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Wednesday, February 25, 2009

Nano Logic

Nano Logic


As we watch the UPA Government, on its last legs, put in miniscule attempts at economic stimulus, the latest being tiny cuts in excise and service taxes, it is hard to imagine that there is anyone realistic in-charge. It reminds you of nano-technology taken out of context. These economic tinkerings are so ineffectual that they seem to do no more than add insult to injury. And even this twee mockery of stimulation is being administered in disconnected dribbles and drabbles.

The Government, through eminent spokesmen such as the Planning Commission’s Mr. Montek Singh Ahluwalia and acting Prime Minister, Mr. Pranab Mukherjee, has said it believes in this gradualism. That gradualism is best because the Government does not want to “exhaust” its options. The UPA Government cannot see the virtues of drastic, bold action, of thinking outside of its tired old box, even as the economy crashes and burns around it. The Indian economy is deteriorating fast, plummeting and coming unstuck from the liquidity-fuelled boom years of 2003 to 2006, when growth was, in a sense, imported. But the Government prefers to believe its own propaganda, and live in “business-as-usual” denial.

This, even as the projected fiscal deficit has finally been let out of the closet as other countries struggle to come out of their own economic tailspins. Still, it has been admitted by the Government at last, though it has been pointed out by the discerning, like the IMF, World Bank and The Economist, for years. But now, India’s sovereign ratings too are in danger of falling below investment grade.

But with the developed world itself in economic turmoil, the UPA Government is undaunted. Notwithstanding the sad fact that our fiscal deficit has not gone to fuel an economic rescue. Most of ours has been racked up through unproductive consumption, inefficiency and leakages, or rank and cynical populism. If only it had gone towards stimulating growth in the economy, creating infrastructure for the future, or even to improve the functioning of a creaking, groaning, over-run set of facilities, there would be less grief all around and better wherewithal to cope.

Perhaps the Government knows this, but now, at the end of its term, it can’t be bothered. It seems, as former Chief Economic Adviser Mr. Shankar Acharya put it recently, “uncoordinated,” with multiple spokespersons saying entirely different things. Some, for example, are indicating imminent further interest rate cuts, waiting on the RBI, and others, are saying quite the opposite, that because of the high fiscal deficit it is difficult to effect further rate cuts without fuelling inflation.

Meanwhile, Business and Industry has been more or less abandoned to its own devices. For them, the credit market is frozen because loans, even when available, are offered at prohibitively high rates, both nationally and internationally. Many of our top guns, including the iconic TATA Group, are struggling with the high debt generated by their “inorganic growth” acquisition programmes, both domestically and abroad, coupled with a drastic fall off in demand.

The Government, on its part, has offered no substantial tax and levy relief, no sustainable liquidity, no effective demand spur, nothing, except unctuous advice and the aforementioned pathetic attempts at economic stimulus. Far from improving financial conditions for business and industry, the Government has itself also become a voracious borrower, the biggest, its demands raised to unprecedented levels, thereby sucking up most of the available credit.

With the rank abdication of governance, the need of the hour, in these economically grim times, is for an inexpensive, affordable stimulus from some other quarter, one that fires the public imagination and lifts spirits out of the all pervasive gloom. And, serendipitously, waiting in the wings, is the about to be launched TATA Nano.

The Nano has the potential to empower ordinary people, those with an annual income of just one lakh rupees; and revive the automotive industry and the lucky bank ( SBI), slated to offer credit against Nano sales, at the same time.

The Automotive Industry, all sectors, from commercial vehicles to the two-wheeler, has been very badly hit. It is, after all, one of two major industries, the other being Housing, that interfaces with millions of consumers and has a great swathe of manufacturing industry dependent on its progress.

So the advent of the TATA Nano, obscured by the tumultuous tenor of recent events, is coming at just the right time. It is perhaps no coincidence that, like the Nano, the 38 HP, near indestructible VW Beetle was also launched in the humiliatingly impoverished years just before WWII.

The TATA Nano, powered initially by a two cylinder 33 HP petrol engine, is set to take the aam aadmi by storm. Later, TATA has plans for a deluxe model, diesel and hybrid variants, a solar-aided electric version, and so on. When it was unveiled at the January 2008, 9th Auto Expo in New Delhi, many found it difficult to take the cute little car seriously. It was viewed patronisingly as a vehicle for the underclass and of little relevance to the others. Spokesmen for other car manufacturers underlined that they did not consider it as competition at all even as several announced plans to create their own versions of Nano. Today, with the entire economy on its knees, the Nano will come into the world with a very real potential to expand the Indian automotive market by a whopping 65 per cent.

Like the pre-war VW Beetle, manufactured from 1938 to 2003, the TATA Nano too is a rear-engined four passenger car capable of a top speed of about 100 km/hr. The TATA Nano will sell for just over 100,000/- Rupees at first, and in 1939, the VW Beetle could be purchased for 990 German Reichsmarks; about the cost of a small German motorcycle of the period.

In hard times, we have seen, the underdog, however improbably, wins. Likewise, in the summer of 2009, bereft of hope and imagination from any other quarter, we could well see the Nano turn out to be the little-big idea whose time has come. This inexpensive vehicle that seems to wear a perpetual smile and can carry four people in comfort,could well become the prime-mover of an elephantine if faltering economy,on the strength of little more than its good looks and a nifty set of wheels.

(1,051 words)

Wednesday, 25th February, 2009
Gautam Mukherjee

Published as the Op-Ed Page Leader on March 4th, 2009 as "This could be our Beetle" and online at www.dailypioneer.com. Archived under Columnists.

Thursday, February 19, 2009

BOOK REVIEW: BRANDS UNDER FIRE

BOOK REVIEW



Brands Under Fire by Ivan Arthur & Kurien Mathews
Published by Penguin Books India, Portfolio, 2008, 214 pages. Rs. 499/-



Crises of Faith

Brands Under Fire is a reprise of three brand crises in the well-known worlds of Cadbury chocolates, Pepsi & Coke soft drinks and the kalash logo-bearing Unit Trust of India with special reference to their flagship Unit-64 Scheme.

This lucid book composed of three brief case studies, excerpts of discussions, and brief essays on branding and related issues; has been published under the aegis of The Subhas Ghosal Foundation, formed in memory of the Thompson Advertising legend, and the AICAR Business School, founded by Walter Saldanha, the former Chairman and Managing Director of advertising company Leo Burnett, India.

Every single wave of phosphorescent logic from a collection of 13 advertising and marketing gurus assembled at a conclave on the AICAR campus in 2006 crashes down again and again on the conceptual rock of “Trust”.

It is “Trust” that is the adhesive between the company or institution and its consumer. And if this fragile entity is betrayed, then the “Brand” takes an incalculable hit. The only way forward is to restore that trust using multiple tools at the guilty company’s command, including good leadership, advertising, public relations, and swift reparations if not full-fledged restitution.

A brand is defined repeatedly by the conclave. Shekhar Swamy of RK SWAMY BBDO/HANSA calls it a “promise or a pact between manufacturer and buyer assuring (a) product authenticity and (b) product consistency between places over time.” In all three case studies, this compact is temporarily broken and then repaired.

In the first, Cadbury is seen to have sat on its hands despite prior knowledge of the problem, till a “worms infestation” in its inadequately packed and badly stored chocolates, blew up in its face. The “thoughtless worms struck,” as a tongue-in-cheek Gerson da Cunha puts it, when the infestation received the adverse attentions of the Indian Food and Drink Administration (FDA) and a raucous media.
But once placed with its feet to the fire, Cadbury rescued the situation from plummeting sales and a hornet’s nest of bad publicity, by promptly changing its packaging. They also brought in hugely popular celluloid idol Amitabh Bachchan, using the actor in a TV advertising campaign to restore trust.

Commendably, some of the discussion in the book reaches beyond marketing to comment on India’s interminably slow and “weak legal system” that enables international brands like Cadbury to get away lightly without the massive punitive damages they would have had to pay in the West. Nevertheless, Cadbury, being a household brand in India, did act to set things right, to see its sales climbing afresh and all was soon forgiven.

In the Pepsi and Coke case study, both international soft drink giants were accused of selling product with pesticides in them to a strength of 30 times the permissible limits. The whistle-blower was a New Delhi based NGO, the Centre for Science and Environment (CSE). But ignoring the possibility that some of their multiple bottling plants might indeed be using contaminated ground water and less than rigorous process controls; both companies chose to conduct independent tests on their colas and presented their blameless findings in a robust advertising campaign.

They also decided to use their film-star brand ambassadors Aamir Khan and Shahrukh Khan to reassure their consumers. Other back channel efforts yielded a clean chit from the government of the day. The consumers were duly convinced and sales did not suffer beyond an initial dip. The cynical prognosis, in a country where one can certainly not drink even the treated tap-water safely, is that the Coke and Pepsi, not to mention some nine other brands of cola and bottled- water cited by the CSE study; were, “safe by local standards”.

Sunita Narayan, Head of CSE, prominent in water management issues, invokes the big picture of a “failure of government institutions to take the issue of public health seriously,” and concludes, a little helplessly, that we, “care little for standards in India”.

The final case study is about the collapse and resurrection of Unit 64. This was India’s first, indeed its only mutual fund for decades. Set up by the Government of India in 1964, it gave its millions of small investors reliable tax free returns ranging from 6 to 23 per cent per annum for many years.

In 2001, the fund’s net worth was largely eroded and it had to temporarily halt trading. After those responsible for the debacle were removed, a new Chairman, M.Damodaran, later to preside over SEBI, came in to revitalise UTI. Viewed from the perspective of a global financial collapse in 2009, with venerable brands strewn all over the global floor; Damodaran’s rescue of Unit 64 and the “vibrancy” he imparted to the whole company makes for an inspirational template.

Damodaran termed the US-64 problem as a “liquidity issue rather than a solvency one” and the Government of India backed him up with the necessary liquidity. Effectively, the government nationalised Unit-64 and reaped huge profits from the equity holdings over time. For the 20 million or more betrayed unit holders it has not gone quite so well. But, even they did get their money back with a modest return on investment.

(850 words)

Thursday 19th February, 2009
Gautam Mukherjee

Monday, February 16, 2009

Push Comes to Shove Liberalisation

Push Comes to Shove Liberalisation



Watching Mr. Pranab Mukherjee present the UPA Government’s final Interim Budget was witnessing an exercise in brazen, experienced politics, rather than economics. Mr. Mukherjee manfully catalogued the achievements of five high-growth years of UPA rule and dwelt on enumerating the benefits given to the farming sector and rural development as a whole, but said as little as possible on the present state of the economy overall.

The fact is, the bulk of the economy, some 82 per cent of it, is currently in dire straits. But of course, Mr. Mukherjee, his colleagues, supporters and apologists, in and around the UPA Government, are not about to admit this on the eve of the general elections. However, deny reality as they may, with talk of restoration to 9 per cent growth at the earliest, the people at large are unlikely to be convinced. Not even Mr. Mukherjee can pull off this sleight-of-hand.

Mr. Mukherjee made much of the 4 per cent growth in Agriculture and while it is true that Agriculture supports at least 50 per cent of our population and we have all had quite enough of farmer distress and suicides; it is also an electoral demographic that has surely not escaped the government’s notice. And a 4 per cent growth in Agriculture impacts the overall economy by just 0.7 per cent. Agriculture today accounts for a modest 18 per cent of GDP and is therefore not in a position to rescue the economy as a whole.

In contrast, we have negative growth in industrial production (IIP) to the extent of 3.5 per cent for the third quarter, or a crippling minus 14 per cent annualised! There are also sharp declines in the employment intensive “services” sector that account for over 50 per cent of the economy, and demand shrinkage in every one of the other sectors, atrophied, in fact, by horrifying percentages.

For example, demand for commercial vehicles has fallen by 75 per cent! The situation is so bad in corporate India that it calls for the culling of lakhs of jobs by big, medium and small companies just in order to stay afloat; as well as a near moratorium on fresh hiring.

On-budget, the one noteworthy, if much belated point, was the increase in the Defence allocation. Off-budget, the recent fuel price cut was indeed most welcome. With inflation moderated to about 4 per cent (WPI) at present, and indications that it may go even lower, and crude oil prices at well under 40 dollars a barrel, there is room for further interest rate and fuel price cuts before the mandatory lay-off period prescribed by the Election Commission.

The regrettable part is that as an economy dependent on domestic consumption, again to the extent of about 80 per cent, this state of affairs cannot be blamed wholly on the global economic crisis.

Much of our current predicament can be attributed to the fact that for almost two years now, the government has been doing all in its power to slow growth and curb inflation that had risen to nearly 13 per cent in a ham-fisted bid to calm prices. Growth was indeed curtailed by relentlessly raising interest rates and sucking liquidity out of the financial system, but inflation has only fallen by default because of a drastic fall in crude oil prices from about 147 dollars a barrel to under 40 dollars today.

But had this not happened, the ridiculous monetary tightening indulged in by the UPA Government would not have lowered either the inflation rate or prices. In fact, even today, food prices are still tending upwards, and it is oil prices that our government had no control over, that accounts for the overall reduction in the wholesale price index (WPI) inflation number.

Truth be told, the UPA Government, despite its high profile and eminent economists at the helm, has a long list of sins to answer for. It has given away money to farmers and government employees by increasing the fiscal deficit and burdening future administrations with a recurring bill. It has enhanced non-budget expenditure with cavalier abandon to further add to the fiscal deficit even while choking off the very growth that may have contributed sorely needed government finances. It has wilfully reduced the viability of public sector banks by politically interfering in their functioning and causing sharp increases in their quantum of non-performing assets. It has failed to curb the ingress of a flood of counterfeit currency from entering our financial mainstream. It has deliberately turned the credit tap off on hundreds of financially starved blue chip companies. It has dragged its feet on infrastructure development that is essential for future growth and hampered our defence preparedness. It has failed dismally at stock market regulation to prevent fraud and has been taken totally unawares in the face of corporate brigandage with the aid, abetment and collusion of ruling party and alliance politicians.

And this minimum listing of the Government’s sins of omission and commission does not even refer to the non-economic failures on security, law and order, diplomacy, and the like.

But now, even with favourable inflation and oil price numbers, we have no liquidity to take advantage of the favourable circumstances. We have run our economy into the ground and no domestic source can provide the billions of dollars we need to re-inflate the economy. So, perforce, we must wait for a groundswell of liquidity from abroad. And considering the state of affairs internationally this may not be forthcoming for quite some time to come.

There is, however, a silver lining. Recently the government, perhaps in desperation, or more likely, taking advantage of a time when they could get away with it politically, has vastly liberalised the foreign direct investment (FDI) norms. In convoluted effect, it has done away with caps on FDI in practically any sector of the economy. This includes controversial sectors such as retail, insurance and the airlines that had met with local resistance from vested interests when they were sought to be opened up to foreign investment in the past.

This virtual “open sesame” coming as it has amongst the prevailing doom and gloom from multiple quarters has attracted very little comment. But when the money comes back to the global system, India may yet benefit substantially.

(1,050 words)

Monday, 16th February 2009
Gautam Mukherjee


Published on the OP-Ed Page of The Pioneer as "Crisis? What crisis?" on Tuesday, 17th February 2009 and online at www.dailypioneer.com. Also archived at www.dailypioneer.com under Columnists.

Friday, February 13, 2009

Of Peacocks and Feather Dusters

Of Peacocks and Feather Dusters


Peacocks and Rajasthan share a symbiotic relationship, along with partridges that prefer to walk. Peacocks preen and call and are painted and depicted on every medium to hand. Teethers, plump, mud-brown, with little heads and composed, almost totally, of delicious meat; tempt. Aiming slingshots at them, might, I suppose, persuade them to take wing.

I ask my genteel Rajasthani friends, related to the erstwhile Jaipur royal family, why Vasundhara Raje of Gwalior didn’t win a second term. “Infighting in the BJP” said one. “Rajasthan alternates between the BJP and Congress”, said another.

“But didn’t she do good work,” I ask. “She’s been repairing the forts and havelis alright. Amer Fort which is government owned is much improved, like Jodhpur’s Mehrangarh, which is still with the royal family. Nahargarh is saved from tumbling down. The miles of walls and watchtowers too. Tourism would be up if there were tourists now. Congress doesn’t do Heritage. Prefers to let ruins stay ruined. More authentic to them but she’s a royal you see,” says my friend of the first part.

“And still she goes, voted out in what is primarily a tourist state,” says I. “Just like Parikkar in Goa,” I add. “It’s the goonery,” says my friend significantly, “people don’t like the goonery ”. “But Gehlot comes from a family of Magicians,” says his wife mysteriously. “Like John Major,” I say, “except, his was a family of trapeze artists.”

Sounds like so much gossip doesn’t it? But as we enter the run up to the big one, the politically-minded will jostle. The electorate needs swaying. Causes have to resonate. Alliances have to be struck. The arithmetic must work. And these days it is only one part about the voting public. For them, once it was catch the right wind, coin the right slogan, and it would’ve swept you into power.

Think of it. There was “Roti, Kapda aur Makaan,” more celluloid theatrics than politics, and the socialistic bombast of “Garibi Hatao” in an economy growing at two per cent chased by inflation at eighteen percent!

The last rounds witnessed the modern day hypocrisy of “Aam Aadmi” contrasted with the overreaching boomerang of “Shining India”. But, is there a single slogan that can move India this time? And what might that be? Will a new, improved, “Swadeshi,” or “Aam Aadmi II” and “Youth Power” cut the mustard in 2009?

What can you depend on in a regionalised, fractured polity? SP General Secretary Amar Singh says Congress likes to “use and throw” its allies as in use for nuclear power and throw for General Election. Uttar Pradesh and its 80 MPs may be up for grabs. Both SP and rivals BSP may be out there looking for best bids. Thank God Bihar is holding true to existing fault lines. Other states, other slates.

On cue, Mr. S from Hyderabad expostulates at breakfast. He is in Rajasthan to buy a 100,000 sq.ft. of marble for his construction company. “It is a buyer’s market now” he says happily. Mr. S says Chandrababu Naidu has apologised to the peasantry for neglecting them the last time around and they have forgiven him. He says the TDP will win this time. “Naidu and Advani really click,” says Mr. S, snapping his fingers. I start counting 28 MPs from Andhra but wince a bit when I see the newspaper report on Reddy saying Congress will not stand in the way of a new state of Telengana carved out of Andhra.

Then there’s the whole security can of worms. Congress says it will now get tough on security. But this is Rahul Gandhi’s Yuvrajspeak. He can, after all, dare to float any trial balloon he chooses. Besides everyone is still looking for resonance and Congress, no different, is trying to fine-tune Aam Aadmi II.

Meanwhile, the Election Commission is under suspicion. Can they be fair and partisan at the same time? Ditto, the President of the Republic! And the Judges who refuse to declare their assets and begrudge being prosecuted for corruption. The intelligence agencies are busy gathering information on allies and opposition alike. The entire Apparatus of State poses stiff challenges to our lion-headed motto Satyamev Jayate and probably one or two to Jai Ho too for that matter.

But this could be seen through a different prism. After, that is, moaning ineffectually about how disgustingly soft India is; how totally uncaring about the safety and security of its people. And complaining also about how corrupt; inefficient; nepotistic, classist, sexist, casteist, communal, regional, obscurantist, over-crowded, filthy, slow, confused, it is. And after moaning also about red-tape riddled systems that don’t work except for the powerful; about the non-functioning courts and how the political classes and their bureaucratic minions are immune to all harm; one does cross a synapse into a eureka flash about the good side of things.

There is something good to be said for being soft like a pillow. It helps to absorb shocks. And show Gandhian patience in the face of lies and being regularly kissed off. It comforts, even as it creates a masochistic appetite for punishment. It knows that every aggressor eventually runs out of bullets, bombs, missiles, even venom. It jives with big picture ahimsa and maya and karma, and climate crusading Greens. It lets you appreciate that looters, murderers, frauds, rapists and the like have their own compelling reasons. It lets you feel compassion for Kasab!

It tells you all things pass, even for the inefficient. And Things are, for the Newagers and the rest of us, just as they are meant to be. Bobby Ghosh explains the essential difference in Time magazine: “All countries have armies, but in Pakistan, the army has a country”. Oh Har de Har!

Being soft makes you non-reactive, and infuriates the aggressive. Besides it is good for blood pressure and clear thought. One like the next central government will indeed belong to the better alliance builder, never mind the issues.

For the rest, it is as Pat Quinn, the new Illinois Governor who replaced the impeached Rod Blagojevich put it: “One day a peacock, the next day a feather duster”. It shouldn’t surprise a good desi. After all, Martin Luther King learned his non-violence from the Mahatma. So, why shouldn’t the Mighty Quinn rap about maya using a Rajasthani peacock metaphor?


(1,053 words)

Friday, 13th February, 2009
Gautam Mukherjee