The Perception, Reality and The Truth

Early 90’s was an exiting period for the state of Maharashtra. The state was called the most developed , forward looking , prosperous and richest in the country .The state also seemed to have a ‘very good and efficient administration’ and a ‘ visionary leadership’. Nothing it seems can go wrong for the state.

Come 2006 . The state and Vidarbha region is witnessing unprecedented number of suicides by farmers .Regional imbalances are raising tension and threaten to tore the state apart .The state is in a vicious debt trap . Naxal violence and terrorism are the latest new problems. The state administration seems to be complete slumber and people seem to be content and complacent.

Just what happened in a decade?

I come from Vidarbha region. A decade ago when Maharashtra was called a developed state I could not really relate the prosperity of the state .It was a kind of double whammy. You come from one of the poorest regions in the country and yet are looked upon as one from the most developed region! It was difficult to explain the issue to others. Not any longer though!

This is what happed with Maharastra in last decade .

The resources were spent on unproductive purposes like bailing out sugar mills and giving sops to sugar belt farmers.

The investments that were made by taking expensive debt then did not yield desired returns a prime example is Mumbai – Pune express highway or developing the sugar belt.

There was virtually no investment in power and Infrastructure where it was needed like Mumbai . Mumbai now has a marginal growth rate as a result.

No effort was made to remove backlog of various backward region . In fact the backlog only increased fuelling regional tension.

The state failed to come up with a theme for development like Bangalore for IT and Gujarat for Petroleum

The state now finds itself where it has too high a debt coupled with an increasing expenditure and an compelling need to make huge investements in underdeveloped regions.

This is what happens really with governments worldwide. Somebody makes mistakes and others have to bear the brunt. Likewise somebody makes a sincere effort and others reap the benefit.

The leadership that took Maharashtra to such a nadir level is now nowhere to be blamed and in fact still revered. The state seems fit case where people live in past glory rather than thinking about getting over present ruins.

The significance of a Diverse Workforce

I was going through an article about affirmative action policies adopted in US about half a century ago. One of the basic premise and foundation about the policy was the feedback from the US Industry that a diverse workforce tends to be more professional, effective and a better decision maker.

I think this is absolutely true .

I have worked through teams on both ends of the spectrum. With a diverse background comes richness of Ideas , culture , perspectives , behaviors which tends to foster a professional , tolerant culture which is open to fresh thinking and calculated risk taking .I have always loved to work in such an environment so will most ….

I am a firm believer in the policy of diversity and would go at length to maintain it. To put it simply , I would prefer a diverse and above average team to a homogeneous and most competent one.

Now consider the opposite side of the spectrum.

People from same background and culture will generally have same line of thinking and risk taking ability . The work culture is more of a family , a bit like mom and pop office with little room for accountability and professionalism. Only certain type of ideas will generally accepted and resistance to change will be a big hurdle.

Just look at Indian cities . Mumbai is a very cosmopolitan place with people from all possible diversity . On the other spectrum lie places like Delhi , Kolkata and Chennai in lower diversity order. Can you make the difference in the work culture ? I do…

India has so much diversity be it language , regional , racial , caste ( genetic diversity basically) and religion . I think sharpest cultural diversity in India is regional and then language , caste , racial and religion in downward order though language and region are very related in India and diversity based on religion is I think a debatable subject.

HR in most Indian companies have realized the importance of a diverse workforace and are working towards making diversity an important component of their HR policy .But with the experience that I have about Indian industry lot needs to be done to really foster and internalize diversity. I can see a typical problem here . People at the top know the importance and want to implement it and person(s) doing actual implementation has either no clue about it or simply unwilling to do it because it benefits him/her to keep it that way.

Humko to bhai Bus khana khana hai

I have observed this tendency of Indian society for ages but never seriously thought about it .Success of every social function be it marriage , party , get to gather , event depends on how tasty the food was. That is quite understandable given the importence that food has in every culture.

Hmm….

I recently went to a party organized to celebrate Silver Jubilee of my company .It was really a grand event with professional singers and employee performances organized.
The food to be served was starters and then dinner after an hour. So midway through the function it was announced that starters are being served , I predicted that soon the entire hall will get empty . And guess what it really did :) :) in 10 minutes flat!
Now everybody was interested to be in the long que for food than have a look at the performances .I could not really stop laughing and let me tell you it is not a rare scene at all. What was interesting was the fact that all the employees are very well paid and will count among the higher end of upper middle class in India. Phew!

I also remember a similar event. There is a branch of an MNC in India with strength of 1500. Stationary is distributed freely and guess what the monthly consumption of pens there is? 5000 +.

I worked for a private sector bank in India a few years ago .A grand sale was announced once by a city based retailer with almost 50% discount. There was almost a stampede at the event . What surprised me was the fact that a senior manager was purchasing all types for clothes and packing them in boxes. I soon realized that he wanted to purchase all that he can and sell these clothes outside!

I think we still live in that old mindset that everything including food is scarce and that you need to fight for it at every possible opportunity. Not surprising given the history of famines in our country just some half a century ago and a social culture built around that belief.

TATA CSN Corus

I’ve been curiously watching the developments on the proposed takeover of CORUS for quite sometime now. TATA and CSN now seem to have been locked in a lose- lose bidding war game of one upmanship for getting CORUS.

What are the options before TATAS apart from a outright acquisition?

I think it’s merger with Corus. So rather than spending resources for acquisition of CORUS just merge TATA Steel and Corus and avoid the debt burden.The proposed entity will then have the war chest to make another ( or more – the most obvious being CSN) mega acquisition.

On the flop TATA’s own share in the merged entity will be barely in double digits.This’ll make the new entity very vulnerable to takeover .Here I think TATA’s should enfuse capital of $5-6 Billion to up their stake to more than 50%.TATA sons has the wherewithal to raise so much capital. The financial muscle can then be used to acquire another 'major steelmaker'.

But CSN here also will try to justify it’s own case of merger. Then what?

I think TATA’s should just purchase 20-25% of CSN from open market. This’ll silence CSN. The merged entity can then comfortably takeover CSN if it wants.

What CSN is really afraid of is a takeover Bid from TATA’s.

There is another win –win option .A Triple merger of CSN , CORUS and TATA Steel.
But I think CSN and TATA are poles apart in terms of culture and this option although most feasible theoretically, it is most difficult operationally and hence highly unlikely.

An Afterthought :

What could have been done to smoothly purchase CORUS ?

I think TATA’s should have bought around 20% of Corus from open market before making the bid .This would have fend off any potential bidder.

Reservation - No Affirmative Action

I’ve been watching the debate in India about extension of Governments reservation policy to OBC’s for quite sometime now .

I must confess that I haven’t seen a single authoritative article from any Indian journalist which appears to be fair , holistic , rational and with scientific reason – Indian media has no representation for SC’s and ST’s and a very marginal representation for OBC’s . So more than two third of India’s population has a very marginal representation in Indian media .

Let me use a fair Problem solving method that is used in the Industry - DMAIC ( Define, Measure, Analyse, Implement, Control) to find a solution .

Problem Definition :

What is the problem that India faces ?
Some readily identifiable socially disadvantaged groups are underrepresented and relatively underdeveloped in India. These groups need to be brought to the national mainstream by giving them a fair socio, economic and political share .

Seems fine? If I’m unable to define the problem correctly then I’ll not be able to arrive at a correct solution.

The phrase Readily identifiable and socially disadvantaged is very important . Every country will have poor and disadvantaged people. The special problem with India is that they can be readily identified given India’s castist history and are socially disadvantaged because of past history.

Measure :

What are the ‘Readily identifiable and socially disadvantaged’ groups in India?

As per Government of India :

SC’s and ST’s are easy to identify given their ‘ untouchable status .SC’s constitute about 16% and ST’s about 8% of India’s population. Lowest in social hierarchy in India.

OBC’s ( Other Backward Classes) : These were above SC’s and ST’s in caste hierarchy but below Upper caste and are identified by Government of India. Constitute staggering 45-50% of India’s population. I think they are not readily identifiable as a group but they are socially disadvantaged as identified by Govt of India.

Muslims : Constitute about 14% of India’s population. Various reports suggest that they are equivalent or below OBC’s and even SC’s and ST’s in social parameters. But not all Muslims are socially disadvantaged . In that sense although they are readily identifiable all of them may not be socially disadvantaged.

This is all what we can measure! It is not known as to what their actual share is in private jobs or even current population percentage . Most of the population data is taken from 1931 census of India though Government carries out sampling often.

Analyse :

It is beyond doubt that the social groups that I have talked about do not have a fair representation in Education, Judiciary , Corporate world and Media .The same may not be true about legislative assemblies and the parliament.

How to bring all these groups in national mainstream by giving them fair social ,economic and political share?

The social groups that I have mentioned seem to have different socio economic profile.

Hmm….

I think the only way is to provide these people with right opportunities and skills to take on the world. But the fact remains that most of these communities do not have fair share in education. Education has to be the logical starting point for any social upliftment. Affirmative action seems to be the short term answer .What this will do is provide proportionate representation to youths from these communities to various educational institutes and in politics which can itself bring economic benefits. Yes , but that process is long drawn and furthermore in a country where educational opportunities are limited there is always a vast majority that does not get benefit of these affirmative actions anyway. But aren’t opportunities limited in India anyways? What about vast majority the youths who could not avail of these benefits?

Hmm…. .

seem to have stuck to a dead end now. Even if you do affirmative action it’ll not reach the vast majority to bring about the social transformation that we are talking about. So even if they get fair share look at the proportion of population that we are talking about.
But then this has to do with overall economic growth of the country which is a different issue.

What about vast rural India that’ll be untouched by the affirmative action policy?

Reminds me of a long forgotten story ….

Land Reforms …

The land reforms that were carried out in different states Independent India were only of a notional nature and the benefits never reached the needed although the degree with which these reforms were implemented varied across the states.

Kick starting fresh land reforms with proper practices and checks and balances in place ( so that the land is really transferred to the needy and not go back to the landlords again .This is what happed sadly with Indian land reforms) will really help restore the caste balance in rural India. In fact the caste wars in rural India and birth of Maoist and Naxalites is largely due to the failure of land reforms.

What about Primary education?


Yes. Good quality universal primary education is still not available in rural India . Providing primary education to all the sections of society ( and hence the weaker sections) will reduce the huge social difference that exists among various classes in India.
I would like to emphasize the point that without proper primary education even the benefits of reservation will not reach the needy as those selected through reservation will not be able to compete with general category.

To be continued….

The Glamour Degree

Yes I’m talking about MBA!

Born in US in the early 20^th century this degree has now become very coveted all over the world. In India I can’t help notice young Govt. babus doing MBA for getting a promotion, busy executives stretching themselves to the limit by doing Part time MBA because they want to see the three letters added to their qualifications , ambitious youngsters doing the degree because it fetches lucrative jobs and professionals to give a kick and a new path to their career and above all page three celebrities, actors , models , children of businessmen for showing their high educational status and intellectual ability to the world which world thinks they squarely lack.

Hmm…

Reminds me of my days as an MBA student not so long ago. It was quite hectic and stressful initially to adjust after ‘B.E. type’ of education. Loads of notes and assignments, projects ( which I seldom did with seriousness) , tests and unforgiving and sadist Professors ,interviews and so on. I took the education as just a normal course that I needed to pass until I went to the industry. I found that MBA knowledge is very applicable in every aspect of business. In that sense MBA is a very solution oriented degree as compared to say B.Tech. where one makes very little use of his actual knowledge outside his specialization area. But I must stress that there’s not something very unique or substantial that one learns that a graduate cannot practically do.

I also think that MBA is a dual nature degree. You either learn and improve or you go the other way.

What makes MBA special it covers entire gamut of knowledge about business from HR and Operations to Finance , Marketing and Sales and Economics etc . One also learns to work in a team rather than as an individual.

During the course one observes his weaknesses and works on them, most common among them is presentation skills , report writing etc. It should logically make one a better decision maker in every aspect of life be it business or career planning to managing finances.

You go the other way if:

One thinks MBA is just another academic course where you need good marks and hence automatically a good job and then the rat race starts …

I think there is a wide variation in the standards of MBA students in India . Some top B- schools really produce best in class MBA’s and the standard falls rapidly if one goes down to most private ‘ profit oriented ‘ MBA schools. I also think the best time to do MBA is after 3-4 years of Industry experience.

Some Common accusations about MBA’s:

MBA’s don’t normally do well in business : That’s true .You won’t find many MBA’s doing their business .This is because they have a lot to lose – a good high paying and secured job , a high position and in the rat race if they want to go their own way. Very very few want to take that risk.

They don’t want to do routine or technical jobs: This is also true .Most develop aversion for these kind of jobs after doing MBA and now he/she wants to think about strategy , breakthrough, learning and high position . This is what I call MBA EGO.

They took too much time to arrive at a decision : This may be because now they think too much :).

Indian business strategy - Follow up

This is how TATA wants to buy Corus – a leveraged buyout. It entails creating a SPV and raising debt on the strength of the to be acquired company i.e Corus and then transferring the shareholding of the acquired company to SPV. Though this is a less risky strategy as the debt so raised are not the acquirer’s books, it does have many pitfalls especially in case of Indian companies like TATA who are fond of acquiring much bigger companies then themselves.

Stock markets worldwide are on highest ever and so are commodity prices. This may not sustain for long especially in a commodity like Steel which has a highly cyclical demand.Once price of steel and profitability drops so will market valuation and the trouble starts.

Nevertheless if there are substantial benefits that can be accrued from the acquisition like economics of scale, cheap raw materials ( TATA have access to captive mines) and opening up of new markets , new technology etc then it is worth it.

The Grand Indian Business Strategy

So now Indian companies are on a buying spree across the world . One can see TATAs , Ambanis ,Vijay Mallyas,Videocon, Bharat Forge, Ranbaxy and even grand old PSU powerhouse BHEL contemplating outrightly buying US and European Companies. In fact TATAs have taken over roughly 30 companies in last five years. That is Great no doubt about it!

Going through the strategy adopted by Indian companies reminds me of the strategies adopted by Japanese and Korean companies about decades back .Koreans created so called chaebols – a group of family owned companies with a bank as the central company .What followed was very interesting .The risk with these chaebols is if the central bank collapses, it takes the chaebol with it and the risk materialized with many of them. Take the Japanses. They created capacities in last 90s with hope that they can utilize them and overtake US within a decade. But the capacities were never utilized and what followed was a prolonged recession.

Now lets look at the theory.

A merger/acquisition will be successful only when certain conditions are fulfilled :

• The so formed entity is better off Financially or Technologically. In case of technology , it should either suppress emergence of new technology or make a leader in a particular technology or bring down R& D costs .However all this should finally reflect in better financial performance.

• Opens up or creates retail network or increases shelf space or reduces the same for competition
• Reduces Overhead costs substantially
• Brings about consolidation in either market or suppliers or both and thereby causes expansion of margins
• Opens up a potent new market or brings up the prospect of rapid expansion in a new market

All these benefits should come at the right price for an acquisition or you carry a huge risk of carrying a debt in case you are financing the acquisition through borrowing.

Looking at Indian companies it seems that they do carry a huge debt repayment risk as most of them are financing the acquisition through borrowing. In fact acquisition has become more of a fashion nowadays . It causes so much nostalgia and xenophobia . It makes big headlines and everybody loves that .But then nothing succeeds like success and I just hope that Indian companies are not carried away by the hype. But there is no room for celebretisation and I hope they understand and imbibe the basics.

Complex problems AND Simple solutions

I was going through the report submitted by a committed to HRD ministry about reforms changes and new additions to IIT’s. list A few existing colleges will be turned to IIT’s etc,etc But what caught my attention was this suggestion that all graduate level courses in IIT be converted to integrated post graduate five year duration courses for example, there will be five year integrated M.Tech. instead of flagship four year B.Tech and one and half year M.Tech. I think this is a very welcome and practical step.

For one it imparts what IIT’s are meant for .Serious Engineering education for serious and interested Technology students. But there’s more than what meets the eye. It’ll also discourage students who want to do change field and do MBA or IAS. They can well do B.Tech in other engineering colleges and save a precious year .What about students who want to peruse PG courses abroad especially in US? Well now students coming out of IIT’s will all be PG and as such there’s no need for these courses for these students. Some ambitious ones can do that but they would have lost one year to their peers from other engineering colleges. A dreaded prospect indeed ! Come out of a premier technological institute and be still behind by a year to your batchmates !!

This is really a win - win formula. Those who just want to do their base degree as engineering can do that from any other engineering colleges so that IIT’s are spared for only the one who are interested in Technology .Seems interesting!

For years academicians were asking for some restrictions and measures be put on brain drain and non serious technology students in IIT like asking these students to do a compulsory job in India for five years etc sighting reasons like waste of taxpayers money and resources of a poor country. But we did not put these restrictions even during hopeless period of 1970-90 when we had literally no hope for ourselves with the so called Hindu growth rate of 3% . But then putting such socialistic practices may really not be the best option in a democracy .A clear cut policy like this which gives you options will ensure that there is no imposition of frustrating rules while ensuring that real objectives are met .

That’s what I always say .It ‘s all about options!

.

India - An Analysis ( Independence Dy Special)

On the occasion of India's Independence day would like to share some thoughts about India

What we need to do?

• Grow continually to be a economic superpower and lift millions out of poverty
• Get rid of corruption
• Set our administration right - make it professional
• Build world class universities and education system
• Create a good social security system . It is almost non existent today
• Be ahead in cutting edge technology and innovation and build a society based on scientific temper
• Get rid of ' we were old superpower and have world's best culture mania' and learn to respect others culture
• Think big and do Bigger things
• Develop strong and independent institutions like Election Commission, Supreme Court. We need more such institutions. Look at CBI,Dept of Revenue and Tax like CBDT, CVC

What we can be proud of:

• Financial services system - one of the best in the world .I think this is the biggest asset that we can leverage currently
• Technically sound manpower - though very less as compared to our population we have one of the very best. Another asset .We know it all
• Judicial system - for financial and dispute resolution ( we have a very bad system for criminal justice)
• A good democracy - though most of it is dominated by politicians of 60's and 70's mentality. It can be considered a big success if we look at our neighbours. Most of them are either autocratic states or banana republics.

What can we hate about us:

• Castism - this is the biggest problem and worst baggage of history that we have
• Regionalism - another old baggage
• Corruption - endemic
• Indiscipline and bad etiquette - we do not follow any rules from standing in a queue to traffic rules .We also have to improve a lot on mannerism. Just look how our leaders talk filth.
• Tag of a soft state - we really do not value a life
• Indian crab mentality - this has always pulled us down
• Not taking ownership - we blame everything on government and conveniently forget that we only elected it .Can we take some matters in our control?

Fighting for Nothing

I was just going through India’s boundry disputes recently with its two big neighbours China and Pakistan. They are Aksai Chin, Arunachal Pradesh with China and Siachen , Sir Creek with Pakistan. I can find a very basic similarity with all these places geographically. Aksai Chin currently under Chinese control is a barren white desert where there is no vegetation and in fact it’ll be challenge to find grass in this region. Arunachal Pradesh is a sparsely populated hilly and remote north eastern part of the country. Now comes the famous and known ones . Siachen glacier is world’s coldest battle field with more soldiers dyeing because of cold than by battle fatalities.Sir Creek is a marshy island which is difficult to demarcate and is a bone of contention between India and Pakistan.

So as a country we are fighting for pieces of real estates in which nobody will be interested . This really makes no sense economically although we fight because we think it is our land , basically for pride and national honour etc. Though this sounds incredibly correct we must recognize that we are spending resources and energy where it is least required.

Indian Economic Reforms? Can they be hold hostage by allies?

In the past few days Central Government has been forced to withdraw disinvestments in Naveli Lignite Corp by belligerent allies. Media has branded that the reforms have come to a standstill given the developements. Such comments by the media sometimes make me wonder whether disinvestments in super profitable PSU's only means reforms. Such views only give a lopsided and false view of structural adjustments needed for the Indian economy.

SO what can the government do in face of stiff opposition from the allies? Can the reforms be made in current situation where government has the constraint of allies and left.

Well...It is all about creating options... being sincere to the purpose

I think using disinvestment as a tool to bridge fiscal defecit is not going to solve any purpose. Britain sold it's most profitable PSU's in 80's under Iron Lady Margaret Thacher now find that they now control none of them. I don't know how much did this selloff help to bridge fiscal defecit, but selling these companies at bargain price is not a good idea.

The fiscal hole is too big to be bridged by selloff of profitable stocks. This will neither help solve the fundamental probs faced by PSU's.

I think government has to look at the option of strengthening the PSU's by:


allowing to raise money from the market rather then selling own share

This will raise money for PSU's which they can use for their expansion plans and investments etc. In fact even common minimum prog of UPA supports this.

Giving operational autonomy to PSU's

This is an old and off repeated issue. But franky speaking without giving autonomy to PSU's and asking them to face the competion is like hitting a person with his hands tied in the back.
I sicerely believe that PSU's have never been allowed to run as business ventures. What PSU's require are good management and consequently good resources . The very first step is then bringing all PSU's under one ministry I call PSU ministry.This ministry can also act as an agency to make the PSU's to follow best practices that it can itself set. I hope this will also free PSU's from 750 odd laws and regulations that they have to follow currently.
The second step would be to lift the ristriction on salaries though I think this can be achieved by the proposed ministry.

Looking at these options I do not think any ally will oppose these reforms as they are inherently do not cause any opposition.

My Image

Failed State Called Maharashtra

This title itself would make many wonder how the so called most developed state in India a failed state!! Maharastra y no means is Bihar or UP. I must be jonking Right.Well I'm not.

Consider these Facts:

Vidarbha has only 4% agricultural land under cultivation as compared to about 80% in western Maharashtra.Per capita income is 30% of that of western maharashtra.About 600 farmers have committed suicide in the region in last one year alone due to failed crops and still counting.. The region has to cope up with Naxal problem in Gadchiroli,Chandrapur and Bhandara.

Now go straight to Mumbai.

There has not been a single big Infrastructre project for Mumbai in last century! except for metro rail this year.Travel by local rain here is simply inhuman. Country's commercial capital has a marginal growth rate when country is experiencing double digit growth. 65% of city's population is living in slums .More people are shifting to slums as it becomes more and more difficult to live in a flat due to cost of living. All this because there has been no focus on Mumbai . It has been milched for money for so long and since people here are professional they are not bothered about all this.


What ails Maharatra?

Well the state is simply unmanageable if you do not have priorities.The challenges that Mumbai faces are not the same as what Western Maharastra faces, Vidarbha has very different developemental needs as compared to other parts of the state so does Marathwada.
The govt is only interested in developement of Sangli,Satara, Pune ...In fact the only region that has benefitted because of creation of Maharashtra is Western Maharastra thanks to so called 'Sugar King Politics'.

What can be done?

If I think from most efficient administration point of view :

Seperate states Vidarbha, Mumbai Metroplitan Region , Marathwada and Western Maharasthra and Konkan - based on administration challenges.