Dieselification of the economy and its Long term impact

With diesel heavily subsidized by the government, the impact is clearly visible -People are figuring out a way to replace other fuel with diesel, wherever possible. It is for everyone to see that the sale of diesel cars is growing much more than that of petrol.

It is so short term and so foolish! Two things - First, government cannot continue to subsidize it for ever, that is clear. 2nd, diesel (as a fossil fuel) is going to ultimately run out, that too is clear.

By subsidizing diesel, government is doing two things - a) Burning a hole in its pocket, running a fiscal deficit that is scaring the investors away and hence slowing down the economy. b) Channeling money, R&D, effort, time and energy of other enterprises (government owned or otherwise) in an area which anyways is not a long term bet.

We as a nation would be much better off if  we put in these kind of resource in researching alternate form of energy, something that is going to last long term - fusion reactors, bio fuel, efficient solar panels, safer fission reactors, efficient wind turbines, harnessing wave energy, tapping geothermal energy. So much can be done, only if we set our goals right.

Making a case for Rahul Gandhi to take over as Prime Minister

India's GDP numbers for the last quarter is a sad commentary on how our government is running our economy into the ground. Pranab Mukerjee talks about India's GDP growth better than that of Euro zone countries. He does not talk about the basic standard of life that those countries have already provided to their citizens. I really wonder what is the motivation for people like him, who are far beyond their retirement age, to stretch and aggressively work towards economic upliftment of the country or fix issues quickly. They are happy warming their cozy chairs, bending backwards to appease the people who keep them in power. While we are stuck with Congress for couple more years, here is the best possible scenario that I can think of, under current circumstance  - Rahul Ghandhi should take over as Prime Minister. He is young and has maximum at stake - his future. He has shown the inclination to go out and connect with people. He had the courage to speak in favor of FDI in retail, logically arguing that it will benefit a large population of farmers vs the short term impact that it will have on the trading community. There are still couple of years for him to turn things around. The going has been so bad for UPA II till now, that anything marginally better would reflect good on him. He has to just put some energy and focus on getting things done. If group of Ministers must meet to take a decision, then instead of that meeting taking place after couple months, have that meeting done now, push the envelop. Allow executives to take decisions rather than lining up all of them for legislative discussion and hence delays. Punish people for corruption and showing favoritism, however don't start second guessing executive decisions, there is no end to it. No one will take any decision. Hindsight is always 20-20. 


Manmohan Singh should take over Finance portfolio.(A good nurse may not necessarily be a good nurse supervisor, likewise, a good economist may not necessarily be a good administrator/politician). Why not use Manmohan Singh in a role that he is good at - Finance vs. in a role where he is ineffective. Pranab M should be booted up to Presidential Palace.

Mr Prime Minister please take over Finance Portfolio

World over, the economic environment  is getting tough and uncertain. The countries that show that they have their act together will have less pain and the countries that continue to dither will bring misery to their citizens.

In case of India, we have done enough in the recent past to scare away the investors - changed the tax laws retrospectively, cancelled the spectrum allocations in case of telecom, brought in General Anti Avoidance Rule (GAAR), announced opening up of retail and then put it on hold,  not implemented uniform Goods and Services Tax, did not do anything concrete to bring the runaway subsidy bill under control, created ambiguity around allocation of coal blocks, allowed general corruption and red tape to have a field day. The list goes on and on.

I am sure there are a lot of good things happening too. However, the perception and the sentiment is negative and before you know it becomes reality.

If there is one thing that this government could do, just one, to start hacking away at the negative sentiments, then that would be to move Finance Ministry under Prime Minister Manmohan Singh.

Bump up the current finance minister - Pranab Mukherjee - to the President's office and make Prime Minister Manmohan Singh take additional charge of Finance.

Manmohan Singh is not known for his political astuteness, we have witnessed that, (or may be he is, that is why he became the Prime Minister, topic for another debate), however he is recognized for his hold on economics. He is respected for that. Why not send a signal to the world that we take our economy seriously and we show this concrete action to back our words!

Mr Prime Minister please do it!

Shape of Water

Went to Sikh National College, Qadian (near Batala) yesterday. (Very rich history, topic for another note, some other time). Drove thru' Punjab country side. I was amused to see the shape of overhead water tanks in private homes. They come in all shapes - Cocks, Pigeons, Hawks, Aeroplanes, Cars, Footballs etc. Do the other parts of the country have anything like this?

Making Past Perfect!

Our government follows it literally! It has chosen to revise the tax laws from back date. The law in question relates to capital gains on sale of India based assets, when the transaction happens between two foreign entities. We are not debating whether the change is right or not, I personally think it is right. However, the bigger question is whether the government should change this from past or not!

It is akin to government making changes to the motor vehicle act, mandating that all vehicles should be driven on the right side of the road instead of left . Imagine these changes are made with effect from 1960. As a followup, the government sends penalty notice to all the people, who owned any vehicle since 1960, since they have been driving on the wrong side of the road. To soften the blow, government says, the normal penalty is Rs500  but we will only charge Rs250 to the people who have been driving on the left prior to April of this year! What generosity!

It does not take a rocket scientist to figure out that this is nonsensical? So do we assume that the top policy makers and bureaucrats are idiots? I am tempted to believe it, however, the situation is probably more complex than what seems on the ground. 

Here's what I think is the core issue. Government does want to tax sales of any India based asset, even if the ownership of the asset changing hand lies outside India. Fair so far. I think it also does not want to tax past transactions(I would like to give it a benefit of doubt). Here's the catch, there probably are cases, in the past, where such transactions were taxed. Supreme courts ruling in Vodafone's case would have allowed such companies, who paid taxes in the past, to come back and claim refund. Government, by bringing in this law, with retro effect, is covering its behind. 

Government is between a rock and a hard place! If it does not bring in the legislation from back date, it is vulnerable to refund claims by companies, who can cite Supreme Courts' ruling in Vodafone's case. If it does, it  vitiates the investment environment! What should it do? 

What is your vote?

Fiscal Deficit and The Diesel Price

Fiscal deficit and the diesel price. What is the connection? Simple - Both burn a hole in our pocket. What is the difference, one burns the hole visibly, and the other stealthy! The funny thing is, the stealth hole is much bigger and deeper, but most of us don't care about it! Why? Are we idiots? Don't we know what is right and what is wrong? No, none of that.

The diesel hole is direct, visible, pinches immediately and is understood by 99% of us. The fiscal deficit hole is much bigger, deeper, indirect, comes with a lag and is  understood by 1% of us. I love percentages, they change the game completely!

Our politicians, all seasoned politicians, have access to best of the economists, have been in public life for many decades, have interacted with best brains, clearly understand both the economics of diesel and fiscal deficit. But more than the economics they understand the percentages, the percentage of electorate who know or don't know the difference!

And that is where the character matters, character of these politicians, which determines how they use the information that they have.  They can be true leaders, go to the masses, teach them why letting diesel prices float and allowing it to burn small hole in our pocket, for now, will help us ward off fire to our trouser! or they can be, guess what, politicians(!) and tell people that they are the ones keeping the lid on the diesel prices, who cares about fiscal deficit!

Socially Yours

Love it or hate it,  but you can't ignore it. Social networking is here to stay. To some, social networking is antisocial, making people not mingle in person, to some, this is the best thing since sliced bread.

Most of the educated humanity, with means, seems to have congregated on it already. Whosoever has not, is increasingly feeling isolated and under tremendous social pressure to jump on the bandwagon.

Businesses can not afford to ignore this congregation. However, the rules of this congregation are very different from any that the business has ever dealt with in the past.

Traditional marketing techniques don't apply.  New rules have to be learned, new techniques have to be mastered. However interesting thing is the new rules and techniques are not clear either.

There are so many of these sites, what to do? Which circle to use what face to spite? On which site to put up the official business page? How much to tweet? How much to share?  How to track who is saying what about the business? How to respond to good or bad comments? How to know and track the influencers and influence them? How to know what your competition is doing? How to track and measure the effectiveness of your social media strategy?

There are answers to all the above questions, however, the interesting part is that the answers have a shelf life. Today's correct answers won't necessarily be correct tomorrow. The landscape is not just changing, it is getting created, at a rapid pace. Hence, the techniques used to address this congregation of people in the virtual world today, would not work tomorrow, that is almost a certainty.


As a first step, businesses would do themselves a favor if they recognize the importance of social networks and virtual communities.

Stay tuned for more....