Is Indian Ocean still India’s Ocean?!

Prime Minister’s visit to Seychelles, Mauritius and Sri Lanka has infused fresh energy and support to all these Indian Ocean states. Many of the countries in Indian Ocean are crucial for India’s security and economic concerns. As Hindustan Times rightly mentioned, New Delhi has to ensure that Indian Ocean is, strategically, India’s Ocean! This visit has signaled that India is a security provider in strategically crucial sea lanes for global commerce and geopolitics. India is making its maritime safe and secure for the nation’s interest.

Indian Ocean(Image taken from http://www.marineline.com website)

What PM did in these three countries was to assert India is still a leader with the ability to safeguard and develop these regions and it does not waste its comparative advantages to China and partly US which are trying to influence their presence.

At the same time this does not mean dominance or an ownership, but India would like these countries to consult it before taking any major strategic decisions. Generally small countries lying in the Naval borders of big Nations can feel venerable. For instance China’s revolution in military affairs (RMA) has raised fears of mineral rights, claims over territories, in the nations of East and South China seas. Where as India will never go for a territorial claim, it would strengthen the defense sectors of those countries to eliminate any external powers in those regions.

It is important and a high time for India to strengthen ties with these nations because:

  • Seychelles had previously offered refueling and docking facilities to Chinese warships. Sri Lanka too had hosted Chinese submarines for re-supplying. With the mindset of Chinese to send more and more Naval naval escorts to these places, India should ensure it is the “preferred partner” for these kind of activities.
  • Terrorism through sea is a threat to India

In Summary, Modi has signed two agreements with Seychelles and Mauritius and thus India acquired the infrastructure development rights. By operating and sharing the surveillance systems on these islands, India is slowing ensuring its presence and support in Indian Ocean.

Analyzed from ET and HT.

 

Indo US relations – Expectations from Obama’s Visit

The Obama’s visit last time in 2010 was to an extent beneficial. He announced a series of business deals worth more than 10 billion $ even though there was a declining trend in economy that time. Later, the bilateral relations between India and US were stalled in the last two years of UPA government because of Manmohan Singh’s inability to advance economic reform (due to various reasons). With few friends by the time he left the office, America was not happy with PM’s performance putting pressure to act tough on India.

Now that Modi is doing his best to advance the economic reforms, US is gaining the confidence back. His 5 day visit in September 2014 has induced feel good factor. Though there are still some challenges in the relations, for instance, the disagreement at the World Trade Organization over trade substitutes – unlike Singh, Modi has decade long track record of being a business friendly CM. This is a positive factor to US to advance in strong political relationships.

India US(picture copied from brahmand.com website)

Obama’s Visit can benefit in the following with some actions being taken:

Energy and Climate Change:

India is eager to produce electricity from US built nuclear power plants.
White House stated: “increasing energy access, reducing greenhouse gas emissions, and improving resilience in the face of climate change, President Obama and Prime Minister Modi agreed to a new and enhanced strategic partnership on energy security, clean energy, and climate change”

Defense:

  • Renew for ten more years the 2005 Framework for the U.S.-India Defense Relationship
  • US to work together in military education and training
  • Maritime security, especially important during the domination of China in Indian Ocean

High Tech and Space technologies:

  • India’s is a strong contributor with the U.S. Department of Energy on high-energy physics and accelerator research and development. India is expecting US to partner with IIT’s
  • Also the India is eagerly looking forward for the NASA-ISRO Synthetic Aperture Radar (NISAR) mission, to be launched in 2021.  Next steps to accomplish the mission can be discussed.

India ranks 4 in the most powerful Militaries!!

ET magazine today published “The 10 most powerful militaries in the world” in its centre page. I felt a moment of pride when I see India ranking 4th. I see India has second largest military manpower in the world after China. While US spends $612 billion and China $126 billion, Russia $76 billion, countries UK, Japan, India, France and Germany spend nearly $45 billion each of their budget. Also published are various numbers of military assets like tanks, rocket systems, aircrafts, helicopters, submarines, and aircraft carriers.

indiandefence

Image taken from indiandefence.com

It’s also nice to see India possess 2 aircraft carriers while rest of the countries has 1 or none. Of course no need to mention US has 10. The number of aircraft carriers a country has determines its air power and amount of dependency on other countries’ local military bases.

In the last year’s Union budget, FDI limit in defence was increased from 26 to 49% to boost military modernization. It is very vital for India to allocate its budget based on strategic and operational (military modernization) priorities. Government has made military modernization as priority for now.

Strategic priorities determine when and where the forces are to be deployed. Though two third’s of military is deployed against Pakistan, the threat of conventional military war from Pakistan is not as much as from China now.

Why threat from China is noticeable:

  • There are unanswered questions on how the mountain corps across the China’s border is raised.
  • There has been increased presence of China’s navy in Indian Ocean.
  • The increased China’s defence budget.

Well, when it comes to National security – defence, not all strategies are not visible to us. I am certainly sure; there is something in our government’s mind that has a counter to China.

“Extra” charge for Viber and Skype?

Recently Airtel has increased the tariff for some of the internet services like Viber and Skype. After a couple of days later, they have reverted the rates back. The analogy given in Economic times on 30th Dec is quite interesting. How would you feel if the Toll booth guy on the highway stops your Maruti Swift and says, “Sorry, we have decided to charge more for Maruti Swifts, can you pay double the rate now for the toll?” How would you feel?

network (image taken from it watchdogs.com)

Lets see what Net Neutrality is: ISPs and governments need to treat all data equally, irrespective of service provided by the data, type of user – because Internet is a public resource. A logical question from Airtel’ perspective can be right: how internet is a public resource?, how about my cost of fibre, towers, etc. An ISP has every right to recover those costs of investment, but there is a thin line of difference between right to determine the price and right to differentiate the traffic. As he built the highway, a toll booth guy can demand a toll price for a car, but he don’t have right to differentiate price among cars as all cars occupies same space on road.

Similarly, fibre network is different and Internet is different. An ISP to convert fibre cables to internet infrastructure, it needs internet resources like IP addresses that are public property. When you have access to public property, you cannot determine the usage of it on your terms, or for your business interests. Innovation is a right path to navigate through the new challenges in market instead of raising the charges for Viber and Skype calls in a lazy way. It is not really appreciated a kind of good “business strategy”

The above article is analyzed from ET, 30th Dec

Small and Medium Enterprises (SMEs) are key

 

Certainly, India is on a growing path. However, our economy still struggles to generate enough employment to match the eligible population. One reason is because the economic and financial institutions are not able to provide support the small and micro enterprises (SME). It seems banks are able to support only 4% of this small and micro enterprises sector. I have mentioned the significance of the small and micro enterprises in one of my previous articles: http://thekalyan.com/2014/05/29/india-should-focus-on-micro-small-and-medium-enterprises-now/

SME

(image taken from “The Hindu”)

As per the statistics, these small and medium enterprises provide 90% of employment to decentralized manufacturing, services industries. Majorly known as “unorganized”, this sector is owned by self-employed people. Also the numbers shows that 45 per cent of GDP is contributed by this sector. Once properly recognized, trained, this sector can be of great value to our nation.

Some of the recent positive events can help SME develop

  • Sebi has proposed that bank funding to listed SMEs. This move will give a huge boost to the SME trading platform and eases the financing needs of smaller companies. Another
  • As a part of its strategy to strengthen itself in India, foreign lender DBS is now focusing on SMEs as well, typically one that has a loan requirement of Rs. 5 crore or below.
  • The recent comments by Joe Hockey, Australian treasurer that SMEs can play a major role in strengthening trade ties between Australia and India has made us remind the significance of SMEs.

Well, “Make in India” initiative by our PM is majorly to improve the manufacturing areas of SME sector, we hope there will be new initiatives also taken for other areas of SMEs.

When oil price falls

Currently the oil price is around $80 per barrel.

In the past, whenever there is a fall in crude oil prices, Organization of Petroleum Exporting Countries (OPEC) led by Saudi Arabia used to cut production to ensure that supply fell and the respective prices were maintained. This time it did not happen. For some reason Saudi says “ We do not seek to politicize oil…for us, it’s a question of supply and demand, it’s purely business.” But one can easily see that the actual reason being that US and Canada has seen an increase in Shale oil production in their countries. (Shale oil – A substitute for traditional crude oil, one can comfortably use for power generation etc. ) This boom has led to the United States and Canada producing much more oil than they were a few years back. However, the production of Shale oil is very expensive and it is economically reasonable for US and Canadian oil companies to produce Shale oil only if the crude oil price is between $50 and $75 per barrel. Hence, by ensuring low oil prices the Saudis wants to ‘kill’ the shale oil producing companies in Canada and United States.

Oil picture Kalyan

The Saudi’s strategy is already working. It seems The International Energy Agency (IEA) has said that the investment in shale oil fields will fall by 10% next year, if oil prices continue to remain at $80 per barrel.

On a positive side, for countries like India, it is evident that fall in oil prices it is beneficial. Calculations say that, a $20-per-barrel drop in oil prices transfers $6-700 billion from oil producing nations to consumers worldwide or nearly 1% of world GDP. Falling oil prices are also benefiting the airline and shipping industries, where fuel is their biggest expense.

On the other side of the world, the countries that may get into trouble if the prices continue to stay low are mainly Russia and Iran. Russia and Iran relies heavily on exports of oil and gas. Saudi is giving a tough competition. Again the stats show that Russia and Iran compete with Saudi Arabia in the international oil market, and both need oil prices to be roughly $110 a barrel in order to balance their budgets.

– Analyzed from articles in firstbiz website, IndianExpress and The Economic Times

 

So it’s happening: E-Commerce / E-tail / Online retailing

Probably, you might have seen couple of headlines in the yesterdays and todays newspapers on the conflict between the views of traditional retail companies and that of online retail companies.

Arguments:

Traditional retail companies’ claim:
The ‘predatory pricing’ followed by e-retailers like Flipkart, Amazon, Snapdeal hurts the traditional brick and mortar retailers. The discounts provided by them are far below the landing price (the minimum price that is offered in retail shops). This has impacted 25-30% of the businesses of traditional retailers and have lost it to e-retailers in last 6 months. This may impact lakhs of jobs in the traditional retail industry.
Traditional retailers are also concerned if the owners of online retailers have funded the sellers to boost the sales. Boosting the traffic on these websites provide e-retailers higher valuation, hence more investments and improving their business.

 

E-retailer companies’ claim:
E-retailers provide only a ‘marketplace’ where sellers and consumers meet. They provide a website , a portal where the consumers can view the products from sellers and the respective prices from sellers. They do not own inventory or decide the prices for the products.

etail2image courtesy: mytokri.com

 

Point of view from traditional retailers
E-retailers sell brands indirectly. Once has to be cautious about it. Assume premium products getting sold for low prices in a consistent way, that will impact the brand value.
As per the basic concept of marketing, any business selling at below cost like that of predatory pricing following by e-retailers now is unsustainable. They have to be cautious that such business model will fall down eventually.
Only way traditional retailers can sustain the competition from e-retailers – move to omni-channel capabilities. These days all retailers also have an online portal available. We have also seen signs of some small kirana stores now offering online ordering and delivering facilities.

Point of view from e-retailers:
At the same time, online markets have enabled small sellers, retailers take their products to customers. People living in small towns have access now to the same selection of products as that in metros. E-retailers can reach to larger customer base using a fraction of the capital they would require for traditional retail store. Adding with the low cost of sales and distribution compared to traditional retailers has contributed to higher profits.

E-commerce is not only a meeting place for consumers and sellers. It is also improving the logistic and courier companies, which employ lacks of people.

Summary:
As per stats, Indian retail market will gear up from current $650 million to $1 trillion by 2020 and there are a lot of opportunities for both offline and online retailing.

 

Featured Image courtesy :www.business2community.com

Boosting solar usage in India

Today one of the TV programs was highlighting the importance of Solar Power in India. Meerwada, a small village in Madhya Pradesh is one of first villages to completely operate with Solar Power for their household activities. The power is round the clock. This is a motivating factor to rest of India to use solar power. What made it more inspiring is that the monthly electricity bill for each household is Rs. 75/- that was equal to the Kerosene consumption for the lighting lamps before. A point to note is that the electricity bill is also not subsidized.  A California-based solar power service company has chosen 150 villages to light them up with Solar power.

Solar plant

 

(image copied from treehugger)

At the same time, many places in Gujarat and Rajasthan are also successful in implementing these solar powered models. A small solar plant and the own people of Village manage it.

PM’s decision of spending 1500 crores two days back is quite a good one to cherish. 40% of India’s population has no access to reliable electricity. This should be of great good for those people. The amount will boost the use of solar power, building ultra-modern solar power plants. Also this helps in powering farm irrigation pumps, and to lay solar panels across the banks of canals. Based on the technology used, a typical 1MW power plant that can cater the needs of nearly 1000 homes, needs 5-6 Acers of land and the plant has life time is 25 years.

Also the decision to double the tax on Coal producers is an indication to incline the investments towards renewable energies.

How far Bullet Train is feasible in India

Though, the high-speed train proposition has been initiated by Mr. Lalu Prasad in 2008, the then Railway minister, it seems that current government looks anxious in completing the project. Lalu has proposed Mumbai Ahmedabad as one of the high-speed rail corridor with 160-200KMPH. But Modi’s govt is making it a full speed corridor with the speed of 300KMPH in line with Japan’s bullet trains.

BulletTrain

 

(image taken from hdnux website)

Bullet train is obviously a sign of growth for Railways. Well, with most of benefits like less travelling time and high-end infrastructure and other amenities like Wifi etc, there comes lot of questions and risks involved in building the project.

  • Reaching the common man: With the commercials mentioned below, it is evident that the travel in bullet train is not for common man. With the recent hike in railway charges, and reducing passenger subsidies even to the poor, it may not be wise to set up a bullet train where fares have to be subsidised.
  • Feasibility of the project commercials: Critics question the creation of 60,000 crore project when Railways are short of money. The Rs.60,000 crore project has to earn a minimum surplus of 6,000 Crore, annually to service debts and the capital.  To generate profit of 6,000 Crore annually, with an estimate of 10 lakh passengers (no. as per Railway info) travelling in the corridor, the annual servicing cost of the investment would have to be Rs. 60,000 per journey. Experts feel this math is nearly impossible.
  • Land acquisition: A huge amount of land should be acquired and it may take up to 5 years as per experts. The cost of project will be increased for every passing day. The bullet train runs in a populated line where land acquisition rate will be high.
  • One more point to note is with respect to bullet trains in China: except the Beijing and Shanghai line, rest all bullet train facilities are operating in losses for years. We should be cautious and learn not to repeat the mistakes they did.

Having said, all these, government would have considered all these challenges and hence let us wish and wait to see how our government will overcome these.

Overcome immediate hurdles in IT industry

With the new economic activities in US, there has been a growth in jobs in US, at the same time more work offshored to India. Also the positive sentiment is shown in Britain and Europe that in turn helps India in getting more work. A global economic recovery is good news for those who are relying on the IT budgets. Even the Software product development companies are also benefited with this trend. These all looks like a positive trend in the IT industry.

IT-industry-bcbay

(image taken from trackworks website)

But, there are two main reasons that are having a negative impact on the growth of IT industry in a short term. It is majorly on the decreased margins or the increased costs with relatively less increase in topline.

  • The annual pay raise to its employees
  • Higher visa costs for the employees in the customer locations

Solution: The way the margins can be increased is by:

  • Automation of routine tasks, so that increases in staff productivity will stay ahead of costs
  • Indian IT companies should gain confidence of the clients’ core activities such as research and development areas so that those core activities can also be offshored, increasing the work that can be offshored.

There is a very possibility that Indian IT companies can cope up with the margins, but as mentioned, it may be difficult to have it done in the first quarter.