Thursday, 19 October 2017

GDP Growth: Looking at the Bigger Picture

If someone asked you for an opinion about the general health of X based on the fact that he weighs 75 kgs, how would you react? You would most probably want to know about his height and other parameters like blood sugar, heart rate, and cholesterol level before drawing conclusions, wouldn't you? 

Diagnosing the health of an economy based on GDP growth rate is similar to pronouncing on someone's health based on the weight alone. With the GDP growth rate slowing down to 5.7% during the second quarter of the current financial year (2017-18), comments on the health of the economy are flying thick and fast. It would be pertinent to dig deeper and diagnose the real health of the Indian economy. We shall attempt to do so, based on the level of activity in what can be termed as six 'core' sectors, for reasons explained below.

Cement & Steel: The demand for cement and steel is a very crucial metric in analysing the health of the Indian economy due to the two sectors of activity which account for the bulk of the demand: infrastructure and construction, both of which have a multiplier effect on the economy. It is estimated that every penny invested in infrastructure creation generates GDP growth of twice the amount. Besides, infrastructure and construction are the biggest generators of employment after agriculture, accounting directly or indirectly for 45 million jobs.

The demand for cement is estimated to grow at 3.5 to 4% in the current financial year, while the demand for steel is expected to register a growth of 6.1%. Industry sources predict a significant uptick in demand for both products in the next financial year. While the current growth figures may appear modest, there is scope for optimism given the fact that the economy is currently having to deal with stressed balance sheets and the challenges of a structural shift with the coming into force of GST and RERA.

Industrial Production: The Index of Industrial Production (IIP), which measures changes in the volume of production of industrial goods, is a reliable indicator of growth (or decline) in the demand for manufactured goods, given that production is normally driven by demand.

The IIP for the 5-month period between April and August 2017 registered a growth of 2.2%. Since the vast majority of manufacturing companies slowed down production during that period due to the transition to GST, the real picture will emerge by the end of the current financial year, by which time the situation should have stabilised.

Tractors: It would be fair to assume that growth in the sales of tractors is an indication of an optimistic outlook for the agricultural sector, which provides a livelihood to over 50% of the population of India. On that front, the Indian economy appears to be extremely well placed, with an expected growth of 11-13% in the sale of tractors in the current financial year, despite a slightly below par monsoon and uneven distribution of rainfall.

Having said that, the agricultural sector still has several structural bottlenecks to overcome to achieve long term stability, not least the over-dependence on rains, marginal land holdings and limited access to institutional credit.

Commercial Vehicles: The sale of commercial vehicles is an important indicator of the level of economic activity, since the drivers for demand are sectors such as transportation, mining, manufacturing and infrastructure, which are the key drivers of economic activity. On that count, the numbers portend good times ahead for the Indian economy, with a whopping 25.27% increase in sales volumes for the half year ended 30th September.

Rural Roads: One of the least appreciated successes of the Government of India is the Pradhan Mantri Gram Sadak Yojana PMGSY). Access to all weather roads can make the difference between abject poverty and a dignified existence for crores of rural Indians. Having constructed a record 47,350 kms of rural roads in financial year 2016-17, the Ministry of Rural Development is, by all accounts, well set to achieve its target of building 57,000 kms of roads and connecting 16,600 eligible rural habitations during the current financial year.

The long term impact of this success remains to be seen, but there is little doubt that from a long term perspective, construction of rural roads will have a far greater impact on the Indian economy than the national highways, which corner a disproportionate share of the attention of the mainstream media.

Power Consumption:  Per capita power consumption is frequently seen as an indicator of a nation's progress. The most developed nations are also the biggest per capita consumers of power. India's annual per capita consumption of electricity registered a 17% increase between financial years 2014 and 2017. However, much work still needs to be done on this front, as India's per capita power consumption is less than half the global average. 

Admittedly the success of the UDAY initiative helped state power utilities reduce their losses by 21.5% during the last financial year. It remains to be seen how far the central government succeeds in implementing its proposed reforms. At this point in time, it would be fair to say that the future outlook for the power sector is neutral.

And so, out of the six core sectors of economic activity, the outlook is undoubtedly optimistic for three, namely Tractors, Commercial Vehicles and Rural Roads. For the remaining three (Cement & Steel, Industrial Production and Power Consumption), the outlook is currently neutral. A clearer picture should emerge by the end of the current financial year.


  • Dr. Ranjeet Mehta, Real Estate and Construction Sector Set to Create Maximum Jobs, (15th January 2016)
  • Abhishek Dangra, The Missing Piece in India's Economic Growth Story, (2nd August 2016)
  • Press Trust of India, Cement Demand Growth to be Around 3.5-4% in FY18, Business Standard (28th September 2017) 
  • Press Trust of India, SAIL eyes higher market share on surging steel demand, (22nd September 2017)
  • India Infoline, India's August Industrial Production rises 4.3% (12th October 2017)
  • K.T. Jagannathan, Tractor Sales May Grow at 11-13% During 2017-18, The Hindu (16th September 2017)
  •, India Auto Inc in festive mood as all segments drive onto growth road (12th October 2017)
  • The Masterbuilder, PMGSY Performed Better Over Other Schemes, (5th October 2017)
  • Gireesh Chandra Prasad, UDAY scheme impact: State-run power discoms cut losses by 21.5% in FY17, The Mint (26th July 2017)

Monday, 29 May 2017

Baahubali: The Way Forward?

As I write, the box office collections of Baahubali 2 in India alone stand at nearly 2000 crores- a figure unprecedented in the history of Indian cinema and one that Hindi cinema can never hope to achieve on its own. For an industry facing an existential crisis, Baahubali could well prove to be the trailblazer showing the way forward.

Much as I hate the term 'Bollywood', it is a pretty apt description of the Hindi film industry in Mumbai, which has usually functioned as a poor man's Hollywood, recycling the plots of older movies or simply ripping off Hollywood movies. Add to it the fact that over the last two decades, Bollywood movies started looking less and less Indian, with very little by way of original content and frequently set abroad.

About the same time, Hollywood studios started releasing their movies dubbed in Hindi and other regional languages (which Bollywood never bothered to do). What that effectively did, was to leave Bollywood filmmakers in direct competition with Hollywood studios, with their deeper pockets and far bigger budgets. Predictably, dubbed versions of Hollywood movies have chomped off a huge slice of the pie. 

It must also be said that Bollywood filmmakers did themselves no favours with their sudden obsession with northern culture. Since the turn of the century, the vast majority of characters in Bollywood movies have been north Indians. Bollywood long ago stopped reflecting the socio-cultural diversity of India. In fact, in recent years we have been treated to absurdities like a Gujarati character singing about a 'Punjabi wedding song' or a South Indian character singing a song with the obviously Punjabi words 'Ghar nahi jaana'!

What that effectively did was to alienate a huge chunk of the potential audience which could not connect with the characters or cultural references. The resultant vacuum was filled by regional cinema, to the point where the budgets and box office returns of regional films started matching those of Bollywood films. There too the contest has become increasingly uneven, as regional films carry far lower risk, catering as they do to a specific audience. 

A striking example of the rise of regional cinema is Bahubali, which would have made a massive profit even if it had not been dubbed in Hindi. As a matter of fact, South Indian movies dubbed in Hindi have been appearing on television for several years now and there exists a significant audience for such movies, not least due to the fact that the characters and the settings are unmistakably Indian, quite unlike a lot of Bollywood movies these days. 

And so Bollywood filmmakers today find themselves waging an uphill struggle against Hollywood on the one hand and regional cinema on the other. This is not a passing phase but a struggle for relevance in a rapidly changing environment. There is only one way forward- unlearn and relearn. With the vast majority of movies sinking at the box office, the starting point is for Bollywood to realise that the existing way of doing things can no longer continue.

First and foremost, filmmakers need to do a serious rethink on their content. With access to Hollywood movies dubbed in their own languages, there is no reason why viewers would care to watch copycat movies in what is perhaps their second or even third language. The only way to win them back is to develop original content, which is hardly a challenge if the industry stops neglecting its writers. There's also the fact that that there exists an ocean of brilliant content if Bollywood wallahs took the trouble to explore pulp fiction in Indian languages.

Secondly, Bollywood needs to open up its eyes to the vast untapped potential of regional languages. If the makers of Bahubali could make a killing by releasing their movie in Hindi, there is no reason why Hindi movies cannot do likewise by dubbing their movies in regional languages. However, there are two things they need to be cautious about if this opportunity has to be exploited: one, the quality of dubbing is of paramount importance. Two, the characters and the content should reflect the cultural diversity of India, if the movies are to connect with the potential audience.

In this context, Bollywood could actually tap into hitherto neglected markets. There are several regions where the regional language industry is either non-existent or too small in terms of budget or scale. There is absolutely no reason why filmmakers cannot tap into that audience by dubbing their movies in the languages of those regions. Bringing on board regional actors could also help reduce the wildly inflated budgets. That would serve the dual benefit of opening up a new market while simultaneously giving a boost to the local cinema. Here once again, the relatability of the content will be crucial. 

Admittedly, there is the added challenge of piracy that Bollywood has been facing since several decades now. However, given the presence of torrents and other file sharing sites online, there is little that the industry can do. What it can do, however, is to explore new markets. While the likes of Aamir Khan have already shown the vast opportunity waiting to be tapped in the Chinese market, there remains a huge opportunity waiting to be exploited within India.

To my knowledge, Bollywood has made little effort to address the dual challenge from Hollywood and regional cinema beyond merely acknowledging the gravity of the situation. Predictably, industry wallahs have been pressing for protectionist measures, instead of stepping out of their comfort zone. It is a classic situation of attempting to treat cancer with band-aids. You can safely bet your last penny that the situation is only going to get worse from here.

The only question is whether the industry wakes up from its slumber before it gets too late.

Friday, 31 March 2017

Towards a Congress Mukt Bharat?

BJP President Amit Shah clarified about a year ago that his party's vision of a 'Congress mukt Bharat' (Congress free India) meant a break from the decades of disorder under the Congress and not just getting rid of the political party. As it stands now, I strongly believe that the people of India have embraced the idea wholeheartedly. 

Illustrating the point is the evolution of the political landscape of India as shown below. To the left is the landscape as it stood in June 2013 and to the right is the landscape as of March 2017. Witness how BJP (yellow) - singly or in coalition- is rapidly overrunning not only the Congress (Green), but even regional parties (Blue). 

Political Landscape of India (June 2013 v March 2017)

Admittedly, BJP's unprecedented victory in the Lok Sabha elections in 2014 confounded all expectations (including mine). However, since then the party has dramatically expanded its footprint across India. Not only has it captured several key states, it has made significant inroads in states like Manipur, Assam, Arunachal Pradesh and Kerala, where it never even had a presence hitherto. Factors like "polarisation" of the electorate or even caste equations cannot adequately explain this phenomenon. The very fact that BJP won in Muslim dominated constituencies in Uttar Pradesh (UP) goes to prove that old electoral logic equations no longer hold true.

The one common thread across all BJP wins has been the fact that they appealed to aspirations rather than fears or grievances. For example, the very first sentence of their election manifesto for UP emphasised "Change", "Development" and "Empowerment". Having interacted with people from nearly every strata of society over the last year or so, I can testify to the desire for a change, for empowerment rather than entitlement. It is precisely this sentiment that the party has repeatedly tapped into. Nearly every other political party speaks the old language of identity or freebies.

Modi: The Disruptor

I do not deny even for a moment that identity politics might have contributed at the individual constituency level. Nonetheless, it is self-serving and patronising to put down BJP's electoral successes to that factor alone. Opponents and political 'pundits' seem unable or unwilling to grasp the fact that BJP has created an electoral space that's exclusively its own through the promise of good governance and better opportunities.

The simple reality is that India is a land of aspirations where the people are tired of the old way of doing things after decades of being denied even the most basic governance. One party has repeatedly promised a break from the past and the electorate has voted on its feet. Congress mukt Bharat is no longer an electoral catchphrase- it is what the people of India want today. Those who comes to terms with changed realities will survive. The rest will be consigned to the dustbin of history.

Monday, 15 August 2016

Congratulations Mr. Vijay Goel

Dear Mr. Goel,

Let me start off by congratulating you and your team of officials. You have managed to travel across the world to Brazil, that too by business class, all of that on someone's else's money! Middle class Indians like us cannot dream of doing that, even on economy class. 

And talking of economy class, I presume you're aware that some (if not all) of our atheletes had to travel by economy class. Why, most of them were not even allowed to bring their personal trainers/ physios with them. You and your officials did a tremendous job of cutting down costs, especially since the funds came from taxpayers' money. If everyone starts travelling by business class, like your officials, that would be a huge strain on our country's economy. Thank you very much for the cost saving. 

Believe me Mr. Goel, I am quite jealous of you and your officials. India's medal tally, as I write, stands at zero and not a question has been asked, much less even a word spoken about you or any of your officials losing their jobs. Lesser mortals like us, who have to justify the salary we earn, would have long since been fired for much less. You and your officials, despite such an embarrassing performance do not need to answer any questions. Pardon me Sir, but I am green with envy.

I know that its just over a month since you assumed office and that you personally deserve little credit for the performance of our atheletes at Rio. Nonetheless, judging by your selfie spree and the controversy over the conduct of your entourage, I have little doubt that you will uphold India's glorious sporting traditions. Hopefully, some day India would have won as many olympic medals as Phelps. That would be a fantastic achievement, isn't it?

Let me make a small suggestion that would not only help preserve our glorious tradition, but also save a lot of taxpayers' money: boycott olympic games in the future! I know that you and your officials would lose out on a free vacation, but surely, other avenues can be found. 

Congratulations and thank you once again. Keep up the good work Mr. Goel. Your officials have successfully managed to make India an object of derision every olympics and I am confident they will continue doing so under your leadership.

A Middle Class Indian.

Monday, 1 August 2016

Open Letter to Devendra Fadnavis

Dear Devendraji,

I trust that the plentiful monsoon that Maharashtra is currently experiencing would have brought you and your government some much needed relief. I fully understand and appreciate the mess you inherited after 15 years of poor governance and back to back droughts in your first two years in power. I also appreciate that its less than two years since you assumed power, and so it is too early to comment on the work being done by your government.

Nonetheless, the work being done under the Jalyukta Shivar Yojna is commendable. Hopefully droughts will indeed be a thing of the past in a few years time. The work done by your government on reducing the number of clearances required to start a business has been tremendous. The urban infrastructure projects your government is expediting will hopefully improve the quality of life in urban Maharashtra. Given all those facts, there is reason to cheer.

Having said that, I fear there are significant areas of concern that still remain and to be honest, I see little (if anything) being done on that front.

Lets start with the condition of urban roads. Admittedly my perspective is limited to what I have seen in Mumbai. Still, from the little that I see, nothing has improved. The roads in Mumbai still remain potholed. Why, the road outside the lane where I live has depressions that look like craters rather than potholes. I have also seen several spots where paver blocks have come out. I'm sure you're aware of the hundreds of crores lost due to the accidents and time lost due to the resultant traffic jams. We, the people, understand that there are vested interests there. Nonetheless, if the Chief Minister cannot fix the roads in his state capital, what hope does the rest of the state have?

A second issue is that of law and order. From what I hear, nothing has changed on the ground as far as policing is concerned. Its been a decade since the Supreme Court came out with its ruling on police reforms in the Prakash Singh case. Can we, the people of Maharashtra, hope that we will eventually see a police force that's free to do its duty, unhindered by political pressures?

Much the same can be said of the state judiciary. Being a member of the legal fraternity, you have first hand knowledge of the appalling shortage of judges and the extent of corruption in the lower courts. Non-functioning fast track courts hardly augur well for a state that has ambitions of being the best in the country.

And talking of reforms, can we expect that the supreme court directives in the TSR Subramanian case will see the light of day in our state? As the Chief Minister, you certainly know better than anyone else that your government's vision will remain just that until you reform the bureaucracy. If nothing else, it would be in your own interest to implement bureaucratic reforms.

Lastly Mr. Fadnavis, I urge you to give a serious thought to the power situation in our state. Having yourself grown up in a city where power cuts and load shedding are the norm, you can imagine perfectly well the condition of Maharashtrians in smaller towns and villages. I am aware of the fact that your government has sanctioned solar power projects for 87.5 MW. Hopefully, those projects will actually be implemented in the coming years.

I am neither an ardent supporter nor a blind detractor Mr. Chief Minister. Purely as a resident of your state, I request you and your team to give us a better life than previous governments have deemed us fit to enjoy. If you can do that, you have my unquestioned support in 2019- and on this count, I believe I speak for millions of Maharashtrians.


A Proud Maharashtrian.

Friday, 27 May 2016

The Road to Development

I read an article some weeks ago, which stated the highways ministry has built highways at the speed of 17 kms per day over the last year or so. It may look like a mere statistic to city slickers like us, but ask anyone living in the villages what it means, and he's likely to tell you that it could be the difference between abject poverty and a dignified existence.

I realised it from first hand experience about a decade ago, when I was on the way to Satna, from a client's plant. The driver- a native of the nearby village- told me that construction of the road on which we were driving was a Godsend for the village. The villagers were predominantly farmers for whom the road meant easy access to the town market. That was not possible until the construction of the road, which left them entirely at the mercy of middlemen. Apparently, the presence of that road had lifted the people of his village from utter poverty to a relatively comfortable existence in just a generation.

That obscure little village is a small place that's far too insignificant to merit so much as a dot on the map of India. Nevertheless, the story of that village could well be taken as a microcosm of rural India. The importance of a good road network cannot possibly be overstated or exaggerated.

Imagine a situation where your mother or your child has a medical emergency. What would you first do? Rush to the doctor's place, isn't it? Now imagine if that trip is on a kuchha road which is in such pathetic condition that you cannot possibly drive fast. We may have bad roads in our cities, but we have ambulances or at worst, cars as opposed to the open air tractors in which our rural compatriots have to travel. Goodness knows how many people have had their health irreparably damaged while being driven on bumpy roads and how many died because they could not get medical attention in time.

Besides, imagine the impact on the families of the affected. There is, for starters, the loss of a working member of the house or he/ she working at significantly diminished capacity. That in turn would impact the lives of the children- more so if the affected person happens to be the mother.

Another under appreciated aspect is a social one. There are school kids in some backward regions who miss out on school due to the absence of good roads. Even a few kilometres could be a huge distance to travel if there is no connecting road. If travelling the distance on a daily basis is daunting, dropouts/ non-enrollment could become common. As you can imagine, girl children would be the first to be affected. Godness knows how many talented people have been lost over the years due to the absence of good roads.

Construction of highways also opens up new avenues in the form of food courts and hotels along the route, which would not only benefit entrepreneurs, but also generate employment for the local populace. There is also the fact that highways give a boost to sectors like tourism and logistics, which in turn would generate demand for derivative services like banking and insurance. 

In short, the construction of highways has a multiplier effect on the economy. For every mile of excellent roads, there are scores of people whose lives have been profoundly changed for the better.

And so the next time you drive down the highway, just remember that it isn't merely a smooth road for your vehicle to ply on. It is the road to India's development.

This the updated version of an article of mine that appeared in the now defunct website in April 2012

Thursday, 19 May 2016

Congress Bags a Pair

Today, 19th May 2016 could prove a historic day in the evolution of the political landscape in India. Having had a track record for getting predictions spectacularly wrong, I believe that for once, I have reason to myself pat myself in the back. 

About eighteen months ago, I had said in this very blog that we might be witnessing the beginning of the end for the Indian National Congress. Today's election results confirm the trend. The Congress has lost power in Assam and Kerala. The opportunistic alliances it forged with DMK in Tamil Nadu and its leftist partners in West Bengal have both bitten the dust. Just as significantly, BJP has made inroads in states like Assam and Kerala, where it has historically never even had a presence.

There is not the least doubt now, that the BJP is rapidly coming to occupy the position that the Congress once did. The 'grand old' party is rapidly descending into the dustbin of history. Only a miracle can save it now. 

To explain my point, I have given below the political map of India as it stood in July 2013 (With apologies for my designing skills- or rather the lack thereof). The green shade denotes states ruled by the Congress either singly or in coalition back then. The states shaded in Orange were ruled by BJP- either singly or in coalition. The ones in Red were communist ruled state, while those in blue were ruled by other parties.

Map 1: Political Landscape of India (2013)

Witness the pre-dominantly green (Congress ruled) landscape, with the odd smattering of Orange (BJP Ruled) as of July 2013. BJP had just ceded Karnataka to Congress at the time and it was just a few weeks since Nitish Kumar had broken off his alliance with them. 

Contrast that with the political landscape as it stands today. Witness how the BJP (Orange) has assumed power- singly or in coalition- all the way from Kashmir to Goa, while Congress now retains only one major state (I have shaded Andhra Pradesh in Blue, even though the BJP is part of the ruling alliance there).

Map 2: Political Landscape of India (2016)

The situation could soon turn much worse for the Congress due to two factors. One, north-eastern states tend to swing in favour of the party in power at the centre. With Assam gone, it is perfectly possible that other north-eastern states will follow suit (elections in most north-eastern states are due in 2017-18). Two, popular dissatisfaction in Karnataka, Uttarakhand and Himachal Pradesh- the remaining states where it is still in power- could see the party suffer reverses there too. Sonia Gandhi & Co have their task cut out if they are to even remain in the race leading up to 2019.

The shrinking electoral footprint naturally means that the numerical superiority which the Congress currently enjoys in Rajya Sabha- the main reason why they still remain relevant in national politics- will erode even further in 2017, when many current members will lay down office, to be replaced by nominees from states no longer controlled by the party.

To be sure, temporary downturns in fortunes are not unusual in politics. However, the Congress is experiencing something far more serious than a cyclical phenomenon. It has historically never managed to win back any major state where it lost power (The only exception being Maharashtra, but there too, the Congress was the single biggest party when it lost power in 1995). Out of the 10 electorally most important states (which account for 382 out of 543 seats in the Lok Sabha), Karnataka is the only state where they are in power. 

Political Landscape of India (2013 v 2016)

Dig deeper, and the situation looks even worse. In five out of the remaining nine states, they have not been in power for at least two decades now. In Maharashtra and Andhra Pradesh (lost in 2014), anti-Congress sentiment is strong after a decade of corruption and misgovernance. Chances of their regaining power in those states are pretty slim. It does not help that they do not have a single prominent leader in any of those states, thanks to the vice like grip exercised by the party's first family.

In fact the first family has successfully ensured that no other leader of stature has risen in its ranks, which means that they alone will have to shoulder the burden of turning around the party's fortunes. To say that their prospects are bleak would be optimistic, struggling as they are with a fragmented leadership distributed between an aged matriarch and a man who seems to have neither the aptitude nor the desire for it.

Writing on this subject in November 2014, I had said "Whisper it if you may, but we may be witnessing the beginning of the end of the Congress,". You can say it out loud now.