Indian Business and Finance, October 2nd

The usual news plus America’s sloppy approach to the "foundation of American democracy" for its overseas citizens.

Indian Business and Finance, October 2^nd

The usual news plus America’s sloppy approach to the “foundation of American democracy” for its overseas voters in the upcoming national election

An Indian obsession

The IPO filing of the week was by Swiggy, one of many Indian companies that promises to deliver stuff, usually small stuff, remarkably fast and provide the just-in-time delivery that in a place with larger homes would be less necessary because of closets and storage. The result is the streets of Indian cities are filled with buzzing scooters “breaking” (to use the local term ) lights to deliver prescriptions, pencils and even single cups of ice cream. Really. The company loses money (of course) but one of its competitors, Zomato, has become profitable and it will be a very large offering by Indian standards, possibly valuing the company at $15bn. Growth numbers spread out across the 526-page prospectus are striking. The number of customer transactions over three years has expanded from 243,000 to 323,000 to 393,000, the number of users from 35m to 43m to 47m. The number of gig workers making deliveries has almost doubled since 2022 to 457,000 while their payments have remained relatively flat at 58 rupees, or $0.69, for each order. They deliver on average 463 orders each month.

Business is evolving almost as quickly as orders are delivered. The number of restaurants whose orders were delivered through Swiggy has grown from 129,000 in 2022 to 224,000 at the end of June. Four warehouses in 2022 have expanded to 50. It has begun building “dark stores”, meaning ones that have no retail customers but are packed with common items and positioned to enable fast delivery. There were 12 in 2022; there are 538 at the end of June. 

India is up

Commercial leasing activity continued apace in major cities through the first three quarters of the calendar year, according to data from Colliers, a real estate consultancy, as reported in The Economic Times. The hottest market by far in the third quarter was Bangalore, with 6.3m square feet leased, followed by Hyderabad with 2.9m square feet, Delhi-NCR with 2.4m, Mumbai with 1.7m and Chennai with 1.4m. The data reflect many different trends. It likely captures the emergence of global capability centres, the technology development outposts of non-Indian multinationals, which congregate particularly in Bangalore but also Hyderabad and the area surrounding Delhi. The numbers also capture the relative allure of Mumbai as a business hub, which is fading largely because of how poorly it has been run. Transportation is terrible and even poor housing is expensive. Mumbaikers will say it survives despite everything for one reason: them..

An economic statistic that may mean something

Indian household financial assets as a percentage of GDP rose from 78% in 2013 to 158% at the end of the first quarter, according to a study by Motilal Oswal, a brokerage. At the same time, household debt rose from around 26% in 2009 to 42% at the end of the first quarter, all of which suggests that in the new financial era, Indian households are richer and more leveraged.

Lack of jobs/lack of workers/lack of exports

Bangladesh’s problems have naturally raised the prospect of gains for India as businesses look for less fraught surroundings. A long story in Mint, however, says that in Tamil Nadu, which has traditionally been responsible for a high percentage of the country's yarn and garment exports–Bangladesh’s main export–, production is crippled by a lack of labour.

Why this shortage exists is not clear. Manufacturing is a key prong in India’s plan to follow the usual development path from agriculture (which employs 43% of the Indian population) to manufacturing (which employs under 12%). Suggested causes include low wages and how the industry is organized around clusters of small companies. In a well-functioning economy, both of these factors should adjust as companies consolidate and in the process of become more efficient and able to cover the required higher wages.

Another reason could be that the available workers are shifting to the state’s emergent electronics assembly industry but that raises questions about why factories are not relocating to other areas of the country where advanced industries have yet to take root. India’s biggest problem is often said to be an inability to create jobs. Oddly,  what is unfolding in Tamil Nadu suggests the problem is an inability to produce labour.

This leads to another issue. As underscored in a leader in The Financial Express, India has an export problem. Exports grew just 3% in the fiscal year concluding at the end of March and shrank in August. Some of this is due to the slow global economy but surely not all. It is simply still too hard to do business in India. Since the national election earlier this year, reforms have seemed to slow down. What does seem to emanate from Delhi–threats to foreign companies from a competition policy or border taxes or the creation of new production zones based on a Chinese model–seems only to aggravate concerns about a chaotic operating environment.

Future case study

Campa Cola was a popular brand in India in the 1970s and 1980s after Coca-Cola was forced to leave because it refused to give up its formula. It subsequently disappeared but has been acquired by Reliance, India’s biggest private company, and is being relaunched in the Reliance way, which means cheap prices and wide distribution, to take on Coke and Pepsi. It will be interesting to see whether it succeeds. The American giants are no strangers to low-end competition and Reliance, notwithstanding its dominance of oil refining, telecoms and the gargantuan weddings of its promoter’s children, seems, anecdotally at least, to have never developed the same level of trust among Indians as Tata, Bajaj, TVS, HDFC Bank, Hindustan Unilever and a handful of other major companies operating in India. That is because its success has relied on other factors. The refining business depends on engineering and scale and ensuring cheap supplies of oil from controversial sources are available and not blocked by countries with opposing foreign policies. The telecom business succeeded with the broad public based on very cheap prices. In theory, fizzy drinks are just soda, sugar and a bit of flavouring. Reliance will certainly provide that at a very low price and it has hired at least one former Coke bigshot. That would seem to be a compelling package. But others have failed pursuing similar strategies. To succeed, Reliance will have to become genuinely liked by the public. That will be an interesting test.  

Economic hubris

India’s “informal” sector, comprising agriculture, hawkers, watchmen, sweeping, loading, and innumerable other industries, survives in part because it is outside of the government’s reach. Thus, in a striking move, the government has imposed new minimum wages which, of course, differ for various categories and consequently will lead to issues of enforcement. The range, according to The Times of India, seems to be from Rs425 a day ($5.07) to Rs1,035 ($12.35) a day.

India’s troubled pharma industry

Tests by the Central Drugs Standard Control Organization, a government entity, found 48 drugs from 35 companies failed quality tests.  

News (almost no) one can use

Rolls Royce announced its new Cullinan Series II will be available in India for Rs105m to Rs125m (in excess of $1.3m). The company reportedly sells a few more than 60 vehicles a year in India and for that sort of buyer, prices may not matter.

The criminal side of public offerings

Bank of America has apparently suspended two employees for leaking information on secondary public offerings. A request for comment was not returned. Will tweak if I do hear back. Meanwhile, the Bombay Stock Exchange has warned investment banks to tighten up on due diligence, with hints that there have been failures in site visits and monitoring of odd accounting issues, such as sharp rises in inventories or sudden changes in results.

Could there be a weirder product in the universe of legal and illegal international trade?

Two men were arrested at the Mumbai airport for bringing in five baby crocodiles from Bangkok. Police told The Times of India they have yet to arrest the kingpin behind the operation.

American (non) voting overseas

American tax policy means Americans overseas face a vocational disadvantage and consequently even large outposts of big “American” companies employee few of them. A consequence is that absentee voting among people who really are absent does not get as much attention as theoretically might be the case.

But voting in particular is a big deal in any democracy and in recent years it has been a particularly big deal for America. It defines the direction of a country and who holds power. For citizens, it theoretically provides voice. Realistically, though, the voice of an individual citizen is unlikely to make a difference and consequently it is not worth their time to vote. That is why a difficult process can preclude engagement. But if everyone takes that position, democracy is lost so it is vital that the process be fair and efficient.

As a reporter, I do not vote if any of my coverage touches politics because I believe the press should not take sides. For a similar reason I am not registered with a political party. But I am by any definition a “natural born” American citizen, to cite Article 2, Section 1 of the American Constitution, and thus uncontrovertibly entitled to my country’s electoral rights. Consequently, the upcoming presidential election, which I am not covering, is an interesting moment for that right to be explored.

Much of the controversy in America this time around concerns the use of absentee ballots. One interpretation of this debate is that is serves as a pretext for the existing administration to use federal resources to harvest votes from people it believes will support its continuance power rather than any fundamental belief in universal democracy. But overseas voters do get a mention, albeit a relatively brief one, in the executive order announced by President Joe Biden on March 7^th, 2021 to use federal resources to ensure participation (see https://www.whitehouse.gov/briefing-room/presidential-actions/2021/03/07/executive-order-on-promoting-access-to-voting/). That made it interesting to see what would happen to an American voter in Mumbai.

The easiest way to ensure participation in what President Biden said in his order called “the foundation of American democracy” would be the participation of the American consulates and embassies in the distribution and receipt of ballots. They are, after all, outposts of the American government. Instead, following the instructions, I applied online for a ballot which never arrived. A friend who applied while in America had a similar result. That may be America’s fault or it may be the Indian postal system but in defense of India, it never volunteered to be a key pillar of a fundamental American right.

There is a backup plan online which I downloaded included various mis-labelled pdfs, such as one that said “security envelope” which was not an envelope, and some verbiage discouraging the use of tape in refashioning the paper because it would gum up postal machines. How then to vote? There was a number on the relevant website for the Mumbai consulate, but calls went unconnected. I decided to visit the consulate which can best be described as a well-fortified and provisioned bubble within Mumbai’s traffic-clogged new business district. Getting there from only a short distance away can take hours. The consulate had left on an outside wall of its main building a small box with a cheap lock and stickers that had faded in Mumbai’s brutal heat and rain where ballots could be crammed (see photo) but that still left open the question of how a ballot should be prepared and sealed.

Calls from a guard to a consular official for help led after much delay and resistance to his making it down to the air-conditioned interior side of a bullet-proof window from which he could speak through a hole to petitioners who were left to wait in the heat. He advised using glue and lots of tape to bundle up the forms but that seemed sloppy and contracted other instructions. He said it was just the way it was done. I asked about New York’s requirements for an envelope within an envelope, but he replied that sort of knowledge was beyond him which would make sense but for the wording of President Biden’s executive order which says federal government agencies shall promote voter participation by “assisting applicants in completing voter registration and vote-by-mail ballot application forms in a manner consistent with all relevant State laws” - see Sec. 3. (a) iii (A).  Perhaps that sort of thing should go on the foreign service exam.

I asked if I could have some glue or tape or appropriately sized envelopes (Indian envelopes are a bit different than American ones) but was told to go away and find them elsewhere, which inevitably meant a round trip possibly lasting hours on the traffic-clogged roads. And even then, it wasn’t clear if the package I managed to construct would work with the American postal service or qualify under the state and national rules Struck by the indifference to this fundamental right, I asked the diplomat: “how do you vote”?

He replied: “by diplomatic pouch”.

Could I do that as well,” I responded. “No”, he said.

A distinguishing characteristic of American democracy is that those in public service should not have privileged access to anything and certainly not the polls. But clearly in Mumbai, they do.

In India, voting is celebrated with the submission of a ballot accompanied by the staining of a finger with a special ink, which people then photograph. For the many in Asia, and particularly in India, American statements about democracy are often seen as grating hypocritical talking points to batter other countries while not being enforced at home. This crowd would see the consulate’s approach and respond with a laugh and an “I told you so”.

For Americans who think President Biden’s executive order was merely a strategy tied to use federal power to harvest the votes of voting groups he thought would favour his party rather than a heartfelt principle about fundamental rights, there would be a similar reaction, though maybe without the laughter. Because of this expectation, the order is now facing a serious legal challenge. And for those Americans living in America who think their State Department has become detached from the state it represents, it serves as just another little example that is metaphorically hugely important (what exceeds “the foundation of American democracy”?) even if, in reality, the non-votes of those in distant places are unlikely to matter.

For distribution in America