Anand Krishna’s musings

A friend of mine recently forwarded an SMS to me. I found it quite witty and apt and am reproducing the essence here. I do not intend any offence to anyone… so apologies in advance. Apologies also to the one who came up with this originally- I do not know who you are, so I cannot cite you. But I do wish to  unabashedly acknowledge your creative genius.

The Left parties might want to consider changing their symbol to a condom. Here’s why…

A condom allows inflation, blocks production, destroys the next generation and creates a sense of security when you are actually being screwed…..

Personally, I think the Left should focus more on the inflation issue- which affects “aam janata” even more than the nuclear deal- at least in the short term. I also think the SP support to Congress is an unholy alliance. The SP will demand its pound of flesh sooner rather than later. In my opinion, the nation (and possibly, the Congress as well) would have been better off taking the decision to go to the IAEA a couple of months ago, even at the risk of early elections. The Indian electorate is much savvier than it is given credit for. If any political party is cogently able to explain its stance (keeping aside emotions, election rhetoric and rabble rousing tactics), I for one believe that the voters will deliver the right electoral verdict.

I thought I saw on one of the news tickers of one of the TV channels earlier this evening a news item to the effect that SEBI has said it is not mandatory for government and court employees to have a PAN card (and by implication therefore, that these categories of our fellow citizens do not need to quote their PAN numbers while making investments).

To me, this concession seems very strange for a couple of reasons:

1. Black money is not the preserve of industrialists and businessmen. Several government and court employees too accept bribes etc. By granting government and court employees exemption from having to quote their PAN numbers, SEBI is only making it easier for corrupt officals to funnel their ill-gotten gains into the stock market etc.
2. What happens if a government official makes a huge investment without citing his/her PAN number and resigns a couple of months later?
3. Will this not encourage more “benami” transactions?

I am not exactly what you would call “fair” in terms of complexion, but I am still amazed at the fetish for fairness that many Indians seem to have. Milions of Rupees are spent on developing and advertising  products that supposedly enhance one’s complexion and make one look “fairer” (and hence, “more beautiful”). Even more money is spent by consumers on buying such products. I do not know if these products work- and frankly, I am not worried about their efficacy or veracity of advertising claims. I fret more about the kind of messages we are reinforcing in the tender minds of our children- the so called future of India. Why is complexion more important than competence, attitude, poise, or any number of so-called “soft skills”? As a responsible society, do we not try and inculcate in our children values like honesty, cleanliness, work ethic, punctuality and so on? Should we not then also tell them that complexion- which is really skin deep- is not as big a deal as is made out to be?

For several months now, Indian polity has been rocked on and off by the proposed Indo-US nuclear deal. While political parties of every hue know that India needs better technology for tapping nuclear power, every party pretends to be holier than thou and makes vague references to India’s “strategic interests” while posturing against the deal.

With crude prices predicted to touch $200/barrel in the next 6 months, Indians (politicians included) really worried about India’s (and the world’s) future had better take some bold decisions about alternative sources of energy- preferably, renewable.

Inflation is at its highest level in more than 12-13 years and the current oil shock will not cause a change in the inflation trend in a hurry. My personal guess is that by the time the world economy gets back on even keel, we’re looking at another 12-18 months. And who knows what else will happen in this time-frame?!

Coalition politics cannot be wished away in India for the near future. But pushing the country to elections even 9 months ahead of term will not serve anybody’s interests. Thus, rather than make political capital and adopt hard postures, now is the time for all right-thinking parties to unite and declare war on inflation and the energy crisis.

If Lok Sabha elections are held in say, 4-5 months and a new government comes to power by year-end, consider what it will inherit. Out-of-control inflation, crude oil and petroleum prices going through the roof, stock markets firmly in the grip of a bear hug, the world hurtling towards an environmental disaster…. need I list more? Will it not be a crown of thorns more than a bed of roses?

Go on, Dr Singh- resign and recommend early elections…. let us see how much spunk career politicians really possess?

As Indian IT services companies move up the value chain, so too must their marketing. In the current market scenario, there is pressure on both top-line and bottom-line. Budgets will inevitably be cut- and yet, it will be expected that the company’s brand grows from strength to strength, and its positioning protected. Prima facie, this seems to be a tall ask. However, it is possible for marketers to modify their channel mix and choice of vehicles to achieve these goals. Online (or “digital” or “new”) media must be deployed. Other below-the-line avenues like securing speaking slots at industry trade shows, extensive analyst briefings and proactively courting media to position company leaders as thought leaders (so that the journalists will check back for views- and offer the courtesy of a few soundbytes in the story) etc. are some other ways to maximize impact during these days of low marketing budgets.

Read more of my views on the subject at:

http://www.thehindubusinessline.com/catalyst/2008/06/12/stories/2008061250130300.htm

Here’s my top 8 list:

1. Oil prices
2. Number of vehicles on the road (in spite of the rising fuel prices)
3. Carbon emissions (duh…. because of all the additional vehicles)
4. Number of people infected by HIV
5. Inflation
6. Road accidents (caused by irresponsible youngsters who are more often drunk than sober)
7. Stress in our lives
8. Number of people disenchanted with their careers (even life)

Help me get to 10 please.

As one trained in Civil Engineering, I cringe when I travel on Bangalore’s roads. I am not talking about just the potholes here. In pavement design, we were taught about camber, berms, designing for natural drainage of the road surface, proportion of bitumen in the mix, proportion of corase and fine aggregate, temeperature of the bitumen mix when it is to be laid, number of passes by rollers etc. But one look at most roads in Bangalore today (and I must confess I have not gone to the new airport or yet or travelled on the “NICE Road”- so no comments on them)- and I am convinced that the people responsible for constructing these roads either do not have the qualifications or have sold their professional pride (and souls) to the devil for a pile of cash.

Is it any wonder then, that road surfaces start disintegrating within a few months, if not weeks or days, of them being laid? Think of the incremental fuel being consumed because of poor road conditions. And then think about what poor riding comfort does to your car’s shock absorbers- and to your own skeletal system!

Although the initial cost will be an order of magnitude higher, I think it is worth concreting the arterial roads. Rigid pavements (to give concrete roads their technical name) will mean longer road life and lower maintenance cost over say a 20 year period. Of course, that too depends on the concrete mix used and curing techniques adopted.

Major contractors are either kept out or not interested or are seldom selected because they are expensive. Naturally, the contracts are awarded to smaller contractors who may neither have the technical expertise nor the wherewithal (or willingness) to use modern road construction techniques. Further, many of them would have paid hefty bribes to win the contract- and their main interest would be to recover several multiples of their “investment”.

Perhaps what is needed is for more of us (members of the public) to file a query under the Right to Information (RTI) Act about which contractor was awarded which contracts, at what price, whether the road was inspected and certified by the competent authority and finally, whether the bills have been paid. Quite a Pandora’s box, I would imagine.

For years, America produced more billionaires than any other country on earth. But now, that long-standing distinction is under serious threat. Last year, it was felt that Bill Gates had been unseated by Carlos Slim as the world’s richest man. This year (according to Forbes magazine), Bill Gates ranks third, after Warren Buffett and Carlos Slim. And right after these is a troika of Indians- Lakshmi Mittal and the two Ambani brothers. Mukesh is marginally ahead of Anil, but it is in fact, the younger Ambani) (Anil), who has seen his fortunes rise from a little under $6B in 2006 to over $42B in 2008.

The data below from Forbes magazine is very very telling: in terms of the world’s super rich, there is a clear shift away from the US to other countries- and India is a significant contributor to the new billionaires. Even money-making seems to have been outsourced to India!

Gurgaon has become the darling of real-estate owners there (not to mention DLF). From an unknown township that existed more on plans than in reality 25 years or so ago, Gurgaon is today one of the “most happening” parts of India, fuelled by its proximity to Delhi, the airport and the emergence of high-quality apartments and commercial office space. Possibly, Haryana’s policies too had a role to play.

But in the last couple of years, Gurgaon has become associated more with horror stories such as the kidney racket involving labourers, the Aarushi Talwar and Hemraj murder case two weeks ago and the Naini family murder case that has been unfolding over the past few days. Proving yet again that fame and notoriety are two sides of the same coin.

It used to be said about consulting firms that they do well no matter what. When the going is good, clients are willing to pay them to try new things; in a downturn, clients turn to consultants for advice (paid, of course!) on how to cut costs, restructure businesses or even find buyers for their companies. [I use the word "consultant" loosely]. In today’s environment, “consultants” have been replaced by outsourced service providers (IT/BPO services). On the one hand, there is pressure to reduce costs- and hence outsource stuff that CEOs and CFOs know can be safely outsourced (because their own peers have been doing it for years). But there is also pressure is from the C-suite on executives to outsource newer areas/functions. Reality is that both the above forces will contribute to the growth of outsourcing at least over the next 5-6 years. What remains to be seen is which of the two forces above will dominate. If the former force dominates, it will be more of the same for providers of outsourced services. If it is the latter, the service providers will need to acquire and develop many more capabilities.

Here are some possibilities:

- Global pharmaceutical players (such as GSK, Pfizer & Merck) may be able to design and produce collateral and even online content in India. The material could be printed in India for a fraction of what it costs in the US or Europe and shipped. Even after you factor shipping costs, savings can easily be of the order of 50%.

- Technical writing (for example, the instruction manual for a new TV or mobile handset) too can be outsourced to a central facility (say in India). Printing too can be done in India and the requisite number of manuals shipped to locations across the world.

If someone is aware of companies that are already doing this, please be so kind as to post comments.

After a long and often acrimonious battle, it appears that Barack Obama has beaten Hillary Clinton to secure the Democratic Party’s nomination. As I said in an earlier blog post, either way, history would have been made. For the Democrats, the real battle begins now. Supporters of both Obama and Hillary must close ranks and unite to put their best foot forward against McCain.

Irrespective of who becomes the next POTUS (President of the United States), it would be fair to say that the first year or so will be especially challenging. The continuing softness in the US economy, and indeed, the global economy, will require skilful management and some bold decisions. The energy crisis, fuelled by the galloping price of crude oil, and the threat to our environment are all other real dangers. There is also, of course, the ever-present danger of terrorism around the world- whether it is motivated by social, economic, political, language or religious considerations.

Whether Obama will choose Hillary as his running mate and whether this combination will beat the Republican combo of McCain and Bobby Jindal, Romney or Crist will only be known in the course of time.  But irrespective of who becomes the next POTUS, I hope that he will address the real issues faced by the US and the world.

The BJP has a wonderful opportunity to prove that it can deliver better governance than either the Congress or JD(S). Whether it will is open to debate. Mr B S Yeddyurappa is hamstrung by the fact that the BJP is 3 seats short of a clear majority, and has to rely on the support of independent candidates, most of whom are Congress, BJP or JD(S) “rebels” who were denied tickets by the parties with who they were originally affiliated. This dependence might cramp his style. But if he and his government take the bold steps required to reduce corruption, improve infrsatructure (not just roads, but also water, sanitation, education etc.),  strengthen  development of rural Karnataka and those parts of the state that have been largely ignored so far, and sort out the myriad ills that plague Bangalore, he can be assured of the undying gratitude- and votes- of the citizens of the state.

Today is the day when the champion of the inaugural edition of the IPL will be crowned (unless rain interferes). The Rajasthan Royals have been the most consistent team in the tournament and are deserving finalists. The Chennai Super Kings, on the other hand, started with a bang, only to taper off towards the middle. Their entry to the semi-finals was itself in part the result of what other teams did/did not, rather than its own steam. However, in yesterday’s semi-final, they completely outplayed the Punjab team and made it to the finals.

Warne’s team has been dealt a serious blow by the injury to Graeme Smith, who, along with Swapnil Asnodkar, has formed what is arguably the most reliable opening pair in the IPL. A solid and quick start is crucial to winning a T20 match, and Warne will be well aware of the handicap his team faces. Dhoni seems more blessed, and his team does not face any apparent injury problems. How well team Chennai capitalizes on Smith’s absence remains to be seen.

As always, may the best team win!

Last evening, some family members (myself included) were stuck in a huge traffic jam that was caused, in part, by heavy thundershowers. It took us over 3 hours to cover a distance of around 40 Kms- which, for the record, is the distance to Malleswaram (a Bangalore suburb) from Bidadi, which is on the Bangalore-Mysore highway. My brother-in-law and I started to talk about the impending hike in petrol/diesel costs. He looked around at the mass of vehicles and commented wryly that no matter how much fuel costs, the traffic jams in Bangalore will not reduce. That set me thinking.

If Bangalore had better mass rapid transit infrastructure that offered high-speed and good quality connectivity between various points in th city, wouldn’t more of the city’s denizens choose to use those facilities? In turn, wouldn’t the number of vehicles carrying one or two people come down? And in the process, would Bangalore’s fuel consumption- and hence demand- not drop? Ditto for the city’s carbon footprint.

I personally think that the air-conditioned Volvo buses run to/from the new airport is a great way to travel there. The buses are comfortable, quite frequent and best of all, you avoid having your car travel empty one way. If these buses are empty, they should allow other passengers to also use them- of course, by paying the higher fare. That way, the cost of running empty buses can also be defrayed to some extent.

The basic point I want to make is this: petroleum products are not renewable in the short term. Given the world’s demand, prices will only keep rising (given that production isn’t going to rise). Building infrastructure is not cheap- but is a one-time investment followed by annual operating costs. Creating such infrastructure will achieve multiple goals:

1. help ease congestion and pollution in cities such as Bangalore
2. speed up travel- and hence increase productivity of citizens (productivity is lost either due to time lost in jams and/or illnesses caused by pollution and/or a general absence of well-being that leads to road rage, accidents etc.
3. protect and even enhance real estate values
4. curtail consumption of petroleum products- and hence contribute to overall price stability/inflation control
5. provide tangible and visible evidence of our country’s progress

Crude oil is now selling for almost $135 a barrel. This is three times the $45/barrel price that prevailed only about 3 years ago. Not surprisingly, inflation is on the rise. Everyone seems to be focused on asking OPEC to increase production, so that prices will come down. Personally, I think that is the wrong approach. What is OPEC’s incentive to increase production? Even at current levels of oil prices, there seems to be no dearth of buyers- including countries like India and China- and of course, the US. The OPEC countries will naturally want to make hay while the sun shines. Known oil and gas reserves may not last for more than another 75 years- and if production were to increase, even this time horizon could reduce.

What is needed is for large consumers like the US, China and India to focus urgently on policies that will curtail consumption and hence demand. With the subsidy on diesel, petrol and cooking gas, what is happening is a forced redistribution (transfer) of wealth from the public sector oil marketing companies to consumers. In other words, Peter is being robbed to pay Paul. The current subsidy is uniform, and does not discriminate between someone who earns Rs100,000 per month and someone who earns say, Rs10000 per month. Both pay the same prices for fuel; for the latter, the rising fuel price makes a much bigger dent on his/her monthly budget than for the former.  Maybe fuel should be priced based on people’s income. If income is not something that can be practically tracked for such purposes, the cars that people drive can be a good proxy. It is reasonable that someone driving a Mercedes Benz, Toyota Corolla or Hyundai Embera is wealthier than someone that drives a Maruti Alto, Tata Indica or Hyundai Santro. Similarly, let someone  riding a Hayabusa or Ducati pay more for fuel than someone riding a lower-end motorcycle/scooter. Let the price of fuel be based on what vehicle you drive- the more expensive the vehicle, the more you pay.

Another critical element of demand management for oil is the creation of quality mass transit infrastructure at adequate service levels. For instance, the new airport at Bangalore is a good 35-50 Kms from most main residential areas of Bangalore. If people use their cars to get picked up and/or dropped, their cars will consume a good amount of fuel. If, on the other hand, they use the air-conditioned Volvo buses (the Vayu Vajra service) that BMTC has introduced, significant amounts of petrol/diesel will be saved everyday. And if bus fleets in large cities are converted to CNG, that too will save money in a couple of years (of course, there is the initial investment to worry about). And a major side-benefit will be reduced emissions from buses that run on fossil fuels.

Once can only hope that in the next decade or so, alternative fuels will become more mainstream and the world as a whole will depend less on conventional petroleum-based fuels.