Tuesday, June 29, 2021

India after Covid - Nine areas where we see major changes

Currently, in India, we are seeing the weakening of COVID's second wave. 'Weakened' doesn't mean wiped out; hence, there is a possibility that delta and its variants - probable future series like lamda, zeta, eta, etc may hit us with more power. I assume that one day, current or future vaccines finally will be able to bring the disease under control. 

In this article, I would like to discuss major changes that may happen in India and that is directly linked to Covid. 

1. Perception of Government
Clearly, neither central nor state governments were able to predict or do advance planning for the second wave. This clearly made a hole in the invincibility and infallibility perceptions of the current central government across the population. There was a time when all actions by the central government - regardless of its own merit - were considered to be the right thing to do. This is going to change; a lot of those changes are already there. Note that, this might not affect the winnability of central government. 

2. Poverty
Over the last three decades, India pulled millions out of poverty. A lot of that effort was undone by this single disease. As per the numbers from Azim Premji University, during last year's local down approximately 230 million(2.3 crores) Indians were pushed back to poverty (numbers are based on national minimum wage around 45$/month). Earning of organized labor sector also reduced - many lost jobs and many others suffered a direct or indirect reduction in salary. At the same time, the price of a lot of items, including but not limited to petroleum products were increased. This will definitely take a hit on family savings and their budget. Many families will be forced to cut back their expenses; this will have a domino effect on consumer markets.

3. Medical Expenditure
India's government spends around 1.2% of its GDP on health care. Even in normal times, Indians pay 60% of their health care cost from their savings or by borrowing. Covid generated huge medical bills. The absence of government services in many places left the people at the mercy of private hospitals. Many of whom charged exorbitantly. Economist says, even in normal years 1 in every 20 families are pushed into poverty due to medical expenses. Just imagine the situation in a year ravaged by COVID. Emergency and long-term medical expenditure will push a lot of families to poverty. 

Will this bring a change in the way Indians pay for healthcare? Probably yes. I think this is the right time for governments (central and state) and the insurance sector to pitch in and cover the masses. 

4. Biological water and public health 
India is not known for the eco-friendly processing of medical/biological waste. More than one and half years of Covid created a lot of medical waste; all of these are not getting processed properly. If not addressed early this is going to create a new set of problems. 

We all saw the pictures of numerous bodies floating in Ganga. We also see the government personals re-cremating the bodies which were in shallow graves in the riverbed. If not addressed early this is going to create problems for people who are living downstream and depend on river water. 

5. Business
Needless to say, all businesses are affected by Covid one way or another. Take the example of the tourism and hospitality industry. Globally the number of tourists and business travelers reduced considerably. This affects the business of hospitality, airlines, tour operators, hotels, etc. Similarly, people are cutting back on all non-essential expenditures. This affects a lot of small and medium-scale industries as well. It will take some time to recover. 

In some areas, things may have changed permanently. For e.g. teleconferencing, video conferencing, and other real-time communication softwares are here to stay. This means growth in business-related travels will not be as per earlier projections. Work from home (WFH) culture might increase even if everything is back to normal. This means people don't have to pay rent inexpensive cities, instead of that they can sit wherever they are comfortable and work from there. 

The closure of theaters moved a lot of movie releases to OTT platforms like Amazon Prime, Netflix etc. This will essentially change the way we are watching movies.

Similarly, more government services will be moved to the web and apps. This will definitely cut down the work of a lot of middlemen and consultancies. There are many more categories like that. All of them need to reinvent themselves to survive. 

6. State finances
One of the biggest threats to independent decision-making of states and federalism is the dire state of state government's finances. Most of the state's financial situation is an economic basket case. They were not able to generate enough revenue from the activities at the state level and depends on the central government's transfer of funds to states. Even if these funds are the right of states, the central government collects and then distributes them. The ability to print, collect money, and set rules gives the central government disproportionate power in the Indian federal system. Unless the states are not able to generate income on their own and improve their finances; even the most forward-looking and prosperous states will not able to implement their policies. Simply taxing more on liquor and petroleum products is not going to make this change. 

COVID was probably one of the toughest nails on the coffin called state treasury. Since health care is a state subject, each state has to spend a lot from its pocket. At the same time, tax growth is not as per the expectations.

7. Antibiotic Resistance
As per multiple reports, in exasperation or otherwise, a lot of antibiotics and other medicines which are used as a last resort were used like normal paracetamol tablets during the pandemic times. How it is going to affect antibiotic resistance on large scale is yet to see. There will be some damages. 

8. Nature
Among a lot of bad things, there is some good news as well. For decades, the ever-growing intervention of human beings in nature and its cycles created catastrophic damages. COVID put a break on a lot of those activities, where the conventional bans had no effect. We still fire up the coal plants and pump a lot of greenhouse gases; but, reduced human footprints on the source of rivers and forests are showing some kind of revival in the health of aquifers and other water bodies.

9. Social media
Pandemic brought back a lot of families together. People who see old friends and relatives only via video calls and hear via mobile phones can see them sitting on the next chair. One side effect is, many spend more of their hours on social media, which beyond a point may not be healthy. 

Wish that COVID go away as fast as they spread across the world and once again we can roam freely across the globe without wearing masks.

Sajeev

Thursday, May 20, 2021

An Interesting One Time Settlement(OTS) with IDBI Bank

There are some common practices in banking and finance. One such practice is, if you borrow money from a bank then you need to pay it back with interest. If you fail to pay, then bank will take appropriate actions to recover the money. Well, this is for common people. In the case of agriculture loans; based on government directives banks may write off the loans fully or partially. 

There are a separate set of rules for corporate sector called 'Insolvency and Bankruptcy Code (IBC) 2016'. This allows creditors to recover the money in case of default using insolvency proceedings. Under IBC, creditors may not get the whole amount. This however provides a meaningful resolution to the problem. IBC doesn't allow defaulting promotors to acquire the company under insolvency proceedings and there is a good reason for that.

What happened in this specific case is, lenders led by IDBI bank (49% owned by LIC) initiated bankruptcy proceedings against Siva Industries in 2019 for an amount in the tune of 5,000 crores. International Asset Reconstruction Company holds - 22%, IDBI Bank - 17%,  Union Bank of India (UBI) - 12% of the admitted debt. Other lenders are LIC, SBI, Yes Bank, and Bank of India. Well, company's liquidation value seems to be well below 5000 crores. 

Banks later agreed to a one-time settlement (OTS) offer from Siva Industries’s promoters (part of Aircel founder C Sivasankaran’s group). Under this settlement, banks will get 10% of their money. IDBI says, this amount is better than that of the company's liquidation value and agreed to a one-time settlement. By the way, OTS is not against the law. Even if insolvency proceedings don't allow defaulting promoters to acquire their company; bankers can still do a one-time settlement with lenders if enough of them agree. Under this Siva group will get their company back and can come out of the liquidation process. All are happy, right? 

Well no. Banks may get more money compared to the liquidation process; but they forget the fact that it is the same promoter who actually owes that much to them. Its like your company take a loan of 5000 crores from a bank, company default on payments, the bank took over the company, after some time you pay 500 crores (10%) to the bank and take control of your company. This can act as a template for any promotor to come out of insolvency proceedings in the future. If one bank can accept it and one promoter can get their company bank then what stops others from trying? After all, it's not against the existing law!!! 

The sole loser here is the Indian banking system, which losses money on deal after deal. Their NPA rates are going to create new records. Regulators should intervene and make sure to close all the loopholes in the law. OTS should not end up as an easy way for promotors to default, don't pay, and still retain the ownership of the company.  

Sajeev

US Recognising Armenian Genocide - More to do with Turkey than to do with Armenia

Russian soldiers pictured in the former Armenian village of Sheykhalan -1915. Photo courtesy: Wikipedia
A
rmenian genocide happened during World War I; more than a century back - in 1915. In those days, Middle-East was under Ottoman rule. Russian Empire was part of Allied Powers while Ottomans were part of Central Powers. During the war, Ottomans took their army to conquer Caucasus from Russia. They fought agaisnt Russian Caucasus army in the harsh winter conditions. We already know what happened to, two other powerful armies which tried to fight against Russia in Russia in winter. Well, Ottomans lost more than 60,000 men and retreated. While retreating Ottoman army destroyed Armenian villages (there were some massacres as well). Ottomans blamed Armenians for their defeat, stating that they sided with Russians. By the way, imperial Russian army had a contingent of Armenians, made up of Armenians lived in Russian empire.

Ottoman empire passed a temporary law called - Tehcir Law, and thus started the genocide. Armenians who were living in the front line areas (remember WW1 was still going on) were killed and others were deported. Able bodied males were killed; women and children were forced to death marches to remote Syrian desert. Deprived of food and water those people were robbed, raped and massacred en-route. Number of deaths during the deportation is estimated to be in between 800,000 to 1.5 million. 

Armenian Genocide Map. Courtesy: Wikipedia


For a very long time Armenians demanded the wholesale ethnic clensing to be declared as genocide. US was reluctanct to do that. There were multiple reason for that. Turkey is an ally and one of the biggest NATO member; in fact US uses Turkish bases in various operations. Turkey also has considerable influence in Middle Easten wars; especially in Syria. For Europeans, Turkey holds the flood gate of refugees to Europe. Another mass refugee flow to Europe might destablize the relations between EU nations. 

Over a period of time all that got changed. Turkey under Erdogan is more autocratic. Despite US warnings, Turkey went ahead and bought s-400 missile defence systems. Integrating Russian hardware and software with NATO equipments was a nighmare for US. Later US excluded Turkey from F-35 fighter program, citing the same reason. Turkish intervention in Libya which was followed by Libya-Turkey maritime deal didnt go down well with another NATO partner Greece. US and Turkey also found themselves at opposite ends in Syrian civil war. During this time, Turkish economy was crashed and islamization reached a new level. 

It is at this time, US president declared the killing of more than a million Armenians as a genocide. US recognition hardly has any weightage in internation law. However timing is interesting; for a long time, US didn't recognize the tragic event as genocide (despite requests from Armenians), but it did when the relation with Turkey reached an all time law. Another proof that in international politics, countries always act based on their self interest. 

Sajeev

PS: Last year(2021) Armenia fought a war with Azerbaijan over disputed territory of Nagorno-Karabakh. It lasted for 44 days, from 2020 September 27 to 2020 November 10. This was one of the most brutal wars of 21st century. Drone led warfare by Azerbaijan crushed Armenian military. Any idea who provided those drones? a good protion of that was from Turkey - Bayraktar TB2 UCAVs!!!

Tuesday, May 18, 2021

An unexpected cabinet - Kerala 2021 elections

When the new Kerala cabinet was announced; there was one question in the air - where is K.K.Shailaja? the famous health minister of the previous government.

People expected her to be returned as the health minister. Her leadership during the Nipah outbreak and later on Covid times were exemplary and well appreciated. In fact, she got the largest majority in the last assembly election. Her majority of 60963 is greater than the second-highest majority (the chief minister himself) by more than 10000 votes. There were rumors that she became more famous than the CM itself and she may be axed. Probably people never expected that she will be axed. In the new dispensation, she will be CPI(M)'s whip in the Assembly.  

It is good to give opportunities to different people. At the same time, one should be rewarded for their work; if people reward her then what is the problem for the leadership in digesting it? 

In India, there are always demands for young people to become ministers and occupy other important administrative positions. Unfortunately, what people often overlook is, in this vast over populous country, it will take a lifetime of work to climb from grass-roots politics to reach the highest echelons of Delhi. By this time, most of them will be old. If people are coming up with rules like - ministers cannot be old, or one can only have one term etc. then it actually shut the door in front of many people. Most often those who reach the highest positions in power at a very young age will be son\daughter of existing political heavyweights. Do we really want to reward them in the name of young leadership?

Hence before coming with arbitrary rules of including or excluding people in the ministry people think twice. 

Sajeev

PS: In the new Kerala cabinet except Chief minister, all are new. One can always ask, why not a new chief minister also?

Saturday, May 8, 2021

Another life extension for Moore's law!!!

There is a law (a prediction actually) in electronics, which everyone knew will break one day; because it's impossible to stay on the explosive growth trajectory predicted by that law. Surprisingly, this law still has life and kicking. Some of you may already figure out that prediction by now; yes, it's the famous Moore's law (prediction by the co-founder of Fairchild Semiconductor and Intel). He, in 1965 stated that the number of components in an integrated circuit will double every year; he also projected that this state of growth will continue for at least another decade. In 1975, he revised the forecasting of doubling-in to every two years.

There is a wonderful animation about Moore's law over decades here. @datagrapha



Now, the new inventions by IBM researchers at Albany gave another life for that law. As per IBM, with new methodology, it's possible to pack two-thirds of components more than what was previously possible. Translating this to common language; it says - using this process a smartphone can run 45% faster at the same time consuming only 1/4 energy. Currently, chip makes uses a design called FinNET - where electrons flow vertically. IBM took this to next level, by stacking one nanosheet over another one. New process called '2 nanometer' is three generations ahead of current technology. Since IBM don't have a chip-making facility now, this might be licensed to Intel or some other companies. It may take some more years for these chips to power our phones and other electronics equipments.

This time it may take some time for Samsung and TSMC (from Taiwan) to catch up. 

Wonderful news at the time of Covid.  

Sajeev. 

References