Big ideas often come out of small conversations. This seems to be the case with marketing guru Nirmalya Kumar’s latest book Brand Breakout: How Emerging Market Brands Will Go Global, which he has co-authored with Jan-Benedict EM Steenkamp.
“This book started one evening in my apartment [in London] when I was sitting with my friend JB [Jan-Benedict]. The latest Interbrand [a brand consultancy] 100 global brands list had come out. Not a single brand from the emerging markets was on it,” says Kumar, a professor of marketing and co-director at the Aditya Birla India Centre at London Business School.
“JB and I started talking about why things are the way they are. First we came up with reasons why there were no emerging market brands on the Interbrand list. Then we started to figure out how, if emerging market brands had to go global, they would need to go about it.”
Kumar and Steenkamp found one part of the answer in the list of the top 500 companies in the world. China has 73 companies on it—the second largest after the US. And here’s the nub: Most of these are business-to-business [B2B] companies, or those in the business of extracting natural resources, or those like China Mobile that are monopolies in their local markets.
B2B CAN DO WITHOUT BRANDING
“In B2B marketing, brands play a very small role,” says Kumar. “You go to the man on the street and ask him to name any of the top B2B brands. Chances are he won’t be able to name any. You ask people about ABB, nobody knows about ABB. Before it became Sony-Ericsson, nobody knew of Ericsson either.”
Nevertheless, there are some B2B companies that have been able to build big brands. But they are exceptions. “General Electric gets a branding because of being in washing machines and other electronic goods. Shell gets a name because of gas stations. IBM has a brand name that is consumer-oriented because they were in PCs and they have been around for 100 years or more. Otherwise IBM would not be a known brand,” says Kumar. “There are companies like Tetra Pak in packaging or Intel with its ‘Intel Inside’ campaign, which have been able to build brands.”
Companies from emerging markets don’t need to build global brands because most of them are not in consumer-facing businesses. Take Indian IT companies, for instance. They have concentrated on IT services, and not built products where they would have needed to create brands. “I suspect that the logic of a product company is very different from the logic of a service company,” says Kumar.
This is precisely why contract manufacturers in emerging markets haven’t developed brands. “Their existing business model is very successful. To evolve into a new business model with uncertain chances of success and doubtful profitability is unlikely,” he says.
Kumar cites the example of contract manufacturers in Bangladesh. “No country owns contract manufacturing like Bangladesh. When I was in Bangladesh, they told me, we have to have our own brands; we are tired of manufacturing for others. But their existing business model is so profitable, the question is do they need to develop brands?”
Also, to build a global brand in the business-to-consumer (B2C) space, companies need to create awareness among Western consumers through advertising and marketing—that may be an expensive proposition for emerging market countries. “The United States, Europe and Japan are probably the three most expensive places in the world to advertise. Given that, no emerging market can rationally make a case for advertising investment,” says Kumar.
Besides this, the country-of-origin effect [a psychological effect on customers when they are unfamiliar with a product] is also at play. “All Western consumers, when asked what they think of a brand that comes from India or China or any other emerging market, say it will be of poor quality,” says Kumar.
The irony, of course, is that consumers from emerging markets think the same about brands from their own countries. “Even Indian and Chinese consumers would say that brands coming from emerging markets, including their own, are of poorer quality than Western and Japanese ones.”
BUT BRANDS CAN BE BUILT
The dearth of global brands from emerging markets can be corrected in the time to come. There are a number of strategies that companies in these countries can follow in order to build brands in the West.
One is to use the diaspora route. “This strategy involves companies targeting immigrants from their own country and building enough scale and sales to support a brand push. You see a lot of brands doing that, including Pran [Foods] from Bangladesh, Dabur, ICICI Bank and, to some extent, SBI, Nando’s from South Africa, and Corona from Mexico,” says Kumar.
The second is the cultural resources route. Even though brands from emerging markets are considered to be of inferior quality by Western consumers, there are certain things that are regarded positively. “Even though Brazil has a poor image for any brand that comes out of it, nobody questions Brazil for fun, beach, sun and sand. That’s why they have a brand called Havaianas that sells flip-flops,” says Kumar.
Similarly, China is known for its ancient medicine and silk. India is known for ayurveda, a culture of history, yoga and religion. If a brand from an emerging market country positions itself around these things, it has a good chance of being accepted.
BRANDING COMMODITIES
Another route, which is very important for India, is through branding commodities. India has several such opportunities from Darjeeling tea and Mysore coffee to Basmati rice and Alphonso mango.
Once countries are able to brand commodities, they are able to get a price premium on that. “We have shown it with Columbian coffee (in our book). Even when coffee prices dip, Columbian coffee prices don’t dip as much. And Columbia is not even the largest producer of coffee. It is Brazil,” says Kumar.
First, the geographical region where a particular commodity is produced needs to be defined properly. “I have not seen any effort on this front in India. I know there is a Tea Board [of India] but there is a need for a Darjeeling tea board that authenticates things,” says Kumar.
Second, the production process needs to be tightened. “There are 14 steps that go into making some kind of wine in France. I bet you that even nine of them are not necessary. But it’s a way to show people that a lot of care is being taken in producing the wine to give it special qualities.
“Also, a very tough enforcement scheme needs to be put in place. If you try to put champagne on any sparkling wine produced anywhere else, it cannot be called champagne. Only sparkling wine from the Champagne region in France can be called champagne,” says Kumar. And any company using ‘champagne’ for sparkling wine gets sued by the French.
“Even the Americans had to remove the word champagne from their California sparkling wine,” says Kumar.
WHY CHINA IS AHEAD
Kumar is of the view that companies in China are better poised than those in other emerging markets when it comes to creating global brands.
“When Japan, South Korea and Taiwan started going down the path of globalisation, their quality of products was poor. Over time they put in R&D investments to improve the quality. China is the only exception as an emerging market; they have world-class manufacturing and nobody questions the quality of Chinese products when they are produced to Western specifics,” he says.
And it is easier to brand a product that is already high on quality. Kumar explains this with a thought experiment from his book. “Assume there are 1,000 Chinese manufacturers on contract for Western product companies and brands. They are manufacturing iPads and iPods for the world. So they can’t be bad. Out of those 1,000, let’s say 100 decide to build their own brand and try to diversify out of the low-margin contract manufacturing business where they are always at the mercy of Western companies. Out of the 100 who decide to do their own thing, 10 succeed. That means you will have 10 global brands coming out of China in the next decade.”
What also aids Chinese companies is that they think long-term. Indian companies don’t.
“Chinese companies have a long-term orientation, which comes from Confucius. They are playing for the next 100 years. They are not playing for the next 10,” says Kumar.
“And there is a reason for that: Indian companies are borrowing at very high rates from the capital markets. The major Chinese companies have state banks that are supporting them to some extent. So they are not paying the same interest rates, and can play the longer game much better,” he adds.
The Chinese government, too, has an eye for the future. “We might complain that the Chinese state is oppressive, but I have to grant one thing to the Chinese government—they do make big bets for the future,” Kumar says.
Take, for instance, their bet on urbanisation: “China knew 30 years ago that urbanisation is going to take place and they needed to have the infrastructure in place. They built that infrastructure. Today you can say that the Shanghai-Beijing train looks half empty. Yes, maybe it does. But they are not building it for today. You have to build the infrastructure for the next 20 years. I am sure it is going to be full some day,” says Kumar.
He adds, “The same thing is true for Shanghai and Beijing airports. They realise that they are building infrastructure for the next 20 years. We can’t be building an airport every two years.”
This interview was done when Nirmalya Kumar was professor of marketing at London Business School. He is now a member of the Group Executive Council, Tata Sons
The interview originally appeared in the India edition of the Forbes Magazine, dated August 23, 2013
Month: August 2013
Rupee at 64: It’s a Swadeshi crisis, not a foreign one
Vivek Kaul
The government of India has tried to blame the recent depreciation of the rupee against the US dollar on everything but the state of the Indian economy. Rupee has fallen because Indians buy too much gold, we have often been told over the last few moths.
Rupee has fallen because foreign investors have been withdrawing money in response to the decision of the Federal Reserve of United States to go slow on money printing in the time to come, is another explanation which is often offered. While there is no denying that these factors have been responsible for the fall of the rupee, but the truth is a little more complicated than just that.
Mark Buchanan uses the term disequilibrium thinking in his new book Forecast – What Physics, Meteorology and the Natural Sciences Can Teach Us About Economics. As he writes “one of the key concepts of disequilibrium thinking is the notion of ‘metastability’ which explains how a system can seem stable, yet actually be highly unstable, much like the sulfrous coating on a match, ready to explode if it receives the right kind of spark. Inherently unstable and dangerous situations can persist untroubled for very long periods, yet also guarantee eventual disaster.”
The situation in India was precisely like that. The rupee was more or less stable against the dollar between November 2012 and end of May 2013. It moved in the range of Rs 53.5-Rs 55.5 to a dollar. This stability in no way meant that all was well with the Indian economy.
In a discussion yesterday on NDTV, Ruchir Sharma, Head of Emerging Markets Equity and Global Macro at Morgan Stanley Investment Management, provided a lot of data to show just that. In 2007, the current account deficit of India stood at $8 billion. In technical terms, the current account deficit is the difference between total value of imports and the sum of the total value of its exports and net foreign remittances.
The foreign exchange reserves of India in 2007 stood at $300 billion. So the foreign exchange reserves were 37.5 times the current account deficit. For 2013, the current account deficit is at $90 billion whereas the foreign exchange reserves are down to around $275 billion. So the foreign exchange reserves are now just three times the size of the current account deficit, in comparison to 37.5 times earlier.
Another worrying point is the import cover (foreign exchange reserves/monthly imports). It currently stands at 5.5 months, the lowest in 15 years. This is very low in comparison to other emerging markets (like China has 18 months of import cover, Brazil has 11 months).
Now what does this mean in simple English? It means that the demand for dollars has gone up much faster than their supply. And this did not happen overnight. It did not happen towards the end of May, when the rupee rapidly started losing value against the dollar. The situation has deteriorated over the last five to six years, while the government was busy doing other things.
Sharma gave out some other numbers as well. In 2007,the short term debt (or debt that needs to be repaid during the course of the year) stood at $80 billion. Currently it stands at around $170 billion. As and when this debt matures, it will have to repaid (unless its rolled over) and that would mean more demand for dollars and a greater pressure on the rupee. Given this, its not surprising that analysts are now predicting that the rupee soon touch 70 to a dollar.
What remains to be seen is whether companies which need to repay this debt are allowed to roll it over. The situation is very tricky given that 25% of Indian companies do not have sufficient cash flow to repay interest on their loans. The amount of loans to be repaid by top 10 Indian corporates has gone up from Rs 1000 billion in 2007 to Rs 6000 billion in 2013. This makes the Indian economy very vulnerable.
Politicians like to compare the current situation to 1991 and tell us that the current situation is not a repeat of 1991. In 1991, the import cover was down to less than a month. Currently it is around 5-6 months (depending on whose calculation you refer to). Hence, the situation is not as bad as 1991.
But the import cover is just one parameter that one can look at. The current account deficit in 1991, stood at 2.5% of the gross domestic product. Currently its around 4.8% of the GDP. Hence, the situation is much worse on this front than in 1991.
The government has tried to control the fall of the rupee against the dollar by making it difficult for Indian companies as well as individuals to take dollars abroad. But that was already happening. The amount of money Indian corporates invested abroad in 2008, stood at $21 billion. It has since come down to $7 billion. The amount of money taken abroad by individuals through legal channels remains minuscule.
The point is that the Indian economy has been extremely vulnerable for sometime, “much like the sulfrous coating on a match, ready to explode if it receives the right kind of spark.” It is just that where the spark will come from leading to explosion of the match, is hard to predict in advance.
As Buchnan puts it “the disequilibrium view….explains in simple terms why the moment of collapse is hard to predict: the arrival of the key triggering event is typically a matter of chance.” And this matter of chance in the Indian context came when Ben Bernanke, the Chairman of the Federal Reserve of United States, the American Central Bank, addressed the Joint Economic Committee of the American Congress ,on May 23, 2013.
As he said “if we see continued improvement and we have confidence that that is going to be sustained, then we could in — in the next few meetings — we could take a step down in our pace of purchases.”
Over the last few years, the Federal Reserve has been pumping money into the American financial system by printing money and using it to buy bonds. This ensures that there is no shortage of money in the system, which in turn ensures low interest rates. The hope is that at lower interest rates people will borrow and spend more, and this in turn will revive economic growth.
After nearly 5 years, some sort of economic growth has started to comeback in the United States. And given this, the expectation is that the Federal Reserve will start going slow on money printing in the months to come. This has pushed interest rates up in the United States making it more interesting for big international investors to invest their money in the United States than India.
This has led to them withdrawing money from India. Since the end of May nearly $10 billion of foreign money has been withdrawn from the Indian bond market. When these bonds are sold, foreign investors get paid in rupees. They need to convert these rupees into dollars, in order to repatriate their money abroad. This puts pressure on the rupee.
And this is how the decision of the Federal Reserve to go slow on money printing in the days to come has led to the fall of the rupee. This is the story that the government officials and ministers have been trying to sell to us.
But the point to remember is that the decision of the Federal Reserve of United States to go slow on money printing was just the ‘spark’ that was needed to explode the ‘sulfrous coating on the match’ that the Indian economy had become. The spark could have come from somewhere else and the ‘sulfrous coating on the match’ would have still exploded leading to a crash of the rupee. Also, it is important to remember that foreign investors have not abandoned India lock, stock and barrel. When it comes to the bond market they have pulled out money to the tune of $10 billion. But they are still largely invested in the equity market. Since late May around $2 billion has been pulled out of the Indian equity market by the foreign investors. This when they have more than $200 billion invested in it.
Ruchir Sharma’s panelist in the NDTV discussion referred to earlier was Arun Shourie. He called the current rupee crisis a swadeshi crisis. It is time that the government realised this as well because the first step in solving any problem is recognising that it exists.
The article was originally published on www.firstpost.com on August 21, 2013.
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Rupee debacle: UPA should stop blaming gold for screw up
Vivek Kaul
“How do I define history?” asked Alan Bennett in the play The History Boys, “It’s just one f@#$%n’ thing after another”.
But this one thing after another has great lessons to offer in the days, weeks, months, years and centuries that follow, if one chooses to learn from it.
Finance minister P Chidambaram and other fire fighters who have been trying to save the Indian economy from sinking, can draw some lessons from the experience of the Mongols in the thirteenth and the fourteenth century.
The Mongol Empire at its peak, in the late 13th and early 14th century, had nearly 25 percent of the world’s population. The British Empire at its peak in the early 20th century covered a greater landmass of the world, but had only around 20 percent of its population. The primary reason for the same was the fact that the Mongols came to rule all of China, which Britain never did.
In 1260 AD, when Kublai Khan became King, there were a number of paper currencies in circulation in China. All these currencies were called in and a new national currency was issued in 1262.
Initially, the Mongols went easy on printing money and the supply was limited. Also, as the use of money spread across a large country like China, there was significant demand for this new money. But from 1275 onwards, the money supply increased dramatically. Between 1275 and 1300, the money supply went up by 32 times.By 1330, the amount of money in supply was 140 times the money supply in 1275.
When money supply increases at a fast pace, the value of money falls and prices go up, as more money chases the same amount of goods. As the value of money falls, the government needs to print more money just to keep meeting its expenditure. This leads to the money supply going up even more, which leads to prices going up further and which, in turn, means more money printing. So the cycle works. That is what seems to have happened in case of Mongol-ruled China.
Gold and silver were prohibited to be used as money and paper money was of very little value as the various Mongol Kings printed more and more of it. Finally, the situation reached such a stage that people started using bamboo and wooden money. This was also prohibited in 1294.
What this tells us is that beyond a certain point the government cannot force its citizens to use something that is losing value as money, just because it deems it to be so. By the middle of the 14th century, the Mongols were compelled to abandon China, a country, they had totally ruined by running the printing press big time.
There is a huge lesson here for Chidambaram and others who have been trying to put a part of the blame on the fall of the rupee against the dollar because of our love for gold. The logic is that Indians are obsessed with buying gold. Since we produce almost no gold of our own, we have to import almost all of it. And every time we import gold we need dollars. This sends up the demand for dollars and drives down the value of the rupee.
This logic has been used to jack up the import duty on gold to 10%. But as Jim Rogers told the Mint in an interview “Indian politicians…suddenly blamed their problems on gold. The three largest imports to India are crude oil, gold and cooking oil. Since they can’t do anything about crude and vegetable oil, the politicians said India’s problems were because of gold, which, in my view, is totally outrageous. But like all politicians across the world, the Indians too needed a scapegoat.”
The question that no politician seems to be answering is, why have Indians really been buying gold, over the last few years? And the answer is ‘high’ inflation. As we saw in Mongol ruled China, it is very difficult to force people to use something that is losing value as money. And rupee has constantly been losing value because of high inflation.
High inflation has led to a situation where the purchasing power of the rupee has fallen dramatically over the last few years. And given that people have been moving their money into gold. As Dylan Grice writes in a newsletter titled On The Intrinsic Value Of Gold, And How Not To Be A Turkey “Now consider gold. In ten years’ time, gold bars will still be gold bars. In fifty years too. And in one hundred. In fact, gold bars held today will still be gold bars in a thousand years from now, and will have roughly the same purchasing power. Therefore, for the purpose of preserving real capital in the long run, gold has a property which is unique in comparison with everything else of which we know: the risk of a loss of purchasing power approaches zero as one goes further into the future. In other words, the risk of a permanent loss of purchasing power is negligible.”
And this is why people are buying gold in India. Gold is the symptom of the problem. Take inflation out of the equation and gold will stop being a problem, though Indians might still continue to buy gold as jewellery. But creating ‘inflation’ is central to the politics of the Congress led UPA. Now that does not mean that people need to suffer because of that? Especially the middle class. As M J Akbar put it in a column in The Times of India “Gold is the minor luxury that a confident economy purchases for its middle class. The cost of gold imports has become a problem only because the economy has imploded.”
Nevertheless people need to protect themselves against the inflationary policies of the government. “Historically, people have understood money’s intrinsic value when they have been forced to, when alternative monies have been rendered unfit for purpose by persistent debasement,” writes Grice.
In ancient times Kings used to mix a base metal like copper with gold or silver coins and keep the gold or silver for themselves. This was referred to as debasement. In modern day terminology, debasement is loss of purchasing power of money due to inflation.
Given this, people will continue to buy gold. The buying may not show up in the official numbers because a lot of gold will simply be smuggled in. A recent Bloomberg report quoted Haresh Soni, New Delhi-based chairman of the All India Gems & Jewellery Trade Federation as saying “Smuggling of gold will increase and the organized industry will be in disarray.”
And other than leading to a loss of revenue for the government, it might have other social consequences as well. As Akbar wrote in his column “If we are not careful we might be staring at 1963, when finance minister Morarji Desai imposed gold control to save foreign exchange. Desai, and a much-weakened prime minister, Jawaharlal Nehru, could issue orders and change laws but they could not thwart the Indian’s appetite for gold, even when he was in a much more abstemious mood half a century ago. All that happened in the 1960s was that the consumer turned to smugglers. From this emerged underworld icons like Haji Mastan, Kareem Lala and their heir, Dawood Ibrahim. India has paid a heavy price, including the whiplash of terrorism.”
Maybe the new Dawood Ibrahims and Haji Mastaans are just about starting up somewhere.
The piece originally appeared on www.firstpost.com on August 20, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Rupee woes: More trouble ahead as oil prices touch all time high
Vivek Kaul
My father takes the Delhi Metro to work. Of late it takes him nearly 25 minutes to get into the Metro station in the evening. This is because the line for the security check is very long.
Basically the high price of petrol and diesel is forcing more and more people to take the Delhi Metro. And things will only get worse on this front in the days to come.
On August 15, 2013, the price of the Indian basket for crude oil touched an all time high of Rs 6680.46 per barrel (around 159 litres). In dollar terms the Indian basket for crude was priced at $ 108.59 per barrel. One dollar was worth Rs 61.52 on August 15, 2013. And this led to a price of Indian basket of Rs 6680.46 per barrel.
This number would have gone up even further today, given that the rupee has depreciated further against the dollar. It touched an all time low of 62.76 to the dollar today. Even if we assume the same price of the Indian basket in dollar terms (i.e. $108.59), at Rs 62.5 to a dollar, this works out to Rs 6786.88 per barrel. This is higher than the price on August 15, 2013.
In a press release dated August 16, 2013, the Ministry of Petroleum and Natural Gas, talks about the increasing under-recoveries on diesel. The under-recovery on diesel has gone up to Rs 10.22 per litre for the fifteen day period ending August 15, 2013. Before this, the under-recovery was at Rs 9.29 per litre. This leads to a daily under-recovery of Rs 389 crore or Rs 11,670 crore for the month. That’s the under-recovery just on diesel. Other than this there are under-recoveries on cooking gas as well as kerosene. The under-recoveries for the first quarter of 2013-2014 (i.e. period between April 1, 2013 and June 30, 2013) stood at Rs 25,579 crore.
This is likely to go up during this quarter, given the depreciation of the rupee and the increasing price of oil. Oil prices have been going up internationally because of the uncertainty that prevails in Egypt. The “fear premium” is getting built into the price of oil. As a report in the Daily News and Analysis points out “Egypt controls the Suez Canal and the 320 km Suez-Mediterranean (Sumed) crude oil pipeline, which together account for around 2.5% of the global crude oil supply. Logically, any threat to these two major infrastructural landmarks could lead to a disruption in supply from the Middle East to customers in the United States and Europe.” And this is driving up the price of oil in dollar terms. Along with this the depreciating rupee has led to a “double whammy” for the price of oil in rupee terms.
Based on the recommendations of the Kirit Parikh Committee, on June 25, 2010, the government of India announced full deregulation of the prices of petrol and at the same time announced that diesel prices would soon follow suit. This meant that the international price of oil would determine the price of petrol and diesel in rupee terms. Till then, the government used to force the oil marketing companies(OMCs) to sell oil at a price which did not make commercial sense for them. The government subsequently compensated the OMCs for these under-recoveries.
While petrol prices were deregulated, the same did not happen in case of diesel prices. As A Citizen’s Guide to Energy Subsidies in India points out “The Government of India (GOI) on 25 June, 2010 announced the full deregulation of the prices of two crucial petroleum products: petrol and diesel. Henceforth, prices of these two products will be determined by the unfettered play of market forces and government “subsidies” on these products…Petrol prices were liberalized from June 2010 and it was reported that diesel prices would soon follow suit.”
But the diesel prices did not follow suit. “The government announced on November 24, 2011 that diesel price deregulation had been put on hold owing to the rise in the level of food inflation. a rise in diesel prices would result in an increase in freight charges levied by transport companies. This would, in turn, feed into higher prices of food commodities,” the report points out.
Only very recently, the government started to increase the price of diesel, to reduce the under-recoveries. But with the international price of oil going up and the rupee depreciating against the dollar, even at higher prices, the under-recoveries on diesel haven’t come down. The under-recovery on diesel was at Rs 9.29 per litre in January. It is now at Rs 10.22, despite diesel prices going up.
It remains to be seen how the government deals with the situation. If it increases the price of diesel it will translate into higher inflation.
If it doesn’t pass on the higher prices to the consumers, then the fiscal deficit of the government will shoot up because it will have to compensate the OMCs for the under-recoveries. Fiscal deficit is the difference between what a government earns and what it spends.
Elections in five states are to be held in December 2013/January 2014. These states are Delhi, Mizoram, Madhya Pradesh, Rajasthan and Chattisgarh. The Congress is not in power in three out of the five states.
Prices of diesel were not raised before the Karnataka elections. Given this, it is likely that the price will not raised in line with the ‘real’ price of diesel. Hence, the fiscal deficit of the government is likely to go up. “We are concerned with the government’s ability to stick to its budgeted fiscal deficit target,” wrote analysts of Nomura in a recent report titled India: turbulent times ahead.
A higher fiscal deficit will lead to higher borrowings by the government. This will lead to higher interest rates as a higher government borrowing will crowd out others. This will slowdown economic growth even further.
If the government tries to maintain the fiscal deficit and at the same time not pass on the higher price of diesel to end consumers, then it will have to slash spending. As the Nomura report points out “If the government wants to stick to its budgeted fiscal deficit target (of 4.8% of GDP in FY14), it will have to either slash spending or substantially hike diesel prices – either way, it will hurt growth.”
Whatever the government does on the diesel price front, the short point is that we are screwed.
The article originally appeared on www.firstpost.com on August 19,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Torture of the rupee: Between a red queen, yuvraj and white veshti
Vivek Kaul
A day after the Independence Day, the Queen’s durbar was in session.
To her left sat mauni baba with his head down and his eyes looking at his feet.
To her right sat the yuvraaj, the man who refused to grow up, fiddling with his new Apple iPhone.
Standing in front of her was the man who always wore the white veshti.
“So why is your veshti not spotlessly white today,” asked the Queen as she started the proceedings for the day.
“Oh, yesterday the wife decided to host an Independence day lunch and asked me to get two kgs of onions,” replied the man who always wore the white veshti, rather matter of factly.
“So?” asked the queen.
“Well, after buying two kgs of onion, I did not have enough money left to buy a Surf Excel sachet. You know, to wash one veshti properly takes one sachet.”
“Oh. I don’t know what this Power Man is upto. He doesn’t seem to understand that many elections have been lost on the price of onions,” lamented the queen.
“Yes madam,” replied the man who always wore the white veshti. “But he will win only if the onion prices keep going up.”
“Anyway so tell me what are we going about the rupee?” asked the Queen. “I gather this morning it even touched 61.97 to a dollar.”
“Rupee, rupee, rupee,” the yuvraaj said before the man who always wore the white veshti could say anything. “Robert keeps talking about them all the time.”
“Shh! Shutup,” said the queen. “Ah. I so wish that my son had married and my daughter had not.”
“Madam we are doing a lot of things to stop the fall of the rupee.”
“Like what?”
“On Wednesday I got the Reserve Bank to put in capital controls.”
“Capital controls”
“Yeah. Like Indian citizens can no longer buy property abroad.”
“That’s good. Anyway there is so much land in the country, why do they need to buy property abroad,” replied the queen. “They can always buy land in Gurgaon.”
“Like Robert, like Robert,” the yuvraaj interrupted again.
The man who always wore the white veshti ignored the interruption and carried on with his explanations.
“We also slashed the amount of money Indian citizens can remit abroad every year to $75,000, from the earlier $200,000. We have raised the import duty on gold and silver to 10%. We have also made it more difficult for Indian companies to invest abroad. All this to make sure that the demand for dollars goes down and the rupee recovers.”
“But it doesn’t seem to be helping,” said the queen. “Does it?”
“You know Ma, what this reminds me of?” the yuvraaj got into the conversation again.
“What beta?” asked the Queen lovingly.
“I recently read this lovely book called Through the Looking Glass, written by Lewis Carrol.”
“Good beta. You should read more instead of fidgeting around with that phone of yours all day long.”
“And the book had a Queen.”
“Really? Like me?”
“Yes, the Red Queen. And there is something that she says in the book that makes immense sense.”
“And what is that beta?”
“As the lines from the book go: “”A slow sort of country!” said the (Red) Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!“”
“Ah, smart boy. Now I really know what is happening. We are not running fast enough. Also let the records of the meeting show that I said that. It’s such a smart thing to say.”
“Yes Madam. That’s what I have been trying to tell Subbu of the Reserve Bank,” said the man who always wore the white veshti, trying to save himself and pass on the blame.
“Call Subbu here at once,” roared the Queen.
“Yes Madam, in fact he is waiting outside,” said the man who always wore the white veshti.
So within five minutes Subbu was brought in. He looked very happy with not a care in the world.
“So Mr Subbu will you care to explain why are we not running fast enough when it comes to preventing the rupee fall,” asked the Queen.
“Madam, to be honest, there is nothing much we can do. The solution to the crisis is very simple. We need to cut down on our oil imports, our coal imports, our edible oil imports and our fertilizer imports. And I guess you know what will happen if we do that? At the same time we need to increase our exports manifold. And that won’t happen unless the physical infrastructure is improved. We need better ports, better roads and a better rail network. All this is not going to happen overnight, given that it has not happened in years. Also, Indian companies have borrowed too much money in dollars and all that needs to be repaid now. The NRIs are also looking to withdraw all the money they had deposited with Indian banks,” came a long answer from Subbu till he was stopped by the yuvraaj.
“In short we are screwed,” exclaimed the yuvraaj.
“So the demand for dollars will continue. The rupee will continue to be under pressure. We cannot sell dollars to control the rupee fall because we have just enough dollars to cover around six and a half months of imports. And that is a very low level. So we can only run to keep in the same place. In fact, we may not be able to do even that,” said Subbu, very matter of factly.
“Oh. But you could still do something about it?” asked the Queen.
“Madam, my time is up. I am going back to Telangana. I have bought a nice house in Nizamabad. And will spend the next few years watching the mythological movies of the late NT Rama Rao garu. It’s up to the Professor now,” said Subbu as he left the room.
“And why is the stock market down by more than 500 points this morning?” asked the ‘worried’ Queen again.
“Basically the foreign investors have now started to fear that we may not allow them to take their money back.”
“Oh, but why? I know of no such plans.”
“Madam, we have reduced the amount of money that Indians could remit abroad to $75,000 from $200,000. So the belief in the market is that our next step will be not allowing foreign investors to take their money back.”
“So?”
“So they are selling out of the stock market, converting their rupees into dollars and taking their money back, before we do any such thing. A similar things seems to be happening in the bond market.”
“Ah. All seems to be going wrong for me,” lamented the Queen. “I had such great plans for the yuvraaj.”
“Que Sera, Sera (Whatever Will Be, Will Be),” played on yuvraaj’s iPhone as the Queen decided to call it a day.
And finally the mauni baba woke up and said something.
“When we don’t know where we are going the journey is the reward.”
The article originally appeared on www.firstpost.com on August 16, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)