Zoo Station

Stephen Roach is back from his third trip to India. This time, he's ga-ga about the Indian consumer and India's domestic consumption-led growth model. In case you're wondering why an article by Roach matters, you certainly are underestimating the man's influence (for better or for worse) among the movers and shakers in finance and industry.

The consumption story -- the organic sustenance of sustainable growth and development -- casts India in a very different light. Don’t get me wrong -- the Indian consumer is hardly a powerful force on today’s global stage. As the accompanying chart shows, India’s per capita income and consumption levels are about half those of China’s. But it is growth at the margin that always drives powerful macro and market trends. And the Indian consumption story is, first and foremost, one of accelerating growth off a low base. The potential comes from the structure of the Indian economy: Private consumption currently accounts for 64% of Indian GDP -- higher than shares in Europe (58%), Japan (55%), and especially China (42%). India’s transition to a 7% growth path in recent years is very much an outgrowth of the emerging consumerism of one of the world’s youngest populations. The increased vigor of private consumption provides a powerful leverage to the Indian growth dynamic that is rarely found in the externally-dependent developing world.

This came through loud and clear on my recent travels through India. Over a span of four days, I met with a number of corporate executives, investors, and senior government officials. Everywhere I went, the focus was on the Indian consumer. I met with the managements of a good cross-section of India’s major consumer companies -- Hindustan Lever (softgoods), Pantaloon (retail), Raymond Textiles (clothing), and McDonald’s (fast food). I also spoke with executives from banks and drug companies -- all of whom have important consumer businesses. And I met with leading industrial companies such as Reliance, where a major five-year initiative has just been announced for the development of nationwide chain of hyper-stores and super-markets. I even went to the Phoenix shopping mall in Mumbai, which was bustling with activity. I have made similar trips to malls in China. There was one key difference between these two experiences -- the locals were buying in India. This is consistent with what I heard from most of the consumer companies I saw -- solid acceleration in same-store sales comparisons over the past six months.
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Most of India’s major consumer players are looking for an imminent consolidation of the country’s highly fragmented retail sector. Currently, there are over three million retail outlets in India -- an industry structure that is ripe for efficiency enhancement. The threat of foreign competition is already spurring a big consolidation push. Wal-Mart is apparently poised to enter India as soon as restrictions on retail FDI are lifted. That appears to be no more than 18 months away. In the meantime, local players like Pantaloon and Reliance are scaling up in an effort to meet the coming Wal-Mart challenge head-on. The competitive juices are coursing through the veins of India’s consumer industry. Unlike other Asian economies, India’s entrepreneurs are eager to compete.

Roach certainly makes a good point of booming domestic demand in India, especially when compared to export-led (exports and fixed asset investment add up to 80%+ of Chinese GDP, growing at 30% pa) growth in China. Liberalisation of the retail sector can help consumption a lot more, which is why it should become a top priority for the Indian government.

If you've gone to the Morgan Stanley website, you'll notice the article I linked to is missing the charts Roach refers to. If you'd like a PDF version of the Roach piece with complete charts, let me know and I'll mail it to you.

I was reading a Sucheta Dalal column in the Financial Express today about the slugfest between Narayana Murthy and Deve Gowda. What struck me was not the larger point she was making -- why don't other businessmen speak up on behalf of NRN -- but a gratuitous swipe she takes at the Indian blogosphere.

Many Indians are global toppers today because they are unencumbered by domestic restrictions. They are outraged that a politician has chosen to attack someone who succeeded while staying back in India. Isn’t this the overwhelming view one has about the Deve Gowda-Narayana Murthy slugfest? Yes, it is. But I found that a cross-section of people who have nothing to do with politics are also gleeful. Let me clarify that I have ignored most of the ‘noise’ on the blogosphere and stuck to serious views in this column.

Given that Ms Dalal's bread-and-butter comes from writing for the MSM, it's not surprising that she would take such a cavalier view about the blogosphere. It could also be breathtaking ignorance. However, it is striking how similar her dismissive views are to that of American media personalities not so long ago. However, after the Trent Lott and Dan Rather episodes, noone in their right mind in America would dismiss the blogosphere as non-serious. I guess the lessons of the IIPM fiasco haven't filtered through to Ms Dalal yet. But it will. Just like it did with the American media firmament.

Nothing like Scott Adams on a Sunday.

There has been a series of bomb blasts in Delhi, set to coincide with Diwali shopping season. Clearly, the bombs were set off to exact maximum damage, given that the bombs went off in crowded markets (Paharganj etc) on a Saturday evening. Current reports suggest that 50 people are dead and countless injured. I hope all ZS readers (and yours) in Delhi are safe.

I have been scratching my head trying to make sense of the indictment that has been handed down by Patrick Fitzgerald. As Josh Marshall has pointed out, you know that both Cheney and Scooter knew that Valerie Plame was an undercover agent. A full reading of the indictment also shows that Scooter was lying and not once, but several times. So, you have to wonder what on earth Libby was thinking. There are only two possibilities really when you think about it. Either Libby is a complete idiot (which is very, very unlikely; Libby is regarded as a super smart chap) who handed his notes over to the prosecutor and then lied about its contents. So, if one assumes that Libby is not an idiot, then it must mean that these silly lies were meant to cover up for someone else. One of Andrew Sullivan's readers points to an even more plausible scenario, one that makes a lot of sense to me.

Seems like Fitz has a pretty strong case for the Espionage Act, and if Plame met the objective standards in the Intelligence Act, for that one too. And it seems like the fact that Libby lied repeatedly is very strong evidence of a culpable state of mind, belying any claim that he didn't "know" the info was classified or that divulging it was wrong. Add that to the very specific allegation in the indictment that he knew exactly where she worked, and there it is.

So why not charge it? Because Fitz has Libby nailed on the 5 counts from today's indictment. Just nailed. So he's bringing Libby in on those charges, they're going to talk some turkey, and Fitz is going to see if Libby will talk, maybe about VP, maybe about Official A (who's clearly Rove), or maybe about the VP's moles at State and in the CIA. Offer some carrots - maybe no jail - but if Libby refuses, then Fitz brings down the espionage or intelligence act charges. Libby has nowhere to go, and Fitz knows it. In my view, he's going to try to exploit that opening before wrapping this thing up.

If Libby does sing, given the real possibility of 30 years in prison, that probably means the VP and Rove are in a real spot bother. How loyal can Libby possibly be?

Boing Boing points to this awesome tribute to Rosa Parks by Jim Leftwich.

Taking note of the 8.1% growth recorded by the Indian economy, The Economist is carrying a couple of stories on the constraints on the Indian economy. The magazine has a leader on India and China, followed by a special report on India called Democracy's Drawbacks. The report addresses all the usual issues, including the Left's protection of its narrow political base, namely organised labour, which means it doesn't really have to care about workers at large. Another issue that is raised is the shocking 14%-15% of GDP spent on subsidies, to which we can add another 1% of GDP courtesy of the REGS. After detailing all of the problems, the obvious question is posed: how can the economy be doing so well, if everything is as messed up as it seems?

There are a number of reasons. The biggest is that the Indian economy is so strong, structurally and cyclically, that it can ride out a period of wobbly policy. India's young population gives it a fast-growing workforce and a declining proportion of dependants. Over the next few decades, that will be good for savings and investment. Industry, meanwhile, has recovered from a splurge of over-investment in the mid-1990s. It has improved efficiency and is now both reaping the benefits and investing again in new capacity.
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Almost every budget since 1991, including this year's, has cut import tariffs and freed more industries from “reservation” for small firms, a big hindrance to competitiveness in businesses that might benefit from economies of scale. This year, moreover, saw the introduction of one long-planned reform, a standardised value-added tax imposed at state level. Typically, politics meant that not all states fell into line, and implementation has been patchy. Yet the tax may eventually not only bring new fiscal stability, but also reduce the burden of cascading excise and sales taxes that is one of the biggest handicaps facing manufacturers. Modest, piecemeal reform, in other words, is not quite dead.

The government's priorities—investment in infrastructure, agriculture, basic education and primary health care—are also right, given that the big macroeconomic stuff was mostly done in the 1990s. But they all need money, and that requires fixing the budget. India's fiscal deficit is now 8% or so of GDP if both state and central governments are counted—an improvement after six years of double-digit deficits, but still too high.
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The deficit, which goes largely on interest payments (40% of recurrent spending), defence, subsidies and civil-service wages and pensions, leaves little room for big capital investments.

What about the Left Front? Will they eventually realise the damage they are doing to the economy and the country?

Jairam Ramesh, a Congress member of parliament who played a big role in writing the “common minimum programme” that defines relations between the UPA and the Left Front, floats the interesting theory that, now that Congress has enacted the Employment Guarantee Act that the Left was so keen on, the Left may prove a little keener on asset sales. They would, after all, be a way of paying for all those jobs. From the Left Front come faint signs of accommodation. Prakash Karat, the general secretary of the CPI (M), the most important party within the group, is, like Mr Ramesh, adamant that full-scale privatisation of profitable public enterprises is not on the agenda. But he says the party is “ready for a discussion” on how to raise resources for spending on the poor.

Ironically, the most telling statements about the nature of power without responsibility, an artform mastered by the Left ideologues in Delhi, came from veteran communist leader, Buddhadeb Bhattacharjee.

On September 30th, the day after Communist-affiliated trade unions had brought his capital, Kolkata to a halt, he could scarcely conceal his exasperation. He told The Economist that the trade unions—and many of his party comrades—had become “one-dimensional”, representing only the interests of the 30m or so workers in India's “organised” sector. Mr Bhattarcharjee concedes that some of his colleagues in Delhi do not seem to grasp that economic reform could benefit a much bigger number of workers than those who belong to unions. If they do, they perhaps see political benefits in ignoring it. But “Here, we are running a government. We have to fulfil the aspirations of the people.”

Exactly, Mr. Bhattacharjee. Now, if only you could convince your Stephanian brethren of exactly this!!

(Via Caitlin) Back in June, I had linked to a Newsweek profile of the Tata Group, describing them as a kinder, gentler, multi-national. The McKinsey Quarterly picks up on the same theme in this interview with Ratan Tata.

On the economics of the people's car.

Today we're producing a $7,000 car, the Indica. Here we're talking about a $2,200 car, which will be smaller and will be produced in larger volumes, with all the high-volume parts manufactured in one plant. We're also looking at more use of plastics on the body and at a very low-cost assembly operation, with some use of modern-day adhesives instead of welding. But the car is in every way a car, with an engine, a suspension, and a steering system designed for its size. We will meet all the emissions requirements. We now have some issues concerning safety, mainly because of the car's modest size, but we will resolve them before the car reaches the market, in about three years' time.

In addition—and this again touches on the social dimension—we're looking at small satellite units, with very low breakeven points, where some of the cars could be assembled, sold, and serviced. We would encourage local entrepreneurs to invest in these units, and we would train these entrepreneurs to assemble the fully knocked-down or semi-knocked-down components that we would send to them, and they would also sell the assembled vehicles and arrange for their servicing. This approach would replace the dealer, and therefore the dealer's margin, with an assembly-cum-retail operation that would be combined with very low-cost service facilities.

On the budget hotel chain

It's exactly the same as the philosophy for the car, and it's a philosophy that's also being thrown out as a challenge to our watch company—why can't we produce a watch at a much lower price to go on everyone's wrist? The mandate has gone out to our people that we now really need to look seriously at the needs of the larger part of the Indian income pyramid, where most consumers can be found.3 If we don't do that, I think the Chinese will come and do it for us.

Why Tata has not entered China in a big way

We haven't found what we can do as yet in China. It's been very difficult to understand the market, at least for me. It is a market that seems, on the one hand, subservient to international brands and, on the other, very price conscious and very willing to buy unbranded products or local brands. It's pricing isn't fully comprehensible. In Beijing, you know, I was taken to some little alley where watches and clothing were sold. The watches were extremely attractive and very similar to known brands, but some had stopwatch buttons that didn't work. So I don't really understand the Chinese market. But if we could identify the right product, I think we would move in there.

On the roadblocks to industry in India

In some areas, rules and laws are more investor friendly in India than they are in some other countries, and in some areas they are less so. Most investors today cite caps on foreign investments as a deterrent. But there are sectors where even 100 percent is permitted, and you don't see people rushing in there. India has an impeccable record of repatriation of profits, so it's not that, either. But a new investor looking at India does run up against different ministries, with each one seeming to have a different angle on the investment and throwing up roadblocks. So companies don't really come in as they do in China or Singapore, where they get clearance and are free to start their operations quickly. And once investors are in India, they quite often find that one bureaucrat interprets the law differently from another bureaucrat. All of us in India live with this. You can have an excise official in Maharashtra who takes a different view of the duty structure than an excise person in Bihar does. You'll go to court and fight that, but you're used to it. But a US, European, or Japanese company finds this terribly debilitating and gets all upset over it.

Mark Glaser has written the best piece I've read so far in the media about the IIPM controversy. Writing in the Online Journalism Review, Glaser calls the flap a 'breakout moment' for the Indian blogosphere. Do yourself a favour and read the whole story.

Pic by Robert Caplin/New York Times

Every now and then, one feels extraordinarily grateful to be living in New York. This Monday, Cream, the extraordinary super-group consisting of Eric Clapton, Ginger Baker and Jack Bruce came together one last time to do 3 nights at Madison Sq Garden. Age has not been very kind to Jack Bruce, but boy, can he still sing and play mean bass!! To me, Eric Clapton proved yet again that his best work was created during his stint with Cream, especially on songs like "Sweet Wine", "Born under a Bad Sign" and "Stormy Monday." The band also performed "Tales of Brave Ulysses" (featuring Clapton's first use of the wah-wah in a song) on stage for the very first time. My favourite song of the night though was the bass-free version of Muddy Waters' "Rollin and Tumbin" with Jack Bruce on vocals and harmonica jamming with Clapton and Baker. The blues never sounded better than it did this stormy New York monday!

Time Magazine has come up with a list of the 100 greatest novels from 1923 to the present. Don't ask me why 1923. It just is. The list is exhaustive and has pretty much every book that I'd have liked to see in such a list, not to mention a whole host of others that I have neither read or even heard about. So, if nothing else, it's an excellent to-read list. The one book I would have included would be "God of Small Things," which IMHO is a better book than Zadie Smith's "White Teeth," for instance. Can you think of any other glaring omissions on this list?

I thought the days of Iranian wingnuttery were over post-Khomeini, but it turns out Mahmoud Ahmadinejad is a worthy successor to the old nutcase. Just a few hours before the latest suicide bombing in Israel, Ayatollah Ahmadinejad began ranting and raving about the need to wipe Israel off the map. Now, this is the sort of language one expects from the Bin Laden crew, but from an elected head of state? The head of state of a country that's desperately trying to justify its need for nuclear fuel/weapons, at that? Maybe India should reconsider its friendship with its civilizational ally until its leaders learn to be civilized?

Desipundit had called for a Blog Quake Day today, the 26th of October, where every blog would link to a couple of charities of choice working on earthquake relief in Kashmir. Rather than point to any particular resource myself, head over to Desipundit and go through this post when you have a moment. I know that most of us are suffering from disaster fatigue, given everything that's happened in the past 12 months. But please remember that there are people out there living in sub-zero temperatures without a roof over their heads, and very little relief getting to them. So, if you can afford it, please do your bit to help with a really bad situation.

Via Priyanka, I found this interesting blog today. Well, who are you? I really wanna know.... tell me, who are you?

Back in April, 2000, the New York Times published a 5,000 word biography of the diamond trade called Diamond Wars. It was a stunning story of how these intrinsically worthless (the DeBeers cartel ensures the high prices) stones fuel most of the major wars in Africa by posing as a 'woman's best friend.' No, diamonds are simply the cartel's best friend and one of Africa's worst enemies. Now, the Times has done a similar story on gold and the real costs of pandering to yet another human obsession. The story is called Behind Gold's Glitter. Make sure you read it in full before it goes behind the great wall of the Times. Here's a couple of extracts to give you a taste of what to expect.

The price of gold is higher than it has been in 17 years - pushing $500 an ounce. But much of the gold left to be mined is microscopic and is being wrung from the earth at enormous environmental cost, often in some of the poorest corners of the world. And unlike past gold manias, from the time of the pharoahs to the forty-niners, this one has little to do with girding empires, economies or currencies. It is almost all about the soaring demand for jewelry, which consumes 80 percent or more of the gold mined today. The extravagance of the moment is provoking a storm among environmental groups and communities near the mines, and forcing even some at Tiffany & Company and the world's largest mining companies to confront uncomfortable questions about the real costs of mining gold.
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Consider a ring. For that one ounce of gold, miners dig up and haul away 30 tons of rock and sprinkle it with diluted cyanide, which separates the gold from the rock. Before they are through, miners at some of the largest mines move a half million tons of earth a day, pile it in mounds that can rival the Great Pyramids, and drizzle the ore with the poisonous solution for years. The scars of open-pit mining on this scale endure.

Something to think about the next time you see someone in your family spend crazy amounts of money to buy gold merely to show off, and display their social standing.

One of the shows I miss in the U.S. because of the unavailability of BBC World (you only get BBC America) is HardTalk, which is probably the hardest hitting talk show on TV. HardTalk has been hosting an India Week and the good news is that all of the interviews are available to watch online. The guests include N.R.Narayana Murthy, Varun Gandhi, Brinda Karat, P. Chidambaram and Aishwarya Rai. The interviewer is not Tim Sebastian, but the BBC's highly regarded foreign correspondent, Stephen Sackur. Each interview is about half an hour long, so make sure you have enough time on your hands.

America has had two larger than life figures heading the Federal Reserve in succession, namely Paul Volcker (the slayer of inflation in the 80's) and Alan Greenspan. You almost have to feel sorry for anyone being appointed to fill these outsized shoes at one of the most important jobs in the world. The WSJ is now reporting that Bush will appoint Ben Bernanke as chairman of the Fed to replace Greenspan. For background on this appointment and why it is so important to the global economy, head over to this excellent piece in the Economist.

PS: Once again, Tradesports got this exactly right.

Given my past involvement with entrepreneurial ventures, this really caught my eye. David Beisel has a 7-point checklist for any of you considering joining a start-up.

1. If you are receiving employee options, what is the number of fully-diluted outstanding shares?
2. Has there ever been a down round, a flat round, or a CEO change?
3. What is the burn rate and how much cash is in the bank now?
4. What is the plan for exit strategy and its timeframe?
5. Could you meet the CEO, the founder(s), and those on the management team?
6. Are there plans in the next six months to hire anyone along the chain-in-command between your position and the CEO?
7. How many employees did/does/will the company have six month ago, now, six months from now, a year from now?

If you need explanations, head over to Beisel's blog.

Amit Varma points to an interesting paragraph in a report about a recent visit to Andhra Pradesh by Rahul Gandhi.

Rahul [Gandhi] visited two villages in Ranga Reddy district to see for himself how the micro-finance scheme of an NGO — Swayam Krushi Samstha — was working.
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The first-hand experience of how small loans can change the lives of the poor and the disadvantaged had strengthened his opposition to subsidies and freebies, Rahul said. “If they are able-bodied and healthy, there should be no free lunch at all. It is bad to give anything as dole.”

Perhaps there is hope after all? Everyone knows Rahul Gandhi will become PM in the next couple of election cycles. And this is not the first time I have heard the chap talk sense. Even his candid remarks about the disastrous state of governance in UP and Bihar offer some proof that he has some very clear and firm views about politics in India. And so far, everything he's been quoted as saying is eminently sensible. Let's see if he can keep this going after he becomes general secretary of the Congress. Watch this space.

(Via Martin) Every year, the BBC Wildlife Magazine and the Natural History Museum organises the Wildlife Photographer of the Year awards. This year, the award was won by Italian Manuel Presti for his stunning photograph of a flock of starlings evading the attack of a Peregrine Falcon. My personal favourite though is the image by Martyn Colbeck of a herd of elephants shot against the backdrop of the beautiful Mount Killimanjaro.

I just discovered that the IIPM fracas has been picked up by CNET News, and via CNET, the story has made it to the New York Times website. Pavan Duggal makes some very interesting points regarding the legality of it all, touching briefly on the impossibility of obtaining identifying information from Google. As I mentioned in a previous post, this is a key issue, the fact that IIPM dragged Google into the mud as well (by claiming that Google compromised user privacy), in its desperate attempt to slime Gaurav, Varna, Rashmi etc.

The case has also raised a fundamental legal issue--can a blogger be sued for defamation, just as a journalist or editor of a print periodical? The Indian Penal Code covers defamation in traditional media, but digital content falls under the purview of the IT Act of 2000, which is silent on defamation. "The present case represents a landmark opportunity to determine the legal view on the rights and liability of bloggers," said Pavan Duggal, a supreme court attorney and head of a cyberlaw consulting firm, Pavan Duggal Associates in New Delhi.

"The matter becomes more interesting when the blogging site is located outside physical territorial boundaries of India. It throws up ticklish and complicated issues concerning jurisdiction in cyberspace," Duggal said. "In the present case, since the blogging site is physically located in the U.S., governed by strict U.S. privacy laws, it is very difficult to get the relevant details about the blogger and his activities from the blogging site, including logs."

These days, good news on the liberalisation front is hard to come by, so I am posting whatever scrap I can find. India's policy makers have ambitious plans for the telecom sector, with the number of subscribers expected to grow to 250 million+ in the next couple of years, up from 110 million now. Trouble is that the sector needs a massive infusion of capital (in excess of $30 billion) to reach these ambitious targets. Without question then, the decision by the cabinet to raise the FDI cap to 74% from 49% is to be welcomed. According to the new rules, the FDI can be made directly in the operating company or indirectly through a holding company. The management of the operating company will remain in Indian hands, as will the remaining 26%.

Hopefully, this fresh infusion of capital will help push telecom services into the untapped rural markets as urban markets get saturated. In the meanwhile, we might as well start accepting bets that the commies will call yet another national strike to protest this anti-national, anti-poor reform measure.

In the India-China international acquisitions game, China has been hogging all the limelight. Just in past year or so, Lenovo acquired IBM, while Haier and CNOOC were rebuffed in their attempts to buy out Maytag and UNOCAL respectively. In all of this noise, what is being missed is that India is making quite a large number of acquisitions as well, albeit smaller-sized ones. Perhaps it is the smallness of the size of acquisitions that keep it under the radar and therefore keep the political economy issues at bay. Here is a comprehensive Businessweek story on India's shopping spree this year.

Indian companies, which had a very small presence in foreign locales just a few years ago, have inked 62 overseas deals worth $1.38 billion so far this year, buying up a variety of foreign outfits, from engineering design house INCAT International in Britain to Valeant Pharma in the U.S. That compares with just $202 million in deals in 2002.

Surprisingly, the biggest plays have not come from India's vibrant tech and outsourcing sector, which, analysts say, has a sound domestic business model and doesn't see the need to travel boldly abroad. The big moves are coming from more traditional industries: telecommunications, pharmaceuticals, auto parts, and other manufacturing businesses that want to secure export markets. Indeed, the biggest deal so far this year is an odd one: Bombay-based TV maker Videocon International Ltd. bought the global color-picture-tube business of France's Thomson (TMS ) for $289.8 million. Yes, picture tubes are decidedly old technology, but Videocon, one of the largest manufacturers of picture-tube glass, plans to supply its product to the Thomson operations and integrate the businesses.

Ten years ago, India's overseas gold rush would have been impossible. The government in New Delhi imposed severe restrictions on the export of the country's foreign exchange -- in part because there wasn't much of it. Today, India's booming tech, auto, and pharma businesses have attracted a flood of foreign investment. The country holds reserves in excess of $140 billion, and curbs on foreign investment by Indian companies are largely gone. Moreover, Corporate India over the last decade has aggressively restructured itself, making management more professional, and increasing efficiencies. In a long list of sectors, including telecom, auto and auto-parts manufacturing, pharma, and commodities like steel and aluminum, Indian companies are globally competitive. At the same time, they still lack the expertise they need in overseas marketing and distribution. To fill the gap they're pursuing deals in the U.S., Europe, and Asia. Given some of India's built-in advantages -- such as its enormous output of skilled engineers -- its global reach can only grow.

It's stale news by now that India is a favourite of the large global private equity firms. The recent announcements by Blackstone and Draper Fisher Jurvetson (of Hotmail fame) to invest $1 billion and $200 million respectively in India confirms this trend. Those of us who have followed this trend know that a good part of the current interest in India was catalyzed by Warburg Pincus's exit from it's investment in Bharti Telecom. For those who came in late, Warburg invested about $300 million in Bharti in 1999. They sold most of the stake for about $1.1 billion and the remainder of their holding in Bharti is worth another $700 million today. So, if there's anyone who can explain the current fad for India, they are the folks at Warburg. Knowledge@Wharton poses the question to Chip Kaye and Dalip Pathak. In particular, I found these bits interesting.

Warburg's bets in India are hardly reckless. The firm generally sticks to the tried, true, big and stock-market listed. That is rarely a winning strategy for a private equity investor in the United States, but can be in India, where the pent-up demands of a billion people leave plenty of room to grow for even the largest conglomerates. So in India, the investment firm is not spending much time seeking out early-stage companies or funky technology. In fact a couple of its forays into tech were jettisoned. They involved minor investments, under $2 million each, Pathak says.

"Larger companies are less risky; listed companies are less risky," he says, citing the transparency afforded by India's capital markets. One other reason to pick big over small, in Pathak's view: Bigger Indian companies are increasingly seeking capital and acquisitions abroad, and if they play foul with Warburg, "they know they will never get investment abroad."

In India, Kaye and Pathak expect the thirst for capital will be unquenched for years to come. Just infrastructure improvements -- greater power generation, better highways and more efficient ports -- are estimated to require $20 billion to $25 billion in investments each year. For policy makers in India, Kaye says, the main social challenge is to lift 200 million people out of abject poverty. Infrastructure projects, far more than IT, have the potential to generate the large numbers of jobs needed to accomplish that task, he adds.

Anand Sreedharan (of Bessemer) also makes some terrific points vis-a-vis private equity pouring into India. I agree with him entirely on where the investment opportunities lie in the India market, which relates to some of the points made in the KAW interview.

In all the noise surrouding the IIPM/JAM/Blogosphere fracas, I think a key issue got sidetracked. That has to do with a single paragraph that IIPM included in its legal summons to Varna and Gaurav, and may yet be their undoing.

Be warned, your telephone numbers, physical addresses thereon, login details, network access mechanisms have all been documented, notarized and legally ratified through google and blogspot.com, thus ensuring that any arrest warrants can be served and implemented on you within one day.

Now, anyone who has followed Google closely knows how their obsessive they are about privacy. After all, a good part of their business model depends on users implicitly trusting Google with their data and trusting Google to do no harm. So, for IIPM to suggest that Google handed not just basic identifying data, but also telephone numbers and physical addresses of long-time blogspot users is bordering on libel, IMHO.

Shouldn't this be something that Google should be worried about, given the worldwide publicity that this case has garnered? Are there any Google employees who read this blog who might want to pursue this angle a bit further?

UPDATE: Just to be absolutely clear, I am not suggesting that Google ever gave any details to IIPM. In fact, I am almost certain they did not, knowing what I know about Google. Nonetheless, the reputational damage to Google, a widely-trusted company, can be pretty substantial if people take IIPM's silly bluff seriously.

I suppose many of you have already read about yet another episode in Bombay of a cop involved in a rape complaint. In this case, the cop in question is alleged to have raped a 15-year old girl, a minor, in the presence of her husband. While the story of a cop raping a minor is disturbing in and of itself, I was also taken aback by Mid-Day's coverage of the story.

The standard code for coverage of rape cases is that a journalist does not reveal the name of the rape victim. There is a school of thought (which I agree with) that says this practice is outdated since it involves some sort of implicit assumption of guilt/shame. However, one must also keep in mind societal realities, especially from the victim's frame of reference.

No, Mid-Day did not spill the name of the victim in this case. Worse, the paper actually published a photograph of the victim!! And not just publish a photograph, but also helpfully identified the victim as the one in 'the left foreground, wearing a red dupatta.' Oh yeah, they also identify her as being a 'bar girl.' You know what that is code for.

How screwed up is that? It's a little girl, a minor, who has been raped. She also belongs to a socio-economic segment where rape brings with it lifelong stigma. And what does Mid-Day do? Publish a photograph of this girl! Just in case!

And you think TOI represents everything that is wrong with Indian journalism.

Here is one of the more amusing T-shirts I have seen at Cafepress, that takes aim at the Bush administration. "Make Levees, Not War," it says!

Suhit sent me a link to Kiva, a VERY interesting new start-up venture in the micro-finance space. I have been doing quite a bit of thinking about the industrial micro-finance/micro private equity space. Traditional micro-finance is on the verge of maturity and the big names have no problems raising capital anymore. I have, however, been looking at new models of micro-finance and boy, I haven't seen anything as innovative as Kiva in recent times.

First things first though. Kiva does not promise returns to investors. It simply is an innovative model to fund small businesses using charitable loans. The modus operandi? You, a prospective donor, start an account with Kiva. You then scrutinise the various businesses Kiva has put up on its website and find something that interests you. You can then loan anything upwards of $25 to the business. Loan, mind you, which means you will get your money back after a certain stipulated period. The downside is that you will not receive any interest, but if it's $25 that can make or break someone's livelihood in Kenya, who cares?

Obviously, it would be better if we could get some minimal interest on our investment, to ensure sustainability, but I think this is a fabulous beginning. Kiva will, however, charge the entrepeneurs interest in order to cover overhead costs, which is vital to Kiva's sustainability.

I am personally looking through some of the businesses to make a small investment, purely to see how the process works. Obviously, if the business works, and I get my money back at the end of the loan period, there is almost no doubt I will reinvest the money in another business. So, if any of you readers are interested in micro-finance and are looking at interesting new models, head over to the Kiva FAQ. Familiarise yourself with the Kiva model and then consider making your first micro-investment in an African business.

This is yet another post I've been meaning to make for the longest time, but got side-tracked in the midst of all my travels. Most of you know about information exchanges like the Iowa Electronic Markets or Tradesports. These websites have proved themselves to be more accurate predictors of events than even exit polls, by aggregating information via futures contracts. Now comes an attempt by one of India's finest bloggers, Nitin Pai (The Acorn) and Srijith Nair, to create a similar information exchange, Public Gyan, but minus real money. Trade is conducted by way of a virtual currency called moolers.

Having done a dissertation on the issue of imperfect information in markets, this is obviously something I am very curious about. Specifically, I am curious about whether such a marketplace will work without monetary incentives. Obviously, if we can actually get such an exchange to work minus real money, that will be terrific and will probably throw up a few questions about traditional notions about markets. The other concern I have is that for a true marketplace to work, you need real depth. If you have information you want to bet on, you've got to bet able to act on it immediately, without having to wait 5 days for your order to be fulfilled.

The latter is something I can actively do something about. So, if any of you are curious about Public Gyan and would like to play (after reading a primer or two), please send me a note and I'll be happy to invite you. You could, of course, just contact Nitin directly too. In the meanwhile, kudos to Nitin and Srijth for going out on a limb to set this up to see if it will work. At the very least, we know something about their risk appetite :)

Bill Gates was at Columbia last week on his tour of six college campuses encouraging youngsters to take up careers in science and math, a matter of some urgency if America is to maintain its lead in all things technological (and economic, as a result). You can watch the full video of his Columbia talk, courtesy of Microsoft.

Over at the Indian Economy Blog, Prashant has posted a link to an excellent pictorial comparison of the Indian and Chinese economies, produced by Deutsche Bank. As Prashant mentions on the IEB, these graphs convey much so much than the average report on how much more India needs to do to catch up with China, leave alone catch up with the G7 countries.

This is from my good friend and colleague at Columbia, Pavel Shlossberg. If any of you know of any way to help Pavel's friend, please contact him directly so as to not slow down the process. You can call him any time of day/night.

Date: Fri, 14 Oct 2005 17:32:20 -0400
From: Pavel Shlossberg
Subject: NEED LIVER DONOR -- PLEASE PASS THIS ON TO JOURNALISTS

Dear Faculty, Staff, and Students:

Last night I found out that a close friend's, Natalie Merker's, liver had suddenly failed. She is 39 years old, had otherwise been in excellent health, and has three young children. Unless a suitable liver donor is found within the next few days, Natalie will die. She is being treated in a hospital in Philadelphia.

** She has been given one to three days to live unless a suitable liver is found. **

She is currently at the very top of the donor match list. So any word about a potential donor (has to be someone within the first 24 hours of death).

Please let me know if you have any suggestions about how we can get word out about our search for a suitable donor--such as through a piece on the evening news, internet, etc., and please pass this E-mail on to other journalists. You have our deep gratitude for your help.

With suggestions or for further information you can contact me by E-mail at ps319@columbia.edu or at 201-248-1683 (cellphone) - 24/7.

Thank you for you help.
Pavel Shlossberg

UPDATE: A potential match was found early this morning. Natalie is in emergency surgery right now.

I have been out of circulation the past couple of weeks. So, I have not been following this story too closely and I didn't know much more than barebones details until I got back to New York. I do remember seeing IIPM ads in the newspapers while I was in India and thinking to myself what planet Arindam Chaudhuri came from. Anyone who needs to proclaim himself to be a 'noted economist' and a 'management guru' because noone else in the academic community will, reeks of loserdom. Without question, his fame is closely linked to the mainstream Indian media's inability to verify facts and run with any trash they find.

Anyways, if you haven't been on Mars, you know about this controversy and have been following it. IIPM puts out silly ads touting its credentials as the best mgmt school ever run by a father-son duo, where the son's major academic credential is that he received a medal from an institute that daddy founded. J.A.M outs IIPM's fake claims. Gaurav Sabnis picks up on the J.A.M story. IIPM gets pissed. Threatens Sabnis's employer with laptop immolation. Threatens Sabnis with lawsuit (and also Rashmi Bansal of JAM), never mind that the supposed lawsuit is so silly it shows up without a digital signature, as required by Indian law. Sabnis resigns from IBM to avoid embarassing Big Blue. IIPM begins to get slammed by the blogosphere. IIPM groupies get abusive towards Rashmi and others. Makes things worse for themselves. More investigation from the blogosphere reveals how shady IIPM really is. As always, the best places to follow this story are India Uncut and DesiPundit.

In some ways, there is nothing left for me to say except to add a personal note. I have been noticing in the comments on Rashmi's blog that attacks have been getting very personal. Gaurav doesn't need the ad hominem attacks either. Now, I don't know Gaurav personally, but he is a co-blogger of mine at the Indian Economy Blog, and most of our common friends have the highest regard for him. I applaud him for standing firm on what is fundamentally a freedom of speech issue and not be cowed down by IIPM's pathetic insults and threats.

Rashmi was a very good friend of mine when I lived in Bombay, and it annoyed me no end to see the crap that was posted on her blog. By way of full disclosure, yes, I also played a small part in starting J.A.M back in '95. For whatever it's worth, from someone who knew Rashmi very well, I should place it on record that the trash being propagated about her is just that! J.A.M has been around for 10 years now. Rashmi has been in the publishing business since she graduated from IIM-A in 1993, and is a well-known face/name in media circles. So, to those of you launching the ad-hominem attacks without ever having met her or knowing anything about her, get a life! Your attacks on Rashmi/Gaurav says more about you than it does about them.

I do think that one very effective way to counter IIPM/Arindam and to disseminate more information about its third-rate lies is to set up a Google bomb. That way, anyone drawn in by IIPM's advertising will find some transparency and clarity the minute they google the institute or AC. Sure, lots of people have been screwed over already, but if you can prevent more innocents falling for IIPM's fake claims, I think this entire fracas would have served some purpose.

PS: Does anyone know where IIPM gets the money to advertise so heavily? Is it a money-laundering outfit, by come chance?

UPDATE: Meanwhile, Kiruba has been creating some means for all of us in the blogging community to show support to Rashmi and Gaurav.

Here is a reminder on Asha Quiz 2005 coming up tomorrow.

The CNJ chapter of Asha for Education is holding their third annual trivia quiz festival at the campus of Rutgers University in New Brunswick, NJ.

The event runs from 9am to 4pm on Saturday, 15 October 2005. There are two quizzes, one for schoolchildren (grades 6 to 12, teams of 2) and one for adults (open, teams of 2 or 3).

Earlier this week, I was pleasantly surprised to discover that both Asha For Education and AID were in the list of 10 Slam Dunk charities compiled by Charity Navigator. The charities on the list are described as being "not only tops in terms of fiscal health, but also for respecting the rights of donors". Charity Navigator is an independent organization that has been featured in the major American news networks for its work on evaluating charities.

Rank Charity Overall Score

1. Asha for Education 69.82

2. Scholarship America 69.65

3. Association for India's Development 69.52

4. The National Christian Foundation 69.42

5. Scholarship Foundation of Santa Barbara 69.31

6. New York City Police Foundation 69.30

7. Disabled American Veterans Charitable Service Trust 69.27

8. Jeffrey Modell Foundation 69.25

9. Westchester Land Trust 69.24

10. Oregon HEAT 69.24

Folks, I still am on the road, so this temporary lull in blogging will continue for a few more days. In the meanwhile, if any of you are looking for more information/ways to help with the aftermath of the Kashmir quake, which has already claimed upwards of 30,000 lives, head over to the Quake Help Blog. Once again, the folks behind the Tsunami Blog have created an extremely useful resource. Friends of ZS at QHB include Harini, Amit, Neha, Dina and Patrix.

"Authorities are holding Al Qaeda operatives in connection with the suspected plot, although no details were available on who they are, where they were detained or what agency captured them, said the government official, who spoke on the condition of anonymity." [emphasis mine]

Straight from the NYT. I kid you not.

Asha, that excellent non-profit organization, will be holding a trivia quiz festival at Rutgers University. If you have ever done College Bowl in the US or quizzing in India, this event is for you. The event is on Saturday, 15 October, from 9 am to 4pm. The talented Mr. Thomas will do the honors as quizmaster. You lucky, lucky East Coasters!

Calling all quizzers! If you live in the northeastern USA, if you're sick of TV game shows like Jeopardy and WWTBAM, and if you want to revisit some hardcore trivia quizzing, this message is for you. The CNJ chapter of Asha for Education is holding their third annual trivia quiz festival at the campus of Rutgers University in New Brunswick, NJ.

The event runs from 9am to 4pm on Saturday, 15 October 2005. There are two quizzes, one for schoolchildren (grades 6 to 12, teams of 2) and one for adults (open, teams of 2 or 3). More information can be found in the email flyer at the bottom of this message, and at the event website, where you can register for the quiz online.

Asha for Education is a non-profit action group that supports basic education for underprivileged children in India. You can support Asha by taking part in the quiz, or in many other ways; visit their website for more details.

Two Australians, Dr Barry Marshall and Dr Robin Warren have been awarded the Nobel Prize in medicine for their discovery that bacterial infection, not stress, causes peptic ulcers.

The Australians' bacterial theory of ulcers was "very much against prevailing knowledge and dogma," Staffan Normark, a member of the Nobel Assembly, said at a news conference in Stockholm. Most doctors believed ulcers came from stress and stomach acid. To make his case, Marshall even deliberately infected himself by swallowing a culture of H. pylori. "I developed a vomiting illness and had severe inflammation in the stomach for about two weeks," he told The Associated Press. "I didn't actually develop an ulcer, but I did prove that a healthy person could be infected by these bacteria, and that was an advance because the skeptics were saying that people with ulcers somehow had a weakened immune system and that the bacteria were infecting them after the event."

He and Warren believed the bacteria came first, causing inflammation, then ulcers. The experiment helped establish that. Warren, a retired pathologist, said it took a decade for others to accept their findings. The long-standard teaching in medicine was that "the stomach was sterile and nothing grew there because of corrosive gastric juices," he said. "So everybody believed there were no bacteria in the stomach.When I said they were there, no one believed it," he added.

Thomas sent me this story from Bloomberg which suggests that Bono, Martti Ahtisaari (for brokering peace in Aceh), and Senators Nunn and Lugar (for nuclear disarmament, especially in the old Soviet states) are among the favourites for the Peace Prize. Given the recent peace settlement in Aceh, I think the bookies have it right by putting Ahtisaari ahead.

Meanwhile, head over to Nobelpreisborse if you want to bet money predicting the winner of the Nobel Prize in Economics (yes, I know that's not the official name). According to the betting market, Ed Prescott is heavily favoured to win, followed by Robert Barro and Paul Krugman. The surprising omission is Jagdish Bhagwati. I personally don't think Krugman will win, and my top 3 would be Prescott, Barro and Bhagwati. What would be really cool though would be Krugman and Bhagwati together for their work on international trade.

Thanks to both Robert and Bhatta for pointing to the obvious problem with this last paragraph. Serves as a reminder to not do serious blogging while on the road (am at Cornell), when blogging time is limited. I just realised I had linked to last year's betting market at Nobelpreisborse. I don't know where the betting markets are this year, so if any of you have any ideas, please let me know. If I were a betting man, I'd still bet on Barro, I guess, though I still wish Krugman and Bhagwati would win.

Speculating about Google's plans is a sport on this blog. Last week, I had made a post about Google letting you download a secure access installer and providing wi-fi access in some corners of San Francisco. Now comes news from the S.F.Chronicle that Google has in fact made an offer to blanket the city by the bay with free, universal wi-fi coverage.

The proposal raises speculation that Google intends to create a free national Wi-Fi network, a business in which the company has limited experience. If so, it could pose a serious challenge to existing Internet service providers such as SBC-Yahoo, Earthlink, Comcast and America Online, which charge subscriptions for wire connections.

As part of its 100-page bid, Google said it could install a Wi-Fi network without cost to the city. Users with Wi-Fi-enabled computers could then log on to basic service, without paying, no matter where they are within the city limits. The speed of basic service would be 300 kilobits per second, which is much faster than dial-up Internet service but slower than some broadband. Sacca said that Google, which makes virtually all its money from online advertising, had yet to determine whether it would include ads in the service. But Google said it would make its Wi-Fi network available for a fee to companies that want to offer paid Internet services. Sacca said there were no plans to share any revenue with the city.

San Francisco is a notoriously difficult city for blanket Wi-Fi coverage because of its hills, valleys and tall buildings. To ensure a good signal, Google would install up to 30 small Wi-Fi antennas per square mile.

I need to check if I can log onto the Google wi-fi network from Bryant Park, one of Google's supposed nodes in NYC. In the meanwhile, Google is also buying 270,000 sq.ft of space in a Chelsea building, which is where the communications infrastructure of some leading telecom providers is collocated. Combine Google's cash hoard, its fabled server farm, and rumours of Google buying an enormous amount of dark fibre, and you begin to get some idea of the emerging GoogleNet.