Urjit Patel’s Signature in Rs 2000 Note

15 11 2016

After the demonetisation was announced, the newly issued Rs 2000 has come into circulation. The Rs 2000 notes currently being issued have the newly appointed RBI Governor Urjit Patel’s signature. urjit-patel-signature

PM Modi and FM Jaitley have claimed that the preparation and printing of currency notes were being secretly done for the last six months. This would mean the Rs 2000 currency notes should have been under printing for the last six months.

But, Urjit Patel was chosen as the RBI Governor only on August 21, 2016 and he took charge from Raghuram Rajan only on September 4, 2016, just two months before the November 8th announcement.

Something is amiss. Either, the government is lying when it says it has been printing currencies to prepare for demonetisation from the last six months or they had decided  Urjit Patel as the next RBI Governor, atleast four months before the official announcement.

It can be speculated that when Raghuram Rajan made an announcement on June 18, 2016 that he would not take the second term as Governor, already Urjit Patel’s signatures as the next Governor were being taken in the new Rs 2000 note. This could have well led to Rajan’s decision to return to academia.

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 www.tatatrusts.org  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.

Money Changers of Dalhousie Square

9 11 2016

Money changers will have a field day from today for exchanging larger denomination notes with smaller ones, after the govt announced the demonetisation of Rs 500 and Rs 1000 currency notes.

I am reminded of Kolkata in the 1990s. In Dalhousie square, Kolkata, the RBI and the GPO are very close by. Outside of GPO, I used to find a lot of vendors, some standing and some sitting with a wooden desk carrying wads of crisp currency notes.

I was curious to know what service they were offering. I asked one of them. He was not eager to talk to me, because he knew I was not a potential customer of his. I approached another one and he was kind enough to explain to me.

Their service was converting smaller denomination old notes to Rs 100 and Rs 500 new crisp notes( Rs 1000 currency notes came only in 2000). This service was offered to the migrant labour from Bihar and eastern UP. These labour used to remit money to their family in villages. They did not use a cheque or Money order. They used to send crisp currency notes in insured letters from the GPO. The money changers would also offer the service of putting the currency inside the envelopes and writing the addresses for the illiterate labour. I heard, occasionally, by a sleight of hand they would insert one or two currency notes less.

My friends from Kolkata tell me these money changers and their unique service continues to this day.

The US-India real estate link

9 11 2016

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

Nirmalya’s Jor Ka Jhatka..Dheere se

7 11 2016

Nirmalya Kumar, a former member of the Group Executive Council of Tata Sons has written a blog post, “I Just Got Fired“. You can get the link to his post here. The post has gone viral and has appeared in many publications.

At first reading, it is a personal account of a senior person’s firing by a corporate.  By using phrases like “No pity is needed” and “ I have nothing negative to say about the Tata group” he creates an impression that this post is not a way of complaining or hitting back at his former employers who fired him. By using “I realize that I am unemployed for the first time since the age of 18 and “Well, a bit lost, and ready at 8:30, instead of the usual 8:00, I head for my morning Starbucks coffee “, he tugs the heartstrings of his readers.

He mixes up the criticisms and his emotions, so cleverly, that you only realise after multiple readings that , this post is a subtle attack at some of the popular  beliefs about Tatas as an employer and as a business group.

Let me elaborate with examples :

  • “Despite the unceremonious and un-Tata like end”

This phrase clearly dispels the popular belief that Tatas do not follow a hire-and-fire policy. A popular perception among the employee community is that a  Tata job is very secure. By using “un-Tata”, he has brought out that Tatas are not what you think. Another aspect is that Tatas are not always graceful and dignified as they appear.

  • “What I found exceptional about the group was the kind of person that Tata attracts – unpretentious and dedicated. Yes, they really drink, as we would say in America, the “koolaid” of Tata. But I observed how hard they work, and how committed they are to the group and its values. “

This to my mind is the nastiest that Nirmalya gets. By praising the average Tata employee as hard working, dedicated and unpretentious, he gets them on his side and then he says “they drink the “koolaid” of Tata”.

Drinking “koolaid”  is an expression that is a reference to the 1978 event at Jonestown, Guyana, where hundreds of members of the Peoples Temple, a Californian cult, committed suicide by drinking Kool-Aid laced with cyanide.

He is clearly hinting that the gullible employees of Tatas are blindly believing the cult of Tatas without knowing the consequences of their faith, which could be disastrous.

  • They deserve a great Chairman.

He could not have got more direct than this one. He clearly feels the current one is not good enough.

  • It was not as if I was fired for non-performance (my last evaluation was excellent).

By this statement, it is apparent that Tatas do not follow any performance management system, despite their claims of professional management. They also are not fair and just with their employees, if the person belongs to a different camp.

  • When in future anyone mentions me, please don’t say anything positive. Throw me under the bus to gain credibility in the new regime. It’s my parting advice.

This parting advice is revealing of the insides of Bombay House and the Tata culture. Bad mouthing the previous bosses and blaming those who are no longer in favour and around to defend themselves, appears to be a sure ticket to succeed.

Tatas in their web-site have said the ” Dr. Nirmalya Kumar, Dr. N S Rajan and Mr. Madhu Kannan have decided to explore options outside Tata Sons and have left the services of the company.”  By writing this post and titling it as “I just got fired” he is openly saying that Tatas are lying when they say the GEC members have left on their own, when actually they have been fired.

Forget about all the exalted Tata values and ethics, one of the basic value is telling the truth and even on that count Tatas fall short.

Nirmalya Kumar through this one post has created such an adverse impact particularly among existing and potential employees of Tata group, that it will take a lot of corporate communications effort to undo the damage.

  •  Posted by G.Mohan

Nirmalya Kumar has posted a follow-up to the above post titled “Just Fired, and Moving On”. 

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