Friday, 15 December 2017

Peering into the Crystal Ball (December 2017)

I have spoken more than once about the existential crisis that the Congress party has been facing since 2014. If the exit polls are to be believed, the grand old party is all set to slip further into the abyss of irrelevance. It is hard to imagine a worse beginning for Rahul Gandhi's reign as party president, should that come to pass.

Himachal Pradesh has had a long history of anti-incumbency, with every election since 1990 leading to a transfer of power between Indian National Congress (INC) and BJP. Considering that background and the controversies that the current Chief Minister Virbhadra Singh is currently embroiled in, it was always going to be an uphill battle for the INC to retain power in the hill state.

Per contra, The Gujarat state assembly election presented a golden opportunity for the Congress to effect a revival. Given the Patidar agitation, the agrarian crisis in the state and the inevitable anti-incumbency after two decades of BJP rule, a dip in the ruling party's vote share is but natural. There also was the fact that the BJP has not yet been able to fill the state leadership vacuum created by the exit of Narendra Modi in 2014. If ever there was a golden opportunity for the INC, this was it.

Political Map of India (15th December 2017)
Legend: Yellow-BJP, Green- INC, Blue- Others

Truth be told, the Gujarat state elections mean a lot more to the Congress than to the incumbent BJP. The later is in power at the centre and in most states. An electoral loss in Gujarat would definitely be an embarrassment for the Modi-Shah duo but a relatively minor setback, since Gujarat accounts for no more than 5% of the seats in both houses of parliament. The outlook is very different for the INC, whose electoral footprint is currently limited to just five states. A victory in Gujarat can turn the tide.

It would seem right now, that the golden opportunity has been squandered. In fact I'll stick my neck out and state that the BJP will retain Gujarat, albeit with a smaller majority. Despite the electoral alliances and the anti-incumbency factor, the INC was handicapped by a variety of factors. Let me explain why.

First and foremost, the party's campaign was led by Rahul Gandhi, who does not speak Gujarati and whose Hindi is clearly rather limited. Its hard to imagine that he was able to connect with the public in a state where regional pride runs high. On that score, his chief opponent was at an obvious advantage, being a Gujarati and a hugely popular former Chief Minister of that very state to wit.

On a related note, I strongly suspect that Mr. Gandhi's constant criticism of Narendra Modi played into the hands of the ruling party. Mr. Modi is still seen by many as the pride of Gujarat. Whatever grievances the people of Gujarat might have against their government, Rahul Gandhi's repeated baiting was bound to be seen as an affront to regional pride- a theme the Prime Minister repeatedly alluded to during the campaign trail.

Rahul Gandhi: The Weakest Link

In fact Mr. Gandhi's leadership was his party's Achilles heel. Irrespective of what was reported in the media, his public utterances (see this press conference for instance) continue to give the impression of a man who makes grandiloquent statements with very little by way of specifics to back them up. If Rahul Gandhi has a clear vision for Gujarat, he certainly failed to articulate it.

Another sign of weakness in the Congress campaign was Mr. Gandhi's temple visits and the proclamation that he is a Shiv Bhakt, which seemed strangely out of sync for the supreme leader of a party that has always worn secularism on its sleeve. It was stranger still, to see the Congress expending so little effort to engage with the Muslim community. One got the impression that the grand old party was reacting to the opposition's strategy, rather than setting the agenda.  

Which brings us to perhaps the INC's greatest weakness: the fact that it has not offered anything by way of an alternate vision. Mr. Gandhi continues to speak about freebies or loan waivers. In short, he and his party promise nothing but more of the same, which is precisely why they have lost a succession of elections over the last five years. The party seems unable or unwilling to grasp the fact that the country has changed dramatically since the turn of the century.

I see little chance of Rahul Gandhi & co upsetting the apple cart in Gujarat. My prediction is that the INC's electoral footprint will shrink to just four states. The BJP will retain Gujarat and topple the Congress in Himachal Pradesh. 

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.