proclamation of financial emergency – the only way out of this nationwide crisis

let’s talk real. majority of citizens are struggling with their finances. factories, offices, shops are shut. since there is no way for anybody, save those employed with various governments and government bodies, to make money, the onus lies on governments to provide relief. agreed, a few big corporates will pay salaries during the lockdown period from their reserves and some bosses driven by ethics and morality will also do so.

but india is a big, big country. nearly 90 percent of total workforce is employed in the informal sector and most of the employers will find it impossible to pay their workers due to nil cash flows and unavailability of reserves earmarked for such situations.

amid all this, the governments are charging for electricity and other supplies. they are doing so since the employees of the state and state-owned enterprises will be paid their salaries in full. but is this justified? at a time when companies are laying off workers and not paying salaries due to exigencies that are beyond the control of employers, how can the state pay its employees in full? how can state-owned enterprises, from public sector undertakings to public sector banks to institutes and bodies under various ministries pay their employees in full?

and if they are doing so, this is against the principles of equity. moreover, the state doesn’t earn from commercial activities. a bulk of its revenues comes from taxes and other levies. even the poorest of poor contributes to the exchequer by paying indirect taxes when a bucket or biscuit is bought. it is this money that is used to pay the state staff.

let’s talk about public sector banks. although they undertake commercial activity, we know they rarely do so in the best way. this is the reason they are supported regularly from budgetary resources to save them from sinking. institutes, bodies and associations under various governments and ministries too are funded from budgetary resources.

now when the very foundation of the budget, the taxpayer, is under severe stress, is the state justified in paying its employees in full? although a handful of state governments have declared some cuts in such expenditures, they aren’t enough to tackle the crisis. the only answer is the government proclaiming financial emergency by using powers under article 360 of the indian constitution. after all, the provision has been added to tackle emergencies and the current crisis is deserving of such action since what is happening is unprecedented.

article 360 gives power to the state to issue direction and “any such direction may include a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a state.”

nation’s resources belong to every citizen, rich or poor. and hence, equity must be brought without any delay.

why we need more jio-styled cos, and psu need to cut costs

the world is becoming ultra-competitive, all thanks to greater than ever dissemination of information through electronic means. today, no company (except those with cutting-edge tech like google and microsoft) operating in a specific industry can expect to be the sole beneficiary of demand for a particular product/ service. margins are getting thinner and this is all a good sign, we will tell you why.

for a country like ours, all problems lie in income disparity that has only exacerbated despite of political promises to curb it. with those who earn handsome money and are willing and actually spending large sums on imported goods like electronics and garments, our trade balance has suffered. this ‘handsome money’ that they make can be attributed to the irrationality of their employers.

companies, both private and public, have not prudently considered changing market conditions and are thus unable to rein in rising operating expenses, especially those incurred on salaries.

take airtel for example. post jio’s entry in the telecom sector, not only the competitors had to reduce their prices for services they offer, they also had to cut on operational costs, resulting in laying off of large number of employees and rationalization of salaries of others.

take another case of private vs public sector banks. when one compares annual cost to company of a state bank of india (sbi) employee with that of his counterpart employed with a private sector bank, huge difference in favour of sbi employee comes as a shock. when market was opened for private and foreign banks in the country, the public sector banks didn’t notice the competition coming and failed to cut their operational costs. the irony is they gradually increased perks of their employees.

jio teaches a lesson to all market players. every sector is vulnerable to competitive forces and no enterprise can senselessly spend on pleasing their workforce. gone are the days when near-zero annual salary increments came as a shock only for a few handful companies. today, enterprises may even need to cut down salaries from past years so as to survive the competition. else, there will be no alternative to posting losses in books, defaulting on bank loans and finally going into liquidation.

to correct the market and more importantly correct the distortion in salaries, we need more and more market participants like jio. they would teach their respective sectors how to run businesses with thin margins by rationalizing costs.

why we must act fast on cannabis and amend the ndps act

medicinal benefits of cannabis are still unknown to the wider audience. however, in recent past, countries in the west, including usa and uk, have liberalized their stance on cannabis in the backdrop of emerging knowledge on extraordinary health benefits that cannabis is capable to deliver.

medical conditions such as chronic pain, epilepsy, side-effects from cancer treatment and muscle spasticity reportedly find cure in cannabis.

the cannabidiol (cbd) contained in cannabis has exceptional medicinal uses and a drug named ‘epidiolex’ (for treatment of childhood epilepsy) containing cbd has recently been approved in the united states. it is notable that cbd is a molecule found in marijuana plant and it has just 0.1 percent of tetrahydrocannabinol (thc), an ingredient that is responsible for making people high once consumed.

many drugs available in the market as cure for above cited medical conditions are either expensive or haven’t been efficacious enough.

in india, prescribing cannabis-based drugs is illegal and research and development in this area is limited to a few players. there have been voices in the parliament that have advocated amending the narcotic drugs and psychotropic substances act (ndps) so that cannabis’ medicinal use can be decriminalized and the drug can serve as savior for those suffering from otherwise curable diseases.

india is to take cue from majority of states in the united states, canada and many other countries that have decriminalized cannabis and are encouraging research and development in the field. india’s pharmaceutical companies are major foreign exchange earners and their active response to the call for cbd as a potential life saver drug can further fuel exports and enable us to win patents.

we are to realise that the marijuana plant, which remains infamous for its ingredient thc, also contains a miraculous element cbd. as early movers in this domain, we must amend the law governing cannabis and initiate large-scale production and research.

sbi, other psb have only abused their hegemonic position

the 2 percent wage hike proposed by indian banks’ association to psb employees is unacceptable to them, and they have their own set of reasons. just one question- are present pay structures of psb employees commensurate with their skills and duties they perform? when one compares the monthly pay of an sbi staffer with that of a private sector staffer with identical skillsets, say with an accountant at a private enterprise, the picture that bank staffers are already drawing exceedingly high salaries becomes clear.

for decades, public sector banks misused and severely abused their dominant positions, which is owing to the general public viewing these banks as quasi-government, not just government-run banks. people feel safe when their savings lie with public sector banks and this compulsion of people to use the services of psb has been exploited to the core.

sbi, for example, not only pays lucrative and unreasonable salaries to probationary officers and other staffers, but also takes care of their utility bills, even petrol expenses and furniture for their home. how sensible or rational does this sound?

the above mentioned roles do not require any extraordinary skills and are only routine jobs, very similar to that of a worker at a mcdonald’s outlet. while a private sector employee would not be paid more than inr 25,000/ month for a similar job, bank employees are being paid much more than industry standards, besides being given perks and allowances.

a news report sympathetic to the demand of bank employees for a much better wage hike has quoted their ‘commendable work’ while executing government policy actions like demonetisation, jan dhan yojana and mudra yojna. why not initiate an enquiry and you would come up with unbelievable number of frauds and misappropriations and abuse of power by bank staffers while implementing these schemes.

even non-performing assets of psb is a product of unprofessionalism and lack of sense of duty in psb staffers. this aside, as per the latest data, nominal rural wage growth has plunged to its lowest level (real wage growth is in negative territory), what salary hike are psb staffers demanding?

why doesn’t one decode the lately declared sbi quarterly loss (q4, 2017-18), which shows that net loss from corporate segment was at inr 13,525 crore, while from retail banking segment the bank earned inr 3,586 crore net profit.

the only way to rein in these staffers is to immediately recruit special staff in all psbs so that banks can remain open to the general public even on sundays, all saturdays and public holidays, that too from 8 am to 8 pm with staffers working in two shifts of 6 hours each.

the newly recruited staffers will not only remind the existing ones of a fundamental market theory that only work is rewarded but will also make banking services more accessible and thus pushing the economy to new heights.

what future holds for flipkart

borrowing an idea from overseas and implementing it in one’s own country is the new success mantra for present-age entrepreneurs. had replicating a successful business model in another country been such easy and rewarding a task, the disparities between developed and underdeveloped nations would have gradually come to an end.

it is obvious that uber, the ride-hailing company, would have employed many market experts while deciding on foraying into other territories beyond us and europe. the outcome, however, is an evidence that their analysis was greatly misplaced with respect to gauging opportunities. uber has called it a day in many asian countries; in india, it is competing with ola and on the back of its deep pockets is making good inroads, but profit is still elusive.

most indian startups fail to take note of a simple fact that the market here is incomparable to that in developed countries. you may be able to acquire customers by offering lucrative discounts and deals, but in the long-run you not only need to break even, but also make profits so as to sustain.

in india, you cannot satisfy a customer so easily and moreover, sellers on e-marketplaces have no push to offer quality products and services to buyers. in the us, for example, a buyer of a good from e-marketplace can rely on the quality of good delivered, but in india’s case, chances of being misled are extremely high. this kicks in returns and refunds, and believe it, even the best economies of scale cannot sustain such high return of goods.

second, indian market is overcrowded, not with respect to customers but also suppliers. this has led to businesses operating on thin margins (just look at d-mart offerings where substantial discounts on prices is luring customers).

the only segment where an e-marketplace can make profits is by selling goods like mobile phones, directly sourced from original equipment manufacturer (oem), which shall allow them to retain some margins after factoring in all operational costs. but even this wouldn’t last for long since subsequently these oem can do away even with flipkart and sell via their own platforms.

for indian startups, comprehending the differences between indian market and consumer habits and preferences and that in overseas is a big challenge, but they need to overcome this.

today, the market is wide open for participants. a new e-marketplace can come up tomorrow and offer additional perks to users and thereby making flipkart obsolete. the fact is that the foundations are so fragile and so severely lack any innovation or value that you can be uprooted any second. give your business model a second thought.

uber, ola fiasco is a lesson for all

the current show of strength by drivers of cab-aggregating companies ola and uber is a reflection of how indian market and market players are unreservedly incomparable to scenarios of the west. it is time that many are debating the impending bubble burst in india’s startup ecosystem; had they been vigilant and diligent from start, such debacles were avertable.

here are five simple lessons for these taxi hailing companies, and these are generic for applicability in wide-ranging scenarios of today.

first, and this is fundamental, assessing india as an aggregate market with stakeholders and consumers toeing the same west line is a fault. replicating stories of growth in west in this asian giant will only culminate into disasters and eroding of public confidence in such businesses.

second, doling out sops and subsidies isn’t what that works in india. had it been so, the government’s persistent bill on fertilizers, food, other subsidies would have eventually come to an end. respect your money.

third, a comprehensive, rational and dedicated study of indian market is what that has to precede any implementation. people’s preferences, capacity and willingness to pay is to be researched, for they are not the same as consumers in developed economies.

four, and another commanding covenant, disruptive tactics won’t work every time, barring a few cases. india already has adequate infrastructure for trade and conduct of other transactions, which is to be factored in and integrated in new business models; circumventing these can rarely work.

five, easy and rush money cases are a flop. you may fill wallets with some gift cash, offer unviable cash backs to customers, incentives to businesses to bring them on board, this will not boil down to sustainability, let alone gaining market share.

the choice is simple, change ways or perish.

indian it, forget h1-b, to survive embrace these corrections

indian it is in alarming condition and timely correction is the only way out to save this sector that employs substantial number of youth, aids indian exports.

h1-b visas tweaking shouldn’t have created this brouhaha, had our companies embraced some much needed changes timely. with cheap labour available and repetitive tasks delivered to onshore business providers, you overlooked fundamentals, the deteriorating condition, plummeting profits and sinking job growth is an evidence.

here is the way-out. this may not be exhaustive, however, you need to make these corrections, today or tomorrow, else the golden sector will soon lose all sheen.

first, collaborate with technical education institutions that are producing nothing more but service sector ‘labourers’. inject in their syllabi the present and projected demands of global industry.

second, start innovating. stop providing solutions for same issues that won’t now survive for too long. conventional development, programming are being overshadowed at quick pace, learn and adapt to this change.

third and most importantly, blunt, regressive this may sound, cut on salaries and perks of top and mid management levels for it is their indifference and inaction that has created an atmosphere of dreadful conditions.

four, competition is immense and india isn’t the only country with cheap and abundant labour. to cope up with new outsourcers embrace quality in operations, sensitise upper echelons and managers to focus more on value than on numbers.

five, go on an aggressive acquisition of small business by setting up a dedicated department to assess these opportunities. but handhold only those businesses that can add value, rather than those that will simply burn your cash reserves.

there are more corrections and you have all means to ponder upon them, start today.

jio’s free data, calls plan is not predatory, let’s see why

what does jio or other telecom companies provide to the hefty customer base? a service that is enabled by purchasing spectrum from the government, hence no manufacturing, no use of inputs per unit, barring some technology and few essentials like towers and cables. so the radiowave that allows you to make calls or download data is all but any cost-incurring product. it may be 100 minutes of talktime or 1000 minutes, 1 gb data or 10 gb, hardly does that matter to your telecom company.

while submitting its arguments in the court, the attorney general, representing the government, clearly mentioned about the cartel of 4-5 telecom companies having billion subscribers and making inr 250 crore a day just from outgoing calls.

he also stated that none of the companies is ready to invest in technology and cited the inaction on their behalf to contain call drops. special mention was made of their counterparts in china who are more inclined toward upgrading their technology.

let’s view this with a wider glance. services are not manufacturing, although they are categorised as industry. a basic difference between the two is that while manufacturers have to spend additional cost on every new unit they produce, service providers have no such costs, even when they have, it’s trivial.

this is true with almost every industry in service sector- banking, telecommunications, hospitality or consultancy. while for manufacturers, competition crops up without delay and doesn’t allow superfluous profit-making, services enjoy some immunity.

moreover, services rank lower than manufacturing or agriculture in terms of their essentiality, hence under no good economic sense can they be allowed to make excess profits; rather, they must be free or provided at no profit no loss criteria since they are enablers, not the makers. internet only helps us know about happenings, helps us communicate, be educated, it cannot feed a child.

jio’s entry saw other players offering four-fold more data and free calls at same old tariff. how? do they fear losses? no. more players like jio will only correct the market, not distort its equilibrium.

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