What doesn't interest the state or the market!

West Champaran is a remote district of Bihar – one of the poorest states of India. The region borders Nepal and is the same place where Mahatma Gandhi started his non-violent campaign against the British Empire. Until 2007, Sixty years since India got Independence several villages in this region remained unelectrified. Though availability of electricity in Bihar is in general sporadic, the State Electricity Board considered it non-feasible to provide electricity to these villages around the Gandak river basin due to geographical difficulties. 

In August 2007, however, things changed. A group of friends managed to find a solution to a problem that the state considered outside its competence. A five year long research process culminated in the formation of Husk Power Systems (HPS) that could provide off-grid electricity that used rice husk, a resource that was abundant in that area. The provision of electricity to villages deemed unfit for grid based delivery was a feat in itself but what was more commendable was the vision of a model that was affordable, self sustainable and scalable.

The villagers could buy power from the micro power plants at the same cost or less than their monthly spend on kerosene oil which they used to burn oil-lamps. A solar system is also capable of off-grid electricity provision but in India it is still an expensive option which a select few can afford. The plants generated revenue from the sale of power units as well as sale of CFL bulbs, and utilisation of the rice char for manufacturing incense sticks. This revenue was sufficient to make each plant profitable and this attracted franchisee interest. The profitability of these plants holds special significance in the Indian context given that most State Electricity Boards (SEBs) are loss making. The operation and maintenance of the power plants was relatively simple and the replication was therefore quick. By 2010, 50 plants had been established and HPS targets 2000 plants by 2014.

The case of HPS is no exception, as India develops economically a number of social enterprises are emerging to somewhat reduce the massive deficits in public service delivery. To read more about such enterprises one may look at "Frugal Innovation: Learning from social entrepreneurs in India."

“Jaypee” immune to bicycles and elephants?

Many people investing in the real estate in Noida must have been dissuaded by brokers and laymen alike to not to buy a Jaypee property because of its close connections with the Mayawati fraternity. It is/was believed that the group has benefitted disproportionately from Mayawati’s regime and will likely go in for a tailspin once the Yadav’s take over.

As a company that is listed on the stock exchange and one that does not take any money in cash from its buyers (unlike the norm of 40-50% in black) the facts suggested a level of transparency. However, the behind-the-scene realities were/are as good as anybody’s guess.

With the elections now over and SP firmly in place the stock markets seem to be indicating that the fears related to the vulnerability of Jaypee to regimes were unfounded.

Twenty days after the victory of the SP, the Jaypee stocks have risen broadly. There were some fluctuations in the first two days of the election results but those seem to have been clearly rested now.

What is not yet settled though is the explanation for this neat outcome for Jaypee? People are wondering if it is actually a company with great fundamentals or if it has the skill of manoeuvring across political parties. 

I thought India was better than Vietnam!

When I first started to look at the economy of Vietnam I thought it is a pretty small economy that is overly reliant on exports and investment and has struggled to maintain its macroeconomic stability off late.

I was also pessimistic about the economy on account of the heavy state involvement in production as well as banking. More than 80% of banking is state controlled and the state owned enterprises (SOEs) contribute to about 35% of the economy. There is heavy channelling of bank lending to state enterprises and that leads to inefficiencies.

Such a scenario in Vietnam made me think that our India is doing quite well. We are a democracy and private markets here are not interfered with. Well all this remains the truth but when compared to Vietnam, I now realise, we are certainly not doing better.

The reforms for the two countries started around the same time (1986 for Vietnam and 1990 for India) and Vietnam has managed to achieve a comparable per capita income already. Like India, Vietnam didn’t contract during the Global Financial Crisis and the growth rates for both countries are quite similar.

What came as a surprise to me is that government owned banks still control 75% of Indian banking system and 3% of their loans are bad. Most of these bad loans are attributable to loans to government owned entities or projects like the Indian Airlines.

And that is not the only negative comparator; India also visited a similar macroeconomic instability recently as Vietnam with high inflation, high twin deficits, and low forex reserves.

Well, India certainly has a much bigger economy than Vietnam as of now but that is due to the enormity of its size. In terms of the economic fundamentals credit must certainly go to Vietnam for catching up so fast despite years of strife on account of the infamous Vietnam War.