Meet the Man Who Will Try to Fix India’s Economy : An article from WSJ

Meet the man who’s been handed one of the toughest jobs in India: reviving economic growth.

Arun Jaitley, 61 years old, is Prime Minister Narendra Modi’s nominee to run India’s Ministry of Finance. Mr. Jaitley, a lawyer, previously headed several ministries between 1999 and 2004–the last time his Bharatiya Janata Party led the national government. As a lawyer he has also represented PepsiCo and Coca-Cola in prominent cases in India.

 

He is considered a close ally of Mr. Modi. Over the years he has defended the BJP, and Mr. Modi, when controversies broke such as the allegations that Mr. Modi, as chief minister of the state of Gujarat, didn’t do enough in 2002 to stop religious rioting there that left thousands of people dead, mostly Muslims. Mr. Modi has said he did everything possible.

 

The Indian economy has slowed sharply the past few years as high inflation and policy gridlock hurt the prospects of Asia’s third-largest economy. Clashes over taxes also discouraged some foreign investors.

 

Although the challenges are big, the BJP has one advantage the previous government didn’t: It holds a clear majority in the powerful lower house of Parliament, which means it doesn’t need to cobble together a more fragile coalition government with other political parties. However, having a clear majority also means it’s harder to blame political gridlock for policy inaction or delays–adding pressure on the BJP to deliver results speedily.

 

In a recent interview with The Wall Street Journal while campaigning in Amritsar, Mr. Jaitley spoke about some of the economic challenges

 

He said a BJP government would try to signal that it is “easy to do business” in India.

A big challenge for Mr. Modi’s government will be to keep price inflation under control, a necessary condition to help keep interest rates low. The BJP has promised a number of steps, such as setting up of special courts to prosecute hoarders of essential commodities, mainly food, to keep prices under control.

 

Mr. Jaitley is viewed as a pro-business leader who initiated some major foreign-investment reforms during his short 17-month tenure as commerce minister in 2003 and 2004. In January 2004, he eased foreign-investment restrictions to allow foreign companies to fully own local ventures in key sectors such as oil exploration and oil- and natural-gas pipelines.

 

The government also allowed foreign investments in some segments of the media, which traditionally had restrictions on overseas ownership. The government allowed 100% foreign ownership in printing scientific and technical magazines.

 

Mr. Jaitley followed up, in March 2004, when his ministry announced that overseas investors would be permitted to own up to 74% of local banks, up from a previous 49%. It also allowed foreign banks the choice to operate in India either by setting up local subsidiaries or through branches.

A worker drags a pile of sugarcane while trucks sit parked in a holding area in Uttar Pradesh, India.

 

Mr. Jaitley also was hailed for presenting India’s views forcefully at the World Trade Organization talks in the Cancun, Mexico, session in September 2003. His articulation of the need for less-developed economies to protect the interests of their farmers won him support from several other nations. At the session, India and other developing economies pressed developed countries, including the U.S. and those in the European Union, to cut subsidies to their farm sectors as well as for their exporters, saying they hurt the competitiveness of developing countries.

 

Mr. Jaitley efforts helped developing countries like China, Argentina, Brazil, South Africa and India, among others, to present a joint proposal at the WTO.

 

Mr. Jaitley also strengthened India’s bilateral trade relations with the U.S. “He warmed up relationship with United States substantially,” said D.K. Mittal, a retired bureaucrat who worked with Mr. Jaitley as a joint secretary in the ministry of commerce.

 

Mr. Jaitley also pressed for India to set up “special economic zones,” loosely modeled on similar zones in China, to boost manufacturing and exports. The policy was later implemented by the Congress-led government in 2005.

 

He also was the minister for law and justice when he promulgated the anti-defection law. That law penalized political factions that broke away from their parties, often leading to government instability.

 

As a lawyer, Mr. Jaitley defended global giants including Coca-Cola and PepsiCo. In 2002 (when Mr. Jaitley was no longer a government minister), he represented PepsiCo in India’s Supreme Court. The Court imposed fines on several companies, including Pepsi, for painting advertisements on trees and rock faces along the Manali-Rohtang road in the Himalayas.

 

In 2004, Mr. Jaitley appeared on behalf of Coca-Cola in a case at the Rajasthan High Court relating to disclosure of pesticide residue in beverages. The Rajasthan High Court ordered cola companies to issue disclosures on bottles that their beverages either didn’t contain pesticide residue, or that the pesticide level was within permissible limits. Coca-Cola maintained that all of its ingredients were within all safety limits.

 

In his brief, eight-month stint as minister for disinvestments–a ministry created following a WTO agreement to reduce government ownership in state-owned companies—starting in 1999, selloffs were much lower than anticipated. In the fiscal year ended March 31, 2000, the government managed to raise only about 18 billion rupees through the sales, far short of the 100-billion-rupee target that the government had set in the budget.

 

On top of that, two large sales planned by the government at the time were successfully challenged in the Supreme Court. The government, during Mr. Jaitley’s tenure, had sought to sell about a third of Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd. However, these were challenged on the ground that the government wasn’t entitled to sell stakes in these companies without seeking the approval of lawmakers, since the companies were set up under laws formulated by parliament.

Mr. Jaitley’s was brought up in New Delhi. He studied at St. Xavier School until 1970, then graduated in commerce from Sri Ram College of Commerce, before going on to study law at the University of Delhi.

 

He made his political debut as a leader of the student wing of theBJP and was elected president of the students’ union of Delhi University in 1974. He was under preventive detention for 19 months between 1975 and 1977 when then-Prime Minister Indira Gandhi declared a national emergency, suspending civil liberties in India.

 

In government, he will face major challenges in implementing policy changes such as implementing the Goods and Services Tax, which has been held up for years due to differences between federal and state governments. “Even in issues such as land development for major projects, he will have to get everyone working together,” said Rajiv Biswas, chief economist for Asia at research firm IHS. “He will need a coordinated approach so that states don’t create obstacles in implementing key legislations,” he said.

Smartphone snags removed online

Technopark company will access faulty phone or computer over Net, fix problem

Your smartphone plays truant just when you have started the day’s work at office. Your best efforts to get that app running seem to be coming to nought. And then, the laptop also seems to have developed a glitch. Silently cursing the software and your misfortune, you take the machines to the lone service centre in the neighbourhood, notorious for fleecing customers.

 

But that situation could soon be a thing of the past. Nocme Technologies, a Technopark-based company is preparing to launch a pioneering initiative that will use remote access technology to repair smartphones and computers with software snags.

 

“Users can log on to a portal and get their machines repaired without leaving their desk,” say Bipin Krishna and Awad Mohammed Hamza, co-founders of Nocme. After logging in, the user has to provide his/her phone number and e-mail ID and pay the fee online to receive a Nocme tool by e-mail. The tool enables the company team to access the phone or computer over the Internet and fix the software issue.

 

“We can remotely load an app such as Skype onto the machine or precisely diagnose a hardware problem and inform the client accordingly so that he does not get fleeced by the service centre,” says Mr. Hamza.

 

The company, which specialises in remote infrastructure management, expects to launch the 24/7 service in the Indian market soon. “We are testing the technology, and hope to get it up and running in a month or two,” says Mr. Krishna. “With this, we will be targeting smartphone, laptop, and desktop users. Apart from individual users, we are also looking at small companies with five to 10 desktops.”

 

Founded in 2010 with five employees, Nocme today has a headcount of 75. It maintains 1,500 servers for clients in the U.S., Canada, Australia, and West Asia. It invests heavily in training to keep its employees abreast of the latest smartphone and computer technologies.

Vineet Nayar brings disruptive innovation to social sector

 Former HCL Technologies CEO Vineet Nayar has turned seed capitalist to promote social entrepreneurs in rural India. Nayar is looking at disruptive innovations and promising entrepreneurs a guaranteed return on their investments for the first five years to create sustainable social enterprises.

Nayar had raised Rs 133 crore from selling his stake in HCL Tech, India's fourth-largest IT services firm, and is now employing it in his non-profit Sampark Foundation.

"Everybody is obsessed with money. If you take that incentive away, entrepreneurs will not put their hearts into social ventures. So I'm guaranteeing a minimum 8-9% return on their investments," says Nayar, under whose tenure as CEO, HCL Tech saw some amazing rates of growth.

Nayar and his team are piloting a project in Bihar and Chhattisgarh to empower rural women to grow organic crops that would be marketed through an e-commerce platform, bypassing all trade intermediaries, under a brand called Mother's Fresh. "If you ship it directly to consumers using the digital platform, you could change the social fabric of that region. I want to be a catalyst than an executor. I have to create entrepreneurs who are interested in this business model," he said.

In the Kanchipuram district in Tamil Nadu, team Sampark has been working with about 16,000 farmers across 19 villages to increase per household income by promoting effective water management practices. "We want to transform mindsets around water," Nayar said.

Farmers in Kanchipuram are reeling under a severe water crisis and require around 1.7 lakh litres of water to grow a single crop. Currently they grow three rice crops, but the third crop invariably gives a very poor yield. Nayar and his team are encouraging farmers to change their cropping patterns, move to two rice crops and one pulse crop. This reduces the water consumption considerably and could improve the per capita income of farmers substantially.

In Baramati in Maharashtra, Sampark is working with 2,000 disadvantaged farmers to focus on crop diversity that will lead to higher income generation.

Nayar has also tied up with the Ladakh Autonomous Hill Development Council (LAHDC) to develop a new blueprint for primary education in the region. The initiative started in November last year with a two week workshop for teachers from Ladakh. Educational kits have been developed that would work specifically in that region.

Sampark has also signed a MoU with the government of Punjab to improve the quality of education across 7,500 primary schools impacting 2.5 lakh children in the state. "In Punjab, children of class 5 and 6 couldn't add and subtract. That was a big downer. Teachers were not motivated enough and there were hardly any incentives. We realized that children had short attention spans and they were more interested in jumping on the tubewells than attend classes," Nayar said.

So he used gamification tools, and folklore and made the curriculum a lot more interesting both for teachers and students. Six months into the project, Nayar said the programme has met with considerable progress.

"Corporates are doing disruptive innovation, where low effort leads to high impact. In the social sector, there's high effort but their impact is low. We need to bring disruptive innovation in the social sector," Nayar said.

Tata’s Cyrus Mistry looks to rural India, asks firms to collaborate

The Tata group has asked its companies to collaborate with each other in an effort to serve India’s vast rural markets more effectively, in a so-called “routes-to-market” strategy that is among the first of several major initiatives being rolled out by Cyrus Mistry, chairman of Tata Sons Ltd. All Tata companies that are “consumer facing” will try to share their networks in rural areas, four officials at the conglomerate said. None of the four wished to be identified.

 

The officials added that the plan is still at an early stage, but said Tata Strategic Management Group, the in-house management consulting arm of the group, is working closely with the companies and will launch a pilot project in the next few months.

 

A Tata Sons spokesperson said the group had no information to share.

 

Since taking over as chairman in late 2012, Mistry, 45, has kept a low profile even as he has gone about building his team, which now includes former BSE chief executive officer Madhu Kannan, who is in charge of business development; Mukund Rajan, in charge of ethics, communication, and corporate social responsibility; Harish Bhat, the former CEO of Tata Global Beverages who is a marketing expert; and N.S. Rajan who was hired from audit and consulting firm EY to head human resources at the group level.

 

At the $100 billion dollar by revenue group, companies such as Tata Chemicals Ltd, Tata Global Beverages Ltd, Tata Teleservices Ltd, Titan Co. Ltd and Tata Motors Ltd already serve the rural markets, but independently, said one of the four executives cited above. The idea of the “routes-to-market” strategy is to make sure the companies draw from each other’s strengths and serve the markets better, and at lower cost, he added.

 

Some Tata group companies, such as Rallis India Ltd that makes seeds, pesticides and fertilizers, were among the earliest to build a strong presence and brand image in rural India, notes Raveendra Chittoor, assistant professor of strategy at the Indian School of Business in Hyderabad. “The last few years have seen consumption in rural markets growing faster than overall growth, leading to a renewed focus on them. Compared to the urban markets in India that witness bitter competition today, rural markets constitute a blue ocean with relatively fewer companies competing,” Chittoor said.

 

For perhaps the first time ever, the average rural household spent more on products and services other than food in 2011-12, according to data from the National Sample Survey Office.

 

The share of spending on products such as furniture and electronic devices and entertainment nearly doubled to 6.1% in 2011-12 from 3.4% in 2004-05. Rural spending on clothes, footwear, consumer services , and conveyance has also seen a sharp jump over the same period.

 

According to Dharmakirti Joshi, chief economist at Crisil Research, “A sharp increase of 7%-8% in rural wages in the recent past has spurred demand for consumer durables, automobiles, etc.”

Joshi warned, however, that if the overall economy doesn’t expand in the near future, “it’s unlikely that rural India will continue to grow as it is not isolated”.

 

Despite their obvious attractions, rural markets pose their own set of challenges, mostly related to distribution and logistics.

 

The initial cost involved in building a presence in rural markets is very high and not many companies can make those investments, explained Chittoor.

 

He added that a large business group such as the Tata group, with several consumer companies, has an edge because it can share the costs as well as the benefits across companies.

 

According to a second Tata group executive, the collaboration between companies could be a prelude to a broader and unified rural markets strategy. There is no umbrella strategy for now, he added, but some companies could develop a common supply chain and marketing network.

 

Initially, companies with an existing focus on such markets such as Rallis India, Tata Chemicals (salt, pulses, water purification) and Tata Global Beverages (tea, coffee, water) could co-operate, this person explained.

 

At a later stage, other businesses, Tata Capital Ltd,  even Tata Housing Development Co. Ltd and Tata Steel Ltd can make use of the network, he and a third Tata group executive said.This is not the first time the Tata group is experimenting with the idea of a group-wide plan for rural markets. A similar effort was initiated six years ago but it didn’t take off, as the companies failed to find a common strategy across product categories. This time around, the intent is stronger. “With the rural markets having seen significant growth over the last five years, it is imperative that we do it now while learning from best practices of companies such as Hindustan Unilever Ltd and Hero MotoCorp Ltd that have shown the way,” a fourth executive said.

 

A 2012 presentation made by Siddhartha Roy, chief economist at the group, estimated that the number of rural households in India would rise to 178 million by 2015-16 and boast a total income of $1.07 trillion. In 2009-10, there were 169 million rural households in the country with a total income of $572 billion, the presentation said. The estimate may have been dented by the economic slowdown over the past few years.

 

It isn’t easy to get group companies to work together, said an expert.  S. Manikutty, a professor at the Indian Institute of Management, Ahmedabad, said that while efforts to generate “synergies” sound fine in principle, they need careful implementation.There is an inherent conflict between holding each unit accountable for its own performance and ensuring that different units coordinate with one another, he said.

 

Manikutty suggested that usually one of the units has to be given the overall responsibility for the operation—in this case, the entire rural strategy—for it to succeed.