations. China, that is revered, worshiped and looked up to by the Communist Party of India, has permitted WALMART to open stores. In response to this, a Chinese entrepreneur has opened outlets with the sole intent of beating WALMART at their own game by out-smarting, out-maneuvering, out-performing WALMART. That is what we Indians should step up to, rather than being obstructionists to progress. For instance Parle now sells packaged Potato Chips. The Indian consumer should act patriotically and choose Piknik and Parle over Kukure and Lays. Now that has a ring to it.

Indian Entrepreneurs should learn the logistic and business practices of these foreign companies and beat them at their own game. Rather than pursuing an obstructionist policy against these foreign companies, Desi companies should provide better quality products and superior customer experience at a cheaper price so that these foreign companies are compelled to down scale or shut shop and leave us.

The darker side of FDI:

The inflow of FDI is another source of enrichment for the maggots in India who wish to benefit from the flow. This is another “ATM” that the maggots will grab - ten to twenty percent or more off of the inflow. Who is to blame for this? A lot of the political opposition is for “show matey”. It will be interesting to see whether the ones who oppose Big Boxes in their State will quietly withdraw their opposition when the dust settles.

The perils of FDI:

If FDI were to come into retail and it serves as a conduit to repatriate profits khullam khulla a la the Coca Cola and IBM scenarios of the 60s and 70s, then that has to be prevented. Coca Cola imported their syrup, bottled it, sold it and repatriated all their profits. IBM imported older computers returned by their US customers and palmed them off in India. Both refused to dilute their ownership and George Fernandez did the right thing booting them out in the mid 1970s. In the case of Coca Cola, they left behind a bottling and distribution network which was quickly leveraged by Indian drinks manufacturers. With IBM leaving, other computer manufacturers ventured into the Indian market. Many years later, Ramesh Vangal, an IIT Bombay graduate, negotiated a deal with PepsiCo with a stipulation that they will export products from India to ensure a balance in Forex. Coca Cola followed suit and so did a host of other Multinationals.

Pragmatic guidelines can be laid, wherein the foreign party is allowed to repatriate 100% of their investment plus say 20% to 30%.  Beyond that they could be permitted to repatriate 20% to 30% of their profits thereafter, provided their net exports is equal or preferably greater than what they repatriate. By negotiating acceptable guidelines, a net outflow of Forex can be curtailed. 

Sovereignty and FDI:

There are allegations that FDI in India will yield significant control to vested foreign interests. This reflects poorly on India, for India is the master of its own destiny and India is fully capable of protecting her own interests even in the face of some unpatriotic maggots who wish to profit from putting their personal interests over that of the country. If it is found that foreign parties are working against India’s interest they can be booted out and their “Brick and Mortar” investments will be left behind. If the infraction is severe, their finances could be “quarantined” in India and subject to legal procedures. It is inconceivable that FDI would be a threat to Sovereignty or National Security and that drastic measures would have to be resorted to in this day and age. The goal is to accrue benefits for the investor, the country, the producer and the consumer.

The issue of percentage ownership is a red herring. Control can always be achieved through proxy ownership. As indicated earlier the important issue is of repatriation of profits and balance of Forex. The goal is to manage the money flow, ownership is a secondary issue. If ownership is a major heart burn, then ownership should be pegged at 30%. But that brings up the issue of raising the necessary capital to get this cart moving. Are Indians ready and able to pony up the required capital?

As it is Big Bazaar is over extended and hurting and other over extended enterprises (KingFisher was one, but now it is history) are probably chomping at the bits to see FDI to rescue them from their financial predicament

In Summary:

If the entry of FDI in retail does not result in a significant imbalance of India’s Forex reserves and the net effect is that both the producer and the consumer benefit by eliminating the middle man, then that it is a good thing. Change often results in winners and losers. A bridge across a river puts the boatmen that ferry people and goods out of business. In this case, the Kirana shops and small retailers will have to adapt by providing better service and delivery, in order to survive and thrive or they will die.

Reflections on India by Sean Paul Kelley

I challenge any Indian to take offense to this article that portrays the Sad Truth. The only exceptions I can cite is that Railway Tickets can be obtained via the Internet, subject to availability and hotel registration is not as cumbersome as he indicates. I have posted his article without his permission and I hope that is OK - RSS.

Reflections on India

by 

Sean Paul Kelley 

If you are Indian, or of Indian descent, I must preface this post with a clear warning: you are not going to like what I have to say. My criticisms may be very hard to stomach. But consider them as the hard words and loving advice of a good friend. Someone who is being honest with you and wants nothing from you.

Lastly, before anyone accuses me of Western Cultural Imperialism, let me say this: if this is what India and Indians want, then, who am I to tell them differently. Take what you like and leave the rest. In the end it doesn't really matter, as I get the sense that Indians, at least many upper class Indians, don't seem to care and the lower classes just don't know any better, what with Indian culture being so intense and pervasive on the sub-continent. But, here goes, nonetheless.

India is a mess. It's that simple, but it's also quite complicated. I'll start with what I think are Indias' four major problems – the four most preventing India from becoming a developing nation – and then move to some of the ancillary ones.

First: Pollution. In my opinion the filth, squalor and all around pollution, indicates a marked lack of respect for India by Indians. I don't know how cultural the filth is, but it's really beyond anything I have ever encountered. At times the smells, trash, refuse and excrement are like a garbage dump. Right next door to the Taj Mahal was a pile of trash that smelled so bad, was so foul as to almost ruin the entire Taj experience. Delhi, Bangalore and Chennai to a lesser degree, were so very polluted as to make me physically ill. Sinus infections, ear infection, bowels churning was an all too common experience in India. Dung, be it goat, cow or human fecal matter, was common on the streets. In major tourist areas filth was everywhere, littering the sidewalks, the roadways, you name it. Toilets in the middle of the road, men urinating and defecating anywhere, in broad daylight.

Whole villages are plastic bag wastelands. Roadsides are choked by it. Air quality that can hardly be called quality. Far too much coal and far too few unleaded vehicles on the road. The measure should be how dangerous the air is for ones' health, not how good it is. People casually throw trash in the streets, on the roads.

The only two cities that could be considered sanitary, in my journey, were Trivandrum – the capital of Kerala – and Calicut. I don't know why this is, but I can assure you that, at some point, this pollution will cut into Indias' productivity, if it already hasn't. The pollution will hobble Indias' growth path, if that indeed is what the country wants. (Which I personally doubt, as India is far too conservative a country, in the small `c' sense.)

The second issue, infrastructure, can be divided into four subcategories: Roads, Rails, Ports and the Electric Grid. The Electric Grid is a joke. Load shedding is all too common, everywhere in India. Wide swathes of the country spend much of the day without the electricity they actually pay for. Without regular electricity, productivity, again, falls.

The Ports are a joke. Antiquated, out of date, hardly even appropriate for the mechanized world of container ports, more in line with the days of longshoremen and the like. 

 
Roads are an equal disaster. I only saw one elevated highway that would be considered decent in Thailand, much less Western Europe or America and I covered fully two-thirds of the country during my visit. There are so few dual carriage-way roads as to be laughable. There are no traffic laws to speak of and, if there are, they are rarely obeyed, much less enforced (another sideline is police corruption). A drive that should take an hour takes three. A drive that should take three takes nine. The buses are at least thirty years old, if not older and, generally, in poor mechanical repair, belching clouds of poisonous smoke and fumes.

Everyone in India, or who travels in India, raves about the railway system. Rubbish! It's awful! When I was there in 2003 and then late 2004 it was decent. But, in the last five years, the traffic on the rails has grown so quickly that once again, it is threatening productivity. Waiting in line just to ask a question now takes thirty minutes. Routes are routinely sold out three and four days in advance now, leaving travelers stranded with little option except to take the decrepit and dangerous buses.

At least fifty million people use the trains a day in India. 50 million people! Not surprising that wait lists of 500 or more people are common now. The rails are affordable and comprehensive, but, they are overcrowded and what with budget airlines popping up in India like sadhus in an ashram in the middle and lowers classes are left to deal with the overutilized rails and quality suffers. No one seems to give a damn.

Seriously, I just never have the impression that the Indian government really cares. Too interested in buying weapons from Russia, Israel and the US, I guess.

The last major problem in India is an old problem and can be divided into two parts: that've been two sides of the same coin since government was invented: bureaucracy and corruption.

It take triplicates to register into a hotel. To get a SIM card for ones' phone is like wading into a jungle of red-tape and photocopies one is not likely to emerge from in a good mood, much less satisfied with customer service.

Getting train tickets is a terrible ordeal, first you have to find the train number, which takes 30 minutes, then you have to fill in the form, which is far from easy, then you have to wait in line to try and make a reservation, which takes 30 minutes at least and if you made a single mistake on the form, back you go to the end of the queue, or what passes for a queue in India.

The government is notoriously uninterested in the problems of the commoners. Too busy fleecing the rich, or trying to get rich themselves in some way, shape or form. Take the trash, for example, civil rubbish collection authorities are too busy taking kickbacks from the wealthy to keep their areas clean that they don't have the time, manpower, money or interest in doing their job.

Rural hospitals are perennially understaffed as doctors pocket the fees the government pays them, never show up at the rural hospitals and practice in the cities instead.

I could go on for quite some time about my perception of India and its problems, but in all seriousness, I don't think anyone in India really cares. And that, to me, is the biggest problem. India is too conservative a society to want to change in any way.

Mumbai, Indias' financial capital, is about as filthy, polluted and poor as the worst city imaginable in Vietnam, or Indonesia – and being more polluted than Medan, in Sumatra, is no easy task. The biggest rats I have ever seen were in Medan !

One would expect a certain amount of, yes, I am going to use this word, "backwardness," in a country that hasn't produced so many Nobel Laureates, nuclear physicists, imminent economists and entrepreneurs. But, India has all these things and what have they brought back to India with them? Nothing.

The rich still have their servants, the lower castes are still there to do the dirty work and so the country remains in stasis. It's a shame. Indians and India have many wonderful things to offer the world, but I'm far from sanguine that India will amount to much in my lifetime.

Now, you have it, call me a cultural imperialist, a spoiled child of the West and all that. But remember, I've been there. I've done it and I've seen 50 other countries on this planet and none, not even Ethiopia, have as long and gargantuan a laundry list of problems as India does.

And, the bottom line is, I don't think India really cares. Too complacent and too conservative. 

About the Author:

Sean Paul Kelley is a travel writer, former radio host, and before that, an asset manager for a Wall Street investment bank that is still (barely) alive. He left a fantastic job in Singapore working for Solar Winds, a software company based out of Austin, to travel around the world for a year or two. He founded The Agonist, in 2002, which is an international affairs, culture and news destination for progressives. He is also the Global Correspondent for The Young Turks, on satellite radio and Air America. 

Government - Don't mess with the JEE

The move to tinker with the JEE* is an example of BAD intentions to spoil something that has worked well for the country. Needless to say there is always scope for improvement of a selection criteria that focuses on merit and is devoid of political meddling and corruption.


It seem to be a politically motivated "vote-bank" or "money-grabbing" idea to curry favour with some constituents or other. Don't these people have better things to do, to improve the plight of the millions of poor in India? Instead of improving people's lives, the prevailing tactic is to lower existing standards to enable "inclusive growth".


The proposal at hand is to change the format of the JEE exam with a preliminary aptitude test, with a 40% weight to the entrance test with Board exam results. The following Scenarios depict some of the possible outcomes:


Scenario 1: It is a non-issue.

The advocates of this moronic idea don't realize the varied levels of the different Boards. Normalizing them is a major challenge. Many students score a greater than 100% result. One possibility is that there will be grade inflation in the harder Boards so that their graduates can compete effectively. And if most of the applicants have greater than 100%, this effectively makes the 40% weight assigned to the Board results a non-issue. Everybody gets the 40%, khullum khula.


Scenario 2: The process crumbles on its own weight.

The JEE is a highly automated test environment capable of handling the massive number of entrants taking the test. Unless the factoring in of this 40% weight into the JEE results is automated, i.e matching the entrants with their Board marks, and the number entered accurately, the process will be fraught with errors. This idiotic idea of ascribing 40% weight to the Board exam adds so much weight to the process that it becomes impossible to implement efficiently and accurately.


Scenario 3: Institute a common Board exam:
That is what the two step JEE was and that was kabashed.


Scenario 4: Bye Bye UPA

The UPA fails to be the next governing body and this issue gets shunted to oblivion.


Scenario 5: Hurting Minority sentiments

The IIT graduates are a minority community and tinkering with this "Sacred Cow" hurts the sentiment of this community. Once this community starts expressing their "hurt", the UPA government which excels in appeasing minorities will be forced to withdraw this effort.


Scenario 5: Non-cooperation

The patriotic faculty could just put its foot down and say this is just not feasible citing Scenario 2. This would force the MHRD to institute a software project to automate factoring in the weighting of the Board results and hopefully it will be assigned to the duds Murthy referred to in his whine and the project will never be completed to fruition.


* JEE - The Joint Entrance Exam that students appear for admission to the IITs

Nano Mistakes and Missteps

Summary:

The Nano was much heralded and expected to take the Indian car industry by storm. However it didn’t quite pan out that way. To begin with the decision to manufacture it in West Bengal was a major catastrophe. Why anyone would locate an industry in a communist infested region begs reason. With a timely invitation from Modi’s government coupled with sheer grit and determination, the unfortunate site selection error though overcome, was just the beginning of many missteps the Nano had to contend with. The technical glitch that caused a few cars to catch fire was overcome as well. However, the biggest error in marketing the Nano was the choice of the Distribution Channel which has resulted in lack luster sales.

Related Info:

Tata bought the bleeding Jaguar-Land Rover company for $2.3 Billion. The expectation was the $2,500 Nano would revolutionize the car industry by launching the “poor man’s car”, and the $65,000 luxury brand would be a millstone around Tata’s neck.

The outcome was quite the opposite. For 2010-11 out of the consolidated net profit of Rs. 9,274 crores, just Rs. 1,812 crores came from the Indian operations of the company. The rest came from JLR and other associated companies.

Sales of UK based JLR rose 26%, while Tata Motors car volume in India grew at 23%. The Jag that costs 25-30 times more than the Nano even at base price sold nearly 53,000 cars against the Nano 70,000.

The Importance of Positioning:

Launching the Nano as a “cheap” car pretty much ruined its Brand Value. The assumption was that if it is cheap enough, then it would attract buyers who were priced out of the existing auto market. This flies in the face of the fundamental marketing principle of targeting early adopters first, then going after a broader market segment. Despite this error, there was an initial ground swell of interest where many people signed up and a lottery was held to select the initial set of buyers. In that sense the hype that accompanied the launch prior to availability did work for a short period of time. And then it fizzled out.

It is not clear what a successful positioning could have been. Clearly it is meant for the married motorcycle owner who now has a child or two. But this buyer is conservative not only with regards to price, but is also risk averse and would rather wait till “others” buy and provide feedback. The fire glitch certainly did not help.

Other positioning questions are:

-         Is it an Urban car or a Rural car?

-         Intended for teenagers?

-         A second car?

-         Self driven or driver driven?

None of the above supports the premise that providing a cheap car will result in buyers. In fact the most appropriate positioning would have been to promote it as an Auto Rickshaw replacement or a cheaper taxi, but in order to do so it would have to run on LPG and also deal with bureaucratic and administrative hurdles.

Pricing error:

It was never a Rs. 1 lakh car, with taxes and transportation added. This immediately set the perception that the 1 Lakh price is just a teaser price and that what one lands up buying will cost more.

The expectations mismatch:

The Nano was trumpeted as an engineering marvel, which it is. However, bringing it to market presents one set of challenges and marketing it successfully is another. As in any new product, the expectations are typically set high and in reality the performance falls short. Too much importance was given to the technical aspects instead of highlighting the fact that it is a “no frills’ car that transports four people safely and economically. The goal should have been to highlight its utilitarian value.

In essence, it should have been promoted as a utilitarian vehicle at and affordable price

The Channel Mistake:

The Nano was sold through the existing Tata Motors car dealerships. What happens when a person interested in a Nano shows up is that the sales person will up-sell the person and convince them that they are better off buying the car next model up. With financing the monthly outlay will not be that much more. The incentive to the dealer and the sales person is better margins and commission respectively. The net result is that the buyer either buys the next model up from Tata or goes some place else with the “upgrade” intent in mind.

A few years down the road, Bajaj will launch their competitive offering. If they do it right they will sell it through their existing motor cycle dealerships. In this case a person interested in buying a motorcycle, like a family man is a potential customer who could be motivated to buy the car instead.

This underscores the importance of the Distribution Channel, which is a major hurdle for Tata. What they have been doing recently is taking the Nano on the road and getting people to test drive it. It appears the objective is to make the sale on the road and rope the customer into the dealership to seal the deal.

Lessons Learned:

This kind of car is targeted to a new market and does not cannibalize the existing market. This is more of a commuter car and appeals to a person who will drive the car themselves.

Growing a market involves patience and the first set of buyers targeted should be early adopters. This was a new product targeted to a new market. The expectation of high volumes at low margins works if one is introducing a better, cheaper replacement to an existing established market.

The target customer is one who has out grown the motorcycle or a buyer who values the utility, safety and economics of such a car. The bulk of the sales eventually will come from the first time car buyers.

It is better to underestimate demand and start with under capacity initially so that demand out strips supply. Having a back log, gives the impression that this is a much desired commodity and worth the wait since the savings are significant.

One can hark back to the VW Bug, which was a bare bones car with the transmission and engine being the two major assemblies that formed the motion system. It was positioned as “the people’s” car and named appropriately. It found popularity amongst the youth. Ultimately, if one wants to repeat this phenomenon in today’s context, the VW Bug serves as an example to build upon.

State of the Indian Railways

The Indian Railways by its sheer size and number of passengers and goods transported is probably one of the best managed and run railways in the world and probably the cheapest. The Indian Railways looses money on passenger traffic and makes money on Goods Transportation. The ensuing result is that travel is cheapest on Indian Railways.

For instance an auto ride of a few kilometres to the station is way more than a long haul Sleeper Class train ticket. Long distance bus ticket prices too are significantly higher than a train ticket for the same distance. This is due to the heavily subsidized passenger fares and running trains carrying passengers at a loss.

The Indian Railways is the Blood Line of the country and rather than continuing to provide services at throw away prices the emphasis ought to be how to improve this Blood Line to fast forward the progress of the nation.

The railways can serve a major role in leveraging the “Demographic Dividend” by providing jobs for the youth that are entering the workforce. By increasing the surplus it generates, it can plough it back as well as borrow more to improve the infrastructure, upgrading services, enabling trains to travel at 160 Km/h (100m/h), double tracking high traffic segments like the Konkan Railway and Mangaluru-Bengaluru etc.

The subsidized ticket prices, results in crumbling infrastructure and subjecting the contract labourers who work on track maintenance to deplorable living conditions. We gloss over their plight. In essence the subsidized rail fares are being supported on the backs of these hard working people. This is an aspect of our socialistic thinking!

Socialism should ensure everyone is served from the very poor to the very rich. And that each segment pays a different price. One gets the basic minimum at a minimal cost and one gets more by paying more.

Daily travel for work is a necessity, whereas all other travel is discretionary. To increase capacity in suburban trains used by commuters, it is suggested that compartments be reconfigured to accommodate more standing and less seating. Currently, one sees a mad rush at each station to secure seating. Providing fewer seats will increase capacity and do away this scrambling.

The goal of serving the less fortunate members of society for long distance travel can be met by applying the following principle. The basic “General” minimalist service is offered for very little. For a little more, one pays a little more. For a lot more, one pays a lot more. Premium Services are offered at a Premium Price. In this way the General Category and Sleeper Class (to some extent) can be subsidized by the ensuing service categories that offer more and cost more.

The situation on the Ground:

The Railway Staff are doing an excellent job of keeping trains running and paying attention to safety. The dedication and performance of the Railway Staff is a great asset to the Indian Railways and the Nation. However, due to lack of resources, namely finances; they are unable to perform many duties pertaining to maintenance and repair of the infrastructure. Furthermore many trains appear unwashed and require a new coat of paint. The following is a pictorial report on the state of the railways.

The Working and Living Conditions of Hard Working Railroad Crews:

(Take note of the children near rhe workers)

The above is a video of a hard working rail maintenance crew. The work generates a lot of dust and they don’t use masks to prevent breathing dust. They start work at 7:30 AM and work without a break until they finish the agreed upon number of slats. Since there is no child care facility for their little children, they are brought to work and the children too are exposed to the dusty environment. The workers live in tents, which in itself is not bad. But they live under deplorable conditions with no sanitation and decent facilities for water and cooking.

The subsidy of rail travel, takes away funds that could be used to provide better facilities for these hard working crews, who work under extreme conditions. In essence the brunt of the subsidy is borne on the backs of these people. Is this justice? Providing benefits to one class of people results in the exploitation of another class!

The work is hard and essential to the operation of the railways.  It is critical and mandatory. What is missing is improving the Quality of Lives of these dedicated hard working men and women.

Articles 42, 43 and 46 (see below) of the Indian Constitution stipulate specific responsibilities on the State. By farming out work to contractors the Railways circumvent these responsibilities on a technicality. Either the Railways should provide the necessary facilities to ensure a “humane” Quality of Life for these workers, or the contractor should be paid to provide the same. That is the spirit of Socialism on which the Indian Constitution is founded on.

The General Class or Unreserved Seating:

The above pictures were taken in a General Class Compartment. As you can see, people are using it as a Sleeper Class compartment. This is the Class of Service that serves the poor and it is understandable if it is subsidized. As mentioned earlier, long distance travel is discretionary and that means it need not be provided at throw away prices.

The Crumbling Infrastructure:

The above pictures are just one instance of crumbling infrastructure. There will be continued deterioration if the railways do not generate the funds to maintain and repair.

Safety Barriers:

The above is an instance of a road running beside the tracks with a partial barrier. Even where there is a barrier, it is crumbling in places and sections are missing. Furthermore, in this particular location, the Railway Quarters are across the road where there is no barrier. This poses real danger to little children who may wander across the road to the railway track.

Great Offering with no facilities:

The above is an excellent service provided by the railways that many truckers utilize. However, the entire train has no cafeteria or sanitation facility. All it would take is to place a portable structure on one of the carriages that could be contracted out to a caterer to provide meals, snacks. And it could include toilet facility for the drivers and the helpers as well.

Intermediate Stations Quota:

A number of intermediate station quotas go unfilled resulting in empty berths. It is suggested that the intermediate station quotas be held till 24 hrs before the train departs the originating station so that those reservations can be released to the General Quota.

The Didi Legacy:

She exclaimed how can the prices be increased for the Sleeper Class! Instead of acting like a communist she ought to have functioned more like a Chairperson of a Corporation that is a vital arterial transportation network of the country. 

Her demand was legitimate provided it is specific to the pricing for General category only (not Sleeper) and that the price of General category be kept as low as possible. Furthermore, holding it constant can only be sustained for a specific period and cannot be made permanent. A stipulation can be made that it will be revised once in two or three years, so that people know what is in store and it would avoid the need for confrontation.

Message to Railway Ministers:

At the very least passenger services should be at break even which generates Capital to invest in areas mentioned above. The focus ought to be how to make it possible. The following are a few suggestions.

The purchasing power of the people is different in different parts of the country. People travelling in West Bengal and in the BIMARU States don’t have the same purchasing power of people living in the Konkan coast, Southern and Northern India. By pegging the price of tickets to accommodate the poorest of the poor, services to the people who can afford to pay is given at a throw away price. The solution is to charge different per Km prices for different segments of the tracks.

We have a growing Middle Class that can afford AC2 and AC3 service resulting in Demand exceeding Supply. The emphasis going forward is to introduce new trains with a better rate of return. Reconfiguring rakes to seat more people. One possibility is to have chair cars for overnight journeys instead of so many Sleeper rakes. Provide seating only on the sides of commuter trains to allow for more standing room.

The poor are not suffering due to unavailability of railway services on existing lines. It is the Middle Class that is being short changed due to inadequate availability. It is time that Railways provide services to this segment that is willing and able to pay higher fares.

In doing so, Passenger Services could be transformed to generate profit. This can be ploughed back to improving the passenger services and/or better pay for the railway employees.

All PSUs need to be weaned off the Indian Government’s Breast Milk. This is the financial viability criteria that must be met by all PSUs. Furthermore, PSUs must generate enough profit to plough back into their respective operations along with the ability to take out loans and service them. Most PSUs with the exception of the railways and a few others must augment the government’s tax revenue base, just as the private sector is expected to do. The Railways and a few others have an additional responsibility of catering to the weaker segments of society that has to be addressed with the financial viability criteria in mind. In that respect it is understandable that the railways function as a non-profit enterprise. i.e the profits are used to subsidize services for poor to some extent.

Recommendations on re-branding classes of service:

The Railways does an outstanding job in addressing demand-supply elasticity to a certain degree, by having different categories of trains with travel on Passenger Trains being the cheapest and with higher pricing for other services such as Mail, Super Fast, Express, Rajdhani etc. Along with different categories of service within these trains such as General or Unreserved, Reserved Seating, Sleeper, AC Chair, AC-3 Tier, AC-2 Tier, First Class etc. multiple price points are offered. But the offerings are skewed towards the lower price categories with the demand for AC services far exceeding supply.

Indira Gandhi did away with III Class saying it portrayed a bad image. The ensuing Make Over resulted in the existing categories. It is suggested that we revisit the current categories and consider the following:

General: This is the subsidized category that is unreserved seating. See Picture 1 for how some people utilize this service.

Economy Chair: This would be comparable to an ordinary bus with reserved seating. Each train that has a General Category should have this category as well.

Economy Sleeper: This would be the existing Sleeper Class and with the intent to increase the number of passengers a train can carry, it is suggested that a few of these Sleeper Class bogies be replaced with Economy seating.

AC Chair: This would be comparable to the AC Volvo and priced competitively to AC Bus transportation. New trains with this class of service should be introduced for the Middle Class.

AC 2 Tier and 3 Tier:  This would remain the same.

Premium  Class: Suggest First Class be renamed to Premium Class.

Luxury Class: This would be the Palace on Wheels.

Super Saver: The Garib Rath is a misnomer and an insult to the people travelling on it. Most of the AC Tier 3 are Middle Class people. Convert the whole train to AC Chair and use the AC 3 Tier bogies to new trains at a better price.

Essence of Articles 42, 43, 46 of the Indian Constitution:

Article 42 provides for just and humane conditions of work and for maternity relief.

Article 43 calls upon the state to secure to all its workers – work, wages and conditions of work ensuring a decent standard of life and full employment of leisure, social and cultural opportunities.

Article 46 stipulates that the state shall take special care of the economic and educational interests of the weaker sections of the society in particular of the Scheduled Castes and Scheduled Tribes and protect them from all forms of exploitation.

Update:

Got this from a post by a friend. This is Jugaad at its best. Hats off to whoever came up with this idea.  Only in India!

Mission India

"Inclusive Growth" is the new Mantra which calls for the Economic Uplift of the masses Below the Poverty Line (BPL). At the "nano-economic" level it translates to a sustainable income for families and individuals of employable age. This means that these folks are either self employed or have jobs that provide them with the requisite sustainable income. (See Note 1). 


India can be broadly partitioned into Urban and Rural Areas, each significantly different, requiring different solutions. Taken in its entirety the situation appears complex. However, the solution to complex problems is to break it down successively to arrive at a set of priorities that can be individually tackled to bring about a comprehensive solution.


At the heart of the problem is the inability of the agricultural sector to absorb the excess labour force resulting in abject rural poverty. This also leads to migration to Urban areas which are already bursting at the seams, resulting in the rural poor moving laterally to become urban poor living in squalid conditions.


The most pragmatic solution is a primary focus on Jobs, Food Security, Education, and Quality of Life. Every development and decision should be targeted towards one or more of these priorities.


Focus on Jobs, Jobs and More Jobs:
Besides providing all the necessary attributes that allow the Private Sector to proceed at an accelerated pace (Energy, Infrastructure, Investment Friendliness, Land Reform - with attention to fairness towards owners of land whose land is acquired and to environmental norms etc.) Two things ought to be kept in mind:

1. Easier to facilitate the relocation of people to Job Opportunities, than to move Job Opportunities to the people. This would help in siphoning off the excess labour that is lacking opportunities in Rural India.
2. Better to locate these Job Opportunities in proximity to an existing railway line or extend the railway line to where the new Job Opportunities will be. (Indian Railways is the fourth largest railway network in the world.)

To facilitate the migration of people to these Job Opportunities, the criteria applied should be simply:

• A person/family, regardless of their income potential should be able to rent a flat,a room or a bed when relocating. 
• All the amenities (shopping, recreation, schools, places of worship) desired by the highly skilled personnel that comprise the Middle Income Group (MIG) and the low/medium skilled personnel that comprise of the Lower Income Group (LIG) should be provided.

The above ought to be the recipe for all SEZs (Special Economic Zones - See Note 2), that includes an "Economic Engine" that provides the primary opportunities around which a number of secondary opportunities are generated. It does not matter if the "Economic Engine" is a nearby Metro, provided efficient public transportation links are incorporated into the plan.

Focus on Food Security:

Farming today is an entrepreneurial endeavor. Marginal farmers are at great risk and does not provide a sustainable income. The focus should be on making the productive farmers more productive and provide the farmers at risk an exit opportunity by way of a job. This means removing the barriers that exist in the acquisition of agricultural land and allowing farm consolidation. The focus should be on ensuring agricultural land land remains agricultural land rather than who owns the land and how much they own. What India needs is a Food Security Strategy that includes improving farm output, food processing and agro-industry. See Note 3.


Education:
The Quality of Education can be improved significantly by the use of modern technology. Students can obtain access to Good Teachers and Quality education through "Distant Learning" programs. 

Focus on Quality of Life:
This encompasses many areas from housing, health, education to security, defense and environment. However,the "in our face" issue is the plight of the people at the "Bottom of the Pyramid", who represent a largest segment of India’s population. This segment continues to be treated as “Invisibles”, in that their existence is ignored, and they are neglected.   They exist, but have been intellectualized into non-existence.  The solution is not a hand out to this segment.  What this segment needs is affordable solutions that they can pay for. It is no longer conscionable or moral to marginalize and neglect the needs of this segment. 

Instead on the emphasis on ownership, the focus ought to be on affordable rentals, with ownership being the desired end goal. The emphasis ought to be in making it economically viable to provide housing solutions to the "Bottom of the Pyramid". This includes "owner friendly" rental laws and providing the requisite "Living Wages" that enable these wage earners to rent reasonable accommodation. See Note 4.

Note 1: The term "Living Wage" and "Minimum Wage" can be used to debate what translates to a sustainable income. Minimum wage is usually an amount defined legally for a country, whereas Living Wage defines what is required for an individual or family for a specific geographic area.


Note 2: Special Economic Zones (SEZs)


Note 3: What is India's Agricultural Policy?


Note 4: Alleviating Visual Poverty

The Times are a Changin...

"Parliament is Supreme", scream the Politicians, Pseudo-Intellectuals and the cocktail crowd. That is granted. But "Parliamentarians are Not". It is clear that these "Parliamentarians" have done a poor job regarding corruption and have misused the "power" vested in them. Our "Parliamentarians" are drunken with power and are hell bent on resisting the "political flogging" meted out to them by Team Anna.


One of the major criticisms of Team Anna’s Satyagraha is that it was undemocratic and extra-parliamentary in approach and that Civil Society does not represent the majority opinion of the citizens of Bharat. Times have changed and people who prescribe to this opinion are ostriches with their head buried in the sands of time. 

With the advent of modern communications technology a broader base of citizens distributed Nationally are able to participate and voice their opinions on issues of National importance. An elected politician represents just his or her constituency, whereas the issue raised by Team Anna energized people across the country, who showed their support by their presence and participation in support of Team Anna’s Satyagraha. Their sheer numbers probably exceeded the votes garnered by many Members of Parliament, to get themselves elected. 

Anna said it best indicating that the people of the country are the owners and that the elected Members of Parliament and Bureaucrat’s job is to serve the owners. There is no argument that the politicians and bureaucrats have failed the owners when it comes to curbing corruption. 

In the absence of a process for a National Referendum, Team Anna has effectively utilized the process of Satyagraha on which the very foundation of our country was established as demonstrated by the Father of our Nation, Mahatma Gandhi. This is the beginning of a trend and heralds a change in the role of the politician in the Democracy of the Future. 

On a local level, politicians will continue to champion the causes of their constituents. On a National level or for that matter at the State and City level, more and more issues will be thrown open to citizens to vote upon and decide. The politician’s role in this aspect will be to ensure that the referendum does not discriminate between a particular community based on their religion, affiliation or gender. 

In the absence of such a process, Team Anna has taken the first step and demonstrated effectively how a National Referendum can be “demanded” in a non-procedural manner.

Currently, the demands have only been accepted for consideration. They still have to be formulated into a Bill and it has to be voted upon by Parliament. In the Democracy of the future, the parliamentary vote would be eliminated, by the issue voted upon by the citizens. While we may claim that “Parliament is Supreme”, let it be noted that Parliament is accountable to the citizens of the country and that the citizens of the country collectively, supersede the “Supremacy of Parliament”.

This process has been implemented in smaller democracies and the time has come for the world’s largest democracy; Bharat and the world’s richest democracy; the US, to pay heed to the issue of National Referendum and institutionalize a process by which it can be done. In the US many State and City level issues are voted upon as Ballot Measures, by the citizens. So for the ostriches whose heads are buried in the sands of time, this is an indication, that a time may come when certain issues may be decided directly by the citizens of the Country, State or City, with the Parliament being a shared body of power as opposed to the sole body of power.

Get Real Mr. Murthy

The claim that IIT graduates are not up to snuff, that coaching classes is one of the reasons responsible for this situation could well be the outcome of the statement being framed incorrectly. An alternate claim could well be that the IT industry does not provide interesting opportunities to attract IIT graduates.

Kudos to the IT Industry:

The IT Industry comprising of notable companies such as Infosys, TCS, WIPRO and others, has put India on the map as a leader in World Class software solutions and BPO service providers. The IT Industry has been so successful that the term “Banglored” is being used to describe jobs in the developed world that are being outsourced. Even President Obama, (who moves his head from side to side as he speaks), talks of jobs that he wants in Buffalo, (while he looks in one direction), instead of evaporating to Bengaluru (while he looks in the other direction). The people involved in the IT Industry are doing a yeoman’s job and something that has brought our Nation a tremendous amount of pride, employs a lot of individuals both directly and indirectly and brings in much needed foreign exchange.

There is more to IT:

IT activity can be broadly categorized as Architecture, Construction and Services. The Indian IT industry for the most part is involved in “construction” activity that extends the customers existing computing environment and services. The former involves “pounding the keyboard”, and the latter involves providing technical support, maintenance etc., answering the phone, and/or doing some administrative work. Star IIT graduates look for opportunities that go beyond these activities, let alone answering the phone during night owl hours!

Where the Opportunity is, Graduates will go:

Consequently graduates gravitate to where the opportunity and remuneration is, be it the Financial or FMCG sectors. Yes, they follow the money. Furthermore, there are attractive opportunities at companies such as Intel, GE, Microsoft, etc. Graduates interested in software development would rather work for high tech companies involved in developing innovative products rather than IT companies involved in “construction” activities. The fact of the matter is that industry comes to IIT and clamor for IIT graduates. Many have multiple job offers. Some are disappointed with the compensation extended and do look for alternatives. And yes there maybe some slackers.

In search of the ideal IT candidate:

The issue of competency in English was raised. Technical skills and competency are orthogonal. One could be very competent technically in Hindi or their regional language. Obviously, English competency is important in the IT industry that is involved in what is commonly referred to as “body shopping”. And yes the IT companies eagerly look for technically competent individuals, fluent in English who would be happy and content “pounding the keyboard” that they i.e. the IT company can “body shop”. Infosys is an excellent company and it does well by hiring graduates that augment its success from regional colleges. An IIT graduate who scores the JEE, and graduates from this elite institute, probably aspires to something more than being recruited and bunched with second and third rung college grads.

In Summary:

It appears Mr. Murthy’s statement was based on anecdotal experience and not grounded on facts. Maybe, just maybe, the IITs are the wrong place to look for the ideal IT employee.