What a government does not do can reveal as much about its intentions as what it does
By Mohan Sule
Prime Minister Narendra Modi has received a bucketful of advice on what he must do to shake up the economy. In governance, what you do not do is equally important as what you do. Most federal bank governors in the world are reticent and confine to releasing quarterly reviews and outlook lest any of their remarks is wrongly interpreted by the money markets. There is no place for bravado while acting to tame inflation, boost growth, and restore investor confidence. From his first few days in office, it is evident that Modi is not going to practice some of the rhetorical flourishes of his campaign. He did not bow down to pressure from allies on the presence of Pakistan’s prime minister and Srilanka’s president at his inauguration. In the same way, he should not equate the strength of the rupee with India’s might in the global order. The import bill would surely come down if the Indian currency appreciates significantly but so will export earning. Just as inflation, its level hinges on the economic policies of the government. Tweaking of interest rates and intervention in the foreign exchange market by the Reserve Bank of India are merely firefighting exercises. The September 2008 global credit crisis has demonstrated that a currency is capable of moving due to factors beyond the control of the government and the central bank. Besides, what should be the level of the rupee is a debatable question.
One of the prime reasons for the defeat of Congress in the April-May general election was surging consumer prices. The new government is under pressure to tame inflation. In a report commissioned by the UPA I government early during its tenure, Modi had recommended crackdown on hoarders and clearing distributing bottlenecks. As such he is bound to implement his own suggestions. What he should not do is to pressurize the central bank to lower interest rates. Soft lending rates will no doubt boost consumption and trigger investment revival. The downside is these will not be sustainable. The release of pent-up demand and lag effect in ensuring availability could push up prices again. Instead the prime minister should let the RBI take a call, restricting himself to tackling supply-side issues and policy on minimum support prices for food grains. This hands-off approach should extend to scamsters, some of whom have political connections. The promoters of Sahara and NSEL are currently behind bars, accused of duping investors of crores of rupees. The then ruling dispensation at the Centre tried to ensnare the chief minister of Gujarat in many cases. In the end, Modi emerged triumphant by allowing the law to take its course. He should allow the wheels of justice to determine the fate of Subrata Roy and Jignesh Shah. Similarly, the prime minister should not be seen favouring any industrial group. The test case will be pricing of RIL’s gas. The previous government had okayed a hike to be implemented from April but deferred due to the Lok Sabha polls. A rollback will be a popular move but offer temporary respite as pricing of any commodity is not static and has to incorporate demand and supply. Not acting would be capitalized by opposition and could contribute to inflation. Modi should neither try to appease the consumers, which include Reliance Power, or the producer but take a long-term view that would ensure steady supply at reasonable price.
It would not be wrong to say that the UPA II government was ruled by committees. Within the cabinet, there were empowered groups of ministers, now abolished, to decide on sensitive policies. Another fad was appointing commissions to come out with reports on controversial subjects. The government does need expert advice from time to time. With the wisdom of hindsight, it is now clear that the findings can be tailored by packing the panel with members tilted towards a particular view. On many occasions the recommendations of the committees have been junked for being too radical or not suited to the prevalent political climate. Modi has positioned himself as decisive. Hence, he should not fall prey to the temptation of passing the buck. The electorate should know that, in whatever way it was arrived, the decision has his stamp of approval. Last, never should the prime minister say that he does not lose sleep over stock market volatility, like Manmohan Singh famously did during his stint as finance minister. The capital market is a measure of the health of the country. Transparent, forward-looking, and stable policies are essential for issuers and consumers of capital, who are necessary to create jobs, one of the objectives of the prime minister. A robust primary and secondary market is the best gauge for Modi to measure the success of his development agenda.
Wednesday, June 18, 2014
Thursday, June 5, 2014
Selling Mr Modi
Did the campaign draw inspiration from corporate marketing or should companies learn from his strategies?
By Mohan Sule
The recent election to the Lok Sabha was remarkable in many ways. First, the campaign was turned into a referendum on an opposition leader rather than on the ruling party. Second was the combining of non-traditional platforms such as social media with the old fashion way of logging miles. Third was the strategy of tarring rivals. The question at hindsight is if political parties drew lessons from companies’ marketing tactics or is there a lesson for Corporate India in the way the war rooms were analyzing ground-level feedback and organizing logistics for an intricate schedule of rallies across the country? Many inferences can be drawn from the successful culmination of Narendra Modi’s journey to prime minister. First, a product’s local fame can be leveraged nationally with good marketing. Amul has become a pan India brand from being a Made-in-Gujarat variety due to its superior distribution network. However, mass selling should not diffuse product differentiation. This is the second lesson. In a country where politicians prefer the easy way of emotive appeal of religion and caste, Modi propagated development to stand apart. This approach works if it is backed by user experience. Reports suggest that the Modi wave in north India was not just a by-product of hype but also the result of testimonials of migrants from this region about the opportunities and uninterrupted power supply in Gujarat.
Actions, rather than words, reinforce an image is the third lesson. In their bid to blunt Modi’s talked-about administrative acumen, opponents used comparative advertising to show that other states were better on some social indicators. Indirectly, the debate ensured that the Gujarat model remained in the news. For the young voters hungry for jobs, the uniqueness was that Modi welcomed business investment. The contrast became stark against the backdrop of huge projects getting stuck for want of environmental clearances even as the UPA government was spending on giveaways. Modi demonstrated decisiveness when he quickly seized the opportunity presented by the agitating farmers of Singur, West Bengal, by welcoming Tatas’ Nano project. On the other hand, Rahul Gandhi’s pro-tribal stand on the troubled Posco mining project in Orissa strengthened the perception that he preferred populist posturing. While assigning valuations to stocks, the market, too, takes into account management credibility. Infrastructure companies are viewed with caution due to their dependence on government contracts. Technology and pharma companies get better discounting as they cater to the fussy developed markets. Similarly, a stock showing a sudden spurt in prices raises suspicion. While Modi’s more than 10-year track record as chief minister of Gujarat could be examined and debated, Rahul was thrust as a fresh face that the country should rely on. The hitch was that the electorate viewed him as part of the problem rather than the solution. After his criticism resulted in the withdrawal of the ordinance that would have allowed convicted politicians to contest polls, he could no longer position himself as an outsider. Voters read his inaction for most of the decade-long UPA rule either as indifference to the policy paralysis or as covert support to various ministers’ acts of omission and commission. The fourth lesson, therefore, is that consumers are open to experiment with innovations but not those merely packaged as new.
The message has to be tailored to the market. When HUL was blindsided by low-end Nirma washing powder, the leader in the premium segment hit back with its own cheaper brands. Similarly, the FMCG sector’s experiment with sachets for the small and rural users has turned out be a roaring success. Starting off with the development agenda in urban and semi-urban areas in the first half of the long election schedule, Modi switched track to his humble beginning as a tea seller. The fifth lesson is widely practised in the consumer durables segment. Automobile manufacturers produce a range of vehicles for the premium segment and the common man. The last lesson is that running down competitors should be based on facts that are not open to any other interpretation. Harping on Modi’s largesse of giving land cheaply to the Adani group did not resonate among educated urban voters who knew that the price of an immovable asset depends on its location. So the alleged setback to the exchequer on this account was not comparable with the revenue loss suffered due to selling telecom spectrum and coal blocks to cronies at throwaway prices. In fact, Rahul’s attempt to provoke outrage boomeranged as it triggered association with his brother-in-law’s dealings in real estate. In the end, it is sometimes better to sacrifice the pawns rather than expose the Queen by rash moves.
By Mohan Sule
The recent election to the Lok Sabha was remarkable in many ways. First, the campaign was turned into a referendum on an opposition leader rather than on the ruling party. Second was the combining of non-traditional platforms such as social media with the old fashion way of logging miles. Third was the strategy of tarring rivals. The question at hindsight is if political parties drew lessons from companies’ marketing tactics or is there a lesson for Corporate India in the way the war rooms were analyzing ground-level feedback and organizing logistics for an intricate schedule of rallies across the country? Many inferences can be drawn from the successful culmination of Narendra Modi’s journey to prime minister. First, a product’s local fame can be leveraged nationally with good marketing. Amul has become a pan India brand from being a Made-in-Gujarat variety due to its superior distribution network. However, mass selling should not diffuse product differentiation. This is the second lesson. In a country where politicians prefer the easy way of emotive appeal of religion and caste, Modi propagated development to stand apart. This approach works if it is backed by user experience. Reports suggest that the Modi wave in north India was not just a by-product of hype but also the result of testimonials of migrants from this region about the opportunities and uninterrupted power supply in Gujarat.
Actions, rather than words, reinforce an image is the third lesson. In their bid to blunt Modi’s talked-about administrative acumen, opponents used comparative advertising to show that other states were better on some social indicators. Indirectly, the debate ensured that the Gujarat model remained in the news. For the young voters hungry for jobs, the uniqueness was that Modi welcomed business investment. The contrast became stark against the backdrop of huge projects getting stuck for want of environmental clearances even as the UPA government was spending on giveaways. Modi demonstrated decisiveness when he quickly seized the opportunity presented by the agitating farmers of Singur, West Bengal, by welcoming Tatas’ Nano project. On the other hand, Rahul Gandhi’s pro-tribal stand on the troubled Posco mining project in Orissa strengthened the perception that he preferred populist posturing. While assigning valuations to stocks, the market, too, takes into account management credibility. Infrastructure companies are viewed with caution due to their dependence on government contracts. Technology and pharma companies get better discounting as they cater to the fussy developed markets. Similarly, a stock showing a sudden spurt in prices raises suspicion. While Modi’s more than 10-year track record as chief minister of Gujarat could be examined and debated, Rahul was thrust as a fresh face that the country should rely on. The hitch was that the electorate viewed him as part of the problem rather than the solution. After his criticism resulted in the withdrawal of the ordinance that would have allowed convicted politicians to contest polls, he could no longer position himself as an outsider. Voters read his inaction for most of the decade-long UPA rule either as indifference to the policy paralysis or as covert support to various ministers’ acts of omission and commission. The fourth lesson, therefore, is that consumers are open to experiment with innovations but not those merely packaged as new.
The message has to be tailored to the market. When HUL was blindsided by low-end Nirma washing powder, the leader in the premium segment hit back with its own cheaper brands. Similarly, the FMCG sector’s experiment with sachets for the small and rural users has turned out be a roaring success. Starting off with the development agenda in urban and semi-urban areas in the first half of the long election schedule, Modi switched track to his humble beginning as a tea seller. The fifth lesson is widely practised in the consumer durables segment. Automobile manufacturers produce a range of vehicles for the premium segment and the common man. The last lesson is that running down competitors should be based on facts that are not open to any other interpretation. Harping on Modi’s largesse of giving land cheaply to the Adani group did not resonate among educated urban voters who knew that the price of an immovable asset depends on its location. So the alleged setback to the exchequer on this account was not comparable with the revenue loss suffered due to selling telecom spectrum and coal blocks to cronies at throwaway prices. In fact, Rahul’s attempt to provoke outrage boomeranged as it triggered association with his brother-in-law’s dealings in real estate. In the end, it is sometimes better to sacrifice the pawns rather than expose the Queen by rash moves.
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