One Month Since #Demonetisation : Linkfest

11 12 2016

On December 8th, 2016, it is one month since the Demonetisation was announced. After 30 days, many columnists and commentators have written pieces to look at this rather disruptive event in Indian economic history. This topic refuses to leave the headlines, as India is struggling to get hold of cash to get on with their daily lives. The Government has gone on a overdrive to make India adopt digital payments and become a cash-less society.

  1. Twists on the road by T.N.Ninan in Business Standard
  2. India’s cash bonfire is too much too soon by Kenneth S.Rogoff in Financial Times
  3. Fifth column : Murmurs of trouble by Tavleen Singh in The Indian Express
  4. Demonetization will cause grievous injury to the honest Indian by Manmohan Singh in The Hindustan Times
  5. “‘Modi has intense desire to do something but lacks imagination”says Ashis Nandy in The Wire
  6. India’s demoetization debacle by Sadanand Dhume in Wall Street Journal
  7. India’s botched war on cash by Bhaskar Chakravorti in Harvard Business Review
  8. Modi’s attempt to crush the black economy is hurting the poor in The Economist
  9. April 2017: Earliest India will get it’s cash back by Sahil Kini in IndiaSpend
  10. War on black money : Demoentization is a courageous reform that will bring substantive benefits by Jagdish Bhagwati and others in Times of India
  11. A monumental disaster in offing by James Wilson in his blog
  12. Costs and benefits of the currency swap I and II by V.Ananta Nageswaran in Mint


Newspapers are conducting surveys to assess the impact of Demonetization in the ground

  1. Demonetisation: Consumption down, but cash ban gets a thumbs up in Economic Times
  2. Express survey : 41 % feel government did not plan well for demonetization in The New Indian Express

The link to the earlier Linkfest on Demonetisation is here.Link 


Cash in the Wallet

14 11 2016

The announcement on November 8th by government to demonetise Rs 500 and Rs 1000 currency notes came like a sudden surprise to Indians. This announcement was followed by one day of banks ATM closure and an additional day of ATM closure.

Even the tax paying, educated middle class, who had nothing to hide by way of black money, was confronted with the challenge of how to pull through the next few days expenses with minimum cash using the lower denomination notes of Rs 100, Rs 50 and lower.

Even after the banks and ATMs opened from 11th November onwards, there were limits prescribed by RBI for exchange, withdrawals and ATMs. Also, the queues were very long and there was considerable pain to be experienced in withdrawing one’s own money.

That is the time, when I was faced with a question of how much cash to withdraw and keep in the wallet. In days when banks and ATMs would be functioning normally, I would draw a large amount in the beginning of the month for all the monthly payments and then I would withdraw a smaller amount sometime in the middle of the month for the  rest of the month’s expenses.

By withdrawing nearly 15 days expenses at one go, I was essentially losing out on some savings bank interest and also running the risk of losing money, if I lose the wallet. But this costs and risks were entirely mine. But in a cash crunch, if I overdrew, someone else was not getting the essential cash for their needs.

I knew that cash in the wallet or house is a psychological thing. So, I ran a straw poll among my friends on Facebook. I asked them, how many days expenses they would keep as cash in their wallet or house. There were 23 responses in all.

A. Less than 2 days – 3
B. Between 2 and 4 days – 2
C. Between 5 and 7 days – 8
D. More than 7 days – 10 

It is a biased sample of my friends so they are majority male, urban, salaried class, highly qualified people with families. The median age would be 45 years.

From this poll,it appears even when people have cards and electronic wallets, they find comfort in keeping 7 days or more expenses in the form of cash in their wallet. Many mentioned that they have 15 days of expenses in the form of cash with them.

My friends seemed to be quite like me. But it set me thinking, is this appropriate in this time and age ? Is there a need for so much cash in the wallet or home ?

Talking for myself, I reflected on why I was keeping 15 days expenses as cash at most times. I could think of the following reasons :

  • Habit –  Being a salaried person, most expenses are bunched at the beginning of the month. Going to bank in the beginning of the month and withdrawing money for monthly expenses has become a habit. The only change now is instead of walking into a bank branch, I visit the neighbourhood ATM.
  • ATM limits – As there are upper limits of daily withdrawal in most banks ATMs, I am compelled to go one more time at least during the month. This I normally time it in the middle of the month or when cash situation reaches below a limit.
  • Comfort of cash – Despite the cards and PayTM, when I set out of house I feel there should be enough cash. Just in case, I need it.No logic. I am gone past the age when I used to keep less cash in the wallet to avoid impulse purchases. These days, most spending is done on the cards and yet the cash continues to occupy the wallet. While travelling this fear multiplies, even when I know most airports and cities I go to have ATMs.
  • Emergency – As a family person, one wants to be prepared for a sudden health issue or be prepared to travel at short notice. But actually when they come, the 15 days expenses that you keep in the form of cash may be too less, so you end up rushing to an ATM immediately. Also, most hospitals and airlines would accept cards.

Most people of my age who started earning and spending money before the cards and ATM era, would continue to believe and hoard cash than is necessary because of old habits. This demonetisation exercise gives us a chance to recalibrate our cash requirement.





Ratan Tata’s Succession Plan was Incomplete

14 11 2016

After the October 24, 2016 unceremonious exit of Cyrus Mistry as the Tata Sons, Chairman and reappointment of Ratan Tata as the interim Chairman of Tata Sons, many media commentators are saying that Ratan Tata reversed his decision of 2011. In 2011, he chose Cyrus Mistry as his successor by appointing him as Vice Chairman. In 2012, Cyrus was appointed as Chairman of Tata Sons.

By appointing Cyrus Mistry as Chairman of Tata Sons and later as Chairman of the various operating companies it appeared to the world that Ratan Tata had chosen his successor and has quietly gone into retirement. He did not entirely. He had kept an important lever of control with himself. He remained the Chairman of all the Tata trusts.

To the world Tata trusts, may appear as some charity arms of the Tata group, they are more than that. Tata trusts own 66 % of Tata Sons Ltd, an unlisted public limited company. Tata Sons Limited is the holding company that has the promoter status in all the operating Tata companies where stakes vary from 26 % to even 100 %.

By remaining as Chairman of all Tata Trusts,  Ratan Tata did not give the most important lever of controlling the group to Cyrus Mistry. He used that lever to appoint directors in Tata Sons and also to oust Cyrus Mistry as Chairman.

Only for a brief while, the Chairmanships of Tata trusts and Tata Sons were in two different hands. When Ratan Tata took over as Tata Sons Chairman in 1991, JRD Tata remained as Tata trusts chairman until his death in 1993. After which, Ratan Tata took over as the Chairman of Tata Trusts.

It appears, the 66 % stake in Tata Sons by the Tata trusts will also allow Ratan Tata as Chairman of Tata Trusts to even oust Cyrus Mistry as a Director ofTata Sons Ltd, if they  call an EGM. This will violate an old tradition  where a member of the Shapoorji Pallonji Mistry family sits on the board of Tata Sons for their 18 % stake in Tata Sons as this Forbes article brings out

Shapoorji was smart enough to see his 17.5 percent stake was no match for this. His family was limited to having just one seat on the Tata Sons board, which is the case even today. His shares also gave him no authority to nominate board members and the company’s existing directors were all loyal to JRD. 

Shapoorji was also smart enough to see there was more value in him letting JRD’s team grow Tatas than in trying to do so himself. “He was practical, he was not aggressive,” a Tata insider says. “He committed to JRD that he would never vote against Tatas.”

It appears that the gentleman agreement between Tatas and Mistry family that continued for eight decades has got broken now. As Cyrus Mistry has already gone against the Tatas, Ratan Tata will see Cyrus Mistry out of Tata Sons board too.

Ratan Tata has the golden key because he is the Chairman of the Tata trusts. It is revealing that even before the unfortunate incidents of October 24, Cyrus Mistry was never even a trustee in any of the Tata Trusts. For those who speculate that whether Noel Tata, the half brother of Ratan Tata could be a successor to Ratan Tata after the four months period, it is revealing that Noel Tata is also not even a Trustee in any of the trusts. For a complete list of trustees visit  and Dorabji  Tata Trusts. Names like R.K.Krishnakumar, N A Soonawala and his former Executive Assistant R.Venkataraman appear in several boards.

The next Chairman of Tata Sons  would have to contend with a Board of Trustees who are well into their 70s and 80s. Also, given the unique structure and recent bitter experience, the Chairmanship of Tata trusts would not be given easily to the next Tata Sons Chairman.So I reckon that even after four months the succession plan would remain incomplete, even if a new Tata Sons Chairman takes charge.

Linkfest on Demonetisation

10 11 2016

On 8th November, PM Modi announced demonetisation of Rs 500 and Rs 1000. Here is a selection of articles by various economists and commentators on this big decision.

  1. Demonetization – Witless and Anti People by Prabhat Patnaik in Citizen
  2. Surgical strike on old Rs 500, Rs 1000 notes by Ajay Shah in his blog

  3. NDA Demonetises Rs 500 And Rs 1,000: Modi’s Surgical Strike Against Black Money Stuns All by R .Jagannathan in Swarajya

  4. Here’s What Raghuram Rajan Thinks Of Currency Demonetisation in Huffington Post

  5. Introduction Of Rs. 2,000 Notes A Puzzle: P. Chidambaram in NDTV
  6. Note demonetisation: 86% of Indian currency has been frozen overnight by Anupam Gupta in Scroll

  7. India’s ill-timed paper chase by Andy Mukherjee in Bloomberg
  8. Modi move a huge blow to purchasing power, may backfire on PM : Swaminathan Aiyar in ET
  9. How long India will get all its cash back – Sahil Kini in LinkedIn
  10. Demonetisation : we are paying the price for loving cash too much – R.Jagannathan in Swarajya
  11. Theatrics on Black Money : EPW
  12. No proof required : Big Bang or Big Thud : Surjit Bhalla in Indian Express
  13. Wealth transfer from rich to poor : Bibek Debroy in NDTV
  14. You have been warned : Pratap Bhanu Mehta in Indian Express
  15. Demonetization is a hollow move : Pronab Sen in Mint
  16. Even as world changes under Trump, India’s currency shortage will stay for months : Saumitra Chaudhuri in Economic Times
  17. Wiping India’s blackened face : Gautam Pingle in New Indian Express
  18. Committing suicide also radical, says Arun Shourie on notes ban in NDTV
  19. Demonetisation to drag down FY18 Growth to 5.8 % : Ambit Capital in Mint
  20. Demonetisation is a game changer : Deepak Parekh in Quint
  21. Most sweeping change in currency policy in the world – Larry Summers and Natasha Sarin in his blog
  22. India’s currency exchange and the curse of cash – Kenneth Rogoff in his blog
  23. Demonetization in a booming economy is like shooting at the tyres of a racing car – Jean Dreze in Economic Times
  24. Former RBI Governor Y.V. Reddy on Black Money, Tax Evasion and Lawlessness in India – YV Reddy in The Wire

  25. Six battlefronts for the war on corruption– Vijay Kelkar and Ajay Shah in Mint
  26. The cashless economy of Chikalthana – P.Sainath in PARI

  27. Purging the poor – Mukul Kesavan in The Telegraph
  28. The chattering classes just don’t get this surgical strike – Swapan Dasgupta in TOI

  29. 10 Pieces That Dissect Threadbare Demonetisation And Its Aftermath – Huffingtonpost
  30. Demonetisation: The good, the bad and the ugly – Montek S.Ahluwalia in Mint
  31. Revenge No Development Strategy: Populist nationalism cannot paper over economic chaos unleashed by demonetisation drive – Ruchir Sharma in ToI

  32. Subir Gokarn hails monetisation, needs to be done frequently – Economic Times
  33. S.Gurumurthy explains why demonetisation was needed and how it will help the India growth story – Swarajyamag

For following all the news and views as it is happening on demonetization, you can also follow the Liveblog in Medianama.

The US-India real estate link

9 11 2016

A real estate tycoon in White House
Indian real estate tycoons in dog house

Tata vs. Mistry: Shaan* vs. Strategy?

3 11 2016

Tata Sons in their rejoinder to the leaked Cyrus Mistry letter have said ” The tenure of the former Chairman was marked by repeated departures from the culture and ethos of the group”

What is the culture and ethos of the Tata Group that Cyrus Mistry seems to have deviated from ?

Tatas are pioneers in Indian industry. They are founders of the many businesses that are part of the group. Due to their founder status, they consider themselves as owners. Owners, they are not. They are only part owners, sometimes even with minority stakes.

Till the 1960s, when managing agency system was prevalent, Tata Sons with a single digit stake in their companies used to control a big empire. After this system was abolished, Tatas created a complex web of cross holdings, which helped them keep management control. The government which often held majority stakes in these companies through FIs, just played along.

After liberalisation, Ratan Tata realised that he had to increase the stake in many companies in order to keep control. Here, he hit pay dirt with TCS. TCS was a division of Tata Sons till 2004. ( In an internal presentation made to employees, FC Kohli, then DIC of TCS, said that Tata Sons had invested Rs 25 lakhs in TCS in 1968, after which TCS never went to Tata Sons for capital ). The profits of TCS was used to increase the stakes in the Tata Group companies significantly.

Thanks to TCS, Tata group could maintain its “shaan” as the leading business house of India with business interests ranging from salt-to-software. Even today, dividend from TCS is the single biggest source of cash for Tata Sons and the TCS board religiously declares a fairly high dividend quarter after quarter. ( read this article by Jaggi in Swarajya)

Unfortunately, there are large parts of this conglomerate that do not generate adequate profits, some even incur losses. Tata group, overall has poor return on capital employed. This was being questioned and to a small extent even being rectified by Cyrus Mistry. This did not seem to go down well with the Tata Sons board, particularly Ratan Tata.

So the departure from culture and ethos seems to be whether we should continue to portray that we are a large conglomerate with companies in every sector or we run a profitable business with focus in a few areas.

In the first round “Shaan” seems to have won over strategy.

*Shaan is a Hindustani word which does not have an exact English equivalent. Pride comes close.

Lessons from Paddy’s career in Tatas

3 11 2016

S.Padmanabhan ( Paddy) former Head-HR of TCS, has now become the Chief Human Resources Officer of the entire Tata Group. What does it tell us about careers in large organisations. When the politics of the place changes, your career can change overnight.

In large organisations, politics and internal power structures influence a lot. If you suddenly face a demotion, you do not need to do anything remarkable to come back. You just have to hang around. Suffer some ignominy, some humiliations, sudden loss of power and relevance. Just plod along, accept whatever roles the large organisation gives you. In the case of Paddy he moved from TCS to Tata Power ( a much smaller co) and then to an absolutely sinecure and inconsequential position as the head of Tata Quality Management Services.

When Cyrus Mistry got replaced, suddenly the whole politics of Bombay House changed. Paddy and many other veterans’ fortunes have changed overnight.Paddy who was found not good enough for even one company i.e TCS, suddenly becomes the boss of HR of the entire Tata group.

If Cyrus Mistry had continued, perhaps Paddy would have retired quietly with no one knowing where he went.

The quality to succeed in large organisations is resilience and having this understanding that internal circumstances of your organisation have a huge role in your success or failure. You just have to be around and not do anything silly.

You can go from to hero to zero and become a hero back again.


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