WOW what a business model

US of A the big apple is in the doldrums. Europe has followed it in the same lane.people are losing jobs, have already turned over their houses to mortgages and now are queueing up for doles. Where is growth coming from? India and China. India is growing at 6%+ and is hoping to keep this pace for the next few years. So here is a country where per capita income is growing (slowly and steadily). A country where people love cricket and movies. They make around 1000 movies every year and some of them actually go out to become super hits. Recently its reported that the Aamir Khan starrer "Ghajini" had crossed gross collections of 50 crores in a couple of months. That makes it $10 million in a couple of months. This is a great model of business. make movies for an audience which pays anywhere between one dollar to two dollars for watching the movies and the sheer size of the population takes care of the economics. Did somebody say Prahalad? yes that was what the revered guru of management was talking about when he talked about the bottom of the pyramid!

Cut-to-the-present: A British film maker understands this economics and uses the same bottom of the pyramid to make a movie with little known actors to fashion out a nice Indian masala movie of a rags to riches story. Signs up musical geniuses Rehaman and Gulzar and dishes out a fast food like masala movie called "The Slumdog Millionaire". That was the commercial angle, then comes the master stroke of promoting it. As it is said "Business is Marketing" and "Promotion is Everything" or "The content is the medium itself". A deft piece of lobbying is orchestrated by making a famous fashion-magnate-dress-designer to choose the theme of "Jai Ho" for his latest fashion show. Good controversy is created in India over depiction of slums etc. this prepares the ground for the "BUZZ' that needs to be generated for an OSCAR Gambit. Next are the BAFTA and other awards which go to the movie. Since an art form is always intangible and abstract, once the "know alls" or the marketing mavens (sorry Mr. Gadwell for using your term") start endorsing it it becomes fashion to endorse the particular art form. Then perfect hammers become great actors and subtle acting becomes a dead pan expression. So once the buzz is created then its just a matter of time that the judges will be inspired to see the unseen in the movie and give it the award.

So that's what it takes to be an Oscar winner. making a good film is only half the job, marketing it is "THE JOB".

Now why did we start with the state of the economy? lets get back to economics now. Once this movie performs well in India because of the glorious awards and the great story told. we will have a beeline of more Hollywood movies releasing in India, for Hollywood will rediscover the Indian audience and the power of the 300 million English speaking people in the country. So with a movie on Indian slums and a rags to riches story of an Indian boy from the slums our friends in the Hollywood have been able to create an awareness of the Oscars to such an extent that future Oscar ceremonies and Oscar winning movies will all be lapped by the ever foreign-entertainment hungry population of the country.

This is what is called, hitting two birds with one stone. WOW there's no business like show business

INTERIM... INDIA

We are living history. This must be the only time in the history of India when we have a minister who is PM, FM and External Affairs Minister-all-rolled-into-one. Of course there is supervision by an extra constitutional authority against whom no one in India has the guts to talk. Are we a democracy? are we not a banana republic? are we not a dictatorship? we need to answer these questions as fast as possible if we have to find some semblance of sanity in our country.

Look at the irony of the country, we have a home minister who gives a statement on finance everyday. We have a part time finance minister presenting an interim budget. It cant get any more interim here!

The icing on the cake is the hopes built up by our gullible investors that an part-time finance minister with a mandate to present the interim budget will declare a stimulus package. How can you expect this to happen? The part time finance minister has his hands full in the external affairs ministry as he has to deal with the unprecedented diplomatic offensives from our neighbouring countries.

The election commission was expected to save face by showing readiness to conduct polls as and when the parliament is dissolved or at the end of the term. But internecine rivalry and party politics has also crept into the only non-partisan institution in the country.

The interim budget was, as expected a vote on account to help the government to spend money in the next four months from April 2009 to July 2009 so that the affairs of the state can be carried out smoothly. Expecting too much from this exercise was a wrong thing. As I had written earlier the stock markets would be meandering for a while until the elections. This is the time when the markets will probably bottom out. We can expect the indices to test the October 2008 lows in the meanwhile. The fourth quarter results, annual results and the results of the general elections will help the pessimistic sentiment further.

As far as the expectations of the results of the general elections go, I believe that we will see a completely fractured mandate and we would have a government which would bring in strange partners together and a coalition of opposite ideologies would be in power in for the next eighteen months at least. This period of "interim government" is going to continue for another 18 months now. Unless growth slows down to the "Hindu growth rate" or India heads towards a recession don't expect fireworks in the political arena nor the economic arena. Babus will continue to run the show and ensure that we slip into inactive mode.

DOLE Time in US and VOTE Time in India

Stimulus packages of the recent times have started to have the "Look and Feel" of socialism. unemployment compensation, food stamps and Subsidized Medical Insurance seem to be from the era of socialistic societies. This further proves the economic management cycle professed earlier. This cycle, as written earlier consists of of "Liberalization, Privatization, Globalization, Nationalization".

The debate of whether to bail out individuals or institutions is another matter which needs attention. Do individuals who speculated in the real estate market on account of greed need a bail out or Institution who nourished this greed and found themselves holding "toxic assets" need a bail out?

Lets once again examine the root of all these problems. Lets start with the housing statistics of USA, for a population of 305 million the country has 130 million houses which makes it, one house for every three people in the country. Its a nobrainer that housing supply is more than demand in this country and people have started buying and selling houses for speculative purposes than for dwelling purposes. When real estate is used for speculation then the "reality" of the investment gets lost and becomes a virtual asset. Now tell me if there is any point is letting banks lend to people who want to speculate in the housing trade? isn't it same as lending money to trade in the stock markets? In stock markets when money is lent, the stocks are subjected to a haircut and the haircut is as big as 50% in India, whereas the haircut here was 5% owing to the fact that this was "Real" asset and not a stock! But it turned out to be an "Unreal" one.

Another side of the problem is the propensity of American consumers to consume. Consumption in itself is no taboo but consumption by discounting your future income is a problem. That too using up your future income projections to pay for speculative buying of real estate is a disaster.

If this is the root of the problem, then should the new administration stop housing construction activity and? Should old houses be demolished and new ones built so that a renewal of assets happens and housing supply remains constant? these are the question that need to be answered by the new administration. I, for one would always suggest asset renewal over new asset augmentation that would generate employment and renew the infrastructure. It would also be wise to start a massive Infrastructure renewal plan to kick start the economy. that would surely percolate to other countries and would be an answer to the bulging cash stashed in the banks due to liquidity infusion and hoarding of Cash that has been witnessed in the country.

Lets get back to India, what ails us here? We are witnessing a slowing growth rate. Our policy makers are trying to bring down inflation by reducing fuel prices. I think we are barking at the wrong tree! India is bound to have inflation around 5-6% and it cannot be stopped because of the substantial portion of the economy is unaccounted for. That's what is called the black economy. Controlling liquidity at the wrong time suffocated the demand and drove interest rates higher in the last six months. With inflation higher than the repo rate we still have a negative real interest rate. With negative interest rate there is no hope for foreign portfolio investment and therefore no hope for the stock markets because the strong hands of FIIs will not buy India!

No amount of bullied interest rate reduction will work as the banks have become risk averse and are taking their own time to sanction loans. Housing and real estate prices are set to spiral downwards as the stratospheric levels of real estate prices are not sustainable in India too, even if the country is deficient of housing that's because of the affordability issues.

Stock Markets in India will witness laid back meandering business for sometime now as the country is gearing up for elections. Now non-issues will take centre stage.

Elections in India will be highly entertaining and will have very high educational value.