Thursday, May 29, 2008

A Letter to Raj

Dear Raj

You know this as well as I do, Mumbai is a city of immigrants and for so many generations Indians have migrated to this city of dreams to find prosperity and a better livelihood. Mumbai is what it is today, only because of these immigrants who come from around the country and give it their best. These migrants come to Mumbai and fall in love with the city and decide to make it their home. Mumbai offers them everything that they don't find elsewhere in the country.

Mumbai is the most cosmopolitan city in India wherein people live in harmony with a focus on business and entrepreneurship. Gujarati's,Bihari's,Maharashtrians, Muslims and Christians live in harmony and are free to follow any religion. They all consider Mumbai to be their home.

We want Mumbai to be the financial capital of Asia. We want Mumbai to be the most prosperous and respected city in the world . We leave our homes to find our dreams here. We hope to improve our quality of life whether it is a taxi driver, a bus conductor or an autorickshaw driver. The jewellery market is dominated by Gujratis , the steel market is dominated by Marwadis while the food industry is dominated by Punjabis. Does it really matter if someone speaks Marathi or not in this city? We all manage to converse in Hindi or English, learn and respect each other's language.

How would you define Maharashtrians? Are they people who are born and live in Mumbai? Are they people who have immigrated and have adapted to Mumbai? Are they people who pay taxes in Maharashtra? Does the ethnicity, race or language change anything?

Arent we all Maharashtrians?

This is a humble request from a person who loves Mumbai just like everyone else from Mumbai. Please do not divide us. Please do not plant the seeds of divide between North Indians and Maharashrtians. These divisions have forever been an impediment to our progress . Lets talk about Unity for a change. Lets talk about a better livelihood for people. Lets focus on infrastructure issues that have plagued our city now for more than a decade.

Let us make MNS a party of change, a party that unifies all Mumbaites, a party that works for the betterment of all, a party that does not play vote bank politics. I sincerely believe that any political party that works sincerely with this goal in mind will be loved by all and will have the support of all Mumbaikars. Let us all unite and make a new beginning !

Jai Hind! Amchi Mumbai


A Man from India

This letter is written in response to recent events in Mumbai

Tuesday, May 27, 2008

Should India deregulate gas prices?

Not many are aware that the Indian government controls gas prices for the Indian consumer. The two gas types - petrol and diesel have always been subsidised by the government to protect the poor. Diesel is heavily subsidised as all the farmers, truckers and state run public transportation vehicles use diesel to run their vehicles.

The relentless rise in international oil prices that last week touched an all time high of $135 a barrel has forced the government to mull options to save state-run firms, which expect a revenue loss of Rs 200,000 crore this fiscal on sale of petrol, diesel, domestic LPG and kerosene.

I view this as a positive development as this will help the Indian government reduce expenses and will force business to adapt to changing global environment. A lot of well to do Indians are driving now and a lot of that fuel is paid by the government . This limits the Governments ability to spend on much needed infrasturcture development, social development and poverty alleviation programs.
However , the Finance minister and his team will need to take care that deregulating petrol does not bring the Indian economy to a screeching halt.
The following are the risks of deregulating petrol

  1. Inflation will be biggest risk at this time. With current food prices at record highs , deregulation in the oil sector will only cause inflation to go higher.

  2. The aviation industry which has just recently taken off may run into issues as they will have to deal with a sudden jump in petrol prices.

  3. The retail Industry that is just taking off may witness a slowdown.

  4. Strikes by unions in the transportation sector bringing businesses down to its knees.

  5. Opposition pressure to the government forcing the government to subsidise it again or lose power.

This issue like everything else is a challenge for the Indian government and they will need to innovate to find a way to save the country from higher world gas prices as inaction can lead to a high import bills compounded by slower exports resulting from a slow US economy!

The debate over organized retail in India

With the big names of foreign retail knocking on India's doors, it is no surprise that there is a raging debate on whether foreign investment should be allowed. The Left backed UPA government is under increased pressure to not opening up retail sector to foreign investors. However the government has provided a "back door" entry to foreign retailers allowing them access to the Indian market by way of "franchises"

The Proponents of Organized Retail argue that

  1. Foreign investment will hasten the pace of organised retailing. Their case in point: China.In just ten years after China permitted FDI in the sector, the share of organised retail has grown from 10 per cent to 20 per cent.

  2. Current laws allow foreign retailers to access the Indian market via the franchisee route, as has been done by the likes of Marks & Spencer and Mango. Foreign retailers are allowed outlets if they manufacture products in India or source their goods domestically.Foreign retailers therefore, have access to the Indian retail market, while India loses out on the foreign direct investment(FDI).

  3. Foreign retailers would be inclined to source from the Indian market to ensure that goods reach customers on time. As they grow familiar with Indian products, they are also likely to increasingly source from India for their international operations. This will benefit the farmers and help improve quality of their produce.

  4. Some argue that the the "mom & pop" stores have unique advantages such as an understanding of local needs and superior service in the form of home delivery, which will help them retain their edge over the large supermarkets, foreign or Indian.

  5. Competition for the neighbourhood "mom & pop" store could come just as easily from the Big Bazaars and Food Worlds of modern Indian retail.

The Opponents of Organized Retail argue that

  1. The entry of big foreign retailers will displace labour in the retail sector, which employs a massive unskilled workforce.
  2. Any retailer Indian or foreign will have to to invest huge sums of money in setting up a supply chain, cold chains and train farmers to produce goods that meet quality standards.Most retailers have succeeded in this only at the regional level. They do not have the financial muscle to set up a supply chain on a national level. This would give foreign competition an edge and hence the government should not allow foriegn players into the retail space.

I believe preventing foreign investors from entering the Indian retail space only delays the inevitable. Just like any other developed country, the "mom & pop" shops will need to go but most of the unemployed will probably find jobs with the Large retail chains-foriegn or Indian. Big retail chains will fancy the work experience of folks running the "mom & pop" shops and will probably hire them. Historically, such changes have always resulted in the betterment of the consumer and the worker. Furthermore ,Increased competetion is likely to benefit the consumer, the farmer and the worker.

Hopefully the next government elected will not be a coalition government and will be able to take bold decisions to end this debate and take steps to reform the retail sector in India.

Friday, May 23, 2008

Obama,Clinton,McCain - Does it really matter?

There is a lot of talk in the Indian media about which of the current US Presidential candidates will be the best for India.

"The world's oldest democracy (US) and the world's largest democracy (India) are natural partners, sharing important interests and fundamental democratic values," -Obama

"As president, I'll work to restore America's leadership in the world. And one of my goals will be to usher in a new era of partnership between the United States and India. We share so many of the same challenges and have so many of the same goals. Together, we can strengthen our economic partnership, combat terrorism, foster a stable and democratic Pakistan, advance democratic values, promote human rights, tackle global warming and address a host of other problems." - Hillary

Senator McCain has been a consistent advocate of free trade. If he merely persists with the Bush administration's stance towards India, arguably the most pro-Indian of any administration since 1947, he would be improving his relations with India

  • Post 911 people are questioning America's involvement with Pakistan and have realized that Pakistan is the epicenter of terror thanks to the media coverage around the "War on Terror". They also realize the strategic importance of allying with India to combat this threat.

  • A large number of Indians have immigrated to the USA in the last couple of decades which has resulted in people to people interaction and blending of cultures. Americans better understand India today than even a decade earlier.

  • A large portion of their outsourced work goes to India which forces another level of interaction between people. The India Growth Story is no longer a secret and almost every edition of Business Week or Forbes carries stories about Indian Businesses or Entrepreneurship which was not a case even five years earlier.

  • With a hefty trade deficit , the US sees the Indian middle class as big customers for its products.

  • The US government sees rising India as a balance to China's growing dominance on the World Stage.

These presidential candidates are running to be the US President and will be focused on looking after the strategic interest of the USA.Hence it would be irresponsible for any American president ; Democrat or Republican to not ally with India. Hence in my opinion it really does not matter who wins the Presidential race as whoever does is definitely going to take steps to further improve relations with India

Thursday, May 22, 2008

Should India trust the PPP?

Yesterday Pakistan's PPP Chairman Asif Ali Zardari made the following statement -

He also outlined a series of steps that include replacing armed forces along the border by a more humane police force and the creation of economic zones along the Indo Pakistan border. He added that Pakistan can be a supplier of raw materials to India and also provide transport of oil and gas to feed India's growing economy.

But are the two countries ready for this kind of a bilateral relation?

It is true that India and Pakistan were one nation prior to 1947 but they have gone on different paths since Independance. Indian policies revolved around industrialization and self sufficiency while Pakistan imported everything from arms to cars. Since 1991, post economic liberalization India has increased their tax base , got rid of debt obligations and are well on their way to economic prosperity. Militarily too, India is the biggest buyer of arms in the developing world since 2002. On the other hand Pakistan has become the epicenter of terrorist activity in Afghanistan, India and even the USA.

So for Pakistan, befriending India is a good strategy. India represents a huge market to sell goods and raw materials like coal, iron and food grains. This will benefit India too as they will get cheaper goods and services from Pakistan.

However,the biggest risk for India would be the consequences of having a porous border. It would be easier for the ISI (Pakistan's intelligence agency ) to send terrorists across the border. Even if they don't encourage militants anymore , India can be used as a safe haven by Al qaieda terrorists. Once inside India these terrorists have access to the thousand of soft targets in India and can encourage the tiny home grown Indian terrorist organizations like the "Islamic Students Movement of India". They can also reach out to Bangladeshi terror groups who have recently been suspected for the Jaipur blasts.

  1. India and Pakistan will never be able to resolve the Kashmir Issue bilaterally. This issue will always fuel terrorism and bitterness.

  2. India and Pakistan will not be able to address poverty while they are in an arms race. All the surplus funds will always be used to buy military equipment

  3. Many Indians and Pakistanis have families living on either side of the border. Given the current relations and visa issues between countries many have not seen their families since 1947.

  4. India needs natural resources like coal, iron and most importantly gas to fuel its growing economy. Pakistan provides a great route for Indian companies to access gas from Middle Eastern countries.

  5. Indians and Pakistanis speak a similar language, have similar cultures and interaction will help them jointly combat issues like terrorism ,poverty and education.

Strategically , there are many benefits of good Indo -Pak ties and must be pursued. But India must keep the risk of having a porous border and must develop a way to mitigate that risk.

Wednesday, May 21, 2008

Naxalism! Can it derail India's economic growth?

A lot has been written about India's crumbling infrastructure, corruption and political kaos but very little has been said about India's Maoist rebels who operate from the Eastern part of the country. These rebels have been operating in India since 1967 but now the government is beginning to identify these rebels as a threat to economic prosperity. Initially the Naxalite movement in India was contained and these rebels operated only in a few states but now they have spread to most states and are gaining popularity. They threaten various iron and coal industries that operate in the Eastern part of the country and recent events describe their strength is only increasing.

Approximately 85 Million people in India are into this movement or are supporters of this movement. Not many people in India who live in cities or people abroad are aware of this homegrown terrorism. The government has managed to keep this a secret but now are beginning to acknowledge it openly.

If this movement is not curbed or if action is not taken soon, this movement will potentially grow into cities and people and business's will be threatened. Foreign investment will get choked and economic progress will come to an abrupt halt.

The Indian government needs to take steps militarily as well as attempt to understand the root cause of Naxalism in India. Naxalism has emerged from those places in India which are poverty stricken and have not seen economic activity in India since Independance. The roots lie in states like Chattisgarh where poverty is rampant. This time the government cannot blame a neighbouring country but will have to look at some of their own policies that have resulted in this negligence-A confined Naxalite movement in a state now has the potential to derail India's progress.

Monday, May 19, 2008

Is India Causing a Food Crisis? Or...

Recently Mr George Bush, the president of the United States stated that the rising food prices in the USA were a result of the food consumption by the gowing middle class in India. Having been in the USA for sometime and having been a frequent restaurant eater I am suprised by his remarks and decided to write about it.

The portions served in some American restaurants is almost for two people. This is their default servings and no healthy person can eat all that is ordered in a single meal.

Grocery chains like Costco and Sams Club sell super size packages of food of which a lot is wasted . All deals in stores focus on buying more inorder to take advantage of discounts as a result the American consumer believes in buying more than they can actually consume and a large portion of it goes waste.

A more recent study by the Environmental Protection Agency estimated that Americans generate roughly 30 million tons of food waste each year, which is about 12 percent of the total waste stream. Americans waste a huge amount of food — an estimated 27 percent of the food available for consumption, according to a government study.

To save America from higher food prices and obesity , the American government should take steps to educate consumers to save and preserve food just like they have educated consumers the value of gas. Just as gas, food too is going to be a rare commodity if not preserved. Just a reminder to the American consumer - There are more than a billion people who live in developing countries who earn a dollar a day or less and dont get any food to eat for days. So Americans ,save food and and avoid being Obese !