The Internet doesn’t threaten Indian newspapers, TV does.

Here’s an article on Rediff.com about the possibility of newspapers becoming extinct. The premise is that the Internet as a distribution channel, with online newspapers, blogs, wikis and message boards as the content, supported by online (in place of print) advertising, is threatening the very existence of newspapers. According to the article, newspaper circulation is declining, and there’s a vicious circle being formed, with newspapers wanting to shore up revenues by charging advertisers more, who won’t pay until circulation goes up.

In the context of India, though, the threat to the print medium has little to do with the Internet. The penetration of this medium is so poor in India it doesn’t even matter. So from a newspaper’s point of view, blogs, wikis and other online sources of news can take a hike, they don’t even register on the threat radar in this country.

The real threat to newspapers is from Television. From the 24×7 news channels in most major regional languages, and English and Hindi, of course. From the fierce competition among them to provide up-to-the-second updates on everything from cricket scores to the stock market to politics.

The usage model I’m increasingly seeing is: most folks catch up on news throughout the day via TV – or at least in the morning and then during prime time. (which is why the 9PM news bulletin is such a big deal). The next morning they don’t want to see the same news again, this time in print – they’ve already seen that.

What they want is analyses and opinion pieces with regard to that piece of news. They want special reports on a range of topics. Something to complement what they’ve already seen on TV the previous day. That’s the challenge before newspapers today. Content matters more now. I realise that I’ll probably be raising a few hackles here – given readers’ loyalty to newspapers – but the Indian Express seems to be gaining in popularity and readership over the past year. It’s got to do both with the steady improvement in the op-ed section of IE, and the gradual but unmistakable tabloidization of the Times of India. The newspaper is taking the place of the “weeklies” that used to dominate this kind of print content in the 80s and 90s – they’re becoming “dailies” in a different sense.

TV over Telephone lines in Mumbai/Chennai

Now this is really exciting – “MTNL, BSNL to kick-off IPTV from Mumbai, Chennai“. Television via telephone lines! [ via]

It remains to be seen if anyone can offer these services, over MTNL and BSNL’s lines, or if the two state-owned telcos will attempt to “lock-in” users into their content. The problem, of course, is MTNL and BSNL have not yet decided what business they are in. If they are telecom companies, then they ought to stick to maintaining the telecom infrastructure around India. But they imagine that they are ISPs, too – so they’ve “locked in” consumers into using only MTNL’s Triband and BSNL’s DataOne Internet services over their copper-wire infrastructure. Now they also imagine that they’re content providers. Going by past experience, there’ll be a messy “licencing” and “bidding” process for channels/content providers to provide television over, for instance, MTNL’s Triband service.

It would be interesting to see how MTNL would react if there were a service that offered, let’s say, an ad-supported, web-based TV-channel that operated via the RealPlayer or Windows Media Player plugin inside a browser.

Congress purane din vaapas laane waali hai

An insight into how serious the Government is about reform.

Tavleen Singh, in her Sunday column in the Indian Express (Red Flag, so no Economic Progress), put into words what many have been feeling for the past year-and-a-half: “The most intriguing feature of the World Economic Forum’s India Summit last month was that both the Prime Minister and Finance Minister talked as if they were consultants to the Government of India instead of the GoI itself.” Singh hits the nail right on the head – neither Manmohan Singh nor P. Chidambaram hold real power. All they have been able to do over the past so many months, has been to “appeal” to the nation to, among others, grow at 10%. They have not been able to, on even a single occasion, outline what they will do to enable the nation to accelerate beyond the 7-8% growth it is experiencing – because they are themselves not sure what they will be allowed to do.

Most Indians are disillusioned with Manmohan Singh, for a second time. For years and years through the 60s, 70s and 80s he had the vision for India’s economic transformation but no power. When he did finally taste power as Narasimha Rao’s Finance Minister, he initiated reforms for 2 precious years from 1991 to 1993. Once India was no longer in danger of collapse as a result of the 1991 Balance of Payments crisis, reforms stopped, most of them half-implemented – some sectors half-opened-up, others untouched by reform. We did not realise it then; we were so deliriously happy to see the beginning of the end of the Licence-Quota-Permit Raj, that we really believed that the New Industrial Policy of 1991 was India’s Berlin Wall moment. In reality, we had been betrayed.

Today Manmohan Singh is the Prime Minister of India. Theoretically, he is the most powerful man in India, the most powerful man in the third-largest economy in Asia, the most powerful man in the second-fastest growing economy in the world. With such limitless power in his hands, we assumed that he would usher in that second wave of reforms the country desperately needed. Instead, we have been betrayed once again. Because Manmohan Singh as Prime Minister, like P. Chidambaram as Finance Minister, like Montek Singh Ahluwalia as Head of the Planning Commission, actually wields very little power.

P. Chidambaram has not taken a single step as Finance Minister to correct that fundamental flaw in India’s tax structure – that the tax net is way too small. There are just too few people paying for too many others. There are only 4 crore PAN applicants in the country, and only 1.88 crore people filed their returns last Instead, he takes the easy way out and attempts to sqeeze even more money out of existing tax payers. Evidence of that is the Fringe Benefit Tax. Oh, and political parties such as his Congress Party are exempt from it. Another example of arbitrary exemptions and eceptions making a mockery of our tax collection.

The Sonia Gandhi-led National Advisory Council “advises” the Government on most critical decisions. An admirable goal, except that these decisions usually defy economic logic. Consider the presentation that the NAC made to the Government in early December 2005. (http://us.rediff.com/money/2005/dec/07power.htm). I shall not reproduce the article here, except for a few statements. The NAC avers:

“Privatisation is not the silver bullet in power sector reforms. The experience of Delhi and Orissa have been disturbing”.

The presentation has also raised question over the efficacy of the Rajiv Gandhi Grameen Vidyutikaran (rural electrification) programme, terming decentralisation of energy projects as “hot air”. “There is no guarantee that this will succeed where others have failed,” it said.

The presentation also sounded caution on the question of nuclear energy production even after the recent accord with the US in this area.

“PSUs in the energy sector are important, and a multi-sectoral approach is needed to deal with the issue,” the presentation said.

The prime minister’s energy co-ordination committee and the Planning Commission are not considered adequate for the purpose since the former “deals only with energy security” and the latter suffers from “institutional overload and fatigue”.

Sonia Gandhi’s NAC does not trust the private sector. It would rather the Centrally Planned, monopolistic Public Sector continue to run the Power Sector in India the same way it has for the last 60 years, and somehow hope that we “double the country’s power generating capacity by 2012”.

We have already seen a review of the Electricity Act of 2003, which called for unbundling of State Electricity Board and allowed public and private organisations to compete freely. The results of this – in Delhi and Orissa – the NAC finds “disturbing”. Never mind that in Mumbai, areas serviced by Reliance Energy do not have to go through the horrible daily power cuts that the rest of the country, serviced by state-run electricity boards, does.

And why consider only the power sector?

In a recent interview to BusinessWorld India, the Petroleum minister Mani Shankar Iyer said “As a socialist, I would like to see ONGC regain its dominant position in India’s petroleum sector”. With this man and his ideology, can we ever expect any sort of meaningful reform in the petroleum sector?

I’ve already written about the Telecom Minister’s stand on private players leasing BSNL’s fixed-line installed infrastructure.

Just two weeks ago, in a pathetic surrender to vested interests, the Government set up yet another committee to review the entire bidding process for the modernization of the Mumbai and Delhi airports. The ostensible reason is that there are just two bidders for two airports, and that there’d be no competition. Ignore the fact that all foreign bidders dropped out in sheer disgust at the sloth the Government displayed when it dragged its feet over even commencing the bidding process, and the the Airports Authority of India scored somewhere around 50% on the evaluation scale when the cutoff was 80%. The real reason is that there are people who, for reasons of ideology or prospects of financial gain, would like to see the publicly-owned AAI get the contract and to a shoddy job of upgrading these airports to become “world class”.

This Government has, across each and every sector, not only stalled but even begun to reverse any attempt at reform. Perhaps we ought to have expected this exact behaviour. After all, the Congress Party’s ad campaign in 2004 did say “Congress purane din vaapas laane waali hai”.

Robinhood Karat

The Name’s Karat. Prakash “Robinhood” Karat.

Since the elections in May 2004, he’s been a familiar face on TV. News channels and magazines have faithfully attended every one of his press conferences, have hung on to his every word, and have fought among themselves for that “exclusive” interview. He is the mai-baap sarkar of the mai-baap sarkar. The Big Brother of Big Brother. The man with the nice smile and iron teeth. The man who can stall progress with but a single statement.

Ladies and Gentlemen, presenting Prakash Karat of the CPI (M), now in a new avatar as the Robinhood of Hindustan!!

While Manmohan Singh playing a supporting role as the perennial Sheriff of Nottingham, trying to cajole, appealing to see reason, exhorting rational thinking, Prakash Karat is our desi version of that mythical medieval superhero. The man who believes that taking more and more from the rich and handing them out as doles to the poor is the only way to lift the latter out of their miserable existence.

A couple of days ago, he and his merry CPI party mates summoned the press and fulminated against the low tax-to-GDP-ratio in India. “The value ought to be 11%!” they declared. “How dare the rich earn more and more, and the poor stay where they are!” they thundered. “If the rich earn more, they can stay the way they are; anything extra they earn ought to be given to the poor – we must, and we will raise taxes for them!” they concluded.

Middle class consumers stared at their TV screens, aghast, as channel after channel beamed news of this new idea of the Left. They wanted to “track and tax” “conspicuous consumption”. Gems include a cess on all purchases at shopping malls, adding a surcharge on diesel for family cars – but not public transport vehicles), higher VAT rate on everything from watches to cars and most things in between. The idea is to generate more revenue for the Government to be able to fund its Bharat Nirmaan, National Employment Guarantee Scheme, and Jawaharlal Nehru National Urban Renewal Mission, and any other schemes that will doubtless be thought up of in the remaining three-and-a-half years of the UPA Government’s existence.

Wow!

Disgust hits home later. The first emotion is horror, then amazement at the sheer lunacy, ludicrousness and absurdity of such harebrained ideas. First, it is a return to precisely the same kind of attitude, the same kind of policies that strangled India for much of the first half-century of independent existence. We finally seemed to have woken up to our follies in 1991, when in the ensuing decade we improved our tax structure and weeded out useless and discriminatory taxes. However, we bungled up even that, and are today left with half-baked, half-implemented tax reforms. Now the Left wants to mess it up even further.

Most economists (except the hopelessly Leftist ones at JNU, for example) have cried themselves hoarse on the need to widen India’s tax net. I saw, a couple of weeks ago, a horrifying statistic on CNN-IBN – only 1.88 crore – or 18.8 million – tax returns were filed last year. Now how many individuals earn in India? Hundreds of millions at the very least? Out of a population of over a 1000 million? There are just too few people paying for too many people. What we have needed for a long time now is a flat tax rate. A fixed percentage. Simply put, “You earn? You pay.” Everyone pays the same rate, whether he/she earns Rs. 100 a day, or Rs. 10000.

The reason that we need this is that having arbitrarily fixed “slabs” and discriminatory tax rates mean that wealth creators are specifically targeted. The message that goes out is – “If you earn more, be sure that we’ll take more from you” – and that discourages those wealth creators. I am not talking about ultra-rich heads of large corporations and the like – I do not know if they even care about being discriminated against – but of those who earn, say, 5 lakh (Rs. 500000) a year. There are so many in the Rs. 1 lakh to 5 lakh bracket in urban India today. They work hard, and are rewarded commensurately by their jobs. For the first time in their lives, they earn enough to be able to live life they way they want, to be able to satisfy their material desires – because not only are they earning more than 10 years ago, the marketplace now offers them that range of products, across sectors. For the first time, they can aspire for a comfortable, worry-less life. Consumption is on the rise, therefore, like never before (this, incidentally, is often touted as the principal difference between China’s and India’s growth – domestic consumption-driver growth – and is the chief reason why our growth is said to be more sustainable). Now, if this bracket of consumers faces a sudden, sharp rise in expenditure – because they have to pay more for just about everything that they buy – it’s going to leave a very bitter taste in their mouths every time they make a purchase. The point is that this bracket is going to feel the real pinch of the Left’s policies. Such cesses and surcharges may not be large individually, but cumulatively they make a big figure. To use a saying, it is bleeding these consumers with a thousand cuts.

To be sure, this resentment wouldn’t exist if everyone were taxed equally. It is this same model that is followed so astoundingly successfully in Scandinavian nations. In one nation (I forget which, Finland I think), the tax rate goes up to 40% – and no one complains. Because the uniformity of tax application, coupled with strong accountable institutions that guarantee that the tax money will be used effectively, means that there is very little tax evasion, and no protests at the high rate of taxes.

But this section of society is not going to give up the pleasures of consumption once it’s tasted them. When the Government is out to track and tax “conspicuous consumption”, it is not going to be able to cut down on that consumption. No way. It will only turn it into “inconspicuous consumption”. People have money. You tax diesel in such discriminatory ways, ordinary, usually scrupulously honest individuals will become party to a racket that will send public transport vehicles to petrol pumps to fill fuel, and then siphon fuel from those (larger) tanks into their own. Again, it’s a win-win situation for everyone but the Government. The individual consumer gets his diesel at a price lower than what he/she’d have to pay at the filling station, and the truck/lorry/tanker owner would get a cut. But that’d throw up further problems. What’s to stop the truck owner from starting his own kerosene-diesel scam a la Manjunathgate? And will that lead to increasing siphoning-off of kerosene from the Public Distribution System? On a similar note, taxing high-end consumer items will mean going back to the same evil which plagued an entire generation in the 70s and 80s – rampant smuggling. Then it was smuggling foreign goods which would have cost the earth if imported legally, this time it’d be domestic smuggling, on the same principle. To check all of this, you’d need more Government inspectors, more checks at entry/exit points, and a whole bushelful of headaches – not to mention rampant corruption. One thing leads to another, and a single dumb idea launches a whole new series of illegal activities, which do more harm than good, and never end up benefiting the poor at all.

Why does the Left not see reason? The mosquito circling atop my head has been reading this article as I’ve been writing it, and is now buzzing its approval as I make my point and wind up. If a brain of that size can comprehend this concept, what’s keeping the Left from following suit? Are they that stupid?

Not at all; on the contrary, they’re very smart. Or rather, they’re just following the principles of votebank politics. Consider – the Left is a very small party in terms of National presence. In urban India, it does not figure at all. Its bastion is West Bengal and Kerala (and Tripura, mentioned for completeness), and that too the overwhelmingly large rural mass. The Left ignores the needs and demands of that miniscule mass called Urbania, and instead goes into the countryside, telling voters there, of their policies. These policies are sweet music to the rural populace. It is very difficult to convince them otherwise. From an economically poor villager’s point of view, the matter is brutally simple –what sounds better? “We’re going to collect more money from the rich city folks, and give it to you!!” or “We’re going to tax everyone – the rich city folks as well as you. We’re going to use the money to provide basic services – power, education and infrastructure, but not to give it to you directly, or to guarantee jobs to you, or make things artificially cheaper for you. By allowing the rich folks to get richer, we’ll ensure they’ll set up more factories, so that you guys all have a chance to compete for all those new jobs so created.”

In a nutshell, the urban votebank doesn’t matter to the Left. For any party with a true national base – the BJP+allies, or the Congress, urban India does make a big difference to its electoral fortunes. The Left, instead, has maneuvered itself into a unimaginably wonderful position – the epitome of Power without Responsibility. With 63MPs from mostly 3 states, it imagines itself as having the mandate of the entire nation; it has strangled the functioning of all 543 members of Parliament, the Government of India, and the Indian Economy. By not joining the Government, it is not accountable to anyone or anything that it does. And this situation has existed over the last year-and-a-half, simply because of the Congress Government’s sheer lust for power. I repeat my appeal to the Government – call for fresh elections and refuse support from the Communists – if you have any spine.

Update: This article on Rediff.com has this nugget of information – the Left parties had a vote share of 5.66% (yes, really!) in the 2004 elections.

Articles on South Korea’s Broadband penetration.

I’ve set out to read up on as much as I can on the immense penetration (and hence usage) of broadband internet in South Korea, which Wired Magazine had dubbed “The Bandwidth Capital of the World” a couple of years ago. Even though I can just look and wish we in India’d pull up our socks and get that kind of (or even better) infrastructure here. Anyways, I’ll leave wishful thinking for another day, and list what I’ve been reading:

Om Malik: How South Korea got its Broadband Mojo
Om Malik: 200 KBPS is Not Broadband
Om Malik: Broadband? What broadband?
ZDNet: Broadband: Lessons from South Korea
Wired: The Bandwidth Capital of the World
San Francisco Chronicle: The future is South Korea
CNet: South Korea’s house of the future
Emergic.org: Venture Capital in South Korea
The Standard: Online Social Network Scores Hit in South Korea
Newsofttechnology: South Korea Pushes Mobile Broadband