www.businessworld.in | RNI NO. 39847/81 | 25 FEBRUARY 2023 Rs 150 COME AND INVEST IN UP. WE ARE HERE TO PROVIDE YOU HASSLE-FREE CLEARANCE YOGI ADITYANATH, CHIEF MINISTER UTTAR PRADESH UP RECEIVES INVESTMENT PROPOSALS OF AROUND RS 22 LAKH CRORE NEW INDIA’S GROWTH ENGINE
INDIA’S NEW GROWTH UP ENGINE With a resolve to build a new India, Chief Minister Yogi Adityanath led a team of officials to Mumbai, the financial capital of India, asking them to invest in Uttar Pradesh because the world has started taking note of changes taking place in this state. “I ask all of you to contribute towards realizing Prime Minister Narendra Modi’s ‘$5 trillion economy’ goal for India by investing in Uttar Pradesh, through which the path to prosperous self-reliant India passes,” Chief Minister Yogi Adityanath said while addressing the country’s leading industrialists, representatives of financial, banking and industrial institutions, businessmen and investors. The Chief Minister said that the state with the largest population in the country is working diligently to fulfill this resolution as it has potential, vision, and immense possibilities. “We are providing every necessary assistance and resource to the investors in our state and they must take advantage of this”, he said while throwing open the door of opportunities to the captains of the industries. Showcasing Uttar Pradesh as an investment destination in the face of intense competition from other Indian states was in itself a challenge. It was the perseverance of Chief Minister Yogi Adityanath that UP was able to get investment proposals of over Rs 22 lakh crore. The investors from banking to the core sector and from film to the power sector – all showed interest in investment in Uttar Pradesh because of the leadership of Yogi that has transformed UP. The perception of change has come from the fact that the law and order situation in UP has changed, and this was accepted by the industrialists and members of the film fraternity during their interaction with the Chief Minister. Hard selling UP, the Chief Minister said as this is the heartland state of India there is no sector, be it agriculture, food processing or dairy, start-up, infrastructure development, and defence production where there is o scope for growth. The Chief Minister talked about the opening of expressways, airports, metros, and the country’s first waterway, which speaks volumes about its infrastructure. At the ground level, there is 96 lakh registered MSME units that are generating employment at the village level. The philosophy of this government is ‘jo kaha, wo kiya’ which is testified to the way projects worth Rs 4 lakh crore out of Rs 4.68 lakh crore were implemented in the last five years. “Come and invest in UP and we are here to provide you hassle-free clearance,” Chief Minister Yogi Adityanath assured the investors.
Reliance Industries chief Mukesh Ambani has proposed big investments in electronics manufacturing and green energy sectors, including providing 5G internet connectivity across UP and better health services to villages in Uttar Pradesh with the help of artificial intelligence. Adani Group has shown interest in setting up medical colleges in Ballia and Shravasti on the PPP model and a skill development centre with a capacity of 10,000 youths in Noida. Aditya Birla Group Chairman Kumar Mangalam Birla sought the government’s support for setting up a convention center in Noida, which he claims would be one of the largest convention centres in the world. Birla Group appreciated the sectoral policies of UP and showed its interest in investment in food processing, data centers, warehousing, and logistics as well as the solar energy sector. Ajay Piramal of Piramal Enterprises said that his company will launch a special campaign in Varanasi by joining the Prime Minister’s resolve for a TB-free India and expressed his interest in developing a Pharma Park. JSW Group MD Sajjan Jindal promised to set up a stateof-the-art Pumped Storage Plant at Sonbhadra for power generation, an EV manufacturing unit at Kanpur, and a new paint unit. Jindal also expressed his desire to participate in the development of a temple in Kanpur. Darshan Hiranandani, head of the Hiranandani Group, discussed plans for semiconductor investment in collaboration with foreign partners. Tata Sons Chairman N Chandrasekaran promised to make Air India’s flight service at all airports in UP, as well as build hotels. Parle-Agro proposed a Rs 500 crore investment, mainly in the dairy sector. Godrej Group, which already has 4 units operational in UP, has proposed to set up a new factory in Barabanki soon and be part of the development of a new city. Godrej Property will invest Rs 20,000 crores in 05 years. Lodha Group will bring housing projects to Ayodhya, Varanasi, and Gorakhpur with an investment of Rs 3000 crores. Ramky Group is keen to set up a private Pharma Park in UP on the lines of its Pharma Park in Hyderabad. Apart from this, it has also made proposals regarding STP and Solid Waste Management Plants. AA Rami Reddy, the founder of the group, also sought CM’s cooperation in the development of a satellite city between Lucknow and Kanpur. Dr Tushar Motiwala from Kokilaben Dhirubhai Ambani Hospital shared his plan to open Kokilaben Dhirubhai Hospital on Hub and Spoke model in Kanpur PROPOSALS INVESTMENT k k k k k k k k k k k k k MAJOR k Uttar Pradesh Chief Minister Yogi Adityanath in Mumbai with Kumar Mangalam Birla, chairman of the Aditya Birla Group
Darshan Hiranandani, CEO of Hiranandani Group, praised the policies, environment, and working style of the new Uttar Pradesh led by Yogi Adityanath. Sharing his personal experience with his industry colleagues, he said: “We have recently set up a world-class data center park in Greater Noida. The idea of this project came in August 2020 during the Covid period and our conversation started with the Government of Uttar Pradesh. In the midst of Covid, we applied for the project in September, we were allotted land in October, and in December, Chief Minister Yogi Adityanath laid the foundation stone of the project. The necessary clearance for the project was received in January 2021 and the construction of the data center began in March 2021 while on October 31, it was also inaugurated.” He said: This was the first time in the history of the Hiranandani Group, that such a huge project was completed in just 24 months. Getting Permission is Easy Now Amarnath, an entrepreneur running Patterson Energy in the field of plastic waste management, said: “Our company is working in the field of plastic waste management in collaboration with the Municipal Corporation in Mathura. Our experience of working with the Yogi government has been very pleasant.” He said that establishing an industry requires a variety of approvals, which was previously a difficult task in Uttar Pradesh. “However, it has become much simpler now to obtain any form of permission from the Yogi government”, he said. Infrastructure has significantly improved in UP T Srinivasan, Managing Director of Mails System and Services, said that his company has been working in the defence sector for 27 years. “In the Automated Test Systems for the Army manufacturing sector, we are doing fantastic work. Our company is interested in investing in the Defence Corridor being built in Uttar Pradesh. Under the direction of Chief Minister Yogi Adityanath, a lot of changes have taken place in Uttar Pradesh. The cities of UP are now cleaner than they were previously, and the road infrastructure has also improved significantly. Our company is very excited to invest with the Government of Uttar Pradesh.” UP BEST INVESTMENT DESTINATION, CLAIM INDUSTRIALISTS Uttar Pradesh Chief Minister Yogi Adityanath in Mumbai with Deputy Chief Minister of Maharashtra, Shri Devendra Fadnavis Uttar Pradesh Chief Minister Yogi Adityanath Launching Logo Of UP Global Investors Summit (Below) CM Yogi Adityanath with Mukesh Dhirubhai Ambani, chairman and MD, Reliance Industries Ltd
UP RECEIVED INVESTMENT PROPOSALS WORTH MORE THAN RS 7.12 LAKH CRORES FROM ROADSHOWS IN 16 COUNTRIES T he diligence shown by Chief Minister Yogi Adityanath to deliver by taking out structural reforms has won the hearts of investors, not only in India but also in overseas as ‘Team UP’, which went on a global tour to invite entrepreneurs, companies, and institutions from all over the world to invest in Uttar Pradesh, has returned with unprecedented success. In the `Investors Roadshow’ organized in 21 cities of 16 countries immense enthusiasm was seen among entrepreneurs as a global investment of more than Rs 7.12 lakh crores has been assured. Investment proposals worth Rs 4 lakh crore have been received from the United Kingdom, and the United States of America alone. “With this investment from overseas investors this Investors’ Summit will strengthen ‘Brand UP’ on the global stage,” Chief Minister Yogi Adityanath said. Hospitality, Food Processing, Drugs & Pharma, Medical Devices, Chemical, Tourism, Logistics-Warehousing, Green Hydrogen, EV Battery Manufacturing, MSME, Dairy, Education, Defence & Aerospace, Semiconductor, Drone Manufacturing, Agriculture, Textile, Steel Manufacturing are sectors in which investors have shown interest. Companies like Dassault, Saffron, Air Liquide, Thomson, Sanmina Corporation, Computing, Silas, HMI Group, Samsung, Ikea, Ericsson, Motherson, NTT Global, and Mitsui, have shown enthusiasm. Sweden Approved UP’s Potential A delegation led by Industrial Development Minister Nand Gopal Nandi and Public Works Department Minister Jitin Prasad met the Swedish business community where Swedish companies showed interest in investment in Defence, Textiles & Garments, Food Processing, Automobile & EV, Renewable Energy, Waste and Water Management and Transportation. Ikea’s Global Extension Head Jane Christinson showed his intention to invest Rs 4300 crore. Swedish construction company Cernec proposed to invest Rs 10,000 crore in the Film City project, while Boson Energy proposed an investment of 1,000 crores in the Waste Energy Project. Proposals from Canada In Vancouver, Canada, the UP delegation signed 6 Investment Proposals worth Rs 1200 crore. These investment proposals are related to IT parks, manufacturing units of aluminum and kitchen supplies, and the setting up of hotels. US too to assure investment In New York, the UP delegation met Rohit Arora, co-founder of Biz2Credit, which has an investment of $500 million in India. The delegation also met InBev’s Global Vice President Regulatory and Public Affairs Andreas Payet and an MoU was also signed regarding investment in UP. Parag Amin, the founder of iCreate, signed an MoU regarding the development of foster startups in UP. Ajay Srivastava, Co-Founder and MD, E Kuber Ventures, proposed investment in defence, drones, and startups. Investments from Singapore The delegation led by Jal Shakti Minister Swatantra Dev Singh held a business meeting in Singapore. It met MD of Vida Technology and discussed various avenues of investment in OEM/ODM technology in Uttar Pradesh. The investors from Singapore were also introduced to the possibilities of investment in Defence, EV, Banking and Finance, Education Infrastructure and IT and related industries. Hari Pulongsundaram, CEO of Asia’s largest urban infrastructure consulting firm, Surbana Jurong, assured investments in areas like infrastructure, smart city projects and housing development schemes. Uttar Pradesh Chief Minister Yogi Adityanath flagging off the ‘Run for G-20 Walkathon’ organized in four cities of Uttar Pradesh, including Lucknow, Agra, Varanasi, and Gautam Buddha Nagar simultaneously from his residence in Lucknow on January 21
T he focus of investment would not be limited only to Lucknow as all the 75 districts of Uttar Pradesh opened the doors of investment possibilities. The local entrepreneurs were invited and were part of the Global Investors’ Summit. Chief Minister Yogi Adityanath used his managerial skill to ensure that all the ministers for all 75 districts established communication with the public locally. Lucknow took the lead in inviting investments as proposals worth Rs 56,299 crores were inked head of the Global Investors Summit-23. A total of 262 MoUs worth Rs 56,299 crore were signed during the conference from 331 investment proposals that were submitted online. Investors appreciated government efforts. Ravindra Singh, Director, Morassi Pharmaceuticals Pvt. Ltd said hailed the pro-industry decisions of Yogi Adityanath. The facilities provided by the government for passing the map before the start of work in any industry, related to land utilization, simplifying the license process through a single window system, and approving subsidy during the setting up of the industry, are very encouraging for the industries. His comments were dittoed by Rahul, owner of Satyam Foods, who said: “Investors are very excited to come to the state due to the new policies of the Yogi government for various sectors to promote the industry in the state. As a result of the changing image of the state and the improved law and order situation under the able leadership of Chief Minister Yogi Adityanath, all leading banks of the country have agreed to provide loans to the business community setting up enterprises in Uttar Pradesh. The bankers praised the reforms in the state during their meeting with Chief Minister Yogi Adityanath in Mumbai. These are the same banks that refused to lend money for any UP project five years ago, but since CM Yogi came to office, the state has transformed, and this has caused the bankers’ perspectives to shift. These bankers are also now considering Uttar Pradesh as an ideal destination for investment. They no longer fear losing money in UP. Rather, they are now considering a big investment in Uttar Pradesh as an opportunity. They are also expecting a big business deal through this investment. This shift in bankers’ perspectives is due to Uttar Pradesh’s changing environment, security, and good governance. DISTRICTS RISE TO THE OCCASION; ATTRACT INVESTMENTS BANKS JOIN UP’S SUCCESS YATRA Uttar Pradesh Chief Minister Yogi Adityanath addressing top industrialists of country in Mumbai
UP’S FILM POLICIES ARE BLOCKBUSTER, ////////////////// Owing to the friendly policies of the Yogi Government, Uttar Pradesh has emerged as the most cherished destination of the film fraternity of the country. The friendly film policy of the state government has provided a 50 percent subsidy for web series shot in the state. Actor and Gorakhpur MP Ravi Kishan said that at present 100 to 125 films are being shot in UP. A Film City is coming up in Noida, which is well connected with airports and expressways, making the state a hub of film activities. Welcoming the film fraternity to the state of Uttar Pradesh, Chief Minister Yogi Adityanath, during his Mumbai visit asked the film fraternity to shoot films in the state, which is home to exotic locations. Along with security for film shooting, you will also get the facility of connectivity in UP. It is our responsibility to preserve and promote heritage. The Chief Minister said: “All of you have been witness to the changes that have taken place in Uttar Pradesh in the last 5-6 years. Uttar Pradesh, which was facing an identity crisis five years ago, is telling a new story of development today.” Of late, Uttar Pradesh has won many laurels at the national stage. UP received Special Mention Award as Most Film Friendly State at the 64th National Film Festival and Most Film Friendly State at the 68th Film Festival in 2020. The state also received an award in the International Film Festival in Goa (2021) and in Mumbai in 2022. SAY FILM MAKERS FILM ACTORS, AND PRODUCER-DIRECTORS PRAISE CM FOR HIS WORKS Boney Kapoor praised Chief Minister Yogi Adityanath and his work for a crime-free Uttar Pradesh. Subhash Ghai thanked CM Yogi Adityanath for the progress of the film industry in UP. “I want that the children of UP also become trend artists. Only your children can take the film industry forward,” he said. Playback singer Sonu Nigam said that the CM is doing the work of uniting UP and Maharashtra. “We will do whatever is best from our side. You did a lot of work to make UP crime-free,” he said. Producer-Director Rahul Mittra praised Yogi Adityanath for not only willingly hearing the suggestions of all industry experts but also implementing them. Bollywood actor Suniel Shetty also urged Chief Minister Yogi Adityanath to help get rid of the ‘Boycott Bollywood’ trend on social media. Uttar Pradesh Chief Minister Yogi Adityanath With Film Industry People
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4 | BW BUSINESSWORLD | 25 February 2023 America’s roads are not good because America is rich, but America is rich because American roads are good — Former US President John F. Kennedy Dear Reader, THE PAST FORTNIGHT has been eventful for the Indian economy. Union Finance Minister Nirmala Sitharaman’s Budget for the year 2023-24 has been widely hailed. I see both continuity as well as change in Ms Sitharaman’s Budget. She has kept up the momentum on boosting infrastructure —which has been a key governance plank of the Narendra Modi government. With an infrastructure comparable to that of high-income category countries, the country’s economic ambitions soar. It has a multiplier effect on job creation and the overall economic health.It’s however the government that has been making investments in infrastructure. It’s hoped that the private sector, too, would play its part. However, if I were to sum up the Union Budget, the word WARM could very well explain its key thrust areas. The Budget has a lot for Women, Agriculture, Rural India and MSMEs. Its inclusive nature, while it aims to achieve fiscal consolidation, raise capex and also assuage middle class concerns, is one of the reasons why it has been hailed widely. In our special issue, Kiran Mazumdar-Shaw, Rakesh Bharti Mittal are among the India Inc leaders who analyse the Budget, while V. Vaidyanathan shares his perception of Union Budgets over the last few years. The last fortnight has been newsy for two other reasons. One, the country has witnessed a storm of sorts over Adani stocks in the wake of a US shortseller’s report, raising concerns about the regulatory framework, among other things. Two, there have been large-scale layoffs, especially in the IT majors in the US, which has had an impact in India too, with long-term repercussions. In our Budget special, we also bring you special features on these two subjects as well. This special issue of BW Businessworld has all other special features and columns. We hope you continue to enjoy reading our specials and other issues. Please do send us your feedback. Happy reading! ANNURAG BATRA [email protected] UNION BUDGET GETS A THUMBS-UP EDITOR-IN-CHIEF’S NOTE
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8 | B W BUSINESSWORLD | 25 February 2023 MAILBOX YOUR COMMENTS TALK BACK www.businessworld.in LAST WORD:KRIS GOPALAKRISHNAN The most definitive ranking of India’s top listed companies as they make their way through an uncertain environment to realise the $5-trillion economy dream, as also Vision 2047 BW REAL THE Rs Knowledge 150 Partner Indian Oil Corporation Reliance Industries Life Insurance Corporation of India Oil & Natural Gas Corporation Bharat Petroleum Corporation Hindustan Petroleum Corporation Tata Motors Tata Steel Rajesh Exports Tata Consultancy Services Hindalco Industries Larsen & Toubro JSW Steel Vedanta NTPC RNI NO. 39847/81 I 11 FEBRUARY 2023 RESEARCH AND INNOVATION This refers to the editorial (“Budget Can Lay The Groundwork For India To Assume Leadership In Research And Innovation”, BW, February 11). The author points out that gross expenditure on R&D (GERD) as a percentage of GDP has remained stagnant at around 0.7 per cent for about a decade. India will need to raise GERD to the longpromised level of two per cent of GDP if it wants to consolidate on the gains made so far in Science & Technology. In addition to this, the private sector should be incentivised to invest more in R&D. Fiscal incentives, such as the tax credits, enhanced tax deductions and grants can spur the private sector to increase their investments in R&D to create valuable intellectual property. Today, there is an urgent need to introduce research-linked incentives (RLIs), modelled on the lines of the existing production-linked incentives (PLIs) scheme and widen the ambit of CSR spending to fund innovative research. It is good to know that as the current G20 president, India now has an opportunity to establish its credentials as a global innovation leader. PAWAN GAUR, EMAIL SUSTAINABLE BUSINESS OUTCOMES This refers to the editorial (“High Octane Performance”, BW, February 11). It is heartening to know that Indian Oil Corporation (IOC) has emerged at the top of BW Real 500 rankings for the second year in a row. The authors rightly point out that IOC’s presence across the entire hydrocarbon value chain allows it to create sustainable business outcomes. Thus, it is not at all surprising that today IOC accounts for the largest market share of India’s petroleum product consumption. VAISHNAVI NAIR, EMAIL BLIPP THIS PAGE TO GIVE US YOUR FEEDBACK INSTANTLY Submissions to BW |Businessworld should include the writer’s name and address and be sent by email to the editor at [email protected] or by mail to 74-75, Scindia House, Connaught Place, New Delhi-110001
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10 | BW BUSINESSWORLD | 25 February 2023 CONTENTS Cover design by SHIV KUMAR Cover photographs by PIB Budgeting for a Better Tomorrow Union Budget 2023-24, with record capex, hopes to see a massive expansion in infra, even as it aims for fiscal consolidation and assuaging key constituencies 64 12 Jottings India demonstrates commitment to energy transition; Call for a single drug regulatory body; FM’s gift to the tech wizards; Pathan’s box office blast 14 Impromptu Rob Tarkoff, Executive VP & General Manager - CX, Oracle Corporation on the importance of customer experience in the current scenario of economic uncertainty, growing fears of recession, importance of AI and more 18 Columns Minhaz Merchant (p. 18); Vikas Singh (p. 20); Raghav Chandra (p. 22); Krishan Kalra (p. 24);Amit Tiwari (p. 26); Amit Kapoor & Amitabh Kant (p. 28); Kiran Karnik (p. 30); Srinath Sridharan (p. 58) 36 Insight Srinath Sridharan on Virtual Digital Assets and how the history of financialisation of these assets has shaped up over the centuries including moral sanction and regulatory embrace 46 In Conversation Union Tourism Secretary Arvind Singh on the phenomenal growth in domestic tourism post pandemic and how the government is introducing new measures to make this sector a big contributor to the GDP 54 The Layoff Season How the mega layoffs announced by the US tech giants as well as tens of thousands of job cuts by tech startups closer home over the past year may not be the last time we have heard of this phenomenon this year VOLUME 42, ISSUE 09 25 FEBRUARY 2023 Illustration by DINESH S BANDUNI
25 February 2023 | B W BUSINESSWORLD | 11 The pages in BW Businessworld that are labelled BWi or Promotions contain sponsored content. They are entirely generated by an advertiser or the marketing department of BW Businessworld. Also, the inserts being distributed along with some copies of the magazine are advertorials /advertisements. These pages should not be confused with BW Businessworld’s editorial content. TOTAL NO. OF PAGES INCLUDING COVERS 116 66 Thrust on Infra On the robust infrastructure spending announced in the Budget and how it bodes well for the growth prospects of engineering, procurement and construction companies 70 Divestment Dirge How the government’s disinvestment programme, which is intended to free the official machinery from owning and running businesses, has quietly gone off the priority list 74 Nirmalanomics How this Budget has showcased Nirmala Sitharaman’s ability to balance both the political compulsion of an economic resurgence and the economic need of timely policy actions WHAT THEY THOUGHT OF THE BUDGET 76 S.Ravi 78 Kiran Mazumdar-Shaw 80 Rakesh Bharti Mittal 82 Deepak Chhabria 84 Mohit Malhotra 86 Pratik Agarwal 88 Shrinivas Dempo 90 M. Govinda Rao 92 DK Shrivastava 94 Madan Sabnavis 96 Interview Manmeet Nanda, Joint Secretary, DPIIT on the various initiatives of the department to reduce the cost of regulation, their impact on supply chains and how they are addressing real ground-level challenges 100 Master Strokes A discussion on how banks must have a strong hybrid cloud strategy, if they are to catch up with the new-age fintechs that have come up with ways to deliver financial services 106 Last Word V. Vaidyanathan, MD & CEO, IDFC First Bank on Budget 23-24 and how it mirrors the previous Budgets in terms of direction, consistency and the overarching growth objective 42 Embattled Adani A day-by-day account of how the shares of Adani Group companies have been battered out of shape, the charges labelled against the group by US-based short-seller Hindenburg Research that led to the fall, and Adani’s response to the whole saga Photograph by Umesh Goswami Photograph by Umesh Goswami
12 | BW BUSINESSWORLD | 25 February 2023 JOTTINGS BHARAT BIOTECH’S Executive Chairman, Dr Krishna Ella, has called for a unified drug regulatory framework with the merging of all state drug regulatory units with the Central Drugs Standard Control Organisation (CDSCO) to ensure one quality and one standard in pharmaceuticals. He said, “There should be a single regulatory framework in India. All state drug regulatory bodies should be merged with the Central Drugs Standard Control Organisation and that will solve the problem.” His comments come in the wake of the quality of Indian drugs having come under scrutiny around the world over the past few months. Single Drug Regulatory Framework Photograph by Lucian Comans Images/Canva Photograph by PIB India Waves the Green Flag at Energy Week T HE INDIA ENERGY WEEK, which took place between 6-8 February, was the first major energy event under India’s G20 presidency to showcase India’s rising prowess as an energy transition powerhouse. Energy transition has become an important component of energy security for India, where use of green fuels has received many incentives. With India having a first-mover advantage in the Green Hydrogen space, it now aspires to become a net energy exporter. This is an ambitious stance for a nation that continues to depend heavily on fossil fuels like coal and crude oil as sources of energy and has had to take tough diplomatic stands for its energy security. Through the year-long Russia-Ukraine War, India has stuck to its stand on importing Russian oil despite veiled threats of sanctions from the West. Union Minister of External Affairs S. Jaishankar, has at various fora, taken pot shots at the West, especially Europe, for pointing fingers at India, while persisting with its own imports of Russian natural gas. “I have a population of $2,000 (per capita income). I also need energy, and I am not in a position to pay high prices for oil,” he said recently. India’s focus on energy security was also evident at the COP26 Summit in Glasgow in 2021, when through tough last-minute negotiations, India changed an important clause in the agreement from “phasing out” use of coal to “phasing down” coal for energy generation. The emphasis now on energy transition demonstrates India’s intent to move speedily toward green fuels. — Arjun Yadav Recently Chennai-based drug firm, Global Pharma Healthcare, voluntarily recalled its whole batch of eye drops after the United States Foods and Drugs Administration (USFDA) notification alleged that they had caused a death and 55 instances of eye infections and permanent loss of vision. Earlier Made in India cough syrups from two companies had allegedly led to the death of 90 children in Gambia and Uzbekistan. Speaking on the sidelines of an event in Bangalore, Dr Ella said the entire Indian pharmaceutical sector should not be tainted because of a few cases. “We have extremely good companies but due to some local agencies we are getting into trouble,” he said, adding, “The licences for the cough syrups which were under question in the recent cases were provided by state regulatory units and not by the Central regulator.” — Shivam Tyagi
25 February 2023 | B W BUSINESSWORLD | 13 The FM’s Gift to the Tech Whizzes JUST IN CASE YOU HAVE not noticed, Artificial Intelligence (AI) has received a major thumbs up in the Union Budget for FY2023-24. Of late, AI has assumed centre stage in all technology conversations around the globe, thanks to the growing popularity of ChatGPT. The potential ChatGPT offers for breakthrough applications that could now be utilised directly by the common man surely, makes it the innovation of the hour. With a series of measures intended to encourage innovation in AI, the Union Government is going to invest in three AI Centres of Excellence (CoE) at top educational institutions in the country. The initiative was lauded by many in industry, including Rekha M. Menon, Chairperson and Senior Managing Director, Accenture in India. She said, “The government’s intent to set up three centres of excellence (CoE) will encourage the ecosystem to ‘Make AI in India’ and ‘Make AI work for India’.” Photograph by Phonlamaiphotos/Canva BREAKING RECORDS! Jagdish Mitra, Chief Strategy Officer and Head of Growth at Tech Mahindra said, “This budget, with simple steps, took on future skilling, enabling conversation around AI CoEs, 5G labs and so forth. These terminologies were unheard of in budgets and it has given them great visibility.” Considering that AI is expected to contribute an additional $957 billion to the Indian economy by 2035, the Union Finance Minister could scarcely have ignored its potentials. The rest is up to the bright young minds around the country! — Team BW THE MUCH-TALKED OF Hindi film Pathaan, starring Shah Rukh Khan (SRK), continues to create new records at the box-office. The film is witnessing great commercial success since its release on 25 January. In fact, it may just be on its way to becoming the second-highest grossing Hindilanguage production in the country, surpassing actor Yash’s KGF: Chapter 2. According to YRF, the production company that produced and distributed the film, the worldwide gross collection for Pathaan has now reached an impressive Rs 832.20 crore. With no major Bollywood release due till 17 February, Pathaan, film-trade experts say, has the potential to overtake S.S. Rajamouli’s Baahubali 2, which earned Rs 511 crore, as the highestearning film in the Hindi-speaking market. Industry tracker Sacnilk Technologies reported its total India collections at Rs 438.5 crore as on 6 February. Going by these numbers Pathaan may have already exceeded KGF 2’s total collection for the 13-day run, which was Rs 434.7 crore (Hindi). KGF 2 ended its run at the Indian theatres with a collection of approximately Rs 960 crore and its worldwide collection was approximately Rs 1,148 crore. According to film-trade experts, YRF started the Pathaan journey with over Rs 100 crore in its kitty much before the release by selling its OTT rights. With a few more SRK starrers slated for release in 2023, will Bollywood’s winter finally come to an end? —Ashish Sinha
14 | B W BUSINESSWORLD | 25 February 2023 MARKETING AND ADVERTISING You are one of the foremost CX leaders in the world. Could you tell us about the importance of CX in the current difficult economic environment? CX is one of the most important things right now, particularly as we head into a recessionary economic environment, where customer loyalty is going to be more important than ever. We have to work with our clients to make sure that they have the right strategies, technologies and the right way to leverage intelligence on their own customers. So, it’s critical now more than ever because in a constrained economic environment, you have to be much better at knowing and anticipating what your customers want. Could you help us understand the kind of trends that are prevalent among businesses today with regard to understanding customers? There are three major trends that we’re seeing. One is consumer choice. Customers are continually pushing to make sure that any business that interacts with them has a contextual understanding that they need to have a consistent experience, regardless of channel. Whether they are interacting with you over email or in-app, or through advertising, or through service conversational channels, digital channels, they want every company to have contextual awareness of them. In order to do that, you have to really master your first-party data. The other big change we’re seeing is in the way people consume products. Today, there’s a lot of shift happening from transactional models to subscription models. Every business is trying to figure out a way to move from what I will call “individual transactional purchase moments” to an “ongoing recurring revenue relationship” with a customer, where you buy a subscription to access the products. Finally, more and more customers care about how businesses use their data today. And so, we’re being very careful about how we think about privacy and permissions – in the way we use customer data to provide a better experience, making sure that it’s secure and that we have the appropriate consent. We also ensure that we’re using data in ways that customers agree with. Given the conversation around artificial intelligence (AI) today, how important is AI to CX? It is central and critical to every one of our flows. We think about our business not as point products, but as flows between a customer and their consumer, or between our customer and their customer. Machine learning (ML) and AI is built into every Oracle product. That can be everything from IMPROMPTU In a conversation with BW Businessworld, Rob Tarkoff, Executive Vice President & General Manager - CX, Oracle Corporation, speaks on the importance of customer experience (CX) against the backdrop of growing fears of recession, importance of AI and more. Excerpts Rohit Chintapali ‘CX is Very Important in a Recessionary Environment’ “AI can really help you learn more effectively how to service a customer. We think it’s just the beginning, to be honest”
25 February 2023 | B W BUSINESSWORLD | 15 rohit@business world.in the marketing suite, send-time optimisation or subject-line optimisation in an email context. In service, ML can be used to predict when a customer might have a problem or an outage by monitoring IoT signals or asset-based service requests and so on. ChatGPT is a particular implementation of AI. It’s a linguistic model that basically looks at patterns and behaviour and learns from that, like all machine learning. And it’s showing the power of ML in terms of auto-generating responses to questions. At Oracle, we have been doing that for a while in service, having digital assistants and bots, that learn and become smarter about how to optimise a service experience and when to escalate to a human agent. So, we think it’s critical and AI can really help you learn more effectively how to service a customer. We think it’s just the beginning, to be honest. What are the key takeaways from your latest visit to India? And what is the messaging like and what is your intent when it comes to India? We have had a lot of success of late in India in selling to great customers, and also in finding customers who are really going to push us on innovation. And I continue to see that we have customers here that are pushing the envelope on what they want to do with our products and we get the benefit of becoming better at what we do for that. Oracle was early to invest in India as a development centre, as a Centre of Excellence, for not only helping us augment our whole labour force, but really tapping into the best and brightest engineers here to drive innovation. And I continue to see that. We have deeply integrated teams across our India and North American geographies that work together as one. And because of that we think we’re an employer of choice here. We happen to be very invested in India and will remain invested because we’ve built such a corpus of talent here. “We happen to be very invested in India and will remain invested because we’ve built such a corpus of talent here”
MID LAYOFFS and financial fraud, startups face not only a funding winter but the forthcoming Ides of March. The discovery that GoMechanic – an auto services startup that has raised $62 million (Rs 510 crore) in venture capital and private equity funding since it was founded in 2016 and had a valuation of $350 million (Rs 2,900 crore) – cooked its books follows on the heels of several other startups accused of financial fraud, including Singapore-based fashion ecommerce tech firm Zilingo. What do these cases mean for the future relationship between founders and funders? First and foremost, due diligence will sharpen. GoMechanic’s accounting malpractice was spotted only when Japan’s SoftBank Vision Fund vetted its balance sheet ahead of a fresh round of funding. It was set to lead a $75 million (Rs 640 crore) round. EY is now doing a forensic audit of GoMechanic’s books while the founders go on a forced leave of absence. But financial fraud is not the only worry for both founders and funders of startups in India and globally where accounting frauds have spiked, especially in crypto firms like FTX. The other concern is the basic business model of startups. Bouyed by surplus cash looking for investment opportunities when interest rates in the West were Founders Versus Funders A Minhaz Merchant COLUMN MINHAZ MERCHANT IS THE BIOGRAPHER OF RAJIV GANDHI AND ADITYA BIRLA AND AUTHOR OF THE NEW CLASH OF CIVILIZATIONS (RUPA, 2014). HE IS FOUNDER OF STERLING NEWSPAPERS, WHICH WAS ACQUIRED BY THE INDIAN EXPRESS GROUP near-zero till a year ago, startups often received large cheques on the basis of a business plan. Due diligence was light. Masayoshi Son, founder of SoftBank Vision Fund, famously said he invested on intuition. The fables, often apocryphal, of startup entrepreneurs clinching funding over dinner with investors after scribbling their business blueprint on tissue paper, got a whiff of credibility as money poured into startups mired in losses. Its founders though had a good story to tell. Traditional companies have a straightforward revenue model: sales of their products or services are greater than their overheads and all other costs. Startups turned this business model on its head. A significant part of their “revenue” comes from private equity and VC funding. The idea is to accept losses in order to build volume which in future will attract genuine revenue. Amazon made a loss for the first 20 years of its existence, say Indian startup entrepreneurs to justify their business strategy. Why not us? But in the end a business model based on financing expenditure with equity capital, not real revenue, will implode. That is why Indian startups have begun cutting costs with large layoffs. They include big players like Swiggy and Byju’s. The problem though remains. In the scramble to rightsize, companies risk losing market share. For VC and PE investors that signals trouble. With interest rates high in the US and Europe and likely to stay firm for a while, global fund managers are rework18 | B W BUSINESSWORLD | 25 February 2023
fallen to less than half their IPO price. The other fundamental question is: who actually decides a startup’s strategy? Funders aren’t yet breathing down founders’ necks, but most have increased their active involvement. Boards are filled with their nominated directors. Independent board directors come with a health warning. Many are not conversant with the company’s business. Undue interference can demoralise founders who work 24/7 to make their companies successful. They complain that board directors nominated by a PE/VC firm often overstep their brief and force entrepreneurs to make decisions outside the investors’ domain competence. The ideal funder is hands-off on operational matters and hands-on on financial diligence. Founders can learn a lesson from large tech companies on how board vigilance can set things right. Cognizant, one of the world’s leading information technology companies, last month sacked its CEO Brian Humphries. The saga played out over nearly a year during which Cognizant’s underperformance on Humphries’ watch compared to rivals like Infosys forced the board to fire Humphries. His replacement, Ravi Kumar, was president of ing investment options with their funding partners. As The Economist noted recently: “Venture capitalists periodically raise money from limited partners, such as endowments and pension funds. Many of these now want to reduce their exposure to venture capital, since public markets have taken a hit and they seek to keep allocations to different asset classes in rough proportion. As a result, a handful are calling up venture capital funds to say things to the effect of ‘don’t rush back’ for more money, says an investor in several venture capital funds. “Venture capitalists have other reasons to be concerned about relations with limited partners. During the recent boom, funds started to poke their noses far beyond their usual concerns. Sequoia Capital, a famous outfit in Silicon Valley, launched a ‘superfund’ which includes investments ranging from traditional venture capital interests to publicmarket shares. Some limited partners thought these sorts of funds were absurdly broad, but opted to buy in anyway in order to gain access to specialist funds.” With limited partners who fund VC and PE firms becoming increasingly wary of where their money is being invested, Indian startup entrepreneurs will have to rewrite their business models. The stock market performance of the few listed startups shows how ruthless public markets can be. Paytm, PolicyBazaar and Nykaa have nology services firm. The compensation for the role gives a sense of the high stakes for the board. Humphries made $19.7 million in 2021.” The standards startups adopt are not as rigorous as Cognizant or Infosys. Nor are their boards as proactive. But Cognizant, co-founded by Indian-American Francisco D’Souza, and Infosys, cofounded by N. R. Narayana Murthy, Nandan Nilekani and others, are both former startups themselves. They relied on real revenue and real profits to make it to the top, reward shareholders and create an enabling environment for employees. They offer a valuable lesson in good business practice for both Indian founders and funders. Infosys for 20 years. According to Mint, this is how the story unfolded: “The straw that broke the proverbial camel’s back was Humphries’ briefing to the company’s board in the first week of January. Humphries shared with the board that Cognizant would grow in ‘low singledigits’ in 2023. Further, he wanted the board to lower the earnings per share (EPS) outlook for 2022. These two developments sealed the fate of the incumbent at Cognizant and paved the way for the dawn of the Ravi Kumar era at the techWith limited partners who fund VC and PE firms becoming increasingly wary of where their money is being invested, Indian startup entrepreneurs will have to rewrite their business models. The stock market performance of the few listed startups shows how ruthless public markets can be 25 February 2023 Photograph by Woodhouse | B W BUSINESSWORLD | 19
20 | B W BUSINESSWORLD | 25 February 2023 COMPETITION is a complex notion. Its neither observable, nor easily experienced. Monopolists are invisible. They creep into our lives unannounced and don’t ‘vacate’ it. The Indian consumer enjoys more choices than ever before. Oodles of products, countless brand names, mean a plethora of choices, and yet over the last decade the rise of the dominant players is diminishing choice. Sectors not ‘dominated’ by monopolies are dominated by the duopolies i.e., two organisations own significant market share and dictate customer behaviour (think switched off ACs, cancelled rides, surge pricing, festival prices, long wait times). Many sectors are turning into two-horse races. The choice between different consumer products is often a mirage. The choice between different retailers is equally illusionary. The pattern of diminishing choice and rising concentration reflects a profound change. Its mirroring the decades preceding the economic reforms. The top 20 companies take away over 75 per cent of corporate profit. It was only 40 per cent when the reforms were ushered in. There is increasing evidence of the dominant players colluding both on COLUMN By Vikas Singh The author is an economist and columnist prices and features. Monopolies have strong pricing power and a broader moat, making competition difficult. They fortify the moat by adding distinctive ‘stickiness’ features, bundling products etc. Monopolies have more, and cheaper access to capital. They use this effectively to consolidate, bankrupt competitions or acquire them eventually, improving cost synergies; and garnering market share. They price down the competitions, capture both the shelf and mind space (using data effectively, advertising efficiently), even shut others out by luring away customers and dangling freebies. Ability & Intent to Raise Prices, Squash Competition There are other means as well. Many overt, some equally covert. They use patents, mergers, and acquisitions to obtain industry dominance and prevent market entry. They deny consumers’ choices. The overwhelming goal is to neutralise competitors, instead of product innovation or service differentiation. Competition elimination is an investment that is recouped with higher prices once competitors have been squeezed out. Size and capital expedites the penetration to a journey of profitability. A Crux study across 18,000 consumers, 1,200 retailers and 150 small service providers and manufacturers provides support and abundant evidence of the larger players enjoying disproportionate power. Regulators have devised and developed several methods and apply robust tools to measure the degree of competition, and yet (often) the indicators are indeterminate, interpretations are indistinct and even blurred. Tools and their accuracy, authenticity of the methodology to reliably measure, track, and compare the competitive intensity of the market is always in question, leaving much to interpretation. Decisions are invariably taken in isolation. Our institutions lack the capacity. MARKET NOT A JUNGLE, BUT A GARDEN; NEEDS TENDING
25 February 2023 | B W BUSINESSWORLD | 21 Monopolies in Terms of ‘Numbers’ Monopolies do not just effect horizontal integration, bestowing the merged entity with ‘controlling’ market share, and thereby pricing power. Though that’s the most visible aspect. Domination is also about the control through the vertical integration of the entire value chain ie., from production, retail, and service. Monopolies constantly want more for doing less. It’s the early seed of greed, and equally the lack of satisfaction when they get more. The tendency fuels rapacity. It is entitlement and potentially dangerous. Monopolies across the world are associated with crony capitalism, corruption, equality dilution, cost-push inflation, and damage not only the economy but also the democratic system. The ecosystem suffers. One option for policy makers would be to dismantle monopolies by splitting them. The short-term solution (until competition comes in) is to set a price cap. However, this has limitations and more often than not, fails to protect consumers. Regulators in developed economies have pushed monopolies to unbundle and even separate the offerings into smaller competing entities. However, in practice they face legal blockades. ‘Persuading’ companies to accept and adopt the rate-of-return pricing formula has worked particularly in the utilities sector. Governments have a larger role to play. Shortsighted officials try squeezing maximum revenue when they ‘auction and offer’ resources, contributed to the undesirable trend of the dominant player, eventually monopolising the industry. The judiciary, interpreting the law in letter, has perpetuated the rot. Several experts in the study bemoan that the mushrooming of the monopolies and duopolies could even imply the government losing control of some parts of the market. The regulators need to reign in ‘corporate consolidation’, ‘bad mergers’ and equally bad auctions. Their duty is to protect the interests of all stakeholders and not just the shareholders. Competition ‘Watch and Action’ is a Science Regulators need to adopt a holistic approach. Each measure of competition provides only limited information, but together offer useful insights. Regulators often make the mistake of using competition measures at industry or firm level data, neither of which are robust enough to assess the efficacy of competition. Antitrust markets are typically narrower than industries. Measurement must go beyond ‘constant’ performance indicators (mark-ups, profits etc.) and market share. It must equally study dynamic measures like market share volatility, entry and exit rates, average age of firms, concentration ratios, and rank. Focus must be to capture competition as a continuous and dynamic process of rivalry. Regulators must measure and index the ‘threat and incentives’ that rivals apply on each other. Gorillas use purchasing power and leverage to nudge, bend or force their suppliers to lower prices and ‘surrender’ more and more of their profits. It in turn, results in suppliers cutting wages, outsourcing production, invariably manifesting as poor quality, less innovation, and inflation. Similarly, and now increasingly common, are the instances of the monopolies ‘refusing’ to serve customers, particularly those who yield lower profits. In a frail economic structure, the lack of ‘substitutes’ can, and often do shut down business. It has a ripple effect, weakening the economy. People understand that the consumer choices are manipulated and limited by the dominant players. Less understood and not appreciated is the fact that apart from consumers, several others in the value chain suffer too. India has a strong anti-monopoly policy; it’s the implementation that is the concern, allowing, even permitting organisations across sectors to grow large, and equally dominant. A Crux insight supports this notion, pointing to a regulatory leniency over the past few decades, which has driven concentration across markets and segments. India has a strong anti-monopoly policy; it’s the implementation that is the concern Photograph by Elnur
22 | B W BUSINESSWORLD | 25 February 2023 HE MORBI bridge collapse is a classic case of dereliction of duty by a municipal body. The elected body should have accepted moral responsibility and resigned collectively. That the government has issued a show-cause notice for its dismissal is another matter. This colossal tragedy is a definite pointer to the need for urban governance reforms. However, on a somewhat different note, it is also a good example of defining the role of the wealthy in the management of cities and the need for enlightened and responsible corporate citizenship. World over, big corporations have been involved with city development and management because cities are where the action is. As much as 51 per cent of the world’s 6.9 billion people, 3.5 billion souls, live in cities. By 2050 demographers think it will be 70 per cent, or 6.2 billion people. Cities are the funnels for investment, enterprise and innovation. We are already familiar with big names such as Bill and Melinda Gates, Warren Buffet, Richard Branson, Michael Bloomberg and many others who have carved out philanthropic funds to help non-profit organisations serve the poor. There are many who have involved themselves more directly by making cities more liveable. Ely and Edythe Broad who live in Los Angeles have founded the Broad Art Foundation which includes an art library that has lent more than 8,500 top art works to 500 museums. Donald Bren, the American real estate mogul, has given to schools, Caltech and the University of California’s Santa Barbara and Irvine campuses, besides 20,000 acres of parkland to Orange County, part of which established the Black Star Canyon Wilderness Park. George Kaiser, an American oil baron has focused on his home city of Tulsa – with nearly $1.3 billion in contributions and grants to childhood education and community health programmes in the city, including gifts to local non-profits and social T COLUMN Trusteeship in City Management service agencies. According to Forbes, in 2018, Kaiser opened The Gathering Place, a 66-acre park in Tulsa that’s the largest public park in the US that was built with private funds. Julia Koch, the widow of David Koch, has given over $700 million to medical institutions, including more than $200 million to Memorial Sloan Kettering Cancer Center, and some $300 million to arts and culture organisations, including more than $100 million to Manhattan’s Lincoln Center for the Performing Arts. Phil Knight & family of Nike has pledged nearly $800 million to Oregon university, including a $27 million donation to renovate the campus library, a $500 million commitment to establish a new applied science research centre and a $100 million gift to help finance construction of the school’s new basketball venue. He has also committed large sums to the Oregon Health & Science University and Stanford, where he got his MBA. Biggest Business House The Ajanta Oreva group is the biggest and most resourceful business house emerging out of Morbi city with a turnover of more than Rs 1200 crores. It, therefore, had a definite responsibility to the well-being of the citizens of the city of Morbi, along the lines of trusteeship that Gandhiji preached. Its role in improving key infrastructure in a small city like that was important By Raghav Chandra
25 February 2023 | B W BUSINESSWORLD | 23 randi road bridge in Genoa, Italy, collapsed killing 43 people. The Oreva group’s first admission of lapses in the maintenance and operation of the bridge came late – only after the police named the group’s promoter Jaysukh Patel as an accused in the criminal case and issued an arrest warrant against him. It is reported that Patel was missing since the bridge collapsed. It is only now that their lawyer has reportedly said, ‘Something happened at the Morbi municipality’s end, and some wrong was committed by the company. Ultimately, unprecedented damage has been done’ – before the Gujarat High Court, in response to a high court notice to the company on a suo motu PIL. In fact, even the High Court has reportedly observed that it appears that the company had been dictating terms to the municipality. Clearly one can see from this horrendous tragedy that claimed 133 lives that, beyond the role of the municipality, even business houses have to contribute and give back to society, especially to the city to which they owe their growth. This has to be done on non-commercial terms. It is only when they have a selfless zeal to give without asking for anything in return will they earn respect, goodwill and get immortalised as those who helped the city to become good, rather than have their reputation tarnished because they desired to gain. If that change in thinking can take place, the Morbi tragedy will be a good learning for Indian corporates as they aspire to become global business leaders. because this was quite surely a city that was cash-strapped, with weak city governance systems, comprising low-experience manpower whose training was inadequate. That enhanced the responsibility on their corporate shoulders. In fact, the Oreva group describes its vision and mission on its website as: ‘Vision is the art of seeing what is invisible to others … we cogitate to achieve the highest level of customer satisfaction by continuously developing innovative product range to deliver value for money products to our valued customers ... The Human resource management at Ajanta Manufacturing Private Limited (OREVA Group) is a classic case study for every business school HR student.’ Clearly, the overall business-related customer approach of the company was quite different from their civic and social engagement vision. In the very first place the Oreva group should have worked towards buttressing and refurbishing this historic and old bridge in Morbi as an act of charity, for the citizens of that city. It should have got a complete structural and safety audit conducted at its own expense and then worked with the city of Morbi to get it restored. That would have helped to improve its connect with citizens and burnish its branding. On the contrary, it developed a commercial interest in the project, began to negotiate terms with the city, and began tinkering with the contractual terms, with the intent to make money rather than to serve the society from which they had become rich. This ended in their wanting to extract the best price for the deal. Had it undertaken this project on a non-profit basis, then even in the face of a calamity, there would have been sympathy for them. In a similar case, in 2018, the famous Benetton family that had made a global name for itself in the field of textiles and garments, lost face when the MoThe Ajanta Oreva group is the biggest and most resourceful business house emerging out of Morbi city with a turnover of more than Rs 1200 crores. It, therefore, had a definite responsibility to the well-being of the citizens of the city of Morbi, along the lines of trusteeship that Gandhiji preached The author is a former Secretary to the Government of India Photograph by Richard Bartz / Wikimedia US oil baron George Kaiser opened a public park called The Gathering Place
24 | B W BUSINESSWORLD | 25 February 2023 HE RECENT TRAGIC happenings in Joshimath have brought into sharp focus the follies of the construction industry. The mistakes of this crucial sector of the economy – wilful or otherwise – are causing widespread harm to the ecology. The Joshimath tragedy points to why it is absolutely necessary to check the ways of this sector for the sake of sustainability. Unfortunately, Uttarakhand is not the only state where such disastrous ‘sinking of the earth’ has happened. Latest reports bring out horror stories from across the country. Apparently, Shimla and McLeod Ganj in Himachal Pradesh, Darjeeling in West Bengal and Chamoli (again Uttarakhand) have serious issues of a similar nature. These are all hilly areas with a fragile ecology and what is happening in these places bear some similarities by way of ignoring early warning signals. However, the curse of illegal and irresponsible construction is spread almost all over the country and, in fact, is more blatant and more damaging in our bigger cities and metropolises. Yes, one factor is common – the rapid increase in population – leading to huge pressures on land prices and emergence of a sort of ‘cult of unholy nexus between builders and civic administration’. Let me first look at a tier-1 town. Our Towns Gurgaon – that sleepy little town south of Delhi till the 1970s, 1980s and even early 1990s – has seen explosive growth in the last 20 years. Current estimates put its population figure at 12.5 million, which also seems to be less than the actual figure. The place was given the sobriquet of ‘Millennium City’ mostly by the builders. Despite warnings of a looming water shortage, they kept on building as if there was no tomorrow and land prices kept zooming up. Commercial property in the city was lapped up by all the large corporates from all over the world, including perhaps 400 from the ‘Fortune 500’ list. Even though the original master plan had no provision for high-rise residential buildings – only plotted colonies with houses not more than two-and-a- half stories tall – the city has probably the largest number of these in the country after Mumbai. In the last few years, whenever there are heavy rains, Gurugram (new name for the city) gets the infamous invective of ‘Gurujam’, because the whole city gets waterlogged and everything comes to a standstill, at times for 48 hours! So, why does that happen? There’s a simple scientific answer. Every city has some natural drainage channels where no construction is supposed to come up. However, the criminal builder - municipal nexus ignores that with impunity and plans are sanctioned at every place. To add insult to injury, all the 13 beautiful large water bodies in the city have been systematically filled up and construction T Construction Industry is a Big Culprit SUSTAINABILITY By Krishan Kalra Column
25 February 2023 | B W BUSINESSWORLD | 25 up there. The town had hardly any concrete structures in the 1960s – even government departments functioned out of corrugated roof light buildings and their people lived in similar accommodation. The story in Darjeeling – a landslide prone terrain – is pretty much similar– where heavy road and railway projects are coming up. Shimla – a town planned for 25,000 people – has a population of 2.3 lakh at present and the Ridge – ‘pride of the town’– sits on top of a million-gallon water reservoir – or Chamoli or Chamba, for that matter. All these places are waiting for disasters to happen. All our high-profile hill stations like Shimla, Mussorie, Nainital, Manali and Ooty, were designed by the British for a small fraction of the population they have now. Also, the influx of unchecked tourists and establishments to cater to their stay and food add to the woes of these hill towns. No one, neither the civic authorities nor state governments or even the government of India for that matter, seems to have done a study about how many tourists these towns can support safely. We should have learnt lessons from our friendly neighbour Bhutan who has assiduously followed the policy of a strictly controlled inflow of visitors. Bhutan has deliberately refused permission to a larger number and not fallen for greater earnings, to be able to maintain its pristine beauty. It does charge a fee for entry and Bhutanese hotels are quite expensive, but restricting the number of tourist arrivals is sacrosanct for the country. Bhutan’s motto is that its tourism must be ‘ecologically sustainable’. The need of the hour for India, is to make new hill stations and not kill the existing ones that were built by the Brits a century ago for much fewer people. All our high-profile hill stations like Shimla, Mussorie, Nainital, Manali and Ooty were designed by the British for a small fraction of the population they have now. Also, the influx of unchecked tourists and establishments to cater to their stay and food add to the woes of these hill towns admired behemoth, with highly trained technical manpower, did not do a proper job of geological investigation. Also, everyone ignored early warning signs of cracks in the walls, bending trees, fissures in the ground and life went on as usual. And now, reports mention that at many places in Joshimath, the ground has sunk by as much as 70 cm, putting the lives and property of the poor residents at great risk. Like many other Himalayan towns, Joshimath has also seen a huge construction boom with multi- storied buildings on fragile slopes in total disregard to rules and regulations and without reference to seismic surveys. Even Army and ITBP establishments have come The author is Trustee of The Climate Project Foundation, India and past president of AIMA and past BOG member of IIMC – residential or commercial – has come up over these. Add to it, the informal urbanisation of rural areas, wholesale conversion of land use (CLU), encroachments on the forest zone and something called ‘gair mumkin pahar’ (uncultivable wasteland) and we have a medley of new complexes mushrooming all over. Of course, all this happens with lots of money changing hands under the table. It is highly unlikely that this happens without the blessings of powerful politicians. The net result, traffic jams, water logging, regular power and water shortages, perennial air pollution from construction materials lying all over, road repairs going on at all times, stalled smoke-spewing vehicles at every crossing, sharply reduced green cover – and just too many people in a city meant for perhaps, 20 per cent of the present numbers. Probably the situation would be pretty much the same in Bengaluru and Hyderabad. Mumbai was doomed a long time ago but happily, the municipal authorities there keep it going somehow. The Hills Back to the hills – currently in the limelight for all the wrong reasons. It appears that one of the biggest culprits here is one of our major Navratnas – the National Thermal Power Corporation (NTPC). It is unthinkable that this much Photograph by Siddharth Jain / CANVA
26 | B W BUSINESSWORLD | 25 February 2023 HE MAJORITY OF PEOPLE who have attained marketing leadership positions have mostly concentrated on the creative aspect of engagement. However, effective marketing lies at the nexus of creativity, innovation, and art. It involves developing original means of interaction and communication as well as accurately gauging and monitoring the efficacy and outcomes. Given the variety and complexity of channels, the quantitative and measuring aspects of marketing have become increasingly important. It can also be overwhelming when one considers the ever expanding diversity, pace, veracity, and sheer volume of data that exists around campaigns and customers. Nevertheless, more than any other C-suite leader, it’s the CMO who is often armed with the data and insights that are needed to be customer-centric, which in turn, can propel growth opportunities for the organisation. What Needs to Change For CMOs to Be Growth Leaders? Organisations that are customer-centric are by necessity laser-focused on giving their consumers what they need to succeed. And although CMOs are the ones with all the data and analysis on the customer, the proportion of CMOs who really participate in corporate strategy development is far lower than ideal, according to a Forrester’s January 2022 Global CMO Strategy Survey that put the number at fewer than 35 per BETTER MARKETING IS BETTER BUSINESS! cent of CMOs that involved in business strategy decisions. Perhaps it’s time that organisations and board rooms recognise that marketing needs a seat at the table, so that the function with the most valuable customer insights and data can help businesses join the dots, plan better and set relevant goals backed by actionable data. Another aspect that is crucial for marketing success and ultimately, business growth is access to technology that provides unified views of customer data. While CMOs own the customer experience they do not necessarily control the data-driven needs critical to its success. The obstacle to being data-driven in the modern digital world may occasionally be of a financial or operational character, and often it is also a lack of knowledge on where to begin. Businesses need to invest in permeating a DDOM all through the ranks if they are to succeed in their growth agenda. Perhaps this is where it’s up to the CEO and the rest of the C-suite to support and encourage the CMO to step up and partner with CTOs and CFOs to better serve the overall organisational goals. However, it’s not just about the technology stack or the working partnership AMITSCOPE by Amit Tiwari T Photograph by Jirsak
25 February 2023 | B W BUSINESSWORLD | 27 between the C-suite. There’s a deeper criterion that needs to be addressed here – it is essential that CMOs today have a comprehensive understanding of the business and are thinking in the future tense in order to successfully distil the data. The CMO will be unable to use the data very fairly for company growth or serve client needs if he/she doesn’t have a clear overall understanding of how everything fits together around the business’ customers and the organisation’s financials. Without this critical overview of the business, the CMO is only siloed in the marketing world and will therefore only make marketing decisions versus informed business decisions. An empowered CMO is one who holds the customer, the data, the technology AND the bigger picture of the organisation as the centre of his agenda. Propelling Business Change To fulfil their mandate to ignite and propel customer-obsessed growth for the organisation, growth marketers must be co-producers of the corporate strategy, working alongside the leadership team and advocating initiatives across the organisation to discover and deliver value on growth prospects. Too many CMOs become preoccupied with the techniques, such as finetuning the creative advertising execution, discussing the nuances of price changes, making sure their search engine positioning is optimised, being a slave to quarterly revenues, or even the sales team. Chief Marketing Officers have been drawn or seduced into this short-term by the demand for ever-improving data analytics, the usage of precision marketing tools, and the desire for real-time interaction. Yes, it is significant, but it is not everything. Marketing leaders need to broaden their horizons above all else. Chief Marketing Officers need to take the lead in directing organisational strategy, innovation, and transformation. They must be change agents who promote transformation, champion customer focus, and put the customer experience at the forefront of what they do. They serve as the organisation’s alignment guides, bringing together several departments to work toward a common objective. Chief Marketing Officers achieve this through fostering a shared knowledge of consumer insights and expectations within the organisation to execute on a customer-obsession strategy. Stepping Up to the New Chief Marketing Officers today need to be organisational leaders more than marketers. They need to be focused on sustainability, driving the entire organisation to transform its practices, but equally enabling customers to apply their own impact too. The next few years will see more change than ever before. The postpandemic world is in turmoil, the rules are being rewritten, a new generation of brands is emerging. It’s time for CMOs to seize the enormous shifts in consumer behaviour and aspirations, together with the changes in the economy and the massive technological breakthroughs. Marketing and marketers today need to take the reins and inspire, mobilise and influence the future, innovate in business, and spur growth. Being the first to predict and understand changing client demands is currently the best choice for expansion, with inorganic methods like acquisitions and partnerships having been exhausted for many organisations. Operating at the convergence of both creativity and data and by tapping into their connection to customers, CMOs are at the forefront of this pivot and best suited to help their organisations thrive in a rapidly changing business environment Photograph by Variant
28 | B W BUSINESSWORLD | 25 February 2023 NE OF THE MAJOR ISSUES in policy has always been what drives a country’s growth. It sometimes happens that particular areas with booming economic activity tend to be the main drivers of this growth and development, resulting in a varied spatial economic landscape. The need for a more uniform spatial distribution of economic growth is rooted in a fairly simple argument – the more high-performing regions there are within the country, the more significant the economic growth will be. While the backing logic is unmissable, ensuring and achieving uniformity of growth and progress across the country remains a considerable challenge. Most definitely, this raises a clarion call for adopting new perspectives, especially in India’s case, for realising ways through which growth is not isolated, or progress propelled by only a minority of regions. According to the Competitiveness Roadmap for India@100, by Dr Amit Kapoor, Chair, Institute for Competitiveness, Professor Michael E. Porter, and Dr Christian Ketels of Harvard Business School, urban districts only make up about 30 per cent of all districts in India, despite accounting for more than 55 per cent of all wages paid there and close to 45 per cent of all jobs. Similarly, Maharashtra and Gujarat, two states, account for close to half of all exports. States also vary on a number of other factors, including capital generation and innovation. The necessity of achieving a more uniform spatial development in the nation has been widely discussed. However, the need of the hour for India is a new strategy for comprehending what propels growth in distinct areas. As per the competitiveness roadmap, “clusters” become the means to enhance the country’s competitiveness. The variations in cluster portfolio and locational advantages are related to variances in regional economic performance across India. Understanding clusters is necessary to achieve equality in the spatial distribution of economic growth. In essence, clusters are collections of connected and supporting industries in proximity to one another. An oft-cited definition of clusters by Prof. Michael Porter defines them as “geographic agglomerations of companies, suppliers, service providers, and associated institutions in a particular field, linked by externalities and complementarities of various types”. As related businesses and organisations make up clusters, they stand out from simple agglomerations of economic activity. Traded Clusters and Local Clusters are the two types of clusters that operate in regional economies. The division is based on operational competitive dynamics within each type of cluster and patterns of geographic presence. Traded clusters, such as the IT industry in Bengaluru, the video production and distribution industry in Mumbai, and the financial services industry in New INDIA, CLUSTERS AND THE CASE FOR UNIFORM GROWTH ARTHSASTRA by Amit Kapoor& Amitabh Kant Above: Amit Kapoor is Chair, Institute for Competitiveness & Lecturer, Stanford University Below: Amitabh Kant is G-20 Sherpa and former CEO of NITI Aayog O
25 February 2023 | B W BUSINESSWORLD | 29 York City, are thought to be the driving forces behind regional prosperity. Local clusters, on the other hand, are dispersed throughout the country, mirroring the spread of general economic activity and serving the demands of regional markets. While regional clusters tend to be centres for innovation and better incomes, local clusters typically offer employment at the local level. When both types of clusters operate effectively, a region becomes more competitive. Clusters have long been used to shed light on a country’s economic topography. India has the chance to figure out how to create uniformity, given the presence of clusters all throughout the country. According to the Competitiveness Roadmap, a significant portion of Indian districts have not yet developed strong clusters, but a small number of districts are home to numerous strong clusters. The report also observes that strong clusters account for a larger portion of the payroll in areas with higher average wages. Furthermore, high-skill concentration is linked to areas with higher average earnings. Indian trading clusters are distinguished from the rest of the economy by a higher wage level, higher capital intensity, and higher skill intensity. The need to focus efforts on creating sturdy clusters becomes clear from this. To be able to do this, it is critical to first analyse the clustering pattern of the existing data and determine the potential for creating new ones. A laudable attempt in this area is the cluster identification approach developed by the Cluster Mapping Project, a project of the Institute for Strategy and Competitiveness at the Harvard Business School. The project offers a database for cluster mapping of industry clusters and local business ecosystems in the US. The foundation of a nation is its regional economy. India has to create a database of information on regionspecific advantages that can be used to develop practical policies for various regions. This would greatly aid in creating a growth plan for particular areas, industries, and clusters. The presence of more clusters and the reinforcement of existing ones will propel the Indian economy toward its goals. Traded clusters, such as the IT industry in Bengaluru, the video production and distribution industry in Mumbai, and the financial services industry in New York City, are thought to be the driving forces behind regional prosperity. Local clusters, on the other hand, are dispersed throughout the country, mirroring the spread of general economic activity and serving the demands of regional markets. While regional clusters tend to be centres for innovation and better incomes, local clusters typically offer employment at the local level. When both types of clusters operate effectively, a region becomes more competitive Photograph by Amit Darshan Film City, NOIDA
30 | B W BUSINESSWORLD | 25 February 2023 As a run-up to the Global Investors Summit, the Andhra Pradesh government held a curtain raiser event in New Delhi on January 31, which saw participation by diplomats of various countries, company representatives, and state and central government officials. Andhra Pradesh Chief Minister Y. S. Jagan Mohan Reddy, at the event, announced Visakhapatnam as the state’s new capital and, alongside cabinet colleagues including Finance Minister Buggana Rajendranath and Industry Minister Gudivada Amarnath, urged the global community to take advantage of the state’s rapid industrial growth and be a stakeholder in its economic growth. The theme for the Summit is ‘Advantage Andhra Pradesh: Where Abundance Meets Prosperity.’ Through the curtain raiser, the state officials showcased how the state is embarking on the journey towards sustainable development and inclusive growth through robust and decentralised citizen-centric governance. Highlighting the state’s achievements in the industry, Reddy said that Andhra Pradesh is the fastest-growing state in the country with 11.43 per cent gross state domestic product (GSDP). On the Ease of Doing Business Rankings, the chief minister said the state had been ranked first for the past three years. ADVANTAGE ANDHRA PRADESH:STATE CALLS ON INDUSTRY TO INVEST The Andhra Pradesh government will hold its Global Investors Summit (GIS) in its new capital Visakhapatnam on March 3-4. The summit’s theme is ‘Advantage Andhra Pradesh: Where Abundance Meets Prosperity’, which would showcase the vast business opportunities in the state By Arjun Yadav AP GLOBAL INVESTORS SUMMIT CURTAIN RAISER
25 February 2023 | B W BUSINESSWORLD | 31 Textile & Apparel and Tourism & Hospitality. Andhra Pradesh Finance Minister Buggana Rajendranath described the Telugu diaspora as active stakeholders in economic activities outside India. “Due to their propensity for setting up enterprises and gaining deep expertise in technology, they have revolutionised businesses across the world,” he said. He added that he looks forward to hosting the Indian and global investor community and the Telugu diaspora to engage in meaningful conversations and foster sustainable and responsible partnerships. Industries Minister Gudivada Amarnath highlighted various aspects of what it means to do business in the state. He highlighted the state’s low cost of doing business, abundant raw materials, skilled workforce, robust industrial infrastructure, strategic location and strong logistics infrastructure. “The 2023 Global Investors Summit under the leadership of Chief Minister Y. S. Jagan Mohan Reddy will offer an all-inclusive platform to international and domestic investors. It will give them an opportunity to explore and enter into long-term partnerships,” Amarnath said. The state has stood first in the country under Ease of Doing Business for four consecutive years since 2016. It has the highest feedback (97.89 per cent) among all the states by industries surveyed under the Business Reforms Action Plan (BRAP) 2022-21. It has re-engineered five Acts under Labour Laws to provide spot approval on services. The average time in the state to start a business has been brought down to 21 days, and service delivery time has been reduced by half for 18 services in Municipal Administration and Urban Departments. INDUSTRY SPEAKS Several industry leaders lauded Andhra Detailing the advantage in terms of infrastructurereadiness, Reddy said, “We have a 974 kilometre coastline, we have six ports, we are in the process of adding four more ports, and we have six airports. We are also constructing three industrial corridors with the help of the central government.” “Out of the 11 industrial corridors coming up in the country, three of them are coming up in our state. This speaks volumes of the development and the connectivity the state would offer to the industry and community,” he added. To reiterate the importance of the new capital, he told industry leaders, “Here I am to invite you to Visakhapatnam, which is going to be our capital in the coming days. I myself would also be shifting over to Visakhapatnam.” SECTORS IN FOCUS The various sectors that will be in the spotlight at the Summit include Aerospace & Defence, Agri & Food Processing, Automobile & Electric Vehicles, Electronics & IT, Healthcare & Medical Equipment, Industrial & Logistics Infrastructure, Petroleum, Pharmaceuticals, Renewable Energy, The average time in Andhra Pradesh to start a business has been brought down to 21 days, and service delivery time has been reduced by half for 18 services Y. S. Jagan Mohan Reddy, Chief Minister, Andhra Pradesh.
32 | B W BUSINESSWORLD | 25 February 2023 Pradesh’s Ease of Doing Business initiatives at the curtain raiser. They expressed their gratitude to the state for providing them with one of the best singlewindow clearance systems in the entire country. Sharing their experience of working in the state, Deepak Dharmarajan, President, Cadbury India, said that they were proud partners of Andhra Pradesh. “The company has invested more than Rs 2,500 crore and created more than 6,000 direct jobs and several thousand indirect jobs engaging in transportation and distribution,” said Dharmarajan. Kia Motors’ MD & CEO Tae Jin Park said that the ease of connectivity, including proximity to major ports such as Krishnapatnam and Chennai, has enabled them to sell cars not just across India but across 95 countries in the world. “Over the last few years, we have invested in Andhra Pradesh and started the factory during the Covid-19 period. The extraordinary support from the authorities is the reason why it is the most prosperous unit we have inaugurated recently. In a year’s time, it will become sustainable,” said Phani Kumar, CMD, Saint-Gobain Industries India. On how Everton Tea India has grown in the state, its Director Roshan Gunawardhana said, “Though Andhra Pradesh is not a tea-producing state, the company has reposed faith in it. Ease of Doing Business is one factor that is good in the state. The support we got from the government helped us set up units here. And 99 per cent of the employees are residents.” “During Covid, with the support of the government, we started production again in June 2020. Our business plan is to invest more than double our present investment by 2030. We are expecting the state government’s support for growing together,” said Toray Industries MD & CEO Masahiro Yamaguchi. NEW INDUSTRIAL POLICY Speaking to BW Businessworld, R. Karikal Valaven, Special Chief Secretary, Industries, Commerce, Infrastructure and Investment Department, Government of Andhra Pradesh, described the theme of the Summit and why investors should look towards the state. Valaven said that the state offers transparent and corruption-free governance with peaceful industrial relations without any disputes. He also delved into the state’s initiatives towards reducing business costs and promoting the maritime economy. “Logistic support is crucial; thus, we are developing inland waterways. We have a port infrastructure; six functional ports are already there, and four are under development. We are also developing nine fishing harbours, which Gudivada Amarnath, Minister for Industries, Infrastructure, Investment & Commerce, Information Technology, Handlooms & Textiles. The state is embarking on the journey towards sustainable development and inclusive growth through robust and decentralised citizencentric governance AP GLOBAL INVESTORS SUMMIT CURTAIN RAISER
25 February 2023 | B W BUSINESSWORLD | 33 will function as mini ports. With this, we are promoting the maritime economy,” Valaven added. While speaking on some of the recent policy initiatives by the government which has made the business environment more conducive, Valaven said that the state has reimagined land use as the land cost is one of the major capital investments for any business. “We provide land on lease. Thus, the industrialist only has to make 25 per cent of the payment at first. After ten years of successfully running the business, the owner can buy the land. Due to this, the land cost gets reduced,” said Valaven. He also listed consistency in utilities’ tariffs such as water and power and robust road, port, and airways connectivity. On the importance of the MSME sector, Valaven said the industry is crucial for the government because it is the largest employment provider. “We want to support the MSME sector by bringing in huge investments. Such investments do not look at small fiscal incentives. However, they build the infrastructure. And, infrastructure is a major support, which we are going to provide along with the hand holding of industries,” he said. Speaking on the state’s single desk portal, G. Srijana, Director, Industries, Commerce & Export Promotion; Vice Chairman & Managing Director, Andhra Pradesh Industrial Infrastructure Corporation (APIIC); and CEO, Andhra Pradesh Economic Development Board, said it has been ranked number one by the Government of India. She said that the single desk portal has reduced the turnaround time to establish a business unit, making the business environment more conducive. She attributed the harassment-free bureaucratic system as the most significant reform for the budding entrepreneurs in the state. On the upcoming industrial policy, Srijana said that the new policy would gather all industrial policies under a single umbrella, focusing on MSMEs, logistics, ports infrastructure and green hydrogen. R. KARIKAL VALAVEN, Special Chief Secretary, Industries, Commerce, Infrastructure and Investment Department, Government of Andhra Pradesh. G. SRIJANA, Director, Industries, Commerce & Export Promotion; Vice Chairman & Managing Director, Andhra Pradesh Industrial Infrastructure Corporation (APIIC); and CEO, Andhra Pradesh Economic Development Board Photograph by Suresh Gola
34 | B W BUSINESSWORLD | 25 February 2023 HE MOVING FINGER WRITES…”. Omar Khayyam’s ode to the irreversibility of events was taken a step further – the inevitability of destiny - by the lyrics of Jay Livingston and Ray Evans (popularised through Hitchcock’s The Man Who Knew Too Much) “Que sera sera, Whatever’s to be will be will be”. Today, it is often moving feet that write destiny: its inevitability challenged by people who challenge pre-ordained fate by migrating from village to city, or from one country to another. The story of the human species has itself been one of constant movement, with great migrations over vast distances. Originating in Africa’s Great Rift Valley, humans have spread around the globe and, who knows, may soon move to the Moon, or to other planets in the solar system, or even beyond. We Indians are ourselves the descendants, in part, of hardy migrants from Central Asia and Iran (Persia). Today, we continue to see vast movements of people within the country, mainly in search of better livelihoods. The big metropolitan cities have long been a magnet, not only for the nearby rural populace, but also for those whose homes are further away. Employment and entrepreneurial opportunities on a vast scale are what these hubs of industrial and commercial activity offer, along with the excitement of urban life. Yet, who could have imagined that tens of thousands from Assam and the Northeast would migrate to distant and so-different Kerala! This, even as that state itself witnessed the movement of a few million to Gulf countries and Saudi Arabia. The result is the constant movement of ever-more people, peaking at the time of specific festivals, when millions move vast distances across the country. This, and the movement of huge amounts of foodgrain, coal, ores, oils, manufactured goods, and freight of all kinds, means massive movement across all forms of transport. The importance of moving goods and people safely, quickly, comfortably and cheaply is now more important than ever before. T To this mix of requirements is the growing awareness of the need to simultaneously minimise the carbon footprint. The last few years have seen an increased emphasis on investments in transportation infrastructure, with annual budgets providing for bigger amounts of expenditure to upgrade and expand roads and railways. This is evident from the proposed capital outlays for 2024: Rs 162,000 crore for NHAI (almost tripling the figure from 2022) and Rs 240,000 crore for Railways (doubling the 2022 figure). In addition, there are separate allocations for Metro projects (about Rs 20,000 crore) and for roadworks (Rs 108,000). Indicative of its relative priority, the transport sector will get 11.5 per cent of the total expenditure (compared with 6.2 per cent in 2019), according to one estimate. The substantial outlay on roads (which excludes other expenditures on roadbuilding by Municipal Corporations, etc.) will mean more, better, and broader roads. The aim of speeding up traffic flow – whether long-distance or intra-city – will be welcomed. Also, more construction means more jobs, besides creating greater demand for cement and steel. While recognising this, it may be good to also give thought to a contrarian viewpoint regarding relative priorities. First, within the transport sector, while outlays on both road KIRAN’S KONTRARIAN KORNER By Kiran Karnik THE ROAD NOT TAKEN
25 February 2023 | B W BUSINESSWORLD | 35 The writer loves to think in tongue-in-cheek ways, with no maliciousness or offence intended. At other times, he is a public policy analyst and author. His latest book is Decisive Decade: India 2030 Gazelle or Hippo (Rupa, 2021). and rail have increased, it appears that roads are getting relatively higher priority. Highways and Expressways have become showpieces, flaunted by NHAI and the states. This has certainly helped to take road transportation to a new level, but in the absence of as strong a focus on railways, the result could well be a shift of people and goods movement to roads. Already, this ratio is skewed in India, and has progressively got worse. Yet, it is wellknown that an efficient railway system is a more economical and less polluting means of transport. Unlike super-fast completion of well-publicised Expressways, the equally prestigious Delhi-Mumbai (and other) freight corridor seems to be taking endless years. Within the rail sector, show-piece Metros take priority, with innovative management structures for quick implementation. Yet the Metro systems are known to be very expensive, with a bus rapid transit system (BRTS) being a far better alternative. Being less glamorous than a Metro and facing opposition from vocal motorists’ lobbies, the BRTS has been a non-starter in most cases, or quickly abandoned (as in Delhi). Within the road sector, investments in physical infrastructure have dominated thinking. The result is that any driving time saved because of broader and better highways is quickly nullified by timeconsuming toll gates. Excellent solutions like Fast Tags don’t work in the absence of user education, easy availability, and poor enforcement. In addition, lack of lane discipline (again, absence of education/ awareness and enforcement) means slowmoving traffic blocking others, besides more accidents. The latter often results in speed-breakers that nullify the efficiency of better roads. Clearly, investments in awareness, behaviour change, and enforcement may lead to safer and more efficient movement. Why not invest in these “soft” issues instead of six-laning an existing four lane highway? On a broader level, would not more emphasis on village and smalltown roads help farmers, while also decentralising industry and creating more local jobs? After all, the benefits of an existing scheme for village roads have already been established. Why not spend more on expanding the rail network to create new industrial and commercial hubs through efficient movement? Why not a quantum increase in funding the creation and use of waterways? What about more ropeway transportation (reducing pollution, traffic and accidents), and pipelines for produce (e.g., fruits) in the hills? At the next level, why not more i-ways in place of highways? Can Bharat Net progress at Expressway-speed instead of snail’s pace so that broadband electronic connectivity is available in Panchayats and villages across the country? This would lead to further decentralisation, taking work to people instead of vice-versa, and lesser need to move people. As more goods get “dematerialised” (as have books), even the goods movement can decrease. Clearly, the problem itself needs to be redefined – to follow Frost’s “road not taken” – as: how to achieve our goals by possibly reducing the quantity rather than increasing the flow? Time for innovative, contrarian thinking… On a broader level, would not more emphasis on village and small-town roads help farmers, while also decentralising industry and creating more local jobs? After all, the benefits of an existing scheme for village roads have already been established. Why not spend more on expanding the rail network to create new industrial and commercial hubs through efficient movement? Photograph by Navyugproductions
36 | B W BUSINESSWORLD | 25 February 2023 By Srinath Sridharan HISTORY’S N A PREVIOUS OPINION piece, I had touched upon how Indian consumers are adopting purchases of Virtual Digital Assets (VDAs), despite high taxation. It would be relevant to learn how the history of financialisation of assets shaped up over the centuries, and how moral sanction and regulatory embrace happened, either as a counter view or at times, even convergence. Law and Morality are two different concepts that govern the way humans behave. Morals are principles or standards of behaviour that define human conduct within society, but don’t define any compulsion to follow them. Law is a set of rules and regulations that all people are I INSIGHT VIRTUAL D I G I TA L ASSETS FOR VI REGULATI ONS DIGITAL RTUAL obligated to adhere to, if they want to live within the boundaries of a society. The relationship between law and morality has inter-dependencies between them, but are not the same. When we think of these newer emerging asset classes of VDAs, or think of them as whimsical-newbies as one’s opinion permits, we have to look at past learnings of how humans and society and ideology around finance, evolved. For example, early caveman did not have paper or paper currency or coins or banks to save his material possessions. The then-contemporary and financially evolved early 20thcentury bankers did not trade in carbon credits or blue financing. The evolution of digital technologies moots fresher potential in building convenience and comfort for humanity,
25 February 2023 | B W BUSINESSWORLD | 37 allows for global transactions including complex ones – both in terms of assets, as well as structures across a multitude of across-border-regulations. But, when new emerging technologies are the basis of newer asset classes, it worries us, and we assume the worst of them. Who would have even thought that we would be transacting finance through mobile phones? By native intelligence, should we have distrusted anything that was not physically touched or seen? Sometimes engineering and scientific innovations, social discoveries or political compulsions also lead to new asset classes. For example, it was only because of the political understanding around the need for climate action that the world ‘created’ an opportunity around carMESSAGE FOR VI REGULATI ONS DIGITAL ASSET A SPOTLIGHT ON FINANCIAL ASSETS, SOCIETY & REGULATIONS RTUAL The writer is an author, policy researcher & corporate advisor @ssmumbai bon credits and climate financing. That climate-asset-class came up as a political outcome of a global discussion. With the outcome of wealth that the Industrial Revolution created, and the financial structures that it posed and the creativity needed for ownership of those entities, came the idea of Company Equity Capital and Company Stock. Debt and bonds became assets since humans had transferrable money. Similarly, when governments needed to fund wars that were out of their financial reach, they started treating Sovereigns as assets to be funded and traded. Social Approval The world saw the Gold Rush that drove societal frenzy to
38 | B W BUSINESSWORLD | 25 February 2023 daring human courage, as well as to the depths of human depravity. Yet over time, forgetting the human tragedies, 20th Century governments also pegged their formal financial currencies to gold! Centuries ago, people traded in copper, pottery, etc. Can we take a stand today that a vintage pot a few centuries old, should not have value? Rather, the private investment market recognises some of these artifacts to be of immense monetary value, and transactions happen between the willing buyer and seller. Most often, without any regulatory interface. Most of my generation collected fancy flip books of sports stars, or even bottle caps to exchange for a reward of a cap or a poster or a T-shirt. These were promotion campaigns run by large corporations with open advertisement campaigns across the country. For all the value they held years ago, today they probably do not even have salvage value. For example, in the past three decades, Indian society has shown its acceptance of water as a paid-product (compared to the lesser priced public-good). Such is the nature of markets – that which society values is what it thinks is relevant, rare or wealth. For centuries, Indian society saw investments in land and gold. Even the formal banking system has existed in India since the mid -1800s. Until nearly the time of India’s independence, the much popular sahukars used to lend against mortgages, which were probably common and largely used asset classes. Yet until a generation ago, credit was overall seen as a sin or a bad moral behaviour in social context (except for business purposes), while regulations permitted borrowing. In the same timeframe, our country has built fairly participative capital markets, a growing alternate investment asset class, a shallow debt market and a growing bond market, and so many financial markets. For a nation that believed in physical land ownership, we have happily embraced fractional ownership, of at least, realty to begin with. Time will tell us how society and regulations look at change in generational attitude about finance from the nondigital-natives to the digital-natives. Newer Assets - Bubble Vs Bravado Earlier humans traded in tangible physical materials for financial gains. Then came the concept of services being priced. Today in the 21st Century, we face the issue of looking at Virtual Digital Assets – something that’s not physical or tangible and not a service in its entirety. This is what creates a challenge for most of regulatory framework in valuing the asset, if at all it can be called one. It’s the dilemma of what to call such an ‘object’. So from naming-trouble for such objects arises objections to their very existence. If there is sufficient reason to believe that anything creates long-term public-injury, governments and regulators have to ban such products or services. But social obligation for the governINSIGHT VIRTUAL D I G I TA L ASSETS
25 February 2023 | B W BUSINESSWORLD | 39 ments also requires them to build mechanisms to make sure that the specific product is not available underground! One hopes for healthy debates on newer types of assets and asset classification in capitalist markets with socialist guardrails, and believes that popular narrative will avoid dramatising the moral struggles associated with asset acceptance. For example, theoretically, the volatility of virtual digital assets could come down when it gets more regulatorily established. But then, the regulatory establishments cannot make volatility alone a basis for their regulatory philosophy. This reminds one of the observations about the Indian Housing Finance sector. Not too long ago, the common joke in the sector was that the biggest and most unseen competitor to all the HFCs was the ‘father in law’, who would give interest free loan for the young married couple to purchase the house! And the HFCs would borrow monies, primarily from the banking system, to lend onward to the consumers. If they had only said, ‘what if banks give home loans, and we are not needed as a separate asset class’. But look at the sector today, and it has grown well in the past two decades. The noise around negatives about VDAs seems to overtake the positives. One cannot claim any moral benefits or morality based positivity. One has to make economic rationale for having it. Else the worries will continue about unavoidable, unmanageable, unwanted consequences of the new technology. The question that’s been asked without answers in many of the techno-financial policy conversations is this: should one directly regulate the technology itself? Or regulate the users on what they do with the technology? The current concerns seem to tend towards worries of such a technology being a major enabler of a wide range of criminal behaviours, creating risks for the rest of society. But isn’t technology, as a concept, ethically neutral? Could there not be “bad actors” in any financial transaction or market or asset class? The same conundrum was apparent in some of our micro finance sectors. For the poor behaviour of a few actors in the sector, ostracising the sector for some time, and equally depriving the dependant borrower communities, we did clean up the sector, and bettered the governance. Even our Indian capital markets have had scandals, and consumers being deprived of their life earnings, loss of funds, etc. Does it make the entire industry bad? No. We did clean up those acts, and we have further built in guardrails for the future. India & VDA India’s taxation approach and policy development approximates VDAs to gambling and betting. Well, the sin industries like betting on horse races, gambling, tobacco, liquor, are also the largest revenue earners for many governments, and employ large segments of the population across downstream activities. Smoking is injurious to health, with prov20th Century governments also pegged their formal financial currencies to gold! Centuries ago, people traded in copper, pottery, etc. Can we take a stand today that a vintage pot a few centuries old, should not have value? Rather, the private investment market recognises some of these artifacts to be of immense monetary value, and transactions happen Photograph by Castaldostudio Photograph by Khellon
40 | B W BUSINESSWORLD | 25 February 2023 en negative health outcomes. Despite warnings for decades, have governments been able to stop it? Rather they continue their caution campaigns, and think that their moral obligation and financial acumen of higher taxation would stop the smoking habit. So is this an example of what’s legally permissible, and morally wrong? Importantly, the lens through which one sees a product can be a determinant of how to shape it. For a moment, if one visualises VDAs as assets, a simpler solution of creating a bench of talent and subject matter expertise at the securities regulator is a possibility. In this endeavour, one assumes that it has equal status amongst all the financial regulators. If we can bring in regulatory boundaries around VDAs as an asset class, then it would provide for consumer protection, in terms of KYCs for all investable amounts, and importantly regulate all VDA exchanges under Indian regulations. Let those assets not be treated as currencies, leave alone being private ones. That would be akin to having Monopoly game money, but being used in real life monetary transactions. The regulatory worry about consumer protection is burdensome, but what can they do for consumers’ dare or even stupidity at times? The Lord Voldemort Moment With every new crisis, the regulators, the non-state market actors, have a new heart and seem to be in their quest of moral redemption. And yet, the regulations are about allowing businesses to make profits, within a legal framework. Regulators are expected to be like Gods – omnipresent and omnipotent. In a digital world, theoretically it’s a possibility. But practical issues will persist. In a capitalist market, regulators can’t afford to play God. With no recourse is a scary construct – one that the other pillars of democracy would oppose. Regulators playing moral teachers is always a touchy subject. They have to steer society for long term positivity. Yet, they have to take short term harsher and unpopular calls. Many discoveries were initially pooh-poohed as failures. But somehow, many of those have shaped our lives. Also, anything new has a way of shaping up or dying away. So I think how digital innovations could impact our lives is a wait-n-watch. What the future holds for technological, scientific, and societal progress is unknown. So one has to learn to never say ‘never’. It required centuries of development before debt was formalised into financial assets. Virtual digital assets are currently at the very heart of turning into a regulatory humpty-dumpty. They are neither here nor there. They could emerge as an asset class, or be the subset of another one. What history of finance tells us is that the emergence of new asset classes is inevitable. Sometimes it might take a century, and other times it may only take a few years. In short, as long as humans and society exist, there is potential for the emergence of new financial asset classes. Any of the newer asset classes could test the boundaries of regulatory sovereignty. This is where one has to draw a line, in favour of the regulatory authority for financial stability and fiscal resilience. In the run up to Web3 scaling up, India can lead global policy stewardship on Web 3.0. We need to use consumer guardrails as a guiding light. Therein lies the heavier challenge for regulators – how to eliminate bias of the emerging technologies and the due worries of the unknown, and their institutional prejudices on newer emerging financial assets. Yet the compulsion of being morally virtuous has to outlast any moral hazarding. The larger worry is that no one wants to be the fall-guy in case something implodes. INSIGHT VIRTUAL D I G I TA L ASSETS Virtual digital assets are currently at the very heart of turning into a regulatory humptydumpty. They are neither here nor there. They could emerge as an asset class, or be the subset of another one. What history of finance tells us is that the emergence of new asset classes is inevitable Photograph by Mstjahanara
Sunil Khurana Managing Director & CEO BPL Technologies Aakash Sachdev Director of ASG Hospital (ASG) and Managing Director Foundation Holdings Gautam Khanna CEO, PD Hinduja Hospital & Medical Research Centre, Mumbai Dr. Mohit Gupta Professor of Cardiology, GB Pant Hospital, New Delhi Dr. Annurag Batra Chairman & Editor-in-Chief, BW Businessworld & Founder, Exchange4Media Harbinder Narula CEO, BW Healthcare World and Wellbeing World J U R Y M E M B E R S For Nominations & Speaking Opportunities: Smridhi Sharma [email protected] +91 98715 98343 For Sponsorships & Partnerships: Deepika Gosain [email protected] +91 96505 47770 Somyajeet Sengupta [email protected] +91 98182 47444 Kiran Dedhia [email protected] +91 98333 99009 CS Rajaraman [email protected] +91 93422 62859 THIRTY UNDER SUMMIT & AWARDS 2023 #Healthcare30under30 NOMINATE NOW LAST DATE TO NOMINATE: FEB 20, 2023 APRIL 2023
42 | B W BUSINESSWORLD | 25 February 2023 Whew! What a cataclysmic two weeks it has been for the Indian stock market! At the receiving end have been the scrips of Adani Group companies. At the time of filing this report, in the seven trading days since January 24th, the Adani Group had lost $108 billion, with the stock prices of the group companies crashing as much as 54 per cent. These developments have sent shockwaves in the market creating panic and uncertainty among the investor community. On January 24, the Adani Group’s market capitalisation was worth over Rs 19.18 lakh crore. After the release of the report by USbased short-seller Hindenburg Research, which accused the group and its promoter, Gautam Adani of indulging in accounting fraud, stock manipulation, money laundering and what not, the group companies’ share prices have been in a free fall. On January 29, responding to the report and its allegations, the Adani Group called it “nothing but a lie”. Yet, the shares of Adani group companies kept tumbling day after day. By February 3, the group lost over Rs 10 lakh crore in its market cap. The same day Adani Enterprises was removed from the Dow Jones Sustainability Indices. Two days prior to that and on the night of the Union Budget, Adani Enterprises announced that it has withdrawn its Rs 20,000 crore follow-on public offer (FPO) despite full subscription on the final day. This move also contributed to the uncertainties despite the claims that the Hindenburg report was a lie, untrue and written with mala fide intent. In fact, on January 29, the Adani Group responded to what it said were unsubstantiated allegations and THE BIG The hammering received by the scrips of Adani Group companies in the wake of accusations of fraud and stock manipulation by US-based short seller Hindenburg Research will go down as the worst in the Indian stock market history By Team BW IN DEPTH ADANI SAGA FALL Report accuses the group of accounting fraud, stock manipulation, money laundering Jan 24: US-based Hindenburg Research releases report on Adani Group companies Impact: M-cap of Adani Group companies start eroding sharply Jan 27: Rs 2.37 lakh crore is wiped off in 2 days after the report surfaces