Obama’s India Visit: Hyperbole Versus Reality

President Obama concluded his three day visit to India, on 27th Jan 2015; the trip was curtailed since the visit to Agra was cancelled, to allow the President to travel to Saudi Arabia, to extend condolences to the royal family, following the death of King Abdullah, which prompted the quip “Oil is thicker than marble”. The Indian Express, however, has a different story – the cancellation was because of a clash between the Supreme Court’s guidelines, requiring visitors to disembark 500m from the Taj Mahal & the secret service insistence on the “beast” being allowed to travel onto the gate to avoid security risks. But for this minor hiccup, the bonhomie during the visit was palpable starting with the PM, Modi, breaking protocol to receive Obama at the airport. The media coined a new term for the act: “Bromance”.

The US President descended into New Delhi & the bear hugs & back slapping made for interesting optics. Modi, for the sake of national interest, perhaps, has, shaken off the rancour of visa denial in 2005 – courtesy Godhra - & tried to cosy up to the President by addressing him by his first name, Barack, which unfortunately was left un-reciprocated. Post partaking in diplomatic talks on Day 1, the President as chief guest of the grand republic day parade, on day 2, was greeted, largely, by vintage Russian armaments, a strategy perhaps employed by the Indian side, to nudge him to grant greater concessions on defence co-production. That, unfortunately, did not fructify.

Obama, on the last day, addressed the Delhi University students & other selected invitees where his reference to religious freedom & specifically Article 25 left the BJP govt. red faced. While some diplomats called it ungracious, his act warmed the cockles of the Indian opposition parties as well as the conservatives back home, rankled as they were by the perverse acts of “ghar vapasi” & attack on churches. A subtle message was perhaps being conveyed to the the Muslim ummah too. He, finally, ended his tour with a joint radio address - “Man ki Baat” - with Modi. Was Michelle Obama’s surprising absence from some outings - unlike last time - largely a precursor of the events to follow – an event that was high on optics & low on substance? Not entirely.

It is to Ambassador Jaishankar’s credit that the US-India relations that had fallen into a deep abyss post the Devyani Khobragade case were revived. He curated the highly visible Modi show at New York in Sept last year & managed to persuade the US administration to be amenable to a second visit by the US President to India during his tenure – a first for any US President.  PM Modi clinched a “yes” from the President during the ASEAN summit at Myanmar in Nov 2014. No wonder Modi wants Jaishankar to play a much larger foreign policy role based in Delhi. Suitable deployment of strategic assets like Doval & Jaishankar – son of India’s Strategic expert K Subramanyam - is necessary if India is to play the role it deserves in the comity of nations.

The one major takeaway from the visit: India's decisive alignment with the US - a la 1971 moment when the actor was the Soviet Union though. Critics, including the Congress & the Left, have cringed at such an act with the potential to cause annoyance to our northern neighbors. The statements emanating from Beijing cautioning India against falling into a "US trap" confirmed the suspicion. A pragmatic foreign policy is indeed needed since we  cannot become a permanent member of the Security Council with a Chinese veto. The US President did not help matters by lambasting Russia from Indian soil in a press con just as the Russian President caused an embarrassment to the Indian side by having the Crimea’s Prime Minister Sergey Aksyonov sign a trade cooperation pact, during his visit to New Delhi in Dec 2014. Surely, if India has annoyed both sides equally, she is perhaps following an independent foreign policy. And if the US, now, sees merit in our Iran policy we are on the right track.

Modi, to be fair, tried to play a balanced card, by personally getting involved in hosting an impressive reception to President Xi of China, last year, only to be rebuked through border incursions while the visit was in progress – a convenient tactic employed by China in the past too. Modi, therefore, was left with an option of gulping ignominy – like the Congress govt. did during the previous years – or take a decisive action. He opted for the latter – since he had a reputation to protect - & has responded with the Indo-US éntente; the joint strategic vision for Asia Pacific declared “the importance of safeguarding maritime security & ensuring freedom of navigation & over flight throughout the region, especially the South China Sea”. This shall gladden the hearts of all countries in the region threatened by hegemonistic China & hopefully prompt an introspection in the latter. Modi has thus countered the Chinese “string of pearls” strategy to circumvent India by a counter “string of pearls” strategy by forging an Indo-Japan-US-Australia -Vietnam alliance. Clearly he emerges as Obama termed it a “man of action”. One note of caution though - aggression without strengthening the military machine could have dire consequences as the events of 1962 foretell. Therefore, the Indian policy mandarins need to get the infrastructure in the North East & Aksai Chin up & running to take care of any eventuality. The interesting corollary to the entire act is perhaps the victory of India’s covert diplomacy - the election of a pro India govt. in Sri Lanka. The next target: Maldives.

The Indo US joint statement mentions all the usual suspects – “advance mutual prosperity, a clean and healthy environment, greater economic cooperation, regional peace, security and stability” The $4 Billion financial package – including $1billion for “Made in US” exports & $2 billion in renewable energy - promised by President Obama looks miniscule as compared to the $35 billion commitment from Japan. “The nuclear deal is done” said the Indian foreign secretary although the fine print is still hazy.  The BJP while in opposition pushed for a seller liability in consonance with the US tort laws. Without altering the statutes a memorandum of law by the attorney general is proposed by the same party in power now; however victims’ recourse to judicial scrutiny is still permissible & hence corporates could continue to remain wary. A limited liability corpus of about 1500 crore – perhaps, with an equal contribution by insurance companies & GOI is getting created. Not sure if it would inspire confidence, but if it does, then some business shall flow to US firms, GE & Westinghouse. Nuclear power accounts for less than 2% of India’s energy production & with agitations against nuclear power post the Fukushima meltdown & the consequent focus on renewables this % is unlikely to change appreciably in the years to come. The high cost of nuclear power is the other deterrent.

The US supports India’s phased entry into the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Wassenaar Arrangement, and the Australia Group. The US committed itself to a reformed UN Security Council with India as a permanent member with the caveat that "with power comes responsibility” Clearly US would expect India to do more heavy lifting in its international obligations.

The Joint declaration has reaffirmed committment to disrupt entities such as Lashkar-e-Tayyiba, Jaish-e-Mohammad, D Company and the Haqqani Network and reiterated their call to Pakistan to bring the perpetrators of the November 2008 terrorist attack in Mumbai to justice. Pakistan smarting from the de hyphening of that country from India, predictably, had its NSA, Sartaz Aziz, opposing all the positives listed above & demanding that India bring the Samjhouta Express culprits - of 2007 – to book.  Expect Pakistan to get into the Chinese grasp & both of them working closely to needle India in both the Western & Northern borders. Pak Army chief, Raheel Sharief, was in China when the US-India éntente was in progress which buttresses this assessment.

The US wants India to be the pivot in Asia to counter a rising, belligerent China in a bid to maintain international rule of law which includes maritime security. Clearly this calls for economic & military enhancements. However, while India, a 1.9 trillion economy, spends $38 billion on defence, China whose economy is roughly 5 times larger, officially, spends $132 billion, although the actual fig could be 40% higher than the stated fig. India, therefore, needs to grow consistently more than its northern neighbour for about 20 years to play catch up - a big challenge indeed. The PM realizes that & in the ET Global business summit, held in Jan this year, has asked business leaders to dream for a $20 trillion economy. In the interim there is a need to boost indigenization & get more bang for the buck.

In the run up to the summit the US wanted an agreement on climate change, bilateral investment treaty, greater trade & IPR protection, friendly Regulatory & Tax laws & changes in the nuclear liability laws. Obama, on a high post the climate change agreement with China, was keen to conclude a similar deal with India too as he is looking for establishing a lasting legacy before his second term comes to an end. The Indian side wanted greater FDI - especially in defence including joint production - totalization agreement – which shall entail a saving of about $3 billion dollars to Indian IT companies, currently paying for social security in the US - reining in Pakistan & Intelligence sharing.  The US, perhaps, got the nuclear deal while the Indian side got the language it desired on Pakistan & a $4 billion bounty. Surely, US would not share the technology behind its “crown jewels” when it comes to military equipment & neither can we expect them to fight our battles in Pakistan or beyond. The US, therefore, would lend us a helping hand, to help us grow - to reduce its own workload in the Asia Pacific region. However, if India falters on growth or governance, it can fall off the perch fast Therefore, while the deliverables of the summit might appear infinitesimal, the onus is on us to take advantage of this new Nixon- Kissinger moment – which opened up China to the US in 1972 – to make it a truly “defining relationship of the 21st Century”

General Elections: India - 2019

The year, 2014, was memorable, for it threw up a party with absolute majority – after 30 years - shattering the predictions of poll pundits. The rise of President Xi Jinping in China coincides with the emergence of Prime Minister, Narendra Modi, in India. The tectonic “power shift” towards Asia is slowly getting revealed & Modi & Xi are surely going to play a definitive role in accelerating such a transition. While Xi’s continuance for a decade, in China, is assured - because the single party communist leadership ensures leadership transition only once every decade - Modi has the onerous task of winning the 2019 general elections to stay on at the helm. Predicting the 2019 General Elections, therefore, becomes rather interesting, although cynics could scoff at such an analysis, for the actual event is years away.

Looking back at history we find that India, between 1947- 77, was characterized, by the single party rule of the Congress, while the period 1977-1998 was marked by anti-incumbency – 1984 being the only exception when the sympathy wave generated due to Indira Gandhi’s assassination ensured a Congress victory. Remarkably, the period beyond 1998 has seen pro-incumbency for regimes that perform. That begs the question:

What helps regimes trump anti-incumbency?

“Sympathy”, propelled Vajpayee to victory in 1999 since his 13 month regime that started in 1998, was cruelly cut short – a repeat of the fate that befell the 13 day regime of 1996 – by the opposition. By 2004, the electorate had the shoe on the other foot & the NDA regime was booted out, perhaps, because the “India Shining” campaign boomeranged. Voters, it appears, are “kind” to the underdog & “punish” any attempt at going overboard while showcasing achievements.

The UPA, on the other hand, won, in 2009, by promoting transparency – by passing the Right to Information act - & spending on the social sector through NREGA - that helped grow rural wages & ushered economic prosperity. The regime, seen as progressive, caring for India’s energy security - post the nuclear deal with the US – was granted a stupendous victory which unfortunately was squandered due to monumental corruption of the 2G, Coal Gate & CWG (commonwealth games) kind. Obviously, a “silent” Prime Minister was not seen as a liability by the electorate in 2009 which alludes to another takeaway. The electorate, perhaps prefers a “communicative leader” but would not mind a “silent’ one as long as he delivers on governance.

In short, Indian voters are “emotional” who support the underdogs - classical “David versus the Goliath” principle. The growth of the BJP from 2 seats in 1984 to 120 in 1991 was by riding the “emotive” religious Ram temple issue. “Transparency”, a euphemism for “No corruption” touches a chord. “Progressive” leaders with a “Big Idea” who implement effective social sector programmes help create a committed cadre who fan advocacy. Paradoxically, voters detest the leaders who destroy institutions while still adoring “strong leaders”. Indira Gandhi’s leadership during the Bangladesh war was appreciated while her excesses during the Emergency rebuked.

What triggers anti-incumbency?

The elections of 1977 & 1989 were won because of the greater “index of opposition unity”. The disintegration, soon thereafter, of the opportunistic alliances because of competing ideologies & egos of interest groups put paid to further ambitions of a re-election. The electorate, therefore, is wary of “instability” & has lately been making amends by issuing definitive verdicts.

The loss of the Congress in 1996 & BJP in 2004 were due to charges of “corruption”, “inflation concerns”& wrong “alliance arithmetic”. Interesting to note that the Congress tied up with a deeply despised, AIADMK, in 1996 – forgoing a golden opportunity of Congress revival in Tamil Nadu with the help of Rajnikant - & the BJP repeated the mistake in 2004, dumping the DMK, just before the parliamentary elections, to tie up with the significant other – leading to disastrous consequences. Tehelka revelations, Coffin scam, petrol bunk scam, Balco sell off & US64 torpedoed the BJP in 2004 while the Congress tasted dust, in 1996, due to the JMM bribery case- to win the no confidence motion - Jain dairies & the “lack of probity” in Lakhubhai Pathak & Naina Sahni “tandoor’ murder cases.

Interestingly, the Babri Masjid demotion of 1992, & the consequent riots cost the Congress dearly in 1996 while the Gujarat riots cost the BJP, its allies & seats in 2004. It appears therefore that Indians are inherently “peace loving” & any attempts to “destroy communal harmony” is punished, perhaps because perpetual violence leads to shut downs that effect the daily wages of the proletariat.

How would the BJP fare in 2019?

The BJP’s juggernaut continues to roll on, tidily; post a victory in the parliamentary elections, in May 2014, it was won the state elections in Maharashtra, Haryana, Jharkhand & posted its best ever performance in J&K. Delhi elections, scheduled in Feb, 2015 would be a cliffhanger. It would, however, end 2015, losing in Bihar to the triumvirate of the Janata Parivar – Nitish’s JD(U) & Lalu’s RJP – & the Congress. 2016, shall be a busy year when Assam would be retained by Congress - with a depleted strength though - Jaya would win Tamil Nadu - due to the “sympathy’ generated by her arrest in 2013 - & the Left front would regain power in Kerala after a long hiatus. The BJP, inspite of its best efforts in West Bengal would increase its vote share & seats, not good enough though to dislodge Mamata’s TMC. Therefore, the BJP is predicted to be only partially successful in its southern & eastern sojourns.

The BJP, in 2017, would win UP & perhaps increase seats in Punjab too much to the chagrin of the SAD. In its attempt to dominate from the “Panchayat to the Parliament” – a merry cry for the karyakartas – it shall antagonize current allies - like the Shiv Sena, SAD, TDP - & perhaps supporters like the BJD & the AIADMK who would brook no attempts to usurp their support bases. The BJP’s merry ride shall therefore peak by 2017 helping it consolidate its position in the Rajya Sabha; unfortunately, however, it could be a downhill slide from then on.

In 2018, BJP would lose Chhattisgarh - for they won the last elections too by a whisker – lose Rajasthan - characterized as it is by a shifting polity - & perhaps lose Gujarat too – for Anandiben is no Modi.  Shivraj Chouhan could win in MP, just as Naveen Pattnaik - of the BJD – would in Odisha. BJP could make a comeback in Karnataka, in 2018, if it manages its state affairs well.

The BJP shall enter the election minefield of 2019, with freshly elected state governments of Karnataka, MP - in their honeymoon period - Maharashtra, Jharkhand, Haryana & Delhi - perhaps facing huge anti-incumbency unless the new untested leadership at the states performs a miracle. Since replicating the UP & Bihar success, of 2014 - that propelled the BJP to power in the parliamentary elections - is unlikely, it is safe to assume that the BJP would drop to about 170 Lok Sabha seats, in 2019. Would the BJP still remain the single largest party capable of attracting allies is left to conjecture.

What should the BJP’s Game plan be?

The BJP, to regain power, would try to exploit the success mantras: religious polarization; social sector spends; strong leadership. Strong leadership at the helm, they have & social sector spends post growth pick up could flow. Unfortunately, though, the cauldron of communal polarization to beat the caste segregation might be employed leading to a searing social strife.

What should be the game plan of the Congress?

The Congress meanwhile, needs to passionately pursue all the anti-incumbency vectors: corruption: inflation; & attempts to destroy institutions - to besmirch the incumbent. They should work towards greater index of opposition unity; after all it was such a strategy that ensured its victory in 2004. But above all else it needs to have a general, not living in foreign shores or a utopian world, but willing to take charge both inside & outside Parliament.

Conclusion

The elections of 2019 therefore would be an interesting fight between Rahul Gandhi’s David versus Modi’s Goliath. Who shall emerge as the winner in this bruising encounter? Only time will tell. Interesting times cometh. The clock is ticking. 

e-Commerce in India: The Roadblocks To The Juggernaut

2014 was a watershed year for Indian e-commerce since valuations soared & off line players were forced to initiate Omni-channel strategies as a counter foil. The year however shall also be remembered for the roadblocks that threatened to impede if not stop the juggernaut. The angsts of the stakeholders,

E-com Marketplace Angst: Logistic Nightmares:

As per TOI, e-com logistics accounts for 10% of the Indian logistics market of Rs 12000 crores. 80% of the shipments travel by air with a per shipment cost of Rs 90/-. Clearly airlines - with their own profitability concerns - would give preference to passengers, not shipments, during the holiday season. The cancellation of about 100 Spicejet flights, at the end of 2014, delayed shipments to Chennai, Hyderabad, Nagpur & North East leaving the sellers red faced with a potential loss of reputation. Players in this emerging space have their futures hinged on “trust” & must tread cautiously on “customer experience” of which timely delivery forms an important part.

Logistic troubles are not a consequence of lack of investment Infact PE (Private Equity) players see in this sector the potential for grabbing “multibagger” returns. As a consequence, logistic players like ECOM Express raised Rs. 100 crore from PE firm Peepul Capital while Delhivery raised $33 million led by Multiples Alternate Asset Management. If investments are not delivering on scale-up schedules, there is a urgent need for creative innovation.

One imaginative innovation would be for larger e-Com players to get together to buy dedicated aircraft for e-commerce shipments; else should increase sellers within a city. Fashion portal Fashionara has already opened hubs in six cities to deal with logistical bottlenecks & expect more to follow suit.

States Angst: Taxes

E-com players were bogged down by litigation last year. The Karnataka commercial tax department. slapped notices on merchants selling through Amazon & demanded online players to pay VAT on goods stored in their warehouses even before customers have ordered for these products. The notices say these merchants cannot register Amazon’s warehouse as their ‘additional place of business’. Maharashtra too, followed suit, with a demand against tele-shopping and e-commerce platform Naaptol.com.

The e-com players contend that they offer a marketplace model where they bring sellers & buyers together & “facilitate” a transaction for which they receive a commission that attracts service Tax – which they have been paying. Since they do not “own” the goods but are only providing the services of storage, delivery and collection of money for the seller, they profess that neither VAT nor sales tax should apply.

Taxmen on the other hand argue that stocking by on line players is a scientific & not a random act & hence there are elements of value addition that should attract VAT.  In addition, they emphasize, that  since amazon stocks goods like a shopkeeper with a buyback clause – stock are returned if products are unsold - the ownership of the goods is “practically transferred” to the e-com company till they sell it. Amazon in a bid to break the logjam, has suggested that a rule making it mandatory for online firms to furnish details of transactions, seller’s identity and VAT collected to tax authorities shall help check on compliance. 

While political intervention has initiated a “glow slow” a more permanent solution is needed for the ghosts of “archaic laws & retrospective taxation” continue to haunt industry.

The Odisha govt. has raised a different but a pertinent issue. Central Sales Tax (CST) is levied at e-com warehouses located in places like Noida, Mumbai, Chennai and Gurgaon, depleting the tax revenues of consuming states as well as denting the  retail trade in that geography. The state has, therefore, called for modifying CST rules. However, implementation of the goods and services tax (GST) shall resolve the problem as it will be levied at the stage of consumption.

Consumer Angst: Issue of Warranty.

Consumers are lured by e-tailers through low prices & the convenience of doorstep delivery. However the issue of warranty is often overlooked with deleterious consequences. Physical retailers often accuse e-tailers of selling much below the “market operating prices” in a bid to boost traffic to increase sales & valuations. In a knee jerk reaction, manufacturers have responded through differential warranty to assuage physical retail which is inherently flawed since warranty has to be channel agnostic in a “consumer is king” world. Surprisingly, however, Lenovo, Toshiba, Sony, Nikon and Canon have either blacklisted e-retailers or cut warranties on products being sold on these sites.

Many International brands have declared that some of their products, if purchased online, are not eligible for a warranty. Online sellers have stepped in to offer a “seller’s warranty” against the original manufacturer’s warranty which needless to say is inadequate. For instance, Tissot, S.A, issues a two-year international warranty while e-commerce websites post it as one-year Tissot India warranty. The consumer, obviously, feels short-charged.

Warranty for “low value” goods might not be as critical to a buyer as much as an allowance for returning goods, if damaged; however, for Hi-Value goods, warranty is critical. Since marketplaces play the role of intermediation, the law does not make declaration of warranty online mandatory, much to the chagrin of the consumers. The govt. needs to step in to remedy the lacunae through legislation.

Conclusion

Clearly while the sector is zooming, each of the stakeholders has their own set of angsts that could derail the sector if not addressed with agility.  The govt. should initiate a debate, release a discussion paper immediately & close loop on legislation rather than being scuppered by a stalled parliament or tying itself in knots on ordinances.

E-Commerce in India: Future is Bright

India is a 2 trillion economy; retail accounts for 30% of GDP. Globally, as per eMarketer, 8.8% of the retail market is e-commerce, while the figure for India is much less. Explosive growth of e-Commerce, in India, is therefore, inevitable. The interest of PE (private Equity) players & the stratospheric valuations commanded by the Indian start-ups like Flipkart & Snapdeal is but symptomatic of the emerging reality. The growth of data users to over 250 million, smartphone sales to over 80 million per annum & increase in internet speeds, courtesy 3G & 4G networks have only accelerated the trend. As per PWC-ASSOCHAM report 2014, e-Commerce users in India shall grow from 40 million to 65 million & per capita annual spent from Rs 6000/- to Rs 10,000/- within the next one year. Apparel & computer electronics shall continue to account for a major share - 42% of e-com. As per Technopak, apart from online retail & lifestyle, newer online business segments like classifieds, real estate, grocery and healthcare shall gain traction. With China out of bounds, such attractiveness was bound to attract the attention of international players.

The international behemoth, Amazon, made an impressive debut, in 2013, & served to expand the market. E-bay on its own as well as through its stake in Snapdeal has done yeoman service, bringing in international best practices. The entry of Jack Ma’s Alibaba into the Indian terrain through the stake buy in Paytm recently shall only accelerate a bloody game where customer acquisition is the name of the game through heavy discounts, aggressive merchandising, flash sales, daily deals & online loyalty programmes. In this dog eat dog game some players like Indiaplaza fell by the wayside, in 2014, failing to raise funds while  Network 18, post an acquisition by RIL, has stopped selling books – a high margin category. Yebhi.com and Bestylish.com changed their business models to become price comparison websites or aggregators for other e-commerce portals Therefore, the stakes in this game are rising rapidly pushing some to emerge as leaders while others scurry for cover. The following trends need to be keenly watched.

Omni Channel Play:

To counter the threat from the emerging e-com warriors, traditional brick & mortar retail players are decisively opting for an Omni-channel strategy – using multiple channels & resources including online & offline – to push sales. Reliance Retail’s e-commerce platform restricted to grocery sales in Mumbai alone is shaping up for a pan India expansion into new categories - selling TVs, mobiles, laptops, home appliances & apparel - in Q4 FY15. It plans to utilize its strategic assets - 700 reliance digital stores - for product delivery & exchange suggesting a shift to an ubiquitous brick & click strategy. Traditional players like Tata have started consolidating their retail ventures & selling through their own e-store as well as through online marketplaces. Surprisingly, they have sold the Tata Value housing deals on Snapdeal with remarkable success. Domestic electronic retail chains like Vijay Sales & Viveks too have caught on the trend & gone online. Aditya Birla Nuvo’s Madura garments & Lifestyle has launched “Trendin” to further its online ambitions.  Future group - drawing on international learnings' of a drop in retail footfalls - has entered into an agreement with amazon to sell its “own store” brands on the latter’s online platform. Clearly one can witness the thrilling blurring of differences between online & offline while the possibilities of imaginative strategic partnerships make this sector truly exiting.

GOSP & Flipkart “Billion day” sale.

There are many players donning the missionary role to attract more users into the marketplace model.  Google, running the “Great India Shopping Festival” (GOSF) since 2012 has witnessed total brand partners increasing from 90 in 2012 to 450 in 2014; companies like HP, Lenovo Group, Tata Housing Development Co, Van Heusen, Motorola Nexus and Karbonn Mobiles have launched their products exclusively at the festival. Flipkart, launched the “billion day sale” in 2014, which floundered due to technical issues not before amassing sales of $100 million in gross merchandise value (GMV) indicating the latent potential of such an initiative;  after all Alibaba sold $9 billion worth of merchandise  on a single day on Nov 11, 2014 commemorated as “Singles Day” & branded as “Double 11”. Therefore expect Flipkart’s next sale to be much bigger.

Sellers are increasingly gravitated towards an E-commerce platform since it allows a pan India launch in an instant - a luxury denied by traditional physical retail.  Analytics makes for targeted selling while Social Media & search engine marketing provide a greater bang for the buck. The biggest lure, however, is the marketing support from e-com players for brands in return for exclusivity

Fight between alternate market place models.

Internationally, Amazon has favoured an own inventory based model while e-Bay has pushed for a non-Inventory based one; the latter, favours bringing buyers & selling onto a platform in return for a commission. Currently, 100% FDI is allowed only in a non-inventory marketplace model; e-bay wants status quo while amazon has been lobbying for change.  Flipkart, started as an inventory based model but hived off its inventory into a subsidiary WS retail to conform to the regulations. Snapdeal meanwhile favours a non-inventory based model subscribed to by its investors Softbank, e-Bay, Ratan Tata & Premji.  E-com regulations need to be model agnostic & if implemented shall accentuate demands on the government to revisit the FDI policy in multi brand retail

FDI in multi brand retail

The much controversial policy on FDI in retail was passed by the previous UPA regime with the caveat that individual states were at liberty to take a decision regarding market entry. AAP, while in office in Delhi, reversed the previous Congress governments’ permission for retail entry; the BJP, heading the current central government, has not revoked the law but has revealed its displeasure on retail entry of multinationals, citing the fear of a likely decimation of the mom & pop stores. It is difficult to fathom how protecting the interests of 12 million retailers – not all of whom would be decimated by organized retail expansion- is more important than the interest of 600 million farmers - who would gain through better prices through reduction of intermediation  - or the 1250 million citizens  - who shall gain through lower prices & reduced inflation. It is pertinent to note that participation in a marketplace helps retailers - currently constrained to a  local geography – to expand their catchment areas nationally & going forward, hopefully, internationally too. Any attempted by trade to counter e-com expansion shall invite the ire of consumer groups. Simultaneously the massive growth in e-com has raised the shackles of organized retail which is seeking parity. Customers, ultimately, are interested in experience, convenience & affordability & see no utility in managed differences between traditional brick & mortar retail – organized or unorganized - & on-line commerce. All the above vectors shall converge & ensure that FDI in retail, eventually, shall become a reality.

The e-com sector is therefore replete with exciting possibilities & is therefore the buzzword both on campuses & boardrooms.  The revolution has only just begun. Stay tuned!!

Sri Lanka: What should Sirisena do?

Pallewatte Gamaralalage Maithripala Yapa Sirisena or simply “Maitripala Sirisena”, is the giant killer, who has dethroned the imperial “king”, Mahinda Rajapaksa, in the recently concluded Presidential elections, in Sri Lanka, Born in 1951, Maitri, was active in student politics & was an active communist; he later joined the SLPF (Sri Lankan Freedom Party), became an MP for the first time in 1989 & has been a Minister since 1994. He is also the longest serving General Secretary of the SLFP.

Foisted as a joint opposition candidate of the NDF (New Democratic Front) - consisting of an inchoate coalition consisting of  the SLFP, UNP (United National Party), the Jatika Hela Urumaya and the Democratic Party - he came up with an impressive manifesto,  categorized under two heads: a 100 day plan & a 6 year plan. His left of centre leanings are clearly visible in the manifesto. A good intentioned one, the 100 day plan, if implemented, shall help unite a country deeply divided in a fiercely fought election & help him emerge as a true statesman. He has made good beginnings by promising to stay on as President only for one term & has initiated the process of forming a national government under Ranil Wickramasinghe, leader of the UNP. While the promises have been many what can we truly expect of Sirisena?

Foreign Policy

People in India expect Sirisena to be more understanding of India’s interests & help Sri Lanka emerge out of the Chinese grasp - the “String of pearls” strategy to circumvent India. Sirisena’s manifesto promised strengthening of “cordial relations with India, China, Pakistan and Japan, the principal countries of Asia, while improving friendly relations with emerging Asian nations such as Thailand, Indonesia and Korea” The  Indian policy will be based on “an attitude that would be neither anti-Indian nor dependent” it said. It is, therefore, safe to interpret that he shall, quietly, move away from Rajapaksa’s pro-China tilt but not fall into the Indian embrace. That he has promised to make India the first country of his foreign visit buttresses this assessment. He shall follow a “Look East” policy too.

He has promised that he “will prepare the Sri Lankan economy to prevent international assaults by diversification of investment, non-reliance on investments from a single country and re-investment”  He also promised that he “would achieve for the country ten times the development that actually occurred during the past six years only by preventing mega corruption that existed in the country” This clearly implies an intent to a reduce reliance on Chinese investment & plug corruption  that plagued the big ticket infrastructure projects during the Rajspaksa regime. This shall be implemented.

Rajapaksa had filled many of the key positions in the diplomatic service with his relatives. Sirisena has therefore promised that “Within hundred days all political appointments and appointment of relatives attached to the Foreign Service will be annulled and the entire Foreign Service will be reorganised using professional officials and personnel who have obtained professional qualifications”. Expect this to be implemented to clip Rajapaksa’s wings.

His manifesto promises that he “will allow no international power to ill-treat or touch a single citizen of this country on account of the campaign to defeat terrorism”. This is a “self-preservation” strategy from Sirisena was acting Defence Minister many a times - including the crucial last 2 weeks of the campaign to flush out the LTTE in 2009 - & otherwise would have to share the burden of human right violations This promise also helps in raising the cockles of the Sinhala Buddhist majority who believe that Sri Lanka is unnecessarily being harangued by the international community. He shall do with internal enquiry & try to parry off international interventions in this regard.

Minority Issues

The manifesto does not talk about the devolution of powers to the North & East. The only concession is a promise to implement an “agro-irrigation scheme for the Northern Province, principally the Jaffna peninsula”. The TNA (Tamil National Alliance) & the MC (Muslim Congress) did not seek any promises from the common candidate while supporting him while contributing handsomely to his victory for both wanted the “known devil” out. Pertinent, to note, that Sirisena did not raise any of the minority or Tamil issues during the election campaign & hence they might not top his agenda. Devolution of any kind is, therefore, unlikely. India should therefore work closely with the Sri Lankan government on rehabilitation activities including livelihood generation & housing construction & not get carried away by the chauvinistic slogans emanating from Tamil Nadu.

Governance

Sirisena has promised to abolish the Executive Presidential System - embellished with Unlimited Powers, in force since 1978 - within 100 days. Such promise have been made since 1994 but repeatedly flouted since none of the elected incumbents could shrug off the lure of unbridled power. There is another promise regarding the abolishment of the 18th Amendment to the Constitution and replace it with the establishment of independent Commissions in order to secure the impartiality of institutions such as the judiciary, police, elections, auditing and the office of the Attorney-General. This could happen.

Others

He could reinstate Shirani Bandaranayake, the former chief justice, who was sacked by Rajapaksa, two years ago & rehabilitate, Sarath Fonseka, the erstwhile army chief who fought against Rajapaksa in the last Presidential race in 2010, lost. & then was indicted for corruption in military procurement, perhaps due to political vendetta.

Sirisena even with the best of intentions has a tight rope walk to perform. Therefore, prudent not to expect miracles from him but a nuanced approach more appreciative of India’s concerns as compared to the previous regime..

Sri-Lanka: The Portrait of Mahinda Rajapaksa

Mahinda Rajapaksa, the charismatic former President of Sri Lanka had his Presidential tenure dogged by controversies which attracted the attention of the UN     (United Nations). He shall, however, be remembered for his tenacious drive to finish off the much disliked but immensely feared, Tamil terrorist organization, the LTTE (Liberation Tigers of Tamil Ealem) & perhaps seeding everlasting peace in the island state. His human rights record, though, was his Achilles heel, that forced the minorities – Tamils & Muslims who constitute about 30% of the population - to vote decisively against him. Infact, Rajapaksa, the consummate politician, realized that he was losing the minority vote & hence made an appeal that “a known devil is better than an unknown angel” at an election rally in the Tamil heartland, Jaffna. That appeal – if you can term it as one – did not carry though while his attempts to attract the Muslim minority by having Salman Khan campaign for him, did not yield the desired results. Ironically, the lord of Tirupathi, whom Rajapaksa paid obeisance to, just before the commencement of elections, too, did not show mercy. The desertions in his ranks just before the elections were indicative of his imminent loss although astrologers thought otherwise. The end of Rajapaksa’s epochal decade (2005-15) is, therefore, the right time to evaluate his contributions.

Rajapaksa, belonging to a political dynasty, is the son of D A Rajapaksa, a former MP and Cabinet Minister & hence groomed well in the rigmarole of politics. After his father death in 1967, Rajapaksa became an MP, on the SLFP (Sri Lankan Freedom Party) ticket, in 1970 at the age of 24. Later, he studied law and continued practice except for the period when in office. He reached the zenith of this political career when he became President in Nov 2005 & won a second term in 2010 after winning a brutal war in the North & East against the dreaded LTTE. Paradoxically, the LTTE contributed to his victory in both the elections. In 2005, the boycott call given by the LTTE, prevented a Ranil Wikramasinghe win while in 2010, Rajapaksa’s victory was courtesy a stupendous victory over the LTTE. Rajapaksa has three sons Namal, Yoshitha & Rohitha & was reportedly grooming the eldest, Namal, to take over his responsibilities when the electoral setback put paid to his ambitions.

Rajspaksa, to his credit, has steered an economy into a high growth rate & rid the country scrounge of Tamil militancy - that plagued the country for over 30 years. He, therefore, has found a permanent place in the hearts of the Sinhala majority. Incidentally, Maitripala Sirisena, the current winner, in the Presidential race, a Buddhist Sinhala, was a key lieutenant of Rajspaksa, during the fight against the LTTE & too could claim credit for the victory; therefore, the Sinhala majority was split vertically in the middle during the elections. Analysts are however, prone to argue that the election resulted in a Rajapaksa loss rather than a Sirisena win. This view cannot be completely discounted because of the following reasons.

Family Rule

Rajapaksa’s bane has been his unabashed penchant for family rule. All his 3 brothers are in government. Retd. Lt. Col. Gotabhaya is Secretary, Ministry of Defence, Basil Is Minister for Economic development & the eldest Chamal, the speaker of Parliament. The largesse continues; his nephew, Shashindra is the Chief Minister of the Uva & his cousins Jaliya Wickramasuriya is ambassador to the United States & Udayanga Weeratunge is ambassador to Russia. Family rule coupled with unbridled corruption is a dangerous concoction that heralded his downfall.

Crack down on press freedom:

He was accused of trying to control the fourth estate through strong arm tactics in a bid to prevent negative publicity. Attempts to implicate the first family, either on human rights or economic appropriation were scoffed at. While there have been many instances of acts of vandalism & violence against the press scribes, the one which gained the most attention was the murder of newspaper editor, Lasantha Wickrematunge, in January 2009. A poignant reminder was editorial written by the murdered editor, published posthumously, accusing Rajapaksa's government for being responsible for his death.

Human Rights Violations

Rajapaksa’s tenure has been muddied by human rights violations especially during the last phase of the war against the LTTE, in 2009, when indiscriminate shelling of civilians, rapes & massacre of surrendered mercenaries were supposedly committed. While the govt. accuses the LTTE of using civilians as a human shield which resulted in human casualties, what is also true is that the govt. continued with its advances unmindful of the collateral damage. The Sri-Lankan govt. has been under severe scrutiny on this heinous count from Western democracies & the UN & the former President made overtures to China to soften the US drive.

Rajapaksas’, remain an influential family & the economic muscle that they have added in the last decade make them potent foes. Rajapaksa cannot be written off since he continues to head the SLFP & his coalition has over a two third majority in Parliament. Sirisena realized the same & has quietly been making attempts to break the SLFP; about 50 parliamentarians belonging to the erstwhile coalition of Rajapaksa are supposed to be expressed their support to the new head of state & also nominated him as the new SLFP chief.  Rest assured that the “Game of Thrones” would continue to be played & the purported coup attempts by Rajapaksa - after the election results announced – investigated. The “Damocles sword” would continue to rest on the erstwhile “King”. Rajapaksa, make no illusions, is down but not out yet.

Sri-Lanka: The Fall of Mahinda Rajapaksa

Power corrupts & absolute power corrupts absolutely  Lord Acton

January 8th, 2015, is a red letter day in South Asian history; after all the mighty Mahinda Rajapaksa was defeated in the Presidential race by a relative unknown Maitripala Sirisena; the latter was  incidentally a minister in the former’s cabinet till he defected to the opposition’s ranks just before the elections & achieved a stupendous victory. Rajapaksa accepted defeat & promised a smooth transition but his gesture which evinced initial appreciation was soon sullied by an unverified accusation of an aborted attempt by the first family to retain power through military intervention. The steadfastness of the army chief – it is alleged – not to tinker with a democratic process averted a catastrophe. The new dispensation has announced its intention to launch an impartial enquiry.

The drama continues. The sudden disappearance of KP (K Padmanabhan), just after the election results were announced, has surprised many. He was one of the accused in the Rajiv Gandhi assassination case, not repatriated to India by the Sri Lankan Government despite several requests & is now assumed to have found safe sanctuary in either China or Pakistan - states inimical to India’s interests. KP was  the chief arms procurer of the Tamil terrorist outfit, LTTE (Liberation Tigers of Tamil Ealem), till he was captured in a south east Asian country in 2009 & post co-operating with the government, ostensibly released, in 2012, to run his NGO (Non-Government Organization) activities in Killinochi. He was used to finish off the last remnants of the LTTE & perhaps used to make a surreptitious attempt to influence the Tamil minority during the elections. The conspiracy theories are therefore flying thick & fast.

Against this background, it is pertinent to note that the ruling party in India –the BJP -& the government have not acquainted themselves well for they got their assessment of the electoral results completely wrong. Arvind Gupta, the head of the BJP’s IT cell was deputed to help Rajapaska with his social media strategy; after the former’s impressive performance, as part of the Modi’s electoral team, in the just concluded parliamentary elections in May 2014. Salman Khan, surprisingly, canvassed for Rajapaksa, perhaps, with the concurrence of the government, although the media tom-tommed that it was his co-star, Jacqueline Fernandez, who prompted such a move. Surely, Salman, who is facing legal troubles, would not have done anything that would annoy the government.

The hot political climate in the sub-continent is replete with conflicting narratives; the counter narrative, to the one listed above is that India was annoyed with Rajapaksa because of his pro-China tilt & willingness to be part of the “Strings of Pearls” strategy to contain India. Added to that was the irritant of non-devolution of powers to the Tamils in the North & East which heated up the political landscape in Tamil Nadu, much to the chagrin of the BJP which is planning to be a major political force in the southern state. Likewise, the US has been at the forefront, trying to implicate Sri Lanka on the human rights violations front while the OIC (organization of Islamic Countries) was annoyed because the pro Buddhist, Bodu Bala Sena, was being allowed a free run by the government to torment the Muslim minority. It is suggested that all these three interest groups joined hands & used their assets in Sri Lanka to help Sirisena win. All this cannot be ruled out as a figment of imagination for external interventions are but a part of covert diplomacy.

While the reasons could be many, it is a fact that family rule, corruption & denial of minority rights finished off Rajapaksa. Infrastructure development, high growth rates & strong leadership could not come to his rescue. The great fall of Mahinda Rajapaksa is but a reminder that the citizenry across countries seek compassionate & progressive leadership

Elections-2014: Lessons Learnt

Elections are festoons of democracy and a remarkable conduit to usher in what Abraham Lincoln said in the Gettysburg Address, on November 19, 1863 “Government of the people, by the people and for the people”. The year 2014 started with a bang, with AAP renouncing power in Delhi. in February- to fight a national battle - after a 49 day stint, which was admired for its pro poor & anti-graft administration as much as it suffered the derision for its self-professed “anarchism”. The big game of 2014 was, however, the parliamentary elections, held during April & May that was preceded by the cacophony of TV debates & followed, immediately, by book launches, on the enormous significance of this election. No such grand standing here for my intent is to analyse the political events in its entirety and connect the dots to glean a few takeaways  

Lesson-1 “Nurture your constituency or risk political ignominy or worse, oblivion”

Looks obvious isn’t it? However this lesson is often breached, leading to an inglorious end to outstanding political careers. L K Advani is one such offender of this first principle. The BJP patriarch, even to his worst detractors, was the sculptor who moulded the party into the monolith it is today. Advani won the Lok Sabha seat from New Delhi in 1989 & a scare given by Rajesh Khanna, in 1991, forced him to shift to the Gandhinagar thereafter; the latter could not build on his initial electoral success & frittered it away – a repeat of the astounding loss of his super stardom.  

Advani, confident of his national stature, left the nurturing of his constituency to his trusted lieutenant Narendra Modi and Amit Shah; after all it was Advani who protected Modi from being sacked as Chief Minister after the “raj dharma” comment of the then Prime Minister, Vajpayee, post the 2002 Godhra riots. That things turned a full circle by 2013 is part of folklore; Advani’s plea to contest from Bhopal was rejected, sulk overlooked & he is forced to live in semi-retirement as part of the defunct “Margdarshak Mandal” of the BJP. So much for the “Loh Purush”

Rahul Gandhi case is an interesting one. The scion of the first family got the Amethi constituency, the family pocket borough, on a platter & for want of investment of time & effort was given a scare by AAP’s Kumar Vishwas & BJP’s Smriti Irani before he scraped through with a lower margin as compared to the previous election in 2009. Clearly, without clear articulation of his dreams & execution he would find re- election in 2019 difficult.

Lesson 2- “Parties lose but politicians don’t”

Chidambaram once said “We cannot have an affluent promoter and a sick company”. In India companies become bankrupt but promoters don’t. Taking the analogy further “parties India lose but politicians don’t”. As an example the congress pushed through Telengana which meant a definite decimation for the party in Seema-Andhra. However as soon as Telangana happened, most of the Congress MLA’a and MP’s, including ministers in the central cabinet, trooped out to find safe sanctuary in the YSR Congress, the TDP or the BJP. Similar experiences were replicated in the Maharashtra & Haryana elections too that were held in late 2014. We therefore witness a despicable situation where parties that once prided themselves on their ideological purity are now degenerating into entities offering a premium to win-ability alone which is the first sign of a decaying state. Politicians’, sauntering to cooler climes is only a part of the malady.

Lesson 3- “Social media is important,”

In May 2014, India had about 10 crore facebook, 3.3 crore twitter & 2.6 crore linkedin users. Thus, of an 81.4 crore electorate, about 12% had an access to facebook and a still lower percentage of people had access to other social media sites. With aggressive plans by all social media players to increase penetration, it is safe to assume that social media shall play a more decisive role in the next general elections to be held in 2019. With over 93 crore of  the 125 crore indian population enjoying mobile connectivity & the figure only likely to rise northward by 2019, expect targeted, customized mobile advertising by all political parties by such time Politicians have transitioned from image management through carefully curated press leaks to well-groomed exclusive bytes as per the demands of 24x7 TV channels. They now have the daunting task of being media friendly & tech savvy too – a transition to the latter has the potent possibility of speaking over the media to the electorate thereby reducing the costs of intermediation. Will they take the leap?

Lesson 4- “Don’t spread yourself too thin”

“Marketing warfare” & the principle of contraction defence indicates that rather than spreading forces too thin, concentrating forces at one vantage point enhances the chances of victory. Had AAP digested this universal law, it would not have recommended dissolution of the Delhi assembly but concentrated, instead, its forces in the national capital & supported by the strength of the government machinery achieved a spectacular victory, cementing its position further. Had it been more ambitious & resourceful, it could have concentrated its efforts on states surrounding NCR - Punjab, Haryana, HP & Western UP & not contest over 400 seats - which it finally did - with disastrous consequences. While AAP’s attempt to create a national footprint, quickly, riding on a positive sentiment, had its own sets of admirers, it is now clear that spreading themselves thin - both in terms of human & financial resources -  led to a disaster.

Therefore, the year, 2014, shall go down in history as a year that hosted a watershed election, run in a presidential style & helped a man - with humble beginnings, born after Indian independence in 1947 - to become Prime Minister. Likewise the political canvas in India which was always Congress Vs the rest is slowly but surely shifting towards a new paradigm:  BJP vs the rest. The increase in polling percentages across all states including the recent J&K elections as well as the emergence of change agents like AAP gives us hope that India shall evolve into “participative” democracy from merely being a “representative” one. With lessons learnt democracy in India shall not only survive but achieve greater heights.

Peshawar Killings: Nawaz The Gainer

The gruesome murder of 132 children in an army school at Peshawar has elicited international condemnation- rightly so- & for once the Pakistani government has refused to differentiate between “good & bad” Taliban. The incident is numbing as the dastardly killing was retaliation against the Zarb-e-azb campaign launched by the armed forces against the Pakistani Taliban in Khyber Pakhtunkhwa (KP). This is but a grim reminder that the fight against terror therefore can have bloody consequences. Unfortunately, we are condemned to swim in the “crimson tide”. At this juncture it is pertinent to remember Hillary Clinton’s words “you can't keep snakes in your backyard and expect them only to bite your neighbours. Eventually those snakes are going to turn on whoever has them in the backyard," The Pakistani top brass build up the Taliban as a strategic asset to be deployed as per necessity in the neighbourhood but unfortunately their nuanced strategy has boomeranged, incinerating its benefactors in the process.

Certain sections of the press & Government across the border have accused India of connivance in the plot despite the Taliban publicly claiming responsibility; after all no caper is complete without India being part of the same. 16^th of December, incidentally is the day when India won a remarkable victory, in East Pakistan, in 1971; that the Peshawar incident happened on the same day is not seen as a coincidence but strategic scheming.  However, a closer look at the sequence of events shows that Nawaz Sharif, paradoxically, seems to be the biggest gainer of this episode.  Let us look dispassionately at the power calculus in Pakistan.

·          In the general elections held in 2013, Pakistan Muslim League (N)’s Nawaz Sharif became  the PM of Pakistan while his main opponent Imran Khan, representing his party Tehreek-e-Insaaf, formed the government in the state of  Khyber Pakhtunkhwa,  whose capital is Peshawar. It is rumoured that Imran won Khyber, courtesy a deal with the Taliban, in lieu of which he was asked to publicly announce his support for talks with the Taliban & renounce military action. Imran complied.

·         Imran was drawing remarkable crowds in 2013 and presumed that being elected to become a PM was only a formality. However the elections proved otherwise which prompted Imran to protest on the contention that elections were rigged. 

·         The Canadian Cleric, Tahirul Qadri & Imran Khan, purportedly supported by the army, to clip the wings of Nawaz, launched a tirade against the incumbent government & brought Islamabad to a standstill. Nawaz, unwillingly, had to seek the Army’s help for diffusing tensions & unwillingly part with certain concessions especially on foreign policy & army budgets. He has thus become a lame duck & was seething all this while.

·         Imran, meanwhile, planned another protest in Islamabad starting the 18^th of Dec, which apart from the nuisance factor had the potential of either bringing the government down or cull Nawaz’s power further.

·         Attack happens on the Army school on 16^th Dec.

·         Imran either had an option to keep quiet or support the Taliban cause which would have eroded his popularity amongst the public. It would have invited the ire of the army too which would have torpedoed his chances of becoming a Prime Minister in future. The most sensible option for him was to side with the government, be part of the all party conference held on 17^th Dec & publicly condemn the act which could raise the shackles of the Taliban & invite their retribution.  Nawaz gains either way.

·         The army is all fired up since the Taliban have attacked their kin & would leave no stone unturned to wipe them out. In pursuit, the army could inflict collateral damage of innocent civilians who get caught in the crossfire. If Imran protests the killings he invites the ire of the army & if he doesn’t the ire of the Taliban & the public. Imran is finished either way.

·         Nawaz meanwhile sees a window of opportunity to checkmate the army. He has already seized the initiative by promising not to differentiate between “Good & Bad Taliban” thereby gaining international support; this will act as an insurance against his likely putsch.

·         The army shall be busy fighting the Pakistani Taliban while the Afghan Taliban & the Hakkani network shall be busy trying to topple the Afghan government while strategic assets like the Jamaat-ud-Dawa or Hizbul Mujahideen would be deployed against India.

Nawaz Sharif is smiling now & has valuable time on his hands to claw back & reclaim his power; the wily old political survivor has done it again.