Author: Kunal Bose

The Bureaucratic Bungle

By Kunal Bose

In the space of less than a week recently, two leading cerebral lights of the country – Chief Justice of India NV Ramana and former Reserve Bank of India governor Duvvuri Subbarao – expressed their dismay over the unravelling of bureaucracy, multi investigative agencies and the police. But when did the malaise start setting in? In a case like this, one cannot put a precise date on when such pillars that support functioning of a democracy and allows a pluralistic society in an emerging nation to pursue its development goals embracing a universal healthy diet, health and education began to brittle.

For the uninitiated, Subbarao, who was initiated in Indian Administrative Service in the mid-1970s, went on to become the finance secretary and then was appointed RBI governor. His book Who Moved My Interest Rate?: Leading the Reserve Bank of India through Five Turbulent Years came in for much appreciation for the insight it provides into the monetary policy and government-central bank relationship. His appointment as RBI governor virtually coincided with Lehman Brothers filing for bankruptcy marking the climax of subprime mortgage crisis and sending the world financial market reeling. It fell on Subbarao’s shoulders to hold the RBI ship and in turn Indian economy as steady as possible.

At the time of laying down RBI governor’s office, he said: “I had come into the Reserve Bank five years ago, as the Great Recession was setting in. I’m finishing now, as the Great Exit is taking shape, with not a week of respite from the crisis through the five years.” The respective references to ‘Great’ developments were collapse of Lehman Brothers and the US Federal Reserve’s plan to phase out bond-buying.

This is Duvvuri Subbarao for you. Quite a few ahead of him were inducted into the office of RBI governor from either ICS (such as LK Jha and NC Sen Gupta) or IAS (notably RN Malhotra and S Venkitaramanan). The present governor Shaktikanta Das holding the office since December 2018 belongs to IAS cadre. They are not economists like IG Patel or Dr Manmohan Singh or Dr Bimal Jalan but they are all quick learners and have the benefit of inputs they get from the very able deputy governors and the enviably competent research team.

Writing recently about the sad state of affairs of Indian bureaucracy with the IAS officers resting at the pinnacle, Subbarao said at the time of institution of IAS as a successor to the British era ICS, “it was seen as the home grown answer to the enormous task of nation building in a country embarking on an unprecedented experiment of anchoring democracy in a poor, illiterate society.” Jawaharlal Nehru said in his Tryst with Destiny address on the eve of Independence in the Constituent Assembly: “Long years ago… we made a tryst with destiny, and now the time comes when we shall redeem our pledge…  The service of India means the service of the millions who suffer. It means the ending of poverty and ignorance and disease and inequality of opportunity… The ambition of the greatest man of our generation has been to wipe every tear from every eye. That may be beyond us, but as long as there are tears and suffering, so long our work will not be over.”

Calls of this kind from Mahatma Gandhi and his disciples who gave everything to secure Independence had a profound impact on IAS cadre of the time. It will be pertinent to recall here what Sardar Vallabhbhai Patel told the first batch of IAS officers. “I would advise you to maintain to the utmost the impartiality and incorruptibility of administration. A civil servant cannot afford to and must not, take part in politics. Nor must he involve himself in communal wrangles… You are the pioneers in the Indian Service, and the future of this service will depend much upon the foundation and traditions that will be laid down by you, by your character and abilities and by your spirit of service,” the Iron Man said.

Unfortunately, the spirit of service, integrity and impartiality and no expectation of extraneous rewards that Sardar Patel was able to impart on the IAS cadre worn thin over the years. Subbarao, an impartial observer, regrettably will not deny that the IAS has failed the nation after having a great start that lasted many years. He finds the IAS of today as an “elitist, self-serving, status quo perpetuating set of bureaucrats.” As they remain enamoured of the privileges and heightened social status that their offices offer, they have “lost the courage of conviction to stand up for what’s right.”

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But that was not always the case. For all that the nation was set out to do after the Independence, most importantly to create a path out of poverty through development of agriculture and industry, the IAS happened to be the strong delivery arm of the government, in fact in many cases more effective than the predecessor ICS. The British left India as an impoverished nation with poverty rampant and very little health care and primary education for the masses. The immediate task for the government then was to build a “an impressive development administration network from ground zero,” that would at the same time enforce the rule of law and promote social justice. For all this to come about, the country needed a bureaucracy at the top of which was a set of IAS officers absolutely unimpeachable for their “competence, commitment and integrity.”

But what could be the reasons for a service that had such a great start and remained so for a good number of years to lose its way and go down in the esteem of the people? According to Subbarao; “The biggest problem with the IAS is a deeply flawed system of incentives and penalties… When everyone gets promoted by efflux of time… there is no pressure on officers to perform and deliver results… A system that promotes mediocrity and risk aversion rather than innovation and change sinks to a low common denominator as indeed the IAS has.” But can it be denied that in their venality more and more politicians in positions of power are found to be interfering in the work of IAS officers.

There are innumerable instances of the latter not obliging the political bosses for right reasons getting the stick. Take the case of Ashok Khemka, IAS, who at the last count got transferred 54 times in 29 years of service. Subbarao, however, thinks “no political system, no matter how venal, can corrupt a bureaucracy if it stands united and inflexibly committed to collective standards of ethics and professional integrity.” He thinks the malaise relates to a minority of IAS officers but their numbers are no longer negligible.

The country’s Chief Justice does not have many occasions to speak from public forums. But when he does, he has something to say of great import. Our politicians must have squirmed when Justice Ramana urged the central investigative agencies and the police to work “impartially” and break the “nexus with the political executive” for they “owe their allegiance to the Constitution and the rule of law and not to any person.” He wanted all these agencies to “uphold and strengthen democratic values” and not allow “authoritarian tendencies to creep in.”

The rich diversity of the country will not be sustained through dictatorial governance, according to him. He didn’t mince words when he reminded investigative and law enforcing authorities that “the political executive will change with time. But you, as an institution, are permanent. Be impermeable and be independent. Pledge solidarity to your service. Your fraternity is your strength.” It defies intelligence that that over 40 million court cases are pending in the country.

Justice Ramana holds the Union and state governments responsible for half the cases. Either they are moving court against citizens or forcing citizens to move court for redress of official inaction or harassment. He laments while the judiciary is overworked, the government will still add to the work burden by displaying a tendency to defy court orders leading to contempt. A very sad state of affairs, indeed.  

How India Fares On Economic Indicators

By Kunal Bose

Given even half a chance, politicians of all hues will indulge in breast beating. The country was witness to this once again when in the course of 2022-23 budget presentation finance minister Nirmala Sitharaman claimed India’s expected GDP (gross domestic product) growth of 9.2 per cent during 2021-22 would be highest among all large economies. This “sharp recovery and rebound of the economy is reflective of our country’s strong resilience.” In the meantime, however, the Manila headquartered Asian Development Bank in its recently released ‘Asian Development Outlook 2022’ report says India’s GDP last year ‘likely’ grew 8.9 per cent. Mark the word likely in ADB’s calculation.

Whatever 2021-22 growth is finally recorded, Sitharaman could always say in her defence that she presented the budget two months before the closure of financial year and she was only referring to advance estimates. A Trinamool Congress MP was certainly not fair in saying the FM was speaking with ‘fork tongued’ in making such a tall claim for the economy under her charge. No doubt she was boastful, for last year’s growth should ideally be seen against the background of GDP slipping 6.6 per cent in 2020-21. And the 2019-20 GDP growth was a dispiriting 3.7 per cent, very closely approximating the Hindu rate of growth coined by economist Raj Krishna.

The whole of 2019-20 when the bite of Covid-19 pandemic manifested in a series of deadly infections, lockdowns, supply chain disruptions and large-scale migration of labourers to their villages and small towns suffering in the process unbearable hardships was a washout for all economies and India was not an exception. Even while fears of new Covid waves remained throughout the year that closed in March 2021, any relief on that count was negated by high rates of inflation.

Retail inflation, as measured by consumer price index combined (CPI-C) was 6.6 per cent during 2020-21, breaching the Laxman Rekha or threshold level of 6 per cent. But with the revival of economic activities in the post Covid 2021, high inflation became a global phenomenon. For example, among developed countries, the US experienced inflation of 7 per cent in December 2021, the highest since 1982 and in the emerging economic bloc, Brazil suffered price rise of 10.1 per cent in the same month. Expectedly inflation at the rate of 6.6per cent became a source of major popular discontent leading New Delhi to take supply side measures and that tamed it to 5.2 per cent in 2020-21 till December.

But any comfort on inflation front unfortunately for the government and the masses proved short lived. Energy prices were already high when President Vladimir Putin sent his troops to Ukraine in an act of aggression on February 24. That sent oil and gas prices through the roof. As oil and gas and aviation turbine fuel invite very excise duty and also stiff levies at the state level, the two commodities not being covered by GST (goods and services tax), their prices are now greatly stoking inflation. Look at prevailing domestic LPG prices from PPP (purchasing power parity) dollar angle, truly reflecting the local currency’s purchasing power and the income level of average Indian, these are the highest in the world. As for petrol, we pay the third highest price only after Sudan and Laos. Indian oil marketing companies have started buying Russian crude at discounted rates.

As is to be expected, Indian buying of Russian crude has not gone down well with Western nations sanctioning the aggressor country on a growing number of counts. For example, the US has banned all energy supplies from Russia and the UK is working on phasing out oil and coal of that origin by yearend. Whatever sins Russia may be committing, India has deep political and economic ties with that country and the world is aware of that. India has served notice that it will continue to buy crude oil from Russia to protect its own economy.

In any case, fuel prices continuing to rise to new record levels are having an inevitable domino effect with food, edible oils and stationery prices getting revised periodically in sync. A survey conducted by the leading Bengali daily Anandabazar Patrika of families in the monthly income bracket of ₹15,000 to ₹45,000 about how they are coping with the sudden major spurt in inflation found one common answer that even after doing with less of every single item of food and other daily necessities, their savings are going for a toss. Some have lost the capacity to save. Others have started using up what they saved in the past. Experiences of families with identical income or even a little more in other parts of the country are either faring the same or even worse. If this is the condition of people with a regular income, whatever is the size, then think how badly the ones who lost their jobs during the Covid and never got them back or whose deep salary cuts are still to be restored are doing.  

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Mercifully, the unemployment rate, according to the Centre for Monitoring Indian Economy (CMIE), has started declining with economic activities slowly gathering steam. CMIE’s monthly time series data shows unemployment rate was down to 7.6 per cent in March from 8.10 per cent in February. Economist Abhirup Sarkar, however, makes the pertinent observation that even “this unemployment rate is high for India which is a poor country. Poor people, particularly in rural areas cannot afford to remain unemployed, for which they are taking up any job that comes their way.”

Even while the overall national unemployment rate continues to fall, the ranks of unemployed in some states remain worryingly high ranging from 14.4 per cent for Bihar to 26.7 per cent for Haryana. The accepted fact remains inflation has a negative impact on growth and real per capita income. Inflation is not neutral. In no case does it support growth. That is why on the occasion of release of monetary policy the other day, Reserve Bank of India (RBI) governor Shaktikanta Das said: “In the sequence of priorities we have now put inflation before growth. For the last three years starting February 2019, we had put growth ahead of inflation in the sequence. This time we have revised that because we thought that the time is appropriate and that is something which needs to be done.”

Largely caused by Ukrainian war, the inflation outlook has worsened globally as also for India. RBI has revised upward its inflation forecast for 2022-23 to 5.7 per cent from the earlier 4.5 per cent. If the war persists and sanctions further tightened, raging inflation will not be doused. In fact, inflation here could very well cross the Laxman Rekha as the year progresses. If inflation stays this high what option could be there for RBI but to cut this year’s growth forecast to 7.2 per cent from the earlier 7.8 per cent. Inflation and growth outlook being so fluid, Das’ observation that “we are not hostage to any rulebook and no action is off the table when the need of the hour is to safeguard the economy,” is an important pointer to RBI monetary policy staying flexible.

Commodity prices across the board from oil to steel to aluminium and to copper have all significantly appreciated. This is particularly pinching for the micro, small and medium (MSME) sector, which has a share of around 30 per cent of GDP and provides employment to 111 million. High input prices have pushed up working capital requirements of the sector. Will that incremental financial accommodation be available from banks? Unlike large enterprises, most MSMEs don’t have reserves to fall back upon. New Delhi must see that the MSME sector having a share of close to 50 per cent of total national exports is able to walk through difficult times unscathed.

Industry as a whole has welcomed the government investing heavily in infrastructure projects creating demand for products of a host of industries. The combination of mega capital expenditure programme that hopefully will bring Indian infrastructure close to world class resulting in marked fall in logistical cost and supply side measures is the response expected from the government. Private sector too is not found wanting in announcing major investments and this is led by the steel industry with investment commitment of over ₹1,000 billion in new capacity building.

In the challenging circumstances, Indian farmers well deserve a pat on their back for agriculture and allied industries are expected to have recorded growth of 3.9 per cent in 2021-22 against 3.6 per cent in the previous year. There is no promise that the coming days will bring any relief. One may, however, see a silver lining in the Economic observation: “Despite all the disruptions caused by the global pandemic, India’s balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves (they stood at US$634 billion on 31st December 2021). This is equivalent to 13.2 months of merchandise imports and is higher than the country’s external debt. The combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.”

Can Russian Supply Polish Indian Diamond Inc?

By Kunal Bose

Love is supposed to be celebrated with diamonds. Each sparkling stone mined, cut and polished through a laborious and expensive process afterwards becomes a piece of jewellery. A ring or a necklace made of diamond will be for giving to one’s soulmate underpinning everlasting devotion and care. There is one thing about very high value luxuries of life whether it’s a Rolls-Royce Boat Tail or a Bugatti La Voiture Noire in automobile or a Chanel or a Hermes in handbags for women or a piece of diamond jewellery from Tiffany or Boodles, their demand is inflation proof.

Prices may never deter buying a piece of diamond jewellery, but during repeated lockdowns triggered by the Covid-19 pandemic, mining of the precious stone and all that follows before diamond encrusted jewelleries could adorn exclusive stores of Harry Winston and Cartier, there were disruptions in the supply chain where India figures prominently. Diamond is now increasingly coveted by the middle class.

Incidentally, India is the only Asian country with a diamond mining industry located in Madhya Pradesh (MP). However, production is modest with output peaking to 39,390 carats in 2017-18 and then falling to 28,530 carats in 2019-20. Production next year was exceptionally poor at 13,680 carats, thanks to pandemic related disruptions.

Not in what it extracts from MP mines, but in cutting and polishing of roughs and then exporting finished diamonds for use in jewelleries made all over the world, India has an overarching global presence. Confirming this, the world’s leading Hamburg based provider of data and statistics Statista says, of the ten diamonds used in jewelleries across the world as many as nine come from India, after cutting and processing. Now, the Russian invasion of Ukraine leading Western nations to deny banks in Russia to access the SWIFT international payment system has cast a pall of gloom in the humongous diamond processing and trade centre in Surat. The trade is the source of livelihood for nearly 1 million people from Gujarat and other states.

As it would happen, the Indian diamond industry has to contend with uncertainty of supply of uncut stones soon after it staged a remarkable recovery from disruptions caused in every aspect of trade, including large-scale migration of workers engaged in cutting and polishing work to their respective villages and towns, resulting from the pandemic. A spokesperson for the Gem & Jewellery Export Promotion Council says: “Figures till February show exports of cut and polished diamonds had touched $30 billion. March figures are being tallied. But we are hopeful that exports for 2021-22 were a record around $35 billion compared with $25.47 billion in 2020-21.”

For Indian diamond processing industry, Russia is of strategic importance. This is because much of the supplies of roughs come from the mines owned by partly government owned Alrosa, which incidentally has leadership status in the world diamond mining industry. Alrosa, which has a share of around 30 per cent of global diamond production, happens to be the single biggest source of India’s rough imports. The multi-billion dollar Russian enterprise also has mining interest in Africa. It has the world’s largest reserves of the precious stone. In Russia itself, Alrosa has a share of at least 90 per cent of mined roughs.

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The Economic Times says: “While India directly imports only around 10 per cent of Alrosa’s total rough diamond output, most Russian diamonds nevertheless end up here for cutting and polishing through trading centres.” Alrosa annual production of roughs is in excess of 30 million carats. But why does the world has a distinct preference for diamonds occurring in Russia and also why do Indian craftsmen want to work with such stones?

The answer to that is threefold: First, Russian roughs have a high proportion of regularly shaped crystals. This gives an advantage to diamantaires to create “ideally proportioned polished stones.” Second, Russian roughs score high on colour count. Alrosa makes an emphatic claim that the roughs it extracts offer the possibility making “exceptionally white diamonds” that will be difficult to match from stones from any other source. Third, the company takes unabashed pride in saying that diamonds mined in Russia have such “unique morphological characteristics” that their processing will cut cost and time. Moreover, every Alrosa diamond carries a unique certificate after undergoing thorough gemmological examination.

Diamond processors in Surat with a large army of highly trained artisans have an abiding trade relationship with Alrosa with payments in hard currency in millions going through seamlessly till Russian banks were denied access to the SWIFT facility. A further two-stage bite in normal trade with Alrosa came when the US President Joe Biden in his attempt to economically punish Russia first sanctioned Alrosa and its oligarch CEO Sergei Ivanov and then banned imports of diamonds, Vodka and seafood from the country invading Ukraine.

Biden’s first move was not greatly upsetting for the global diamond trade. This was because Alrosa sanction amounted to prohibiting debt and equity transactions. Therefore, it was still entirely legal for US companies to buy and sell diamonds mined in Russia. But the scene changed completely once import ban came. There is the call from non-profit trade association Jewelers of America that its members should “stop buying or selling diamonds, precious metals and/or precious gemstones of Russian or Belorussian origin because of serious ethical, reputational and legal risks.”

Fearing domino effect of US moves on Western allies, Indian diamantaires are keeping their fingers crossed that Russia-Ukraine war will not be a long-drawn one allowing free trade in diamond restored as early as possible. For transaction convenience, they also want Russia once again finding access to SWIFT. “If the West remains lukewarm to Russia origin diamond, then there will be an inevitable squeeze on trade, for that country has such a big share of world production. In consequence, our business, which is largely dependent on processing roughs from Russia will take a knock.

Mercifully, this has not happened as yet since we had fairly good stocks when the war started,” says a diamantaire who doesn’t want to be named. In the meantime, the Surat based trade feels a great sigh of relief as supplies from Alrosa have resumed aided by success of importers here to make payments for rough purchases through German banks. Surat sentiment has been buoyed by the recent Delhi visit by Russian foreign minister Sergey Lavrov, specially his meeting with Prime Minister Narendra Modi. India has historically deep political and economic relationship with Russia. In keeping with that there are reassurances from Alrosa of uninterrupted supplies of roughs to Indian buyers. In fact, orders for roughs placed in March are now arriving in India with payments in hard currencies made through different banking channels. Perhaps soon diamond roughs will be part of Rupee-Rouble trade.

Indian Thirst For Gold, Some Precious Facts

By Kunal Bose

Leave out a tiny section of the truly emancipated of this country’s half the population living mostly in major cities, Indian women nurse an obsessive desire to adorn themselves with gold jewellery and go on piling on it. But is it only about exhibitionism or is there also an economic consideration, howsoever crude that may be driving gold acquisition at individual level? Besides the hedonistic pleasure women derive every time they acquire jewellery pieces, they do also swear by the much touted age old wisdom rooted in Indian tradition that gold should be considered a rainy-day fund.

Women’s craving for the yellow metal is no doubt the major demand driver for the precious metal. But at the same time, not a small section of wealthy Indians, irrespective of gender has found in gold a handy store of undeclared wealth. Almost every time the tax watchdog will conduct a raid, they will find gold with other valuables for which the source of income will perforce remain grey.

But such is the popular appeal of gold, particularly in China, the world’s biggest market for the metal, and India that the present high prices – $1,935 per troy ounce – triggered by Russian invasion of Ukraine and its negative economic fallout reflected in high rates of inflation is not proving to be a deterrent to demand.

“Well, some have definitely postponed buying jewellery waiting for the war to be over and see how gold prices move afterwards. In the near past, we found people abstaining from buying when gold prices climbed to a record ₹56,191 per 10 grams in August 2020. But they came back to whet their appetite and to make for the lost time when prices retreated to ₹43,320 in March 2021. I can tell you, this will be the case again,” says a spokesperson for West Bengal Bullion Merchants and Jewellers Association. Along with the spike in consumer demand, India ended up with record monthly imports of 177 tonnes in March last year riding on sharp price retreat.

Reacting to our gorging on gold in the fourth quarter of 2021 amounting to around 343 tonnes, the Economist of London writes tongue-in- cheek that this was “equivalent to the weight of five healthy Indian elephants every week.” Readers may be informed the Indian pachyderms come with a height of 6.6 to 11.5 feet and they weigh between two and five tonnes. A major concern for policymakers is that Indian craziness about gold is sustained by very high levels of imports, the miniscule domestic production meeting only a sliver of demand.

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Moreover, when the common desire is to build on what they already have, recycling is mostly done by financially stressed families, especially when daughters are to be married off. Whatever progress the country might have made since Independence and whatever our claims to society treating women with respect, a bride’s happiness post marriage is linked to the dowry size, gold invariably being a major component of that. As an extension, gold as a wedding gift is much appreciated.

According to a study covering the five-year period 2016-20, imports had a dominant share of 86% of Indian gold supply, recycling 13% and mining 1%. Referring to the estimated mind-boggling Indian household gold trove of 22,500 tonnes worth $1.4 trillion, the Economist says this is five times the stock in America’s bullion depository at Fort Knox. As it would be, this humongous household stock and also the billions of dollar that the country spends to fund rising gold imports do not come for any productive purposes. Gold whose imports claim the second highest foreign exchange spending after oil and gas is a major factor of the current account deficit and adverse trade balance.

Over the years, an average Indian family has 11% of its wealth in gold against 5% in financial assets, not a flattering statement of economic wisdom. Unarguably, this will not be the case with citizens in any other country, developed or emerging. But is there any way New Delhi can curb the import of yellow metal, whose individual and family ownership is deeply ingrained in Indian culture and tradition?

Gold attracts customs duty of 7.5% but with other surcharges and GST, the total comes to 10.75%. Small mercy that the basic import levy was cut from 12.5% in the 2021-22 budget. But in the prevailing duty there is enough incentive for gold to be smuggled into the country through land, sea and air routes. It is difficult to make an estimate of the volume of gold traded in the grey market. Huge though it is. Some estimates that gold smuggled into the country would be valued around $12 billion. The basic rule is high customs duty emboldens smugglers to trade on a big scale as their risk taking capacity goes up.

Smuggling was negligible when the metal was inviting an import duty of 2% in 2004. But then in the hope of much higher revenue collection, the then UPA (United Progressive Alliance) government led by Congress unadvisedly raised the duty to 10% in 2013, which further went up to 12.5% in 2019 under the present NDA dispensation. Leading jewellers contend that customs duty cut off point should be 4%. Anything above that keeps the smuggling channels alive.

The Covid-19 pandemic leading to lockdown of retail outlets all over the country, postponements of weddings to better times and subdued purchases during Akshaya Tritiya, an auspicious occasion for both the Hindus and the Jains supposed to bring luck and prosperity underpinned tepid demand for gold in 2020. Imports as a result were only 430 tonnes for which the bill came to a modest $22 billion by Indian splurging standard. The health scare largely gone and life having returned to near normal by the final quarter of 2021, gold imports jumped to the most in a decade at 1,050 tonnes, according to official sources.

The volume and also the fact that the precious metal has become so much more expensive ensured the country spending a record amount of $55.7 billion to pay for 2021 imports. The previous record was $53.9 billion in 2011. Unfortunately, the bottom line here is spending so much on import of a non-essential commodity could only put pressure on rupee exchange rate, while the strong demand in China and India keeps gold prices high.

It is no brainer that jewelleries have the largest share of gold use in India. At the same time gold investment demand is rising. Economists will frown on gold imports of Indian size since it does not create value for the economy. But during the two-year long pandemic when jobs were lost and income of families shrank, people started pawning their gold assets for cash to overcome financial crisis that they thought would be temporary. That this is not the case is borne out by the failure of large numbers of borrowers to pay interest on money borrowed by pledging gold. At regular intervals, newspapers will run near full page advertisements of lending institutions putting jewelleries of defaulters on auction. An indication of fast spreading pauperisation of Indians.

NFDC – National Film Development Canned

By Kunal Bose

When the government wants to do something to fulfil its hidden objectives in the name of restructuring art and cultural institutions chances are that will not find favour with the cognoscenti. A much used ploy in such circumstances is to appoint a committee manned by people ready to oblige the powers that be and then readily accept its recommendations. This has happened once again preparing the ground for bringing as many as four institutions doing distinctly different work under the National Film Development Corporation (NFDC).

The process of creating a leviathan out of a moribund NFDC where the government appointed managing director would instead of going by board decisions take direction from the Information & Broadcasting minister and secretary has been set in motion. This NFDC culture of the MD going over the board to the minister, however, is not a recent development. Celebrated film maker Adoor Gopalakrishnan, whose work has received many laurels abroad and great appreciation here, is shocked by the recommendation of the Bimal Julka committee (BJC) that will mean the end of any kind of independence of Films Division (FD), National Film Archives of India (NFAI), Directorate of Film Festivals (DFF) and Children’s Film Society of India (CFSI) as these are sought to be made verticals of NFDC.

Gopalakrishnan gives us a rundown of how NFDC was formed with “high hopes and expectations” based on a recommendation of Dr Shivaram Karanth committee, also called the Film Study Group with members including Mrinal Sen, Shyam Benegal, BR Chopra and Gopalakrishnan himself. He writes in The Times of India: “The Corporation was formed with some of us as members on its first board of directors. We had an MD appointed by the government who would rather take orders from the minister directly than execute the decisions of the board. In effect, the board and the executive (MD) were constantly at loggerheads.” And the MD had impudence to prevail upon the then I&B minister to tell “us to cooperate with her.”

No one in his/her senses will contest Gopalakrishnan argument that the downhill journey of the institution began from the start some four decades ago and during this period more often than not NFDC has worked without a board of directors.

As the government unadvisedly tightened its grip on NFDC, which could only thrive and prosper in an open liberal environment, the institution had lost all its relevance and ceased to be of any value for Indian cinema. Gopalakrishnan is not overstating a bit when he says NFDC has by now “distanced itself from any film business. It now exists for itself.” By way of delivering a coup de grace he says: “It is strange that the government is now planning to saddle it with a heavy load of functions the incumbent is hardly capable of performing even if it is blessed with loads of funds.”

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While there is no denial that all the four agencies sought to be brought under NFDC are underperforming for a long time, the cure for them is certainly not to leave them to the care of NFDC, which, according to Gopalakrishnan, has “proved its worthlessness beyond any doubt.” When he passes such a strong comment, it is out of frustration that NFDC is not what it could have been had the government not sought to control it through its appointed chief executive. Mercifully, the BJC has not come down in the same way on the Satyajit Ray Film & Television Institute and the Film & Television Institute. For the time being at least, these two are spared the sledgehammer blows of an unthinking committee.

When an institution is sought to be hanged, give it a bad name. That is exactly what BJC has done. BJC report and its acceptance in full by the I&B ministry have great import, not the least because Indians are great cinema loving and each of the four institutions can make major contribution in its respective field provided the right work environment and autonomy are given to them. Strangely, even though the report hasn’t got anything to do with national security, the government is not making it public ignoring the urgings of many. Even the filing under the RTI (right to information) ACT did not oblige the government to show the report to the applicant. No explanation is available as to why the public is to be denied access to the report.

Rahul Rawail, director of some popular Bollywood films overlooked, however, by people hooked onto the works of the kind made by Benegal or Gopalakrishnan here or by Woody Allen or Martin Scorsese in the US, was a member of BJC. He is expectedly too very vocal of the great wisdom that the committee has displayed in proposing that FD, NFAI, DFF and CFSI should be brought under NFDC. Interestingly Rawail himself admits NFDC hasn’t “contributed anything of quality and its workforce was having a ball at the expense of the exchequer.”

That makes one wonder how NFDC then in its present state could bring about redemption of the targeted institutions. Talking about these institutions, Rawail says they in the last ten years “slid into a cesspool of muck due to inefficiency, over-staffing and corruption… The only unit that was devoid of corruption was the DFF though it was suffering due to inefficiency of some employees.”

Gopalakrishnan too confirms the “worthlessness” of NFDC “beyond any doubt.” The point is NFDC itself being in a sorry state, what sense it will make to burden it further with the responsibility to infuse life in four other listless organisations. Or is it, as many suspect, the government objective is to see the end of at least a couple of these institutions under the cover of “streamlining and restructuring?”

Rawail has his agenda to inveigh against the four institutions. But as we know all of them did a good job in the past and at least NFAI continues to work assiduously to restore and preserve old films of class for the posterity. Gopalakrishnan says: “One is at a loss to understand how NFAI, which is the country’s treasure trove of film heritage and culture, can be left to languish under a corporate body like NFDC. It (NFAI) is one institution that has been performing exceedingly well from its inception. Fortunately, for some time now it has been headed by a knowledgeable and dedicated officer.”

Tamper with whatever autonomy NFAI enjoys there will then remain the risk of an “irreparable damage” to the institution. Gopalakrishnan has done well to remind us also of good times for CFSI when Jaya Bachchan, a Rajya Sabha member, was heading it. Instead of giving effect to the BJC recommendation that has the potential to further damaging the institutions if not their withering, the sensible thing will be to find the right leaders for each of the concerned institution and give them the freedom to work, of course under the oversight of the government.  

The Cuppa From Darjeeling Hills

By Kunal Bose

Teas grown at some misty high altitude areas in Sri Lanka or Nepal may come somewhat close to the universally celebrated beverage produced in the hills of Darjeeling and these may be selling in the world market as the ‘real’ hoodwinking the unsuspecting drinkers. Connoisseurs will, however, spit all that is fake. For a variety of reasons from climate change resulting in less rains and spells of drought to serious political turmoil in 2017 leading to suspension of plantation work in crucial months to steady migration of potential young plantation workers to the plains to escape from lowly paid garden jobs to city lights, production of fabled Darjeeling tea was down to about 6.20 million kg in 2021, the lowest in a long time from over 10 million kg annually through the 1990s.

Even while the eponymously named tea has always constituted a very small portion of India’s total yearly tea production of over 1.3 billion kg, there were times when over 40 million kg of tea a year was globally sold as Darjeeling brew. As members of Darjeeling Tea Association (DTA) and Indian Tea Exporters Association (ITEA) will bitterly complain unprincipled blenders and packers from both within and outside the country would mix large portions of teas of other origins with some Darjeeling tea and then pass it off as Darjeeling to unsuspicious buyers.

Fearing the erosion of brand equity of Darjeeling tea, which for its special attributes of muscatel flavour and light translucent colour of liquor has earned the moniker champagne of all teas, the Tea Board and industry long worked together to get for the tea grown in Darjeeling hills the Geographical Indication (GI) tag under World Trade Organisation to weed out counterfeit product sold as original, particularly in European markets.

This proved to be a long arduous campaign, for the mighty blenders and packers with links to MNCs took the stand that Darjeeling was only a “type of tea” and therefore, they were free to blend tea from Darjeeling hills with what was plucked in Sri Lankan hills or any other places. Darjeeling tea winning the GI tag in 2005, however, turned the hare-brained argument of packers and blenders got turned on its head. The mischief of misspelling blended tea as Darjeeling tea in European markets continued till September 2012 when the EU took the decision that only the packets containing 100 per cent tea sourced to Darjeeling hills having got the protected GI status could be sold as Darjeeling tea.

But what it is that lends Darjeeling tea the uniqueness putting it on a pedestal much higher than teas of any other origin? According to experts, drinking Darjeeling tea of light golden liquor is pure bliss because the crop grown in a high elevation of 150 metres to 2,100 metres on a unique kind of soil has the benefit of cool damp climate, Himalayan breeze touching hill slopes and constant mist that cannot be replicated elsewhere. Some will say some Taiwanese Oolongs come close to Darjeeling brew. But only ‘close.’ Moreover, under insistence of importers in Europe and Japan, the majority of Darjeeling gardens are totally transformed into making only organic tea with no traces of chemical fertilisers and pesticides. The changeover no doubt has left an impact on production volume. But the demanding agro practice has improved soil fertility as planting of shade trees is helping in preservation of top soil.

ALSO READ: Political Debates And Coffee Beans

Along with production fall in Darjeeling hills, exports of premium tea from the region have shrunk alarmingly by nearly 25 per cent in the past two years. DTA chairman BK Saria regrets the “huge lack of global awareness” of GI of tea grown in Darjeeling hills even after all these years. To correct the situation, he is recommending an appropriately large promotional campaign, coordinated by the government represented by the Tea Board and industry in the EU, Japan and Russia in particular. Such promotion work should also be carried out in the US where more and more people are taking to drinking tea and are appreciative of a good cuppa.  There is no reason why larger quantities of orthodox Darjeeling tea will not find bigger custom in these countries, if supported by marketing and promotional push.

What is also of major concern is large quantities of low cost tea originating in neighbouring Nepal finding their way into India duty free facilitated by trade agreement. Large quantities of Nepalese orthodox tea brought into India and sold in the market here as Darjeeling tea are having a deleterious effect on what is harvested in the hills of northern most district of West Bengal. Low priced Nepalese tea has depressed the prices of Darjeeling tea as it has hijacked a share of the latter’s domestic market. No wonder, imports have strained the finances of the high cost Darjeeling tea growers. Imports playing havoc have happened to the distress of Darjeeling growers at a time when because of Covid-19, domestic demand for the relatively expensive beverage in cities such as Mumbai, Delhi and Bangalore sank. People there in upper echelons have for the time being dispensed with afternoon tea drinking get-together.

India is also the destination for growing imports of large volumes of CTC (crush, tear, curl) tea. In the three years to March 2020, Indian tea imports were 60.35 million kg of which 36.92 million kg was retained within the country and the balance re-exported.  Further, in the first eight months up to August 2021, tea imports into the country were up a hefty 34 per cent on a year-on-year basis, causing prices to fall. It is not, therefore, a day too soon that the Tea Board, which oversees the industry’s working woke up to the damage that cheap tea imports were doing to the local industry and trade.

What also is compromising Indian reputation of a quality tea producer and exporter is low quality teas from Nepal and Kenya on their arrival here are being marketed abroad as Indian beverage. The Board has threatened to cancel licences of importers if they are found to be bringing in cheap teas into the country. The move is triggered by compulsion to ensure that no other teas, imported or otherwise must be blended with the three lines of Indian teas – Darjeeling, Assam orthodox and Kangra and Nilgiris orthodox – for which geographical indication has been secured.

For the middling Darjeeling tea one may be paying around ₹1,000 a kg. But from time to time, some exclusive Darjeeling lines will find foreign buyers for over $1,500 a kg. Such teas come from either late first flush or the second flush. Growers of high quality tea in Darjeeling hills are quite picky about plucking only the best of two leaves and a bud from each plant. This helps in generating good flavour. The follow up withering, rolling and fermentation of leaves are also done with great care to create the unique beverage. Darjeeling tea is harvested and produced in four flashes: First flush is from March first week to May first week when the tea is greenish and the liquor is mild with floral aroma. The second flush running from third week of May to third week of June yields a more mature crop by way of flavour and liquor with a pronounced muscatel flavour. The rain crop coming between July and September is in bulk with hardly any distinguishing character. The fourth flush lasting from September end to mid-November yields strong liquor and also a distinct aroma.

Employees Provident Fund members

India’s Job Creation Challenge

By Kunal Bose

What are the major concerns of Indians today? According to the December issue of Ipsos, the global market research and public opinion specialist, the three burning headaches of urban Indians are unemployment (41%), financial and political corruption (29%) and coronavirus (29%). These are followed by urban Indian worries about crime and violence (25%) and poverty and social inequality (25%). India is one of the 26 countries that feature in Ispos periodic review of citizens’ perception as to whether the things are moving in the “right direction” or “are they off on the wrong track?”

One can always make an issue of the quality and breadth of the survey sample size and how good are interviewers in engaging interviewees in discussions. Whatever that may be, this work of Ispos has won global recognition and there should be no hesitation in accepting that urban unemployment is hitting growing numbers of people across the country as the third Covid-19 wave in the form of mutant Omicron spreads fast. The curse of people going without work and therefore, drying up of their income is being increasingly manifest in rural areas too.

The job data report by the Centre for Monitoring Indian Economy (CMIE) saying unemployment rate in the country touched a four-month high of 7.91% in December comes as confirmation of popular concern of lack of employment opportunities. It will be poor consolation to say that the country had experienced an unemployment rate of 8.3% in August.

According to CMIE, the urban unemployment rate in December rose to 9.30% from 8.21% in the previous month. In rural areas, unemployment rate during the period was up from 6.44% to 7.28%. Remember people living in rural areas constitute close to 70% of the country’s population. This should give an idea of hardships of rural people without ownership of land. CMIE report says new jobs were created in December, but these were far less than people joining the ranks of jobseekers.

“Around 8.3 million additional people were looking for jobs. However, 4 million jobseekers got employment,” says CMIE managing director & CEO Mahesh Vyas. What is happening on the employment front is not surprising against the background of muted economic activity and consumer sentiment downed by Omicron. From an ill-advised demonetisation that badly hit the informal sector and a fairly large part of building construction activities across the country to clumsy rollout of GST, a number of policies were found to be anti-job growth.

State Bank of India says in a recent report that progress of formalisation of the economy has seen the share of informal sector in GDP falling from 52% in 2017-18 to 15-20% in 2020-21.The report has found that ₹130 million crore has come under the formal economy in the last few years. Formalisation is to be welcomed, for it brings increases in output and turnover by firms, which are liable to pay taxes. Cash intensity of the economy will continue to diminish as the government continues to give thrust to cashless transactions, promote digital payments and kisan credit cards and transfer of all kinds of cash benefits to beneficiary bank accounts.

ALSO READ: Covid Has Deepened India’s Poverty Pit

While all that is good for the economy, the question remains as to what extent job losses in the informal sector have been made good by creation of new jobs in the formal sector. Precise figures are not available. But one can easily guess the privation of people who became redundant in the process of emasculation of informal sector gaining pace since the breakout of Covid-19. No wonder more and more faces of jobless Indians stand frazzled.

The unemployment situation being so critical, New Delhi is pushing profit-making public sector undertakings to take up major capital expenditure programme along with green signalling construction of new highways and other infrastructure projects. At the same time, the banks are encouraged to fund private sector greenfield projects and also its expansion at present operating sites. Infra work is always employment intensive, though not of permanent kind. At the same time, because of high levels of automation and digitisation, investments in manufacturing industries are now generating lesser number of jobs than before.

Let’s consider the ArcelorMittal Nippon Steel (AMNS) announcement to build a massive 24 million tonne (mt) steel plant in Kendrapara district of Orissa (since renamed Odisha) at an investment of over ₹10 million crore. The joint venture company will run the plant permanently employing only 16,000 people. No doubt, the proposed steel plant will create significant indirect employment opportunities several times bigger than direct employment in the mother plant through ancillary and downstream industries and services. But compare the direct employment to be created by AMNS investment at Kendrapara with Tata Steel’s 31,189 people on roll (2020-21 annual report figure). The more than a century old Tata Steel has capacity of 19.6 mt at its three mills at Jamshedpur and Odisha.

Odisha chief minister Naveen Patnaik is aware that the state’s rich endowments of mineral resources, including iron ore, coal, chromite manganese ore and bauxite must not only be used to make primary metals such as steel and aluminium but these must be further value added within the state to generate employment for the local people and revenue for his government. That is why at the prodding of Patnaik, the National Aluminium Company and Vedanta Aluminium are building aluminium parks adjacent to their smelters where small and medium units will get liquid metal to make value added aluminium products.

Vedanta Aluminium CEO Rahul Sharma says his company promoted aluminium park will bring in “investment of at least ₹2,000 crore, create an annual incremental economic value of ₹4,500 crore for the state and generate livelihood for more than 10,000 people.” Steel mills and aluminium refineries and smelters in Odisha are found in areas where tribal population is in majority. Ancillaries linked to mother plants and downstream units for value addition to primary metals create many jobs but they need skilled hands. Here the state – in this case Odisha – will have to build institutions in concerned districts to impart skills to tribal and people belonging to Scheduled Castes and Tribes to be ready to work in factories.

India’s rapidly expanding information technology sector, fintech, which is inviting considerable support from venture capitalists and start-ups mounted on IT are the exceptions where supply of human resources are to fall short of growing requirements for at least the next five years. The country’s largest staffing solutions provider Teamlease says fulltime employee attrition in the technology industry will rise to 22% by March 2022 when attrition in contract staffing will be 49%. Shortages of IT and engineering human resources leading to high rates of job hopping are a global phenomenon that is not going to go away any day soon. At the same time, the problem is manifest more in India and other sourcing countries than destination places such as the US and Europe. In their desperation to retain talents, many Indian employers in IT and e-commerce industries are increasingly resorting to the practice of making better offers to people who have served notice to quit. The practice, however, in many cases is proving counterproductive. With counteroffers in hand, the ones having decided to leave in any case get a handle to strike a better deal with new employers.

The counteroffers could result in demoralisation of performers who are not looking for greener pastures. The competitive bidding game is a no-win practice. Shortages of human resources in the specialised niche sectors call for colleges, universities and IITs to raise capacity to produce larger number of IT experts. At the same time, the IT groups and manufacturing companies digitising their operations will have to have bigger budgets for employee up-skilling.

Auto Scrappage Policy & Shared Mobility

By Kunal Bose

Whatever one may say about the quality of management of the economy by Indian finance minister Nirmala Sitharaman, she unfailingly chooses her words aptly irrespective of issues. Even then like politicians everywhere, she is vulnerable to landing herself in trouble, thanks to some media persons given to sensationalising by taking up a point from the raft of arguments she may be making to justify a development.

This happened with her a couple of years ago when she became a target of incessant attack in social media following a newspaper report saying that Sitharaman attributed automobile demand slackening to “millennials prefer not to commit to an EMI and instead prefer having Ola or Uber or taking the metro.” The report didn’t say that the minister also deliberated on impact of stricter emission norms for vehicles (Bharat Stage VI) and registration fees on car demand besides millennial mindset. Sitharaman, as a result, became a sacrifice at the altar of an incomplete report.

Notwithstanding all the brickbats targeted at Sitharaman, surprisingly mostly by the millennials, the ones born between 1980 and 1995, the net savvy upwardly mobile young Indians are increasingly opting for shared mobility and that trend continues to gather pace. This is a phenomenon common in developed and emerging economies, based on convenience, economy in travelling and support from local governments. Minister Sitharaman presented her analysis at the right time in September 2019 since in the earlier month Indian car sales, according to Society of Indian Automobile Manufacturers, nosedived 31.57 per cent to 196,524. August car sales fall was for tenth consecutive month rallying vehicle manufacturers to seek reliefs from the government.

The woes of the industry resulting from growing traction of e-hailing trips, chips shortages hurting production and postponement of car buying by middle class citizens due to the scare surrounding Covid-19 and its variants such as Delta and Omicron remain. For example, passenger vehicles sales in 2020-21 were down to 2,711,457 from 2,773,519 in the previous year. Last month sales were highly disappointing at a seven-year low at 215,000, down 19 per cent from 264,000 in November 2020.

The critics may say anything, but Sitharaman is meeting with growing support for her opinion on virtues of shared mobility. The other day the UK’s junior transport minister Trudy Harrison said owning a car was to become a fad of the past. Speaking at a virtual sustainability conference, she said owning a car was an “outdated 20th century thinking centred around private vehicle ownership. But she thought her country where, according to global database company Statista 63.5 million households out of a total of 80.7 million own at least one car is finally reaching a “tipping point where shared mobility in the form of car clubs, scooters and bike shares will soon be a realistic option for many of us to get around.” What Johnson said was all about laying down the obsession of private car ownership for “greater flexibility (in movement), with personal choice and low carbon shared transport.”

ALSO READ: Biofuel Push Will Aid Farmers, Cut Pollution

Harrison will not be easily laughed out of court. For she has tartly said: “Many things seem far-fetched until they aren’t and I believe the same is true for shared mobility.” At the Cop 26 UN climate change conference, the UK government has made commitment to bring down emissions to net zero by 2050 and towards this goal is a 5 billion sterling pound investment commitment to green transport. Her prime minister has a messianic zeal for cycling and the world saw a demonstration of that when Boris Johnson was filmed riding a bike at the recent Conservative Party conference in Manchester. Johnson’s belief in cycling underpinning good health and clean environment and his transport minister’s recent pronouncement are seen as signals to the UK phasing out use of petrol and diesel cars by 2030. Incidentally, cars have a share of 13 per cent of the UK’s greenhouse emissions.

Reaching that target will be conditional upon carmakers’ capacity to fully migrate to electric vehicles, creation of a countrywide infrastructure of battery charging stations and incentives to be doled out by the government to encourage people to send petrol/diesel cars for scrapping.

But what about India? Take Delhi or Mumbai or Kolkata, the single biggest source of city pollution is emissions from vehicles, many of which wear the tag ELV (end of life vehicle) ready for being consigned to auto recycling yard for recovery of metals such as steel, aluminium and copper. Growing numbers of vehicles left in the open for lack of proper garage space and their open air cleaning are both a public nuisance and a contributor to pollution. After many years of deliberations, the government finally has an automobile recycling policy in place that says more than 15 year old commercial vehicles and cars that have aged 20 years, irrespective of fuel in use will be headed for recycling yard if these fail an automated fitness test.

While the scrappage policy is good news for the automobile industry, it at the same time has to contend with Delloite’s global automotive consumer study saying that the Indian youth are to bring about a “tectonic shift” towards shared mobility services. Remember, people in age groups of 25-44 and 45-64 constitute two major portions of Indian population who commute for work on a daily basis and their travel preferences will have a major bearing on shared mobility. In the meantime, Morgan Stanley says by 2030 India will witness a kind of expansion of shared mobility services to become a global leader in the field. “The proportion of shared miles will reach 35 per cent of all the miles travelled in the country, and this will further increase to 50 per cent by 2040,” says the investment banker.

Many, however, believe that once the internet services beyond the major cities become stable, shared mobility will be embraced by people in the rest of the country. This will further raise the shared mobility’s claim (in terms of percentage) to the total miles travelled.  The American mobility service provider Uber and the home grown Ola have found millennials as committed customers and their clientele that now includes the middle aged and elderly is growing rapidly in the post Covid-19 second wave. This being the reality, automobile makers must get ready to face the structural challenges coming from the two major aggregators and also some small localised service providers.

A ‘strategic assessment of shared mobility market in India’ by consulting and market research firm Frost & Sullivan says both fleet size and revenues from shared mobility services will grow strongly to 2025 and likely beyond as more and more people are getting hooked on to e-hailing because of convenience and economy in commuting compared with owning a car. It expects the fleet size of such services in India to become 4.7 million by 2025 from around 2 million in 2019. A global market study of the emerging business by a separate agency has forecast that the shared mobility market valued at $412.2 billion in 2020 is to become $730.2 billion by 2028. This survey says government urgings that people used share mobility services are the “biggest growth driver” for the business whose origin could be traced to Switzerland of the 1940s and then to the shared micro-mobility offerings such as bicycles in some European countries in the 1960s.

Family Business & Succession Plan

By Kunal Bose

Kokilaben Ambani must still be ruing that her husband Dhirubhai did everything else but write a will clearly stating what their two sons would inherit beyond him. Dhirubhai had an outstanding career of building a monolith that is Reliance from a scratch outsmarting a system in prevalence during his time that to say the least did not encourage new entrepreneurship. Moreover, leading business houses found then had no love lost for adventurous businessmen seeking a place in the sun. Dhirubhai could take care of all that. In fact to the shock of tall men of Indian business, they found Dhirubhai ahead of them, including the storied Birlas and Tatas.

In the pursuit of what even today in a more open environment looks seemingly unachievable, Dhirubhai had his two sons Mukesh and Anil working closely with him for most of the time. The burden of running the business fell on the shoulders of young Ambanis when Dhirubhai suffered the first stroke in 1986 which left him partially paralysed. Even that grievous experience was not enough for the buccaneering industrialist to formally spell out what exactly would be the inheritance of his progeny.

Nobody in the family or his close associates have ever thrown light on what might have baulked the otherwise worldly-wise man charting the course for Mukesh and Anil beyond him. In any case, as was to be expected, the post Dhirubhai days were marked by nasty sibling fights that made way to public domain. Intervention by the mother based on the sane advice of renowned banker KV Kamath who enjoyed the confidence of both Mukesh and Anil ensured splitting of Reliance businesses between the two engaged in a ten-month public row.

Having experienced the nastiness of sibling rivalry and washing of dirty linen in public, it is only to be expected that Mukesh and his wife Nita, who has proved her mettle in a number of areas from sports to education to philanthropy will be working hard to prepare a blueprint for succession so that their three US educated children –Isha, Akash and Anant – continue to move seamlessly to significant roles in Reliance Industries under the watchful eyes of their parents. Under Mukesh’s charge, Reliance Industries has become a behemoth spreading its wings beyond oil-refining and petrochemicals into telecommunications, retail (read both e-commerce and brick and mortar) and technology.

Known for delivering what he promises, Mukesh made an announcement in June of his plans to invest $10bn in green energy over the next three years and at the same time “aggressively” pursue the goal of producing cheaper green hydrogen. All this is to substantially bring down the group’s carbon footprint.

As Mukesh does all this to set the next phase of Reliance diversification and growth, one of the world’s eleven richest individuals is said to be studying the models of billionaire families in the US and Europe transferring control of businesses and wealth to the next generation and also succeeding thereby in wealth preservation. But what must be accepted is that every big family of the Ambani kind has its own challenges and problems and therefore, an arrangement that has worked splendidly well in one case may be found inadequate in other families. For example, at the time of passing of Dhirubhai there was enough in Reliance basket that could have been amicably distributed among Mukesh and Anil. But then sibling rivalry, ill feelings towards each other and blind ambition played spoilsport. Richer by that avoidable experience, Mukesh is reportedly working on a succession plan that will draw ideas from other billionaire families where successions are well settled but still will have its uniqueness.

Bloomberg in a well researched report says: “The 64-year-old Indian tycoon’s favoured plan shares elements with that of Walmart Inc.’s Walton family, people familiar with the matter say, and could provide the framework for one of the biggest transfers of wealth in recent times. Ambani is considering moving his family’s holdings into a trust-like structure that will control Reliance Industries.”

If what is speculated turns into reality, then Mukesh, Nita and the three children will have stakes likely in equal proportions in the trust which will have oversight over the working of Reliance to be run by professionals. Walton family, the owners of big-box retailer has the Walton Family Foundation in place for a long time. Family members may be on the board, controls the listed Wal-Mart Stores Inc. and its direction through majority ownership, but the day-to-day operations are left with professionals who bring new winning ideas and implement them. At the same time, the world is not to doubt that no major decision at the world’s largest retailer with footprints in a number of countries outside the US, including China and India, will ever be taken without consultation with family leaders. No doubt, a good model for Mukesh to seriously consider.

Family business observers will say in one voice that business family heads should not leave any grey areas in matters of succession. No one knows at what point differences will occur even in families where businesses are run jointly by brothers with a sense of amity. Take the brother Hindujas – Srichand, Gopichand, Prakash and Ashok – who between them control a nearly $20bn British-India group. From a high pedestal, the brothers signed a never heard motto in 2014 saying that “everything belongs to everyone and nothing belongs to anyone.” Some years down the line comes the reckoning for the richest London based family, which from trading in commodities and distribution of Bollywood films outside India graduated into sectors embracing automobile (Chennai based Ashok Leyland), banking (Hinduja Bank in Switzerland and IndusInd Bank in India), oil (Gulf Oil International), healthcare and education.

The claim of togetherness got a jolt when Srichand laid claim to sole ownership of the Swiss bank and wanted the London court to rule that the letter signed by four brothers to the effect of common ownership of assets is not legally binding. The 85 year old Srichanda’s health is failing and he also suffers from dementia. His wife Madhu and daughters Vinoo and Shanu believe that the other three brothers are misogynists and therefore, taking actions against them. How the unravelling of more than a century old the House of Hinduja will come about will depend upon decisions of courts in London and Switzerland. No doubt the third generation curse have befallen Hinduja brothers.

Not only siblings fight among themselves. There are quite a few instances in Indian business where parents become victims of the misbehaviour of children. In his newly published An Incomplete Life: The Autobiography, Vijaypat Singhania who made Raymond a household name, there is a chapter The Biggest Mistake in My Life which deals with the blunder of giving away his shares to his son Gautam Hari Singhania and all that followed. He writes: “Things really started to go downhill in 2000–2001, when our clashes became more frequent. After a period of unpleasantness, I thought that the only way out for me was to, in fact, resign as Raymond’s Chairman and Managing Director. I committed the first Himalayan stupid mistake of my life when I sent my resignation letter to Gautam. I had foreseen a scenario where he and I would hug each other – as we had done several times in the past after a disagreement – and we would make up. But this is not how things went. A meeting of the board of directors was urgently called, and my resignation was accepted in my absence. I was in London at the time. You can imagine my abject shock when I came to know of it. I berated myself mentally and not a day went by when I didn’t kick myself for being so impulsive with my legacy… Even after what had felt like an appalling betrayal, I just forgave him for what he did. What else could I do?”

Difficult to find another father like Gautam Hari Singhania who could speak so candidly about the treatment he got from his son and still would be forgiving. The lesson is if you have got a billion dollar or more then keep everything under control as long as it suits you and also write a will clearly stating how your wealth is to be distributed among your children.

Why India Needs A Robust Research Base

By Kunal Bose

An IIT Kharagpur graduate who through all semesters did exceedingly well finally left his mentor and teacher disappointed when instead of doing PhD and spending his life in research and furthering the frontiers of knowledge, he took up a job with a leading foreign owned FMCG group. Over the years, he became a senior vice president of there and was in contention for the office of chairman. He didn’t wait for the outcome of the final roulette. Instead he accepted directorship of Tata Sons, the holding company of all Tata enterprises from automobile to steel to information technology. A great success story in the corporate universe by any yardstick. But his late mentor would never hide his disappointment that the world of academia lost a potentially great researcher to the pull of corporate security and financial rewards.

What happened to this man some five decades ago is still a common occurrence in India. But this is not a unique Indian phenomenon. In developed economies too, many who would do well in pure science research are lured away by the corporate world. There, however, the problem is less acute. Senapathy Kris Gopalakrishnan, cofounder of Infosys and its CEO and managing director from 2007 to 2011, says the problem would not be manifest to the prevailing extent in India had the research ecosystem allowed people to take risks that will not lead to career ruination.

He himself asks the question and then gives the reply: “What is it that allows you to take risks and safely fail without it destroying your entire life? A lot of people tend to pick what is safe because that is more likely to be successful. There’s is a carefully chalked out path for research in academia and when it comes to innovation, we don’t try to be transformative, we try to be incremental. That’s because we are trained to be risk averse, and we recognise that consequences of failure can be very high.”

But times are changing, though not when it comes to undertaking highly time-consuming fundamental research. Let’s consider why are we seeing so many start-ups in the country and some of them becoming unicorns (a unicorn is a privately owned company with a valuation of over $1 billion) over a period of time? From Flipkart, a start-up that Walmart bought by paying $16 billion in 2018 May to hotel aggregator Oyo that is ready to make an IPO to raise over Rs8 billion, many new entrepreneurs have successfully promoted businesses making innovative use of internet and IT.

No doubt what has aided start-ups are family encouragement and funds availability first from venture capitalists (VCs) and then when incubation period is over from hosts of domestic and foreign investors. The media as it is its wont will highlight stories of successful start-ups. There are failures too, not meaning, however, the end of road for start-up founders. Gopalakrishnan wants the same to happen in the “academic and the research environment allowing one to take highly risky, ambitious projects and then try and succeed. Some of these are very long-term, so there’s a commitment required for maybe 10-20, sometimes 30 years.”

What family indulgence and VCs are doing to start-ups, patronage of the government and industry, both in the public and private sectors could do to bring about a fundamental change in the texture of research in India. Take our IT industry of whose rapidly growing turnover, exports and profits we remain boastful. The world is evolving from knowledge economy to the age of artificial intelligence and virtuality. Worth of our IT companies should be judged by their prowess in consulting and capacity to develop software for a variety of applications. As one observer rightly points out, “Indian IT groups are stuck as bottom-feeders, a breed of techno-coolies with no high-end development to claim credit.” The industry may, however, seek solace that TCS, Infosys, HCL Technologies, Wipro and Tech Mahindra find place in Thomson Reuters’ list of “Top 100 Global Tech Leaders.”

The Indian groups in the list are certainly not in the same league as Microsoft, Apple, IBM and Accenture and none of them regrettably is doing enough to get to the coveted position. Even then that Indians working in the West are among the best IT visionaries in the world are borne out by the likes of Satya Nadella, Sundar Pichai and Arvind Krishna guiding Microsoft, Google and IBM, respectively to future growth through robust investment in research and talent and encouraging researchers to take risks without being afraid of failures.

So given the kind of environment that creates a Satya or a Sundar, Indians working in India will be able to take the IT industry to a plane that will be in alignment with the best in the world. No doubt the realisation is donning on the industry here that its R&D needs reinforcing. But look at Infosys annual report – both in financial years ending 2020 and 2021, its allocation for R&D was just 0.6 per cent of revenue. Chairman Nandan M. Nilekani and CEO & MD Salil Parekh must address the issue forthwith. Leaders of other iconic Indian IT groups should also do the same.  

Companies whether in IT or in any other industry will not have to do all research work by themselves. Many of them are already assigning projects to IITs and research institutions and reaping benefits of such partnerships when research results are successfully commercialised.  What a phenomenal collaboration the world saw recently when AstraZeneca and Oxford University worked together for development and distribution of the “recombinant adenovirus vaccine aimed at preventing COVID-19 infection from SARS-CoV-2.”

A few years ago, India too has seen a major breakthrough in developing an early variety and very high sucrose content sugarcane first grown in Uttar Pradesh. The large scale cultivation of the new variety of sugarcane CO-0238 since its introduction in 2012-13 has made significant contribution to the country breaking cyclicality in sugar production to become an ever export surplus producer. Developed at the Indian Council of Scientific Research’s Sugarcane Breeding Centre at Coimbatore, the high-yielding seed is getting progressively introduced in many other sugarcane growing states. This remains a shining example of what an Indian research organisation is capable of doing when there is an ideal collaboration with the industry (in the present instance sugar factories represented by Indian Sugar Mills Association.)

Nobody will question the capacity of Indian scientists to deliver. The challenge is in making available sufficient resources and the right kind of infrastructure. Gopalakrishnan says: “We need to also think about mission-mode programmes with clear goals, ambitious targets and larger teams working on a problem.” The problem is inadequacy of funds for carrying out research work. Just about 0.7 per cent of the country’s GDP is spent on research and most of that coming from the government with a share of 0.6 per cent. Gopalakrishnan would like this to go up to 3per cent of GDP, contributed equally by the government and private sector.

That being said, he says: “We need more people getting into science and scientific research. This has to start from school. We need to create curiosity in children to taken on careers in research, etcetera. Second, we need to ensure that we have enough students getting into PhD programmes. We need to have some mission for the nation to look at certain areas where we direct scientific infrastructure…” The two important goals that the country wants to pursue vigorously are “Aatmanirbhar Bharat” and “Make in India” for the domestic and world markets. To make a success of these, the country first needs a robust research base.