Covid pandemic

India might grow by 30% early next year, but that won’t mean much.

छोड़ो कल की बातें, कल की बात पुरानी
नए दौर में लिखेंगे, मिल कर नई कहानी
हम हिंदुस्तानी, हम हिंदुस्तानी
— Prem Dhawan, Usha Khanna, Mukesh and Ram Mukherjee in Hum Hindustani. 

The Indian economy contracted by 7.5% during July to September 2020, in comparison with the same period in 2019.  When compared with a contraction of 23.9% during April to June 2020, a contraction of 7.5% looks significantly better.

Hence, there has been a lot of song and dance from the establishment and its supporters, on how quickly the Indian economy is recovering, especially when most economists expected the economy to contract by 10% during July to September and it contracted by only 7.5%. Terms like a V-shaped recovery have been bandied around a lot, over the last few weeks.

Nonetheless, India continues to remain in the bottom quartile, when it comes to economic growth/contraction of countries between July to September this year. Greece with an economic contraction of 11.7% is right at the bottom.

In fact, the song and dance of the establishment is likely to continue in the months to come and will reach its peak sometime in the second half of the next year, after the gross domestic product (GDP) figure for the period April to June 2021, is published. GDP is a measure of the economic size of a country.

It is worth remembering here that the GDP during the period April to June 2020 contracted by nearly a fourth. The GDP during the period was Rs 26.90 lakh crore. In comparison, the GDP during April to June 2019 was at Rs 35.35 lakh crore.

So, the GDP during April to June 2021, will grow at a pace which has never been seen before. If it comes in at Rs 30 lakh crore, the growth will be around 11.5%. Given that, the GDP during the period July to September 2020 was already at Rs 33.14 lakh crore, the GDP during April to June 2021, is likely to be higher than that.

At a GDP of Rs 35 lakh crore, the economic growth during April to June 2021 will come in at a whopping 30.1%. Nevertheless, this is just an impact of what economists like to call the low-base effect.

A central government which can use a contraction of 7.5% to market itself, imagine the possibilities of what it can do if the economic growth rate crosses 30% in the first quarter of the next financial year.

While, some song and dance can do no harm to the economy, the real story needs to be understood and told as well. The real GDP in April to June 2021 will be more or less where it was during April to June 2019. In that sense, we will be where we were two years back.

Hence, the economic slowdown which started in mid 2018, along with the contraction that has happened post the spread of the corona epidemic, has pushed the Indian economy back by at least two years. Obviously, this can’t be good news.

Other than talking, the central government hasn’t done much to get the Indian economy going. Between April and October 2020, the government spent a total of Rs 16.61 lakh crore. In comparison, it had spent Rs 16.55 lakh crore during the same period in 2019. The difference being, this year we are in the midst of an economic contraction.

In a scenario where the corporates as well as individuals are going slow on spending money, government spending becomes of utmost importance. Between March 27 and November 20, the non-food credit of banks has gone up just Rs 26,496 crore.

Banks give loans to the Food Corporation of India and other state procurement agencies to buy rice and wheat, directly from the farmers. Once these loans are subtracted from the overall lending of banks what remains is non-food credit.

In comparison, the deposits of banks have gone up by Rs 8.03 lakh crore during the same period. This means just 3.3% of the fresh deposits that banks have got post March have been lent out.

What does this tell us? It tells us that both corporates and individuals are largely sitting tight and saving money. This is an indication of the lack of confidence in the near economic future. While the corporate executives might keep going gaga in the media about an economic revival, these numbers tell us a different story.

What hasn’t helped is the fact corporates have reported bumper profits by driving down their raw material costs, input costs and employee costs. This basically means that along with employees, the suppliers of corporates have also seen an income contraction. This can’t be good news for the overall economy.

The government’s inability to spend, comes from the lack of tax revenues, something that is bound to improve in 2021-22. Other than that, the government hasn’t gotten around to selling its stakes in public sector enterprises. Of the targeted Rs 2.1 lakh crore just 3% has been achieved. This is bizarre given that the stock market is at an all-time high-level.

Hopefully, the government will make up on this in the next financial year. Also, it can look at selling some of the land that it owns in prime localities in Indian cities.

All this can be used to put more money in the hands of consumers through an income tax cut and a goods and services tax cut, encouraging them to spend.

People who pay income tax may form a small part of the population but they are the ones who actually have some purchasing power. And once they start spending more, the chances of it boiling down the hierarchy are higher. Do remember, at the end of the day, one man’s spending is another man’s income.

A slightly different version of this piece appeared in the Deccan Herald on December 20, 2020.

Mumbai Mirror Shutting Down and the Screwed Up Business Model of India Media

Alibaba mil gaya chaalis choron se – Anand Bakshi, Laxmikant-Pyarelal, Runa Laila, Aadesh Shrivastava and Mukul Anand, in Agneepath (1990).

There was a time when I bought and tried to read eight daily newspapers. Two things led to a change on this front. The first reason was very practical. Apartments in Mumbai are small and buying eight newspapers for six days a week (I took a break on Sundays), meant that the raddi accumulated very quickly and took up a lot of space.

The second reason was something I learnt from experience. Most news is just noise. Following noise helps if you are a news reporter because that is precisely your job. But if you are looking to understand the big picture and not miss the wood for the trees, as I was, it made sense to ignore most news that was published and train the mind to look at a few limited things which mattered. (Also, with the internet, one could always Google up the noise later, if the need arose).

This led to a massive cutdown in the newspaper buying habit. Also, around early 2007, I went fully digital, rarely buying physical copies. Hence, I have been reading e-papers now for close to fourteen years. Of course, unlike earlier, I seriously read only two newspapers (on most days) and sort of flip through a third one. And now one of the newspapers which I read seriously, Mumbai Mirror, is shutting down.

This development has made me take a look at the economics of the Indian media, newspapers and digital, in particular. TV news is an entirely different beast, which I do not understand well enough to be writing about. I will also look at the entire issue from the point of view of readers and try to explain why things have become very tricky.
Let’s take a look at the issue pointwise.

1) Indian newspapers, the way they have evolved over the years, have totally become advertisement driven. Depending on who you ask, you are likely to be told that the split between advertisement revenue and subscription revenue, is 80:20 or 90:10, for that matter.

The point being that the readers are not consumers for newspapers, but the product, which is sold to corporates who advertise. Now in a post-corona world, the advertisements in newspapers have come down. Mumbai Mirror used to have an edition of 36 pages on most days before the covid pandemic struck. After covid, the size of the edition barely went beyond 16-18 pages on most days.

Clearly, the newspaper hadn’t been getting enough advertisements, hence, the decision to shut it down. One can also speculate here that the sales of physical copies of newspapers have crashed post the pandemic and are nowhere near what they used to be (I mean newspapers in general here). That’s one reason to possibly explain the lack of advertisements in Mumbai Mirror.
Also, the main reason behind setting up Mumbai Mirror doesn’t exist anymore. The Times Group started the newspaper in 2005, to protect its prime brand, the Mumbai edition of The Times of India, from the Daily News and Analysis (DNA). The Mumbai edition of DNA was launched in July 2005. The other reason behind launching the Mumbai Mirror was to also protect Mumbai edition of The Times of India from The Hindustan Times, which launched a Mumbai edition in July 2005 as well.
DNA was shut down in October 2019, though the newspaper had been down in the dumps for close to a decade before that.

Given this, the Times Group, which looks at its publications not as news ventures but as products which solicit advertising, decided to cut down on its losses.

2) In the last couple of years, many media houses have put their epapers behind the paywall. Some media houses now offer only a certain number of articles per month free, beyond that the reader needs to subscribe (Honestly, there are very simple hacks available to get around this).

While, this might be a sensible thing to do, the chances of it working out quickly are very low. The Western newspapers which have been successful in raising a substantial portion of their revenues digitally, have been at it for almost two decades. Off the record conversations with a few higherups in the newspaper space tell me that digital doesn’t bring in much money currently.

Also, a lot of the digital strategy of the Indian news media is all over the place. Like in the recent past, almost everybody has launched podcasts, without having the most basic infrastructure in place. The recordings of many of these podcasts are absolutely terrible (There are podcasts out there whose production values are superb as well, but that is more an exception which proves the rule). Of course, very few of these podcasts, like most of the digital media, earn any money. They have been launched because everyone else has also done so.

3) One of the theories that has been propounded in the recent past is that the media will survive and report the news that it should, only if the readers pay for the news they consume. Right now most news consumption is free.  Honestly, I have subscribed to this theory as well at some point of time.

But now I am very sceptical of this argument. Let me offer a few reasons for the same. With corporate advertising taking a beating, the news media as a whole is now dependent on government advertising more than ever before. Revenues from the digital media cannot fill the gap because of the fall in corporate advertising.

Hence, the media as a whole needs to keep government(s) in good humour, so that the advertisements keep coming in. Also, other than this economic incentive, the other reason is simple political pressure and the fact that any government has a lot of nuisance value. The current central government thrives on projecting narratives which it wants to and for that it needs the so-called national media on its side. This will stop the media from covering news items like they should.

To cut a long story short, just because you, dear reader, have bought an annual digital subscription which cost Rs 1,000-2,500, it doesn’t mean that the news media will start reporting news the way they should. Propaganda and spin will continue to be the order of the day.

4) Another phenomenon being seen is the rise of paid-newsletters. Some newsletters have achieved some scale and a few thousand paid subscribers. This is often offered as an example of how people are willing to pay for stuff which is written and presented well. While this is a good development, one needs to take into account the fact that the paid-newsletters are extremely niche with a large focus on the private equity, venture capital space, stock market investors etc.

At best they look at business and corporate stories. This doesn’t fulfil the need for the media being the fourth pillar in a democracy. A few thousand people paying for some news they consume isn’t going to help either the Indian media or the Indian democracy in any way, for that matter.

5) Another recent phenomenon has been that of out of work journalists starting their own newsletters and charging for it. While I have no specific idea of how well these newsletters are doing, I can tell you from my own experience that the point about at least 10% of your social media followers will end up paying for the newsletter, is a lot of bunkum. If you can get even 10% of your social media following to click on what you write, you will be doing a decent job of it, forget paying for the content.

6) Also, with newspapers and websites going behind a paywall, WhatsApp forwards and false news, will gain greater legitimacy as people will have easy access to them than genuine news.

As Alan Rusbridger writes in Breaking News – The Remaking of Journalism and Why It Matters Now: “Bad information [is] everywhere: good information [is] increasingly for smaller elites. It [is] harder for good information to compete on equal terms with bad.”

It is very easy to put out bad information out there on the social media, after the fixed cost of a mobile phone or a cheap laptop and an internet connection has been met. The marginal cost after the fixed cost has been met, is almost zero. Politicians and political parties will continue to thrive on this.

7) Where does all this leave news-media houses? A basic point that MBAs who run these organisations haven’t seem to have understood is that today’s reader doesn’t get his news from just one source like the old days, when most families subscribed to one newspaper or at best two newspapers and/or a weekly magazine.

Today’s reader likes to read from multiple sources, basically whatever he finds interesting enough and/or whatever gets shared with him on WhatsApp or social media. Media houses clearly haven’t caught up on this trend. They still want readers to make an upfront payment and commit to a subscription of at least one month.

It’s time that they started adopting micro-payments and pricing their digital stories for as low as five bucks and let people pay for it, if it interests them. Other than offering people choice, this will allow news media houses to tackle the subscription fatigue that will set in sooner rather than later.

It is important to remember here that news media is competing not just with other news media, it is also competing with over the top (OTT) media platforms like Hotstar, Amazon Prime, Netflix, SonLiv etc., for a share of the consumer’s wallet as well as his time and mind-space.

Other than Netflix, which is on the expensive side, the cost of subscribing to other OTTs is quite cheap. The news-media is competing with these OTT platforms as well.

7) Talking about competition, news media houses are now also competing with individual content creators, who have a strong presence on YouTube. Some of these content creators, who focus on delivering free as well as paywalled video content around the important news of the day and cut the clutter, have huge social media followings. Their business model rests around seeking donations from their followers. These donations can be as low as Rs 10. This makes another case for micropayments.

To conclude, common sense suggests that it will be easier to get people to pay for news digitally, if the amounts involved are small. As far as readers are concerned, there are no guarantees that they will get what they are looking for, even if they are ready to pay. One solution is to follow and support individuals like me who are trying to put out stuff they feel people should know about and which the mainstream media isn’t writing about. Nevertheless, the problem there is that there is only so much an individual can do and it is very difficult for individuals to be consistent day and day out.

Disclosure: I worked for the Daily News and Analysis (DNA) between October 2005 and September 2010. I also worked for the Times Group between October 2010 and March 2012.