Economics of Happiness [Must Read] #Economy #Capitalism

Stumbled upon this nice piece by Jeffrey Sachs as he thinks this is an apt time to -

....reconsider the basic sources of happiness in our economic life. The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction. 

He goes on to present conclusions drawn by a gathering of experts in Thimphu - the happiness capital of world.

Third, happiness is achieved through a balanced approach to life by both individuals and societies. As individuals, we are unhappy if we are denied our basic material needs, but we are also unhappy if the pursuit of higher incomes replaces our focus on family, friends, community, compassion, and maintaining internal balance. As a society, it is one thing to organize economic policies to keep living standards on the rise, but quite another to subordinate all of society’s values to the pursuit of profit.

Yet politics in the US has increasingly allowed corporate profits to dominate all other aspirations: fairness, justice, trust, physical and mental health, and environmental sustainability. Corporate campaign contributions increasingly undermine the democratic process, with the blessing of the US Supreme Court.

Read the article here.

Thoughts About India

Some links which are in tune with what's on my mind...

1. India's Costly Culture of Corruption [Steven Pearlstein in Washington Post]

"These are all reminders that, for all its progress in recent years, India’s economy remains very much an insider’s game. A recent study by two American business school professors confirmed that much of the formal economy continues to be run by a couple dozen family-controlled groups that seem to be in just about every major industry — manufacturing, retail, energy, infrastructure, shipping, construction and telecom."

2. India Inc is not a small crony club [Swaminathan A Aiyer in Times of India]

This is a serious and common criticism, but is mostly wrong. Consider the sensex between 1990 (just before economic liberalization) and today. The sensex comprises the 30 top stock market companies, and the Bombay Stock Exchange keeps changing companies in the list as old giants decline and new ones emerge. If indeed India was dominated by a few oligarchs, the sensex would contain much the same companies today as it did 20 years ago.

3. New India story is about flight of capital [Swapan Dasgupta in Times of India]

From sweetheart deals in telecom and offshore exploration to the ouster of reluctant farmers from their lands, corporate India is being painted the root of all evil. It has become the new juju man—the puppeteer controlling a range of subordinate players ranging from bent bureaucrats to pliant politicians.

The first story above tells what is on mind of everybody in India. Second is a repudiation of the first argument - though a flawed one in my view. The third one, like the second tries to defend big coroporates in India from the recent public outcry - again a meek attempt.

The truth is that India has become a corrupt society. Everyboy knows this. The rich and powerful benefit from it. Everybody else suffers - the biggest loss being the that of opportunity.

Reality Is A Farce

Today I got to read 2 extremely brilliant articles which propound a line of thought to which I subscribe whole-heartedly. Interestingly these articles might have seemed a bit politically incorrect had there not been an economic slowdown.

A little secret that will make the world fall apart

Most of the time, the valuelessness of money doesn't really matter. As in a Ponzi scheme or a run on the bank, unless everybody tries to cash out at the same time, nobody ever notices that the bank didn't actually still have all the money you gave it in deposits. Conversely, unless everybody tries to actually exchange their money for goods and services all at once, nobody realizes that the economy didn't actually have all the goods and services you thought you could pay for. When people realize it all of a sudden, that's when you get inflation.

-- Does not this post reflect the title of this blog itself!

The future is… boring

Computers again. We made text editors; text editors expand until they can read email. We made web browsers; now web authors spend half their time choosing an optimal shade of blue and tweaking animation timings. We made software installers with automatic downloading and dependency checking; now systems like Debian split each package into infinitesimal pieces just because they can. We made spreadsheets; they were done by 1995, so we added Clippy instead. We made fancy GUIs with detachable, customizable toolbars and subwindows; now we have non-detachable, non-customizable ribbons and tabs. We made email, then newsgroups, web forums, blogs, and now twitter; the same thing over and over.

And yet we keep trying. Technology fixes a problem, and then it overfixes it ...

-- Is not this the reason why our generations can fancy a 4-Hour Workweek? My father and his father’s father never had any time to kill…

Is ‘Satyam’ An Isolated Case?

2 Eye-opener news -

India’s Bourses Have Hundreds of Satyams

There're hundreds of Satyams listed on the stock exchanges. Good coporate governance seems to be last in the priority list as over 1,200 companies listed on the Bombay Stock Exchange (^BSESN : 9156.31 -250.16) have yet again failed to comply with corporate governance norms for the quarter ended September 2008.

"In terms of Clause 49 of the Listing Agreement, 1,228 companies have not submitted corporate governance report," the BSE says. The exchange has been putting out almost the same number of companies in the list of those of violating Clause 49, quarter after quarter. The Indian Express had earlier reported about this menace but the exchanges and the regulator are yet to tackle the issue. (Link to the story)

Wipro Shares Tumble on World Bank Contract Ban

Shares in India's No 3 software company, Wipro Ltd (WIPRO.NS : 226.85 +-24.1) fell more than 12 percent on Monday after the outsourcer said the World Bank had barred the company from its direct contracts, citing a conflict of interest.

The decision, taken by the World Bank in June 2007 and effective until 2011, was being announced now under revised disclosure policies, Wipro said.

The World Bank said in a separate statement from Washington that the ban was for "improper benefits to bank staff". It had also earlier barred Satyam Computer Services (SATYAM.BO : 36.15 +12.3) for eight years.

(Link to the story)

Nano – Who Is Funding the Car?

I always believe in the fact that there is always something more than what meets your eye. And this has been proved right for me on every occasion.

Take case of Nano – the cheapest car from India’s Tata group. Tatas promise to deliver the car at INR 100,000 (i.e. little more than $ 2000). Mind well – this is a promise, so the car will carry the INR 1 lac tag notwithstanding any external factor.

Initially Nano was to be produced in the eastern Indian state of West Bengal which is ruled by communist party for decades. Surprisingly, the opposition to the Nano project came from not the communists but their opposition – Trinmool Congress leader Mamata Banerjee. She agitated so strongly against take-over of land by Tatas that Tatas had to pull put from the current location – some 50 km away from Kolkata.

The utility of Nano is beyond doubt. A 1 lac car puts mobility within reach for thousands of small-town Indians thereby giving a strong impetus to economy. Forceful agitation by Mamata Banerjee (her supporters sealed the Nano plant area, making normal production impossible) created a roadblock for Nano which by now has become a point of pride for Indians. This act generated widespread anger against the tactics of Mamata and her actions were said to be politically inspired. Incidentally, Tats had to pull out from W. Bengal and they have now opted for Gujarat for setting up the Nano plant. Read these media reports here, here, and here.

Though I am fully for the Nano and believe that political sabotage of any project is worse rather than good, I always felt that there must something more than what meets the eye. For example, no media report was talking @ Tats’s deal with W. Bengal government. No facts were being presented anywhere.

Today, I came across what I was searching for many days – some facts from other side of fence. I am not drawing any conclusions here; I just want to point out some facts presented in an article. Here is an excerpt (read original article here) -

                “The cash starved WB government has given a Rs.200 crore loan to Tata Motors at – yes – at 1% interest. The first installment will be repaid in the 21st year of the project. Does a group that paid Rs 35,000 crore or so to acquire the British steel company Corus need a Rs.200 crore loan at 1% interest? Forget that. By the time the first installment is due, Tata Motors would have earned close to Rs.2,000 crore in interest income by investing that money in a fixed deposit.
               Tata Motors will pay a lease of Rs.1 crore per year on 647 odd acres of land for the first 30 years of the 90 year old lease. That is less than Rs.1,300 per acre in commercial land, less than 50 kilometers from Kolkata. Even poor middle class souls like you and me pay a lease of Rs.1,80,000 per year for a 1,000 square feet house far from the heart of the city.
               The Nano project will get power at Rs.3 per KwH; the current rate in Bengal is Rs.4.15. If rates go up by more than 25 paise per Kwh in five years, the government will refund Tata Motors. You and me are already paying close to Rs.6 per unit for electricity. For every Nano sold in Bengal, the state will de facto refund the VAT and sales tax collected on each sale of Nano.”

If these facts are to be taken as an indicator to the kind of deals state governments are entering into, then it is the state’s taxpayer who is going to bear the burden of car’s cost-price difference.

A 1 lac car, then really is not so attractive an idea that it is without such facts.

Read @ Financial Crisis

Financial Crisis As Explained to My 14 Year Old Sister - Kevin Nguyen

Kevin: I’m getting to that. Let’s say that the Charizard is worth $50, so in case you decide to not return my money, at least I’ll have something that’s worth what I loaned out.

Olivia: Okay.

Kevin: But one day, people realize that Pokémon is stupid and everyone decides that the cards are overvalued. That’s right—everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.

Four Stages of Global Financial Crisis – Ajay Shah

The first place to focus on was US housing construction. US housing was clearly in stratospheric territory. Once the US Fed started raising rates, and Mortgage Equity Withdrawal became less important, trouble was going to come about in US home construction. In this period, I watched the DJ US Home Construction Index.

Can a US Style Financial Crunch Happen In India? – Prof. Jayant Varma

Another way of looking at the Indian situation comes from reading Ellis’ paper “The housing meltdown: Why did it happen in the United States?”, BIS Working Paper 259. Many of the factors mentioned by Ellis are equally applicable to India:

• The supply elasticity of real estate construction has been very high in the current boom (compared to the past) and this supply overhang has the potential to deepen the correction that is required.

Rationality of Panic – Steve Coll in New Yorker

People don’t generally panic in the sunshine. They panic in the dark. And we are in the dark about what assets and liabilities are truly held in what has been properly labeled the “shadow banking system”

Inflation – Where Are the Real Culprits?

In this excellent article, on Livemint.com, Murad Ali Baig points out to the exact share of oil price rise in Inflation. Price hike for every commodity and everything else is attributed to the sky rocketed oil prices. However, as Baig points out that

“…. (but) only few realize that the Rs3 (roughly 8.5%) increase in diesel prices would affect freight transport costs by only a marginal 0.12%, that is equivalent to 12 paise on every Rs100 that is spent on what one purchases.”

He further writes -

“Elementary arithmetic will however show that the cost of transport in the cost of most goods averages just 5% and the cost of fuel is usually about 35% of this cost. India’s four million trucks and one million buses have to additionally pay large finance costs, depreciation, staff salaries, tyres, repairs, taxes, bribes, etc. So if the cost of diesel is just 35% of 5%. it is barely 1.4% of the cost of most of the goods that one buys.

Therefore, the recent 8.5% increase in the price of diesel should only have an impact of about 8.5% on this 1.4% or a miniscule 0.12%. It will vary a little and be even less on high value goods that are transported over long distances and a bit more on milk and vegetables that are transported over short distances.”

You can read the full article here.

Today I got this interesting email which illustrates the role of speculative hoarding in Inflation. Common people also engage in it oblivious of the impact it may have on their purse.

Email is long, but worth reading.

Nice Logic - It May Work!!
A man eats two eggs each morning for breakfast. When he goes to the Kirana store he pays Rs. 12 a dozen. Since a dozen eggs won't last a week he normally buys two dozens at a time. One day while buying eggs he notices that the price has risen to Rs. 16. The next time he buys groceries, eggs are Rs. 22 a dozen.
When asked to explain the price of eggs the store owner says, "The price has gone up and I have to raise my price accordingly". This store buys 100 dozen eggs a day. He checked around for a better price and all the distributors have raised their prices. The distributors have begun to buy from the huge egg farms. The small egg farms have been driven out of business. The huge egg farms sell 100,000 dozen eggs a day to distributors. With no competition, they can set the price as they see fit. The distributors then have to raise their prices to the grocery stores. And on and on and on.
As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there. He checked out the huge egg farms and found they were selling 100,000 dozen eggs to the distributors daily. Nothing had changed but the price of eggs.
Then week before Diwali the price of eggs shot up to Rs. 40 a dozen. Again he asked the grocery owner why and was told, "Cakes and baking for the holiday". The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen.
This pattern continues until the price of eggs is Rs. 60 a dozen. The man says, “There must be something we can do about the price of eggs".
He starts talking to all the people in his town and they decide to stop buying eggs. This didn't work because everyone needed eggs.
Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.
The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn't need any eggs. Maybe wouldn't need any all week.
The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn't have any room for eggs would not need any for at least two weeks.
At the egg farm, the chickens just kept on laying eggs. To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price.
The distributor said, " I don't have the room for the %$&^*&% eggs even if they were free". The distributor told the grocery store owner that he would lower the price of the eggs if the store would start buying again.
The grocery store owner said, "I don't have room for more eggs. The customers are only buying 2 or 3 eggs at a time. Now if you were to drop the price of eggs back down to the original price, the customers would start buying by the dozen again".
The distributors sent that proposal to the huge egg farmers but the egg farmers liked the price they were getting for their eggs but, those chickens just kept on laying. Finally, the egg farmers lowered the price of their eggs. But only a few paisa.
The customers still bought 2 or 3 eggs at a time. They said, "when the price of eggs gets down to where it was before, we will start buying by the dozen."
Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers.
The egg farmers cut their prices because the distributors wouldn't buy at a higher price than they were selling eggs for. Anyway, they had full warehouses and wouldn't need eggs for quite a while.
And those chickens kept on laying.
Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn't sell.
The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price.
And the customers starting buying by the dozen again.
Now, transpose this analogy to the gasoline industry.
What if everyone only bought Rs 200.00 worth of Petrol each time they pulled to the pump? The dealer's tanks would stay semi full all the time. The dealers wouldn't have room for the gas coming from the huge tanks. The tank farms wouldn’t have room for the petrol coming from the refining plants. And the refining plants wouldn't have room for the oil being off loaded from the huge tankers coming from the oil fiends.
Just Rs 200.00 each time you buy gas. Don't fill up the tank of your car. Don't drive to places where you can walk. Don't drive to places where you are just driving because you have a vehicle to spare. You may have to stop for gas twice a week, but the price should come down.
Think about it.
Also, don't buy anything else at the fuel station; don't give them any more of your hard earned money than what you spend on gas, until the prices come down..."

Vodafone-iPhone: First Public Appearance & Some Bugs

In the morning today, I was extremely happy to see this ad on the front-page of Times of India. There so many people like me who are waiting for this beauty of a device. Many had already had unlocked device from USA. But I abstained from buying that time since 1. no money 2. it was better to wait and watch because I had heard so much negative things about iPhone from some of my friends staying in US. Their negative feelings about iPhone were strong enough to prevent me from making my pockets lighter.

Hmmm. But it is an Apple device. I would better use it first and then give it misgivings. Then it was declared that iPhone will come to India through Vodfone (which seemed natural choice against other Indian operators like Airtel/Idea). Now today Vodafone announced that it will bring iPhone 3G into India ‘soon’. (I did not get any reply even after sending sms twice to the short-code listed above).

Now it seems that I won’t be able to withstand this iPhone seduction when it does actually arrive at a Vodafone store in India. The price also looks great in US Dollars - $199 flat – meaning about 8-9000 INR. Other day, we had this great discussion about iPhone pricing in India. Where does Apple wants this product to position? INR 8000 is a middle class range since you commonly see a higher priced Nokia N73 on Indian streets. I thought that 12000-15000 INR is a better guess because it is high enough yet is not prohibitive.

And, I am ready to shell that much. (I was actually thinking between N95 – E51, had this ‘Apple 3G iPhone into India’ thing been not happened).

However, there are so many small (and hence more bugging) bugs in iPhone. About the iPhone 1, I heard from my friend that there is no number forwarding, sms forwarding, no contact search etc. This sucks man. Having been used to these features, not having them is extremely difficult. I don’t know whether these have been worked upon in new iPhone or not. They better be. Today I came across this article on Forbes.com which talks about ‘7 iPhone Disappointments’. The author has listed 7 things that are like the bugs which I talked about above. The biggest surprise in this list is absence of video recording. C’mmon Apple! Won’t a person who wants to click a snap with his cellphone, also want to shoot a clip? Offcourse, anybody would think that natural, but Apple thought otherwise. Another big thing is No Flash! Means so many feature rich website is out of bounds.

Let’s see. My decision is again on hold till iPhone hits the road in USA…

Tata Buys Jaguar & Landrover - Is the Deal Ok?

Tata's deal with Ford has many skeptics. For one, what will be the effect of looming global economic downturn on the market? Then there is the troubled history of UK auto industry - particularly the labor trouble. While on one hand whole nation (except, perhaps the stock markets) felt jubilant after the deal, real success of the deal will hinge on how skillfully Tata's balance the demands of changing economic situations and demands of profitability. Read a Fortune story about the deal below. The story is aptly named 'Tata buys into 40 years of trouble'.

Tata also doesn’t seem all that concerned about instant profits – just as he doesn’t expect instant returns from the tiny Nano car he hopes to launch by year’s end. Instead, he is expected to use the brands and their U.K. plants, executives and labor to help build Tata Motors, which had $7.2 billion sales in fiscal 2007, into a global car company. He’s been on this mission for several years, buying Britain’s Tetley Tea in 2000, a Korea-based Daewoo truck plant in 2004 and steel giant Corus (previously British Steel) last year. Ratan Tata’s hands-off ownership could win him crucial support as he tries to fold the Jaguar and Land Rover brands into Tata. Mark Norbom, the head of General Electric in Japan, wrote recently in the Financial Times about the importance of the “soft side” of a takeover deal. The “look in the eyes that (the buying) company is worthy” has special value, said Norbom, and is something that “does not come naturally to the typical western-trained dealmaker.” Well, it seems to come naturally to Tata and his people. It was evident in the Corus deal, and it seems to be at work again in their Jaguar and Land-Rover plans. This could, of course, mean that Tata is seen - especially by British trade union leaders - as a soft option who will let workforces carry on as usual. Land Rover has had three years of record sales for Tata to build on. But there’s no telling how long the status quo can last, especially if demand slackens in the United States and elsewhere and Ratan Tata has to institute cutbacks at the luxury car makers.

Riding the Elephant Tata buys into 40 years of trouble «

Used-Car Bargain - Economist (Update to original post)

Dollar Bleeds Indian IT - BPO Industry

The Indian success story in ITES was, according to me, a major factor that boosted the confidence levels of Indian business captains. The revenues of IT companies, their liberal HR policies were talk of the nation for a long time. But this is going to change - if the US Dollar downfall continue. Lot of my engineering batchmates were employed in biggies like Infosys and Wipro, and were paid hefty pay-packages for doing nothing. I came to know later that it is a common practice in IT companies whereby they inflate their manpower strength and win contracts. These people were called benchers. Literally, many of them do not have a permanent place to sit in the company premises. But this is going to change now. Not that they will be having permanent place to sit; These benchers will not exist now on, thanx to weakening grip of US Dollar. Indian software firms mostly depend upon US software exports and US Dollar weakening means that the value of exports to US and hence the profits are going to suffer. First blood in this gloom will be of the benchers. read this Times of India story -

It looks like many more technology professionals and BPO executives are going to be pink-slipped this year. Companies normally ask around 10% of their bottom-level performers to quit after appraisals every year. But this year, the rupee appreciation and the widely expected US recession are likely to push this number up to 20%-25%.

Several providers are being told by their clients overseas to cut employee-cost, which has increased by 15% to 20% in the last 18 months. Enterprises are also being pushed to cut drastically or eliminate their bench-sitters. In other words, the industry is clearly heading towards a forced-attrition regime.

''You can't actually term it as downsizing. It will be an overall rationalization exercise, wherein we will also get rid of benches. Every corporate action is dictated by market dynamics,'' said the president (HR) of a leading IT firm.

Global banks have been writing-off billions of dollars due to the sub-prime crisis. Other clients have started cutting or cancelling contracts. Consequently, domestic IT providers are already tightening their belts. Expenditure towards travel, employee entertainment including outing and dinners, birthday/wedding anniversary gifts/vouchers, reward programmes, free holidays and phone calls have already come under the scanner.

More pink-slips for techies this year-India Business-Business-The Times of India

Another great coverage about US Dollar downfall comes from Reuters. Read it here.

Villages or Cities?

I just chanced upon two articles through Rajesh jain's weblog on Emerging Technologies. One of them is in Economist and other one in Mint, an economic daily in India. The article - 'World Goes to Towns' in Economist is a part of their survey on cities, which covers many facets of increasing rate of urbanization. The main argument made in this article is that urbane metroes will be the future and will be the engine of progress for whole modern civilisation. By 2020, 9 cities across the world will touch the figure of almost 20 million inhabitants. In Mint, Atany Dey and Reuben Abraham argue in their article, with similar tones that urbanization is the natural path of human advance and the earlier we get there, better will it be. The name of their article aptly describes this line of thought - 'Can India Afford Its Villages?'
Well. To me this article in Mint looks flawed. The writers say, for example -

Villages are not the proper object of analysis when it comes to economic growth, and hence economic development. By insisting on the development of villages, scarce resources, which could have been more efficiently used elsewhere, are wasted. The same resources can be used in the development of cities. It seems to us that the answer to the development of rural people paradoxically lies in urban development.

The flaw to me here is a visibly rationalistic attitude which treats village as a mere unit in the economy, to which some resources must be allocated and all problems in current societies are merely those of allocation of resources. Look at the Nandigram and Maan /Vagholi SEZ issues that enraged in W. Bengal and Maharashtra. Valuation of a village or land can't be done in monetary terms - a mistake which the economists are doing again and again.
There can't be any debate about the fact that the living conditions of villagers must be improved, but it is not at all convincing that lower living conditions means villages. What about the slums in Mumbai or Delhi then? Those are urbanization minus urbane conditions.
The main question here is not of living conditions off course. The question, as raised by the writers, is of productivity. Productivity and Urbanization are two different things. If we turn all the resources to cities on pretext of low productivity of villages then we will merely force the rural populations to migrate into cities. Even if new city-centers come up to accommodate these immigrants, what about the productivity in farm sector? We would have found no answers to this problem of low agricultural productivity. The results would be completely disastrous for whole economy.
Another curious phenomenon which negates this city-centric resources planning is, that most of the Special Economic Zones come up not on infertile land in some relatively remote places far off from cities. They are, in fact, proposed in close proximity to existing cities only. The logic behind benefit of proximity is clear. There is little infrastructural development in countryside. If we want to develop this infrastructure, again we must shift resources to villages, not cities.

Microsoft Marrying Yahoo?

Google has taken two entities head on. On one hand Google challenged Yahoo; firstly on Search front and then on a lot of other fronts. On the other front, there is Microsoft who is threatened by Google's web based office applications. Among these three, only Google seems to be completely belonging in the Web 2.0 eco-system, while Yahoo is the runner-up(mainly due to Flickr) and Microsoft seems to be totally out of sync in the new regime of user-control, mash-ups, communities etc. Further, the lucrative market of mobile search is also a field where Microsoft and Yahoo would have to toil a lot to take on Google.

However, this particular news of tomorrow is only a rumour today. Most of the newspapers have put a question mark in the end of the news. WallStreet Journal has put up a news as

'Microsoft, Yahoo Discussed Deal'

"Microsoft and Yahoo discussed a possible merger or other matchup that would pair their respective strengths, say people familiar with the situation. The merger discussions are no longer active, these people say, but that doesn't preclude the two companies from some other form of cooperation."

Here is a video commentary of one of WSJ analysts on WSJ Online. Watch it here

3G Enters India...Almost.

Today, there is a full page ad of Nokia N95 in Times Of India. The features list of N95 is just impressive. It has a dual slide design, 5 MP camera, Wi-Fi abilities, internet browser with Mini Map for better internet experience, integration with Flickr, the LifeBlog application, GPS...and so on. Cool! That is a range of features I will die for! See all the features here and a deatiled review here. So, futuristic handsets are here, penetration of mobile-phones is rising at a scorching pace and operators are also prepared to play the 3G game. What about the spectrum?

Other news in the same newspaper, that has caught my attention is about Indian governement's decision (or is it just a proposal?) about inviting global bids for spectrum auction. The Indian Airforce is expected to vacate 42.5 Mhz of spectrum by July, this year. The bids will be invited after this. The significance of global bidding is that it will give some big global players, an opportunity to catch the telecom-boom bus, which they have lost or left earlier. For consumers, this will mean that they will have a richer 3G experience and the tariffs will be lowered considerably. And for government, this will mean big bucks. The news says -

"The most significant aspect of Wednesday's announcement read along with the modified 74% FDI guidelines in telecom announced by the government just last week, is a clear invitation for global telcos to put their money where their mouth is. Analysts suggest that this is perhaps the last opportunity for those who have not been a part of the Indian telecom juggernaut to now jump in."

Read the news here.

Best Cell Phones

Should There Be A Traffic Congestion Tax in India?

Whenever I look at the traffic chaos in Pune, the emerging IT hub in Western India, I always think about the possibility of levying a congestion tax, like in case of London and Stockholm. In London, for example, in central area, an entering vehicle is charged a congestion tax of 8 £, and in case of evasion, a fine of 50 £. This is true from 7 am to 6 pm, every day except Sundays and excepting certain types of vehicles like hospital ambulances. You can read more about London congestion tax here.
The enforcement system includes database of registered vehicles, a number of cameras guarding the entrance and exits of congestion zones, apart from the inner roads in the zone and Automatic Number Plate Recognition Software.
This means that this system implementation is not an easy task, more so for an Indian city like Pune, where the traffic flow is extremely heavy during peak hours. But nonetheless, this can be one of the solutions for the menace of traffic jams and loss of precious time for a lot of office commuters. What needs to be done to implement this solution in Pune?
The first thing that needs to be tackled is the strengthening of public transport in the city. In Pune city, the public transport is monopoly of Pune Municipal Transport, a semi-governmental agency. If the high number of two-wheelers which ply on Pune roads is to be tackled, the PMT must be able to take that load. This would need large investments over the years in upgrading and increasing the fleet of PMT. These PMT buses can then take over from two-wheeler riders who don’t want to pay the congestion tax, at the tax collection posts.
This will also mean that there must be huge parking spaces, near the congestion tax collection points, to serve the commuters who want to opt for cheap public transport, instead of paying hefty congestion charge. The parking may be charged at a nominal charge. The PMT buses will take over from here to the inner parts of the city.
The investments in updating database of vehicle registrations and connecting it with an updated database of all Road Transport Offices in other districts will be an imperative. This is so, because, there is a high level of vehicle immigration into the city. Further, the use of ANPR software will also be needed.
The things that may derail this project include the resistance from commuters, who will resist any idea of paying a tax for entering into the inner city. Daily commuters will fight against this measure, tooth and nail. Chances of politicization are also vary high, for the issue-starving political parties will definitely take advantage of this. Another thing is more taxes, more rules means that more corruption. Simplification in Right to Information Act may be a cure for this.

Do you visualize any other problems that may arise from Congestion Tax?
Also, how should, the taxes collected, be utilised to the best benefits of commuters?

What A Business Model!

A few years ago, when I was staying in Mumbai, I came across this fantastic information about how ingenuity of people can decieve the laws and rules. This was about the Mumbai local train transport system. Mumbai suburban railway system daily carries more than 6 million commuters on 3 corridors - central, western & harbour. 6 million commuters on these trains means that the task for the authorities is extremely difficult. Ensuring that all these commuters pay for the tickets is next to impossible for the railway authorities. The system to discourage ticketless travel has to rely on random ticket checking and the chances are that you will escape getting caught more often than not, while travelling without a ticket. However, if more and more people think that ticketless travel is harmless, the chances of them getting caught in the random check will obviously increase. This keeps the number of ticketless travellers in check.
However, when there is DRM, there is piracy. Because supply reaches to demand (and not vice-versa). This happened in this case also.
Some very intelligent traveller (and in Mumbai everybody is a local train traveller), came up with this brilliant idea. What he did defied this model of random checks. It works like this - if you are a daily traveller, then become a member of this organisation of local train travellers (or was that ticketless local train travellers?) by paying a sum of around Rs. 500 or so. By becoming a member, you receive a guaranteed ticketless travel. What you will have to do is just pay whatever fine authorites charge - IF YOU GET CAUGHT WHILE TRAVELLING WITHOUT A TICKET. Once you pay the fine, go to the organisation's office(?) and show the receipt. You will get 100% refund.
Now, what can be the chances that a passenger who travels for 365 days getting caught in a random check, if he is among 6 million or so fellow passengers?

Update: A few years ago, the fine for travel without ticket was just Rs. 50 [about a US Dollar], plus the charge of ticket, which is minimum - about 0.2 $ for almost 30 km of travel. Around 2002, the fine was increased fivefold, to Rs. 250.This is a considerable increase, for the passengers who are habituated to a Rs. 50 fine. However, what minimizes the disincentive of the fine is the system of random checks. For the passengers who are travelling daily, in these trains, for years, it is extremely difficult for ticket checkers to catch them unaware. One of these daily travelers told me that the passengers even know when the TC’s [that’s what the ticket checkers are called] would be coming. The dates are around middle of the month – from 14 to 17, and at the end of month- around 26 to 30/31. Further, the coaches being extremely crowded, the ticketless travelers can easily escape, when they come to know that the TC’s are there. On these occasions the passengers even enter into rather rare camaraderie against the system and help fellow passengers.
This all actually means that a passenger would say that he even doesn’t need the Rs. 500 membership of the so called ‘ticketless travelers’ association’, because he just would never be caught even in random checks. This can be the reason, why this association, fortunately, never achieved its true menacing potential.