Saturday, April 30, 2005

Black to white...a long journey ahead

Considering that much water has flowed under the liberalisation bridge, the black market should have abated. Right? Not really.

Tax rates in India are still fairly high, which is an incentive for evasion. Therefore the doctor, with a wink and a nudge, accepts a cash payment and never bills it into his legitimate income. If you ask for a bill, he may even charge you higher. The pharmacist bills only those who ask for it, otherwise, he just hands over stuff to you and you walk away with the medicine sans bills, without realising that this small change adds up into crores of evaded tax. Hotels, in any case, rarely maintain bills, or maintain a parallel register for tax purposes.

But if companies product x amount of stuff which is sold for y rupees in the market, shouldn't the government not collect taxes which is a percentage of x*y? In these days of sophisticated systems, would it not be easy to detect that a certain percentage of goods never showed up in the tax books?

Perhaps, it would, if all states had a uniform tax structure and such a system existed (The VAT is taking us there, but it will be a while).
Perhaps, it would, if all tax officials were uniformly incorruptible (this is perhaps the biggest if, which lets goods evade tax and flow into the market).
Perhaps it would if tax structures were simpler, easier to file through and track by the use of an electronic system.

Service incomes are harder to pinpoint and I can agree that some amount of evasion would be taken for granted, notwithstanding code of ethics of governing bodies.

But my guess is that the subsidies which exist at various levels play a role in the creation and sustenance of the black market. Many traders dont have to pay tax; they not only do not pay tax, but also stop short of filing their returns. Sales tax officials, Central excise officials oblige traders who want to make a quick buck. People under declare their income by splitting it across various non taxable ( read, people who dont file returns) categories like senior citizens, minors etc. Farmers (including the richest of them all) dont have to pay taxes. Small scale industries have a different tax structure. Many large companies are actually are a set of small units strung together by legalese. The tax net in India has an absurdly low percentage of its population in it. Thus a small tax paying percentage of the populace, supports a huge non tax paying population.

The government has tried to stop the growth of the black market by the abolition of 1000 rupee notes and 500 rupee notes (they have since been brought back), a Voluntary Disclosure of Income Scheme and tax rationalisation. Yet, there is an incentive for being in the black, the economy. Is there is a solution? There are many, and I suspect that there is no one solution.

One by one we are getting there. From a paper based capital market trading system, we are moving into an electronic system where an investor with multiple joint accounts with his family members will be treated more or less as one source.

The VAT will slowly start pulling the long chain (tail) of tax payers, making it difficult for dishonesty, even if there is one honest payer in the chain. The VAT will take us closer to a state where every billing is noted and tax paid on it.

Once central excise and sales tax go into an electronic mode as do customs duties, there would be greater transparency and ease of filing returns. Real estate is a big drag. Though low interest rates, greater share of salaried individuals buying apartments has brought the new sale market into a full white mode, the second sale market is a pain. Rationalising registration costs and making the registration office corruption free would help in nailing those who undervalue property.

What about all the gold hoarded. Hoarded gold never gains interest, though gold prices have been rising for a while now. Creative solutions are necessary here. Gold bonds have been tried and met with limited succes. But gold gotten with illegal money does not stay as gold, it is converted into ornaments and finds its way into the market, slowly but surely. Perhaps cash purchases of gold ought to be tracked.

Politicians incomes, babus bribe are the other big source. A lot of it is probably in Swiss banks and will continue to stay there. Reissuing currency is perhaps an idea worth a thought (but since this cannot be done every few years, it is a one time weapon because of the costs involved). Making foreign exchange flows transparent by reducing the margins of banks and the transfer agents would stem the hawala trade.

Farm income has to be taxed, even if for a marginal amount and definitely the rich farmers have to taxed more. That is a huge chunk of unaccounted money floating there with a lot of people claiming fraudulent farmer status and ending up paying no tax.

Perhaps the single biggest move towards eliminating the black market or getting it to manageable levels has been the popularity of credit cards and electronic trading. Earlier, where there were notices in shops saying "Dont embarass us by giving a cheque", now there are "Credit Cards accepted" all over. Ditto for electronic trading. Once it becomes popular at trader levels ( and getting traders to use credit cards is difficult with their credit periods etc., but it can be done with some creative ideas. Say a credit card that pays itself after 30 days ( or 60 or 90) to the party with some creative ideas would turn out to be a money spinner.), I think we will be there some day.

What if all the black money gets into the system? What will happen? For one, our GDP, productivity levels, real incomes will be up by a few percentage points.The biggest advantage will be that more people will pay tax which could, in theory, lead to lower taxes all around.

Friday, April 29, 2005

Made in China

How the times have changed. It was Hindi Chini bhai bhai at one time. Then we lapsed into a mistrust of China which has since become a latent mistrust. Somewhere along the way, we began to admire China for its economic prowess and manufacturing skills. We have moved from the neighbourhood smuggler for "phoren maal" (foreign stuff) usually imported from the Middle East or the Far East. China has brought "phoren maal" at our doorstep (though I am not entirely sure, how). A few years back, I saw a Ganesha idol "Made in China". The ultimate symbol of India, now imported from China. Its now Hindi Chini buy buy.

I suspect that some of the so called Chinese stuff is actually Indian, with a "Made in China" printed on it. "Made in China" has created 3 levels of phoren maal in India.

The Made in China brand is "aspirational" for those who want "phoren" stuff. And it is usually cheap, so they dont bother too much with the quality. At this level it is shades, 5o Rupee radios and the odd phone.

Made in China at the middle level is infra dig. Shopkeepers themselves say "Thats Made in China, won't be durable. You are better off buying a Made in India piece (actually!!)." They are usually right since, for pricier things, Indian makes score over Chinese makes. Here it is stuff like a good phone, kitchen equipment or a portable music player.

And at the top level, even if its all Made in China, you can be sure its brought from Italy or US (from the source) with a brand name (perhaps even a guarantee)! Items in this category are cameras, cordless phones etc.

At whichever level, Made in China is here to stay. True there is "Unique to India" stuff which are still best made in India, but otherwise we are way behind in manufacturing. Not for skill, not for productivity, not for learnability, but for the fact that our infrastructure simply does not support a good factory. Produce as you might, can you ship it out on time? Can you even reach it out to the port in time?

Wednesday, April 27, 2005

Logan, logout?

India is the land of "entry level cars". These are those cars which are essentially small cars and offer either a great price, great value for money and sell for a fraction of say a Corolla or an Accord. First it was the Maruti 800 (which itself was a luxury in the days of the Amby and the Padmini), until Tatas Indica swamped the market, redefined it and the M800 is now more entry level than the Indica. Indica is positioned more as a value for money workhorse car.

The trouble with the Indian buyer is that the moment something is labelled "entry level", his fascination with it goes for a toss. The M800 basic model now sells well only in rural areas with the aspirational urban buyer preferring to wait a year or two and move onto an Indica or a Santro or buy a secondhand Zen, Santro or Wagon R. My guess is the M800 cannot be milked beyond a point ( and that point is coming soon) and Maruti Suzuki realises this. It is bracing for the launch of its Swift.

Besides sedans, unlike entry level small cars are aspirational. A person buys a sedan as a status symbol, not because he wants to be transported from point A to point B. The Tatas proved they got their fundamentals right when they launched Indigo, not as an entry level sedan, but as an aspirational brand.

It is into this space that Mahindra plans to launch its Logan in colloboration with Renault. Businessline here has some observations

...Renault, it is expected, will make no bones about the Logan being an entry-level, compact sedan.

Renault and Dacia developed the Logan specially to cater to emerging automotive markets such as India. The car's focus is expected to be affordable pricing, reliability, low running costs and durability. Many of these and other attributes of the Logan, such as a sufficiently tall ride height, easy entry and exit, fuel-efficient engine and extra-large boot volume (all of 510 litres), will be appealing to Indian car buyers in the entry-level sedan category.

If M&M can pull it off and bring the Logan with quality and pricing comparable to the car's versions currently available in Europe (prices average at about Euro 7,000), then budget sedan buyers here are in for a treat. But with two years to go before the Logan hits the roads, the dynamics of the market may witness a lot more changes...

Perhaps Businessline is being very charitable when they say this. I also read somewhere (couldn't locate the piece despite a long search) that in the basic model, the rear windows cannot be rolled down fully (remember the Padmini) due to "design". With such an entry level tag, the only market I see for the Logan is perhaps in the taxi segment, if at all.

Mahindra had salvaged its reputation after building vintage jeeps with the launch of its Scorpio. With Logan, it may well drive itself into a cul de sac.

For Mahindra, doesnt it make sense to continue to make headway in the SUV segment and introduce fuel efficient variants, better designs so as to take on the International SUV's? A car doesnt fit in with Mahindras image, unless they work like the Tatas to reposition themselves.

A new caste system?

In India: A history John keay walks us through the caste system. The caste system, when it began, was all about occupations, he says. Persons could move across the caste system depending on which occupation they chose to take. Thus, a priest could chose to become a businessman or vice versa and his caste would be determined as such.

What seems to have happened over time is perhaps that, lazy sons of fathers seem to have taken it as a birthright to continue what their fathers did. Over time, this could have evolved into a hard coded caste system.

Thinking about it today, we have a soft coded caste system(dynasty, if you will) that looks like it will evolve into a hard coded one. For instance, most scions of doctors become doctors. Sons and daughters of film actors/politicians join the same. Scions of sportspersons try to emulate their parents. While the doctor and educational qualification aided areas are still open to everybody, its difficult to make it as a lawyer, accountant, architect or dentist without some family backing. But in the areas without apparent qualifications, it is almost a family get together. So, is this a new caste system? Till the time they find their place under the sun, they are like the Coat tailers who typically dabble in a few things and then settle onto something that offers, usually, a path of least resistance.

Tuesday, April 26, 2005

Only two things are infinite...

Two things that have happened in Bangalore over the last few weeks.

One is an attempt by the BMP (Bangalore Mahanagara Palike) or its equivalent authority to cut some trees on Residency Road. Tree cutting is a bad idea so no debates on that front. What happened was that many citizens hugged the trees and prevented them from being cut. Which is also fine.

But will saving a few trees really solve the bigger problem Bangalore faces? Which is the fact that rules for development of plots for houses are so "malleable" that houseowners can get away with scraping out that last bit of vegetation that grows on their plot and replace it with concrete (the richer ones prefer mosaic, granite or italian marble in that order) including in the parking lot. Rain water harvesting is not yet mandatory. Very soon the Udyan (Garden) express which runs from Mumbai to Bangalore will be renamed the Concrete express. View Bangalore from the air and you can see that greenery in this city is on the army lands, parks and roads. There is almost no greenery on individual plots. And it is people living in such plots/apartment complexes from which any trace of vegetation has been decimated who hug trees that obstruct traffic on a main road. (The link speaks of a rule wherein a houseowner has to take the permission of the BCC to prune a tree that is above 3 metres in diameter. When was the last time you saw a tree that wide?)

The second, much publicised event, has been a "Go cycling" Bangalore. Now this Go cycling is not a publicity stunt by daily wage earners or that strata of society which really needs to use a bicycle because they cannot afford anything else. It is organised by some shallow brains with money and influence in the press who think that the solution to Bangalores traffic crisis is the bicycle. These, like the ones in the tree cutting scenario above, are those who would never have to use a bicycle in their life. Therefore they would not know that bicyclists are (partly due to their own negligence and partly due to speeding motorists) in the highest risk category for road accidents since there is no special lanes or any other facility for them. Lets have one of those Go cyclists try and ride a bicycle on any Bangalore road through peak hour.

(The heading is part of a quote by Albert Einstein "Only two things are infinite, the universe and human stupidity, and I'm not sure about the former").

Monday, April 25, 2005

Black then...how a parallel economy evolved

Black is the colour of the other Indian economy. Black or the parallel economy is the undercover economy. It is an open secret. Nobody denies its existence, everybody acknowledges its existence, yet all are at a loss on how to tame it. Contrary to popular belief, the black economy not rooted only in smuggling. It encompasses all sorts of pilferage, adulteration and evasion.

It all started from a beast called the Licence raj in Indias socialist days where anybody needed a licence to do anything and the government was the chief authority to issue licences. Licences meant restrictions on capacity, often absurd. Anything that was produced over 'licenced' capacity went into the black market, since these were unaccounted and showed up in industrial accounts as low productivity. These goods typically were products of tax evasion and money from these goods flowed in cash, with no audit trail.

To pass these goods into the market, officials at various levels were paid a portion of the profits, in cash, not through cheques. A further incentive to hoard cash were due to the insane tax rates (refer comment by Madman below) in force at certain points in time, which saw personal tax rates go upto 97.5% (yes, there is no typo). Strict customs restrictions meant smuggling fed the markets appetite for foreign goods (Goods produced in India were of vintage quality and reputations, to say the least, with a few notable exceptions). Draconian foreign exchange regulations meant that foreign repatriations found their way into the market through the parallel foreign exchange market, hawala. Import of gold, which had another set of restrictions provided arbitrage opportunity and was another easy target for smugglers given a large coastline within sailing distance of the Middle East. Second to gold, the easiest place to invest cash was in real estate. Thus real estate came into the ambit of black money. The other place where large sums of money could be used was films financing.

Where there is such a lot of money, mafia cannot stay away, thus they too are part of the murky story of the black economy. Money earned in smuggling often got pseudo legitimised in real estate and films. In between, oil (petrol) got adulterated with ethanol/kerosene and the siphoned off petrol was sold off in the (where else) black market. Kerosene and Foodgrains meant for some place (Public distribution system or relief or plain stolen) are siphoned elsewhere.

With such a leaky bucket, its a wonder that Indias official economy exists at all. In part II we will explore if things have changed today post liberalisation of the Indian economy in the 90s.

Traderspeak on VAT

Why VAT will increase prices. This priceless quote is from a trader who now has more paperwork due to VAT. "If the trader evaded some tax, he did pass some benefit to the end customer. Say, an article that cost 200 as MRP, with say 25 being the retailers margin was passed on to the consumer at about 190 would now cost 200 plus tax because the retailer has to pay tax and wont take a cut on his margins. Ultimately consumers will have to pay for a movement of goods into the tax net."

He estimates that operating expenses of business would increase since maintaining good accounts and proper billing mean more administrative overheads which will be passed on to the consumer, as usual.

But, he also says, the VAT will slowly push more and more of Indias trade into the tax net because now if someone in the chain evades tax someone else will have to pay it.

Sunday, April 24, 2005

Prices go up, up, up...

A few weeks back, VAT was launched in India. Yesterday, while shopping for a pressure cooker,our trader gave us two options.

If you want a bill, you will have to pay 12.5% VAT.
If you dont want a bill, take the cooker at MRP.

But hey, wasnt VAT all about debits and credits for taxes paid along the route to manufacture?
Where if raw material supplier A paid a tax of 10 percent and supplied to finished goods producer B who inturn had to pay a tax of another 10 percent, B has to pay tax only on the value added by him. By the time it reaches the customer, the customer only has to bear the tax on the value added by the final producer (in this case B). So why is the customer being asked to pay "12.5% VAT" (which is the top rate and not a uniform rate)?

Heres a report from the Indian express. (and an excerpt)

...The fact of the matter is that while some prices have gone up due to genuine reasons—as products have shifted to higher VAT rate slabs from their earlier tax rates—in some cases, traders and shopkeepers are taking advantage of the confusion.

‘‘Traders are playing a prank. For example, on drugs and medicines, they have got a refund of 8 per cent on the drugs manufactured before VAT came into place. Then there is a 4 per cent VAT. But they are not passing this reduction to the consumers and are, instead, charging both 8 per cent as well as 4 per cent on top of that.’’ ...

Interestingly, they charge this on all their existing stock, conveniently built up, which was not under the VAT regime ( or they would get a refund on that in any case)

Traders who have not yet computerized ( read: who dont pay taxes at all) are making good use of the existing confusion. While these are short term troubles, VAT is good for India and has to be persisted with.

What also has to happen is a way to bring all the other "unbilled services" - those who do pure cash transactions like doctors, hotels, retailers into the legal system. Only then would the parallel economy be integrated with the real, honest, taxpaying economy.

Friday, April 22, 2005

Budget economy?

I wrote about budget airlines, which led me to think about budget phones and now I think, there can be more than just airlines and phones.

Thinking about it, would we see a parallel budget economy emerge? The more I think about it, the more it seems likely.

In India atleast, Coke introduced a budget bottle for 5 rupees (1 USD = approx 43INR). Frooti, introduced a budget pack of, hold your breath, 2 rupees. Sachets (typically 'one use') of things ranging from cough syrups to shampoos to hair oils to shaving gels are available in a range of 1 to 3 rupees (most of which is the cost of packaging).

Initially, I believed that this trend is India specific, but I found here that it is not. In the US, things are big, bigger and biggest. In India, customers are used to "small". So, nobody buys a 500 ml shampoo pack are stuck with it for a few months. Buy a 1 rupee, one use sachet and throw! It cant get better. In the US too, in the midst of all the Greyhounds, Peterpans, Amtracks is an interesting budget bus service from Boston to New york, Fung-Wah. Fung-Wah is as budget as it can get.

So, is "budget"the future or is it the availability of parallel budget versions of most of the things we want?

Thursday, April 21, 2005

Budget phone anyone?

Budget airlines made a splash. Is there space for "budget" in other markets ? I was thinking about this and my mind went to my Cellone connection. Cellone is the government cell service provider in India. The other big national players from the private sector are Reliance and Airtel. There are others like Hutch (Orange), Tata Indicom, and a whole host of fringe players.

Most of them offer SMS, MMS, Voice Services, News, WAP, Ring tones, Ring backs, Pictures and a whole host of peripheral services like movie ticket booking, stock updates. Cellone does not offer any of these ( or if it does, it is badly marketed). For a user who is not interested in sending fancy MMS or clicking pictures and sending it all over or booking movie tickets through phone web, Cellone is the best service. Its roaming rates are affordable, inter state dialling is also cheaper and it is available all over the country ( unlike the others).

Should Cellone emulate the other players and offer everything or should it, like budget airlines, offer basic phone services and leave out the rest?

Going by cellones experience, I believe there is space for a budget mobile phone service here nd elsewhere. A service which gives users basic reliable phone access, good rates on roaming and good STD and ILD rates. I am not sure if it would work as a standalone service or if it would be better if a premium phone service provider made a budget version available.

What about other markets? We have seen Tata Indione which is a "budget" (more value for money than budget) hotel. Is there more?

Wednesday, April 20, 2005

Standard or variety?

What is better? Standardisation or variety? Think about how standard is a burger or an aloo tiki in a McDonalds . You know that any McD outlet will have stuff that tastes exactly the same.

Now think about how different is a vada pav or a bhelpuri that you get in one stall from the vada pav/bhelpuri you get in another stall. Whats better?

Personally, I prefer variety. It is great to know that I will get good vada pav at say Chandan Vada Pav, great bhelpuri at Guptas, great pav bhaji at Sardar rather than knowing that I will get the same food in all Mc outlets. (Again, lets not confuse hygiene with standardisation.That is out of this discussion)

True, standardisation reduces the risk associated with getting into an eatery and finding that the stuff I ordered is not great. It also lets us feel comfortable by virtue of the same or similar interiors in each of these outlets and ensures that there are no surprises in terms of food. There are reasons why standardisation exists in a McD but not across Udipi hotels ranging from ownership patterns to food preparation methods.

But, the so called battle between standardisation and variety (of the positive kind), is like the battle between hard work and genius. Genius is hard to come by, isnt it!

And I would prefer the Tilak Nagar (Mumbai) vada pav anytime for its lip smacking chutney over a perfectly personality less tomato sauce!

Tuesday, April 19, 2005

Train ride up Bhor Ghat

Heres a link to an article, written by yours truly, featured in Deccan Herald on the train ride up the Bhor Ghat. The Bhor ghat lies between Kalyan and Lonavla on the Bombay Pune line on the west coast of India. Its a glorious rail route with some 28 tunnels, old bridges and breathtaking views esp in the monsoon.

Bharat, as usual, has more to say

"Bhor was a pricely state 100 Kms south of this Ghat... This was one of the 3 main ghats developed by Satvahana to move the goods from the merchant ships from Mesopotemia, Syria & Egypt to Paithan their capital... The port of Karanja & Rajapuri was connected to this ghat.... There are buddhist caves right from these ports to Paithan in form of a chain... similar to Motels of Today.... The other 2 Ghats were Thal and Nane ... When the Brits came on the scene they converted the original Bor Ghat in to the railway Track... starting at Palasdari.... A separate motor track was created from Khopoli... which is still in use.... The Ancient "Kanifnath" Cave that has its entrance right above one of the tunnels... The only way to reach this temple is walking along the track!!!! "

This train ride is always worth taking...

Ready to eat or ready to cook...

The instant food market in India seems to have taken off this time around, after a few tries sometime over the last few decades. For a long long time, Nestles Maggi noodles were about the only big player. Brands like Top Ramen have provided some competition, but only just. With the recent (reasonable) successes of MTR and Aashirvaad (ITC again) ready to eat foods, it looks like this market is finally picking up.

Many factors seem to have contributed, part of which is perhaps, the critical mass of nuclear families with both husband and wife working. Also, the fact that ready to eat stuff is fairly affordably priced ( about 35 odd rupees per person) and it is far better than eating at a hotel day in and day out and can be conveniently stored at home for use on a need-to basis.

The ready to eat available today is also more ready to eat than the ready to cook vermicellli and other mixes that are available in the market. They are neatly packed, quality is assured (there are hiccups, as I once found out). These are simple microwave and eat or boil the pack in water, unwrap and eat.

Would I prefer ready to eat over home cooked food? Not yet. In India home cooked food is the first choice. Eating out is a second choice often, a necessity. Ready to eat lets one be at home without having to cook (Restaurant home delivery options do exist, but I would count this among the people who eat out anyway).

While this market will grow, there is still space for conveniences to ease cooking, but only if there is no compromise on the taste, health and cost front. Heat and eat chapatis did not do too well because of their tendency to crumble on heating. The ready made spice mixes (masalas) , Everest is the most well known, are a fixture in most Indian kitchen these days as are ready to use Ginger Garlic pastes and its derivatives. Ready to use Idli batter is available in most places. Ready to use tamarind mix, coconut milk have not made so much headway.

But I think that between ready to eat and home made stuff is is a market waiting to be tapped.

Monday, April 18, 2005

Acropolis, Sun City and Diamond District...

Did you know that Residency means "The house of a colonial resident." or that Riviera means "A narrow coastal region between the Alps and the Mediterranean Sea extending from southeast France to northwest Italy. The Riviera, known as the Côte d'Azur in France, is a popular resort area noted for its flowers grown for use in perfumery." Most kids in Bangalore would think that they are names of apartment complexes.

The number of apartments named "Residency" in Bangalore are so many that one would think that the English Raj was back. Bangaloreans are living in houses sounding grander than ever before, given the real estate boom, as mentioned here. If there is an Acropolis bang in the middle of the city, there is a Sun City and a Diamond District elsewhere. There are Redwoods (you got to check out this meaning), Palm Meadows on the newly developed areas and there are enough apartments named after precious stones (Topaz, Garnet, and countless other stones nobody knew existed). Apartments have been named after flowers. Meadows have been converted into concrete jungles and named, what else, Meadows. Coconut groves have been decimated into apartment complexes named, well, Park or Orchard or Palm Meadows!

A walk around Bangalore or a cursory glance at addresses of Bangaloreans would reveal a host of apartment names, each one grander than the other, regardless of how plebian the building is.

Sunday, April 17, 2005

Thoughts on a Sunday noon...India, China and infrastructure

In a typically incisive piece by the Economist in one of its recent issues about India and China, it says that if India and China are competing in a race, India has been lapped. Its not hard to see why from the article. I have never visited China nor am I a pessimist, but if we think India is going to overtake China, we are sadly delusioned.

There are atleast 2 flyovers in India's Silicon valley (there is more valley than Silicon these days here), Bangalore (flyovers, not nuclear reactors nor a mega dam project) that are in the making for about 2 years now. Roads are crumbling all over the place. As I mulled over the gloom, Infosys results appeared.

Infosys sets the pace to growth yet again. In its last Financial year results announced recently, it has done it again, with scorching growth. An architect friend of mine says typical timeframes for building an Infosys (or any IT campus) building from scratch is a few months. In this race between India and China, a few companies from India do well and will continue to do well, but as a country we are a long unpaved, crumbling road away from progress to an expressway. Copy pasting solutions from other countries may not work. We need innovative solutions to bring infrastructure up to speed.

Putting the above two things together and as seen from many examples, Indias private initiative is its strength. Why not let the IT giants handle infrastructure for Bangalore?

Friday, April 15, 2005

Selling Pasta in India, ITC...

ITC, a company that is moving from its cigarette tagline into a host of other industries is a company that is serious about rebuilding its image moving away from cigarettes. Its a company I started to admire after using its products (Ashirvad atta, Biscuits) and reading about the good work with its e-choupal project, is onto something new this time around.

They are trying to make a dent in the Indian instant snacks market with their Pasta. Selling pasta to Indians? Yes, thats exactly what they are trying. I tried one of their flavours, the masala flavour and it tastes good.

Looks like they have got their platform right with the "No maida, not fried" tagline. They are also not competing directly with Nestles Maggi in the instant noodles segment, yet they are competing with them with a real product differentiator. Maggi has also launched its own "Atta" (Wheat) noodles in a retaliatory move.

Can pasta succeed in India, a market known for its finicky tastes? I think it can attract new triers given its health platform and if ITC can keep them hooked, they can really give Maggi a run for its money.

Thursday, April 14, 2005

My 25 paise...

The Indian Rupee (INR) (history here) is divided into a 100 paise, much like the dollar is divided into cents. It has been a long time since a paisa could get one anything, much like the cent. The coinage below the rupee is of 5 paise, 10 paise, 20 paise, 25 paise and 50 paise. There used to be coins for 1 and 2 paise, but they are not legal tender any longer.

It has been while since people stopped accepting 5, 10 and 20 paise, but now people do not accept even 25 and 50 paise ( so if something costs 12.25, you pay 12.50 or 12.00 depending on the person you transact with). Circulars have been issued or 5 paise and for the 25 and 50 paise tender but people simply dont accept it these days.

What can be done? Listen to the people? Reality is that even a local phone call comes for a minimum of a rupee, so perhaps it deserves a hearing that 25 paise gets nobody anything and hence is not worth preserving.

Wednesday, April 13, 2005

The "Ambassador" effect

Did you wonder when you closed the door of a car, why you slammed it so hard?

I call it the "Ambassador" effect. 40 odd years of the rule of the Ambassador and the Premier Padmini have taken their toll on our door closing instincts. The newer cars dont need to be slammed shut, a cute push is good enough.
But with the Ambassador, the old warhorse of the olden days, one needed brute strength to open and shut the door. When we think car door, the Ambassador mindset takes over and we use brute strength.

Like the typist who graduates to the touchpad of a computer, yet hammers his keystrokes into it...

Monday, April 11, 2005

Hotels and mark ups

Most of us who have stayed in hotels have noted that the cost of using a phone in a hotel is absurdly high. Typically, most of the services offered inside of a hotel are available cheaper outside and it is known to all those who use it. Yet hotels persist with these absurd charges.

Why?

Is it because the hotel does not want to provide these services (like laundry) or is it just eyeing an obscene mark up (like telephone calls). Do hotels depend on the urgency of the need of the customer and thus aim to make a quick buck? Is it because companies foot the bill for business travellers and hence they can make good money on these peripheral services? But if the core business of hotels is customer service how is pricing these services at astronomical rates good?

Somehow, these have never made sense to me. Perhaps there is something I do not know.

Travel thoughts 3

When I travelled as a 5 year old in trains, it was fun to look forward to the randomness of the person/family/group who would travel in the seat(s) next to me. As a teen and into youth, I hoped for a pretty girl beside me. Optimism gave way to scepticism a couple trips down the line. Today, I hope nobody disturbs me while I travel. Is this just a natural progression of age or is this something else?

In the earlier days, travel times used to be longer with a lot of boredom sprinkled over and we needed some company to while away time. Today with discman(s), cellphones, ipods and gameboys are we caught up in our own world not needing "company" ? These gizmos enable us to carry our world of security with us, but do they also cut us off from the real world surrounding us? Today, at the end of a journey, there are more cellphones whipped out to inform arrivals, than good byes to fellow travellers.

Is it difficult to make new friends due to our preoccupation with these "personal gizmos?"

Thursday, April 07, 2005

Waiting for the rains...

The rains are here, even though these are pre monsoon showers. The monsoon is a big thing in India. If it rains, the agriculture sector does well, which in turn increases the purchasing power in the rural areas; they buy goods and there is prosperity all around. If there isnt, the reverse happens. Before it reaches India, the monsoon begins to stir up many months earlier in the warm currents in the ocean.

I found a good link here

...A monsoon is a term from early Arabs called the "Mausin," or "the season of winds." This was in reference to the seasonally shifting winds in the Indian Ocean and surrounding regions, including the Arabian Sea. These winds blow from the southwest during one half of the year and from the northeast during the other...

From there again

...monsoons share three basic physical mechanisms: differential heating between the land and oceans; Coriolis forces due to the rotation of the Earth; and the role of water which stores and releases energy as it changes from liquid to vapor and back (latent heat). The combined effect of these three mechanisms produces the monsoon's characteristic reversals of high winds and precipitation. Scientists say that the two key ingredients needed to make a monsoon are a hot land mass and a cooler ocean. In India, for instance, the land absorbs heat faster from the sun than the surrounding Indian Ocean does. This causes air masses over the land to heat up, expand, and rise. As the air rises, cooler, moister, and heavier air from over the ocean will replace it.. Over India, this damp, cool layer can be up to three miles thick. As the cool air arrives, the winds also shift. During the dry season, the winds blow offshore, from land to sea.

Then, as the monsoon begins, the winds blow onshore, from sea to land. In the case of the Indian Ocean Monsoon the first and third mechanisms produce more intense effects than any other place in the world...

...The Indian summer monsoon typically covers large areas of western and central India receiving more than 90% of their total annual precipitation during the period, and southern and northwestern India receiving 50%-75% of their total annual rainfall. Overall, monthly totals average 200-300 mm over the country as a whole, with the largest values observed during the heart of the monsoon season in July and August...

June, July coincides with the sowing season for crops and the quantum of rain received in this phase determines the fortunes of Indias agriculture and hence about 1/3rd of Indias economy and GDP as well. Delays, less than adequate rainfall can lead to catastrophic effects to farmers who are dependent on the rainfall for his crops. Unseasonal rains can also cause similar effects.

Traditionally about 2/5ths (steadily decreasing) of Indias GDP comes from the agrarian sector,
this is probably the single biggest dependency on nature on a regular basis for any economy.

Wednesday, April 06, 2005

Golden Quadrilateral

The Golden Quadrilateral (GQ) (connecting the four metros of Delhi, Bombay, Calcutta and Madras) and the NSEW corridor is a network of roads that will connect the East and West of India, North and South and the diagonals. Even in 2005, when Beijing has six ring roads, the world is filled with freeways, the GQ is still not on the fast track.

While the Golden Quadrilateral may not exactly be an expressway, it is a marked improvement over what passes off as a highway ( and proudly labelled National highways) in India.

Highway driving abroad means easy driving. In India it is a stressful exercise. The current highways (prior to GQ) are single lane. Driving essentially means, move at a high speed, come to a snails pace behind an auto ( or bike or man or animal or truck), look into the direction of oncoming traffic because there is no lane or lane separator, overtake, move back into your side of the traffic all the while watching for speedbreakers (yes, on national highways), drunk drivers, pedestrians, broken headlights and a prayer on your lips.

Sad, very sad. Hope the GQ moves fast toward completion.

Tuesday, April 05, 2005

Travel thoughts 2

Between Air conditioned or ordinary travel what is better ? Of course, travelling in airconditioned comfort is comfortable, but I think its more like a zoo with toughened glass in which one does the travel as a spectator detached from the surroundings. Yes, one can see outside, get off at every station on the way, but once outside, all that we want is to rush back into the comfort zone.
To know a country, travel coach class!

Monday, April 04, 2005

Of Sukhois and F-16's

There has been a lot of hullabaloo about the Americans selling ( rather) delivering F-16's to Pakistan and offering F-18's to India. This piece is not about that, but about a rather interesting comparison of the Sukhoi 30MKI with the F-16's and F-18's here.

The piece notes that the comparison of both these is theoretical, because the former is a heavy class fighter and the latter is a strike aircraft. It goes on to say

"...In terms of maximum aerodynamic efficiency, the Su-30MKI, like all Su-27-family aircraft, is unparalleled in the world and outperforms the above foreign counterparts by at least 50 to 100 percent..."

"...Notably, in terms of quantity and types of weapons, the Russian fighter considerably outclasses the F-16C Block 50 and F-16C Block 60 aircraft. Only the F-18E/F is close to the Su-30MKI in this respect..."

For more, read the piece there...

Saturday, April 02, 2005

Travel thoughts 1

Just thinking about travel got me blogging away.

Travel, to me, is a time of introspection. Looking at the world through the window of a bus or a train (somehow, cars and planes do not seem to qualify) is a time to reflect. Perhaps on the landscapes passing us by, on what has already passed. Perhaps on the destination yet to arrive, on the events we await in our life. Landscapes that seem to mimic our moods after a nap...i can keep going on and on(The 2 am tea at the way side stall during a bus journey, is the wow! part of a journey.) On longish overnight journeys, the early mornings are a joy as the destination seems just around the corner.

Which is why my visceral hatred toward "video coaches" - the ones which will run a movie through a journey and prevent you from enjoying either a good nap or the journey.

Travel time to me is a period of mindfulness - just being in the present.

Friday, April 01, 2005

My PC below INR 10K

Do you know what is Xenitis? Then do you know what is Aamar PC ? Does Aamchi PC ring a bell ? Or Aapna PC ? Nammo PC, then, surely should ?

If it doesnt, then remember that these brands ( each of Aamar, Aamchi, Aapna, Nammo means "My" in Bengali, Marathi, Hindi and the southern languages) are the lowest cost PCs available in India. It has created a market presence for itself in Eastern India and is well on its way to creating a name for itself in the other areas.

The PCs are typically Linux boxes with Open source office software. Whats even more incredible is the fact they manufacture their own hardware in India ( while the others are all into assembling PCs). Their base model sells for 10,000 INR (approx USD 225). They are not just assemblers who assemble and forget, but their machines come with onsite service warranty and all the frills.

Wow!!

VAT India

India is a country, divided into some 28 states. Thats where the similarity ends. Cultures are different, as are languages. Talk about tax laws (not the centrally administered income tax or professional tax, but local sales tax), and the cultural and language differences seem negligible. Add octroi which is levied on entry into some states, entry tax and soon you are in a maze of rules and complexities.

From this chaotic archaic form taxes, India, attempts to move into what is called a VAT, value added tax. VAT is a simple proposition really, as defined here in wikipedia. ( wikipedia is amazing!). The way VAT is being implemented in India, it is more of a paper based system and not an IT based system (as are most existing taxes) and is not a central VAT, but a state VAT. Also services are not under VAT, just as yet. With all these flaws, it is still a beginning.
Almost everybody agrees right from industry associations, finance ministers, state ministers (this agreement has come about after long years of persuasion) that VAT is the right way to go. But traders went on a 72 hour strike protesting against the implementation of VAT. VAT doesnt affect the profits of traders ( as shown in the Wiki example), so why would they go on a strike ?

The real fear amongst the trader community is that they would have to pay taxes. Many traders indulge only in cash transactions and very few "billed" transactions and pay almost no tax.The government, though, has stuck to its decision of implementing VAT.