Tuesday, June 28, 2011

When Innovation Meets Red-Tape

The Hindu reports that the National Innovation Council has appointed an Israeli consulting firm, Systematic Inventive Thinking (SIT), to help create an "innovation road-map" for India, and to bring about a "culture of innovation" in the country.

The first thought that crossed my mind?  "Oh no! not again!". Yet another case of a street-smart Israeli company preparing the ground to sucker a few millions from Indian bureaucrats. Last time I saw this was in the early 1990's when a company called Netafim used Japanese government grant-aid funds to sell its drip-irrigation system to the Chandrababu Naidu government in Andhra Pradesh. It had been an impressive display of naivete, short-sightedness and lack of self-confidence by government officials, at the cost of Indian firms like Jain Irrigation Systems.

This news-item quotes a SIT Director - "In India there are 80 innovation centers but they don't have a good success rate.". This was not merely a polite understatement but a clear build up towards a very effective sales pitch. Why do Indian R&D centers have such a poor record in producing internationally competitive goods? Why is Israel so different?

Perhaps a part of the answer lies in the unique socio-economic environment that seems to be typical of smaller countries that continuously struggle to survive in a tough environment. Like Israel, countries like Japan, Singapore, Finland and Switzerland, depend heavily on international trade. But unlike the others, Israel has effectively leveraged military discipline & bonding into a potent economic tool.

Much has been written in recent years about the secretive dynamos that power the Israeli innovation-machine. Stacy Perman (2010) writes about the military unit-8200 whose alumni have created numerous ground-breaking innovations in the IT business. Dan Breznitz (2007) has written about state-led, rapid-innovation based industrial development in Israel.

SIT's own team is a fine example of the kind of human resources you need in your team before you even start talking about innovation. It states:
Helping organizations and individuals to innovate is not something they teach you in university. Which is why our SIT team members' backgrounds, interests, and skills are so diverse, ranging from electrical, mechanical, and food engineering to business, psychology, cultural studies, and music. Not to mention our collective expertise in Greco-Roman wrestling, guided imagery, shiatsu, backwards speaking and other useful skills.
It is a celebration of diversity way beyond the grimy corridors inhabited by government officials in India. The innovators thrive on thinking out of the box while most of our bureaucrats are incapable of thinking without one.

How on earth will these two worlds meet? How will the bureaucrats sitting in the Planning Commission communicate the pearls of wisdom they receive from SIT to the small & medium enterprises that actually need - but cannot afford - such services? Will the presence of the venerable Mr. Sam Pitroda make a difference to the effectiveness of NIC?

Like Netafim, I can already hear SIT laughing all the way to the bank...  :(

  • Wadke, Rahul (2011): 'INDIA NEEDS TO NURTURE A CULTURE OF INNOVATION', The Hindu BusinessLine, 28 June 2011
  • Kerbs, Gill (2007): Technology - The Unit, Forbes.com, 2 Aug 2007. URL - http://www.forbes.com/2007/02/07/israel-military-unit-ventures-biz-cx_gk_0208israel.html
  • McElroy, Damien (2010): Israel's unit 8200: cyber warfare, The Telegraph UK. URL - http://www.telegraph.co.uk/news/worldnews/middleeast/israel/8034882/Israels-unit-8200-cyber-warfare.html
  • National Innovation Council, India. URL - http://www.innovationcouncil.gov.in/aboutus/aboutnic.php
  • Perman, Stacy (2010): Spies Inc.: Business Innovation from Israel's Masters of Espionage, Kindle eBook
  • Breznitz, Dan (2007): Innovation and the State - Political Choices and Strategies for Growth in Israel, Taiwan and Ireland, Kindle eBook

Sunday, June 26, 2011

The Theatrics of Oil Price Hikes

Yesterday, the Indian government has hiked the price of diesel, kerosene and cooking gas, and, predictably all the opposition parties, sensing public anger over rising inflation, have rushed in to demand a roll back. In response, the Ministry of Petroleum & Natural Gas has put out large advertisements in the newspapers pleading for "public support in this difficult situation".

The advertisement, titled, "Was the Increase in Prices of Petroleum Products Avoidable?" , presents the following line of argument:
  • India has to import 84% of its crude oil requirements and the international prices have gone up from US$75 (June 2010) to $ 110 per barrel.
  • Government oil companies are losing Rs.122,000 Cr (US$ 27 billion) through subsidies, of which Rs.66,000 Cr would be lost for diesel alone this year
  • Inflation is inevitable - if it were not from the price-rise, it would come from increase in fiscal deficit (higher subsidies)
What is not mentioned in the adverts is the fact that more than 50% of the retail fuel prices comes,  from taxes & duties imposed by the government. In 2008 itself, the retail price of petrol included 59% taxes, duties & commissions, and just 41% reflected the actual price of the fuel. The revenue from the sale of fuel is so important that for a number of small states, it is a critical source of budgetary revenue.

Also , it is not clear how the government is calculating the alleged loss of  $27 billion to its oil companies, given the secrecy surrounding their actual revenues from sale of petroleum by-products.

It would be interesting to know if the ongoing debate goes beyond the usual price-hike theatrics, and forces the government to come up with  numbers that  reveal more than they conceal!


  • Implement Parikh Committee report, says CARE (The Hindu February 6, 2010)
  • Ill Informed Debate on Oil De-control Act (SA Iyer, Economic Times)
  • How petrol price is calculated in India (11 June 2008) http://www.managementparadise.com/forums/articles/28356-how-petrol-price-calculated-india.html 
  • Why do we pay so much for petrol? (Veeresh Malik, Rediff July 10, 2006) http://www.rediff.com/money/2006/jul/10price.htmv 
  • Sethi, Surya P (2010): Analyzing the Parikh Committee Report on Pricing of Petroleum   (27th March 2010)     

Wednesday, June 22, 2011

The Cashew Paradox

In the world of globally traded nuts (cashew nut, Brazil nut, hazel nut, walnut, almond) cashew-nuts occupy a prominent place,  accounting for nearly 20% of total trade by weight. 

Originally from South America, global production of this commodity is now dominated by Vietnam, India, Brazil and a few West African countries.

India, despite being the largest processor & exporter of cashew nuts at 4.5 million cartons (nearly double that of Vietnam at 2.3 m), is a laggard when it comes to technical innovations that would define the business in the years to come. One of the most critical elements in the processing industry has traditionally been the highly skilled, labor-intensive task of shelling and peeling cashews.

With its numerous R&D centers aimed specifically at agro-processing industry, one would have expected to see cashew shelling & peeling machines to emerge from India. Instead, what we are seeing now is that the most cost-effective machines are being imported to India, not from one of the industrially advanced countries, but from Vietnam!

What is it about Vietnam that is making it a leading innovator, as well as a formidable competitor in the agri-commodities trade?

  • Cashew Processing Machine: http://vn.countrysearch.tradekey.com/cashew-peeling-machine.htm
  • Si Chuan Co - http://www.scuic.com/cashew-shelling-machine.html?gclid=CJDt67asy6kCFcwa6wodNRBCLw
  • Indian demand fuels African cashew trade (Kate Thomas,28 July, 2010, This is Africa) - http://www.thisisafricaonline.com/news/fullstory.php/aid/212/Indian_demand_fuels_African_cashew_trade.html 
  • Cashew trade mellows on waning demand (G K Nair, HinduBL, 28 Apr., 2011) - http://www.thehindubusinessline.com/markets/commodities/article1818948.ece
  • Food Museum - Cashew - http://www.foodmuseum.com/cashew.html
  • Cashew Trade Overview - http://indiancashews.in/cashews
  • Cashew Export Promotion Council India - http://www.cashewindia.org/
  • CRN India - Commodities Trade - http://www.crnindia.com/commodity/cashew.html
  • Africa Biz Online - http://businessafrica.net/africabiz/cashew.php

Sunday, June 19, 2011


Yesterday, after a span of 28 years, I re-visited Sabarimala. You could call me biased but for a person who has seen the transformation of Vaishno Devi shrine (J&K, India) and hiked to the summit of Mt. Fuji (Japan), it was appaling to see a preeminent centre of pilgrimage in Kerala, tranformed into a mega industrial complex, sitting like a cancerous scab amidst lush tropical forests.

View Larger Map

It is tempting to see Sabarimala as a victim of its own celebrity status. The hill shrine now attracts over 40 million visitors (not all are pilgrims) every year from all across India, and contributes over Rs.50 Crores (US$ 11 million) to the Kerala state coffers in just one 'season' (Nov-Jan). Visits by politicians, film stars and tycoons gets prominent press coverage. This, in turn, encourages some of them to use try and redeem themselves with "donations" in exchange for public recognition. A liquor baron got the sanctum gold-plated for his name to be prominently displayed on the temple walls, another one is building a glass roof over the "18 Steps" for reasons that are no doubt, just as dubious.

Yet, for all the money that flows into the coffers, what stands out is the unbelievable scale of carelessness out there -- the ugliness of manmade structures, concrete pathways and crude sheds that seem to have been built to suit the whims and fancies of assorted, aesthetically challenged civil engineers; the lack of adequate toilets and washing facilities; poor signboards and the absence of guide-maps; loud speakers blaring out devotional-pop in multiple languages; the absence of general garbage bins and its logical consequence - pigs sauntering about in the open drains and slush.

At the heart of this industrial complex sits the "Sannidhanam", a sanctum sanctorum, which is a concrete maze teeming  with gilded barricades and conveyor belts. In the gaps between the buildings are open garbage dumps strewn with broken tube lights and plastic packets.  A special police force enforces "order" here, shouting and bullying the huddling masses into the farthest lanes while escorting the VIPs - politicians, businessmen and other assorted movers & shakers - into special enclosures from where they can have a tête-à-tête with the Lord and personally handover big currency notes to a battery of priests sitting inside the sanctum (what is the need for so many to cram into such a tiny space, one wonders).

In one of the side rooms, in a room marked "Thantri", a glum looking priest sits next to an empty, decorated chair. Pilgrims are supposed to drop their dakshina (money offerings) on the empty chair, and, in exchange, the gentleman will deign to drop on your hands a leaf containing some allegedly consecrated flowers and bhasmam (ashes). Like the president of a industrial conglomerate, he rakes in the biggest bucks with the slightest effort. Lower down the value chain, are the scores of sub-priests and administrators; and hundreds of security guards, coolies, hawkers and vendors...all thriving in an economy based on public piety.

Standing in the Sabari hills, it is difficult to believe that until just two generations ago this was a site that represented the ultimate coming-of-age journey for young boys. A dangerous trek of at least 50 km through forests infested with wild animals - a journey once undertaken after months of preparations has now been reduced to a farce by seekers of instant gratification.

In any other place, a site like this would have highlighted its finest cultural traditions. It would have encouraged pilgrim-volunteers to guide and help visitors, and to keep the hills neat and tidy; architects would have showcased the beauty of the forests by setting up viewing points along the swift-flowing Pamba river, and along pathways snaking through the hills.

If I were to ignore the scabs and pick out memorable images from this visit, it would start with a dip in the cool, swift waters of the Pamba; the invigorating climb through early morning mist in deep silence interspersed with bird calls and the chirping of insects; glimpses of a full moon at its brightest, surrounded by a halo and veiled every now and then by thick grey rainclouds. And then, while standing under one of those towering bombax trees along the pathway, as I crane my neck to see the canopy, large drops of water slowly drip down from the highest branches,  glinting in the morning light before exploding over my nose & eyes like tiny bomblets...bliss!  :)


Wednesday, June 15, 2011

India-Japan CEPA

A few months ago at ADBI Tokyo, an interesting discussion had come up on the merits of bilateral trade agreements. The question was: do trade agreements between two government really have an impact on trade ? The answer was not too flattering for governments... apparently FTA's and CEPA's have only a marginal impact business and trade decisions in the Asian region.

It is nearly four months since a Comprehensive Economic Partnership Agreement was signed between India and Japan (16 Feb., 2011). This was the second such agreement India signed with any developed country (Singapore was the first), and the outcome of five years of negotiations. It is expected to boost bilateral trade from the current level of $10.3 billion to $25 billion by 2014.

Is the India-Japan CEPA translating into an increase in trade between the two countries?


* Ranjan, Prabhash (2011). INDO-JAPAN CEPA AND SOVEREIGNTY ISSUES. Financial Express, 31 March 2011
* FE Bureau (2011). INDIA-JAPAN CEPA TO BOOKST BILATRAL TRADE TO $25 BILLION. Financial Express, 17 Feb 2011
* India's Foreign Trade (Ministry of Commerce & Industry, India): February 2011March 2011,
* Official Press Release (MoCI): 16 Feb 2011 - http://commerce.nic.in/pressrelease/pressrelease_detail.asp?id=2732
* World Bank: India's Trade Policy - http://go.worldbank.org/RJEB2JGTC0

Tuesday, June 14, 2011

Starry, Cloudy Nights...

These days we have heavy rains interspersed with bright, burning sunshine. Tall cumulus clouds opening up into brilliant blue skies. At night, the same clarity now allows us to catch a glimpse of stars and constellations that would have been impossible to see a month earlier.

The problem with clarity, though, is that it brings up new questions! What, for instance, is that bright double star sitting next to Porrima in the Virgo constellation?

Traditionally, this season of heavy rains concides with the Malayalam month of "Edavam" (15 May - 14 June), which coincides with the Taurus sun-sign & constellation. While Taurus is aligned with the rising sun in the east, in this part of the world, it is Leo that is sitting right overhead, straddling the sun's elliptic path. So we start every evening with the brightest star on Leo - Regulus - and work backwards to the characteristic triangle Denebola & Zosma) that makes Leo's rear-side. Further north lies the Great Bear (Ursa Major) aka "Sapta Rishi" (7 great sages), with a double-star (Arundhati) marking the bend in its tail. And towards south is the Crux (Trishanku) hiding below the Centaurus.

Since Porrima's neighbor is not on the charts, it is, in all likelihood, a planet. Perhaps it is Saturn...or is it?

Thursday, June 09, 2011

Protecting the Corrupt

During the past few weeks, the UPA government has been making a grand display of its incompetence. Faced with mounting public anger over the issue of corruption and black-money it seems have really lost it. Here are some excepts from the press that reflect my own frustration and angst:

* Editorial, BusinessLine (2011). DO PEOPLE MATTER? The Hindu BusinessLine, 8 June 2011
- The main takeaway for the people is that this government will go to any lengths to protect the corrupt. The mistakes have been well chronicled but it is the ingenuous arguments that now stand out. One is that groups of well meaning citizens cannot be allowed to hijack legislative agenda; the other is that the RSS is behind the anti-corruption movement.
- The first argument - that citizens should not drive the legislative agenda - is intellectually identical to what colonial and Soviet style authoritarian governments tend to use: we know what's good for you... This is sheer effrontery.
- It is the Congress party that has created the National Advisory Committee (NAC), chaired by its President. If it is fine for the (unelected members of) NAC to recommend legislation, why is it not all right for Anna Hazare and Ramdev to do likewise? As Shekesphere said, it is surely a tangled web they weave when they seek to deceive.

* Raghavan, B.S (2011). WILL, NOT MAGIC WAND, IS NEEDED. OpEd The Hindu BusinessLine, 8 June 2011
- All we are getting...from Dr. Singh is alibis and excuses: His helplessness because of coalition compulsions, the imperative need to adhere to legal niceties, the inadvisability of second-guessing ongoing investigations and court proceedings, the inability to take action on allegations pending proof to the hilt; the difficulty in dealing with foreign governments in regard to black money.
- Dr. Singh bends over backwards not to hurt perpetrators of serious crimes but is so very quick in unleashing the Delhi police...on peacefully sleeping men, women and children who had come to join the fight against corruption and black money.

* Mehta, Bhanu Pratap (2011). SECOND TIME AS FARCE. Indian Express, 8 JUne 2011
- The UPA government continues to defy all norms of rationality, morality, commonsense and good judgement. These days it is difficult to make sense of what the government is thinking, if it is thinking at all. But on every measure, the midnight raid on Baba Ramdev and his supporters was an act of wilful perversity. The government may have thought its raid was a show of authority. Instead it made the state look like a set of thuggish weaklings: conducting raids on peaceful congregations in the middle of the night.
- The Congress started with cravenness, then descended to impunity. Then it made the mistake of treating citizens like idiots.
- First, no one claims responsibility for anything (“the party had nothing to do with it”)...Second, there is the consistent threat to use state power to intimidate opponents...Third, there is constant dissimulation. Ramdev is a legitimate interlocutor one minute, he is Satan the next...Fourth, there is the old RSS canard...Fifth, the Congress simply does not get it. Its core problem is a crisis of credibility.What is it about the Congress party that repeatedly produces an intellectual culture that turns intelligent people into self-destructive political animals? It has performed the miracle of turning a moment of great hope for India into a moment of political despair.

* Editorial (2011). THE UPA's POLITICAL BANKRUPTCY. The Hindu, 6 June 2011
- India's black & dirty money...has been analyzed powerfully in Nicholas Shaxson's book, Treasure Islands: Tax Havens and the Men Who Stole the World (The Bodley Head, London, 2011)
- Beleaguered by a multitude of corruption scandals dominated by the 2G-spectrum allocation, (the UPA) has earned the reputation of being the most corrupt dispensation independent India has seen.

* Varadarajan, Siddharth (2011). A WEAKNESS BORN OF BAD INTENT. The Hindu, 6 June 2011
- Corruption was an integral part of the "license-permit raj" of Nehruvian socialism. But it has grown into frightening proportions in our liberalized free market economy.
- The case of a Delhi Minister, Raj Kumar Chauhan, who sought to interfere with tax inspectors even as they conducted a raid at the premises of a private establishment. A complaint filed by a senior IAS officer, Jala Shrivastava...and indicted by Justice Sarin. But nothing was done by the UPA government...The protection afforded to the Delhi minister...shows the extent to which the "system" is programmed to circle its wagons at the first signs of trouble.

Tuesday, June 07, 2011

Laboring in Kerala: Changing Times

Is it possible to quantify the economic cost of cultural norms or attitudes?

Take, for instance, the attitude towards physical work in Kerala, India. Even a casual visitor to the state would not fail to notice a strange phenomena: large swathes of fertile agricultural land lying fallow, while able-bodied men hang about in public places, idling, sipping sweet-tea and discussing politics.

At 9.4% (2007) Kerala has one of the highest official unemployment rates in the country and simultaneously suffers a serious shortage of skilled and unskilled labor. The state is the largest producer of rubber, spices and coconuts in the country, and yet, there are not enough farm hands.

This disconnect could have been logically explained if workers were being poorly paid and exploited by the landlords or industrialists; or if agriculture was grossly un-remunerative. The situation, in fact, is quite the opposite. The average daily wage here is the highest in the country at Rs.450/day (strictly 9AM-6PM); the state has the highest literacy rates, the highest health indices and the highest per-capita income in the country. Over the years, militant workers unions have also ensured that is is "normal" to have blatantly extortionist practices like "Nokku kooli" which has effectively shut out manufacturing industries from Kerala.

So here we have a state that has the capacity but not the will to make the best use of its human & natural resources - other than, of course, "softer" options like tourism and ITES services. This bring us to the most critical - but notoriously un-quantifiable - aspect of any society: attitudes and cultural norms.

Youngsters who are loath to be seen with a shovel in own farms gladly travel across the Arabian Sea to sweat out in the desert sun as construction workers. Kerala sends out over 2.5 million people to work overseas (91% in the Gulf region), and they, in turn, prop up the state's economy through their remittances (over 20% of gross state domestic product). Is it because find more dignity, self-respect and social mobility in toiling anonymously in foreign lands rather than subject themselves to hide bound social conventions and caste hierarchies back home?

And now we have an interesting new phenomenon building up: laborers and skilled workers from other states in India, and even neighboring countries are pouring in, to work in Kerala.  Workers from Nepal, Bihar, Orissa, Tamil Nadu, and the North East have now become fairly commonplace, even in the remotest corners of the state. By some estimates there are over half a million such migrant workers in Kerala now. As of now, they engage themselves in work that the locals just don't want to do:  quarrying, road-building, carpentry, construction and rubber-tapping. And much like the early Keralan workers to the Gulf, they are being exploited by local middle-men who routinely cheat them of their wages, sometimes handing out less than half of what a local worker would earn as minimum wages (Rs.450), which is still higher than what they would earn elsewhere in the country.

Will a flood of "domestic migration" to Kerala bring about a change in local attitudes towards work?

  • Kerala's Net State Domestic Product (NSDP) in 2003 was Rs.83,782 Cr (~ US$ 21 billion) of which remittances accounted for 22% (~ US$ 4.6b). This was 1.74 times the revenue of the state, 7 times of the transfers to the state from the central government and 1.8 times the annual expenditure of the Kerala Government. Remittances were also sufficient to wipe out 60% of the state's debt....15 times the export earnings of cashew and 18 times those from marine products (Rajan 2007)

  • Rajan, S. Irudaya & Zachariah, K.C (2007). The Migration-Development Nexus: Remittances and its impact of the Kerala Economy and Society. ISS, The Netherlands (31 Aug 2007). URL - www.iss.nl/content/download/8303/81035/.../Panel%202_Rajan.pdf
  • Krishnakumar, M.K (2011). Perumbavurile Paradeshikal (Malayalam- The Outsiders in Perumbavur). Mathrubhumi, 5 June 2011
  • Rediff.com (2009). Kerala Remittances Economy Under Threat. 2 Feb., 2009.  URL - http://www.rediff.com/money/2009/feb/02keralas-remittance-economy-under-threat.htm
  • Special Correspondent (2011). COMPREHENSIVE LABOR POLICY SOON. The Hindu. 29 May 2011
  • Staff Reporter (2011). Campaign to end 'Nokkukooli'. The Hindu, Kollam edition, 4 June 2011
  • Current Minimum Wage Rate in India - http://www.paycheck.in/main/officialminimumwages
  • Official Minimum Wages in Kerala - http://www.paycheck.in/main/officialminimumwages/kerala
  • Mathew, A (1986). The Coconut Economy of Kerala. JSTOR - http://www.jstor.org/pss/3517251
  • Philip, Shaju (2010). Kerala's Coconut Economy Takes a Hit. Financial Express, 10 Oct., 2010.

Sunday, June 05, 2011

Trivandrum Skyline

Which are the peaks in the Western Ghats range to the east of Thiruvananthapuram?

If one looks at a corresponding GoogleMap, it seems the ridges & peaks, going from Left to Right (or North to South) are:
* Agastyamala
* Mukkunimala
* Ponmudi Hills
* Kodayar Ranges

View Larger Map

Thursday, June 02, 2011

Monsoons: Arrived On Time!

Its a breathtaking sight from the seashore.

As far as the eye can see, a massive wall of dark grey clouds silently approaching the Kerala coast, bringing in a season of torrential rains. It is an event carefully monitored by the Met Department, for, in these clouds, hangs the fate of agricultural production in much of the Indian subcontinent.

Here are some pics from Valiyathura Pier in Thiruvananthapuram, Kerala - 

A turbulent Arabian Sea

 A fishing boat being readied on Valiyathura Pier

  • Indian Meteorological Department: Monsoon Updates - http://www.imd.gov.in/section/nhac/dynamic/Monsoon_frame.htm
  • Much awaited southwest monsoon sets in over Kerala, 3 days before normal . The Hindu 30 May 2011. http://www.hindu.com/2011/05/30/stories/2011053058901100.htm
  • South-West Monsoon Active Over Kerala. ToI 31 May 2011. http://articles.timesofindia.indiatimes.com/2011-05-31/india/29603548_1_meteorology-sources-kerala-and-lakshadweep-south-arabian-sea

Wednesday, June 01, 2011

Chinese Whispers for Indian Importers

Thanks to the incessant power outages in Kerala, I needed a rechargable battery for my emergency lamp. At the electrical shops lining Thakaraparambil road in Trivandrum, the battery is easily available . A shopkeeper unpacks a set and I take a look at the product code - it is the correct one. How much does it cost?

"Rs.185", says the shopkeeper.

I turn it over and see that it has a printed sticker marked - "Rs. 75 Maximum Retail Price (MRP)". I protest.

The shopkeeper removes the product from the counter and puts it back on the shelf. "Take it or leave it", he says, "Chinese products always come this way. Even the caller-id machines come with an MRP of Rs.5 but we never sell it for less than Rs.50". Needless to say, there is no proof-of-purchase here - the shops flatly refuse to provide receipts for Chinese goods.

Obviously somebody has cleared the imports based on the MRP, and made a killing. If you consider the fact that just about everything in the electrical goods market is now Chinese, how much is the net excise-duty & tax evasion on account of Chinese imports to India?