How LIC systematically derailed the retirement plans of many Indians ?

Max Life Insurance has conducted “India’s Retirement Index” study based on an extensive urban survey ( 1816 respondents) . Here is the link.

I am just taking an important finding from the study. To a question asked to the respondent ” Hpw long will the savings last into retirement ? ” .

– Only 18 % say Entire retired life

– 27 % say ” 10 years and above”

– 30 % – 5 to 10 years

– 26 % – 5 years

In other words, majority ( 56%) of the respondents fear that they will run out of savings within 10 years of retirement. Given the rising life expectancy, for most the retirement life is expected to be longer than 10 years. For some it may be a lot longer.

Now, why have they landed up in such a situation. It is a combination of all of these factors

1. Inadequate savings during their working/ earning life

2 Started saving late for retirement and so lost the benefit of compounding

3. Choosing wrong investment avenues

The first two are clearly an individual’s responsibility. Even the third one is an individual’s choice but I will try to qualify that by elaborating how an individual gets deceived by the system unwittingly.

As per the same study, 67% of the respondents feel that “Life Insurance policies” are the best investment product for retirement.

LIC is by far the market leader in the Life Insurance space and it is a rare Indian who does not have an LIC policy.

I have seen how young employees and others get sucked into buying LIC policies. LIC policy is often bought by a push from a colleague whose relative is an agent or some relative or a friendly uncle who is a parent’s friend. The policies are chosen based on how much savings are possible monthly or annually. Often the tax benefit is shown as the immediate carrot.

Once the policy gets in motion, the premium is paid periodically. The policyholder in the meanwhile has lot of demands on his/her monthly income. He/she is just happy paying the premia with some hope that a long term nest egg is getting created. At the time of buying the policy, the sum assured or the amounts to be received on maturity or periodic moneybacks look attractive. But when they are received, they no longer seem big or even adequate for the financial goal.

Culprit- Inflation.

How Life Insurance policies or LIC have let us down ? Prima facie, there is nothing wrong with LIC. It provides decent customer service. It honours the claims. It has a wide network of offices through which its products are sold and policy holders are serviced. Its online services are good and comparable with most private insurance companies.

Where, LIC has failed big is in giving decent returns to its policy holders. Most schemes have yields only between 4-6 % per annum. In an inflationary economy like India’s, with average inflation being higher than 6 % p.a per annum, the real return on the savings made through LIC has been negative.

LIC is either a bad investor or it does not share the returns with its policy holders.

LIC is one of the biggest investors in the Indian stock markets. The rolling returns for 20 years of BSE SENSEX in the last 5 years is between 11%-12 %. By that yardstick, LIC’s investments in equity should have yielded 11-12 % p.a or higher. If it is generating lower return on its equity portfolio, it means that it is using considerations other than policyholder’s interest in its decision making. Its owner the formidable Govt of India directs LIC to buy PSU stocks or sick banks like IDBI Bank to bail the government out. LIC is also called to intervene when there is a big correction in the market.

Periodically, LIC management announces that they have booked big profits on their equity investments. But there is no transparency in their accounts. If they are making good returns, they are clearly not sharing it with the policy holders. Maybe, they are just giving it to their owner, the Government of India. LIC is a pet of the Govt of India.

Whichever be the party in power, the importance of LIC for the government is next only to the RBI… When LIC goes public, I wonder how they would increase transparency about their business and accounts.

Where the policyholders have gone wrong ?

By choosing LIC policies for retirement. They believed that LIC policies were long term savings cum insurance cum tax saving instruments. The money being saved will take care of their retirement By giving inadequate returns, LIC has systematically derailed the retirement plans of lakhs of Indians. You cannot even blame the LIC because they never promised high returns.

  • Posted by G.Mohan on his Facebook Page on 17th December

Kunji for the Whatsapp University

I am sure almost all of you , who are on Whatsapp , would have received this meme. I got it in four different groups. It means clearly the meme has gone viral.

Does this meme pass the ‘mum’ test ?. .

Will your mother who generally does not follow business news, understand this meme fully. I doubt it.

She will surely understand the message but not the images fully..

I tested this even with my MBA class group. They could not identify all. I think three CEO images will pass the mum test.

Sundar Pichai, second from left, Satya Nadella , third from left are both well known.Parag Agrawal, fourth from left who has become famous overnight.

Now let me tell my mum about the three others.

The one on the extreme left is Shantanu Narayen. This Hyderabadi is an alumnus of Osmania University..He was the long standing CEO of Adobe..Adobe is a software company known for its pdf reader and Photoshop.

The one on the extreme right is Arvind Krishna ..He is an IIT Kanpur alumnus and is the current CEO of IBM…IBM is the original computer company when people did not separate hardware and software..A bit boring company now , it is still huge.

The one second from right is Dinesh Paliwal. Dinesh Paliwal is perhaps the least known in India..He was the CEO of Harman International. This alumnus of IIT Roorkee was CEO of Harman from 2007 to 2020. Harman is known for its audio products like Harman Kardon , JBL, AKG

Whatsapp University content also needs study notes ( Kunji) at times ..I am happy to provide one.

  • Posted by G.Mohan on Facebook on 1st December

From paparazzi to datarazzi ?

I heard the word ‘paparazzi’ first in connection with the news concerning Princess Diana’s death.

Paparazzi are photographers who follow celebrities and click them to sell to a newspaper.

For newspapers, any news around celebrities has value…Fans of celebrities want to know everything about their stars. Not just cricket news about cricketers or the next film of their favourite star. Fans want to know the dress they wear , the friends they socialise with, the holiday locations they chill out in and the way they live.

Remember the number of stories in press that came out when the Ambanis built their Antilia. And now we see news about their London property. There is a childlike curiosity about the palaces of modern kings and queens !

Whenever I have passed through some posh localities like Jubilee Hills in Hyderabad, Alipore in Kolkata, Poes Garden in Chennai or Bandra in Mumbai , I have seen a few houses with very tall gates and compound walls so high that you cannot see the building behind. I then ask anyone accompanying me including the driver who it belongs to. Mostly, it will belong to some celebrity.

Obviously, the celebrities are protecting their privacy from the paparazzi. Now the celebrities have a new threat to their privacy. The property registration data are now available online. There are sites like zapkey.com that offer information on large property deals mainly aimed at the real estate dealers. These provide data on things like the buyer, seller, size of the house, deal size, property tax etc.

The journalists covering Page 3 are now scouring these sites to look for familiar celebrity names and create stories around celebrity houses. These are the datarazzi. I clicked one such story in FB of a bungalow bought by PayTM founder VS Sharma in Golf Links , Delhi… As I should have expected, I now know about Harbhajan’s and Abhishek Bachchan’s bungalow deal also !!! šŸ˜

I wonder if celebrities feel good or bad about these stories. They buy expensive bungalows in tony neighbourhoods to show off their success and then make great efforts to guard their privacy from the paparazzi.

  • Posted by G.Mohan on his Facebook page on 26th November 2021

25Virender Gupta, Rajendra Nargundkar and 23 others21 commentsLikeCommentShare

Dharmendra and Rajdoot

Rajdoot was a popular motorcycle in the 60s and 70s..It was made by Escorts..Coming from a tractor manufacturer, the motorcycle was popular among the rural riders.

In urban centres, where Yezdi and Bullet were seen as more stylish, Rajdoot was called a ‘doodhwala’ motorcycle. Dharmendra did very few advertisements.

The one TV Commercial that has stayed with me is his endorsing Rajdoot.In the advert he plays himself..He has a He-Man attire. He can be seen driving the Rajdoot in the muddy roads of the villages. The people he meets on the roads are the typical farmer folk, who are also his typical fanbase. The ad ends with Dharam paaji’s booming voice.

One good example of where the celebrity’s image and product fit is excellent. It makes a memorable advertisement. Remembered this ad today on Dharmendra’s birthday.

Happy birthday Dharmendra.

  • Posted by G.Mohan on his Facebook Page on 8th December

Ola Electric – Nano or Tesla ?

Occasionally a model comes that generates a lot of excitement among the prospective buyers. The company and the personalities behind it are hyped up by the media..Every small bit of news is presented like the way celebrity weddings are tracked and reported. . .

Remember Tata Nano. The car that was supposed to completely change the small car market in India. It was supposed to upgrade two wheeler buyers to small car users. It did not.

Tesla, the electric car announced Model 3 , a relatively inexpensive electric car. It had a lot of hiccups in its development and delayed deliveries. But it came out tops and is the top selling electric car in the world. Tesla is valued at over a Trillion $ and its CEO Elon Musk a rock star.

Anticipation surrounding Ola Electric scooter is similar. It has got a huge number of bookings. Sneak previews and photos are coming out. Ola Electric delivery was supposed to start in October. It has now been postponed to December 15. It may once again get delayed as people say the product, the factory, the supply chain and all have huge problems.

Fans of Bhavesh Agarwal, the CEO of Ola , think that he can make things happen like Elon Musk. Billions of $ of VC money is riding on him.

Will Ola Electric succeed like Tesla or fail like Nano ?

  • Posted by G.Mohan on his Facebook page on 9th December

The unreliability of Uber/Ola

As we get back to the normal business of travelling and going about the city, the need to book cabs have increased.

It is clear, atleast in Hyderabad, Uber and Ola are not the same as they were Pre-COVID. They have become undependable

– Long waiting times ( Fewer cars ?)

– Frequent cancellations

– Drivers calling to know your destination and then deciding whether to accept the rides or not

– Old run down cars

– Fares are very steep ( this I can attribute to an extent to fuel hikes )

One cannot plan important events , such as catching a flight by depending on Uber/ Ola.

Maybe it is time we get back to our old arrangements.

  • Posted by G.Mohan on his Facebook page on 20th November

Volvo as a generic name for a comfortable long distance bus

Yesterday, while travelling to work I saw a few road rollers quietly levelling the road. Having mostly seen the noisy big machines in the past, this one looked different. I noticed the name on the machine, Volvo.

Then my mind went whirring about Volvo…Volvo is a big Swedish multinational known for its cars, buses and trucks. They seem to be in construction equipment also.

Volvo cars have a clear positioning as the safest. Having ‘developed/invented’ the seat belt and air bags, they have always marketed their cars on their ‘safety’ features. I do see a few Volvo cars on Hyderabad roads…Not many.

For Indians, Volvo means a comfortable bus suitable for long distance. It has become a generic name for an AC Semi-Sleeper/ Sleeper bus with a low base, comfortable seats and having excellent suspensions that makes the ride comfortable.

Volvo launched their premium buses at a time when India’s highways became broader and better. Suddenly, people were willing to leave the overnight train for a bus ride. Typically 500-1000 km could be covered in a night.

Bus operators, public and private, all saw Volvo buses as perfect answer for long distance bus services.

Volvo entered late in the duopoly enjoyed by Tata and Ashok Leyland by offering a premium product priced much higher than the leaders and took the market away from them. When you see a Tata or a Leyland bus painted Volvo at the back, it just means that Volvo has become the generic name for a comfortable long distance bus. The operators know it and the passengers know it.

When you hear ‘Volvo’, what comes to your mind first ?

  • Posted by G.Mohan on his Facebook page on 25th November

What Soviet Union is to Indian manufacturing , GE is to Indian IT industry

As General Electric (GE) gets broken up into three companies, there are many stories in the business press in US about the various reasons behind the decline. The business press loves to build up a company as a shining star and then pulls it down when chinks appear. The successes and failures are both exaggerated.

How should India or Indians view the GE story ?

Indian steel, defence and manufacturing industry in the 50s and 60s was built on help from Soviet Union. At a time when no one recognised us or believed we could build an indigenous industry the Soviets came forward and helped us. Obviously, it was not charity. They had their self interests. But no one can deny their help.

Similarly GE , Jack Welch particularly, believed in the power of Indian IT services. In the late 1990s TCS got 30 % of its revenue from GE alone. The success with GE opened doors for Indian IT Companies in other Fortune 500 companies. To this day, 60 % of revenue of Indian IT comes from large US companies only.

If Soviet Union helped us build townships like Bhilai, Bokaro and smaller townships around HEC, HAL plants etc , Gurugram (Gurgaon) owes it to GE..The satellite city came because of friendship between KP Singh of DLF and Jack Welch of GE..The entire BPO industry in India was seeded by GE in Gurgaon.One can say in hindsight , if GE had not done it someone else would have done it. But the fact that they did it is undeniable.

Those of us who teach management, General Electric is our staple diet. What Russia is to Chess, GE is to Management..No one can snatch that credit from them. Ratan Tata and Tata group was completely sold on the GE model of developing managersā€¦He even brought in Manab Bose from GE in his core teamā€¦Tata ManagementTraining Centre was copying GE’s Crotonville training centre.

Just like many of us love and believe the rubbish about Russians and Soviets as depicted in Hollywood or Bond films , we should not fall for the rubbish on GE written in American business press..They are just prisoners of the stock priceā€¦Writing decline and fall stories of greats gives pleasure to journalists. Whatever financial and other shenanigans GE might have used in their business and finance, Indian IT industry benefitted a lot from GE and owes a lot to GE. Their contribution to professional management is also solid and irrefutable.

  • Posted by G.Mohan on 17th November

Higher education is a financial decision also

In the past investment in higher education was a no-brainer…It paid back quickly and later big also.All the other benefits like life skills,network, social status were the bonus.

Now with higher education becoming expensive and job markets being uncertain, the decision to pay high fees for higher education is no longer an easy one ..It is no longer a career decision only , it is a financial decision also.

My advice to parents is that just like you will buy a car or a house within your means , choose the course and the university for your wards based on your means…A little bit of risk and a little bit of stretch is fine. To illustrate, if in order to to fund an Indian higher education degree itself you have to take an education loan , please do not take a bigger education loan to send the child abroad. Even payback from foreign education has become extremely uncertain.

Do not delude yourselves with old beliefs that higher education is always good investment.

Posted by G,Mohan in his Facebook Page on 14th November

The privileges of growing up in Bhilai Township

I grew up in Bhilai, earlier MP, now in Chhattisgarh. We lived in the quarters provided by the Steel Plant, now part of SAIL.

My classmates and schoolmates who grew up in Bhilai township have distinguished themselves well in their careers and life not only in India but abroad also.

Good schools, peer pressure, great role models have all helped us in these achievements.

Girls of Bhilai have done as well or even better than the boys. This in no small measure is due to their talent, efforts and their families.In this post,

I would like to highlight how the Bhilai township in 1960s and 1970s helped the girls and women. The privileges that Bhilai township provided would not be apparent but it sure helped us in a big way.

Let me start with water. Every quarter, be it a small one room one or a big bungalow, in the colony got piped filtered drinking water. It was not 24 X 7. Twice a day, at appointed times, water was available. The quantity was adequate. The quality was so good that we used to drink water straight from the tap or hosepipe after a tiring game in the sun.

In India, responsibility for water is often on women. If water is not available on tap, it has to be brought from a well or a pond or a public tap. This water needs to be boiled and filtered. Even then they may not be healthy. This may lead to children becoming sick. The burden of sick children is often on the mother.

Piped filtered drinking water liberates the woman. It gives the woman extra time and energy that can be used for more productive purposes. Piped filtered drinking water on tap would be a privilege even today in India, to have that in the 1960s in Bhilai was such a privilege.

The township provided us a reliable and subsidised electricity supply. Electricity availability was taken for granted. Occasional power cuts were there but nothing that would disrupt the routines in a big way. I have heard from friends who tell me that in there small towns they had to plan their routine around the 4-5 hours of daily electricity supply. I have myself lived in the load-shedding days of Calcutta.

Reliable electricity supply meant Bhilai township residents could use all the gadgets that simplified household work. Boys and Girls could burn the midnight oil and study, without any fear of non-availability of light.

In the 60s and 70s, Bhilai was very safe. It had excellent street lights. You could return merrily from a night-show at Chitra Mandir after 12 O clock. I realised this was a privilege when I moved to Ranchi in ’80s when everybody was advised to get back home at 7 PM.

How this helped girls ? My sister then a college student used to return alone in her bicycle after her tuitions at 9.00 PM almost every evening. This certainly helped her career.

When I was growing up these privileges were not apparent to me. I thought all places were like this only. Only when I started living in other places, I realised Bhilai township was a well-planned urban island, a model township, way ahead of the rest of the country.

Thank you Bhilai. Thank you Bhilai Steel Plant.