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14 ISSUES AND INSIGHTS
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Poor talent competitiveness score
India’s educational system fails to provide the skills needed for employability
HUMAN FACTOR
SHYAMAL MAJUMDAR
I
ndia has moved up on a global
index of talent competitiveness to
the 81st position from 92nd last
year. The index, released by Adecco,
Insead and Tata Communications on
the first day of the World Economic
Forum annual meeting in Davos,
measures how countries grow, attract
and retain talent. The good news, how-
Needed: A rolling stock policy
In addition to plans for electrification, there should be a plan for disposing off diesel locomotives, over and above the path of least
resistance, that of sending them to the scrap yard
INFRA DIG
BIBEK DEBROY
I
ndian Railways (IR) has just over
11,100 locomotives. (This figure is
about a year old.) 39 are steam, 5,869
are diesel and 5,214 are electric.
Naturally, not all are broad gauge.
About 13 of steam can be deducted as
narrow gauge, just over 100 of diesel are
also narrow gauge. Steam no longer
matters. Nor does narrow (or metre)
gauge. Therefore, sticking to broad
gauge, let’s say 5,800 diesel locomotives
and 5,200 electric locomotives, an
aggregate of 11,000. Roughly 53 per cent
of this rolling stock is diesel. These are
locomotives proper. They aren’t mobile
units of either diesel or electric variety,
DEMUs and EMUs. Note the obvious,
not too many countries in the world use
broad gauge — other than India, there
are Pakistan, some parts of Bangladesh,
Sri Lanka and a couple of countries in
Latin America. In hindsight, gauge
conversion may have had benefits, but
also increased the costs of integrating
railway networks with other countries,
including those in East Asia.
Globally, there are an estimated
120,000 locomotives. And 55 per cent
We get it, Netflix. You’re big. But don’t be bad
You're also running on debt, and bondholders will lose patience
MEGAN MCARDLE
T
he other night, I watched one
of the worst movies I’ve ever
seen. Normally at this point I
would say “spoiler alert,” but this film
can hardly be spoiled.
“Open House” is a horror movie
that just went up on Netflix. It
involves a recent widow and her son
who move to a relative’s mountain
house (currently on the market,
which is where the title comes from),
in order to get back on their feet
financially. The only requirement is
that they allow the real-estate agent
to hold open houses.
The standard horror movie hijinks
ensue: strange noises, things that
inexplicably move, a pilot light that
keeps going out. These events are
about as scary as your average
episode of “This Old House.” But
none of it goes anywhere: They are
sad; there are noises; they are still
sad; there are some more noises.
There is no development of the par-
ent-child relationship or the charac-
ters … no escalation of the suspense
… the whole thing feels like a series of
almost-unrelated events.
Then, suddenly and for no appar-
ent reason, a villain appears. We
don’t know what relation he bears to
them, or why he might have become
obsessed with the pilot light of their
furnace. We don’t know who he is, or
even what he looks like, because his
face is always cut off by the frame, or
blurred out in long shot.
The world’s scariest HVAC tech-
nician is certainly villainous enough;
he spends the third act torturing
Mom and kid. Eventually Mom dies.
Eventually kid dies. The end.
The audience is left without any of
its questions resolved: Who was that
man? Why did he torture them? How
did anyone agree to greenlight a
movie that was totally without a nar-
ever, ends here, as India’s ranking was
the worst among the five BRICS coun-
tries in 2017. China has moved up to
43rd; Russia to 53rd, South Africa to
63rd and Brazil to 73rd position.
One of the main components of the
index is diversity, which is required for
undertaking complex tasks that require
creativity. Views of diversity have
evolved significantly during the last
few decades, says Paul Evans, co-editor
of the report, as countries have learned
that there is a difference between
singing in unison (uniformity) and
singing in harmony (diversity), and that
this difference can be measured in
terms of efficiency, competitiveness,
and innovation. Formal education
(from kindergarten to tertiary educa-
tion) has a crucial responsibility in
building the collaborative competences
needed for a more inclusive world.
Countries that realise the impor-
tance of leveraging diversity as a
resource and do so effectively have
are diesel. There has been a lot of elec-
trification in Europe. I read somewhere
that in Switzerland, 100 per cent (or
close to it) of traction is electric.
However, even for Europe as a whole, 33
per cent of traction is diesel. Despite all
the recent emphasis on electrification,
43 per cent of China’s traction is diesel.
Ditto for several other countries, USA,
Russia, CIS, Australia. In other words,
the diesel versus electric traction debate
is not a settled one. Even when they use
electric for passenger trains, many
countries prefer diesel for freight.
But IR now has a focus on electric
traction and diesel locomotives will pre-
sumably be phased out. In 2002, IR set
up a High Level Committee on Disaster
Management. This stated, “To meet the
requirements of relief, restoration and
passenger convenience, it has been pro-
jected to the Committee that diesel
locos in electrified territories be
deployed in such a manner that there is
a diesel loco available in 25-75 km (aver-
age 50 km) of the accident site so that
the above mentioned constraints in
approaching the golden hour concept
are overcome thus ensuring speedier
rescue and relief operations in case of
serious accidents disrupting the route
or major power breakdown or grid fail-
ures, etc. This would ensure that diesel
locos are available for running the res-
cue trains, relief trains, relative specials
and for pulling out the unaffected trains
with stranded passengers”.
In other words, even if you have
complete electrification, you don’t scrap
all diesel locomotives. Some are
retained as a precaution. That 50 km
recommendation must refer to track
length and not track km. Since full elec-
BUSINESS LIFE
rative arc? Why did I just fritter away
an hour and a half watching it?
And now you may have a ques-
tion as well: Why would I torture you
with details about this execrable
film? Well, because Netflix released
its earnings estimates this week. And
this movie illustrates, I think, the
challenge facing Netflix in its battle
to dominate the future of streaming.
My colleague Joe Nocera recently
outlined what that battle looks like —
taking on lots of debt and effectively
“betting the company” every year by
binge-spending on content and hop-
ing that that’s enough to drive sub-
scriptions. Like my colleague, I think
that’s a smart strategy. As long as it
was dependent on leasing streaming
rights from studios, Netflix was a vic-
tim of its own success: The bigger it
got, the more content providers wor-
ried that the company would mur-
der its rivals, leaving them the only
game in town for studios looking to
sell streaming rights. So studios
made it very expensive for Netflix to
acquire rights — which is why, for
years, Netflix’s streaming movie
inventory kept going down.
Owning content keeps Netflix in
the game. And so far, at least, this strat-
egy is paying off. Netflix added 8.3 mil-
lion net subscribers in the fourth quar-
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obviously led this year’s index. For
example, Switzerland, which tops the
index yet again, retains the talent it
grows and is also welcoming to outside
talent. Almost a quarter of
Switzerland’s population was born
abroad, though the country still has
issues regarding gender diversity.
Among the middle-income group
countries, Malaysia has done well
(ranked 27) as the country makes hiring
workers very easy and is effective in
matching skills learned in secondary
education with jobs.
The index also looks at the brain
drain issue — how countries are able to
retain its best people. India fares poor-
ly on that, too. The report says where
the country has plenty of room for
improvement is in minimising brain
drain while achieving a brain gain by
luring back some of its talented dias-
pora members (it ranks 98th in the
‘Attract’ pillar) and in retaining its own
talent (99th in ‘Retain’) — particularly
TIME UP: In other countries, train-sets have replaced passenger locomotives,
with electric traction
trification is intended, what percentage
of the track is electrified is not relevant.
With a track of 66,687 km, we need 1,333
diesel locomotives as backup, say 1,500.
Therefore, some 4,300 diesel locomo-
tives are surplus and beyond a few lim-
ited quantities, can’t be exported.
IR has an indicated “codal” life of
assets, the number of years the asset is
normally expected to last. It is 35 years
for electric locomotives and 18 years for
diesel locomotives. Since surplus diesel
locomotives can’t be exported, they will
have to be junked ahead of their lives
being over. I have certainly simplified.
Electrification doesn’t happen
overnight, there is a time-line. Diesel
locomotive works in Varanasi can meta-
morphose, over time, to producing elec-
ter — higher than estimates, and the
most in the company’s history.
But as my colleague Shira Ovide
notes, those subscribers come at a
cost: specifically, the mountain of
debt that Netflix is taking on in order
to fund its content binge. Equity
investors may be thrilled to see Netflix
growing its subscriber base and con-
solidating its market position, but
bond investors don’t really care about
the stock price, and they don’t even
care that much about the total num-
ber of subscribers. What they want to
see is “free cash flow,” which is to say,
they want to know that Netflix will
have enough cash on hand to make its
future bond payments.
At this point, however, Netflix is
shoveling cash out the door as fast as it
comes in, acquiring and creating con-
tent to add to its library. The company
has said that it will spend up to $8 bil-
lion on content this year. Many com-
mentators have asked whether this is
too much for financial stability. But I
think we may need to ask whether this
is simply too much, period.
The iron law of economics is that
almost everything, eventually, reach-
es the point of diminishing returns.
The last French fry doesn’t taste as
good as the first; Warren Buffett’s final
$1 billion probably hasn’t brought him
as much joy as his first million did.
And eventually would-be content
kings simply run out of good projects
to make; after that, they must either
stop spending or make some terrible
stuff that no one in their right mind
would want to watch.
This moment arrives even sooner
because Netflix isn’t the only com-
pany on a buying binge. Everyone is
hoping to build a streaming empire.
And many of them, like Amazon and
Disney, have deeper pockets buffered
by other revenue streams.
© Bloomberg
in the context of high emigration rates
of high-skilled people.
The reason is obvious: Seen in the
context of the purchasing power parity,
average wages for a person in the US is
more than six times of his Indian coun-
terpart in the academia, more than
three times in management and more
than double in the IT sector. It’s not a
surprise therefore that India is unable
to attract talent from abroad as is evi-
dent from India showing one of the
worst scores on this count.
Most importantly, all the top ranked
nations have one common feature: they
all have a well-developed educational
system providing the social and col-
laboration skills needed for employa-
bility in today’s labour market.
This is where India has faltered big
time. As the ASER 2017 report showed,
a large number of children in the age
group 14 to 18 years in rural India drop
out of school every year. On a rough cal-
culation, therefore, nearly 1.7 million
children drop out of school every year.
The big problem is that even those
who stay back in school are not learning
basic foundational skills. Barely literate
or numerate, they are not enrolled in
skill development courses and are
tric or hybrid locomotives, or diesel
locomotives in other gauges for export.
Any criticism about over-simplification
is indeed true.
But I think the point I am making
remains valid. In addition to plans for
electrification, there should be a plan
for disposing off diesel locomotives,
over and above the path of least resist-
ance, that of sending them to the scrap
yard. Why did I say diesel locomotives?
There should be a policy on all locomo-
tives. We have tended to think of IR’s
operations in terms of rakes. A train,
passenger of freight, is formed by hook-
ing together coaches, wagons and loco-
motives. In an era of shortages, coupling
that khichdi together produced a train.
Learning from international experi-
> LETTERS
Another Republic Day
Welcome to another Republic Day,
But is the country going the right way.
Great hopes we had of this government,
Alas it is turning out to be a figment.
A party obsessed with cows and religion,
Is creating a lot unnecessary tension.
With cow care and ban on beef,
Has caused loss of jobs and grief.
Many promises were made,
As usual they went in to a fade.
The much touted job creation,
Has become an illusion.
Even the honourable supreme judges,
Have developed certain grudges.
The Chief remains standoffish,
And continues to be selfish.
Where is the sign of development,
There is only futile argument.
Expected was better governance,
What we got was only nuisance.
In politics, there is too much religion,
Leading to hostility and aggression.
This kind of relentless negativity,
Results in progress becoming a casualty.
Engine of politics is black money,
For the politician pure honey!
The government is like an octopus,
With its tentacles all around us.
For the slightest and trivial reason,
The fringe becomes bold and brazen.
And a reason to go on a rampage,
To vent their pent up ugly rage.
So let us celebrate this Republic day,
And sincerely mend our ways,
To keep our country going astray!!
Shanmugam Mudaliar Pune
Sad state of affairs
This is with reference to “Fringe groups
on the rampage ahead of Padmaavat
release” (January 24). When the
Supreme Court has cleared the all-
MUMBAI | FRIDAY, 26 JANUARY 2018
unemployable except in low-skill jobs,
and fated to depend on farm employ-
ment and other casual, manual labour.
The government itself has indicated
> CHINESE
that of the 1.76 million people trained
under the Pradhan Mantri Kaushal
Vikas Yojana, its flagship skilling pro-
gramme, till April 2016, only 560,000
people could be certified as having suc-
cessfully completed the training and
only 82,000 were actually placed in
jobs. But even those who get jobs see
their skills getting outdated very soon
as India doesn’t have something that
most developed nations have — a sys-
tem in place to ensure that electricians,
plumbers, agricultural machine opera-
tors and other skilled trade workers
update their skills regularly through an
institutionalised licensing mechanism.
Gender gap is another issue. Once
the eight years of elementary schooling
are completed, girls begin to abandon
schooling in far greater numbers than do
boys; by age 18, there are 4.3 per cent
more girls than boys who are not
enrolled in the formal education system.
Unless these issues get on the coun-
try’s priority list, India has little hope of
climbing higher on the global index of
talent competitiveness.
ence and from metros, there has been a
shift to train-sets. Everything will be
integrated, with no separate locomo-
tives. For instance, ICF (Integral Coach
Factory) in Chennai will produce semi-
speed/high-speed (160 km/hour) train-
sets. This is known as the Train-2018
project, because the production will
happen in 2018. Other than trailer
coaches and motor coaches, there will
be 16 passenger coaches. Since this is a
self-propelled train-set, there is no need
for a separate locomotive. While this is
for 2018, there is a parallel and modern
exercise for 2020, known as Train 20.
There will be 14 train-sets, each with 20
passenger coaches and these train-sets
will run between metros, beginning first
with Delhi-Mumbai. Bids have been
invited from prospective bidders for
design, development and manufactur-
ing. With the technology transfer, ICF
will start to manufacture these, after a
few initial imports. These will also be
self-propelled, with no separate loco-
motives. We thus have a double shift,
away from diesel locomotives and away
from all locomotives.
Hence, shouldn’t we think about our
stock of locomotives? More realistically
though, in other countries, train-sets
have replaced passenger locomotives,
with electric traction. But for freight,
you don’t have train-sets, nor do you
always eliminate diesel. Our vision gets
clouded by passenger. What was the first
locomotive to run in India? I suspect
you won’t think of Thomason, because
it hauled earth in 1851. You will name a
passenger locomotive.
The author is chairman, Economic Advisory
Council to the Prime Minister. Views are personal
India release of this controversial
movie and even the censor board had
cleared the movie with a few cuts, there
is no way protesters should be allowed
to damage public property like this.
The current state of affairs is most
unfortunate to say the least. These
attackers who did not even spare a
school bus and were armed with petrol
bombs just shows the extent of damage
they wanted to do.
What a shame that anyone now can
hold our democracy to ransom. We all
should hang our heads in shame if this
is the kind of environment we are giv-
ing to our future generations. If main-
taining law and order of a state is the
prime responsibility of a state govern-
ment then they need to do a lot of
introspection. It is good to show a rosy
picture of India to international
investors at Davos but if we can not
keep our house in order and let these
fringe elements run riot, we are no
> HAMBONE
https://t.
1
WHISPERS
What’s in a name?
English spellings of Indian names have
often led to confusion. Take the case of
the financial services secretary. While
the name plate at his office in Sardar
Patel Marg, Delhi, shows his name as
‘Rajiv Kumar’, his twitter handle spells
it as ‘Rajeev Kumar’. The same
confusion occurred after Atal Bihari
Vajpayee became Prime Minister. While
some were used to writing his middle
name as Bihari, others wrote Behari,
before it was clarified that it is Bihari.
Look before you tweet
As pictures and videos of attacks on
public property by the Karni Sena became
viral on social media, the Ministry of
Environment, Forest & Climate Change
(MoEF&CC), added its own twist to the
tale. In response to a tweet that "BJP will
have to pay high price to this country...",
the official Twitter handle of the ministry,
used for official communication,
tweeted, "Not a single tweet from
Cong president condemning
#KarniSenaViolence, instead just a
cheesy tweet like this one". This,
incidentally, was not an original tweet,
but lifted from the message of another
Twitter user. The same text was used by
several BJP sympathisers. After being
trolled for the "copy-paste job", the
MoEF&CC handle deleted the tweet. An
apology remains due.
Kissa kursi ka
Congress leaders are miffed that their
President Rahul Gandhi, who has been
invited for the Republic Day parade, has
been offered a seat in the fourth row. A
senior Congress leader, however,
maintained that Rahul Gandhi would
attend the function despite the seating
arrangement. What has left the leaders
irked is the fact that the party president
is traditionally seated in the front row,
and that included former president
Sonia Gandhi.
good for any investment.
Bal Govind Noida
Charity begins at home
Narendra Modi has visited about 50
countries since he became the Prime
Minister. During his visits abroad, he
has hardly missed any opportunity to
talk about terrorism which is certain-
ly the biggest ever danger for the
humanity faced today. Before the
Parliamentary elections of 2015, the
BJP in its manifesto had also talked
about terrorism. Giving justification
of demonetisation, the PM had said
that demonetisation will act against
the circulation of fake currency notes
printed “across the border” which will
ultimately check terrorism.
Unfortunately, not only did this
later prove false, the Union govern-
ment has not been able to prevent ter-
ror — rather, data analysed by the
National Consortium for the Study of
Terrorism and Responses to
Terrorism (US Department of State)
reveals India is third after Iraq and
Afghanistan in terms of terror
attacks. It is desirable that the gov-
ernment first contain terrorism in
India — “charity begins at home” —
and then give sermons to world.
S K Khosla Chandigarh
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BY MIKE FLANAGAN
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OPINION 15
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Volume XXII Number 119

ILLUSTRATION BY BINAY SINHA
MUMBAI | FRIDAY, 26 JANUARY 2018

We, the people both the organised and unorganised sectors.

Indians must go back to the values enshrined in the Constitution Fourth, irrespective of the urban/rural location,
the share of plants accessing external loans in the

O
n India’s 69th Republic Day, it is important to reflect on the extraor- organised sector has increased over time. By contrast,
dinary nature of the country’s achievement. A continent-sized it has declined for the unorganised sector.
country has, thanks to a liberal and inclusive Constitution, survived Fifth, there are urban-rural disparities in access to
wars, droughts, inflation, and dissensions of various hues. It has finance, with rural locations lagging their urban coun-
terparts.
seen off challenges to democracy and retained its faith in the wisdom of the
Sixth, and most importantly, there is significant
electorate. Among other things, India is the largest growing large economy, disparity against women-owned enterprises.
millions have moved above the poverty line, and even the socially depressed Although the gap between the access shares of female
have been able to achieve upward mobility. The country has made great employee-dominated plants vis-à-vis male employee-
strides in life expectancy, infant mortality, and literacy over the decades, dominated plants is closing in the organised sector,
and there are remarkable achievements in technology, on the ground and in this gap is not shrinking in the unorganised sector.
space; there is a fresh data revolution in telecom, and so on. Economic activ-

Fixing India’s twin

Factor misallocation and productivity growth
ity has shifted to Asia, and India is a large and growing part of that story as its It is widely recognised that growth can be enhanced
economy has given it greater global heft. by the reallocation of the factors of production from
Yet, on this particular January 26, as mobs force the closure of cinemas across less-productive to more-productive firms. Thus, the
ranking of firms by factor usage should reflect their rel-

balance sheet problem

the country and stone school buses, the incomplete nature of the Indian project
is also clearly visible. Democratic institutions have not been able by themselves ative productivity ranking and hence be perfectly cor-
related under optimum allocation. Conversely, a less-
to control the growing trend of polarisation in India, both socially and political- than-perfect correlation between productivity and
ly. Liberal values require open debate, open discussion, and open dissent. But there factor usage indicates a misallocation of factors across
no longer appears to be a firm ground on which such deliberation can occur. firms. The lower this correlation between productiv-
Identity, not ideas, are dominant in politics, and cults of the individual have More than labour reforms, policy makers need to address ity and factor usage, the greater is the extent of mis-
replaced a commitment to institutions. Technological and social changes have the misallocation of land and capital allocation of factors of production.
We computed an index of misallocation in all the
caused citizens to be increasingly trapped within echo chambers that intensify
districts in India for the organised and unorganised
their prejudices and hamper the open exchange of views that is the foundation

A
key challenge for many developing countries
of a free society. People are thus prone to taking stark, maximalist positions. is to promote growth by reducing the misallo-
This year began with Dalits in Maharashtra commemorating, as they have cation of factors of production — labour, cap-
for decades, the defeat of the Peshwas by the British in a battle that featured the ital, and land. Huge gains in growth can be made by
heroics of the Mahar Regiment. In any liberal society, such commemoration is the reducing factor misallocation. Growth requires more
efficient firms to produce more output and use more
right of any individual or group. But matters turned ugly, some Dalit protestors
factors of production.
were attacked, and India’s financial capital was soon paralysed following ever- Which factor market is most dis-
angrier protests in response to that attack. This cleavage, born as it is out of torted in India? There is mounting
ancient divisions and hierarchies, may appear unique. But others have disrupt- evidence that land misallocation is
ed normal life in recent times. Sub-nationalism has become the dominant polit- worse than labour misallocation.
ical issue in southern states such as Karnataka and Tamil Nadu. Locally dominant Low-productivity firms have better
access to land and buildings than
castes such as Jats and Gujjars in the north and Patidars in Gujarat have sought
high-productivity firms. Indeed,
preferential treatment from the state, sometimes using threats and violence. And, land misallocation appears to be at
of course, religious tension has been stoked by cow protection programmes and the root of much of the misalloca-
other such activism. tion of output in the manufacturing
sector.
EJAZ GHANI
This is the main challenge that “We, the people” — in the words of the
If land is misallocated, is capital
Constitution — have to face going forward. How can India manage these increas-
also misallocated? There is an impor-
ing divisions and the growing communitarian, rather than the liberal, approach
tant reason to suspect that the two are connected.
to politics and social organisation? Too many communities feel the stakes in terms Most bank loans require some form of collateral to
of respect or economic empowerment are so high right now that they have no guarantee the loan. Land is simply the best form of col-
alternative but to mobilise around illiberal demands. The growing power of lateral due to its immobility (i.e. the debtor can’t run
social media means that echo chambers are more widespread and that there is off with land). This can be contrasted with a piece of
a great incentive for leaders to take the sort of extreme positions that play well to specialised machinery, for example, where the bor-
rower could seek to hide it from debt collectors or
an online audience of partisans. Indians need to go back to the values and prin-
where its sale to other parties after repossession is
ciples enshrined in the Constitution. weak. This difference is visible in terms of the amount
of loan collateral possible against asset classes.
While borrowers can often pledge 80 per cent of
firms in asset-intensive sectors require external
finance due to their capital growth needs. If this is
reduced due to land misallocation, this would help
explain why India’s firms have trouble scaling up, or
why the pace and scale of manufacturing trend has
slowed down.
Poorly functioning land markets
may explain why there are so few
start-ups in the manufacturing sec-
tor in India, given that that start-ups
are often backed by bank loans for
which land is used as collateral (see,
D Gilles, E Ghani, A Goswami, and W
Kerr. “Effects of land misallocation
on capital allocations in India”, Policy
Research Working Paper Series 7451,
The World Bank).
Impact of financial
misallocation
A detailed examination of millions of manufactur-
ing enterprises in some 600 districts shows some
striking trends in India’s financial misallocation:
First, a very low proportion of manufacturing
establishments access financial loans in India (8 per
cent).
Second, this low average masks huge spatial, sec-
toral, and gender differences. It is significantly high-
er in leading regions compared to lagging regions.
Leading states such as Maharashtra show important
depth of financing for firms. At the other extreme are
sectors separately. The indices of misallocation for
output, value added, and factors of production were
computed individually for factors such as labour and
the extent of financial loans. These measures of mis-
allocation were then used in various district-industry
level regressions to examine both the determinants
and the implications of misallocation, especially how
the misallocation in access to finance is linked to the
misallocations in land and buildings and labour.
Empirical evidence provides substantial confirma-
tion in the links between land misallocation and finan-
cial misallocation at the district level.
Looking to the future
Policy makers need to pay more attention to address-
ing the underlying causes of factor misallocation,
especially land and financial misallocation to address
the twin balance sheet challenge of India. Bank and
corporate restructuring may not be enough to put
growth on a higher trajectory. This would involve
removing land market distortions, better land-use
regulations, and more efficient taxation of proper-
ties. Faster growth requires marching ahead with even
stronger policy reforms to promote competition, and
enable more efficient firm to grow faster.
Making growth more inclusive also needs more
attention. The unorganised sector accounts for near-
ly 80 per cent of employment and about half of the val-
ue of land and buildings held in the manufacturing
sector. Yet, the value of financial loans reported in
this sector is barely 2-6 per cent of the value of total

Bailing out the govt land values against loans, for most other forms of
fixed investment the loan-to-collateral value ratio is
substantially lower (e.g. 25 per cent). So, if land mar-
ONGC-HPCL deal has logic, but it can’t address fiscal woes kets are highly distorted, then it is likely that the bank
states such as Bihar where access to loan is very low.
Third, firms in the organised sector have much
higher access to loans compared to firms in the unor-
loans reported in the manufacturing sector. Much
more striking is the huge disparity against women-
owned enterprises, where the gap is increasing. These
ganised sector. States like Gujarat, Punjab, Haryana, gaps should also be addressed as an integral part of

S
loan allocation is also distorted, given the misplaced
tate-controlled oil exploration giant, Oil and Natural Gas Corporation
collateral channel. This can in turn lead to its own eco-
(ONGC), has entered into a share-purchase agreement with the President nomic consequences. For example, rapidly growing
of India for acquiring 51.11 per cent equity in another state-controlled oil
refining and marketing company, Hindustan Petroleum Corporation
Limited (HPCL). The transaction will be completed by the end of the month, con-
verting HPCL into a wholly-owned subsidiary of ONGC. This deal is different from
ONGC acquiring an 80 per cent stake in one of the gas blocks of the Gujarat gov-
ernment-controlled GSPC in the Krishna-Godavari basin in December 2016. That
deal was widely seen as a bailout for the debt-laden GSPC at a cost of about ~80 bil-
The great placement gamble
A
lion, which ONGC had to incur. column I had written for this newspaper —
There is no such bailout in the ONGC-HPCL deal. Established names in the provocatively titled “Placements, statistics
mergers and acquisition space were involved as transaction and legal advisors to and damned lies” — exactly three years ago
popped up again on Facebook a few nights back. It
the deal and the price of about ~474 a share of HPCL reflected a 14 per cent premium was posted by none other than
to the stock’s last traded price (or 10 per cent of the stock’s 60-day weighted aver- Madhukar Shukla, one of the
age price). Moreover, in this case, at least there is some merit because there are obvi- senior-most and much-loved
ous benefits of synergy when a downstream refining and marketing company like professors at XLRI, Jamshedpur.
HPCL is brought under the fold of an upstream oil explorer and producer like Professor Shukla added an
ONGC. As an integrated oil conglomerate, ONGC should be able to absorb the intriguing comment to the post:
He said the column is still rele-
volatility of crude oil prices and gain from the diversification of its cash flows to mid- vant and will be year after year!
stream and downstream sectors. Now, this ought to gladden the
Yet, questions are likely to be raised on two counts. The exemption granted heart of any columnist, except
to this deal from the open offer requirement will deny the non-promoter and retail that this isn’t about tooting my
investors an option to exercise their choice: Would they like to stay invested in own horn. Because this column
in question dealt with a serious
HPCL or exit at the same price at which the sale of the 51.11 per cent equity took
subject: Why the process of
place? There will also be questions on whether the cultural synergies between the
two companies were kept in mind before a final decision was taken. ONGC and
campus placements at business
schools was dangerously flawed.
STRATEGIC INTENT
HPCL are two companies that are run on vastly different management styles and And to have Professor Shukla INDRAJIT GUPTA
the latter coming under the former will not be painless, particularly for the openly and honestly admit that
employees concerned. things had simply not improved was disappointing,
to say the least.
An even bigger worry pertains to the credibility of the government’s fiscal con-
It is around this time every year that thousands
solidation exercise. The deal has provided a boost to the government’s disinvest- of young business school graduates try their luck at
ment proceeds by over ~369 billion, helping the government exceed, for the first placements. For a variety of reasons that the earlier
time in recent years, its total disinvestment receipts target of ~725 billion by a healthy column had explored, it remains a game of hit and
margin. This, in turn, will help the government meet its fiscal deficit numbers. A miss. More miss, less hit.
shortfall in non-tax revenues and indirect tax receipts has raised concerns over the Next morning, I shared the column with my busi-
ness school batchmates on our WhatsApp group.
government’s ability to meet its fiscal deficit target of 3.2 per cent of the gross domes-
Many of them now had grown-up kids. And the
tic product in the current year. The ONGC-HPCL deal could thus bail the govern- refrain was much the same: Getting a job wasn’t a
ment out from a difficult fiscal situation. While the transaction in itself has many challenge. But more often than not, either it was a job
benefits for the two companies and the oil sector, the government will do well to that they didn’t want — or they were merely doing it
recognise that using such proceeds cannot be a sustainable strategy for staying on to mark time, save some money and pay off their
the path of fiscal consolidation. educational loans, before taking the plunge into
something that they really cared about. In that same
column, I had quoted a survey done by a leading
and Rajasthan have access to financial loans for over
95 per cent of the organised sector plants. Lagging
states perform poorly in providing credit support for
business school, which seemed to suggest that near-
ly 70 per cent of students quit their first job after
graduating within nine months to a year!
And no one seems to be too bothered. So long as
business schools maintain a
100 per cent placement record
and they continue to receive
thousands of applications dur-
ing admissions, they aren’t
overly worried about the lack of
fitment. HR folks in the coun-
try’s best-run companies are
rated on their ability to attract
the cream of the batch. And so
long as they build their profile
on campus by organising yet
another business plan compe-
tition and making a few target-
ed pre-placement offers, they
aren’t unduly concerned about
deeper issues of mismatch.
And the media too remains
more interested in publishing special B-school edi-
tions — choc-a-bloc with advertisements from busi-
ness schools themselves — based on rankings that
give high weightage to the school’s placement record,
but conveniently ignoring the underlying issues.
So what needs to change? I spoke to a bunch of
people, including Professor Shukla, to build a list of
things that do need to change for the better.
One, insist that students have at least two years of
work experience before applying for business school.
It is hard to blame students for their naivety, if
they’ve never seen the insides of a workplace, let
alone understand the purpose of management, strat-
egy and leadership. Not only will they relate better to
what is being taught in class, the assumption is that
their sense of clarity about career choices will be a lot
better.
overcoming the twin balance sheet challenge.
The writer is lead economist, World Bank
Two, invite alums to run career clinics and drive
greater industry interactions from the get go. A few
things are clear: Core faculty are often not best placed
to offer career advice. And today, there’s a lot more
choice beyond the traditional MBA hunting grounds
in investment banking, consulting and FMCG. Each
student must get proper coaching in building per-
sonalised career plans. That’s one way to beat the
herd mentality which is evident at placements.
Three, dismantle the pernicious rules that
reduce choice. In the last three years, things have
actually got worse. As batch sizes have increased,
business schools have enforced tougher rules that
force students to accept the first firm offer they get.
Also, the personalised advice that faculty would
provide when the batch size was smaller has gone
out of the window. Business schools must refrain
from irresponsibly crowing about completing place-
ment in less than three-four days — and tom-tom-
ming the big salary jobs. Neither of these really
matter, in the final scheme of things, and do more
harm than good.
Four, there’s one silver lining though: A few
business schools are now offering a modicum of
financial support for the first three years for stu-
dents, who prefer to skip placements and start up
their own new venture. This will encourage at least
a few more students to follow their heart — and
chase their dreams. If there is one thing that has tru-
ly changed since the time I graduated 25 years ago,
it is this: Entrepreneurship. More young people
want to start their own venture rather than look to
climb the totem pole at a global corporation. In the
end, our best hope is to make it more aspirational for
our young MBAs to be job creators, rather than
chase big dollar salaries. And I’d argue this is what
India truly needs.
The writer is co-founder at Founding Fuel

A book of half revelations Even more tantalising is the following

BOOK REVIEW
KARAN THAPAR
If you ask me to describe Sheila Dikshit’s
autobiography in a single word I’d say
it’s tantalising. Called Citizen Delhi and
to be launched at the Jaipur Literature
Festival on Saturday, it’s also revealing,
touching, and delightful to read. But
what lingers in my memory is how it
teases but fails to offer more. It’s full of
enticing snippets that whet the appetite
but leave you hungry.
Let’s start with the events that precipi-
tated her fall. Speaking about the
Opposition campaign around the
Commonwealth Games, Sheila Dikshit
says, “they pilloried the Delhi government
for its many alleged acts of corruption. I
did not know how to respond.” But she
never reveals why nor what the problem
was. Then, referring to the Aam Aadmi
Party she says “many of us had underesti-
mated (it)”. She even admits “we were fool-
ish” to do so. But why did that happen?
She’s not an inept politician to do this inad-
vertently. So what’s the explanation?
Ms Dikshit’s real explanation for her
defeat is to point the blame towards the
Manmohan Singh government in the
Centre. She does so on two separate occa-
sions but only with suggestive hints.
First, “I knew that the Centre’s misfor-
tunes would impact our standing in
Delhi as well.” Then, “many attributed
our loss to public anger against the cen-
tral government as the Delhi government
was often identified with UPA2 simply
because it was a Congress-led govern-
ment.” But that’s all she has to say. No
further details follow.
half sentence: “It was not always smooth
going between our government and the
Centre”. This is the first time I’ve ever
heard a Congress chief minister complain
about her own government at the Centre.
But what were the issues? And why did
they become a problem? Again, silence.
Even when Ms Dikshit is deliberately
revealing something she does not go
beyond a brief statement. Speaking of
how she became Governor of Kerala, she
writes: “Sonia Gandhi offered this assign-
ment and I did not refuse.” But, surely, this
was the Prime Minister’s prerogative and
Sonia Gandhi was trespassing on his pow-
ers? Again, Ms Dikshit says nothing about
that. Just silence.
Let’s now come to the many other
teasers in this book. Ms Dikshit was on the
plane that brought Rajiv Gandhi back to
Delhi in 1984 when Indira Gandhi was
assassinated. She writes of Pranab
Mukherjee, a fellow passenger: “Pranab
Mukherjee put forth his view that a prece-
dent of having an interim Prime Minister
had been established in India from the
time of Nehru.” So was Mr Mukherjee
making a claim? Is this confirmation of
why he was subsequently dropped from
the Cabinet and expelled from the party?
After hinting, Ms Dikshit has no more to
say. I was left wondering why her lips are
suddenly sealed.
Of the Emergency we’re told that her
father-in-law, Uma Shankar Dikshit, who
was a minister when it was declared,
“experienced discomfort”. He was “dis-
content” and “disturbed by the draconian
aspects of the Emergency.” But what were
these aspects? Slum clearance?
Sterilisation? I don’t think those words
even occur in this book. We’re simply left
to guess why Dikshit père was unhappy.
Elsewhere you discover she had a key
role to play convincing Congress MPs to
vote for the Bill that reversed the Supreme
Court’s Shah Bano judgment. But she nev-
er explains whether she did this willingly
or, even, whether she believed in the
measure. When she asks at a later point
“why do we not discuss issues like marital
rape in the context of domestic violence?”
you get the feeling she must have compro-
mised her views in supporting the Shah
Bano Bill. But, of course, Ms Dikshit won’t
say so. In fact, she doesn’t even hint at it.
So what do I make of all this? No doubt
these are small gems and the autobiogra-
phy is littered with them. At times they
even sparkle. Yet they lie scattered like
pieces of an unstrung necklace. And you
search in vain for the thread that should
connect them. Why is it missing? It could
hardly have been forgotten or deliberately
overlooked? Which leads me to the con-
clusion Ms Dikshit still has a lot more to
say. But will she ever speak out fully?
I doubt it. Ms Dikshit has avoided dis-
cussing two issues where her 15 years’
experience as chief minister must have giv-
en her great insights and which are major
controversies under her successor. They
are the question “Should Delhi be a full-
fledged state?”, and “Is it inevitable that the
relationship between the lieutenant gover-
nor and chief minister will be fraught?”
Neither has been touched upon. Not a
sentence. It’s as if Sheila Dikshit thinks
they’re unimportant or irrelevant. Yet, as
chief minister she was in favour of full
statehood. She also had moments of sharp
tension with the lieutenant governors she
served under.
This silence is disappointing. She has
obviously deliberately chosen not to speak
out. But why? I can think of no credible,
leave aside convincing, reason.
The book is more forthcoming when it
addresses her personal life and marriage.
She calls her late husband, Vinod Dikshit,
“the love of my life”. She describes how
they met, how he proposed, her mother-
in-law’s fierce opposition, and how she
was made to sleep in a “store room
crammed with utensils”.
Few politicians write so frankly. The
Dikshits would do wonderfully crazy
things like seeing three consecutive shows
of My Fair Lady. And she adored him. Her
description of his tragic death may be
brief but you can feel the shock and pain.
“Part of me died with Vinod forever,” she
adds. What a wonderful job she’s done
hiding that from the rest of us.
CITIZEN DELHI
My Times, My Life
Sheila Dikshit
Bloomsbury
175 pages; ~599