Mahant!

One of the stupidest myth attributed to FDI in Retail is that it will make Rupee stronger. People who say this have absolutely no idea or are just out there to make fool of others or are just delusional. FDI in Retail is not going to make Rupee any stronger.  Rupee strength due to FDI in Retail can only occur in two case, either FDI is enormously successful with large number of players entering the market, thus displacing massive number of local retailers and / or if the MNC retailers use India as their hub to source the SKUs for their international operations, which would be a good case.. Why Strong Rupee? The first question to ask is: Why do you need a strong Rupee? Rupee is just a medium of exchange, and if all things being equal it will help Indian economy clean up its mess by enabling efficient capital allocation. I.e. for example, in case of weak Rupee, capital / business will shift from import intensive to export intensive. A country deciding where it wants to peg the curren...

I couldn't have said it better: Criticism is never ending fun, and people don't catch on! Just ask those TV talking heads.

Who is Gandhi? My school text books said he was the Father of the nation. The man who got India its freedom. He is a stuff of legends. He is a Mahatma. He was most respected of all the freedom fighters. The most respected of all the politicians of his time. A man of peace. The torch bearer of ahimsa , the non-violent warrior. And many more such. You know what, I couldn't care less. To be truthful, I haven't read much about Gandhi. I have read none of his books. The man on the Rupee note does not interest me. I have read more on Genghis Khan and obscure artists than I have read on Gandhi. And I don't think, I will want to start now. I have no idea when my animosity against Gandhi started. But I strongly doubt, it was when I realized (as a kid) Gandhi was sorely responsible for the partition and Hinduisation of Indian politics. I have never forgotten this nugget (I hardly remember how I got it.) But from those days on, I have always (been prejudiced...

Sometimes, on the days like this actually, I ruefully wonder if there is any sense in what we do at all. There is only so much of facts that can go around at any point of day or a week. Everything else is an opinion or further (almost needless) elucidation of facts. If you were to print a new paper of facts probably the entire fact-set for the day can be easily printed in 2 or 3 pages. Here are some major facts without any explanation needed: Europe is broke. Spain is broke. US is broke. UK is broke but is trying something good. Japan is broke, broke and broke. Indian growth is falling. China growth is stalling. Australia, hooked to China, is stalling. Greece will exit Euro. So will others. 90% chance Euro might collapse. FED, ECB, BOJ will keep printing until their political and banking masters ask them to stop. Unemployment the wold over is at the highest. Social unrest all over Europe and middle east. They will attack Iran someday on some pretext. We are dead if e...

Two documentaries (I recommend) of so many out there. Just to get a perspective. Walmart: The high cost of low prices How Walmart kill the mom-pop stores.

No points for guessing this is the most popular myth. Jobs growth is the Bhramastra of all the social carrots to lure the unsuspecting citizens. Everyone wants to be projecting helping the society and society wants to believe that what is being done is beneficial to it, hence whatever they are doing they are doing for a jobs growth. Re-election guaranteed! Make no mistake there is lots of employment opportunities – of jobs and its creations – in the retail sector.  The real question is how much will be the contribution of the new MNC players in the job creation and growth. 1. Before we get into the details, lets do some basic calculations, About 5% of Indian population is directly or indirectly involved in retail sector. That is roughly about 6Crore people employed – direct and indirect – by retail. Since, there were about 1.3Crore retail outlets (as of 2007, let us assume no change), we can guess there are at least 1.3Crore people directly involved, and that leaves us about 4.7Cr...

What is the role of Chance in our lives? What is the role of those random events on which we have no control of?  How do these effect our lives, and do we have any control on how our lives will shape up? There are several good books which deal with these concepts notably by Naseem Taleb’s Fooled by Randomness. We always assume that we have everything under control. We are under the impression that where we chose to study, what we chose to study, whom we marry, which city to live, which company to work, the career decisions we make etc - all are made with a rational unbiased mind. This is clearly wrong. Human mind would not be able to process all the required information were it not for the 'gleanings' and 'wisdom' that we pick in our life. To understand the true picture, behind all the facades of thinking process, we have to first look at the definitions of Rational and Bias. What is Rational? Rational according to dictionary means “in accordance with logic”, “exerci...

This mass scale retail organization is and will ultimately be bad for Farmers. Of course, the benefits and its impact on the farmer will be directly proportional to their status in land-holding and livelihood. You can be very sure of one thing: mass scale organization of retail will always be bad for a small farmer with small landholdings. 1. Large retailers for the sake economies prefer contract farming. Large retailers usually have a very specific demand for vegetables and fruits. Not every mango is a mango, and not every rice is the rice they would prefer. 2. Farmers risk by growing a very select variety of fruits and vegetables. There may be no other demand for that produce other than the consumer / retailer who has ordered it. Hence the farmer becomes "associated "with it. 3. GM and hybrid crops are the favorites of large retailers due to longer shelf life. So if you want to grow and sell some indigenous varieties, you most likely will not get the shelf space to do it. 4...

Some people have argued this sudden reform-virtuousness is a red carpet welcome to Obama and his crew. Is there any truth in that? It would not be possible to full understand the back-room negotiations and give-takes but some co-incidences are biting. It’s was just a strange coincidence that on the days heading to French elections early this year India offered Dassault Aviation a $10Billion fighter aircraft order. It was a stunning choice as Dassualt was not even considered a strong contender as it had not sold a substantial order till date. For all the baruhaha, Dassault’s Raffale is an unproven machine in combat and not a single machine had been sold outside of France. There was nothing going for it. Dassault’s Raffale, an unproven combat machine, with not a single aircraft outside of France and an under-performer. The competitors cried foul alleging irregularities, as the competitive aircraft and options were far more worthy than Dassault. It seemed something else was ...

People say Retail industry has to be liberalized, unfortunately they are entirely wrong. Every industry that has ever been liberalized in India, be it roads, power, telecom, textiles, automobiles, resources etc, were government dominated industries. Government was a pivotal player in these industries but a resource-hogging, inefficient, innovation constricting player and survived only due to license raj. Hence it was very important to liberalize these industries by opening the doors to private players.  On the other hand, Retail Industry has been and has always been a purely private sector venture. What has driven its growth has been the private investments, private job creations and geographical expansions.  This is as liberalized as it could be, only that there is a cap on the operations of MNC retailers. Government has absolutely no presence in this sector and should never have one. The reason why Retail is so widespread and employs so many millions is due to this...

Now having established some ground rules, let’s face some dirty facts : Retail industry is one the most important sector in India with about 5% of population directly or indirectly linked to it. There is nothing the foreign MNC retailers can do to the present population of retailers and their stakeholders that Indian Mega retailers cannot do. India has little more than Three times the population for USA but the US per capita income is roughly 13 times more. Hence the retailers though they can serve more people and gauge more footfalls, won’t be able to sell or profit in equal measure – unless they are betting on surging per capita growth in next decades. The organized retail industry for all its wonderful growth (from a zero base) to present state has been a  magnificent failure. (How else do you explain the supposed inefficiencies in the sector? How else can the foreign retailers think there is more space to conquer here? Either the entire charade is to fleece the foreign ret...

To start, let me make my position on Retail - FDI much clearer: FDI in retail is a natural progression of the Liberalization initiated in 1992 and massive global integration subsequently. FDI in retail is a very important legislation that will impact crores of people, and should not be committed in hurry to win some brownie points To effectively create a level playing field with domestic under-financed players, a lot of work needs to be done to create an environment where FDI in Retail can flourish! Yes, I said flourish! (Nobody in the world seems to think that this can be a Win-Win. This is of course a good possibility however given the right environment and level-playing field.) A lot of expectations being set in support of FDI in retail is purely bulls**t.  Either their proponents should come up with some different or stop this stupid broken-record chest thumping. In many ways the horrors depicted due to MNC retailers are overplayed; however there are substantial chances that th...

The biggest riddle of last week was why would this government which could not push a simple paper legislation get down into water to fight an army of crocodiles. Why would this government beleaguered and besieged as it is, try ing attacking and reforming the FDI in retail – the most contentious, with massive social impact and with no preparations? To understand, nay to even start estimating the impact of this act, we have first chart out some simple facts:          Retail is the BIGGEST sector in India and all the countries         Retail directly capitalizes and monetizes large population and its consumption,          Most of the present retailers are small distributed outlets denigratingly called mom-pop stores         About 5% of the total population is directly or indirectly connected to retail industry for living       Retail companies when they enter, will become very rich in ...

I am little surprised at the insistence of government and its senior ministers' adamant stance at such a breathtaking reform measure as FDI in Retail and capping of LPG cylinder for households. Something is amiss. These savy people don't do anything random and my guess, this too is NOT random. Here I am throwing up another theory in the air. Here goes: It is widely known it takes about a quarter for any policy to make an impression. And it is also widely known the three months prior to elections decide the votes, irrespective of what happened previous years. So, basically, politicians are trying to figure out the best way to give you 'good times' before the elections hit. If you dont believe me ask Ben Bernanke, he just wrote a $1.5trillion check to help Obama campaign. How can you ensure that people are happy 6-8 months down the line? Simple, kick all the bad news in one shot. It should take atleast about 3 months for the inflation etc to figure in the consumer spendin...

Today is going to be interesting. It looks like Congress has called Mamta's bluff and has dared her to quit the government. It looks odd when a dominant partner in an alliance totally takes a minority partner for granted. The problem is not in the actual act but the psychology of what it means to the snubbed person and others watching the game play out. I love these type of game theory scenarios. Lets bite in a bit: so what are Mamata's options and the consequences of those options, and the betterment and possibility by fulfilling those options. 1. Quit the Govt 2. Partially pull back from Govt 3. Do nothing In case Mamta decides to quit govt the damages are the most to the offender (Congress) and in case she decides to hang on the damages are most to the projector (Mamta). The best option for either is the second one, where there is a "symbollic" walkout of the government with lots of media and propaganda to satisfy all the consituencies. However, what we do have and...

With RBI passing up another opportunity to cut the rates, the window on where it can act is rapidly closing down. This assessment was up in the air, for we felt RBI might use the opportunity to move the rate a little lower.  The coming months will see some serious events in terms of the market and geo-political scenario, add to it the fuel of liquidity, high commodity prices and inflation, add to it the inefficiency and inability of government to push through any reforms and add to it the beginnings of posturing for the elections in early 2014. RBI is now unlikely to come ahead a cut interest rates as we are in the high-inflation risk zone for next some months. And given the government's lip-service of rate-cut but the secret desire to hold-high-rates, its unlikely RBI too will have any pressure to bring down rates. Therefore effectively, RBI has very slight chance or opportunity to cut rates until March/ April. This will suit the governments heading into elections, ...

India is unique. India is different. India is actually very unique. There are no other possible comparisons in the world except China. There are two very important and super critical factors that differentiate India from most of the rest of the world, and most especially from developed countries. I can't emphasize them enough. They are: 1. More than 50% of India lives in villages. It is unlikely to change in next decades. 2. Indian population EXCEEDS a billion. Anybody who wants to pontificate on policy matters should keep these two factors firmly in mind before they start their blind adoption of western strategies. We all want India to be a developed country; however the path that will make India a developed country is and will be totally different from the strategies used in US, Europe, Singapore, or anywhere else. This is because of the above two factors. We have seen our policy makers blindly adopt developed country strategies in a copy-paste mode without any or much local...

Did RBI clearly telegraph government they will not cut rates unless something was done on the policy area? Did RBI agree to cut if there was some strong policy movement? Were these the reasons for comatose government to suddenly wake up? Can RBI really cut rates? It was widely expected to cut rates. But with the latest shock and awe "reform" blitzkrieg it looks like Manmohan Singh has answered for RBI. If the "growth" is really back on track, RBI has to do nothing. And with the Diesel price hikes and LPG subsidy cuts, its clear we are looking at an inflation spike couple of months down the road. RBI will surely be uncomfortable with that. RBI's rate cut, though badly needed, will only bailout an incompetent government. But this is the season of Central Bankers bailing out the Governments inefficiencies. Obama, Merkel, Rajoy and host of others got bailed out this week. Will RBI bailout Manmohan? Having missed out on the monsoon session to do anything reasonable, ...