Slowdown! Recession and the cycle! 

Economic cycleThe science of economy is something which I don’t understand, seriously! Noble laureates give their theories, experts write essays, but an engineer like me understands only physics. Whatever goes up must come down! It is the theory of gravity. Sometimes it goes up slowly and comes down fast with a thud. Sometimes both speeds are similar. Economic growth goes up swiftly and comes down slowly sometimes. India has been lucky that it came out of the 2008 recession reasonably unscathed and bounced back for the last eight years to a decent growth rate of 6 to 8%.

Many factors lead to growth. Similarly, different factors slow down the economy. These factors are market sentiment, buying power, and so on; the Indian economy since independence did not show correct growth due to a parallel economy. The parallel economy, in the local language, is called Black Money. What is black money, and how does it get generated? Many businesses like construction, land dealings, trade pay each other by cash. Cash payment is made to avoid Income Tax. A part of business activity is never shown on paper. When there is “no business” there is no profit hence no Income Tax. The parallel economy also grew because of unprecedented corruption activity. Nobody takes bribe by cheque, so spending is also done in cash.

In some cases, corruption is in kind by gifting condos, high-end cars, or items which can be bought in cash. Such gifting is done in the name of non-earning spouse or a relative. In Many cases, such assets are “Benami” assets in the name of one’s sweepers, peons and drivers. In a recent interview, Mahindra & Mahindra Chairman Anand Mahindra said that the economy has been going through a process of ‘detoxification’. Since the negative impact of disruptions is now over, the economy is expected to see an upside in FY21, Bloomberg TV reported Chairman Mahindra as saying at an event in Davos, Switzerland. “The prime minister has been quite obsessed with the kind of growth he wants, and that is transparent, free of corruption” Mahindra also said. He also felt that the upcoming budget is expected to be watched closely by different quarters of the economy amid the slowdown.

The Indian economy is seeing a slowdown for some time now on account of a fall in consumption and demand. The government announced a slew of measures in the past few months to revive growth ranging from bank recapitalisation and boost in liquidity.

The perception right now is that government actions caused the slowdown. But on the other hand, if you are going to detox yourself, you always have a process of cleansing before you start recovering and running again. Demonetisation and GST were the part of disruptions that have now ended, and the economy is already seeing signs of life. From the next fiscal, India will surprise the world on the upside is the general market sentiment.

The International Monetary Fund (IMF) recently slashed the growth estimates for both the Indian and the global economy. The global growth is expected to reach 3.3 per cent in 2020, compared to 2.9 per cent in 2019, the slowest pace since the financial crisis a decade ago. The Washington-based international crisis lender revised downward India’s GDP growth projection to 4.8 per cent for FY20 and 5.8 per cent for FY21. “India’s domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth,” the IMF report said.

Detoxification had to be done. It has not eliminated black money. But the reports say that it is reduced to some degree. The government is relentlessly after the businesses and businessmen who have cheated their customers and banks. People like Modi and Mallya are in jail in Britain. Other business people like Sahara Subrata Roy, D S Kulkarni, Wadhawan are in prison. Unitech projects have been taken over by the government to give homes to 21000 people like you and me. The authorities did not have the guts to detoxify the banking system in olden days. The detoxification process has started bringing out huge NPA’s (non-performing assets) of many banks. These NPA’s were created with the help of bank employees sometimes. But many times, the businessmen cheated the banks. Under the garb of hidden NPA’s our economy was “doing well”. When the cleansing act began a few years back, the loan sanctioning processes became a little tougher. The result of more scrutiny was that credit availability came down. When the available credit comes down, business activity slows down. It is a spiral that any economy dreads. But system correction was a must.

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Growth any any country cannot be perpetually high. As the base increases rate of growth is bound to come down.

On one side, the automotive industry has slowed down, but there are reasons like availability of Ola’s and Uber’s of this world. But there is a surprise that the SUV introduced by KIA is selling like hotcakes. There is going to be one more hurdle here; the government is pushing for Electric Cars or initially more efficient IC Engine Hybrid cars. These cars will be more expensive than current IC Engine cars; the young generation is now changing their thought process. They don’t buy cars, but prefer Uber and Ola; they rent homes instead of buying homes. India has now become number two in the world behind China for the Smart Phone market. Spending ways are changing.

I am happy about this downturn for another reason. Gita Gopinath from IMF explained that the Indian recession has caused a 0.1 % reduction in the growth rate in the world economy. It indicates that India is not a small cog in the world economic wheel. At the same time, she has also said that the worst for the Indian economy is over, and it will start the upward movement in growth rate from this year 2020! The statement will disturb some people because they hoped that bad times would continue. Each group has his/her agenda! Some for political reasons and others for TRP reasons! The lousy news is THE news!

Indian economic experts had made similar predictions and statements! But we believe in someone who sits in cool climes; even if the person is desi, it is okay! Old habits die hard!

I have observed an interesting thing in international diplomacy. Turkey and Malaysia had no business to poke their nose in the internal affairs of India. They made some statements which were not necessary. When India protested, they continued in the same vein expecting the docile Indian response of yester years. But they must have got a shock of their life. India kicked them where it really hurts. India had ordered one ship worth US $2.2/ billions, on Turkey; it was put on hold. For Malaysia, India was the most significant customer of refined palm oil. A few hints here and there, the purchase pattern changed within a few months. Indian traders switched over to Indonesian palm oil. Malaysia was shocked, and they have no option but to accept it. Their prime minister accepted that Malaysia is too small to retaliate. They are trying to offer some sweet deals to India. But India is ignoring them.

Friends, in the economy of any country and for that matter world, there are always cycles of growth and downturn. A downturn can be because of market sentiments, inflation and sometimes the combination of two, stagflation. The experts of every country find ways that suit their economy. Japan for years is not doing great because of their efficient methods of working. The Japanese markets are too small for some of their giants like Toyota, Honda, Docomo. They have no option but to export and open plants in different countries. The German case is also like Japan because its economy is entirely dependent on the exports of superb engineering products. The economies of different countries are now changing from a global open market to the one which is suitable for own requirements. The US has become a leader of such self centered thoughts.

It is going to be a game of diplomacy where each country will look for ways which will be to their benefit only. Brexit is a latest classic example of this thought process. In each country, the opposition plays the political games of troubling the incumbent governments. Whichever is the government in any country, they can make mistakes, but they all put the interest of the country ahead of everything else.

For commoners like you and me, it is necessary to be remember that economic activity is a cyclic process. It goes down and then it bounces back; we need not worry about these issues.

 

 

 

 

Recession or Cyclic downturn?

The automotive sector in India is under significant stress. Sales are going down drastically in unprecedented numbers. It is a vast sector and has already started giving layoffs, having non-production days- a euphemism for plant closures. A large number of dealerships have cancelled their tie-ups as the business does not appear to be lucrative. On top of this, BS-VI norms will be starting from 1/4/2020, which will cause further stress as no BS-IV vehicle will be even registered from 1/4/2020.

More difficulties will come up during this year and maybe even next year. The reasons for this is that CAFÉ norms will come into the picture from 2022. There is already a discussion of auto companies going slow on investments, but statutory requirements are mandatory, and these companies cannot avoid them. BS-VI norms and CAFÉ norms will increase the prices of cars. One thing that never comes into the discussion is the sale of old vehicles. It is not that people are not buying cars. People suddenly don’t change their habits. But people become practical and smarter.

George Mathew

I will tell you what I mean. I read an article from Indian Express which was discussing the sales pattern in the industry in general. The data in the table is for two thousand plus companies. The table above shows the business figures for April-June quarter comparison of 2018 and 2019. Sales of AC’s are generally seasonal. But other items like TV’s, Microwaves have not shown any decline. Sales are almost normal and have only shown seasonal changes.

I want to write a disclaimer. I cannot “read” the financial data, and hence, I cannot analyse it too! But as a layman, I thought there is not much difference for these two years. The sales have gone up in 2019.  Operating margins have reduced slightly. Depreciation is quite high in 2019, indicating the investments done in the that year. Hence interest paid has gone up maybe due to investments in plant and machinery. Proportionately tax paid has gone down, and profit has gone down. These figures do not show any drastic changes happening in the market. Companies considered in this table exclude banking and finance companies.

Then why is the auto sector in distress? I have mentioned that people have become smarter and practical. In the last financial year, the total number of vehicles sold was large. But the sales of new cars have come down. There is a secondary market where people buy used cars. The total number of old vehicles sold was four lacs more than new cars. Why is this happening? Small cars like Alto are now sold more in three-tier towns. Young people in big cities want to buy bigger vehicles. I understand that a 3 to the 4-year-old big sedan is now available for the price of an Alto. The trend of buying used fancy cars is affecting the sale of new cars.

I am not arguing that there is no recession in the auto sector. But we should not forget that it is one of the most protected sectors in India. Customs duty on cars below US $ 40000/ is 60 % and above this value 100%. The used cars have a customs duty of 125%.  For various reasons, this sector has remained inefficient. After many international companies started coming to India and opened their factories in India, the auto sector had a tough time. Some Indian companies took 15 years to reach the quality levels of global companies. One company that followed a correct way of doing business is Bajaj Auto. They currently export 1.8 million motorcycles every year. It gives them a buffer when the local market sales dip!

Some of the reasons for the downturn could be that main barrier for transport vehicles like octroi has been removed. The action has speeded up the turnaround time of vehicles  substantially. The effect would be that the number of trucks needed to transport material would be less than those previously required. Another reason that is making rounds is that demonetisation effect causing the sales to drop. Is such a large industry dependent on cash? In the rural areas cash was being used to buy vehicles; even large SUV’s were bought using cash. If people had so much cash with them why did they not use bank instruments to pay? The answer is obvious. Not paying taxes honestly is a habit that does go away quickly.

What was the auto industry turnover 20 years back? How much has this industry grown? The auto industry has made decent profits all these years, so I am sure they have reserves. Pollution norms have been known to everybody, so no point in raising hue and cry about investments needed.

Any sector that is in stress always talks of alarming results of the recessionary trends in their business. Should the government give selective help to the stressed industry? Is such action fair to other sectors which are doing okay in their business? The financial stimulus can be a solution, but such money gets diverted from equally essential areas. We should not forget that high tariff on imported vehicles has helped the industry for a long time.

All the companies in the automotive sector are large organisations, and they have the wherewithal to overcome current tough times. Asking for a reduction in GST is a short-term major and is taking a myopic view of the situation. In the last couple of years, the government has been receiving feedback from business about GST. Government has already made changes for the benefit of both industry and the government. Making changes for a specific industry for a short duration is an incorrect way. The auto industry has been generating decent profit for the last few years. Some things have changed; some new variables have come into play. There are who experts can find a solution and suggest corrective actions. I am sure the industry will come out of it.

Raising the alarm, making statements like “It is the wake-up call for the Government of the day” does not solve issues. But the government help should be an exception but not a rule. There is an interesting story about General Motors and Chrysler. When they were in serious financial trouble, a decade ago, the senior executives of both companies were called to Washington DC for discussions. In the initial informal chat, they were asked if they reached Washington the previous night. The surprised executives said, “Oh, we landed only about 45 minutes back. We chartered a plane to come here.” The government official was aghast!

So where is the vendor conference this year? Italy, Las Vegas, Macau? How can you have the conference inside your factory? Cost cutting is for others. I have attended General Motors vendor conference once in Pune. It was at the Oxford club and there were at least six helicopters used by GM bosses to arrive at the venue! It is not a surprise that GM closed their shop in India.

Administrative Reforms Tsunami!

 

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The above slide depicts the difference between a specialist and the generalists. India currently is administered by Generalists where now the need is for both Generalists but in many places that of specialists.

https://indianexpress.com/article/india/plan-to-import-talent-a-third-of-deputy-secys-from-outside-govt-starts-work-to-induct-400-directors-5776102/ 

This news item from a newspaper must have sent shock waves through a particular section of the administration in India. Prelude to this was the appointment as External Affairs Minister, of Mr Jaishankar, recently retired career diplomat who had handled his work with aplomb during his career. Instead of appointing a politician, Jaishankar, the domain expert was appointed.  

The British ruled us for 150 years. They created an administrative infrastructure to suit their needs and not the needs of India. At the top of the pyramid were the elite IAS service and other such allied services. Their job was to ensure that the British rule and its arm functioned smoothly. Their main targets were to ensure that the taxes were collected on time, to break the agitations against the British government and nip them in the bud. (Remember Jalianwala Baug?) An example of different priority was the cultivation of opium in Bengal and Bihar. British made sure that all the produce was sold to the government and at one stage British sold Opium worth Seven Million British Pounds in a year to China from India; for opium growing areas officers were expected to give top priority to opium fields over all other functions. Anti-mutiny work and Opium farming were a couple of services which indicated that the system was designed to run in ironclad fashion with no allowance for deviation. It was a sound system, and it served the purpose of the Britishers. We inherited and continued with the same system even after the Independence was achieved, which helped us initially. It served its purpose till the last colony, the one in Goa by Portuguese, was driven away in 1960.  

As usual, everybody was happy with the status quo. Why repair something which ain’t broken? Out of all central services, the IAS was considered top echelon even above the Police. As administrators, they advised the government on every subject under the Sun. The system continued to remain ironclad with all the keys safely with the IAS team. They decided rules, regulations, salary rules, transfer rules everything. It ensured that Civil Services always had the best deal. They continued to have a group of staff to support them at home with many other facilities. As per the rules, they were generally transferred every three years or less to make sure that special interests were not created. So from district administration to finance, finance to technology, technology to Land reforms and the law was the typical journey. They were considered experts in whichever department they were handling.  

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I started thinking about persons who appear for a competitive examination at the age of 25. Based on this examination and interviews, they are selected to become an officer to run a district, the state and the nation. The system was probably alright till the ’70 s of the last century. But slowly, with the advent of computers and India getting linked to the global economy over a period, their “expertise” was found wanting though was never challenged. Most of the selected persons have been smart people with reasonable intelligence. But the situation has changed so much in the last 25 years or so that everybody realised that we must have domain experts to run the government departments too!  

All domains have become multidisciplinary where even technologists can find going tough. For example, GST involves knowledge of taxation, law, commerce, computers and project management. Aadhar card needed software knowledge, database expertise, data science; fortunately, we had Nandan Nilekani to handle this.

Rajeev Gandhi recognised the lateral entry need in government when he was the PM. He invited Sam Pitroda to suggest the ways and means for India’s entry into the modern telecom & electronics era. That was a masterstroke, and India did start moving in the right direction under Pitroda’s guidance. But such entries were infrequent. Pitroda had direct access to Rajeev Gandhi so he could put aside objections from the administrative framework. The massive behemoth of administration prefers the status quo to anything else. The people were Subedars in their domain. They would try and not take decisions or move the files backwards and forwards. The administrative infrastructure was like Khan Market gang, privileged, with everybody knowing each other. India moved at a snails pace if and when, in spite of the group. Twentyfive years back, the Indian growth story started, so did the need for the specialists.  

Who could break the shackles of generalists? Dilliwalas? No way. In came a confident Narendra Modi, a rank outsider from Gujarat with a background of a tea-seller. A common man but a man with zeal to take India forward. In his first term, he broke shackles and started with improving efficiencies. All the subedars had to swipe their cards in the office at nine am. Time frames were decided for specific actions and achieved. 

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Now in the second term, the government has realised that only the advisors and consultants are not going to make the government more efficient and successful. Executives also must be specialists where needed, and this is what the government has started. Now if you reread the above article, you will realise the importance of specialists. I am very much aware that every system needs both specialists and generalists. For understanding social issues (and many such issues) and tackle them, generalists will continue, and they may be essential also. But the government is trying to fill 1/3 of the positions with specialists.  

Two critical points to be remembered are that the empire is going to strike back looking for rules, loopholes and ways of preventing lateral entry from happening. After all, the entry of specialists is directly affecting their career prospects and importance. Reservations is another issue that needs to be handled. In allowing the lateral entry, reservations need to be kept in mind. When the first nine such positions were filled, the HR department decided to advertise each post as an independent post and not as a pool of secretaries. Single post declaration allowed HR to overcome reservations requirement. The change will cover a large population in India. Though the number of entries being discussed currently is only 400, unrest can start leading to agitations. 

Friends, the modern world, say in the last 30 years has changed so much that the specialists and subspecialists will be needed everywhere. How can the administrator decide which fighter plane India should buy? Should we have Shinkansen or Maglev or TGV trains for India? How to improve and ensure that modern electronics goods are manufactured in a big way in India? Even specialists are going to find it tough to understand such things. But this change is going to create a big Tsunami for the administrators whether they like it or not!

To err is human!

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The common phrase ‘To err is human’ is often heard in its fuller form ‘To err is human; to forgive, divine.’ It means that we humans are bound to make mistakes, and err while we live. But it is crucial that others forgive those who have made errors. Without this forgiveness, people will try to avoid the work they are doing.  One thing for sure is that what we are talking are errors and nobody wants to make errors deliberately.  But the slide above is a more realistic representation of the human thought process.

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But there are some fields where errors are almost non-acceptable. These are the functions where human life is involved, for example, the medical field, the pilots, and so on. Errors in these fields can lead to loss of human life and/ or property. But that is another subject.

Sometimes we all lose our way. We are humans, after all. We make mistakes. We focus on the wrong things. We pursue goals at all costs. We waver on ethical and moral cliffs. We get too far down a slippery slope. We steal. We cheat. We lie. We deceive others. We deceive ourselves. We don’t open ourselves up to our friends. We see crime or fraud committed by our friends and colleagues, but we don’t speak out. These can be misjudgments by good people. In these moments we’re not the friend others deserve, the partner others choose, the child our parents raised, the epitome we wish to be, nor the person we’re capable of being. But does this mean that we should not get a second chance? Does it mean that we should be blamed throughout our lives? Should we be punished for life? 

Take the case of Australian Cricketers Smith and Warner. They were caught planning and cheating to alter the ball condition in a test match; there was video evidence. They were sent back from the tour and banned from playing Cricket for one year. It was a great humiliation. Loss of face which happened because of a moment of indiscretion; the indiscretion was caused by an urge to try and win a test match at any cost, by any means. Were these players born cheats? Were they bad humans? I don’t think anybody is born that way. They learned their lesson, accepted the punishment with humility and fought their way back in the team by sheer performance. Last week, Smith was being punished the second time by booing crowd at the Oval in London in a World Cup game against India by mostly Indian group. The second part of the proverb came into play to the surprise of all. Their cricketing foe Virat Kohli gestured to the crowd, while batting, to cheer Smith instead of booing. Such magnanimity! To me, this gesture was more pleasing than the Indian victory. It showed how Humane Virat is! Later he said, “Smith was already punished; he has all the rights to make a comeback!” 

It is not the failure that defines people; it is how they come back from disaster. It is already a bad thing that you stumbled, but it is worse if you do not want to change, improve and attempt to become the right person again.  

What defines a mistake? What is an error? When we started living in an organised society thousands of years back, the society formed its own rules. The societal norms became acceptable by trial and error. In the absence of the concept of ownership in the pre-farming days, the standards were different. The idea of marriage and ownership did not exist. When couples had sex, there was no question of breaking the rules as there were no rules. Probably, only the mother knew about the birth father of the child. The concept of theft was not very serious, as almost no one owned anything.  

But there are mistakes and errors which are the time honoured ones like a promise given to another human being. In today’s world of social media, we have too much data and information flowing in our direction. Add to this the travel time required in major cities, which has gone up.  We have so many “friends.” It is moralistic thinking “to err and to forgive”. All these can lead to failure on our part to honour commitments.

But with modern society, new thought processes have also come into vogue.

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This is a tongue in cheek slide which reflects on the current management principles. The rules and thoughts about erring are quite different because of politics in any organisation. Those who can win the political game, win the race. Forgiveness be damned! This my friends is real life! Proverbs and sayings are for mere mortals not for hotshot managers!

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This slide, of course, is looking at the new technology with humour. Computers have made life quite simple for us. At the same time, we are becoming over-dependent on computers. How can the computer make a mistake is a real question? The way computers process data and information for us is totally dependent on how we humans have programmed it. To correctly program the computer, those writing the program should understand the subject in details. Advice from domain experts is critical. I will share one professional experience with you. We had sold a software product to a multinational for their business processes. Later on, the GST regime started. We had made our product GST compliant. From the customer side, they had a top-notch management company to advise them on the subject. Some changes were needed in their SAP. We called for a meeting to check the compatibility of our system. We found that the knowledge of the domain team from consultants was not adequate. With our experience, we knew that in such a complicated situation, a smaller vendor is declared erroneous! Might is always right. But we made sure that we were perfect and their system was tweaked to match our policy.

So in the real world, the mighty is always right, they never err! So it is necessary to avoid errors or mistakes. Also, it is essential that the whole world knows about it. But in personal life, forgiveness works, and you don’t need to blow your trumpet! Forgiveness reminded me of a story.

A thief is caught after some theft in his village. His mother comes to see him at the police station. Before being taken away, he requests a private meeting with his mother. He embraces her and bites her ear. She screams, but the thief says, “Mom, I always used to steal things in school, but you never reprimanded me, in fact, you almost praised me. Your forgiveness was wrong as you never scolded me. Look now, I have become a thief!”

 

 

Where are you, my audience?

Sunil Barve actor, producer and a friend, wrote an article about a Marathi play produced by him under the banner Herbarium 2. Herbarium is a collection of preserved plants stored, catalogued, and arranged systematically for study later. The idea is to look at the plants and leaves after enough time has passed, and to view them in posterity. Sunil named his endeavor Herbarium for the old plays to be  enjoyed nostalgically after 3 to 4 decades. Herbarium 1, was extremely successful where Sunil revived five old Marathi plays, in 2010. The response from audience was exceptional, to say the least. Each drama had 25 performances all over Maharashtra. Herbarium 2, started with a Marathi play, Pati Gele Ga Kathewadi पती गेले काठेवाडी. This was in September 2017.

SunilPatiGele

Sunil wrote the article in surprise, to the reaction from the audience; he said where has the audience gone? It was just a matter of seven years. In that period, very good response for Herbarium 1, switched to ok response in Herbarium 2. Sunil was wondering what could have happened during this period? Sunil and I spoke on phone on the subject. I think that these seven years were crucial years where the generation which was nostalgic about the old plays, became much older and the younger people were not very keen about those plays.

Life meanders in a way where old likes & dislikes change, new thought processes come up, new technologies and media like Netflix become popular. The traditions and social ethos change with time. We may feel that certain things continue and do not change much. But they do change, though subtly! For example, foods and food habits change over a period. In my childhood drinking coffee in Maharashtra was almost non-existent; now we have so many coffee-shops and bistros. Drinking alcohol during my school times was taboo but now it is a socially accepted drink. Stadiums used to be full for Test matches, but slowly one-day matches took over; T-20 was the next step but IPL jamboree is the most popular now.

50’s in the last century had movies which were themes based on nation which had just earned freedom, मेरे देश की धरती सोना उगले, उगले हिरे मोती. 60’s films were more of sad stories and love stories. Then in the next decade came angry young man movies. So, trends keep on changing. Now the popular movies are, Salman Khan type of movies like Dabang. Connoisseurs of movies may like art movies with subtle stories, but general populace prefers Dabang. Connoisseurs may call such movies gross, but life’s realities are different! Ultimately, making movies and producing plays is business and their success will be dependent the masses and not classes. 

Connoisseurs of dramas would rather see Herbarium 1, but this number is dwindling. Are the days of such revivals numbered? Do people really care for plays in which Dr. Lagoo, Satish Dubashi, Nilu Phule and Kashinath Ghanekar acted? Do people now really care of writers & poets like Vi Sa Khandekar and Kusumagraj? If they are not in awe of such personalities, then there will be no nostalgia. Someone like Pu La Deshpande may remain in the lime light for a generation or two more. Do we hear the names Ga Di Madgulkar and Shanta Shelke these days? Pu La, Lata Mangeshkar, Mohamad Rafi are still on pedestal but for how long will they remain there? The most popular actors of yester years were Clark Cable, Vivian Leigh? Heard these names anywhere lately?

Another thing that comes to mind is the strong drama movement in Newyork’s Broadway and in London. Similarly, strong activity happens in Prithvi theater in Mumbai and NSD in Delhi. This continues at one location in one city! But, does it mean that going to different towns to perform, may not happen in future? The costs have gone up because of travel, and now GST. With these limitations it can be difficult to revive old plays in future. What lies in future for attempts like Herbarium is difficult to judge but indications are that it is going to be a tough call! Maybe equivalent of Prithvi theater in Pune, is the way forward!

I will share one more nostalgic experience with you. Recently, I purchased a device called “Caravan Saregama”. It looks like a Radio of the olden days with knobs and all! It of course, has a remote too! This device has 5000 songs stored on it and these songs can be played by mood, singer, music director and has Amin Sayani’s Binaca Geet Mala songs stored with his commentry. Songs are between the period 1950 to 2000! The moment I saw the advertisement I bought Caravan; nostalgia, love for olden days, not too much efforts to search songs,  were the reasons I bought it. How long this device will sell?  I don’t know. Maybe they can increase its life span by having songs between 1970 to 2010 and so on.  Audience for 50’s & 60’s songs is going to dwindle fast! But will the young gang buy this device for themselves? What is Amin Sayani for them? What is “Hava mein Udata Jaye” for them? I am not sure! In fact, I am sure it does not mean anything to them!

Caravan-Brown-9

 

Experiments like Herbarium are fantastic things that happened to Marathi theater, but the quality of the play and actors was not the only reason people flocked to see the first edition! Herbarium was “Amin Sayani”  & “Hava mein Udata Jaye”  of theater for them, nostalgia! Is my generation, which around 70, craving for Sehgal’s “Jab Dil hi toot Gaya”? No, it is not! The natural process of fading with the time, goes on all the time! I am quite sure that Sunil will definitely find the right path for more such experiments!

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Since I am in filmy mood, let me end up with an appropriate Hindi song Ye Jeevan Hai! It says this is what life is all about! There is some happiness and there is some sorrow! Life goes on and on! 

 

Data, the New Oil!

In one of my blogs, I had used a statement by Mukesh Ambani, “Data is New Oil” My friend Ajit suggested that I elaborate on the statement. So here we go!

We have been using oil and Petroleum products, extensively during last century! Initially, the approach taken by westerners was flamboyant! They went to the desert land of Arabs and extracted oil at a decent profit. In early 70’s in the last century, Arabs realized that they were sitting on a goldmine and rest as they say is history! From desert kingdoms, where the countries were mainly run by expats, these countries have become rich countries and are sitting on a mountain of money! This was all due to correct commercial exploitation of Oil as a resource and later squeezing non-oil producing countries!

Current century is the century of data as we have already started observing. A lot many things happen digitally and there is tremendous amount of data that is getting generated and obviously being stored somewhere! The country, the businesses which will harness the power of data, already available, will become leaders in their own field. How to exploit this data? For doing any digital transaction, authentication is mandatory. We started with passwords, spoken word and so on for authentication. Indian government had a foresight to start creating a database of people in India and issuing digital identity to people called Aadhar. Aadhar has Unique identification which is biometric. This is THE ultimate method of authentication. Aadhar UID is the largest such data of population with authenticated identities in the world.

Due to this authentication method, many things can be done digitally. First and foremost, what Aadhar has achieved is to bring large number of poor people in India into formal system; this allowed these people to open zero balance bank accounts, to start with. Large number of populace has been outside the formal system all along, because of non-inclusion! Non-inclusion was because these people did not have any formal identity! The inclusion will increase GDP as transactions made by these people will get added in the formal system. The same poor people, get subsidies from the government. There has been extremely high leakage of subsidy as this money did not reach the right people. In the system when black money gets generated, it goes out of circulation and formal economy gets affected. With Aadhar, subsidies go directly to people’s bank accounts.

These are some of the effects of large amount of authenticated data being available. There are more advantages of authenticated data. During GST returns filing, it is mandatory to share that month’s sales figures with authorities. Now government will link this data from GST returns to Income Tax returns filed. Naturally, the values must match. If they don’t, the tax evaders can be easily trapped. This change will happen because of linked data. According to some estimates India’s GDP is much higher than what is seen on paper; this is because cash or black money transactions remain outside the formal system. Black money is the money on which income tax is not paid. When all transactions happening in India become above board, real GDP figures will be known. Data is the way for that! GST data will be huge data but putting it to proper use is going to be the key to success. Initially people required PAN cards for some financial transactions but there was no real authentication done while issuing them. With the result that people had several PAN cards making it easy to cheat. With Aadhar linking of PAN cards, each person can have only one PAN card. Power of authenticated data!

What is being linked to Aadhar? Bank accounts & FD’s, LIC and other policies, Mutual fund investments, Cell phones and many more things. These instruments are used by all people irrespective of their status whether they have black money or tax paid money. Authorities can link all this data from huge data bank and link it with Income Tax data base. I need not elaborate what will happen as the result of this linking.

Ambani’s cell phone company Jio has sizable data of their subscribers. Subscribers are registered using Aadhar card. Jio has plans to compete with Amazons of the world with a different business model. It is said that not even 10% of population buy their stuff on the net! Jio will provide discount coupons to the subscribers for local shops, within their cities and preferably in the vicinity. These subscribers will go to the shops using their cell phones & linked coupons will buy things they want and pay the vendor. These vendors will be local grocers, fruit wallas and will compete with Amazons through Jio. The vendors phones and customers phones are linked via Aadhar to handle the payment part.

Another business process that is being tested in China which can be adopted with or without modification in India. Someone wants to buy stuff from a vending machine. After items are selected, the person gives iris scan. This scan is linked to Aadhar card to Credit Cards (if they survive technology onslaught) or bank account. Payment is done using iris scan. Can it get easier? Just imagine that your Iris scan is going to be your credit/debit card, online banking and wallet all rolled in one!

Already there are apps like True Caller! If you have True Caller installed on you cell, any unidentified call received is checked by the app on huge data, thereby displaying you the name of the person calling you!

Another large data that is captured these days is the data from cars. Cars these days have a lot of censors to track and send the data to servers. Such sensors are now functional on normal cars like VW Golf also! High end cars are even more data hogging. What do we do with this data? I will give a couple of examples. Vehicles performance like engine performance, oil levels are captured. In case of some issues in the car, diagnostics is done quickly as data is always available. In VW Golf, if you get flat tyre, and someone else is using your car; your registered cell phone will receive a text message “Your front right side tyre shows reduced air pressure”! There are lot of such messages received when something goes wrong with the car. Driverless cars and EV’s are next in line. They will all capture very large data from all cars. How this data will help? Diagnostics, design improvement, performance fine tuning. Important thing is nobody must go and capture data!

I feel that, in India, data is going to help reduce corruption and black money due to Aadhar linkage. Data has already brought large number poor people in the formal financial system. Data will give true picture to the planners of the nations. All this will allow the nation and thereby people to prosper. The correctly authenticating data is the way to go forward. Looks like iris scan is the proverbial golden wand to do it!  On the technical side data will allow new business processes to evolve; some of which don’t even exist today. Speed of doing research and analysis will become fast. New products, new methods, new medicines will get evolved much faster. All the speed and accuracy due to authentic data will be a real boon to human race!

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Has living in India become easier?  

I read a news item in newspaper that India has jumped 30 places in “Ease of Doing Business” ranking, given by world bank. (Later our PM also said that general living has become easier in India.) These experts have used pre-defined methodology; the same methodology is used all over the world. This indicates India’s ranking is compared with world’s other nations.

This made me think of us common people. Has our life changed? Has “Ease of doing things” changed for us on day to day basis? I am not talking of general infrastructure and holiday destinations and that kind of things. It is day to day mundane things that we are required to do. It is like shopping, making bill payments, availability of services, standing in queues. It is also about travelling from place A to place B which is part of our daily things that we do.

I am talking about city dwellers who have access to wi fi,  and internet on cell phone.  This infrastructure has improved a lot during last five years. Proliferation of cell phones is really deep. This has made life easy for the people, who have adapted to the use of this technology, irrespective of their location. Payment procedure of regular monthly bills like cell phone, electricity, insurance policy premium has become extremely simple. These are done by card, net banking or even simpler “standing instructions”. New system of wallets is also spreading quite fast. But how many of us have really started taking advantage of this change? I still see many people going physically, to pay these bills, standing in queue! Reason no belief in the system! Systems are available and they are making things easier. More people should be encouraged to use such systems.

Daily transportation is one of the biggest hassles in daily life! In this aspect, things are definitely improving. Main difference is due introduction of Metros in a big way, in many large cities. Metros definitely ensure that people travel from place A to place B in world class comfort and in shortest possible time. Just to give an example in city of Pune, going from Pimpri to Mandi area in peak hours takes about 75 to ninety minutes. After Metro is introduced, this will be reduced to 30 minutes! This one world class solution does overcome daily hassles, reduces traffic on road. Metro is operational in Kolkata for a long time, Delhi was the second city and now in coming three to five years 10 to 15 cities will have Metro. Another advantage of Metro is world class system has changed the mindset of people in public, they are quite disciplined while using the Metros. Of course, they go back to original ways, once they are out of Metro concourse! But I am sure slowly this conduct will improve outside Metro system too!

Abundance of various items, has definitely improved. Vegetables, fruits, groceries, milk, grain, medicines, and what have you, it is available in abundance! Days of shortage have simply gone. Availability of services of technicians like electricians, plumbers are easily found through yellow pages!

During 90’s when people’s aspirations started increasing, getting admissions to schools, colleges and professional courses became very tough. But since last few years seats in many courses and school/colleges remain vacant. This indicates that supply has become much more than demand.

In Banking system, there is marked difference due to technology. Processing of documents has become easier and many types of personal loans are available quite quickly provided all documents are ready. In fact, some banks offer pre -sanctioned loans to some elite customers. ATM’s have made access to cash simple.

Since India is huge democracy many things take time to happen. But they happen. Income levels have gone up and easiest indication of this is the sale of two wheelers in India. India has become the largest manufacturer of two wheelers in the world! Ok this creates its own problems. But expressways are coming up all over and authorities are trying to improve infrastructure to the best of their abilities.

I will share with you a very efficient system created by Pune Municipal Corporation. This is about their yearly property bill. They send the property bill details by SMS or text message. On clicking the link in the message, I was taken directly to their site with all required details filled in! They only showed a button “Pay”; when clicked it asked the normal payment options and  I paid the tax. Time taken 1 minute. Very similar system is created by vehicle insurance companies; insurance renewal time required is similar. Flipkart, Amazon and all such companies have made doing daily purchases very simple. Don’t forget ease of buying Bus tickets, Air and Train tickets.

Why people do not use the systems is due to apprehensions, lack of knowledge and simply because they have techno phobia. I know of an eighty-year-old lady who decided that she wanted to use all the modern payment systems and she has done the switch in about one month!

Most important change for business community is the GST! This one change has made things very simple. There were many taxes before GST and doing business was a nightmare to which we were used to! But talking to many factory owners, people from trading community, they find things much simpler than before!

Of course, there are minuses! Main issue is confrontational politics, there are naysayers like “development experts” whom I call zolawallas! There are people who are really upset because of Government drive against parallel economy! According to me there is an improvement of 60 points and not 30 points in our day to day lives.

GST ground realities!

Some human emotions and reactions are excitement, frustration, ignorance, arguments! I never thought that GST, Goods and Services Tax, a drab subject will invoke so much of emotions. GST was implemented by Government of India effective from 1st July 2017. Before GST, the tax structure was extremely complicated and each state had its own tax rates and taxes. Doing business and managing tax compliance was an extremely complex thing with many different tax agencies, with many obstacles in doing business, it was almost like a hurdle race. I am not going to write about technicalities of implementation or real life details but about the human angle in GST implementation.

This change is supposed to be a game changer in the business ecosystem of India. GST was being planned since last ten years. But usual political lack of will, government change and horse trading delayed the implementation. First date declared for implementation was 1/10/2016 which was changed to 1/4/2017 then finally to 1/7/2017. Humans are of different types and the tendency in some is to crib about everything. On one side people said how can this government implement GST when they cannot even fix up the date of implementation! Though GST is being discussed for more than 10 years, when it really happened main refrain was “we were not given enough time”. How do you define enough time? Main preparation required for any business reform, other than infrastructure, is the change in mental setup. If you are mentally not ready, 20 years also will not be good enough time for getting ready!

All the big industry and many in trade have been under some tax regime all the time. Laws under excise regime were very strong but it was easier to play around in other tax types. Why do people avoid taxes? Is it with the noble cause of selling goods at a cheaper rate? No way! They do it basically to avoid showing the real volume of business they do, thereby saving on income tax. This is the so called parallel economy or cash economy. This is nothing new and it happens world over. When you have complex laws and equally complex systems, those who want to play around are happy because they can tweak the system and reach their ultimate goal, hide the real income. A friend Mahesh always used to say, “Pramod excise is the best thing that has happened to India.” Mahesh headed a manufacturing organization. He would say, “These laws mandated people to complete their work every day, only because of fear of going to jail!” Many people will be sloppy if allowed and would not complete their daily! It is fear that mandated people to complete the work.

GST compared to previous tax regime before 1/7/2017, is a very simple system. It is addressing many demands of business groups about cascading effect of taxes, causing heavy/double taxation on end products and services. Tax levels all over India for same product are same, so are tax levels on services. When the government decided to go ahead with GST, it was required to fix tax rates for each item based on available information, knowledge and discussions with trade and business groups. With such a large exercise there can never be 100% acceptance and there are bound to be changes over a period, and modifications made on the fly. The affected groups were bound to be unhappy and made a lot of noise! Authorities listened to most but some demands were unreasonable, so government ignored them. Human learns from birth that if you cry loudly mother will give you milk. These people are crying loudly to grab attention. The implementation phase saw cribbing at its best!

In some cases, there were errors and flaws which were not corrected even on approaching helplines, writing to right authorities and making genuine attempts. There were no resolutions coming, initially. This is a small group of businesses and these are the groups that are bound make maximum noise, in some cases justifiable. There were interpretation errors by consultants which resulted in chaos. But there are some groups who on one side say that GST is the best thing that has happened to India but and in the same breath say that it is a draconian system! The system has just started  since last ¾ months. How draconian nature of system can be viewed or experienced by these people in such a short period? I doubt that other than non-resolution of their queries there is hardly any interaction with government agencies. Government is already publishing advertisements in newpapers showing FAQ’s for various group of businesses. I get a feeling that GST system will make life difficult for those who want to avoid taxes, but nobody can openly say so! So beat the drums and trumpets against the system!

People tend to tell false stories to complain against the changes. One person claimed that he was required to spend Rs. 80000/ for getting his organization registered for GST. There are no fees for registration. Governments drive for digitalization requires digital signature during registration. This person claimed that Rs. 30000/ was spent for digital signature process. It is false, consultants charge Rs.1500/ to get this done. Digital signature is valid for two years! So real expense was Rs.1500/. On asking about Rs.50000/ expense he claimed that he could not take Rs.50000/ tax credit because of the delay. This is again false because he could easily have taken it had he registered on time, maybe he did not know the right procedure or his consultant was not competent. Such false stories are floated because of lack of knowledge. Throwing tantrums due to lack of knowledge pretty easy.

Humans don’t want a change, if it is possible, as per Newton’s law of inertia. They will make statements like “Change is the only constant!” But in real life change management needs new systems, processes, retraining and change in thought process. This needs leadership to encourage people to change. Absence of these things will create situation where it is easy to blame everything on GST! Government or GST is a faceless entity so it is very easy to make such a drama if you get an audience. Some people have reached very high in life’s station, but this does not mean that they have total knowledge about GST. In cocktail parties they will make “knowledgeable” statements. When they meet a person with knowledge they tend to drift to join another group for discussion!

I feel that by Diwali next year, these strong emotions, discussions, reactions will taper off. People will then start singing praise of GST as if the whole world is reformed by GST, it is only a change in tax system! People will get used to GST, Newton’s law of inertia will set in and discussions during next Diwali maybe about North Korean nuclear bomb!

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100 Hundred शंभर सौ!

As I have reached  blog number 100, I am excited, apprehensive, and reflective. Many emotions come to mind, one definite one is surprise! I started writing in 2011, and expected that my stint as a person who can write, will be short lived as happens with most of things in our life. Now in 2017 I am reaching the milestone of 100 blogs.

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We start some activity with a great enthusiasm, we think that we are going to do this thing for ever and before you come to know, you have simply stopped doing it, not because you don’t want to do it but that is how life takes you around.  Since last three years my blog writing frequency has increased. All of us see something happening in our lives, a small episode in our day to day life, or a normal interaction with people. Afterwards, thoughts keep on meandering in mind about that event and inner thought process starts automatically. This chain of thoughts stops only when I write something.

It is said that humans age and wine matures!  But those close to me, say that I have aged but my writing has matured!  I feel that maturity in anything is a matter doing something regularly, or some event takes place which makes you more reflective in turn matures you. This is the difference in how I looked in 2011 and how I look now. I don’t know if by blogs written then and now look equally different! 

 

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I had never planned to be a blogger but it appears that after my Cancer treatment in 2013/14 my frequency of writing increased and I became a reasonably regular writer (though my professional work comes in the way even today!) My thoughts are more about human interactions, human reactions, human thinking and human nature. The event that induces me to write a blog could be taking my grand-daughter for small walk to a Mandir when she was two years old, or watching a lady suddenly going in a trance, reading about new tech products like Electric car being suddenly pushed hard by all.  My thinking in most cases looks into human aspect of the situation. Very few of my blogs are like an “article” which I recently wrote about GST implementation in India. Another subject that has kicked in a lot of thought processes in my mind are electric cars and non-conventional energy generation systems.

Events that stimulate my blog writing are of two types, divergent or convergent. Now let me explain. Some ideas are such that, in the beginning they look big, they look promising; but as I start writing, a very narrow thought or a conclusion comes out of it. These are convergent ideas for me. In case of divergent ideas, process is exactly reverse; I start with something very small but end with some idea which is universal and/or very big! 

Writing on different subjects needs a lot of study and has become much easier because of Internet. There is no dearth of information if one is willing to dig. When I started writing, it never touched my mind if anyone will ever read what I write. I would share my blogs with family and a few friends. Then I started understanding the techniques of sharing with others. A reasonable number people not known to me are followers of my blogs now. Later on I realized, that I can publish the blogs simultaneously on Facebook, Linked in and so on. I am also a member of a few groups on WhatsApp. I share my blog on these groups too! Out of curiosity I check the statistics that are available on WordPress site and I come to know how my blog has been “found”! It is found from search engines (Tagging helps!) on FB and so on. I also get to know the geographical locations where the blogs are “seen”. The main areas are naturally English speaking ones like US, Canada, Australia besides India but sometimes these are accessed even from Scandinavia or Eastern Europe countries! English speaking people from these places are doing this. Another information that I want to share is that in the whole year of 2014, I published 28 blogs and these were viewed by about 1000 people; till my last blog I have published 28 blogs in 2017 but the viewership is 3500! This does not mean that my blogs have suddenly become popular but I have improved the distribution! I have also observed that a couple of my friends from Facebook, share my blog with others. People give their comments on the blog itself or they send separate email to send comments. There are friends who prefer to call and discuss. My blog writing, comments, discussions also show that I am doing what I have been preaching! I have been saying, all the time in different blogs, please do something that will keep you reasonably busy during the course of the day, other than exercising, watching TV and time on Facebook/WhatsApp! I am also lucky that I love what I am doing.

My main criteria for publishing is that I myself should find the blog “readable”. My definition of “readable” is a bit stringent. If a person starts reading my blog then he should finish reading the blog in one go! Many of you have told me that my blogs are readable!

What next? Well in cricketing terms, I am taking fresh guard, will adjust my pads and will check my bat!  Next hundred should be possible in two years time. Frequency of my writing improved from 2014 and it took me about 3 1/2 years to reach 100. 2011 to 2013 were real baby steps! I think my blog theme will always be human relations and relationships! But it appears that I will pepper you folks in between on Solar Energy and Electric cars too!

Till then .. so long ! Thank You from bottom of my heart! Your encouragement is what really puts my blog writing in turbo charge mode!  Keep commenting, keep criticizing, keep liking too! 

धन्यवाद, आभार, Love you! 

 

 

 

GST pluses and minuses

This is not a blog  in the usual sense! But I thought GST is very important  subject in India and it touches our life everyday. In my software business, we have handled GST related changes for our customers hence I know a bit about the subject. So I thought why not write about GST in simplest possible language without using accounting buzzwords.

It’s more than a month after introduction of GST in India. There has always been a question why GST? Modern world has switched over to Goods & Services Tax (GST) over a period of last 15 years or so. I felt that there is a need to explain GST in the format that will make it easy to understand the simplicity as well as complexity of the system.

Why GST?

Before GST there was a plethora of taxes by different names, different authorities, different rates, different procedures, and different forms, making things extremely complex. What GST has done is that it has helped the system to go away from all these taxes. All these various taxes have been merged into two taxes one is under Central Govt (CGST) and other by State Govt (SGST). Central Govt portion takes care of previous excise tax and State Govt portion takes care VAT and Service tax.

Definition of GST

It is very simple. GST is a tax which is based on Supply and it is destination based. This means that whatever you supply Products or Services, there will be only one type of tax, GST! The beauty of this system is that there is same tax percentage for a supply all over India.

CGST/SGST & IGST

When a supply is a made within the state there are two elements of tax, CGST and SGST. If supply is made outside state then there is only one tax element, IGST. If tax percentage is defined at 18% for an item, then IGST is 18% for interstate transaction and intra state tax is 50% of 18%, each for two elements i.e. 9% CGST and 9% SGST.

Why so many tax percentages in GST?

India is a very complex heterogeneous country. Diversity of Income is quite extreme in India. Hence to take care of such issues tax % have been defined from 0% to 28%. This is a compromise that was needed to achieve the social goals as well as fiscal goals of the Govt. World over, taxes have been from 6% to 20 plus % depending on the particular countries requirements. But majority of the countries in the world are as big only as some of our states are or even smaller than them, with reasonably homogeneous population. If we take 28% GST, which is supposed to be on luxury items, in case of cars the prices of most cars did come down post GST. There are some cases where post GST, prices went up and they came down in others.

Input tax credit

At every stage, the seller can take Input Tax Credit of tax charged to him at the buying stage thereby taking care of double taxation. This means that seller charges the tax based on his profit margin and not on the complete price.

Immediate benefit of GST to Govt

Govt is all the time looking to increase the tax base in the country. With GST implementation, a large number of new entities have opted to register under GST, thereby helping in reduction of transactions in parallel economy or so called Black economy. There is an interesting rule. An entity buys something from another entity, which is not registered under GST and does not charge GST for the transaction. The onus of paying GST in this case is on the buyer. The buyer has to raise a self-Invoice for the amount equal to purchase value and charge GST as % defined in the system. He then pays that tax to the Govt. System of “Purchi” will have tough time in future.

Ease of use

For traders who make a large number of sell transactions every day, there is a system that allows them to be under Composition Scheme. They are required to pay GST to Govt every quarter, at a fixed % based on their turnover.

Why people Love to Hate GST?

First and foremost, the reason is ignorance! Second most important aspect is the transactions will come above board requiring the entity to pay correct amount of Income Tax! Hiding Income can become tough over a period because the transactions, and returns of different entities are now going to be entangled with each other.

GST Returns filing

This is another reason for hating the GST. Except for those who have opted for composition scheme, returns need to be filed on a monthly basis. In previous tax system returns were allowed on a quarterly basis. In GST returns, more information is required to be shared with Govt, every month. For example, when returns for July are filed, one has to fill up gross turnover value of that entity between 1st April and 31st July and so on. This will put the limitations of “playing around with figures” at the end of the year! You hate GST, of course many will hate GST!

Entanglement with each other

By a certain date of every month, sales details are to be shared with Govt and these are more detailed than was previously done. This includes names and GSTIN number of customers! This is to be uploaded to Govt site. In next couple of days after this is done, your customers will have visibility of these Invoices and are required to “approve” your Invoice, online. There is dispute resolution mechanism; in case of dispute, two months are allowed to resolve the dispute. There is one more entanglement. To claim set off the customer must “approve” your Invoice. Your customer will finally avail Input Tax Credit during payment of GST, only when you have shared the proof of actual payment of your liability of GST amount on the site! Now, now you hate GST more, you will hate Govt more. But what Govt is trying to do is to bring more discipline in the society and more compliance. The effect of this is even trickier. Everybody’s compliance rating, adhering to discipline will be made available in public domain. This will lead to getting lower business in case compliance rating is down! This is because the lack of compliance indicates indiscipline and financial burden to your customer. You cannot avail tax credit if your vendor has not paid taxes. What do you do in such cases, go to a better compliant vendor! Simple?

I have tried to explain the gist of GST in non-technical way and have tried not to use accounting jargon! Its early days for GST and we will see improvements over a period. This GST system will probably create world’s largest data under one roof and will be a challenge to data analysis experts too! Happy GSTing!