Five Differences Between India and China

Rajiv Lall, Managing Director and Chief Executive Officer, Infrastructure Development Finance Company (IDFC), was the opening keynote speaker at the India Business Conference 2008. The India-China economy comparison is inevitable in any business conference. As the head of IDFC, Lall talked about India’s infrastructure issues by comparing it to China’s.

Note: I haven’t had the time to figure out how to insert a table within Wordpress, therefore I created an img. Please click thru the img to see full table text.

Indian government finances 50% of its infrastructure projects. Therefore, India is not as highly levered as China where the govt only invests 16% from the budget and 54% is funded by debt from banks and private sector. However, India has very high subsidies and inefficient distribution system and hence loss-making operations. For e.g. 45% of the total power distributed is lost due to theft (illegal tapping of power lines).

In India, only 44% villages have power. Farmers enjoy subsidies, and power is delivered for free to villages. On the other hand, 99% of China’s villages are powered. Rural taxes are often higher than those in urban areas.

Said Lall, India’s biggest challenge – Leadership. Enough said!

Tambola In The Newspaper… Brilliant!

The newspaper industry is booming in India as reported here, especially financial newspapers since the Indian economy is growing 8% and the average investor wants to stay informed. But that hasn’t stopped newspapers from getting creative.

This is obviously old news, but I recently found out about it since my parents moved to Bangalore. Move over Crosswords, Sudoku, Chess and Bridge problems. My father gets his daily copy of Times of India (TOI) delivered with a Tambola ticket. For this who don’t know what Tambola is, it is a game similar to Bingo.

Here’s how TOI describes the game – “A game with prizes and celebrities mixed together. Just grab today’s Times of India.” So every copy of TOI ships with a Tambola ticket. A series of numbers are released each day, and winners are selected within a week. These first round winners have to appear in person to play another round of Tambola at a gathering hosted by local celebrities. There are prizes for everyone and the whole event is sponsored by corporate firms.

Fire In Princeton Meadows And Hyperlocal Content

Finally got the time to upload this picture I took 3 weeks ago.

A fire broke out in Princeton Meadows, a strip mall in Plainsboro, last month. The fire originated in a bakery, Hot Breads, and completely burnt down 4 stores. Also gone is the popular pizzeria, Al Jons, which had been in the neighborhood for almost 17 years. Like me if you don’t read local community newspapers or websites, where do you go for hyperlocal content? Try Topix.

For those that haven’t heard of Topix, it is to hyperlocal content what Google News is to world news and Techmeme is to technology news.  Topix crawls over 50,000 sources for hyperlocal community news.  More on Topix’s about page here.

I talked to some Topix folks at the Web 2.0 conference in SF and the biggest issue they were facing was the lack of hyperlocal advertising dollars. Topix has some Google ads, but the local pizza shop owner or dentist is less likely to open a Google Adsense account anytime soon. Topix also had a free classifieds section, but then there’s Craigslist.

Practical Lesson In Financial Accounting

If you are a small business under 10M in sales revenue, you have the option of either using cash-based or accrual-based accounting. And if you’re in a business that has a high percent of Account Receivables, you’re better off using cash-based accounting. Why? Because you’re paying taxes upfront on income you won’t be receiving for another 90-120 days (depending on the payment terms you’re offering your customer).

My friend Vijyendra is a wholesale importer of stones from India. It is a very high-margin, but slow-growth business. He has been in business for about 3 years and is currently importing 1 container a month, half of which is pre-ordered stones. When he puts an order in for a container, he has pay his supplier within 30 days. However, he doesn’t get paid from his retailer till the stone has been etched and shipped to the end customer (90-120 days). To make matters worse, December is the busiest month (yes, among other good stuff people also buy and upgrade tombstones when they get their annual bonuses). So when it is time to close the books, he is showing zero payables and 25% receivables. Not good if your books are Accrual-based!

Death of the Newspaper?

Livmint has published two articles that have contradictory headlines – first about readers, advertisers and analysts abandoning newspapers and second about the increase in newspaper circulation.

The panelists and participants at the Web 2.0 Expo had no doubts in their mind – the Internet was killing the newspaper, and the newspaper readers are a dying breed.

Some of my takeaways from the conference:

How Web 2.0 is owchanging traditional media?

• New Publishing – focus on aggregation & curation of content of a niche audience
• Reduced acquisition cost for content generators & editors.
• Guerilla marketing (PR, link swapping & viral marketing) as opposed to brand advertising.

For all those MSM firms hoping Web2.0 is their way out of this slump:

• Not everyone can be a content aggregator, it’s a fast-paced, “winner takes most” marketplace.

From the makers of the ubiquitous Stag umbrella

Fast Company has an interesting write up on the change in strategy by the makers of the Stag umbrellas. If you’re from Mumbai, you need no further introduction to the ubiquitous, black Stag umbrellas and the reasons to own one.

Threatened by cheaper products from China, the company switched from a low cost strategy to differentiation – offering specialized, high-quality products. The timing couldn’t be any better, the Indian consumer can definitely afford a premium on personalized umbrellas. On the other hand, corporates will be more than happy to give out branded umbrellas for free.

Imagine India: Macy’s brings Lord Ganesha to SFO

Walking around Union Square in San Francisco, I was surprised to see a huge Lord Ganesha sitting on top of the Macy’s sign. Apparently, the SFO Union Square Macy’s has a flower show every year. The theme for their 61st annual Flower show was “Imagine India”.

They got it mostly right – 20 feet Ganesha in front, windows decorated, lots of silk and Indian cotton apparels in the store, and of course the Indian tricolor fluttering on top of the store. You wonder what’s the business incentive – it wasn’t additional foot traffic. Cultural capital, maybe?

India Unleashed 2007

Notes from the The South Asian Business Association (SABA) conference at Columbia University:

India shining:

• 50% of India’s population is under 30 years old
• India #1 in milk production and #2 in fruit & veg production
• Hindalco – World’s #1 Aluminium producer
• Mittal – World’s #1 Steel producer
• Reliance invests 22M in Chevron, Dow Chemicals and few other US based companies

Challenges facing India:

• Bringing 600M non-urban population into the mainstream
• Building infrastructure – 350B dollars invested
• Power Crisis – the culture of “free power” has to go
• Water shortage
• 50% illiteracy in Bihar & UP
• 5.7M HIV infected (projected: 50M deaths/year by 2050)
• Education & Health – address social infrastructure problems
• Agricultural productivity and inefficient supply chain – new retail chains like Reliance Fresh & Bharati-Walmart should help eliminate inefficiencies in raw produce procurement from farmers
• Nuclear threat and inflammation a huge threat (India’s nuclear weapons capability annual expenses = 0.5% of GDP – Amartya Sen in The Argumentative Indian)

Arun Shourie, former Disinvestment Minister and former editor of Indian Express, emphasized that every Indian is a reflection of India; non-Indians look at us and develop an impression of India and Indians. On a lighter note (joked Shashi Tharoor), don’t be alarmed if an American walks up to you with a broken laptop at the airport.

• Economy steadily growing 9% YOY
• Exports growing 23% every year
• Forex Reserves touch 200B
• Remittances into India 24M/year
• 6M new mobile subscribers/month

But then…

• 98% of parliamentarians voted on minority vote
• 60% voted into parliament by less than 40% voter turnout

Shourie’s Quote of the Day: While India is not the land of snake charmers anymore, we also can charm snakes.

Shashi Tharoor stressed upon the significance of nation’s “soft power” – the ability to influence or persuade other nations without military power. Soft power could be derived from spreading culture and awareness (Bollywood and tourism), political values (biggest democracy and secular governing body) and foreign policy (credibility).

Move over “melting pots” and “salad bowl”, the thali is here.  Tharoor used the thali as an analogy for Indian diversity – assorted platter, yet each its own.