What drives the Rupee down ?

Indian rupee collection

Indian rupee collection (Photo credit: Wikipedia)

Global factors, local forces or animal spirits – what drives the Rupee down ?

As the Indian rupee nose-dived this past week, and stock markets were enveloped in gloom, pundits struggled to decode the answers to this question.

One thing however was painfully clear : the consequence of the lower rupee would be higher prices for all of us.

–       we would pay more for fuel, fertilisers and every item that had imported parts

–       we would pay more for our loans, as the Reserve Bank of India raised interest rates, in an effort to keep FII money from flowing out

How did the Indian economy, hailed as a roaring tiger just a few years ago, reach this sorry state ?  What triggered the fall  and what  sustains the rupee’s downward momentum ?

The first global trigger was the suggestion by Ben Bernanke on June 19, 2013, that the central bank of the USA was prepared to begin phasing out it’s Quantitative Easing (QE) Program.  As a result bond yields in the USA rose, and markets across the world fell, as Foreign Institutional Investors (FIIs), pulled money out of equities and emerging markets to invest in US treasuries.

Economies such as India, which had developed dependencies on FII inflows to fund their Current Account Deficits, faced immediate and painful adjustments.

A second trigger came earlier this week, as fears of military action against Syria escalated.  As the price of Brent crude spiked, markets assumed that rising oil prices would undermine growth – especially for countries highly dependent on oil imports.

However these factors affected many emerging markets. Why have the currencies of Mexico, South Korea and many eastern European nations held up so well, while the currencies of countries like Turkey, South Africa and India have plummeted ?

The answer is that FII’s are differentiating between countries.  They are looking at the fundamental factors driving each local economy and choosing where they wish to place their bets.

Countries that rely most on short-term foreign money to fund trade deficits have been the hardest hit. India has a Current Account Deficit (CAD) of  5.1 % of GDP (Turkey  is at 5.9%, S Africa  at 6.3%)

But even this does not fully why FII’s are pulling more money out of India, hence causing the Indian rupee to weaken more than other currencies ?

The answer lies with the elusive animal spirits.

There is a change in guard at the Reserve Bank of India. Markets will observe carefully to see if the new governor, Dr Raghuram Rajan, will take as strong a stance as his predecessor Dr D Subbarao, on inflation, monetary policy and the autonomy of the central bank.

More importantly it is clear to Investors that the Indian political establishment will cater to vote bank politics rather than focus on economics in an election year.

To quote the Wall Street Journal, dt Aug 29, 2013 :  “If India’s fiscally irresponsible “antihunger “ bill passes the Upper House, while needed structural reforms languish, don’t be surprised if pessimism over the country’s future deepens.”

What is the way out of this situation ?

The markets, like all of us, are looking to see decisive actions by the Government, that will help restore confidence in the Indian economy. Three simple steps will not only stem the fall of the rupee but also set the Indian economy back on the path of growth :

1)   Rein in Government Spending and bring the fiscal deficit under control

2)   Take quick measures to address the Current account deficit

3)   Start seriously undertaking pro-growth reforms

As Terrence Checki of the New York Federal Reserve stated “Fundamentals are Fundamental”. Three simple words that our Policy makers and politicians would do well to heed.


What I stand for

In 2009, I stood for the Lok Sabha, National Parliamentary election as an Independent Candidate for South Mumbai. Though I lost, I learnt a great deal about my city and the people at its heart. It was the beginning of a journey, and one that I knew, I would devote the rest of my life to.

At the time, my step was considered quixotic by many, who regarded it as tilting at the windmills of the powerful Indian political establishment. Yet, in the four years since then, I have been delighted to see a rising wave of other independent citizen candidates and newly formed political parties, start to contest local and state elections.

It is as if the floodgates have opened, and the common citizen, the Aam Janta have said “Enough”. The initial reluctance of our generation, to participate in a political process widely regarded as venal and corrupt, has given away to the realisation that Politics matters. We can no longer abdicate the space of Governing our nation to the lowest common denominator. We can and must participate constructively, not just in the political debate, but in the process itself.

In the past four years I have been asked repeatedly if I would stand again; from which constituency and what my campaign strategy would be. Friends and well wishers have been generous with advice and offers of support, that I greatly value.

But it was a simple question from a child that has dominated my thoughts over the past four years.  “Why are you standing” she asked, “and what do you stand for ?”

To answer this question, I started to undertake a series of exploratory journeys. The first into the issues that our country grapples with. The problems of education and health; of law and order and human rights; of poverty and corruption; of water, energy and food security…and of the best practices and policies that India could adopt, to address these challenges.

But it soon became evident that my ideas were shaped by my own background and perspectives – that of a banker who had grown up in urban India. In my years of banking I had learnt one thing – if you make the wrong assumptions, you make the wrong decisions – and such mistakes can be very expensive. There is no better way to understand the business and prospects of clients than to spend time with them in the field and understand the dynamics and drivers of their business.

Since India lives in her villages, it became clear to me, that this is where I would have to go. So in the summer of 2012, I embarked on a journey to the villages of India. During the course of the year I visited 15 states and spent time in over 120 villages. For the most part I traveled by public transport and lived in the homes, for a day and a night, with the women beneficiaries of my bank’s foundation.

Some of the stories of the journey have been shared with you through this blog and posts on Face book and twitter, and much of it still remains to be told. But the thread that ran through each and every step of this path, was that despite all the cynicism and sense of hopelessness that we experience when we watch TV or read the papers, the heart of India beats strongly.

The dignity and generosity with which I was welcomed into the homes, of women who had very little, will stay with me for ever.

In home after home, my hostesses refused to take any compensation for the hospitality they provided me. The true meaning of “Atithi Devo Bhava” came home to me when in one instance my gift of a saree was gracefully accepted and then in return I was presented her “shaadi ka joda”. Despite the  hard physical labour which they put in over long hours (women everywhere in our country rise at dawn and work till late at night), there was always time for the sharing of stories and for the gift of laughter. It became abundantly clear to me that the women of our country have very big hearts and very broad shoulders.

But it also became clear to me, that we are eroding this moral fibre of our people with the policy of hand-outs and give-aways that every political party is adopting for short-term electoral gains.

In Gram Sabhas, I was often asked aggressively by male villagers, as to what I had come to give them. The plethora of Government schemes driven by electoral promises, delivered inefficiently and with innumerable leakages, is creating a climate of entitlement. This is worsened by well-meaning NGO’s who see development through the lens of charity.

In other villages I was asked for help in accessing bank loans. Initially very pleased at this request, I was distressed to learn the reason bank loans were preferred to all other forms of credit was that “they never had to be repaid – as they were invariably written off before the next election.”

Flag ship schemes such as MGNREGS, which if well executed can transform districts (ref my blog on the Bankura experiment) are in general so poorly implemented that they are becoming major vehicles for corruption and theft. Villagers across the country confided how they had received money despite doing no work, but also shared that they did so in the knowledge that everyone up the chain had taken a much larger cut. “Is it not fair that we should get our share ?” was the simple question.

So we have embarked on a path, where policies that ostensibly aim to provide social justice and inclusion are becoming ruinous. From the recent experience of some countries in Europe, it is clear that such policies are not financially sustainable in the long run and result in the impoverishment of the finances of a nation. What is worse, is that through the collateral damage they create, they impoverish the soul of a nation.

We are converting a proud and dignified people into those who are dependant on hand-outs. This will destroy the future of our children.

The second major concern that I gathered on this journey, was the erosion of faith in our Institutions. The common man has begun to doubt the pillars that are the very foundation of this country – the police, the judiciary, the CBI, various constitutional bodies, and even the Armed Forces.

These are institutions that we look up to, to uphold our rights as free citizens – no matter what our social status or incomes, no matter what our gender, community, caste or religion. We can only be equal in the eyes of the law if there are institutions that defend and uphold our rights, not just in letter but in spirit.

But sadly, whether this is justified or not, the people of India have begun to feel that the integrity of these important institutions have been compromised. This will erode the faith of citizens in the state and the very basis of our democracy.

We are at a tipping point.

Ours is a nation of hard-working, innovative, entrepreneurial people who are decent, God-fearing and honest. Our people have no need for charity, nor is it in their nature to cheat or defraud anyone. We are not a corrupt nation but sadly some of our leaders are. It is not the people of India who have let our country down, but regrettably much of our political leadership has.

It is time for all of us to take a position in defending what we believe to be right. And so, this is why I stand.

And this is what I stand for :

I stand for the soul of India.

I stand to uphold the integrity of our institutions.

And I stand for the dream of every mother who believes that the future of her child will be bright – based on his/her own hard work and because she/he had no more, but also no less, than a fair and equal opportunity.

The Bankura Experiment – NREGS can work


As I have travelled through the country, it has been rare to find anyone who speaks positively about the National Rural Employment Guarantee Scheme (MGNREGS) colloquially referred to as the Sau Divsi (100 day) scheme.

Passed as an Act of Parliament in September 2005, the NREG Act aimed to provide for the enhancement of livelihood security of the households in rural areas of the country by providing at least 100 days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual labour.

In order of priority, the Act encouraged a focus on :

1) Water Conservation & Water Harvesting
2) Drought proofing through afforestation and tree planting
3) Irrigation canals ( micro and mini irrigation works)
4) Provision of irrigation facilities to SC/ST households
4) Renovation of traditional water bodies including desilting of tanks
5) Land development
6) Flood control and protection works
7) Rural connectivity to provide all weather access

Well conceived, the Act provided for a series of checks and balances to encourage decentralisation and prevent abuse and mis-appropriation of funds such as making Gram Panchayats accountable for identifying projects and executing and supervising work; direct credit of wages to the beneficiaries’ bank or post office account; distribution of wages ideally on a weekly and no later than fortnightly basis; and providing for an unemployment allowance if work could not be provided within 15 days of the request for work.

From a policy perspective therefore, the Act seemed to provide a good framework to meet its objectives.

However feedback in village after village, across all the states I have visited, was negative. Where job cards were available, no more than a few days entries could be found. Villagers complained of payments delayed by several months. In many areas there were allegations of corruption at the VCDC or Gram Panchayat. Level. Some villagers even stated they had received payment for doing no work – adding that Panchayat members withdrew 3-5 times the amount they received for facilitating such payments.

As for outcomes, other than village roads (which I have to say, have by and large been excellent) little was to be seen in the form of durable assets or water harvesting structures. Given that this was the flagship Poverty alleviation program of the Government with a budget allocation of Rs 40,000 crores in 2011-12, I began to actively search for success stories under NREGS.

It was therefore very encouraging to come across an excellent implementation of NREGS in Bankura, West Bengal.

The district of Bankura, located on the eastern edge of the Chhota Nagpur plateau, can be divided into the semi arid and relatively poor western region, and the fertile relatively richer Eastern region. The population of Western Bankura comprises more than 50% of Scheduled Castes & Scheduled tribes (SC/ST), predominantly Santhals. Over 50 % of the families are classified as Below Poverty Line (BPL) and the literacy rate is below the national average at 54%.

The area is almost entirely rain fed, with subsistence agriculture being the main occupation. 65% of farmers are classified as marginal, with land holdings below half a hectare, and 32% as small, with land holdings below 1.5 hectares.

Originally a densely forested area, (21% of the area is still classified as Forest land) growing deforestation has led to a steady decline in soil fertility, due to soil erosion. The Adivasi tribal inhabitants of the region also report that rain patterns seem to have changed. Now classified as a highly drought prone area , migration eastwards from Bankura in the dry season, to the Burdhwan and Hooghly districts of W Bengal, but also to other parts of the country, traditionally exceeds 50% of the adult population. The saying in the region is “like our water, our people flow each year to the east “

Should they be unable to migrate, the only other livelihood option, (typically undertaken by women) is scouring river beds for stones, breaking these into smaller pieces and selling them for road construction work @ Rs 5 per “jhudi” (small bunch of stones – typically in a circle of diameter of 3 ft).

In short, a region inured to tremendous hard ship and back breaking work.

The success of the NREGS scheme in Bankura (now also extended to the districts of Purulia and West Midnapur), viewed in the above context is all the more remarkable.

For the first time on my journey, I was able to see job cards that reflected close to 100 days work and bank accounts that reflected corresponding payments. More importantly, in all the villages I visited, there were water bodies that had been constructed by local villagers under NREGS : large village ponds, smaller village tanks (Hapas) and tiny seepage tanks – as a consequence of which farmers were undertaking SRI cultivation of paddy, and growing vegetables and lentils on land, which otherwise would have lain fallow.

Most inspiring of all, was the very innovative scheme of Mango orchards and Social Forestry, whereby landless women formed Self Help Groups (SHGs) to lease barren land for 25 years, under a crop sharing scheme, and used NREGS funds to treat the land and plant orchards and timber. The pride on the face of these women as they showed me their orchards, was testimony to the fact that proper execution and a focus on Outcomes, can convert an Employment guarantee scheme into a meaningful program that creates Durable Assets which provide sustainable Livelihoods for the poor.

Much of the credit for the Bankura experiment goes to the NGO Pradan, who have been working in the region since the mid 90s on Integrated Natural Resource Management (INRM) and Livelihood enhancement.

Through their bi-partisan and apolitical approach they had won the trust of not just the local communities, but also District, Block and Village level Govt officials, as also the elected representatives of the various Panchayati Raj Institutions (Gram Panchayats, Panchayat Samitis and Zilla Parishads).

In 2007 with the assistance of an enlightened Block Development Officer (BDO) by the name of Babulal Mahatao, and the blessings of the local PRIs, they conducted a pilot, to combine the power of NREGS, with the principles of INRM.

In the Hirabandh block of Bankura district, they selected 3 villages under the Gopalpur Gram Panchayat, for comprehensive water conservation and harvesting works. To achieve lasting results works were planned to suit the topography of the land.

Land in the Bankura district is locally classified as upland (Taand), Medium upland (Baid), Medium lowland ( Kanali) and Lowland (Sol). Generally the higher the land, the poorer the soil quality, and therefore the poorer it’s inhabitants.

In order to ensure the buy-in of the entire village, including richer and more powerful farmers, but also to address water conservation on a long term basis, Pradan recommended a comprehensive Ridge to valley, water conservation and harvesting process. However work was prioritised from Upland to lowland treatment (i.e poorer to richer).

In the Uplands, the land lease scheme for orchards and timber described above, was implemented along with water conservation treatment to reduce the velocity of water run off. Described as the 30 : 40 model, 30 feet bundhs were built along the slope, and 40 ft bundhs were built across the slope thus ensuring water velocity was reduced. The area that was dug out to provide mud for the bundhs, became a water reservoir. Soil erosion was thus reduced, and moisture content of the soil increased. The Orchards and timber plantations, further helped to bind the soil in addition to creating a durable asset for the women who leased the land. Until production started, women practised inter cropping between plants growing vegetables that were an additional source of income for them. A win win on many counts !

For the Midlands they conceived the widespread implementation of the 5 % Individual Benefit scheme. Recognising that small and marginal farmers could rarely afford the cost of pumping and transporting water from the village pond to their small plots, they planned the construction of several water tanks (Hapas) dug on 5 % of the farmers own land. As the soil in the region is rocky, water retention is good, and rain water is stored in these tanks. While all those who work on digging the Hapa are paid under NREGS (@ Rs 136 per day), the farmer on whose land the Hapa is dug, acquires a permanent and valuable irrigation source. As a saturation approach was planned at the outset, villagers had clear sight of when their plots would be covered and there were no tensions or jealousies in the community. As workers were also owners of the asset, the quality of work that I observed was uniformly good.

In the Lowlands, small seepage tanks were constructed, which filled through seepage of ground water resources, providing farmers in the lowlands with a small but almost perennial source of water.

The success of these schemes, and the buy-in of villagers, ensured that the pilot started being replicated across the district. Pradan was chosen as the facilitating agency for NREGS in Bankura.

The results have been impressive. From 2008 to 2012 a total of Rs 150 million has been spent on INRM related NREGS work in the Bankura district. Over 5500 ST families, in 119 villages, have been provided with 8.3 million man days of work. Equally important 3600 small water bodies (Hapas and seepage tanks) have been constructed. In the Hirbandh block alone approx 100 hectares of mango orchards have been planted.

More impressive than these statistics, is the impact on the villagers of Bankura. Though still very poor, there was a sense of deep pride and dignity, about the women I met. As they welcomed me into their homes and offered me their hospitality, many shared the same stories. Just 2 or 3 years ago, they said, they would not have had the ability to offer me anything. Today the combination of NREGS wages for works in their own village, in addition to the incremental income generated from vegetables, mangoes, etc had made it possible to offer a stranger hospitality.

As they shared their dreams and fears, several said that all that they wished for, was not to have to leave their homes again, in search of water, food or employment. In 2010, when the region faced a major drought, a mass scale migration was feared. Instead, due to the availability, howsoever limited, of water, and the employment guarantee under NREGS, there was almost no migration from the District.

The Bankura experiment has filled me with hope. It proves that NREGS can be successfulm and is worthy of emulation across the country.

It also shows that there is scope for Innovation : if the demand for work can be combined with projects that are optimised to meet local needs, then Sustainable livelihoods, Durable assets and Water security are all Outcomes that are possible.



Villages of Mehsana


Over the past two days I have spent time in three villages of Mehsana district, in North Gujarat, where the RBS Foundation has been working over the past 5 years.

In this district, the work of our Foundation from 2007-11, focused primarily on the development of Pani Panchayats, or Participatory Irrigation Management (PIM), in 90 villages, covering a command area of 26,000 hectares. This area is irrigated by waters from the Dharoi Dam on the River Sabarmati. Though the project was built in 1979, many villages in the command area had no access to water, due to poor water management. The project sought to introduce a co- operative approach to the management of the Dharoi Dam waters both within villages and between villages at the Head and tail of the canal. The project also sought to improve access to drinking water and enhance Agricultural Productivity in these 90 villages.

Given the tremendous success of this project, which along with similar projects in Gujarat, has been dubbed the “blue revolution”, we extended the Project to a second phase 2011-2015. While continuing to support PIM, the project was extended to redress Gender Balance issues ( and therefore provide incremental income sources to women), enhance Capacity building and market linkages, and develop local value chains through Kisan/ farmers clubs.

Each of the villages I visited, though not more than 50-60 kms apart was very different from the other, and provided an interesting insight into the Gujarat of 2012.

Kesimpa, the first village I visited, was both the most affluent and the most progressive.

The village comprises of Shia Muslims and Hindus from the Rabari community. Residents were proud of the fact that there had never been a communal incident in their village. I stayed in a Muslim Mohalla and received the most extraordinary hospitality and affection. All the children were well educated,(including several going to English medium schools) They also received religious education in Urdu, at the village Madrassa to which I was welcomed in the morning.

The women of this village rise at 5, milk their cows and buffaloes, then work in the farms all day. Many of their men folk work elsewhere in the country or in the Middle East as construction labour. To supplement their incomes we introduced them to vermiculture which they adopted enthusiastically. They have now become Resource guides and consultants to our other villages. They have also all started small vegetable gardens, for their own consumption, with modest surpluses being sold commercially.

Each house in the Mohalla had electricity, running water, gas connections for cooking, at least one mobile phone and toilets. 40% of the women I met had individual savings bank accounts, all of them had Post office savings and in addition they had formed a women’s savings co-operative society. Homes are of “Pucca” cement construction, cattle sheds are located opposite the homes, and farms which are typically quite small are 10-15 mins walk from their homes.

Marriages, which are arranged, take place as community weddings, thus reducing expenditure to approx Rs 5000 per wedding. Girls are encouraged to study till graduate and often post graduate level, and were well informed and confident. Security in the village was said to be very good – no one could recall any incident of theft or violent crime in recent memory.

Dedasan, the next vilage, by contrast was both much poorer and very conservative. Comprising mostly of the Darbari Rajput community, women observed Ghunghat, and would not speak in the presence of an older man.

Though Dedasan is located at the Head of the Irrigation project and receives adequate water, the soil is rocky and not very fertile. Life is clearly hard, as could be seen from the weathered complexions of its residents. Though it also has 24×7 electricity, Dedasan has no piped water, no gas connections and only 10% of the homes had toilets. Approx 30% of the women I met, had mobile connectivity. Homes are more spread out and range from cement, to mud to temporary straw construction. Cattle are kept in sheds on the farms.

Women have taken to vermiculture but have hesitated to adopt other value addition activities such as grading, sorting and packing the spices they grow – because they simply feel they cannot cope. They want to save but have no access to bank or post office accounts. There are no hospital facilities with the nearest hospital 25 Km’s away. Road access to the village exists, but no regular bus service, and autos are quite expensive. There is great dignity about the people, but you sense their fatigue and weariness.

Karbatiya, the third village is relatively prosperous but not as homogenous or receptive to ideas as the other two. The village is divided along caste lines, and though relations are harmonious, there is little agreement on matters of collective importance.

The mindset is commercial and favours individual enterprise. The village therefore has 4 milk dairies (as opposed to 1 in most other villages). It also supports a Reverse Osmosis water purification plant, set up by a village entrepreneur named Raju Bhaiyya, at a cost of Rs 375,000. He has been provided land by the village Panchayat, in return for which he has undertaken to provide purified “mineral water” at Rs 6 for 20 litres. At an average cost of Rs 180 per household per month, villagers find this well worth their while, for the water has a fluoride content which leads to joint pains, and of course, it saves the time and expense of boiling water.

Here also homes were of cement construction, had 24×7 electricity, gas, mobile connectivity and toilets. The village is very compact, with homes close together, and cattle sheds either in front of or behind the home. Farms surround the village and land holdings are on average larger than the other two villages.

Bus access to the nearest town was good, and several young girls joined me on the bus ride to their college in the morning. ( the state provides free bus transportation to rural girls going to school or college)

There has been both inward ( people retiring and returning home) and outward (young people leaving for better job opportunities) migration from the village, and most of the young people I spoke to were looking for a way out. Though a fertile, irrigated area, there was little interest in the younger males to take up farming.

If I were to summarise my observation of the Mehsana district, it would be that while development has been impressive, not everything is shining. There are clear areas of success which the rest of the country can learn from; equally there are areas that would benefit from attention. These are shared below :

Clear Success Areas :
– the Co-operative mentality seeded by the white revolution of Anand, which has provided the foundation for collective effort in other areas eg water management
– the Jyoti Gram Yojna which has provided electricity to most villages in Gujarat, and the good discipline of charging for electricity both for agricultural use (Rs 7 per unit) and domestic rural consumption (Rs 4 per unit)
– the PIM which has led to greater water security both for agriculture and human consumption
– the excellent infrastructure to support Dairy and animal husbandry which provides a sustainable source of livelihood to supplement agriculture

Areas that could benefit from attention :
– though villages in this part of Gujarat are clearly prosperous, like many of our towns, development has been haphazard. Though homes inside are very clean, Common village areas in all three villages were dirty and dusty. No one seems to take accountability for village hygiene. The planting of trees and flowering plants; segregated areas for storage of dung; and emphasis on providing toilets to each home could make a world of difference.
– Though Gujarat has tackled its power situation admirably solar energy should be encouraged at least for street lighting, solar cookers and geysers.
– Insurance for dairy animals is widely used. However farmers have no faith in the current Crop and weather insurance – there is an opportunity for insurance firms to fill this gap
– In this small sample survey, women reported the incidence of Caesarian deliveries being as high as 80%. If representative of a larger population this requires serious attention.

My next destination is the Sabarkantha district in Eastern Gujarat. This is a tribal district with poor access to irrigation facilities, and therefore dependant on the vagaries of the monsoon. It will be interesting to see and understand the development model here.



Bankruptcy & Re-birth…

Doctor Vijay Mallya's personal aircraft.

Image via Wikipedia

As the Kingfisher Airlines saga dominates the airwaves, and public indignation runs high as to a possible Government sponsored bail out of Vijay Mallya’s beleaguered airline, the words of a brilliant Dutch professor came to mind.

Bankruptcy is a bit like Death” he said.”It’s sad when it happens, but it is most merciful and best for all concerned when it happens swiftly.

This sounded a bit counterintuitive, especially if one looked at it from the point of view of key stakeholders like employees, who for no fault of theirs would be out of a job, or shareholders who would lose their investment.

To counter our protests, Dr Bomhoff went on to explain. “In many ways it’s a bit like your Hindu cycle of Death and re-birth. At the point a company goes bankrupt, it dies because it has run out of cash and no one is willing to extend it further credit. However, at that point its assets are still productive. The soul of the company can be re-born again in a new Avatar and have a great new life !”

The concept was quite intriguing but not quite clear. As we discussed it, the Professor laid out his argument as follows :

  • The plant and machinery of the bankrupt firm  (in Kingfisher’s case its aircraft) if liquidated and sold swiftly, could be bought by a more efficient competitor (for example a profitable airline like Indigo) and put to use.
  • Similarly, though employees of the bankrupt firm (in Kingfisher’s case its pilots, crew, engineers, ground staff etc) would lose their jobs, they were skilled and well trained and could be re-hired by competitors
  • Because the liquidation price of assets were likely to be lower than the original capital expenditure, and staff were likely to accept competitive salaries, the new owner, would probably be able to offer the same goods & services at a more competitive rate, thus benefitting the customer
  • Investors and creditors who took a hair-cut and lost money, would learn from their experience and have a better understanding of the risk – reward relationship going forward. Risk would be appropriately priced which is always beneficial for a healthy entrepreneurial environment.
  • The alternative to swift bankruptcy proceedings – namely a protracted and painful restructuring or a shut down of the firm while everyone protested its closure, would be like a slow and lingering death. While this took place both the physical and human assets of the firm would atrophy leading to a net loss for all concerned.
His comments were made several years ago in the context of a major Power plant.
With the passage of years it is evident how true his words were. They will probably prove to be as prophetic, in the case of not just Kingfisher, but also the other airlines in India which are struggling to keep afloat.
Let us hope that the concept of Bankruptcy and Re-birth takes root, allowing firms, like individuals to live out their karmic destiny !