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AAP’s Business Line

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AAP’s Business Line
Debutant Aam Aadmi Party’s (AAP) stellar performance in Delhi is attributed to its stand against corruption, its call for transparency in political donations, and the promise of aam aadmi welfare (reduction in electricity tariff, low-cost healthcare, etc.). AAP’s message, however, can’t be confined to the political class, since there can’t be ‘corruption’ or ‘political donation’ without the involvement of businesses and industrial houses. Corporate houses — big and small — will now need to introspect on their practices, as well as curb their desire to influence matters of policy, remuneration, etc. It may not be long before the mood of the nation turns against them. It appears, over two decades of liberalisation has done little to dim Indians’ enthusiasm for the welfare state .— Joe C. Mathew
 
A Matter Of Curbing Judicial Activism?
While overturning the Delhi High Court verdict on the validity of Section 377, the Supreme Court (SC) made the point that if the law on homosexuality needs to be changed, then Parliament is free to do so. That is an admirable stand, but the SC has not always adhered to it. In the case of the spectrum auctions, and several others, the SC has shown a great degree of judicial activism and has even been accused of stepping into the areas of the ‘executive’ and the ‘legislature’. 
 
BW | Businessworld’s stand has always been that it is best if each of the three arms of the government — the judiciary, legislature and executive — stay within the parameters of the roles assigned to them by the Constitution. 
— Rajeev Dubey
 
The Shopping Bug Spreads
In the coming year, e-tail action will shift to the tier-2 and -3 cities — despite the retail letdown and poor broadband connectivity. With smartphones getting cheaper, the number of mobile shoppers in these markets is growing dramatically. And, according to experts, the numbers are expected to soon surpass traffic from the metros and tier-1 markets. 
 
Last quarter, nearly 53 per cent of orders for health and fitness store Healthkart.com came from non-metro markets, of which 35-40 per cent were via mobiles; Shopclues.com (which is yet to launch its mobile app) also gets over 60 per cent of its orders from tier-2 and -3 markets, of which 10-15 per cent already comes through cellphones. Craftsvilla.com’s mobile transactions have more than doubled in the past three months, and the firm expects mobile shopping from tier-2 and -3 markets to contribute 10-15 per cent of its overall transactions. The consumerist culture in India’s smaller cities seems to be battling the drawbacks in telecom infrastructure with gusto.
— Shrutika Verma

‘No’ To Cash & Income Tax
Can income tax be abolished? At least that’s what the NGO Arthakranti believes. It suggests all taxes and levies (import or customs duties) be abolished, and a single ‘arthakranti’, or transaction tax, be automatically levied on all financial transactions in the banking system instead. The NGO says a 2 per cent tax on all banking transactions will contribute more to the exchequer than the combined revenues from income tax, sales tax, octroi, etc. Arthakranti wants all cash transactions above Rs 2,000 to be discouraged by removing their legal sanctity, and also wants all currency notes of denominations over Rs 100 withdrawn. There’s also a drive to provide every citizen a bank account using the Aadhar number. Utopian? Not really, as the Bharatiya Janata Party (BJP), which hopes to form the government next year, seems interested. BJP said Arthakranti’s economic agenda is one of the proposals currently being examined by the party ahead of announcing its vision statement. Exploring of alternative revenue models is welcome, though arthakranti’s soundness needs to be tested. ­
— Joe C. Mathew
 
Hopes Driven By Clicks and Cards
Would you want to buy your car online and pay by card? As car sales in India continue to go down, some carmakers such as Nissan and Skoda are exploring selling cars online. Nissan recently announced that its cars would be available for online purchase, and buyers can even pay the whole amount by card (credit or debit). While many experts say this is an experiment that may not succeed, it also shows the desperation of the industry. Car sales in November dipped by 8 per cent compared with the same period last year, according to the Society of Indian Automobile Manufacturers. Internationally, though, this model hasn’t been very successful, even though both eBay and OLX (in India) have been “re-selling” second-hand cars and bikes. Of the total volume of cars sold globally, 0.1 per cent is sold online, say experts, dismissive of the idea that the trend will catch on.  
— Sachin Dave
 
(Bloomberg)
Calling In The Big Numbers
The Department of Telecommunications (DoT) is getting ready for spectrum auctions in January. The government estimates that the auction of the 1,800 MHz spectrum band across India and the 900 MHz band in Delhi, Mumbai and Kolkata will help it raise Rs 49,000 crore this fiscal. But that seems difficult. For starters, as most incumbent operators have enough spectrum in the 1,800 MHz band, demand is likely to be muted. Since new operators need to acquire a minimum of 5 MHz in a circle, bidding could be selective, and DoT would be lucky if it manages to get buyers for even half the quantum of 1,800 MHz up for grabs. Then, in some key circles, there is limited spectrum on offer. So, the real action is likely to be in the 900 MHz band, where Bharti Airtel and Vodafone will bid to retain their spectrum, while Idea Cellular is expected to be aggressive in Mumbai. However, it will finally depend on how Reliance Jio bids. That could be defined by the agreement between Bharti Airtel and Reliance Jio to share infrastructure. That’s the alliance to watch out for.
— Anup Jayaram

The ‘Free’ Way To Job Hunting
For years, the job market business model has remained the same: the recruitment agency arranges the meeting; the recruit gets the job and the employer pays the agency. But with two bad years and growing competition from social sites like LinkedIn, 2014 will herald a new business model for job portals: the ‘free’ model. This means, neither the recruiter nor the job seeker pays for the services; the revenue comes from ads and priority positioning on the site. While such ‘free’ websites have been around in developed markets, sites such as Careesma, CareerAge and Jobomas are bringing the concept to India. Careesma allows unlimited access; the other two just allow the first few job ads to be posted for free. Amid a weak market and a shift towards social hiring, is the free model a workable strategy to stay in business?
— Shrutika Verma
 
Investments from Cyprus were blacklisted in November for tax avoidance
Plugging The Loopholes
Is this the end of the misuse of India’s treaties with tax havens like Mauritius and Cyprus? Based on the recently executed General Anti Avoidance Rules, India blacklisted investments from Cyprus in November, denying investors tax benefits. This is because many firms have been using the European country just as a ‘post box’ base to avail tax benefits. Now, Mauritius — which had been resisting a change in its treaty with India, fearing that it would lose its attractiveness as a tax haven — has agreed to modify the treaty, restricting tax benefits to only those entities with a genuine presence in the country. Sabre-rattling seems to have done what years of cajoling couldn’t.
— Abraham C. Mathews

The Font Story
The Insurance Regulatory and Development Authority (Irda) seems to be missing the wood for the trees. In a curious circular a few weeks ago, the regulator asked insurers to use the ‘Times New Roman, size 7’ font while printing policy servicing forms; it also directed insurers to print these forms in all vernacular languages recognised under the Constitution. The attention to detail, though understandable, disregards the fact that the real problem is that these instructions on scheme documents are never really read, as buyers usually rely on verbal interpretations by agents. Also, the directive will actually reduce the font size from its current avatar, making it even more difficult for investors to read up on the details. Irda should take up larger issues plaguing the industry, given that tokenism is least expected from financial regulators. Instead of such cosmetic changes, Irda should focus on tighter rules to curb mis-selling by insurance agents.
— Shailesh Menon
 
When Message Is The Medium
It’s that time of the year when all the good ads made during the year flash before our eyes. Everyone’s coming up with their pick of the top 10 ads of 2013. Of course, it’s all subjective (except for the YouTube list that’s based on the number of views), but some have made it to most lists. And therein lies the advertising story of 2013. This seems to have been the year when accolade-winning ads have not sold products but social messages! Be it the Dove beauty sketches ad, where women’s self-perceptions were touched upon, or the Google reunion ad, or the Lifebuoy ad on helping a child reach the age of five — a social story’s built in. There were the funny ads (Cadbury’s 5 Star duo of Ramesh-Suresh), and the idiosyncratic (Old Spice Mantastic Man) that stood out, but the year belonged to the likes of Tanishq, which created a Twitter frenzy with its dusky mother bride, and Dove. Is content scoring over creativity in ad popularity?
— Chitra Narayanan
 
The top Indian steelmakers used a depreciating rupee to their advantage
(Bloomberg)
Rolling With The Times
Indian steel firms, which have been riding high over the past four months, will be at the mercy of external — largely economical — factors in 2014, as experts see little space for improvement within the firms. In 2014, factors such as raw materials (iron ore and coking coal), finished steel and dollar price fluctuations will primarily control the financial performances of steelmakers. This year, though, the major players — on a downward bend since the 2008 slowdown, with added pressure from decreasing demand in the auto segment — displayed a V-shaped bounce-back from mid-August onwards, riding on the depreciating rupee. The firms cashed in on the currency’s fall by increasing exports and entering new markets. For instance, JSW Steel expanded to South Korea, Japan, China, Malaysia and Thailand, while Tata Steel improved its presence in Europe. So, while the Sensex just moved up by 16 per cent in the past four months, the three top steelmakers — SAIL, JSW Steel and Tata Steel — increased their value by 74 per cent, 87 per cent and 106 per cent, respectively. Will the good run carry on into 2014? ­
— Nevin John
 
In Need Of A Booster Dose
Over 2013, the myth that the Indian pharma market  is slowdown-proof was shattered. The 
Rs 72,000-crore market, which is one of the world’s fastest growing, with an annual growth rate of 13-15 per cent for the past five years, is likely to witness only a 6-8 per cent growth in 2013, based on drug sales trends. Legal battles, lack of price control and an economic slump contributed to sluggish sales. The Centre needs to change its attitude towards the industry, take some
(BW pic by Bivash Banerjee)
practical decisions and ensure price control for essential drugs, else 2014 will see a dip as well.
— P.B. Jayakumar
 
Looking At An Industry Revival
After two years of turbulence, the mining sector may see an upswing in 2014, thanks to a flurry of activities by the Centre in 2013. The steps included allocation of 14 new coal blocks to PSUs, rules for the use of excess coal from captive mines, ‘pass through’ of imported coal prices, approval of the mine developer-cum-operator model, ruling on coal auction pricing, Coal India’s approval of PPP in mining projects, etc. All these lay the foundation for the involvement of more private firms in mining — improving efficiency and competition. But given that the major hurdles of land acquisition and environmental clearances are yet to be resolved, it’s unclear if the Centre’s efforts will bear fruit.
— Moyna
 
(This story was published in BW | Businessworld Issue Dated 13-01-2014)


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