Rural 2.0

Rural 2.0
Vanita Kohli-Khandekar and Janhavi Khandekar

NO small sachets, no video-on-wheels, no wall paintings. Rural 2.0 is not just about selling soaps or colas in flexible sizes at lower prices. It is about creating a market from scratch by first developing it, solving its basic problems, figuring out what it needs and then designing a product or service built around that one need that a company could, probably, service. It sounds exhausting (and somewhat evident). ‘Developmental marketing’, as we christen it, is a long, hard grind. There may be no TV or print to reach out to people, there is usually no supply chain to manage because there are no roads or electricity.

Yet dozens of companies are taking this exhausting route. The reason is simple: more than 742 million people (or about 65 per cent of India) with rising incomes and aspirations. According to IRS data, over half of the 145 million rural homes in India earn between Rs 1,000-Rs 5,000 per month. Estimates put the rural market in India at Rs 80,000 crore. There are, however, no estimates on how it is growing in comparison with urban markets.

But this is not putting off the marketers, with no shortage of companies and organisations making the step into rural India. New Delhi-based DCM Shriram Consolidated (DSCL) made the jump in 2003, after about 40 years of selling urea and other agri-products, when it realised it needed to better utilise its knowledge of rural markets. The result was Hariyali Kisan Bazaar, a 54-outlet strong chain of rural supermarkets that offer everything one may need on a farm, and more.

Joining DSCL is Hindustan Petroleum, in association with marketing research agency MART, which has set up 589 common community kitchens (rasoighars) in 30 villages across India over the past two years. The plan is to take that to 720 by the end of the year. The idea: to bring clean fuel and save time in gathering firewood. The result: in villages such as Agwan, in Maharashtra, self-help groups have helped collect funds to get connections for the entire village. The side effect: since they have the time, girls go to school in many of these villages.

And, by March 2008, the Indian government hopes to set up 100,000 common sevice centres (CSCs) across India. These e-kiosks will offer everything from crop prices and insurance to tele-medicine and education. Footing the bill for half of them is Microsoft India.

You may argue that this potential has always existed. What is different now is the players, their mindset and approach, and the texture of the market.

Unlike the first phase of rural marketing over the last two decades, which was dominated by FMCG majors HLL, ITC and Union Carbide (Eveready), this time the push is coming from a mixed set of players. A host of companies, including Kodak, Shell, Reliance Industries, Microsoft, Dhanuka Sugars, Hughes, HDFC, ICICI, HPCL, Nokia and Tata Teleservices, among others, are plugging into rural India in their quest for growth. Also, unlike the soap and cola marketers, these players are targeting the entire rural population, not just the top 100,000 relatively easier to reach villages that house 70 per cent of rural India. These are what the first phase targeted. Now, “People have started thinking of scale,” says Pranav Roach, president, Hughes Network Systems in Gurgaon. (Hughes is the company that will provide all the wireless bandwidth for the CSCs.)

The biggest change is that the players are not looking at selling a product or a service, immediately. They are in for the long haul. HPCL, for instance, will continue to make losses on the rural rasoighars in addition to a loss of Rs 150 on every cylinder sold. (They predict sales of 100 per month). DCM Shriram admits that margins are a problem, even as revenues from its planned 250 retail outlets could run into “healthy three digit numbers,” says Rajiv Sinha, deputy managing director, in New Delhi. “Understanding the rural consumer is something that needs time and patience,” says Ashish Bhasin, director, Integrated Marketing Action Group, in Mumbai. It is this time and patience that companies are now investing, into what they see as their future growth markets. What HLL or Union Carbide did was create the base in the top 100,000 villages to sell their products. These, however, were individual efforts that gave them enviable distribution reach. (HLL reaches 6.3 million outlets directly and indirectly). After the sale, however, the transaction was over. It is only lately that both ITC with e-Choupal and HLL with Shakti went the developmental way.

The new lot, whether it is agri-marketers who are old hands or others, is going that route to begin with. It is allying with NGOs, self-help groups, government organisations or other companies in order to first plug into the rural markets and then service their needs. Many are using communication technology — wireless broadband or stripped down telecom networks — to first develop the region and then the market. In the process, they are creating the eco-system necessary to connect India to Bharat.

The New Rural MarketersIt is somewhat difficult to cluster what companies are doing, so just run through it at random and the pattern — collaborative, developmental, tech-oriented — emerges. Take the CSC project. Along with the Department of IT and Microsoft (and in some places, Hughes), the Indian government is setting up 100,000 CSCs. Microsoft set up the first kiosk in Nagapattanam in February. The kiosk is a computer centre that a local is trained to run. It will link the melas, haats (weekly markets), daily markets, and give the villagers daily inputs about the weather, prices, etc. Think of these as advanced versions of the information kiosks set up in parts of Tamil Nadu and Maharashtra in the late 1990s. The idea is to have one centre for six villages, so the government plans to reach all of India’s 600,000 villages by March 2008. Besides post offices, and perhaps telephone booths, nothing has matched that kind of reach. “CSCs will equal the reach of post offices in the country,” claims Aruna Sundararajan, CEO, CSC Project, Government of India.

The imperatives for each of these players are evident. To Sundararajan’s mind, these are 100,000 retail outlets, that any company — public or private — could use to bring some of the perks of living in a city into remote, inaccessible places. Microsoft is working at tying in banks, financial institutions and other companies that might want to offer their products and services through these kiosks. Some of it is probably driven by the fear that Linux could easily replace Microsoft in this context-setting exercise. Hughes gets to monetise all the wireless bandwidth it sits on.

Like the CSCs, most other companies, too, are focusing on plugging information, infrastructure and need gaps rather than selling plain products. The study by the Bangalore-based Centre for Knowledge Societies, commissioned by Nokia, looks at how their new mobility could be used by villagers to jump over the social and digital divide between rural and urban India. Driven by the fact that 60 per cent of all growth in subscribers is now going to come from rural areas, almost every major operator — Reliance, Airtel, BSNL — has adopted a village to revolutionise communication.

In Uttar Pradesh, Tata Teleservices (TTSL) has started training programmes for teachers from villages to help them teach locals about telecommunication. “In the rural markets, growth is constrained by supply, not demand,” says Vikas Shah, president (access business unit), TTSL. A few months back, his company launched the parivar offer (family plan), in Punjab. It allows one family, of 3-10 people, to connect to each other through a common network at a minimum cost of 10 paise per minute. In three years, TTSL expects half of its revenues to come from rural India, against the current 30 per cent.

If much of this seems too digital and tech-oriented, look at what the companies tackling the physical infrastructure needs are doing. In 1997, more than three decades after it entered the rural markets, DCM Shriram started setting up the Shriram Krishi Vikas Centres. The idea was to do some value-adds to its primary business of selling urea, fertilisers and sugar manufacturing — all dealing with farmers. The centres offer the services of agronomists to local farmers across 100 villages in India. These centres are hooked to a regional centre in Alwar (Rajasthan) which, in turn, can plug into Delhi and several rural research institutes. The average number of queries the centre gets could run into thousands, according to the company. “We realised that the availability of technology, information and quality of product were still huge issues,” says Sinha. For instance, in Punjab, farmers were not using potash as a fertiliser because of a three-year-old government advisory that stated that there was enough potash in the soil. Tests showed that this was not true any longer, and, therefore, productivity was dropping.

Clearly, here was an opportunity to connect its agro-products and advice, along with other things. That is how the first Hariyali Kisan Bazaar was born in July 2003. The idea was to create a retail ambience that farmers were comfortable in, where they were not cheated and were treated with dignity and trust, says Sinha. That meant stocking all brands of urea and fertiliser (besides its own) and tying up with fuel companies such as BPCL. As consumers started demanding more, the whole product range kept expanding to several non-agri products. These could be anything from apparel to school-bags, Tata-Sky’s DTH service or insurance (ICICI-Lombard for weather and
ICICI-Prudential for life insurance). There is currently a huge demand for banking services, but licensing issues hold the group back. Soon it will be rolling out the National Commodities Exchange (NCDEX) services to make future trading available to farmers. “In the next six months we should cover 80-90 per cent of his (the farmer’s) wallet,” says Sinha.

By the end of two years, the target is to have 250 Hariyali Kissan Bazaars nationally — each servicing an area within a radius of 15-20 km.

It is a strategy that several agri-product companies such as Mahindra & Mahindra or Dhanuka Sugars — previously content to sell just urea, fertilisers or tractors — have been rolling out in different forms. The imperatives for the players may change, but the problem-solving, developmental and collaborative approach does not. Reliance, for instance, was forced to look at rural markets because its licence for petrol retail was granted on those grounds. The farm fuels project that began in 2001 discovered that against the average urban fuel consumption of 300,000-400,000 litres per month, rural consumption is about 20,000 litres. So Reliance has specially designed small sized fuel pumps costing about Rs 4 lakh-7 lakh against the usual Rs 40 lakh-1.5 crore in cities. Each was designed to service an area within the radius of 10 km. The first of 60 pumps, covering 720 villages, was set up in 2005 in Tanna (Gujarat).

Trying HarderThe pattern among these ventures is the ‘developmental’ approach and the big picture it gives is the creation of the eco-system. As everything from self-help groups to banks and the government get together, a network of physical and other services is beginning to find its way into rural India. This approach, however, has its own set of problems. The first being the patience needed to hang in there with the capital and resources needed. For instance, HPCL worked hard bringing the cost of its community kitchen down to Rs 10,400 (from Rs 50,000) over the last two years. But as entire villages get their own connections, the number of people cooking in them keeps going down. To solve this problem, HPCL and MART have now launched mobile kitchens that move on when their job is done.

The second problem remains that of logistics and communication. Whatever the long-term potential of rural India, for now it is tough for companies to even set foot in many villages, let alone sell something. Many, such as Microsoft and ICICI, are piggybacking on others. These could be the agri-marketers such as M&M and DSCL or the government. The others are taking the long, hard route of setting up their own bases, albeit in collaboration with agencies — such as HPCL and MART.

But marketers reckon, “The country and markets are so diverse that unless you address all individual problems, you cannot succeed,” as Sandip Bhansal, country head, Xpanse Asia, in Mumbai, puts it. (Xpanse is the small-town and rural division of media agency Starcom.) Most companies, so far, seem willing to live with the lack of returns for some time.

Will it work?

Yes, it will. Because for the first time in the two odd decades since companies started looking at rural India, there is an attempt to treat it like a market full of real consumers, not just a milch-cow.


Petro-cos rural initiative

Commodoties trading

Rural banking

Foodgrain procurement

Farming initiatives

Contract farming

Crop insurance

Value for money?

The Right Moves

Mobis Philipose

Indian stock exchanges have embraced the consolidation process occurring among financial exchanges globally. The Bombay Stock Exchange (BSE) has roped in Deutsche Börse and Singapore Exchange as strategic partners, close on the heels of NSE’s decision to allow NYSE as an equity partner.

“This is a firm beginning towards bringing the global markets to India,” said BSE managing director and CEO Rajnikant Patel in Mumbai, just after the recent announcement. Since the process of cross-listing securities between the two exchanges depends on regulatory changes it may take a while to materialise. But analysts expect Indian exchanges to begin benefitting immediately from information sharing on product development and technology.

However, no dramatic changes are expected, says C.J. George, managing director, Geojit Financial Services, in Kochi. “For that to happen, strategic partners would have to be given a more significant stake and involvement in the management of the exchange,” he says. Sebi regulations currently restrict foreign investors to only a 5 per cent stake, which won’t even get the foreign exchanges a seat on the BSE board.




What still makes local exchanges, such as the BSE and NSE, attractive to global exchanges is that cross-border alliances enable them to create global trading networks. That’s why similar deals are happening across the world. The NYSE Group recently entered into an alliance with Tokyo Stock Exchange, and Deutsche Börse entered into an agreement with Korea Exchange. As Frankfurt -based Deutsche Börse’s CEO Reto Francioni said recently, “We see the exchange business becoming increasingly global.”

Given the spate of deals, stock exchanges are also being re-rated. Hong Kong Exchanges and Clearing has more than doubled in value in just the past year, while Singapore Exchange’s stock has risen by 76 per cent. London Stock Exchange and Deutsche Börse have each risen by about 50 per cent in value.

NYSE paid Rs 500 crore, or 36 times the NSE’s consolidated FY06 profit, for its 5 per cent stake in the exchange. Deutsche Börse and Singapore Exchange’s 5 per cent stake in BSE cost about Rs 200 crore, or 42 times the FY06 earnings of the latter.

Such high valuations may seem out of line with current financial fundamentals. But for global exchanges, the investment is small change compared to the benefit of having a presence in India. Even for financial investors, valuations would not be a large concern, given the scarcity of investment opportunities in this space. T.V. Raghunath, executive director (investment banking), Kotak Mahindra Capital in Mumbai, says, “It’s a one-time, lifetime opportunity,” referring to BSE’s plan to offer 41 per cent of its capital to institutional investors.

While the full strategic value of global alliances could take years to exploit, the NSE is already poised to give investors good returns in the short term. Its turnover is set to grow by 44 per cent this year. This could translate into high earnings growth given the high operating leverage the stock exchange business enjoys. In fact, another year of similar growth could end up making the NYSE’s acquisition cost look cheap.

However, the BSE’s turnover is set to grow by only 20 per cent this fiscal, primarily due to its near absence in the derivatives market. Also, a staggering 65 per cent of the exchange’s profit comes from non-operating investment income, compared to just 22 per cent for the NSE. So, the benefit of operating leverage would not be seen as much in the BSE’s overall profit growth.

But BSE supporters say the exchange can still boost returns by building revenue streams in areas such as data dissemination, which it has not fully tapped yet. Besides, the opportunity for growth is much larger for BSE, given that it has a mere 2 per cent share of the derivatives market. For now though, like investing in the plethora of BSE’s small-cap stocks, an investment in BSE could well be a high-risk, high-return strategy.

Capital IDEAS
Manas chakravarty

At a conference in Mumbai recently, Ratnesh Kumar, head of India Research and India strategist for Citigroup Investment Research, had an interesting point of view about the high valuations in the Indian market. He pointed to the host of new business opportunities being explored in India, which currently sit on corporate balance sheets but haven’t yet started to earn profits. Obvious examples would be the insurance businesses in the books of banks or the exploration business in Reliance’s books. In many balance sheets, the value of nascent forays into retailing or into real estate would also need to be taken into account. Kumar says these businesses have “embedded value” and estimates that this would account for 1700 points of the Sensex. Facile comparisons of the Indian market vis-à-vis others need to factor this in. Kumar forecasts a fair value of 13,300 for the Sensex by December this year. Add to that a 10-20 per cent premium, and Citigroup’s year-end target for the Sensex is between 14,700 and 16,000.

The premium is added because of several factors, says Kumar. One of them is that Indian companies not only have strong earnings growth but also strong return on equity. This high capital efficiency deserves a premium. Also, there could be upgrades in profit estimates going forward, as happened last year. There is also the strength of the long-term India story. And finally, there is global risk appetite, which was in India’s favour a few weeks ago, but has since reversed direction.




The big question is whether there is a slowdown looming ahead. Sanjay Nayar, Citigroup India CEO, says his bank is seeing a slowdown in retail credit and mortgage growth, a point being repeatedly made these days by ICICI Bank’s CEO and managing director K.V. Kamath as well. But while the growth in consumer credit may decelerate, Kumar made the point that the current bout of wage inflation should continue to buoy urban consumption growth.

The really big opportunity, however, comes from investment demand. The capital expenditure to GDP ratio was around 26 per cent a couple of years ago, which is similar to the Chinese level in the early 1990s. Kumar said he expects this ratio to go up to at least 35-40 per cent. And although much will depend on the liquidity available in the banking system and on how high interest rates rise, the good news is that corporate balance sheets are still not very leveraged. What is more, incremental cash flow continues to be higher than capex and debt-equity ratios of Indian corporates are still declining.

Underleveraged balance sheets also have another advantage — of not being affected much by the rise in interest rates. Kumar believes that the rise in wage levels may hurt bottomlines more than the higher interest rates. The biggest impact on the Indian market, however, will come about if there is a change in global risk appetite. In the past three-to-four years, India has received a disproportionately high share of funds flowing into its markets as a result of high risk appetite. In short, as many analysts have pointed out, India is a high beta market. The flip side is that when the tide turns and risk aversion raises its head, markets like India get hurt badly.

Finally, in the past three years corporates in India have had the advantages of higher sales without having to do capex and while enjoying the benefits of their earlier cost-cutting measures, which resulted in profits higher than sales. That golden age is now coming to an end.

Why the east lags behind

The absence of submarine cables linking the easter parts of India with the rest of the world has held back the region in the IT and ITES sectors. These optic-fibre cables carry voice and data traffic in the size of terrabits and link India with the civilized world. Traditionally the ports of Mumbai, Cochin, and Chennai have been terminal points for the subarine cables——all of these in the peninsula region. For this reason the IT sector has preffered locations close to these ports.



Bengal, Bihar, Orissa, the north-easter states are geographically too far away to take advantage of the optic-fibre. The increased costs and reduced bandwidth does not affect consumers using telephones or the internet, but is a dampener for the companies that rely on such bandwidth for their business. Moreover this infrastructural lacuna has held back local entreprenuers and deprived the youth of the eastern regions from local jobs——forcing them to migrate to the IT centers in the south.

Eastern state governments have bee keenly aware of the problem as has the central government in Delhi. The latter sanctioned an undersea cable to terminate at the Haldia port in West Bengal...this is due for completion in 2007.

West Bengal Loses out

West Bengal has lost out to Tamil Nadu as the landing point for the first undersea cable of Bharat Sanchar Nigam Ltd ostensibly because the river at Haldia is too shallow.

After a year of intense lobbying by the West Bengal government led by its information technology minister, Manabendra Mukherjee, BSNL has finally decided on Tuticorin as the landing point for its undersea cable that will hook up with an international network at Colombo. Haldia in West Bengal has lost out.

BSNL’s chairman, AK Sinha, did not wish to be drawn into any political controversy.
All he would say was that Tuticorin to Colombo is the shortest distance.

However, senior BSNL officials pointed out that the Haldia site in West Bengal is at the mouth of the silt-plagued Hoogly and too shallow for comfort.

The undersea fibre-optic cable is expected to give a boost to BSNL’s Rs 4000-crore international long distance (ILD) traffic.

The West Bengal government had been lobbying for Haldia because it feels that the IT industry in eastern India would have gained immensely from the extra bandwidth of the cable.
At present, all international traffic to eastern India links up with undersea cables after travelling over land to either Chennai, Mumbai or Kochi.

IT in the east

This is what happens when you have a friendly government at the Centre: you can expect it to consider your wishlist. In what could be a significant development for West Bengal's IT hopes, Dayanidhi Maran, the cabinet minister for communications and IT, has asked Bharat Sanchar Nigam (BSNL) to look into the possibilities of locating an optic fibre cable landing station at Haldia in West Bengal. This marks a culmination of the state's repeated missives to the Centre for a landing station in the eastern part of the country, especially Haldia. This will be good news to all those players like Wipro, TCS and HSBC, who are looking to expand in the state and who would benefit directly from the lower bandwidth costs. In fact, Wipro's Azim Premji and TCS's S. Ramadorai have been personally working with the West Bengal government to this end.



A submarine landing station at Haldia is expected to cut connectivity costs by 10 per cent to 30 per cent. This holds true despite the fact that BSNL has started deploying Dense Wavelength Division Multiplexing Systems (DWDM) between landing stations and cities in eastern India. DWDM is a technique that works by combining and transmitting multiple signals simultaneously at different wavelengths on the same fibre. That allows multiple video, audio and data channels to be transmitted over one fibre while maintaining system performance. However, connectivity is always easier and cheaper if the business is close to the landing station. Kolkata in these terms is still a 'class C' city, which means it is 500 km away from a landing station. So, as compared to Mumbai, telecom costs would be two to three times higher. A landing station at Haldia will also be seen as a growth driver for the north-eastern states in the country.


Kolkata offers about 580 mbps international satellite connectivity through VSNL and STPI (Software Technology Park of India). Two earth stations have also been commissioned at Kharagpur and Durgapur and cable connectivity is provided through BSNL lease lines from Mumbai. However, onward connectivity through submarine cable is only available from VSNL's Mumbai landing station and Bharti's landing station in Chennai. Before, there was talk that Reliance, along with Flag, would take up a submarine landing station at Haldia but nothing seemed forthcoming. The proposal for a landing station at Haldia was mooted during the NDA government, but couldn't make much headway. Now, with a 'friendly' UPA government in Delhi, the Left Front government in the state lost no time in tabling the same proposal. If the project comes through after the requisite techno-economic studies, the Left in West Bengal can prove that it can sometimes be right.

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Indian women in the emerging economy

http://www.businessworld.in/

The New Indian Women

Rama Bijapurkar (The author is an independent market strategy consultant)

I recently heard a point of view from a society watcher on Indian women that had me scrambling for my research boots. Had I got it wrong? Had the women’s liberation and empowerment revolution happened in the few moments when I was not paying attention? The point of view was that the mainstream urban Indian women never had it so good before. She has truly become the all powerful ghar ki rani, a long way from her naukrani status of not so long ago, and has a career to boot.

Apparently, thanks to burgeoning economic independence, she is now ‘confident’ and ‘discerning’ and ‘demanding’, and her backward sisters who aren’t quite there yet find her very ‘aspirational’ and want to emulate her. All of these words, of course, are the marketing folk’s mumbo jumbo for justifying the kind of women that look great in advertising. Who wants a beleaguered wife and mother who is perennially worried about stains on the rugs, kids’ tiffin dabbas, and husband’s grumbling about the quality of dinner!

But what really is the reality of what the Indian woman of today is like? Is economic independence really there? Or is this a new kind of ‘forced to work’ pressure being perpetrated on her by the family, and how much of her pay cheque does she get to keep? How does one reconcile these ‘never had it so good’ theories based on sound anecdotal evidence with the hard statistics of the gender ratios? The usual argument does not hold here — that the rich have evolved but the poor have some way to go. The gender ratios are at their worst in richer states and cities.

Well, here is that same old lesson about India that we keep forgetting and struggle to learn again and again. That India changes in insidious ways. She changes slowly and in a morphing kind of way. Change slowly creeps its way up, accompanied by a lot of evidence to the contrary. And for ever, whatever we say about Indian women, the opposite will also be true. There will be positive empowerment as a result of panchayat reservations and change in inheritance laws and gender-friendly police stations, but it may take several generations before women actually ride on these newly built roads. The Indian woman is now stressed out in her new role as provider partner.



It is true that women are getting more of a say in homes and families and their own lives than they have had before. They are getting more educated, more entrepreneurial, and more gutsy about narrowing the gap between them and authority figures in their lives — more so spouses and in-laws than parents. This is going to keep increasing because once the worm turns, there is no stopping it.

So, let’s try and separate the signal of change from the noise, and examine how urban women’s lives are changing in India and understand what is driving this change. At the least, we will be able to market to them better, and at best to help them evolve further.

The Twist In The Tale

While it is true, by women’s own admissions, that mothers-in-law are more tolerant and husbands less repressive, and she has equal voting rights on family issues, it isn’t social evolution that is driving this change as much as the state of the economy. In other words, we have God (or Goddess?) EMI or equated monthly installment to thank for driving this change. The concept of family has changed from a predominantly social unit to an economic unit. The new truth about Indian marriages is the old truth — that its business model is around a pragmatic ‘life business’ partnership rather than around romance. Ask any young man, or woman, and you will know!

Taking a loan for whatever purpose is the new Indian way of life. The EMI is here to stay. And everyone has to do whatever they can in the family to enable family earnings to happen, so that the quality of living can be improved or the house can be owned or made livable.





What is the role of the woman in this? In the lower social class, she must either earn and be a co-contributor or she must look after the housework and the children of the extended family so that the men and the women who are working outside the home can maximise their earnings.

In the middle and upper class households, she must take care of all home and ‘outdoor work’ of the family so that she facilitates and insulates the man who is better qualified and who can earn big bucks to continue to do so with no distraction.

At the very top social class, if she can be an equal earning partner, she must contribute and do so. But only up to a point of ‘adequacy’, because the idea is to optimise the unit’s earnings, not maximise the woman’s earning. Therefore, predictably, 20 per cent of social class (SEC) A housewives work outside the home going down to 16 per cent as you proceed towards SEC B and C. And from D as you make your way towards E (husband unskilled worker and uneducated too), that number rides up from 16 per cent to almost 40 per cent.

Have no doubt about it — the beleaguered wife and mother is still around. But instead of being worried about stains on the rugs, kids’ tiffin dabbas, and husband’s grumbling about the quality of dinner, she is totally stressed out in her old role as nurturer and her new role as provider partner, either directly or indirectly contributing to the offering to Goddess EMI.

The good news is that as her economic role in the marriage becomes more and more important, she gets treated better and better, and she gets more and more freedom in terms of what she does when she is outside the house earning her living or doing ‘outdoor’ family work. The bad news is what an analysis of last week’s matrimonial ads showed.



I first looked in the ‘wanted brides’ section, under the title ‘cosmopolitan’. Well educated, beautiful, homely/ convent educated, charming, extremely beautiful... the emphasis on education is hard to not notice. Because in her new role as provider facilitator, education helps for sure. Does that explain at least in part why enrolment of girls in college, even in the smaller towns, is increasing?

Then there are those seeking career oriented bride/ seeks working, very beautiful bride/ seeks beautiful professionally qualified girl/ working girl preferred. The ratio was 60 per cent of the latter and 40 per cent of the former. Need I say more on this subject?

I went to look at the Brahmin brides section because I thought maybe those hidebound enough to stick to caste may have a different view on this. I should have known better. Preferable engineering graduate/ suitable medico girl/ seeks engineer / doctor / MBA beautiful, fair slim girl from decent family/ seeks qualified Maithil non-vatsa bride...

Yes, the times, they are a changing. But not exactly in the way we think they are!

New services in aviation

Hindustan Times

Would you like to start a seaplane service from the Gateway of India to Ganpatiphule? Or perhaps a helicopter service from Gurgaon to Manali?

Civil Aviation Minister Praful Patel has announced that his ministry is throwing open such opportunities to both foreign and Indian investors. “Come tomorrow,” Patel exclaimed. “I will clear any such proposals.”

On a visit to the HT office, Patel said his ministry had on Friday recommended that the government allow up to 100 per cent foreign direct investment (FDI) in seaplane and helicopter services.

There’s more.

Patel also announced that 74 per cent FDI would be allowed for cargo operations and “non-scheduled operators”, like charters. He has also recommended 100 per cent FDI for maintenance services.




“Aviation is a great economic multiplier,” Patel said. “The time has come to let the India have its full benefits.”

Patel said there were only six Indian-owned cargo planes. Big international cargo companies like UPS and Fed Ex have 500 to 600 planes. “Can you imagine the cargo services needed in India?” Asked Patel. “With Reliance, Bharti-Walmart planning retail stores across the country, you will need cargo planes to fly fresh produce and other goods.” To tap the opportunity, Jet Airways and the Deccan Chronicle Group are starting new cargo carriers, while Indian and Air India are expanding their cargo operations.

Patel said that like the telecom sector, aviation will be the sunrise sector of the future and the aviation value chain can add 50 lakh jobs. “With 250 aircraft, the sector employs 2.5 lakh people; in 10 years, you would have 2,500 aircraft. You will need engineering support, software, besides pilots and crew,” said Patel. The government will also soon come out with new procedures for aiding the creation of new cargo infrastructure, said Patel.

Patel said the international airport at Navi Mumbai could be ready by 2012, if the state government makes available the required land by the end of this year.

“We can have recourse to foreign collaborations which can bring us more aircraft and money. We will also benefit from their expertise in seaplanes, where we do not have any expertise,” said Jayant Poovaiah, executive director, Deccan Aviation, which offers helicopters on charters. “Seaplanes are great way to travel to islands (like the Andamans). But it’s expensive. You need such passengers to spend money.”

Inflation in India and China—comparison

http://www.businessworld.in/issue/news02.asp

Manas Chakravarty

The government’s Economic Survey is important not so much for its remembrance of things past, but for the signs and portents it provides for the future. Seen from that perspective, the recent survey can only be described as extremely gung-ho. Liberated from the constraints of the old Hindu rate of growth, the economy has soared into a trajectory so high that only the metaphors of space travel are adequate to describe it. Hence, the talk of having achieved “escape velocity”.



The issues that remain are the problems of plenty: how to ensure that the growth is sustained without inflation, and how to ensure more inclusive growth. Sustainability is apparently not an issue, since the demographic dividend from a growing proportion of the population in the working-age group will boost savings, which will boost investment and growth, in turn leading to more savings and a virtuous cycle. What’s more, the economy is also getting more efficient in the utilisation of resources — another impetus to growth.

What about inflation? There lies the rub. The survey frankly says inflation is a problem and finding immediate answers to supply shortages is difficult. The challenge is of “carefully calibrating inflation without taming growth”. Even the short-term prospects for agriculture appear to be bright, although the survey pulls out the laundry list of measures badly needed in the medium-term, such as irrigation, more high-yielding crops et al. Investment prospects are bright, with high savings ratios and higher FDI. The stockmarkets too are expected to do well, fuelled by foreign investors seeing India as “one of the preferred destinations”.

This rosy portrait of the economy is marred by factors such as the power constraint, shrinking employment and the inability to curb government expenditure. The crux of the issue is simple. For sustainable growth, productivity must improve. For that to happen, infrastructure, from the power situation to the congestion in ports, has to get better. Training programmes to correct the skill shortage need to be put in place. And faster growth in the services and industry sectors must draw surplus and underemployed labour from agriculture. Also, industry is now operating at close to its maximum capacity. It is unclear, therefore, how high levels of growth can be sustained without overheating, so long as the supply problems are not addressed.

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Jehangir S. Pocha in Beijing

New Delhi has long touted its superior capital markets and banking system as a major competitive advantage over China, where real commercial banking is only two decades old and the central bank self-confessedly ill-equipped to independently handle the vagaries of a modern economy. Yet, the People’s Bank of China has adroitly kept the nation’s inflation rate well within the global average of 2.5 per cent while India’s inflation rate is currently more than double that, standing at about 6.5 per cent.

More embarrassingly for India, the bulk of China’s inflation is rooted in surging oil prices and a sudden spurt in the domestic cost of food oil, eggs, meat and grain, which have all logged double-digit increases in recent months. Once these costs are stripped out, core inflation in China can be seen to have held steady at less than 1 per cent over the past five years, Jonathan Anderson, chief Asian economist with UBS bank in Hong Kong, said recently. That is an astonishing fact, given China is enjoying record international trade surpluses ($177 billion in 2006) and has a raging hot domestic economy that grew at close to 10 per cent last year. Massive export earnings, helped by China’s under-valued renminbi, have also been flooding the financial system and creating asset bubbles in various areas such as real estate and the stockmarket (one of the world’s best-performing in 2006). Wages are also rising in the boom towns along China’s eastern coast and spiralling demand for raw materials are pushing commodity prices to record levels.

Yet, a retiree in Beijing can pick up his usual monthly supplies for pretty much the same price as he paid two years ago largely because of two reasons: an inflation-wary governor at the helm of the central bank, and an investment-crazy corporate sector whose current investments are running at about 45 per cent of the total gross domestic product, according to official reports.

Zhou Xiaochuan, the professorial head of the People’s Bank of China, has repeatedly stated inflation is China’s financial public enemy No. 1, and his actions have left no one in doubt of how seriously he means that. Over the past nine months, Zhou has raised interest rates twice and acted to curb bank lending a record four times in the same period, mostly by increasing the national credit reserve ratio. As a result, inflation is currently down to 2.2 per cent after climbing to 2.8 per cent in December 2006. China’s money supply (M2) also rose only 15.9 per cent in January 2007, less than the 16.9 per cent it climbed to in December 2006.

More significantly, Stephen Green, chief economist with Standard Chartered Bank, Shanghai, says the keystone factor in China’s low inflation is that companies here have been utilising their cash to make huge investments in building new capacities in numerous industries — from steel to TVs to computers. The resulting glut in products and services is holding down prices, says Green, as companies struggle to win customers and fend off ever-increasing competition. In contrast, India is still a supply-driven economy, where sellers can command sky-high prices from consumers aching to satiate years, if not decades, of their pent-up demand for products and services. While this applies across the board, it is especially true for those semi-luxury and luxury goods and services that more and more people now consume, but which are still not a significant part of India’s consumer price index (CPI). The cost of these items is substantially higher in India than China, both because of India’s high and compounding taxes, and because of the differing overall cost structures in both countries. Consider this: a 19-inch colour TV from Haier costs about Rs 3,000 in China and twice that in India, a Thai meal for two at a restaurant in Beijing costs about Rs 1,000, while in Delhi it would cost at least twice as much.



Part of the reason for the high price of such goods in India is that consumers here are more willing to pay for their new toys than their counterparts in China. “In developing economies, producers charge high prices just because they can,” says Edward Bell, head (planning), Ogilvy & Mather, Beijing. “Consumers are not sophisticated and unwittingly pay premiums for ordinary products.”

China’s inflation is also low because unlike India, the retail market is very crowded and competitive, making stores wary of consumer ire over rising prices. “If I raise my prices, people will just buy from someone else,” says Li He, a vegetable vendor in Beijing. “There is a supermarket down the road, where things are really cheap.” In India, vendors and stores raise prices more readily because real estate and capital shortages, regulatory and administrative difficulties with starting businesses, not to mention the necessity of dealing with local political hoodlums, have inhibited natural competition in retailing.

In some respects, these differences underline the gap in the economic maturity of the Chinese and Indian economies. But they also hint at the different political economy forming in both nations. Policy makers consistently have to choose between pleasing industry and consumers, and in China, authorities have learned to strike an awkward but effective balance between the two. While Communist Party oligarchs and powerful businessmen certainly extract their pound of economic flesh from self-serving policies, the government is also watchful of how much pain citizens are able to bear. Since the Communist Party’s fraying legitimacy is based in large part on its ability to provide economic benefits to its people, the government is at pains to keep inflation under control. Price rises could quickly alienate large parts of the population and further stoke the already deep disillusionment with the Communist Party across the country, says a professor of economics in Beijing who asked not to be identified.

In India, an analysis of recent industrial regulations and tax incidence shows that policy makers have been handing out sops to industries, and often specific industrialists, without an equal concern for protecting the economic interests of consumers. For example, the top effective tax rate for individuals is about 35 per cent, while for numerous booming industries, such as telecom, it is just about 17 per cent.

More significantly, China, like India, is also experiencing massive increases in the stockmarket and the price of real estate. But Beijing has acted fast to clamp down on speculative demand for housing by starting to enforce a land appreciation tax and increasing the amount of money buyers need to put down on purchases. Chinese authorities have also defended the stockmarket from speculators by suspending the launch of new mutual funds, telling investors to be wary of entering the stockmarket at this stage, and ordering banks to ensure that commercial loans are not used for punting on stocks.

India’s responses have been much meeker, says a commercial banker in Mumbai. “There is a view now in Delhi that the focus should be on allowing people and companies to make money and drive growth,” he says. “People think that will solve all economic problems and consumer issues aren’t really on the table.” Of course, the Congress Party could pay a price for that in the coming elections, and to avoid that, it might come up with some populist measures. “But the core issue, the basic way policy is being formulated, will not change,” says the banker.

The Chinese professor says it is not fair to blame India’s political economy alone for the differences in the way China is managing its inflation. The Chinese government, he says, has the advantage of being in direct control of a much larger part of its national economy. “Here, the government, central bank, commercial banks and state-owned enterprises (which collectively account for 60 per cent of the economy) can move in step,” he says. “In India, policy is less efficient. It is already a high-cost economy. High inflation will make India economically unattractive to investors.” Then he chuckles. China’s amusement with India’s monetary policy appears to be spreading.

Retail bills payment network

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ANUP JAYARAM

Batra Mediways is an ordinary pharmacy in West Delhi’s Mansarovar Garden. When proprietor Gurjeet Singh installed a sleek new phone terminal at the store, it began to attract a lot more customers than before.

That is because, this isn’t your ordinary public call office (PCO). The green dangler above the terminal at Batra Mediways says it all. Soon, this wonderful little jack-in-the-box will be able to provide customers with a whole new range of services, including recharging pre-paid mobile cards from any service provider. And this is just the beginning. Over time, consumers will be able to pay utility bills, buy movie tickets, check their bank balances, send e-mails and even transfer money, all via the Indepay terminal that operates on Tata Indicom’s CDMA (code division multiple access) mobile network.



Indepay Networks, led by CEO and president Rajib Saha, is all set to unveil a variety of applications. Indepay is a retail distribution and payment network that links retailers directly to service providers. Singh is one of about 1,000 retailers in six cities who are currently being trained to use the terminal. Many others are undergoing user trials.

While the consumer gains from the wide variety of services, Indepay also adds muscle to retailers. With an initial investment of just Rs 9,000, shop owners are able to provide scores of services that they do not physically sell. And since all these are electronic services, inventories get totally eliminated. Additionally, with commissions for retailers who use the terminal on par with existing sales commissions, Indepay provides retailers with an additional stream of income.

Indepay vice-president and chief financial officer Sameer Kakar is loathe to reveal details of how the company generates revenues, but he does divulge that there are different partnership models for different service providers. Tata Indicom, for example, gets paid for calls made and for the time its network is in use, in addition to instrument rental charges.

While initially available only in Delhi, Indepay terminals will hit nearly 150,000 lakh retail outlets in 63 cities by mid-2007. Of this, 40 per cent will be deployed in the metros and 45 per cent in the next 21 big cities, with the remain-der going to another 36 smaller cities. There are plans to deploy one million terminals across the country over the next couple of years. Currently, the terminals come from a Malaysian facility of Flextronics. Terminals that operate on the GSM network may be introduced at a later stage.



For these plans to roll out seamlessly, Indepay is tying up with various service providers. Customers will soon be in a position to book airline tickets from Flightraja and Yatra, book railway tickets from the Indian Railway Catering and Tourism Corporation (IRCTC) and even buy flowers from Ferns & Petals simply by pushing buttons to browse through the terminal’s on-screen menu. There are also plans for installing Indepay terminals at Sulabh International outlets. These terminals will be utilised primarily for recharging mobile phones and booking railway tickets.

In future, consumers may even enjoy the convenience of paying by swiping credit cards on the machine. Banks stand to gain from this big-time with access to a whole new set of small retailers. With currently only about 300,000 point-of-sale terminals for credit cards in India, Indepay could contribute to taking this number to as high as one million.

As Saha puts it, “The beauty of Indepay is that it will reach the un-reached, connect the un-connected and bank the un-banked.”

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