How to make people use Toilet

Almost 50% of our population (Approximately 600 million people) defecate in open and they don't have access to proper sanitation. Mr. Modi has promised to build toilets for people to address the issue.

My take on this issue is simple - rather than providing people toilet, make them to have toilets. Make it a status symbol and an aspiration to have a toilet. A shift in popular attitude is necessary.

Poor people don't feel bad when rich look down on them. They feel bad when their neighbours look down on them. The toilet needs to have similar status in mind and life as mobile phones have. You look odd when you don't have it. When you have a better one, people are jealous of you.

Also, there is documentary evidence that people are unable to accept or understand why a room has been surrected around their community. And usage of room as toilet discontinues, it is either abandoned or not used as a toilet. It becomes a store room. People continue to defecate outside.

So, we need to 1st create toilet in the minds of people. We have to change the repositioning of toilet from dirty dark room to a happy and colourful room. We have to reposition the toilet in the mind of people like a product. Toilet is a lifetime companion. We have to explain them why they need to have toilets and why they need to have good toilets.

One strategy is to change the greetings. This is proven fact that people will feel happier after visiting a toilet. So, create a greeting like, Are you happy today?" This greeting will create a fashion and reposition toilet in the minds of people leading to a cultural shift which is essential to adoption of toilet in desired way.

Perspective on Oil Prices

Oil price reflect the world order in a single number. Its price movement reveals the underlying forces which are multiple and so varied that many attempts to build a reliable model to oil price has failed.

Who would have guessed that oil prices will dropped 29% since June 2014 despite geopolitical tension in Middle East, a strengthening US economy (The US Federal Bank has declared to end quantitative easing)  and a moderate growth in Asia. Drop in oil prices have kept oil analysts, OPEC member countries and world over Finance Ministers to find the possible causes to define long-term strategy to manage their finances accordingly.  This single number is one of the biggest influences to monetary policy of every single country irrespective of whether it is net importer or net exporter.

So, the 1st and foremost question is: Is this price drop a seasonal phenomenon or a structural change? I am inclined towards declaring it as a structural change due to below reasons:

1) US, largest consumer, has observed increased production in-house. Subsequently, its dependency on import has declined, leading to less demand and hence, drop in oil prices.  Nigeria, the 5th largest exporter to US, has not exported a single drop of oil since July 2014. It has impact on geo-political equations and US isn’t rushing its forces to fight ISIS.

2) Oil demand has declined in Europe and Japan which has been battling deflation.

3) Growth in China has stagnated. Also, Chinese has been suffering from air pollution which has spurred demand of clean energy and China is going big on clean energy.

While the drop in oil prices is good news for net importers Like India (where central government has linked diesel prices to market and reduced government subsidy bill); the drop is serious concerns for net exporters like Venezuela, Russia and Nigeria because government revenue is plummeting.

The worst impacted is Venezuela where inflation is running at 50% and a drop in oil prices has shrunk government revenue. The investors are jittery that Venezuela government may default on debt repayment.

Nigeria government gets 80% of its revenue from oil. Nigeria had a bad-weather fund to manage drop in oil prices however the fund has only $4 billion (where it ought to have $20 billion) and this is getting messy because government is reluctant to reduce its spending where elections are due in February 2015.

Russia has seen Ruble decline. Putin drives maximum strength from oil prices and oil price above $100/barrel keeps his ambitions floating but this continuous drop may throw Russia Economy in recession coupled with western sanctions after annexation of Crimea.

Venezuela has called meeting of OPEC on 27th November, 2014 to stem acceleration in drop of Oil Prices.  OPEC may find difficult to arrest this drop because a 2 million barrel/day production cut is required. There may not be enough members willing to cut production because it will reduce government revenues which will aggravate the member nations’ fragile fiscal position further.

So, we may rule out a production cut to make significant impact on oil prices. We shall find out more on 27th November however meeting may spring a surprise where OPEC members aren’t able to maneuver Oil prices, proving that this drop in oil price is indeed structural.

An open market has self-correcting mechanism.  As prices drop significantly, suppliers start working towards increasing price which may take time but will show impact. 2nd, drop in energy prices spur latent demand and it resurfaces, resulting in sustained increasing demand.  But, the climate change is also showing impact and world over governments have been investing in renewal energy (India has one of the most ambitious plan to boost solar energy); if so, the oil price drop may continue and stabile around a price which we may not predict as on date.

We must note that mankind didn’t stop using stones because earth ran out of stones.  The oil may meet a similar fate. We may be witnessing a tectonic shift in energy consumption pattern in mankind history: The beginning of end of Oil. It may farfetched as on date but there is probability. The time will tell.

Unemployment in India

There is unemployment on gigantic scale in India. Our government doesn't even measure employment data seriously and periodically. It does measure, however, once in 5 years and that too through sampling methods.

This shows how little we, as a country don't care about employment or think everybody is not entitled to be employed in a dignified manner or an environment which promotes unstructured employment or seasonal employment.

This is a topic which requires debate and immediate resolution. Sustained unemployment is set to create social imbalance and derail Indian growth story.

Unstructured Employment: Let me think loudly. A middle class family in top 10 cities of India requires at least 2-5 support personnel...Bai, driver, child care taker etc. Now, if government implements 'right to education' in spirit and letter, I am sure cost of living in India will multiply 4 times. It may restructure middle class way of life. It may make luxury truly unaffordable or redefine luxury itself.

Seasonal unemployment: Our politicians and we Indians need it badly. India celebrates two festivals apart from regular festival. One is election (vidhansabha or loksabha) and marriage. Winning election is not a child game and it requires mammoth coordination which requires human resources at each and every level. No business provides employment to local youths as much elections and marriages do.

Hidden unemployment: I had read it in social studies at class 10th but saw its manifestation when I joined work. I can say with confidence that it prevails largely in corporate sector. First, our IT companies exploited talented youths from IITs. IIT engineers are supposed to do better things in life but few men presented jobs wrapped so nicely that almost every IITian fell for it. An IIT engineer has more-than-adequate talent and aptitude to maintain a US client system or write code or manage coolies.

The interesting question is why it happened. It happened due to TINA (There Is No Alternate) factor. Our government and institutes failed to provide an conducive or stimulating environment of innovation, research or creation and the country has been loosing excellent engineers to few men who claim they have created 'value'. I don't deny it but the opportunity cost is huge. opponents to my argument may argue that opportunity cost doesn't exist because there was no alternative however why we haven't woken-up till date is another question for some other day.

If China has become manufacturing hub of this world, we are in the process of being back-office support center of this world. We need to push innovation, creation or research. The government, private institutes and corporate India should provide adequate incentive to educated youth for innovation and research to harness our in-house talent adequately.

In the nutshell, we need to wake-up to aspiration of people in this country at all levels. The prevailing environment and worsening law-and-order situation is a sound warning to all governing bodies, state and central governments. The kids who should be in laboratories were pelting stones in streets in J&K. We have naxal problem in many states. We have 'right to education' act but we lack political will and financial muscle to implement it. Education has slowly become luxury in this country either by design or by inaction.

The problem of unemployment may convert demographic dividend to a unmanageable law-and-order problem. The country needs to act fast at all levels.

Financial Inclusion

Recently, RBI deputy governor gave a brilliant speech on financial inclusion with facts, figures and way to go (http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=538).

The government, planning commission and Reserve Bank of India has been playing role of arm chair consultant on financial inclusion. There is an urgent need for one of these institutions to take the lead in setting-up Information technology framework which may support a low-cost business model to make financial inclusion viable.

Reserve Bank of India may keep pushing banks to implement financial inclusion. Basically, financial inclusion is not about business model, it is about technology innovation to support low-cost banking with given infrastructure (network, electricity, connectivity). Therefore, it would be ideal if Reserve Bank of India can ask a imminent technical person (or a company) to work with IRDBT and create technology infrastructure which can work seamlessly with UID and Mobile Number. I am sure Reserve Bank of India has excellent people to dedicate for this initiative and it may choose a person from Industry (RBI may check availability of Nandan Nilekani before searching further)

The requirement is to develop a technology-cum-process framework to create a value proposition and ask banks to follow it. If a bank innovates further, so far so good, however I feel strongly that regulator and government has no choice but to invest money and resources to create a viable technical infrastructure if they are really serious about financial inclusion.

Once this infrastructure is created and signed-off by all stakeholders, I guess banks will follow this business model. Reserve bank of India should remember that financial inclusion is agenda of Union Government because it is committed to include everybody on growth path (why it didn't wake-up earlier which is another question for another day. Even if India was growing at 5%, a poor man needed prompt credit) .

Banks have a simple mandate: Accept deposits and provide loans and banks will follow it wherever it makes business sense. I do not think I, as a shareholder will like my bank to invest INR 3000-4000 crores per year on financial inclusion and wait for returns.

Financial inclusion also means that Reserve Bank of India will need to increase its presence and reach beyond state capitals to ensure financial inclusion is happening under the regulatory umbrella of banking act and RBI act.

Interbank Mobile Payment Service

Till now, interbank mobile payments were processed through NEFT and since NEFT is executed in batches, it was not real time.

Recently, Deputy Governor of Reserve Bank of India launched real time (or instant) Interbank Mobile Payment System. It is instant 24x7, interbank electronic fund transfer service through mobile phones. It provides customer facility to use his mobile phone as another channel to access and transfer his funds in a secured manner with immediate confirmation features.

Interbank Mobile Payment Service rides on the existing NFS interbank ATM transaction switching infrastructure and message format and therefore easy for banks to adopt.

The process requires one time registration for both remitter and beneficiary where they have to register their mobile number, bank account and get MMID and MPIN.

MMID is a 7 digit number to be issued by bank to customer upon registration. Customer has choice to map multiple account numbers per mobile number. This is to avoid human error while transferring money and for transaction routing through NPCI.

Remitter will use initiate transaction using Beneficiary Mobile number, Beneficiary MMID and amount.

The remitter bank will :

a) verify remitter mobile number
b) MMID verification
c) MPIN validation
d) Remitter a/c identification
e) Debit to the remitter a/c
f) Generate and send transaction to NPCI
g) SMS confirmation to remitter

The beneficiary bank will:

a) verify b mobile number
b) Beneficiary a/c identification
c) Credit to beneficiary a/c
d) Generate and send transaction response
e) SMS confirmation to the beneficiary

There is per day limit on transactions depending on level of encryption. It is one more positive step towards financial inclusion.

Business agility driven from IT agility

IT agility is important in an organization to drive business agility especially for financial services companies. Agile IT set-up can help to launch new products in minimum time and subsequent versions or varieties by few mouse clicks.

Therefore, it has been increasingly important to invest judiciously in IT set-up and educate business teams to drive more out of IT investments. It is important to invest in right mix of people for IT set-up who understand business. For example, an old Chinese saying is,"If you want to employ people for building ship, search those who have passion to fight with sea storms."

An IT set-up which understands business, will inherently devise IT strategy which believes in building robust, flexible, configurable and independent frameworks. These frameworks can take care of immediate as well as near future changes and may keep evolving as business grows and customer habits change.

My point is having good business analysts is not enough, organization needs to employ people who have sound understanding of business processes and who do not require step-by-step guidance from business teams.

As I have learned, implementing a complex system and aligning people around it doesn't work as good as starting from basic and gradually implementing IT systems as organization grows, business grows, volume grows and processes mature. This method ensures sustainable and gradual investment in IT and you are not running a risk of creating IT capital which may be never used.

Banking in India - A way forward

Private Banks have led the way in last decade (1997 onwards) and brought reforms in banking sector riding on technology. Government banks followed and the happiest stakeholder is customer.

Having said that, the ball has begun rolling and financial inclusion is the buzz word. Government, Regulator and Finance Minister have agreed on target to be achieved by 2012. I recall Prime Minister Dr. Manmohan Singh started talking about financial inclusion in 2004-2005 and now the idea has taken good shape.

The government facilitated the same by implementing UID project because completing KYC norms is one of the major hurdles for financial inclusion. Also, it is not advisable to dilute KYC norms in the name of financial inclusion.

Till now, Indian banks implemented technology with language English and served urban customers. If financial inclusion has to be successful and economically feasible, banks would need to delve deeper into Technology and multi-layered integration will play a major role.

There will be need for multilingual technology platforms, need for many kinds of authentication mechanisms, devising mobile applications which may work on GPRS or 3G, establishing multiple kiosk operated through solar energy, ATM operable through solar energy etc etc.

While it is possible to use technology to deliver banking services to last man in the society, the role of banking regulator and self regulation of banks will play a major role in its successful and satisfying implementation. The information may not get updated on a real time basis which may pose its own risk. Documentation and other details will take time to reach head quarter or nearest branch and there may be dilution in rules for providing credit or accepting deposit. Central bank would do good to appoint a local regulator or reviewer who may send periodic reports to them and also educate people about banking services and various charges from bankers.

We have seen how various programs of Central Government fail in implementation at the last mile. I hope central bank is smarter and will ensure financial inclusion doesn't remain lip service and a facility on paper.

Next decade (2011-2020) will see rural and semi urban population income growth and of middle-class. Remember, poor doesn't require cheap credit but he requires prompt credit. The prompt credit facility is set to change lives of many Indians.