“Hum to doobe hain sanam, par tumko bhi le doobenge,” was a line often used in the Hindi movies of the sixties, seventies and eighties. This line now applies to the Congress party as it tries to divert the attention from its involvement in the coal-gate scam.
The Central Bureau of Investigation (CBI) will now widen the scope of its inquiry into the coal-gate scam. The inquiry will now cover allocation of all coal blocks given away for free to private companies including state government entities since the policy was first initiated in 1993.
“The ongoing CBI inquiry covers 67 blocks allotted to private parties since 2004 when the ruling United Progressive Alliance (UPA) came to power,” reports the Business Standard. The CBI will now probe all the allocations made to private companies going back to 1993.
This means that the inquiry will now also look at allocations made to private companies before the Congress led United Progressive Alliance(UPA) came to power. “The probe will now cover the blocks given during the six-year tenure of the BJP-led NDA government, from 1998 to 2004, besides those allotted by the Congress government led by P.V. Narasimha Rao after 1993 and the United Front government from 1996 to 1998. Till now, the CBI was investigating private companies that got blocks between 2004 and 2009,” reports The Hindu.
This widening of the inquiry came on the basis of a reference made by the Central Vigilance Commission (CVC). The reference made by the CVC was in response to a letter written by Coal Minister Sriprakash Jaiswal drawing the attention of the commission to the concerns of seven MPs of the United Progressive Alliance (UPA). These MPs included Sandip Dikshit, Harish Chaudhary, Ravneet Singh and Raghuveer Singh Meena. In a letter written to the Coal Minister on September 5, 2012, the MPs said: “It appears that there were many cases of malpractice while allocating blocks between 1993 and 2004. All blocks allotted since 1993 should be investigated by the CBI, specially looking at systems through which state governments selected private companies whose names they forwarded to the government.”
While any investigation has to expose those who are guilty, it still does not change the fact that coal-gate has largely been a Congress scam. This is clearly pointed out by the numbers in the Provisional Coal Statistics 2011-12, put out by theCoal Controller’s Organisation, Ministry of Coal.
A total 195 coal blocks have been allocated between 1993 and 2011. Of these only 39 were allocated prior to 2004. Hence, only 80% of the coal blocks were allocated in the period prior to 2004. As we know the Congress led UPA has been in power since May 2004.
Things get even more interesting when we measure in terms of the geological reserves these coal blocks (i.e. the amount of coal) have. In fact, the total geological reserves of the coal blocks given away for free between 1993 and 2011 stands at 44802.9 million tonnes.
The coal blocksallocated between 2004 and 2011, the period during which the Congress led UPA has been in power, have geological reserves amounting to a total of 41235.9 million tonnes. This means that 92% of the total geological reserves were given for free during the period of 2004 and 2011. As mentioned earlier the Congress led UPA has been in power since May 2004.
To this we also need to add the coal blocks given away for free during the period 1993 and 1996 when the Congress government led by PV Narsimha Rao was in power. During this period nine blocks with geological reserves of 917.7million tonnes was given away for free. Hence, the Congress party was directly involved in giving away 42153.6 million tonnes or 94% of the total reserves for free.
These numbers include both private and government owned companies. The scope of the investigation as we know is limited to coal blocks given away for free to private companies. I couldn’t locate any data that gives the exact breakdown of the geological reserves of coal blocks allocated to private companies between 1993 and 2003, and then between 2004 and 2011. But the report put out by the Comptroller and Auditor General (CAG) of India does give us some information on this front.
The total geological reserves of coal blocks given away to private companies (excluding ultra mega power projects) for free between 1993 and 2009 amounted to 17397.22 million tonnes. Of this, a total of 14060.34 million tonnes was allocated between 2006 and 2009, when the free giveaway of coal blocks was at its peak. Also, the Prime Minister Manmohan Singh was also the Coal Minister for a large part of this period.
So around 81% of the the total geological reserves given to private companies was given between 2006 and 2009. We don’t have an exact breakdown for the earlier years. If we did the number would have been significantly higher.
What these numbers clearly tell us is that coal-gate is a Congress scam. There might have been corruption during periods of non-Congress rule and that cannot be denied. But as we saw chances are that as much as 94% of the total geological reserves were given away for free during periods of Congress rule.
Between 2004-2005 and 2008-2009 there was a rally on in global commodity prices as China expanded at breakneck speed gobbling up commodities from all over the world. Hence, the price of coal shot through the roof. The international price of coal was a little over $20 per metric tonne in mid 2003. It shot up to around $40 per metric tonne in mid 2005 and kept rising after that. Prices shot up to around $190 per tonne internationally in mid 2008. As the price of coal shot up, so did the number of coal blocks given away for free by the Congress led UPA government.
Given this, asking the CBI to investigate everything from 1993 onwards is just a step towards diluting the scope of the investigation and hoping to gather some political ammunition against the opposition parties .As the Business Standard reports “If the inquiry raises questions over allocations during the National Democratic Alliance (NDA) regime, it will provide the government with political ammunition to counter criticism by the Opposition.”
(The article originally appeared at www.firstpost.com on September 25,2012. http://www.firstpost.com/business/coalgate-is-94-percent-congress-scam-6-percent-others-467619.html)
(Vivek Kaul is a writer. He can be reached at [email protected])
The year was 1983 and as a six year old on my way to school I saw posters of this movie called Hip Hip Hurray. The movie had a special connection with the city of Ranchi, where I was born and brought up in. A major part of the movie had been shot in schools in Ranchi (not my school though) and to my knowledge it remains the only Hindi film to be shot in the city till date.
The story of the movie was set around a school football team and its inspiring coach (played by Raj Kiran, who has since disappeared). The script and the lyrics for the movie were written by Gulzar, with the songs being set to tune by Vanraj Bhatia. (This song from the movie, sung by Bhupendra and Asha Bhonsle is an absolute gem and so is this lovely Yesudas number).
The movie also happened to be the first directorial venture of Prakash Jha. Jha made a couple of art films more and disappeared from the scene, concentrating on documentaries instead. He returned to the Hindi film industry with Madhuri Dixit starrer Mrityudand in 1997. Since then he has directed movies like Gangaajal, Apharan, Raajneeti and Aarakakshan. As their names suggest all these movies had a lot political content in them. Given this Jha has never been far from controversies. His latest film Chakravyuh is set around the problem of naxalism. And given that controversy couldn’t have been far behind.
The movie has a song with the line: “Tata, Birla, Ambani aur Bata, sab ne hai desh ko kaata”. The song is a reflection of the deep hatred and mistrust Indians have towards big businesses and people who run them (though Bata can hardly be called a big business anymore. But it still remains one of India’s most recognisable business brands).
It is safe to say this mistrust of businesses started during the late sixties and early seventies once businessmen started to get too close to politicians. This was necessary for them if they wanted to survive in the era of “license permit quota raj” that Jawahar Lal Nehru had initiated and Indira Gandhi spread.
As Dilip Chitre wrote in the May-June 1972 edition of The Quest magazine “Mrs Gandhi…has suppressed the industrial private sector in the cruelest fashion. The suppression is in the form of controls which place in the hands of bureaucracy the power of tools of permits and licenses.” (Source: The Best of Quest, Tranquebar)
This meant that businessmen needed to be close to the Congress(Indira) which ruled the nation as well as the bureaucrats. As Chitre wrote “Since in India, today political power is directly transferrable into economic power, manipulative entrepreneurs in every sphere of activity are drawn towards the ruling party. This may not prevent Mrs Gandhi from pursuing a misadventurous economic policy. It only means that her policies will continue to benefit those corrupt entrepreneurs who regard politics as the only industry which offers the best monetary gains in India today.”
Thus emerged the unholy nexus between big business and politics in India. The other thing that happened was that the income tax rates went through the roof. This ensured that businessmen did not declare a major portion of the profits they made leading to a swelling black money economy in India.
This benefitted politicians as well because this black money helped finance their election campaigns. “Even election funds come from the swelling reservoirs of black money. It is black money which is the grease that makes every wheel in Indian public life move. The higher the taxes, the greater will be the incentives to avoid or evade them…The new class is here to stay and it will co-operate with capitalist speculators, feudal chiefs controlling the rural co-operatives, millionaire smugglers and corrupt top executives. These are the only beneficiaries of the parallel economy and they comprise, by and large, the Establishment,” wrote Chitre.
Due to the “license permit quota raj” was born a deep distrust for big-business in the minds of Indians. C Rajagopalachari, India’s second and last governor general, was the first to use the phrase license permit quota raj to describe the socialist economy that Nehru had created and Indira Gandhi spread.
As Gurucharan Das writes inIndia Grows At Night “Rajaji (C Rajagopalachari)…was the first to describe Nehru’s socialist economy as a ‘license permit quota raj’ in the late 1950s. When a reporter suggested that corruption had increased because Indians, not the British, were ruling, Rajaji had quickly retorted that corruption was less matter of culture and more about economic incentives. Socialist controls sent out the wrong signals to human beings on how to behave. Yes, culture mattered but culture would quickly change if the incentives changed.”
Things finally started to change around in 1991 once the Indian economy started to be opened up and the license permit quota raj was gradually done away with. It unleashed big business from the web of socialist control and economic growth followed. But the reputation of big business other than the likes of the Infosys, Wipro and TCS, still remained shady in the minds of the average Indian. As big businesses benefitted, reforms came to be associated more with them. This made reforms a perpetual hard-sell to the average Indian.
As Pratap Bhanu Mehta recently wrote in theIndian Express “One reason reform does not have as large a social base is that reform has come to be associated with reform for the big boys. We can debate the merits of FDI in retail. Even if its net benefits are uncertain, the fears it ignites are highly exaggerated. Making that a priority over other reforms may send out sound signals to other investors. But it reinforces the idea that you have to be big and organised to get a hearing. Despite two decades of reform rhetoric, small and medium business in India still feels trapped in the clutches of the state.” (you can read the complete piece here)
This is something that Das backs up with examples in his book. As he writes “Here was another irony. While the speed of trucks had risen 50 per cent thanks to four and six-lane highways, truckers were still mired in the old inefficiencies…Many municipalities in India continued to levy octroi because this medieval tax was their only source of revenue.”
And wherever there is a government check post there is also an opportunity to demand a bribe. Das describes one such experience when he ran into a line of trucks. “There was an interminable line of unhappy trucks parked on one side of the road…I pulled across up alongside an idle truck driver, and asked him what was going on. He had been waiting at the revenue check naka for four hours, he said. He was afraid that the bribe on this occasion was going to be double because the Check Sahib’s daughter was getting married. There would be more than half a dozen check posts like this on his journey from Delhi to Mumbai. There would also be police posts to bribe, and a journey of twenty-four hour would take forty-four, half the time lost in queues and in negotiating bribes.”
Indeed, as Das writes, Transparency International reported that in 2005 India’s trucking industry had paid bribes amounting to Rs 22,000 crore. This was roughly equal to what the truck drivers earn annually by the way of salary.
Also the end of license quota permit raj has been replaced by the rise of the inspector raj. Das recounts the story of an entrepreneur friend Navin Parikh who runs a factory near Ajmer, which makes sophisticated parts and equipments for the suppliers to the world’s defence industries. This is how Das recounts Navin’s experience. “‘Not a week goes by,’ Navin said, without an inspector from some department or the other coming for his hafta vasooli, “weekly bribe”. Labour, excise, fire, police, octroi, sales tax, boilers and more – we have to keep all of them happy. Otherwise, they make life hell. More than 10 per cent of my costs are in “managing the system”.” Navin has to deal with on an average seventeen inspectors who have the power to close down his business on one pretext or another.
So reforms have come to be associated with the big boys of business simply because things haven’t changed at all at the lower levels. As per a World Bank study in 2011, India ranked 134 out of 180 countries when it came to the ease of doing business.
What has also not helped is the fact that the reputation of businessmen and politicians has taken a nose dive in the recent past as wave of scams with allegations of crony capitalism has come to light. “The corruption story has also become part of the reform story. Open loot at the top lends credence to the idea that anyone should grab anything from the state that they can,” writes Mehta.
Given these reasons any attempt at economic reform in India doesn’t go down well with the average Indian. This impression of reforms benefitting big business is unlikely to go away in a hurry. Whether the current UPA government is serious about the “few” reforms that it has initiated remains to be seen. Or is just a diversionary tactic to get the attention away from coal-gate.
The only way out is transparency. As Mehta puts it “But more importantly, the real intent behind reform will become more apparent if the state can go towards a rules-based working in its inner core. But as state institutions are being decimated one after the other, it is hard to inspire confidence that we are moving to a transparent rules-based system. This is still a system where, on everything from CBI investigations to company law cases, deals seem possible. When the government says things like environmental clearances will speed up, it is not clear what exactly that means. Is it a harbinger of a new transparent and effective regime or simply more deals? The idea that the state is fundamentally about negotiated quick-fixes has not disappeared.”}
Another reason for reforms being a difficult sell is what economist Vivek Dehejia calls the original sin of 1991. “What makes that more difficult now is what I call the original sin of 1991. I am not the only one who has observed this. What happened from 1991 and thereon was reform by stealth. Reform by the stroke of the pen reform and reform in a mode of crisis, where there was never an attempt made to sort of articulate to the Indian voter why are we doing this? What is the sort of the intellectual or the real rationale for this? Why is it that we must open up? It wasn’t good enough to say that look we are in a crisis,” he told me in an interview I did for the Daily News and Analysis (DNA) sometime back. (You read the complete interview here).
Manmohan Singh’s speech to the nation the other day tried to explain the few steps of economic reform the government has initiated over the last ten days. But what he was basically saying like he did in 1991 was that, look we are in a crisis and there is no way out.
Given these reasons, when it comes to serious economic reforms that will benefit India in the years to come, I remain pessimistic.
(The article originally appeared on www.firstpost.com on September 24, 2012. http://www.firstpost.com/business/why-reform-is-a-bad-word-in-india-466243.html)
(Vivek Kaul is a writer. He can be reached at [email protected])
The press note for allowing foreign direct investment (FDI) of up to 51% in multi-brand foreign retailing throws up several interesting points as well as questions.
One of the major points of the press note is that retail sales outlets may be set up only in cities with a population of more than 10 lakh as per 2011 census. There are 45 cities in India that meet this requirement.
Currently eight states, the national capital territory of Delhi and the union territories of Daman & Diu and Dadra and Nagar Haveli have agreed to allow FDI in multi-brand retailing. All these states are ruled by the Congress party.
But as the data from the 2011 census points out, only 20 of these 45 cities are in states that have currently agreed to FDI in muti-brand foreign retailing or big retail, as it is more popularly referred to as.
Interestingly, the Census of India has two classifications. One is cities having population 1 lakh and above. And another is urban agglomerations/cities having population 1 lakh and above. As per the former India has 45 cities of population which have a population of 10 lakh or more. As per the latter India has 53 cities/urban agglomerations which have a population of 10 lakh or more.
For the sake of this analysis the former has been used because the press note uses the word “cities” very clearly and not cities/urban agglomerations. But even if one works with the assumption of 53 cities, the analysis that follows doesn’t change much. Nevertheless, the government needs to clear this confusion on which version of the census applies here.
The state of Maharashtra leads the pack with 10 cities out of the 20 cities which qualify for big retail. These are Aurangabad, Kalyan-Dombivilli, Navi Mumbai, Mumbai, Pimpri-Chinchwad, Pune Nagpur, Nashik, Thane and Vasai-Virar. Hyderabad, Vijaywada and Vishakapatnam are the three cities that meet the criteria in Andhra Pradesh. Kota, Jaipur and Jodhpur are the three cities in Rajasthan. Srinagar in Jammu and Kashmir, Faridabad in Haryana (and not the fancied Gurgaon which has a population of 876,824 as per the 2011 census), New Delhi and Chandigarh are the four other cities that make the list. Chandigarh is the capital of Haryana, which has agreed to allow FDI in big retail. But it is also the capital of the state of Punjab, which hasn’t.
What is interesting is that 50% of the cities eligible for big retail are in one state i.e. Maharashtra. It also means that there are no cities in Assam, Manipur and the Union Territories of Daman & Diu and Dadra and Nagar Haveli which meet the criteria of population of more than 10 lakh.
To get around this problem the note allows companies to be set up retail sales outlets in the cities of their choice, preferably the largest city, in states/ union territories not having cities with population of more than 10 lakh as per 2011 Census.
But the most interesting part of the note is that most of the policies elucidated in the note are only enabling in nature. Hence, governments in states and union territories are free to make their own policies. This means that it is very well possible that states might allow big retail to set shop in places with a population of less than 10 lakh. What stops the state of Haryana from allowing big retail presence in the city of Gurgaon? Or Maharashtra allowing big retail in Mira Road-Bhayander which has a population of 8,14,655 as per the 2011 census. The same can be said about Secunderabad, which is Hyderabad’s twin city, and Jammu which is the second largest city in the state of Jammu and Kashmir. Another point in the note is that at least 50% of total FDI brought in shall be invested in ‘backend infrastructure’ within three years of the first tranche of FDI. The note doesn’t specify whether this investment is to be limited in states that have allowed big retail. So the conclusion is that this investment can be made all across India. But here is where practical problems might crop up.
A company like Wal-Mart to may set up backend infrastructure in a state like Himachal Pradesh to source apples. But as we know Himachal Pradesh isn’t on the list of states that have allowed FDI in big retail. So we will end up with a situation where big retail is present in a state at the backend but at the same time it’s not allowed to set up a front end retail store. That would not be an ideal situation.
Another major problem can crop up because of the decision being currently left to the states. The states that have agreed to big retail are all Congress ruled (except Kerala which is ruled by the Congress led United Democratic Front but hasn’t said yes to big retail). Now what happens if the Congress party loses the next elections in these states? Can the party or front which comes to power reverse the earlier decision?
The note also points out that the government will have the first right to procurement of agricultural products. What is implied by this? At the same time the note points out that at least 30% of the value of procurement of manufactured/processed products purchased, shall be sourced from Indian ‘small industries’ which have a total investment in plant & machinery not exceeding US $1 million. This will be a huge problem for big retail companies which play on economies of scale.
But at the same time the note is silent on international procurement of goods and products by these companies. This means that companies which invest in big retail can source their products internationally. Hence, a Wal-Mart can source products for the Indian market from China. “More than 70% of the goods sold in Wal-Mart stores around the world are made in China,” point out Garry Gereffi and Ryan Ong in a case study titled Wal-Mart in China which was published in the Harvard Asia Pacific Review. Sourcing from China has been the backbone of Wal-Mart’s everyday low pricing strategy.
The state governments that allow FDI in big retail can change any of the policies mentioned above and frame their own policies because these policies are only enabling in nature. The only part that they cannot change is retail trading by means of e-commerce.
(The article originally appeared in the Daily News and Analysis on September 24, 2012. http://www.dnaindia.com/money/report_retail-fdi-note-raises-more-questions-than-it-answers_1744390)
(Vivek Kaul is a writer. He can be reached at [email protected])
What’s the first word recognised by most kids all over the world? No it’s not Mum! Or Dad for that matter “Donald – a variation of McDonald’s is the word. In fact the word beats even the most simple (and emotional word): Mom,” says brand guru Martin Lindstrom. “True, most 18-month-old babies cannot physically articulate the word ‘McDonald’s’, but what they can do is recognise the fast-food chain’s red and yellow colours, roofline, golden arches and logo. Then they can jab their chunky little fingers at a McDonald’s from the backseat of a car,” he writes in his new bookBrandwashed – Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy. Such is the power of brands. In this interview to Vivek Kaul, Lindstrom talks about In the thorny issue of consumer manipulation and gives a full-frontal exposé of the wanton trickery employed by many conglomerates, iconic brands included, to squeeze money out of their loyal customers.
To what extent can companies go to engineer desire to get us to buy things?
There’s a fundamental difference between creating a need and activating a need – in my books I do not believe it is possible to create a need simply because it is against our instinctual behaviour – instead I believe it’s all about “activating a need” i.e. a fundamental need we all have – and thus which can be fulfilled in a new way. Our basic need is to be entertained – justifying the existence of the iPod, our fundamental need is to be stimulated – justifying the need for computer games etc.
Could you explain that in a little detail?
So when we talk about engineering needs I think it is fair to say it is more a matter of engineering new ways of fulfilling pre-existing needs. Needs can be activated in many ways. The typical tools of persuasion would be fear, guilt, aspiration, sex etc. Close to 45% of all advertising in the U.S. today either is based on fear, guilt or sex – fear of not belonging to our group, fear of losing our jobs or fear of death, deceases or theft. Guilt of being overweight, not looking good, not cooking a meal for our kids (simply because we don’t have these cooking skills any longer etc) etc. A lot of communication these days press those buttons – like fuelling the idea of you attracting some disease, or the fear of witnessing some stranger breaking into your home.
An example of fear being used to sell us something that is a hand sanitiser. Why have we welcomed the hand sanitisers into our lives as a cheap, everyday, utterly essential staple, even though they are not very useful?
After the release of SARS followed by swine-flue in 2003 and 2008 we’ve witnessed an amazing uptake of hand-sanitising products. What’s ironic is that none of those products – such as Purell actually do any better job than soap and water – however we’ve led to believe it is the case. The companies has done a extraordinary job in building their brands on the back of the fear created by those global viruses – indicating that we’ll be safe using these brands – once we’ve begun using these – this habit will stay for life. The ironic side of the story however is that the life expectancy in Japan is decreasing for the first time in history – why – because the country simply have become too clean – the Japanese have weakened their immune system as a result of overuse of hand sanitising products.
How and why has fear mongering become a favoured tactic of the marketers?
Because we’re all hardwired to be seduced by fear – fear is the number one soft button in our brain – it is a survival instinct. Fear is used by most insurance companies and even Colgate who claimed in one ad that they could remove the risk of cancer by the usage of their toothpaste. You talk about how certain websites rewiring our brains to get us hooked on the act of shopping and buying. Could you explain this in detail with an example?
Rewiring is a big word – that said some websites indeed are designed to hook us – an example would be the count-down-clock on Amazon.com – which kicks in during the Holiday Season – and begin ticking the minute you’ve landed on the site – this gives you a sense of urgency – pushes the dopamine levels in your brain and result in you acting more irrational (or emotional). In the future we’ll see more and more sites based on gaming concepts – i.e. encouraging us to participate, earn points or in some cases secure access to products before everyone else.
One of the interesting things that you write in Brandwashed is that “Our brand and product preferences are pretty firmly embedded in us by the age of seven…I’d even go so far to suggest that some of the cleverest manufacturers in the world are at work trying to manipulate our taste preferences even earlier than that. Much earlier. Even before we’re even born.” Is it really so?
Before I even was born I fell victim to this very phenomena as my mom and dad danced every evening to their favourite Bossa Nova (a well-known style of Brazilian music developed and popularised in the 1950s and 1960) song. The day I was born the record player dropped on the floor and broke in to pieces – as a result it never played again – and never played from the very day I was born. Ironically I love Bossa Nova – and have done so from the first day I was born my mom and dad, tell me.
So what is the point you are trying to make?
Based on numerous experiments we today know that what mothers eat and listen to during pregnancy affects their un-born babies – this is the principal some companies are tapping into.
Kopiko in the Philippines is a scary example of how far this can go – the manufacturer has for decades been known for its coffee candy – yet recently they entered the coffee market. Their technique to enter the market was to hand out free Kopiko coffee infused candy to pedestrians and doctors for them to give to pregnant mothers. Today Kopiko is one of the leading coffee brands – a position they’ve secured within only very few years.
You write that “in general women tend to more easily persuaded by ads that are more romantic than sexual… Men, on the other hand, respond to sexual innuendo and women in bikini.” Can you explain this in some detail through examples?
Women prefer to be able to continue the storyline – men prefer to see the end of the storyline – sex can play a major role in both scenarios – yet the role of sex would have to change in order to stimulate us accordingly.
What is the ultimate male fantasy? How did Unilever use it to make the Axe brand?
A man sitting in a hot-top-spa with two naked ladies on each side – popping a bottle of Champagne. Unilever, the manufacturer of AXE discovered this very observation based on thousands of interviews and observations of men worldwide – realizing that this very fantasy indeed seems global – and today explaining why AXE uses this very imagination as the foundation for all their ads.
You talk about the migration of the male consumer into a traditional female arena is overturning the rules of marketing and advertising. Can you explain that through examples?
Cosmetics is a great example – until recently men wouldn’t dare even thinking about buying a moisturiser. Today it’s different. This is far from a coincidence – the world’s leading cosmetics companies has for years pushed this trend, by educating men to activate the need for beauty and cleanness. Unilever educated the man to liquid soap (due to cost saving reasons) in the shower in the U.S. something men avoided as they couldn’t cope with the idea of touching their own body in the shower – something they felt was too feminine. The way to justify this change – the introduction of a washing device which would separate the guys hand from the body. And P&G separated the aisles of cosmetics – so that men would have one section far away from the women – ensuring that they wouldn’t be shy buying a cream.
You point out that people get addicted onto brands in two stages, the routine stage and the dream stage. Could you discuss this in detail?
Routine – means daily duties – i.e. using the iTunes service on our iPod, while watching movies on our iPod streamed from our iTV is easy, because we don’t have to think – we just plug and play – it’s a routine. The dream stage is when a brand allows us to dream – or disappear into a dream. Let’s say that you went to Ibiza in Spain for the holiday – you had great fun, drank a lot of Red Bull’s and then return back to the grey-everyday-life. Once you see the Red Bull brand again – in your everyday life you feel the brand helps you to escape back to this dream world – the life you had for just 1 week but which “kind of” can be extended by drinking a Red Bull.
How do companies activate our cravings to get us to buy food products?
In many ways – by among other adding bubbles (or sweat as they call it) onto the cans and bottles – the more bubbles the more craving. Or by playing the sound of a cola being poured into a glass with ice (the worlds 5th most craving generating sound) or by adding many chips on the front of a snack package – the more chips the more we believe there’s in the bag – the more craving we generate.
“Peer pressure delivers a windfall for brands and companies,” you write. Could you explain that in detail through some examples?
The entire social media space is heaven for brands as it allows to fuel peer pressure – and do it fast. Numerous studies show that this is incredible powerful including the $3 million study I did for my latest book Brandwashed where we realised that it only takes 5 people to convince 195 people to do the same. Pear pressure is everywhere from the recent release of iPhone 5 (I feel embarrassed running around with a iPhone 4) to fashion (you simply can’t wear that tie from two years ago – it is too old-fashioned) to cigarette smoking.
What is a perceived justification symbol?
It’s a way to convert intangible stuff into tangible stuff – to make the invisible benefit become visible. Let’s take the dishwashing tablet – it has a white, blue level and a red dot – indicating the powerful magical clean button. The reality is that it’s all the same but we get a sense of that something “black box” stuff is happening – cleaning our plates. Another example is Duracell’s power meter – which helps us to measure how much battery power there’s left in the battery. Why is this a genius idea? Because consumers fundamentally believe that batteries hanging in the store looses power – and thus by installing such device – a PJS we’ll be convinced otherwise.
Why does nostalgia marketing work well in uncertain economic times?
It gives us certainty, comfort and creates a framework of safety around us. Studies show that we indeed recall past memories in a more positive light that present memories – this phenomena is called Rosy Memories and is used by many brands including Pepsi’s recent Throwback – a replicate of the old Pepsi recipe and pack design to Coke’s re-play of “I want to teach the world to sing”.
Can a famous face really have that much of an impact on how we spend our money? Are we human beings that naïve?
We all need leaders around us – in today’s world where fewer countries have royal families as leaders, where politicians are failing – celebrities becomes our leaders of our time. We’re hardwired to be seduced by such leaders even though we know they might not be real – kind of like some people knock-on-wood for good luck – despite the fact that they very well know it has no effect.
(The article originally appeared in the Daily News and Analysis on September 24, 2012. http://www.dnaindia.com/money/interview_romantic-ads-seduce-women-men-fall-for-sexual-innuendo_1744404)
(Interviewer Kaul is a writer. He can be reached at [email protected])
Mamata Banerjee has been severely criticised for quitting the Congress led United Progressive Alliance (UPA) government. The major reason for the same is the fact that the government of West Bengal is in a financial mess. As on March 31, 2012, the debt burden of the government stood at Rs 2,08,382.58 crore. To repay this loan the government needs to pay interest and principal amounting to Rs 23,200 crore during the course of this financial year (i.e. between April 1, 2012 and March 31, 2012).
As an article in the Business Standard points out “West Bengal’s outstanding debt by the end of this financial year is slated to be about Rs 2,26,000 crore , making it the most indebted state in the country in terms of debt to gross state domestic product ratio at close to 39 per cent.” (You can read the complete article here)
This huge debt is a legacy of nearly three and a half decade of misrule by the Left Front. “The Left believed that the key to power was to co-opt every section of society – school and college teachers, bus drivers, municipal employees, healthcare workers and so on – into government. So, the Bengal government is one of the largest employers in the country today,” writes Abheek Barman in an editorial in the Times of India. (You can read the complete piece here).
Given this, the expenses of the government of West Bengal are higher than its revenues. The difference it has to meet by borrowing. The revenue that the government expects to earn this year stands at Rs 76,943 crore. The expenses are at Rs 83,801 crore, leaving a deficit of Rs 6,585 crore.
The government of West Bengal had been negotiating with the government of India for a debt relief package. “When President Pranab Mujkherjee was the Union finance minister, both Mitra(Amit Mitra, the finance minister of West Bengal) and chief minister Mamata Banerjee had lined up for countless meetings in the hope of a financial package. “During the last 11 months, I have met the Prime Minister ten times and finance minister 20 times,” Banerjee had earlier said,” the Business Standard points out.
The government of West Bengal was hoping that the government of India allows the state to skip interest payment and principal repayments amounting to around Rs 22,000 crore, for each of the next three years. It also wanted its debt restructured with the interest rate on the debt being lowered as well as the repayment tenure being extended.
This relief programme would have helped the government of West Bengal to fix the state’s economy to some extent. It would have given them money to spend on the state’s infrastructure rather than just about being able to pay salaries to its employees. As Barman writes “People who voted for Mamata and her Trinamool Congress had hoped that she would fix Bengal’s broken economy, attract investment and jobs back to the state and repair its broken finances. A key component of the recovery plan was the debt-relief programme.”
Also with the withdrawal of support to UPA, Trinamool has had to give up the Railways Ministry which is one of the biggest job creators in the government. And it is a well known fact that Railway Ministers do influence jobs towards states they come from
With this background in mind the prevalent opinion is that Mamata has shot herself in the foot. Critics are also of the opinion that if she was so against foreign direct investment in multi-brand foreign retailing then she had the option of not allowing it in West Bengal. The Press Note allowing multi-brand foreign retailing clearly points out that “the State GovernmentslUnion Territories would be free to take their own decisions in regard to implementation of the policy.”
Also after all this any debt relief package for West Bengal, from the government of India, clearly won’t see the light of day. Nitish Kumar, the chief minister of Bihar, clearly saw an opportunity here and threw his hat into the ring. He said that his party (the Samta party) would support anyone who would come up with a package for Bihar.
Mamata Banerjee has had a very edgy relationship with the Congress since she quit the party and formed her own party, the Trinamool Congress on January 1, 1998. Given this her past behaviour with the grand old political party of India has appeared to be fairly whimsical.
She has often been accused of thinking with her heart and letting her emotions override her decisions rather than thinking with her head and making cold and calculated political decisions.
But what people forget very easily is that Mamata Banerjee is the only woman political leader of some standing in India who has risen on her own, without the support of any male or for that matter family.
As Monobina Gupta writes in Didi – A Political Biography “In fact, viewed through gender lens, Mamata’s story does indeed stand apart from the narratives of India’s most powerful contemporary women leaders. Says Krishna Bose “Mamata has not been the widow, the wife, daughter of companion of somebody.’ Just pick three top women leaders in Indian politics today – Sonia Gandhi, Mayawati, J.Jayalalithaa – each has had a prop, a male guardian of compelling power, or a lineage or redoubtable political growth.”
Mamata has clearly made it of her own and understands the games that people play in politics very well. As Gupta writes “Even when Rajiv Gandhi was alive, Mamata found herself in the company of Congressmen liaising with senior party leaders in Delhi, plotting to sabotage her career to crash her soaring political ambitions to the ground. In the void following Rajiv’s death, Mamata was left to defend herself against plots and counter-plots often real, sometimes imaginary, hatched by her own party leaders to pull her down.”
Mamata Banerjee may not understand economics. She may not be fit to govern. But she does understand what politics is all about. And given that the decision to withdraw support to the Congress led UPA government at the centre was nothing but a cold and a calculated chance that she is taking.
And how is that? Before I answer that let me deviate a little to discuss something that Gurucharan Das writes about in his new book India Grows At Night. As he writes “There are two spaces in the politics of India and one of them is largely empty. They reflect the classic division between those who look ahead and aspire versus those who look back and complain. India’s political parties still tend to cater to the second – to the victim in us – through their politics of grievance.”
Leading this list is the Congress party. “The Congress appeals to the victim in policies for the aam aadmi…with an ever expanding menu of job guarantees, food security and subsidy for gas diesel, kerosene, fertilizers and more…All this is about the politics of grievance…grievance admittedly can be a powerful motivator to action.”
This has put India in an economic mess and has forced the Congress led UPA to suddenly turn reformist. As Pratap Bhanu Mehta writes in the Indian Express “these reforms are coming after four years of colossal mismanagement is making the reform narrative problematic…politically it is not easy for the government, after running all fiscal responsibility into the ground for four years, and after stoking structural inflation, to turn back and accuse opponents of being populist.”
Given this Mamata is only doing what Congress has done all these years. She is practicing the politics of grievance and appealing to the victim in us i.e. the voters. She is trying to project herself on the national stage, as someone who cares about the poor and the not so well off. With the Congress talking reforms someone has to fill the space that has been left empty for the time being.
And how does that help Mamata and the Trinamool Congress? The panchayat polls in West Bengal slated for May next year could be advanced to the coming winter months. Mamata is appealing to the victim in the voters, by asking for a partial repeal in the diesel price hike and an increase in the number of subsidised cooking gas cylinders, which the government of India has limited to six.
She is also trying to influence the traders and the small shopkeepers by projecting FDI in multi-brand foreign retailing as a devil and asking for it to be squashed. A victory in the panchayat elections would really make Trinamool Congress stand true to its name.
The word Trinamool means grass-root. And currently the Trinamool Congress only controls two out of the seventeen zila parishads in the state. A victory here for the Trinamool Congress would be a further dent to the Left parties in West Bengal and would help consolidate Mamata’s position.
Also any instability in Delhi benefits Mamata and Trinamool. The party currently has 19 out of the 42 Lok Sabha seats in West Bengal. An early Lok Sabha election will clearly benefit Trinamool. Hence by withdrawing support Mamata is trying to destabilise the Congress led UPA government, and hoping that UPA loses its majority in the Lok Sabha.
If an early Lok Sabha poll does happen and the Trinamool Congress does get 30-35 seats, then Mamata Banerjee will clearly become an important player in the so called “fourth” or “federal” front that is now being talked about. It is a likely coalition of strong chief ministers like Nitish Kumar (who runs the Samta party), Naveen Patnaik (who runs the Biju Janta Dal), J Jayalalithaa(who runs the AIADMK) and Mamata.
This could mean that Mamata Banerjee could end up playing a very important role in the government of India. If the sleepy HD Deve Gowda could become the Prime Minister of India, why can’t Mamata Banerjee? That is the game at play.
And what about West Bengal? Well for a state that has gone through 35 years of mis-governance and is an economic mess, can surely wait for a few years more. In the meanwhile, their Didi is meant for bigger things.
(The piece originally appeared with a different headline on www.firstpost.com on September 22, 2012 http://www.firstpost.com/politics/mamata-may-be-trying-to-out-sonia-sonia-for-bigger-stakes-464467.html)
(Vivek Kaul is a writer and can be reached at [email protected])