TECHNOLOGIES AS SOLUTIONS

Technologies as solutions


Just like open ended mutual funds have made investors' focus short term, so, perhaps, has 5 year democracy made political focus short term. They care little about strategic planning for the future, unsure, as they are, about being re-elected. Their policies leave, in their wake, messes for others to clean up, since they lack the political will to take necessary but unpopular action.

The cleaning up is left to judiciary, as evidenced by the Supreme Court judgement compelling transporters to use cleaner CNG, instead of diesel adulterated with subsidised kerosene, which was asphyxiating Delhi. The politicians nor the bureaucrats had the gumption to take on the mafia that benefitted from such adulteration (they still don't! and continue with an incorrect subsidy delivery mechanism).

Technologies are also coming to the rescue, but politicians, again, are slow to adopt them, for want of a long term interest in bettering society. Consider, e.g. inclusive banking. There is much talk about banking not having reached the majority of villages, as setting up a brick and mortar bank is unviable. This has many social consequences. One is the excessive reliance on usurious money lenders, with the consequent suicide of farmers unable to service such usurious debt obligations. Another is the huge appetite for gold/silver in the absence of safe alternatives to store savings (with banking services, financial products, such as equity, could replace, over time, savings in bullion).

As per the Economist of Sep 26, mobile phones can, if allowed, become banks. In Kenya, telecom operator Safaricom has launched M-PESA, a mobile money service, in 2007, and it has changed lives. Money can be transferred via sms, quickly, efficiently and cost effectively, without needing to set up brick and mortar branches. This is inclusive banking! Why has India not adopted it? Because of 'security concerns' (what if terrorists use it to transfer funds for funding their operation?). This concern is easily addressed by setting a limit on the amount transferred; just as ATMs have a limit on withdrawals.

Should mobile money be permitted, as, indeed, it ought, it would provide a fillip to the telecom sector. Telecom stocks were hit last week, after TRAI asked telcos to offer tariff plans based on 'per second' billing. Right now it is 'per minute' billing; hence the customer is billed even for a call lasting a second. Another fillip to the stocks would come from the long awaited auction of 3G spectrum, in December. They would then be able to offer a host of value added services. From January the telecom space would become interesting as mobile number portability (MNP) kicks in. The freedom this gives customers to switch from an existing operator to another one, would witness a lot of churn. It would result in even more competitive tariff plans and better customer service.

Mobile phones are also being used by farmers, e.g. to turn on/off their water pumps, through a device called Nano Ganesh.

Kamal Nath, Minister Roads, Transport and Highways, who is undertaking a transformative investment programme of Rs 3 lac crores in the road sector, wants a single road tax which will allow free movement of freight across states. The fact that we are unable to prevent stoppage of trucks at border crossings, in order that the State collects octroi, is a crying shame. It poses a senseless hurdle to the advantages of the huge domestic market provided by the federated structure. The border checkpoints are, basically, toll booths for corruption. The single road tax, if it helps supplant the asinine octroi system, would indeed be a boon. Here, again, RFID technology can help in identifying the cargo. This enables movement of vehicles without stopping, and the data contained on the RFID chip to be read by a scanner.

Basically, India has to undergo huge structural reforms. It is untenable that the 60% of the population that is dependant for its livelihood on agriculture, gets only 18% of national income. Something has to give.

So, for me, a rise in food inflation is a welcome trend, not a worrying one as expressed by most economists. Provided the additional income goes to the farmers and not to middlemen or hoarders. As yet, there is no worry of rising food, or other prices, and so the Government is continuing with an accommodative monetary policy. Australia became, last week, the first G20 country to increase interest rates. Others will follow. When they do, it would reduce relative attraction of equity versus debt.

The social impact of such an iniquitous distribution of national income manifests itself in Maoist/Naxal violence which resulted in the death of 27 policemen in Maharashtra, their gruesome beheading in AP, and declaration of war on them by the state. Investors ought to be alarmed at this turn of events.

The coming week will end in Divali, so here's wishing readers a Happy Divali


Coutsey: Jawahir Mulraj.