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Farm Gate Prices And Urban Apathy…

Published June 16, 2016 by vishalvkale

Today’s Indian Express carries an interesting article on the rural landscape of India, bringing to the fore a superbly balanced presentation of the farm gate prices issue: should farmers be able to sell as per their choice, and not just through the APMC-demarcated regulated market   yards and auctions. This raises many questions, as we shall see. But first, the article in question:

APMCs were originally established with a view to prevent exploitation of farmers by intermediaries, who compelled them to dispose of their produce at the farmgate at very low prices. By mandating all farm produce to be brought to regulated market yards and sold through auctions, the APMC mechanism was meant to ensure fair prices to farmers. But in many cases, these bodies have themselves become dens for cartelisation by traders, who control prices and charge hefty commission fees on produce transactions.

An extreme case that surfaced recently was of Devidas Maruti Parbhane. This farmer from Vadgaon Rasai, a village in Pune district’s Shirur taluka, supplied one tonne of onions early this month at the local market yard under the Pune APMC’s jurisdiction. The price he got — a little more than Rs 1.5 per kg — was itself very low. But adding insult to injury was the various “cuts” imposed on top of this.

A scrutiny of Parbhane’s patti (trade slip) by The Indian Express revealed his total revenues from the sale of one tonne of onions at Rs 1,523.20. The total cuts even on this meagre amount added up to Rs 1,522.20. That included commission fees of Rs 91.30, hamali or labour charges of Rs 59, bharai or filling-in-bags charges of Rs 18.55, tolai or loading charges of Rs 33.30, and transport charges of Rs 1,320 (as the kutcha patti issued in Shirur was billed for delivery at Pune). Parbhane, at the end of it, was left with a net earning of Re 1: “When after the auction, the trader handed me a Re 1 coin, I was flabbergasted. Maybe, he should not have taken the trouble to pay me even that!”

Traders, however, dismiss these as one-off incidents, while claiming that delisting of F&V would ultimately hurt even farmers. “The produce brought by farmers is not uniform, which is what processors want. The APMCs are tuned to handle variety. Here, we have 50-55 varieties of vegetables and 25-30 varieties of fruits arriving on a daily basis. Such variety will disappear once delisting happens. Moreover, instead of a centralised marketplace, you’ll have small and medium vehicles carrying farm produce and creating traffic mayhem in Mumbai,” warned Rajendra Shelke, a leading onion and potato commission agent at the Vashi APMC.

Besides, the APMC system guarantees that the farmer is paid for his produce, which wouldn’t be the case if he were to sell directly? “The proposed reform looks good on paper, but it will only spell doom for the farmer and end up completely destroying the agrarian economy,” he added.

Sanjay Pansare, who represents traders at the Vashi APMC’s fruit market, justified the high commission rates on grounds that the goods being handled here were perishable and prone to quality deterioration. Only around a quarter of the produce brought to the market is eventually of the best quality; the rest falls between medium and bad. The losses borne by b on this count have to, therefore, be made up through higher commission fees. Since 2002, the Maharashtra government has been issuing marketing licenses to various entities for procuring directly from the farmgate. Besides, 34 private markets have been allowed to be set up. But despite this, an estimated 75 per cent of annual arrivals of F&V in the state still take place in APMCs. The proportions are lower at 46 per cent for cotton and 25-30 per cent in oilseeds and foodgrains.

The good part of the article is for the first time in my reading at least, has someone tried to place the other side – the benefits from traders to farmers; for too long, we have been treated to articles that focus on the low farm gate prices prevalent in India. Such an approach suffers from one major disadvantage: the bulk of purchasing happens through these regulated markets; these are an intermediary reality that cannot be wished away; they form an ecosystem within the economy, have large dependencies of families as well as business connected to them.

Any change process can only be successful when both sides of the coin are taken care of; the concerns of the traders need to be met head-on and dealt with, as, regardless of the question of compensation to farmers, they currently fulfil a market function. This is where a slow and planned change can bear results – as seen in the example above, wherein the procurement for cotton and oilseeds, foodgrains are at much lower percentages. Full marks to the Maharashtra state Government for crafting a graded transition to the newer system!

It is heartening to see Maharashtra and Delhi take the first tentative steps towards making a fair and balanced system for all; this is something needs to be taken forward in all states. Therein lies the major issue- it nationwide implementation. Sadly, I have not come across more coverage, or at least focused and concerted coverage in the media on this vital aspect. While Foreign Policy, Political brouhaha, Make In India etc find coverage and deep, informed, threadbare analysis – this is all but absent in this matter. As a net result, sporadic articles spring up in the media, and the public remains mute, unconcerned and uncaring regarding this matter. While the other initiatives will impact Urban India immediately, and Rural India through the trickle down effect over time – this will have a  much faster and potent impact, given that more than 2/3rd of India is Rural…

This is a systemic change, deep and layered; it does not have the dramatic, esoteric and visual impact of  Make In India, or Digital India or the other steps of the Government; and yet, it is equally, and in some ways more effective in ensuring the development of our nation; it is also something that the internet generation, social media, mainstream media and Urban India just do not have an interest in, which is truly sad.  Frankly, this state of affairs is a brutal indictment of Urban India

The shocking example above exposes the state of affairs – that the farmer is not getting anywhere near enough; other data and proof in the for of articles can be provided; let us take Onions as an example. How much do we pay in retail? 20/- a Kg – 30/- a Kg? At times, 40/- a Kg? How much of this should the farmer take home? Prices to farmers have even gone as low as 20 Paisa a Kg. We hear a massive hue and cry when prices shoot up – so why are the people and the media silent now? Why is there total silence on such a vital matter? Because it doesn’t impact Urban India?

The bumper harvest this year, however, has left farmers in tears with reports suggesting that prices have fallen to an all-time-low of Rs. 30 paise per kg at Madhya Pradesh’s mandi in Neemuch district. “There has been surplus onion production across the country this time, and the demand is relatively low. The farmers are badly hit as they spend at least Rs. 12 per kg in the entire process of producing the crop, excluding their labour cost,” said Rajender Sharma, member of Azadpur, Agriculture Produce Market Committee (APMC).

In Delhi, which primarily relies on these two States among a few others for onions, the situation is equally grim. At the Azadpur Mandi, the kitchen essential is being sold at Rs. 7.86 per kilo on an average. The best-quality onions are being sold at a wholesale rate of Rs. 10.5 per kg, whereas the poor-quality and the smaller ones are being bought by traders at Rs. 4.5 per kilo. The retail prices in the city range between Rs. 18 per kilo and Rs. 20 per kilo.

Did we read much of this in  the Media? And do note the difference between retail and wholesale prices; and ask yourselves some questions on tis state of affairs. Also do ask yourself is it fair that these matters take backstage to the much more visual steps that directly impact Urban India – and also ask yourself how can we change the state of affairs?

Book Review : India 2020 – A Vision For The New Millennium

Published March 27, 2016 by vishalvkale



This is perhaps one of the best known books penned on India’s Growth Imperatives in its search for developed country status, penned by one of India’s favourite sons-  our beloved Late Dr APJ Abdul Kalam, Former President, Nuclear Scientist – and, as it turns out, thinker extraordinaire with a tremendous passion for India and all things Indian.  It has been co-authored with Dr Y S Rajan, who used to be the Scientific Secretary to the office of the Principal Scientific Adviser to the Government of India. He was also associated with ISRO and the Department of Space
This book, as it turns out, is far more than a mere problems/challenges-and-solutions stuff… it is the dream of a great Indian, a man who had given his entire life in the service of the nation. It is in every way a vision, a passionate dream; but one that is well presented, sorted out, supported with extensive research, facts & data – and does justice to most of the problems and challenges our nation faces in its quest for developed nation status. It justifies its title in letter and spirit : A Vision For The New Millennium.

Before delving into the specifics of the challenges, the book looks at the need of a national vision. The best part about this section, covered in 3 engaging chapters, is the usage of real world examples of visions – both from India as well as from the rest of the world. The Indian vision : The Struggle For Freedom… this drives home the point of how, when the majority of the people come to dream one single dream – the impossible becomes suddenly within reach and feasible.
The book then moves onto real world examples of how a vision document was created in other countries, and how it was implemented, giving a more practical, deeper insight into the concept of a vision and its applicability in the Modern World. The best part – appealing to both the emotional, historical and practical aspects of the first challenge, that of selling the concept of a vision is remarkable, and indicative of a person of high intellect as well as emotional maturity, which is of course well known to all of us!
This isn’t a coffee table analysis, done on the basis of experience – this is the result of hard, painstaking research, with solid data, field work and a series of discussions with Government, Quasi Government  and private professionals from various fields, with an effort to understand as well as analyse each  and every aspect of the presented points. This is a veritable treasure of data, and not just an ideation session that seeks to implant ideas in your mind. This is a seriously put together document that needs attention and repeated referencing for it to be properly assimilated and understood by the serious reader.
The first task taken was then to identify the specific areas or industries where we can develop a competitive advantage, and go onto build world class infrastructure, institutions and companies in these areas. And this is where the book really hits home, and hard : as opposed to the current penchant of grand projects,  high tech fields, bullet trains, and smart cities that we currently dream of – the book takes off an entirely different tangent… and succeeds in developing a workable vision for all of us. Question is : are we working on it?
That is where the concept of a Vision comes in. The authors have identified all key variables that impact and influence the current status : population distribution and dependency, GDP factors, social variables, income distribution etc in a short but deeply incisive chapter that sets your grey cells on overdrive. From that exercise, the strategy to be adopted flows effortlessly, giving a complete picture of each  sector, with a chapter devoted to each :

*   Food, Agriculture & Processing
*   Materials and the Future
*   Chemical Industries and our Biological Wealth
*   Manufacturing for the Future
*   Services as People’s Wealth
*   Strategic Industries
*   Health Care For All
*   The Enabling Infrastructure
Note the selected points and areas : no mention of Power, Education, Infrastructure, Roads, Internet Connectivity, and other terms we are so used to hearing. Think for a moment about that : why should it be so? That is the leap of thought, the leap of insight we as a people urgently require. All the ones we eulogise about are in reality the  enablers, not the end-objective. We don’t need power for power itself, it is a means to production. Similar is the case with the other points mentioned.
By focusing on the means and only the means, we are leaving the what-to-so-with-these unplanned, and at the vagaries of the market; there is no conscious plan, no strategy industry wise, where we deal with the hindrances & the available opportunities to us as a people.  This reduces the efficacy, as market forces alone will never ensure competitive strength; it requires a series of inputs and plans to ensure a competitive strength in a defined area.
The chosen sectors are broad enough to ensure flexibility, and yet have, with sufficient details inside each section, core areas of concentration identified. That brings me to my second observation – if a Nuclear Scientist can understand, given the income distribution, people dependency on and status of Agriculture – that it has to be the thrust of any developmental effort that dreams to make India a developed nation, then why cant we? Food for thought. High time we, the people of India, started giving Agriculture the attention and respect it so richly deserves!
The book was authored in 1998, and 18 years have passed since then. We are very near the target date taken for the national vision: 2020. It would be pertinent to look at how far we have progressed on the dream of a developed India as put forth in the book. That, however, is a herculean task, given the vast number of data points given, industries covered, sectors analysed with solid data – and cannot be the subject of a single article; this will require subject matter expertise, and research on each topic… I do hope some people do this exercise. On my part, I will attempt an analysis of the area of my speciality in this : the field of my graduation – Agriculture. I hope to present it someday…

Comprehensive Development : Hindrances and Possible Solutions

Published March 12, 2016 by vishalvkale

This is the 3rd and concluding part of my ongoing conversation into the Budget and The Indian Economy with Mr Amitabh D Sinha, carried on from :

This discussion started with my contention that the recent budget is now on the right path, having focussed on Rural India; and that Rural economy should get preference over the Urban. The contention of Mr Sinha, an expert in Service Culture, Business strategy and the Director of Finance and Investment for the SME Chamber of India – is that we can do both; that the path of growth will be smoother and faster if we think out of the box and attempt the seemingly impossible

In the story so far, the two {or three-four} of us had got to the point of systemic competence in the Indian Economy to gear up to meet the new paradigm facing India, Inc; and the preferabality of a model that focussed on both Urban as well as Rural segments of the economy. This goes against the common grind, that we cannot do both. The contention introduced by Mr Sinha was that this is doable, which is as far as we had reached in the first two parts of this discussion
Moving on :

Me : Coming to the core question of comprehensive model, I have no doubts as to its inherent superiority; that is a no-brainer. If you can develop several strains and solve several problems by parallel processing, you get faster development. {Thing of processer cores, and how parallel computing improved things}

That models assumes enough system maturity to ensure seamless integration at the conclusion point; in the field of economics, it also assumes transparency and building trust – as you rightly pointed out above. Do have the requisite level of systemic competencies in our internal mechanisms to deliver on such a tough task? Agreed on the take on Credit policies, and the commitment to the Basle Framework; beyond argument, pretty much. Rationalizing, Assessment, Disbursement etc are also all very valid points raised by you; the problem is again in the ground realities and the doability

My contention is the same as before : I fully realise the inherent power of the model being proposed by you; that is transparently obvious. If we can develop Education, Rural / Agriculture alongside employment generation activities like industry on a small scale {given our structure}, the benefits are obvious. Further, given the existing entrepreneurial spirit and structure, the ease of promoting MSMEs also is far easier. Add to the the focus on big industry – and you have a mighty plan at hand. That I readily grant.

As another contributor in this thread pointed out, as well as myself in an earlier article, to create educated manpower without jobs is a recipe for certain disaster.
The issue is two-fold :
1) How do we implement the aspects pointed out above, in a scenario of multiple holdings by same promoter, lack of full penetration of accepted accounting standards, lack of transparency in documents, and so on and so forth? These will put the system at risk; the main difficulty in credit worthiness assessment comes from such factors.
2) Monitoring, early warning etc requires free, relatively full and fair information; that is absent by and large – although this being a major focus area, things are getting better with increasing penetration of proper accounts, systemic requirements like PAN, broadening of Direct Tax Net. Thus again, we are back to my original contention – that this might be premature.

As to the rest, spot-on accurate: the single biggest hurdle actually is what you state basis my 17 years work experience – lack of fund flow is the way I would like to put it, which results in companies running dry of working capital leading to shut downs. The receivable cycle has increased almost precisely as per your contention in my experience as well.  Further, the raised point of incentivising is indeed thought-provoking, it would, if added with penalisation, create a suitable environment. That might just be what is needed!

But again, wont the TReDS help in a major way in sorting out the mess in liqiudity? Am not too much into that, but am to speed on its basics. Next, extending credit is also the flavour of the season, but as I seem to recall it is limited to the priority sector. I do not recall much in this budget on easing norms for the MSME sector, correct me if I am wrong. I recall only point 66, 92 and 172 in my notes on the budget speech…

Amitabh Sinha|Expert – Service Culture, Business Strategy  : Vishal, chaos engineering has its challenges, no doubt, but the upside is palpably higher. As far as the playing field and the environment is concerned, recently at a budget review, I heard a question that is hard to invalidate given what we know of on ground systems – how much of the allocated funds will reach the point of action and how much will dissipate?

We know there will be diversion and dissipation, but we have to go ahead and do it anyway, while working in parallel on plugging leaks and ensuring smooth efficient flow to the point of action right? So no the model does not assume system maturity, it factors system immaturity, but not as an insurmountable hurdle.

The paradigm will never be perfect, but nor do we have the luxury of waiting. Malthus is not going to wait for Keynes 🙂

Vishal, I had missed your critical point on system transparency and information availability, especially people gaming the system through multiple entities, different accounting practices etc.

Part of the problem is being addressed through the information networks and their linking which is already in progress. Mr. Modi’s insistence on ‘Digital India’ might be questioned by many, but will form the main bulwark for creating greater system transparency. Banks are already starting to share client data, next will be to share decision data. UPA II dropped the ball on UID but that’s back in play too.

The next will be to force standardization of accounting practice, which is where the PM’s thrust on bringing in foreign investments will be a huge tool, because international money will demand internationally acceptable practice, which in turn will start to put pressure on local operations that deal with bigger entities to ‘comply or die’. Tough? Yes. Required? Hell yes.

Me : Amitji,
I see that you are in effect advocating a PPP type model for development to circumvent the resource crunch problem I was talking about. That is indeed out of the box thinking; appreciated. Unless I miss the point, you are specifically talking about going even further, and reducing the role of Government as far as possible, along the capitalistic model.

That is certainly doable, and is eventually the way forward. While this could not have been tried hitherto, due to lack of depth in the internal business and wealth scenario, but in the changed paradigm that now is the case in India – this is worth a look at.

As a matter of fact, there are a couple of case studies in the real world in India : where industries have become world leaders through private enterprise, aided by friendly and enabling policies.

I respectfully submit that this model can work out very well indeed in select areas : Manufacturing, Service areas in totality. In Infrastructure and Agriculture, this can certainly be tried in product areas : Fertilizers, Seeds, Implementation of Projects etc are areas that come to mind. But for the overall execution, I do not think the Government can step out due to the humongous nature of the funds required.

The single biggest problem is choosing where to invest the surplus we have. We have a budget {any budget since 1947!} where non-plan expenditure takes the bulk of the funds; this leaves the plan expenditure, with a series of demands on it. You have to choose between one of the two, eventually; therein lies the rub.

You have requirements for huge funds for Roads, MNREGS, Irrigation Projects, Power Sector, Smart Cities, Digital India, Armed Forces, Education, Health and so on and so forth. You do not have the requisite funds to invest in all. Further, given the scale of poverty, you cannot ignore the demands of what is euphemistically {and inaccurately} called Social Spending; as the past year’s experience shows,

That is why, considering the priority of the demands, we have no choice but to ignore the cities of India and put our funds into the rural sector – namely, rural roads, and Agriculture Sector. I accept the advantages of digitisation as outlined by yourself; being a hardcore techie- that is plainly obvious to me. My daily bread is from a hard core technology industry; my survival and growth is a direct function of technology. How can we do both?

Digitisation – rightly pointed by you as both an effective enabler as well as leveler – will require funds. Huge amounts. Where will they come from? Being from Telecom, I am only too well aware of the impact of corporate valuations, cost of funds and the investments, and their impact on the ground scenario.

The current level of infrastructure in India in terms of data – will it sustain the demands of a national digitisation mission? I fear not. 3G is a case in point; the speeds as well as connectivity we enjoy are abysmal by any standards, not due to telco faults, but because the demands on the network are tremendous by any standards, and the additional factor of cost the telcos incur in setting up networks in terms of both capital and revenue expenses. Having finite resources, the telcos have no real option but to put their money where revenue will be maximised; that is the only strategy that makes business sense.

Thus, the PPP model will not really impact rural connectivity except over the long run, given the cost profile of setting up networks across the hinterland. Further, digitisation and seamless connectivity across 545 districts, and thousands of tehsils, talukas and villages is a daunting task. This task is admittedly underway, and we have achieved wonders in this. Accepted.

My point is straightforward : given the paucity of resources at our command, we have no choice but to let the digitisation proceed as its current pace {for example}- and put our money into priority sectors. I accept the points made by you – some were real value additions to me, and made for great learning. But my core question remains unanswered.
The scene in Rural India is worrisome, as pointed out by me with proof in my three recent articles – and such a situation demands we forget all else, and focus on bringing things back on keel once again.

That said, we do need to focus one hell of a lot more on the MSME sector, and I do not spot much in my reading of this current budget {have yet to go through fine print, am on tour}. Credit, the single biggest problem for MSMEs, in addition to gargantuan rules, offers no details as to the Government thinking – correct me if I am wrong. Time will tell – let us see.

As a matter of fact, if we look at Annexure Section of the Budget Speech, specifically Annexure III-A page 36, one can see that while MSME ministry gets an allocation for 3645 Cr, The Ministry of Urban Development gets 24523 Crores.  MSME+Unorganised sector taken together is the largest segment of the economy… Are we paying due attention to this sector?  This is a genuine question in my mind… would love your expert comments, since this is a core part of your daily bread

Amitabh D Sinha : Vishal, for years people have delighted in presenting either-or choices to us as a nation, deftly hiding the fact that either-or always leads to greater rifts and addresses nothing.

The point that I have been trying to make is that we have no choice but to push for what you’re calling PPP and what I call as the only rational model for comprehensive speedy development. What we have inculcated over decades is an efficiency crisis and we always try and present that as a debility. Simple participative accountability and making people do what will benefit them and yield incidental benefits to the country will work, will be faster and will be effective. As Mr. Shetye is saying, build the small outcomes, the large ones will take care of themselves.

Me : That bit hit home, and hard : efficiency crisis, meaning both corruption and productivity issues. I see the point both of you have been trying to make; I am also aware that real life requires hard choices. While we do need to set our priorities straight, as I alluded to earlier – the point above that the resource crunch may not be as big as assumed is well taken – of which there is plenty of evidence; meaning that there is a lot we can do internally.

But what it boils down to, critically, is that we need to tackle corruption as well as enhance efficiency {Both, corruption as well as inefficiency are what lead to leakages} on a war footing : if we can save that money, and tap into internal resources more effectively, we may have a good thing going… we are going to save money to do both – we need to root out both from our internal systems… the question then arises, how can we do that? And is that really doable for us as a people? But that, I am afraid, is the subject matter of an entirely different discussion to be taken up and examined later… Till then, till we can, as a people, solve this riddle, we may have no choice but to focus on one area… that is what worries me!

Thanks for an enlightening discussion – one of the best on Th!nking Indian so far….

If you have liked this discussion, please feel free to visit Th!nking Indian on LinkedIn for the entire discussion, as well as other hot topics with presentations from many people from all walks of life….

Indian Economy : MSME Problems

Published March 10, 2016 by vishalvkale

This is the 2nd part of my ongoing conversation into the Budget and The Indian Economy with Mr Amitabh D Sinha, carried on from : Comprehensive Vs Bottom Up
We had closed the previous article with a comment on the MSME Sector, and the problems it faces, particularly Credit and its attendant problems. Moving on :

Me : The difficulty of extending credit to the rural sector and the MSME sector is rooted in two problems we face as a people : corruption, and lack of identity papers and formal banking access. These two problems together are creating a scenario of trouble. We are a cash economy, not a banking economy. I recall one of my Sales Officers did not have a bank account, neither any identity papers of any kind, nor any address proof in his own name – and this was in Mumbai. That is the hard reality of our economy.

The aspect of cash in our economy is a well studied and known one. Our industry functions on cash and word {not nescecarily illegal – cash can be used legally as well!}, where the spoken word, the promise carries more weight than a banking instrument, where cash is prefered even in metros – let alone the villages of India!

We are a people for whom a promise to pay is more valued than an actual post-dated cheque, where legal contracts are mere formalities that are conducted after all cultural formalities are dispensed with. That I am aware of personally, having handled two such cases. In this scenario, credit and support to priority and SME segment requires the evolution of norms and rules to suit such an amorphous environment. It requires the ability of capture relevant information of each constituent credit customer which spans his or her relationships as well as documentary records, and the complex cultural underlying reality as well

Secondly, Amitji, I call your approach as a comprehensive approach; while penning our conversation {with credit to you of course} on my blog, a thought occurred to me : is your strategy – which I call a comprehensive approach : doable? I would like your detailed thoughts on this point…

Amitabh Sinha|Expert – Service Culture, Business Strategy Vishal, any problem of this complexity has its own hurdles, some natural, most created. That said, is the holistic approach doable? Yes it is.

The ‘Waterfall’ model of development that is still practiced in many cases and places – the build from the ground up model – has two innate problems. The first being the forced prioritization, which causes other problems (those that are high priority yet not highest priority) to fester & escalate. The second, and to my mind bigger issue is that problem quantum definition is done based on projections from the ‘here & now’ perspective, but by the time one reaches predefined milestones in development, one fins that the problem definition or at least the quantum calculation is off. This makes the model akin to a dog permanently chasing its tail.

The agile scrum model of development or the holistic model builds in a certain flexibility and course correction capability on the fly, because we keep testing the premises as we fly. Coming back o the present scenario, why will it not work? Once we begin from that question and with the attitude that it needs to be made to work without an alternative, I really do not see the problems becoming any bigger than they are now, but I do see solutions coming faster.

Before this very budget, I am sure a huge number of people would have considered it virtually impossible for an Indian FM to refocus the country’s budget to attaining rural priorities right?

Yet in one stroke Mr. Jaitley has cracked open that cage and decided to unshackle a giant. Not just that, he has presented an industry unfriendly budget and forced industry to hail it as a huge directional positive. I am glad he has done this, because he has shown change can be made, even with a completely irresponsible, malafide opposition paralyzing parliamentary proceedings.

He is already moving to re-provision banks. Let us take as granted that whatever credit policy changes he tries to make, the RBI has NO choice but to stay within Basle framework regarding securitization and NPA norms. What does that leave us to work with?

Rationalization of how we assess loans, debottlenecking the application, assessment, disbursement process, creating contemporary perspective and understanding of business and industry with the assessors, efficiency in how we monitor them, early warning and flagging systems, more effective and rational restructuring systems. None of these is rocket science, just needs a little more ownership and a perspective that banks are also business institutions that are in the market to make a profit without unnecessarily escalating risk. More ‘do business’, less ‘cover your ass and toady up to the rich boys’. The gun in his hand is big enough, if he can forget the vested constituencies long enough this is step one.

The next part is focusing on what is the single biggest hurdle to increased competitiveness, productivity and profitability in small business. We keep talking of complicated compliance framework, red tape, absence of infrastructure and tech access.

Sorry, flawed perspective. These are important, but not the most important. The biggest culprit is the liquidity crunch. Cost of doing business in India is becoming untenable for a small business simply because the cash does not turn around fast enough – this also segues back into your observation over preference for cash. That is a huge fallacy. The preference for cash comes from inability to realize timely receipts through instruments.

Over the last 20 years I have myself seen businesses go from a 60 days cycle to more than 210 days now. This needs to be sorted not only by creating the TReDS platform, but also by incentivizing its usage. Money turning round 4 times instead of 1.25 times will deliver a massive boost.

Another attitudinal change that we must make is to work with incentives rather than penalization. I don’t know how many people registered or understood the PM saying he wants a regime that trusts people. That is the signal for a huge change and I hope with all my heart that he can make that happen.

A penalization framework – much like the one we have today – is wasteful and inefficient, because it needs constant watchdogs on the lookout for wrongdoing and gives absolutely no incentive to doing the right thing. A little like old school teachers saying if you do everything right, I won’t slap you. So everyone derived bare minimum required and adhered to it, while some spent their energy looking for loopholes – the same energy they could have used for work if it was worthwhile.

An incentivization framework puts the onus for both performance and reporting on the doer. He needs to do, to document, to organize certification and submit. And he has a reason to raise the bar on performance.

Me : Amitji, First of all, let me extend my appreciation for the wonderful flow of thoughts that you have put forth, very educational and thought provoking.

Moving on, I see no issues in focussing on MSMEs for the perfectly simple reason that they contribute more to any dimension of the economy that you may choose to assess from employment to savings to GDP. This is one of the lesser known facts of the structure of the Indian Economy, which is driven on two pillars – MSMEs and Agriculture, which together account for between 59% – 77% of income and GDP, depending on how you define the MSME and the unorganised sector. Our inability to tap into the resourceful nature of this segment must surely stand second only to our neglect of the farming sector..

Coming to the core question of comprehensive model, I have no doubts as to its inherent superiority; that is a no-brainer. If you can develop several strains and solve several problems by parallel processing, you get faster development. {Think of processer cores, and how parallel computing improved things}

That models assumes enough system maturity to ensure seamless integration at the conclusion point; in the field of economics, it also assumes transparency and building trust – as you rightly pointed out above. Do have the requisite level of systemic competencies in our internal mechanisms to deliver on such a tough task?

In this segment of our mutual interaction, Mr Sinha introduced a series of ideas, some already being thought of and some out-of-the-box that deserve a serious look and contemplation, leading us to re-examine some of the precepts we assume as true. For example – our preference for cash, wherein Mr Sinha is stating that one of the reasons for us preferring cash dealings arises out of the delay in realisation of payments through instruments. Second example is the movement from a penalization framework to an incentivization framework to improve system transparency and reporting.

In the concluding part of this series on the discussion on the Budget and the Economy with Mr Sinha, we will go deeper into the doability of the comprehensive approach, MSME sector, Resource Crunch and the way forward – both from my perspective as well as the perspective of Mr Sinha. At least I can admit without shame that this conversation of ours has already cleared some cobwebs, and has enabled me to think beyond the boundaries, and question some basic assumptions…

Comprehensive Vs Bottom Up : A Tale Of Two Economic Ideologies

Published March 6, 2016 by vishalvkale

This is a conversation I had online with a college senior, and a person working extensively in a consultative position with SME companies at a senior level, with a pedigreed work experience at senior management levels. This conversation is between two people of completely varied economic ideologies, and I hope will provide a glimpse of an alternative path of development. This is a slightly different approach I am adopting, and hope that people can connect, as in my opinion it gives an interesting insight into diverse viewpoints; I know I learned a lot from this conversation, and hope others can also glean a lot…
The conversation links onward from my previous article wherein I had compared and analysed the Middle Class, wherein I had stated : “The cities may not like it, but there is nothing they can do about it. They are outnumbered 5.5 – 1 in Rural Urban Split, or perhaps nearer aproximately {from memory, could be off target} 9-to-1 in terms of income..” Excerpts from the conversation are given below : interested people can look up the full conversation on our open LinkedIn group Th!nking Indian :


Mr Amitabh D Sinha {Expert Service Culture, Business Strategy} : Vishal, as I had said right at the start, some much needed direction and I stand by that, but I also feel there isn’t enough substance for the euphoria.  I am also especially annoyed by your comment that the ‘the cities may not like it, but there is nothing they can do about it’. Let us understand we are talking about a single country, there isn’t and should not be a competition between urban and rural India – for god’s sake we have split this country into enough segments and sub-segments already, let’s not add another us Vs. them dimension needlessly.
Given the way this country needs massive urbanization if it is to survive and grow, I also think sentiments of comparison between the rural drive, MII and Digital India are irresponsible – none of them singly, can do what they can do collectively.
Me : This nation does not neet massive urbanisation; not yet anyway – and not for the next decade at least. It needs decent facilities in the villages, make them liveable it needs good primary schools, secondary schools in villages and talukas with good colleges in the Tehsils. It needs good road connectivity. It needs Primary Health Centers in each village, it needs functioning anganwaadis in each vilage, it needs seamless dependable connectivity with tehsil and districty headquarters at each village level. That is the first priority.
The cities, by comparison, have way more than enough, and are in paradise by comparison. Those smart cities, those bullet trains can wait for another ten years, maybe 15. We dont need them, we dont want them – and to be exceedingly blunt, we dont deserve them either. Agreed on MSME; that has to be the second pillar of the nation’s growth : as well as home grown organisations, purely Indian of whatever size as the third pillar. But, in order that benefits get to the innermost regions of India – the first pillar simply has to be agriculture.
This is good news for the cities as well; as industry after industry reaches saturation point in the cities, the new business can only come from the hinterlands and the villages. For that, they have to grow. If they do – the cities benefit in auto mode, as they produce the products that will be purchased by the increasing disposable income.
As regards allocation of resources, a 25% increase in layout to Agriculture is nothing to sneeze at; this is after accounting for the 15K Cr reallocation. This is a hefty incease, in addition to the increase in MNREGS, which gives clear signals for the direction the Governmnt is taking. They have no choice – either they cater to wherever the voters are, or they get tossed out in 2019. The writing is on the wall for them, sad to state.
I am not a socialist, neither am I advocating redistribution of wealth. I am just saying count the blessings we have rather than crying for what could have been. We – most of us – have the blessing of a splendid education {because our parents could AFFORD to send us there}. We should enjoy what we have – sure; that is our right as we have {most of us at any rate} worked hard for it.
But that is where I draw the line; while enjoying our success, let us not forget that not 5 feet away from our enjoyment is a destitute for whom our momentary pleasure is one month’s food. Keep a thought somewhere in our hearts for them.
Mr ADS : You’re not listening. No one is arguing for the trickle down effect theory – the less said about it the better. You’re right, we have finite resources. That’s where the rub is, NOT in how we distribute them, but how we plan to raise more. I am sick and tired of this ‘limited resource’ excuse, simply because I see NO effort to raise income, except through routes that are conventional, low yield and burdened.
You say, let’s face facts, Indian Urban & Rural are competing, my response is then we are doomed, because it’ll be a cold day in hell when either one alone will be able to drive this country’s progress – growth of one at the cost of the other is something we’ve seesawed at interminably, both in theory & policy and look where we are.
We need new thinking hats. We’re coming off almost 5 continuous years of crippled policy making (3 from UPA & 2 from NDA), we need to start solutioning, not merely ideating. I know there are elections ahead, but let’s ensure we have a nation first
We don’t need massive urbanization yet, not for another decade”. False. We need massive urbanization to start NOW, but not by increasing the urban slums around our 200 odd urban centres. We DO NOT need the Mumbai’s and Delhi’s to become bigger, we need to create smaller self-sustaining, contributing, urban and semi-urban centres. Let’s face it Vishal, if agriculture is ever to become a monetarily worthwhile occupation for the farmer, we NEED to solve the land parcel issue. The current population and possible productivity dynamic is unsupportable. It’s great to talk of doubling farmer income in 4 years, how about increasing farming income? I know you will understand what i mean by that.
That cannot be done unless rural youth migrates to NEW urban concentrations where they are NOT designated as unskilled labour, but as people whose skills are built and used to create wealth for them as well as the nation. That will take manufacturing – there is no other wealth creator is there?
Me : That solution you suggest is certainly doable; but not just yet. We only differ in the time scale. You say now, I say 5-10 years. The rural youth to qualify for jobs in the manufacturing sector will need to be educated, that isnt happening. As I look at later in my budget analysis tonight, that is the one sector that remains a cause of deep concern, one where I can see no action happening anywhere. We will first have to invest in education at village and taluka level – note my points made above, before we embark on the path you and others are suggesting.
As regards size of land holding – certainly I understand. At 1.39 Ha average land size and upwards of 76% Small and Marginal Farmers, with 90% {I think} holding less than 2Ha, that is a concern – true. Yet, strangely, these small and micro farms are more productive than larger holdings.
Agriculture requires Seeds, Water, Land Quality, Water Quality, Credit, Market Access, Post Harvest Technology, on a priority…
Mr ADS : There comes a time Vishal to ignore percentages and go after hard numbers. So when you tell me a guy who earns less than 40,000 per annum as usable income is going to have it doubled in 4 years, my mind tracks that against expected consumer price rises @ 10-12% p.a. and the fact that his minimal need for some level of security is more than 1,00,000 today, I am less than ecstatic.
Similarly when you say, a 25% hike in rural outlay is nothing to sneeze at, all I can say is, percentages are for reports. Let’s talk hard numbers in terms of what sells for how much and therefore how far will the money go. My simple submission is that if looks as if it will not go as far as we need to, we can’t throw up our hands in despair and whine ‘but this is all we have’, nor can we sneak a piece from one plate and drop it on another and pat ourselves on the back for a good job well done. We have to find ways to earn more. & We have to find them NOW
Me : Sure size of holding is a concern – but not a priority. Right now priority is education and the issues I list above. The NSDC, {} which is a landmark initiative, will take time to make its impact. We have no choce other than to wait in the interim
In order that farmer and farming income increase, you have to tackle irrigation first – the most visible and immediate impact {to the tune of upto 100-300% depending on other factors} is by irrigation. But that leads to other issues, thus you also have to simultaneously tackle water and land quality, seeds, pests, credit and market issues as well. Most of these are now being looked at, which is what makes me euphoric.
I think the solutions are being implemented in the now – except education, which is a deep and lasting worry flashpoint. With inreasing incomes in Rural Sector, deepening connectivity, dismantling of APMC {or rather, changes to APMC}, Credit on the board – the income should rise in the next few years, and that is welcome.
But without education, there is only so far we can go…
Mr ADS : Why must government wait to do everything itself? Push for a larger manufacturing base and let small industry take care of vocational education that creates jobs for the rural youth as well as paths for aspiration. It is industry that needs the skilled resources, free up some breathing space for industry, stimulate growth factors and industry will create jobs because that will become a bottleneck they can solve.
Please remember that SME in India has grown despite a hostile, inhospitable terrain wherein they have at best been ignored and usually exploited worse than slaves. That SME has still grown is a testament to solution finding ability – partnering them makes sense, pushing them into corners and creating a paradigm where they have no incentive for growth is not only ridiculous, but downright suicidal.
Agriculture requires Seeds, Water, Land Quality, Water Quality, Credit, Market Access, Post Harvest Technology, on a priority… Agreed on every single point. What agriculture DOES NOT need is bottlenecks created by governments trying to do everything by themselves. The government needs to become aggregator rather than sole executor and facilitator rather than regulator. Market access, PHT, Seed quality and Irrigation are definitely areas where the government can invite and leverage non-government players both for knowhow and financial capability.
Credit is the bugbear I agree, yet credit policy is virtually ignored in budget after succeeding budget, citing Basle and various other reasons. Why is Indian bank lending still operating on principles and practices that may have been contemporary 35 years ago, but certainly never any time since?
You said this budget was ideation, unfortunately you’re right, 3 chances gone, 2 to go, we’re still awaiting a gameplan….
Me : Amitji, your take on taxation is fully warranted and accurate; lower taxes make sense for everyone. But is that currently doable? With the taxation returns being around 3 Million, large – majority, in fact – are currently not paying direct taxes. Therein lies the rub. We first need to broaded the tax net, and bring in all people in it. Then we can look at further rationalisation.
As it is, the current situation is far better than what it used to be, that I am sure you will agree with. One of the biggest challenges our country faces is the spectre of black money, and the attendant challenges this poses. With the direct tax net being so narrowly defined, how is any other course feasible? Arent we all to blame – as per turn our eyes the other way on this issue?
On the aspect of the MSME, I would be the last person to argue with you; having had practical work experience in small companies, and a wide-spectrum exposure to the MSME in one particular industry in North and West India. MSME is a segment that needs support. I am always reminded of an outstanding I had with an SME that had its production lines shut due to lack of credit and the attendant inability to pay for raw material from Vendors like me.
Honestly, I did not spot anything too exciting on the MSME front, although I could be wrong as I focussed more on rural sector. I will go through the precise recommendations as I write my Budget review on that segment.  That said, MSME segment also needs to look at its own self in a mirror and reform itself from within if they are to attract talent and retain them. One of the biggest challenges for them is the inability to attract and enthuse mainstream people from organised industry and use their organisational skills and talent…
The Government has rolled out credit targets for the priority sector, and that is a ray of hope, but I do not recall much else in that realm. I could be wrong, but that is what I currently recall.


I have edited large parts of the conversation, which is rather long; the full conversation can be found on the featured post of Th!nking Indian. I would especially love it if people can focus on the highlighted and bold points raised by Mr ADS, which are indeed thought provoking. He consistently has been at centre point, and arguing for increased focus on several parameters where focus is required : SMEs, Raising internal resources, no need for raising rural – urban divide issue; the comments also highlight two diametrically opposite ideologies : Rural and Bottom up from my side versus Comprehensive from Mr ADS… Is the comprehensive doable? Further conversation with him should give a better idea… stay connected

Budget 2016 : Middle Class Perspective Analysed

Published March 4, 2016 by vishalvkale

The recent budget presented by the FM Mr Jaitley took quite a few people by surprise, with especially the middle class – some members at any rate- feeling short changed. Despite that, I personally rate this budget as being among the best to come since 1991; sure there are negatives. Let me take the bull by the horns : Middle Class, you say. Let me be blunt : The Middle Class got nothing, which exactly what it deserved. No more, no less. And yet, in this nothing lies the true benefit to this class from this budget.  
This Middle Class represents those educated people {should / dare I say barely literate? Education implies much more than degrees}; Those literate and degreed people who you can spot spitting on the roads, peeing on the roadside, paying bribes, ignoring accident victims. migrating from India… these people are in a position to do something about such ugliness – and CHOOSE to do nothing. Do they really deserve more than their fair share? Call me an idealist – but I don’t think so.


This budget is more of  an ideation session, a set of ideas and promises that can transform ALL India in a very short time – like MII and Digital India never can. India lives not in the cities, but in the rural areas, with 84% residing outside top 200 agglomerations {let alone cities!}. That is why the budget -any budget – should be only for these, the majority. Kudos to the BJP for doing it. It is noteworthy that they are attempting to reform agriculture and develop it, not give doles – which is what is needed.
Note that I focus not on numbers, but on ideas. Ideas lead to numbers each and every time; I have never ever seen numbers leading to ideas…
Also note that all three major national level forces are now concentrated on Rural India {or the poorer classes} – BJP, The Congress, and the Up-and-coming AAP. The cities may not like it, but there is nothing they can do about it. They are outnumbered 5.5 – 1 in Rural Urban Split, or perhaps nearer aproximately {from memory, could be off target} 9-to-1 in terms of income..
First this is the 3rd Budget of this Government. The initial approach was giving a mistaken impression of Suit Boot Ki Sarkar, with their Urban focussed approach; the previous budget and years contained premature moves like Make In India, Digital India, Smart Cities, Bullet Trains, none of which we require. I say mistaken for the reason that some of their other steps have very likely not been advertised, as the third article in this series brings out – which lays open the feasibility that they have done more than they are advertising.
We dont have the existing systems and the overall ecosystem to support even one of the above initiatives. Take Make In India, for example – in an atmosphere of 58% MSME contribution to GDP, how can any such initiative succeed without sorting out ecosystem issues? There are capacity, credit constraints in that sector to name just two; there are the issues relating to inverted duty structures, skill related problems, outdated technology issues and market access issues that need attending to.
You cannot dismantle inverted duty structures overnight, to consider just one small parameter; it impacts internal equilibrium, erodes profitability over the short term {another ex – Telecom; cant say more as am from same trade. Read latest news please}, and creates a churn. It requires a carefully calibrated approach and a defined plan to execute a successful turnaround. The beginning has been made, but a lot more needs to be done, as industry pundits have been at pains to point out.
You cannot rush in and change everything; the impression the Government was giving was, to me at least, is that it was in a rush to do too much, leading to premature steps. If you have to encourage manufacturing, it is true that you have to make finished products costlier to import – using the exchange rate, duties and other mechanisms to create a favourable internal atmosphere. But you also have to create the internal systems, structures that can enable investment in capacity building, which requires time and a host of changes in quite a few parameters.


While constraints are being sorted our – another sector is begging for attention, which also holds the promise of relief for all. Focussing on Rural India makes sense- it will increase rural consumption in line with increasing disposable rural incomes, which will eventually effect positively the business cycle in the economy as well as Urban Indians, as Manufacturing and Services both will grow, which are largely Middle Class driven. The population behind it is so large, that the impact will be much larger than a mere-Urban growth hoping for trickle down {which – trickle down – is highly debatable, if you consider consumption data from 1978}
Thus, the point is moot; the strategy is for the benefit of all. Everyone stands to gain if Rural Incomes improve, that is a fact.
Where are the products manufactured that Rural India consumes? Who works in those factories? Either Urban Indians, or Middle Classes. Thus, what benefits Rural India benefits all India. GIven the scale- 9-1 and 5.5-1, the impact will be proportionately larger and of a much wider breadth. Given the finite resources a their command, the Government has to make some hard choices. The point of taxing the Uber Rich and the creamy layer, while attractive at first sight, is both difficult to implement, as well as being a dodby strategem to resort to, as past history of the Global Economy shows. Thus, some compromises have to be made.


As far the emotional aspect of the matter is concerned, the middle class being overlooked  – what middle class are we talking about? The one who doesnt even bat an eyelid from the comfy AC interiors of their cars as beggars in tattered clothes beg for the right to survive, as a Nirbhay lies naked, bleeding and dying in the bitter Delhi winter?  The ones who take a bribe from smugglers, with little concern for the health and safety of their countrymen and women? {Read S Hussain Zaidi for stomach turning proof of the integrity of our oh-so-great Middle Class}! The ones who do untold damage to the nation by giving and asking bribes, using substandard raw materials in their output? The ones who throw litter on the roads?
Or perhaps the ones who use every benefit the nation gives them, study till the best levels, and then promptly run away from the country, raising nonsense like the country did not care for me, my skills? It was the same country that gave them those skills, by the way. The same country people find unliveabe – other Indians find good enough to lay their lives for. They are all the people with the benefit of an education. Makes me wonder at our education system!
The fact that educated and uneducated alike show the same behaviour pattern is hardly exculpatory, otherwise, what is the whole point of an education? There has to be some improvement if you manage to get an education, isn’t it? For the Middle Class to ask their rights, collectively we the educated, the Middle Class need to justify the nation’s investment in us. This we collectively are not doing. Sad part is, in the bargain, those of us who are doing our bit have to pay a little bit extra.

Participative Growth – The Need For A 3-Pronged Approach

Published February 14, 2016 by vishalvkale

It has been stated that Industry level growth is the key, the answer to India’s many woes, that industrialisation and its attendant advantages will ensure growth eventually percolates to all levels of society. The caveat in that line of thought is “Eventually” : just how long is eventually supposed to mean? How many lives and generations will have to suffer the pangs of poverty till that eventuality transpires? And, what do we do in the interim?
These people are equal to us, the privileged class – the ones with education and great {or good or even average} well paying jobs. They are our equals in every single way; they have the same rights as us, they have the same dreams and desires as us. The luck of birth, and the chance of education that has been provided us has ensured we live well, by the grace of God. Granted that some among the poorer classes do manage to break the shackles and grow out of poverty; but does that mean we forget the rest of them?
There is a tendency, a rather unfortunate tendency, among the educated classes to equate GDP growth and Industrialisation with the concept of solutions to poverty. That is unfortunate; granted that it is one of the factors that lead to resolution – but this path does not take the full picture into consideration. That Industrialisation is needed is a given; again, a correct observation. I dont differentiate between manufacturing or service here – the creation of options that can be filled by educated people is a needed reality, one which is not upto to speed in the current economy. But who will benefit from this Industrialisation?
The educated people – that is who. The ones with a professional college degree will get the best jobs; the ones with some basic college degree will land jobs and careers that ensures a stable decent life for them and their families; the high-schoolers will get the next level of vacancies; the rest will make do with poorly paid menial jobs and temporary jobs. Some will take advantage of become entrepreneurs, unlocking further jobs and careers for people – but entrepreneurship also generally requires education and a defined skill-set, although service sector entrepreneurship is a different ball-game altogether.
The problem is that the current generation of the poorest segments just cannot afford education for their children; so the question of them benefiting immensely {beyond labour jobs, often poorly paid} does not arise. It only increases the gap; this does not mean we dont industrialise; this does create jobs – even though they are poorly paid ones at the bottom of the pyramid. The key is get out of this vicious circle of poverty. That can only happen throughthe enabler of education, nothing else.
Industrialisation in such an atmosphere does create jobs at all skill levels, but the better jobs that can ensure a proper life are reserved for the educated, as these require certain skills. So how do the poorest and the poor break the barrier? It is manifestly infeasible. There have been jobs created – Engineers, Entrepreneurs, Doctors, Professionals, even Clerical Jobs, Service jobs – a whole new paradigm of change has happened with economic growth. That is beyond debate.  Poverty has also reduced; people have gotten better off, No one can argue with that; the evidence is there for all to see. But we cannot rest on our laurels; not when you see the remaining poor all around you.
Menial jobs for the uneducated and low clerical jobs for the less educated {upto 5-10 years schooling} have been created; these just dont pay enough to ensure a full education to the children often enough. The pace of creation of jobs has also not kept up with the demand, So how to get out of this? Change is happening; but the pace of change is slow; almost too slow. That is the main point of concern for us as a people. We need to increase the pace of change, the pace of growth – as well as ensure that it percolates to the most hapless people in our midst. Like us, they are equal citizens, and we should do far more to ensure they grow.
How do you ensure that jobs lead to development at all levels, without education? How do you ensure that education without jobs will lead to happiness? Both are recipes for trouble; that said, it is true that the latter – education without jobs – can be more harmful as it has the potential to unleash frustration among the educated unemployed. But does that mean we forget the benefits education brings, and place education on a back burner, and not on centre-stage, as the cynosure of all our efforts to modernise our nation and our economy?
What is needed is a balanced approach  – one that caters to Industrialisation, as well as a full scale war-like approach towards education. While the former is happening, the latter is not yet in the public imagination, or Government policy, judging from media space as well as action on Start-ups, Economy, FDI, GDP, Industrialisation etc. Even this two-pronged approach has its disadvantage – it leaves out all of the Agricultural sector from its ambit, where the farmers and the labourers just aren’t earning enough to ensure anything other than a basic life.
And the Rural community, where the farmers and the landless labourers are concentrated, form the bulk of India. We, the Urban Indians, are the exceptions; they are representative – as they are in a majority. High time that we Urban Indians faced upto that hard reality!
And that is yet another reason why Agriculture and its problems need to be defined properly, and solved at the earliest; that can unlock earning potential faster than any other avenue or venture available to us as a people. That will also tend to reverse the trendline we saw in my previous article – with rising imports increasingly becoming a reality

We need to enable the government to allocate more attention to the development of Agriculture than it currently does; that can only happen if the voice of the people reaches the government in a democratic fashion, in Media articles, through people’s letters, small {tiny} forums like this blog and its readers and so on and so forth. Urban India needs to realise and understand that improving Agriculture will lead to improvement of the Urban scenario as well, that it is far more important to elevate our villages than it is to build Urban Infrastructure, given the paucity of resources we have! What these initiatives can be forms the next part of this series on participative growth…