STCMA – 19th April 2019

Atman Trivedi on the India-China reset that was much touted in 2018. He calls for a rethink and he is right, in my view. [Link]

Yanis Varoufakis carefully walks on razor’s edge defending Julian Assange and protesting his possible extradition to the USA and succeeds in doing so. [Link]

Robert Blackwill writes in a new report dealing with Trump’s foreign policy that what matters most is the effectiveness of U.S. policy over time and its consistency with U.S. national interests, not the personal qualities of its leaders. [Link]

The question that crops up in one’s head after reading Anjuli Bhargava’s article on Jet Airways and India’s aviation policy decisions over the years is whether elections do matter or should matter. [Link] – subscription required.

Ashoka Modi raises very sensible questions on IMF’s optimism and ‘don’t ask-don’t tell’ attitude to risks. Cannot blame the IMF. Financial markets and the Fund feed off each others’ attitudes. [Link]

If China has the right to police ‘terrorism’ as it sees it in Xinjiang, does India not have the right to police terrorism on its soil?. Brahma Chellaney writes on the deafening silence in the Muslim world on China’s oppression in Xinjiang. [Link]

STCMA – 15th March 2019

Study Links Eggs to Higher Cholesterol and Risk of Heart Disease [Link]

Across the globe, a question of air safety becomes a question of American leadership [Link]. I agree. America dithered a bit and damaged itself a lot in the process. Some pilot friends explained the nasty ‘penny pinching’ that Boeing did. Sad and condemnable. Chalk one more entry in the journal of ‘how capitalism is destroying itself’

Elbridge Colby urges America to take India’s side [Link]

Disturbing story of the treatment of Kazakh Muslims by China [Link]

This is from February 14. A fascinating long read on China’s mistreatment or harassment of young Marxists [Link]

Aarati Krishnan provides some good statistics on aggregate wage growth and breaks it down well. She explains why the economy is lacking the spark it needs. Well written. [Link]

On Thursday, 108 economists and statisticians put out a note urging that agencies associated with the collection and dissemination of economic statistics should not be subject to any political interference. [Link].

Some question the timing but the appeal has gained in legitimacy in recent months. The government’s many moves on different statistical data have raised more queries than answered them.

Honestly, this requires much more than a cursory mention. The article on how we need to save our ignorance from artificial intelligence is rich with philosophical implications and questions too. [Link]

Undoing IBC

Only the other day, I did a post on the recovery of non-performing assets in India. I wondered or hoped if IBC would help drive a bigger recovery than we have seen in recent years. But, came this op.-ed., in BusinessLine that threw some cold water on my optimism. The reactions to this from friends (they shall remain anonymous) were interesting.

One wrote: This confirms the Gunnar Myrdal thesis: India is a soft state.

Another wrote:

I think it failed purpose in its conditional clauses. It tries to avenge and recover – both cannot sustain. Its dharma  should have been to extract the best price for the assets — from whosoever. This was not to be because the political objective of optics of punishment found place in the rules. The process of criminality or malfeasance cannot be pre-judged by barring original promotersits a mess from day one.

I asked him:

I see your point. Jayanth Varma has made the same point in one of his blog posts too that “dharma  should have been to extract the best price for the assets — from whosoever.”
However, I have this question:
if the borrower was able to bring  70 to 80 paise on the Rupee he owed, clearly, there was a very high probability that the default and the refusal to keep the loan current were mala fide?
How should that be dealt with? Should the asset be sold first back to him and then pursue him separately for fraud? That won’t work and might not be legally tenable.

His response:

I agree it’s complex. But case has to be proved not presumed. So question source of funding, create escrow and process investigation on the side.

Appears reasonable.

Another friend wrote:

But this is typical of the judiciary. India’s courts always act as they please. The law as written does not apply to them; they consider the written text as a suggestion to be considered as far as  possible. Because of the contempt law, the intelligentsia is reluctant to lay blame at their door. Much easier to blame the executive, the politicians etc.

The fourth friend sort of echoed the above:

This is the problem when you allow the judiciary and retired judges to decide such cases. They play to old instincts where worker interest ia paramount. Also NCLAT tends to take long judicial vacations

While two have blamed the judiciary and the retired judges who man the NCLAT for these interpretations, the truth might be more nuanced. The morality aspect may be given more weightage than is due or necessary while the recovery aspect should have been accorded primacy.

The Cadbury Makers

I had made a mental note long ago to check what Mondelez is since I see it every day during my walk in Sri City but never got around to doing some internet hunting. Today, I decided I must check them out. I did not know that they make chocolates for the Cadbury brand.

So, during my internet search, I found this ET article on their workforce. Felt happy to read about their workforce comprising a large portion of rural women from Andhra Pradesh. Good stuf.

Mondelez International has an interesting website, although I am not sure its ‘purpose and strategy’ would pass the Lucy Kellaway test.

Their ‘Compliance & Integrity’ page is rather comprehensive and, at first glance, looks impressive.

NPA recovery in India

On December 28, 2018, RBI released the ‘Statistical Tables Relating to Banks in Inda, 2017-18′. I just quickly browsed the table-headers online and looked at NPA recoveries in India :’ NPAs of Scheduled Commercial Banks Recovered through Various Channels’. The trend has not been good. In that sense, the implementation of the Insolvency and Bankruptcy Code (IBC) has been very timely. It may have initial troubles, changes and resistance, etc.

Which momentous change would go unchallenged or has gone unchallenged by entrenched interests? The table below shows the percentage recovery (col. (2)); percentage recovered through SARFAESI Act (Col. (3)) and the fourth column is the amount referred to the various sources for recovery – Debt Recovery Tribunals, Lok Adalats and SARFAESI Act. The recovery % are proportions of these amounts (Col. (4)).

Source: RBI

Let us see how these numbers evolve in 2017-18 and later, after IBC becomes accepted and established. Clearly, the table shows that IBC had not come a day too soon!

Have the Indian people got their priorities right?

(My column published in MINT on Tuesday. This was my preferred header but MINT Edit page editors thought differently. I have fixed some minor errors in the version below. Unfortunately, they appear in the print version and they were my errors. Not that of the newspaper)

Ever since a Pakistan-backed terrorist killed Central Reserve Police Force jawans, scores of Indians have been making both strategic and tactical decisions on behalf of the government. Their lack of training, experience, and capability to make such decisions in real-time in a fast-moving world have, evidently, not deterred them. On issues that matter to them, such as electricity, water and taxes that they pay or don’t, they are oblivious of the challenges that their children and grandchildren would face. They will be doing the nation a service if they leave external power projection to the government and focus on the provision and pricing of electricity and water.

A land and environment court in New South Wales in Australia took into account the global budget for greenhouse gas and carbon emissions and rejected the appeal of a mining company to establish a coal mine. Coincidence or not, days after the judgement was delivered, separately, Glencore pledged to cap its coal production (Glencore Vows To Cap Global Coal Production, Financial Times, 20 February 2019).

With coal production getting limited because of environmental and business reasons, it will only get pricier. This is not good news for India. India’s power generation is largely coal dependent and will continue to be so for quite some time.

As Mridula Ramesh, director of the Sundaram Climate Institute and author of ‘The Climate Solution—India’s Climate Crisis And What We Can Do About it‘, points out eloquently and crisply in two of her recent articles for Firstpost, a considerable share of the bad debts in Indian banks is because of the problems faced by coal-based thermal power plants. Either the coal is not available or is available at a price much higher than they budgeted for, making it uneconomical to generate electricity at a price that they had committed to sell to their main buyers—the state electricity boards.

The buyers do not have the money to pay, despite the effort to clean up their balance sheets and make them financially viable. The financial viability of state electricity boards depends on the willingness of its end customers to pay for the electricity they consume.

As a growing developing economy, India has a need for power. However, the need translates into demand only when there is a willingness to pay, backed up by the ability to pay. That is missing. Free electricity to farmers results in another problem. It leads to indiscriminate exploitation of groundwater. It is considered politically suicidal to demand that consumers pay for it. However, Ramesh argues that it is not so. Madhya Pradesh showed that water could be charged and the government re-elected. In any case, her institute’s survey in and around Madurai found that many of the borewells, with diesel-powered generator sets, were usually owned by the larger, politically connected farmers.

In recent times, Indian governments have tried to use technology and biometric identification to ensure that subsidies are targeted or paid out as cash transfers. That has not extended to the targeted distribution of electricity and water to the poor at affordable rates, with the rest of the population paying economically remunerative prices. Ramesh’s answer to the problem of India’s electricity generation, which has to be dependent on coal for some time to come, is to price power and to vary the price on an hourly basis depending on the intensity of demand, like app-based taxi services do. A similar approach is needed for water. As she puts it, India’s climate sustainability and financial viability are intertwined. Are politicians ready to grasp the nettle?

When I saw that Feroze Varun Gandhi had recently come out with a book titled A Rural Manifesto: Realizing India’s Future Through Her Villages, it raised my hopes. While the book mostly conflated a wish list for policy proposals, it had its bright spots. The section on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) made for interesting reading. It made an important point that the ministry of rural development stopped monitoring MGNREGA projects once they were completed. The nation may want to know whether the assets are maintained well, used and renewed. It is important in the context of the discussion in this column because the bulk of the assets created under MGNREGA pertains to water bodies. It is important that the rural communities that create these assets “own” these assets and also charge users for the water such that the water bodies could be maintained.

One idea that came to me after reading the book was that corporate social responsibility (CSR) funds should be applied to evaluating the effectiveness of government programmes and interventions, including subsidies, and then publicising them. That is one way to get the public to focus on issues they should care about and can do something about.

Ensuring adequate and safe water for all Indians is a war for which politicians may have to be prepared to lose a political battle or two from time to time so that the nexus of political connections and subsidies in the name of the poor is permanently broken.

The Train (18) man

Thanks to the persistent efforts of some three of my faculty colleagues in IFMR Graduate School of Business (GSB), we had the privilege of hosting the hero of ‘Train 18’ – Vande Bharat Express – in our campus in Sri City today (1st March 2019). Mr. Sudanshu Mani was the General Manager (GM) of the Integral Coach Factory in Perambur, in Chennai, from August 2016 until January 2019. The transformation he has wrought in this period in ICF itself is nothing short of phenomenal.

He made us feel proud; he made us feel happy and he inspired us. He gave us hope about India. He said that he liked the chutzpah of the team – of the workers and executives – he encountered in ICF when he took charge. That gave him the courage and the belief that he could pull off making a ‘train set’ wholly in India to standards not seen before in India.

In the course of his hour+ long speech peppered with Urdu poetry and couplets (which I did not understand, sadly), he also said that there were clear markers on whom to love and whom to discard, among workers. It was not all just ‘lovey-dovey’ stuff. We know that it is not possible in real life. Indiscipline, lack of work ethics and sexual harassment were clear NOs. He made that clear.

His point about ‘S(t)hri Sakthi’ was well made and well received. May be, it is time for ICF in Chennai to erect a scuplture for the ‘Integral Woman’. They have one for the ‘Integral Man’.

He mentioned about the devolution from the Government to the GMs. of Railways. That was actually a very pleasant surprise to me. I would have loved to hear more about it.

I would have also loved to hear more about how he improved productivity so significantly – the number of workers per coach coming down. ICF is now the biggest railway coach manufacturer in the world.

I would have loved to hear more about how he institutionalised the changes so that they would sustain long after the individual left the scene.

The point of mentioning all of the above is that I want him to come back to IFMR GSB and soon!

He reminded me of Nana Patekar. Of course, Mr. Mani is tall and has maintained himself rather well. Not an extra layer of fat in his body.  The kind of sports facilities he has given the ICF colonies in Chennai must be seen to be believed. 

You can see some of it here, here and about the ICF, here. This is one of the many videos available on the internet on Train 18.

From the twitter handle of Mr. Sudanshu Mani, I saw that Mark Tully had written an article on the meaning and importance of Train 18. The article is short, crisp and makes all the points that need to be made on rail travel, on railway board, etc. 

It was sad for me to see and read about some political parties expressing glee about the initial teething troubles that the train has faced. It is made in India.

‘Make in India’ is not about a political party or the political leader of a political party. It is about India. If it succeeded, one should be proud. If it had teething troubles, one should pray that they be fixed soon and the train continued to perform, meet and exceed expectations on comfort, punctuality and safety. 

All in all, it was good to see one of India’s heroes – still a minority but numerous enough to give us glimpses of hope about the future of the country because of their ability to inspire many of us – the ordinary folks – to raise above ourselves. That is their strength. I am happy I met one such man today and shook hands with him!

[Postscript: When I searched for the ‘Railway Man’, I thought I would get hits about E. Sreedharan. But, I got hits about a movie called ‘The Railway Man’ starring Colin Frith and Nicole Kidman produced in 2013! India’s Railway Man is now 86 years old.]