Air India - the taxpayer funded spectacle

The Indian taxpayers and the hapless passengers are being subjected to one more episode of this soap opera called Air India. Controversial aircraft orders in 2006 ,  poor usage of newly acquired long range planes, allegations of corrupt practices , the ill conceived merger of Air India with Indian airlines are only a small but eclectic sample of the bungles.

This begs the question. What is the point of having a taxpayer funded national airline, especially a perennial loss maker? This is a difficult line of business to make money in. If anything this is a business which is prone to rampant political influence and conflicts of interest. Feels like the government is buying planes and running the airline to meet someone else's interests.
It reminds me of a sequence in the movie "Syriana"(PDF version of script), look for the scene at page 89.

If there is a silver lining, the pilot's association is demanding a probe into the alleged mismanagement of the airline. This is something the taxpayers should strongly support, even if it means more losses during the strike.

Update: And the mudslinging match between politicians gets  ratcheted up a notch.

FDI in multi brand retail - quick answer to high food Inflation?

The idea of allowing FDI in multi-brand retailing has been kicked around for a long time in India. With the high food inflation lately,it seems to have gained new found importance.

There are have been arguments along these lines:

"   If FDI is going to happen anyway, why is there so much excitement about it now? The reason is that this is an opportunity to push it through. India, like many other parts of the world, is suffering from high food inflation; at its peak earlier this year, it crossed 18%. India, unlike other parts of the world, suffers from huge wastage in the food chain. "Researchers estimate avoidable supply chain costs (wastage, excess inventory and excess transportation costs) in Indian food and grocery sales to be about US$24 billion," says the PwC-CII report. "One of the arguments in favor of FDI is that it will bring with it the technologies and expertise required to build robust food supply chains."  "

Reforms to allow FDI in multi-brand retailing are urgently needed. However, even if FDI norms were loosened tomorrow, there are some formidable challenges.Laws governing land allocation to industry need reform, without which cost of land would remain exorbitant. Reliable supply of electricity is still a long way off. Roads and other means of transport infrastructure is yet to catch up with the growth in demand.There is also the chronic shortage of skilled professionals who can be employed in the industry.

And then there are attitudes of middle class Indian households towards big retail shops. From anecdotes i have heard from folks, there is still considerable reluctance on the part of people to shop for food in these stores. There is a belief that the cost of food items are higher in these stores as compared to the local kirana shops. Given all the infrastructure hurdles that are in the way of modern retailing, the higher prices are not very surprising.

Unless there is widespread streamlining of the infrastructure, there is scant hope of bringing the fruits of efficient retail to bear. Reforms need to be rolled out across the complete spectrum of industries. Anything short of it, would just not do.

Tackling graft - no silver bullet

Most middle class Indian adults have colourful stories of dealing with corruption in their lives. We all have wondered about the possible solutions. This piece by Aravind Subramanian seems to rule out any real help from our political class.

" So, what can be done? Controlling corruption is related to the quality of public institutions, including democratic accountability, the bureaucracy, the police and the judiciary. And this quality is determined by history and politics, is generally difficult to change, and is glacially slow when it does. Show me an economist who offers a cure for corruption, and I can show you a quack or a snake-oil salesman.
The Lok Pal Bill under discussion will have limited impact, if any. Convicting and jailing the culprits in the 2G spectrum scam would certainly have some benefits, but, judging by the Indian record on convictions, the prospects for this are not bright. And broader reforms of the police and judiciary are, sad to say, pure fantasy. "

So , should the common citizenry just give up? There is reason to be a little more optimistic. For starters, there is the social media. Have a look at the India against corruption page on facebook. There are websites like i paid a bribe and janagraha.  In essence , there is a lot of activity from the ground up.
 And then , there is the promise of aadhar.

The media landscape has changed dramatically in the last 15 years. For all it's loud and aggressive style it is still doing a lot of good in highlighting corruption.

The much needed police and judicial reform may not happen in the foreseeable future, lokpal bill may well turn out to be toothless. But the pressure for change from an increasingly educated country will not stop. In a democracy, that eventually leads to somewhat meaningful results.

WIPRO and Infy - midlife crisis?

There has been a slew of turbulent news from  WIPRO and Infosys lately. There have been leadership changes in WIPRO and an imminent changes in Infosys . Infosys's results for the quarter ending March 2011 were disappointing .For years, they have had phenomenal growth in revenues and eye popping margins.


At the start of the last decade, competition from non indian IT companies for outsourced work was fairly low. I remember asking the Vice president of company about the threat of western IT companies to the Indian outsourcing model. He pointed at a bunch of us working as consultants in a clients' place in the US . He was of the opinion that we were very successful in bridging the gap in cultural issues and business communication. And that was the biggent weakness of the non Indian multinational setting up shop in India.
That was about 7 years ago.

Now they seem to be catching up:

" This list does not include some companies whose corporate headquarters are located outside India, but have significant India-centric delivery capabilities, and have not shared their India-centric revenue figures. Had they been ranked based on their India revenues, companies such as Accenture, Cognizant, HP India, Syntel, Oracle Financial Services and IBM and would also have appeared in this ranking.  "

On the other hand , some of the erstwhile smaller companies are upping the ante.

Is this is the start of a slow decline or just a blip in their unrelenting growth?

A trade of diminishing returns

So a few more politicians and relatives discover there is a semblance of rule of law still prevalent in the country. This is not to jump to any conclusions. There haven't been any convictions and sentences handed out yet.

In a democracy, elections could relegate a ruling party into opposition or into irrelevance rather abruptly. There aren't many opposition parties both at the state and national level who can claim to be squeaky clean. If these parties win elections with the pledge of cleaner governance and renege on it, their day of reckoning won't be too far. The raucous media would make sure there is plenty of coverage along the way.

Sample this volley of grenades being thrown by someone whose integrity is , shall we say questionable.

At least in theory, scandals like the CWG and 2G spectrum would become increasingly hard to pull off. Hopefully, the practice of corruption in politics is reduced to a trade of spectacularly diminishing returns.

You cannot make this stuff up!

The alleged misconduct in the 2G spectrum scandal is slowly losing it's shock value. Something rather bizarre in this report caught my eye. Snippets of the article with emphasis added by me : 

" The transaction of Rs 104.69 crore came seven months after Swan Telecom submitted its application for 2G spectrum and licence. Khot, in charge of retail branch banking operations in ICICI, has furnished details of bank accounts and financial transactions involving the seven firms-ADAE Ventures, Zebra Consultants, Swan Consultants, Tiger Traders, AAA Consultancy Services, Sonata Investment, and Parrot Consultants. "

Another snippet, again emphasis added by me :

" One of those common signatories, Ashish Tambawala, Sr Vice President Account and Finance ( Reliance Infrastructure Ltd )), has told CBI that Swan Consultancy, Tiger Traders, Giraffe Consultancy, Parrot Consultancy, ADAE Ventures, and Swan Capital are all group companies of Reliance ADA Group. He added, "Decisions regarding financial transaction are taken by Gautam Doshi or Hari Nair."  "

Ahem!
It is hard to verify if these names are real. Somebody surely had a sense of humour when they created these companies.

If you were to write a work of fiction about a scandal involving company names like these, nobody would take it seriously!

The "BI-MA-R-U" club- anybody checking out?

Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh (BI-MA-R-U) have been part of a dubious club of laggards in a whole raft of development measures. Here is good reference for comparison of all the states.

Bihar and Madhya Pradesh seem to be showing signs of moving forward. Progress is still uneven. It is yet to be seen if GDP growth can be sustained for the next 5-10 years in these states.
By all measures, governance in Bihar is taking a turn for the better.

Together these four states make up about a third of the country's population(more than 400 million out of 1.21 billion). Brazil and Russia put together are smaller in population.

And fertility rates in these states are much higher than other states too.

There is no moving forward for India without these states getting on with development.

It is to be seen as to which of these states would extricate themselves out of the club first. For India's sake let's just hope they all do in the near future.

High oil prices, is there a silver lining?

Price of crude oil has been rising steadily in the last few months.



Demand from emerging economies,unrest in Libya and the falling value of the dollar have all been cited as possible reasons.

High oil prices place an onerous burden on the government budgets in India , which subsidizes kerosene, LPG and diesel. There is also the risk of food crops being used for fuels like corn based ethanol. This will worsen food inflation worldwide, with terrible consequences especially in developing countries. In India , it is already uncomfortably high.

There might just be a very tiny silver lining to this. My hope is that sustained high oil prices would provide a stronger incentive for use of non-fossil fuels. Research on alternate transportation fuels will get more attention and the much needed boost in funding.

And maybe, this will hasten the introduction of a viable ,mass scale, long term alternative to oil.

Delhi, your wait for the Super Jumbo just got longer!

The story of Airbus 380 service being launched to Delhi just does not seem to end.
 For a quick chronology sample this , this and this report. Various theories abound for the denial of permission to Lufthansa for a Delhi A380 service .

Most international travelers from the west would tell you how little choice they have among Indian carriers when booking flights. I live in the Washington DC area and have never traveled home on an Indian carrier.

In the end it boils down to good old fashioned protectionism. Conflict of interests , mismanagement , controversies and involvement of politicians have dogged the Indian aviation industry for a very long time.

The airbus 380 is very popular with passengers and airlines alike. So why deny that to India bound passengers.

The results of a pre-1991 style closed market economy are evident to everyone. It is time to open the doors and let the fresh air of competition flow in.

What's the matter with Sharad Pawar?

Do you still remember every moment of the World cup final in Mumbai ? Of course, every Indian does!
And did you catch a glimpse of the honorable Agriculture minister Mr.Sharad Pawar in the stands of Wankhede? He was seen dispensing his formidable duties as the president of ICC during the presentation ceremony.

The sight of him made me wonder about his Ministry of agriculture.His performance as agriculture minister is illustrated here, here and umpteen other news reports on the web. So why on earth would he also accept the job of ICC president?

And we haven't mentioned the word corruption yet.

Reasonable citizenry would expect the agriculture minister of a country with such collossal challenges to be spending every waking hour trying to find solutions.

It is time people expected better from their elected representatives.