Will FDI in retail be good for consumers?

This article was first published in Moneylife Magazine and www.moneylife.com on October 25th, 2012


Wal-mart or Tesco may fail in India but consumers must get a choice

At 6am on a Tuesday, the wholesale market for vegetables—Bowenpally Monda (Hyderabad)—is already humming with activity. When talking to a commission agent about their cornering a share of the farmers’ profits, the agent asks, “While statistics are available and the media quotes the number of farmers who have committed suicide or number of farmers who have become impoverished or their condition has worsened, does any government institution or any institution have statistics on how many intermediaries have gone bankrupt? How many people have entered the trading business and lost money and, hence, quit? How much bad debt is there in intermediation? If this statistic is compiled, one would realise that intermediation is not an easy job.” In this, and possibly other markets, the intermediaries or commission agents perform a very important function—that of taking financial risk.

Others from his trade join in to ask: “Why should a farmer worry about what the others are getting? If a farmer gets Rs2 and he has invested only Re1, it’s good business. He makes 100%-200% return on his investment. Any project should be measured on the basis of return on capital. Intermediaries do not make money on each transaction. They make money once in a while. That’s part of the game. Sometimes, they make a killing; on other days, they barely break even or make losses. Volumes bring them money. Their average margins are wafer-thin.

Across the country, debate is raging over foreign direct investment (FDI) in retail and the entry of larger players like Wal-Mart and Tesco. The traders do not seem to be concerned about this. One of the agents asks me, “How is a Reliance or an ITC less smart than Wal-Mart?”

Reliance has the deepest pockets in the country and did hire the best talent in the world for its retail operations. But Reliance Retail has been a fiasco. While one can argue that Reliance has always operated in the industrial arena and does not have a mindset for retail, what about ITC? ITC is a thoroughly farm-consumer market company with deep pockets and deep understanding of the entire value chain. They have worked with farmers at the grassroots level for over 100 years in India. Yet, their fresh retailing business has not been successful.

What is the problem? And can Wal-Mart and others handle it? The CEO of a company, who does not want to be named, which is into large-scale commercial farming, says, “Either the market is more efficient than is believed or the market has not evolved to a point where models of large retail chains can be absorbed in the system.”

It is often said that in India 30%-40% of the fresh produce gets wasted. I once heard Damodar Mall, director of strategy-food at the Future group, which pioneered organised retail business in India, say that in a country like India where people make serious living out of rag-picking, nothing is thrown away. Nothing is wasted. “Yes, the value of the produce can be better preserved. But the cost of retaining that value through refrigeration or pre-cooling, etc, versus the value saved is not financially viable.”
The natural chain is far more efficient. Apples are a classic example where cold chain can be applied. They are produced only in one part of the country and consumed across the country. Concentrated production and distributed consumption. Companies like Adani and Concor, have invested heavily in the cold chain. Yet, cold chain has not become entirely successful.

The marketing and distribution channels have designed themselves in such a way that it is very close to ‘Just-in-Time’. In the US, food habits are more or less uniform throughout the country. In India, every 300km, eating habits are completely different, determined by production in the local catchment which, in turn, depends on the soil, agro-climatic conditions, etc. So the production and consumption is more localised. While there are products like paddy and wheat which are produced in one part of the country and consumed across the country, fruits and vegetables, especially vegetables, are localised. Except for onions and potatoes, few products move further than 300-400km in the country.

When asked about the impact of FDI on the mom-and-pop kirana stores, the CEO, who prefers to be called a farmer, says “Mom-and-pop stores will flourish. They will not go anywhere. In fact, in places where the retail chains set up shop, the mom-and-pop stores will become even more efficient. The Indian trader is very smart. There are several instances where when organised retailers like Reliance run a promotion on tomatoes, for, say, Rs5 per kg, the corner shop vendor comes and buys 10kg and stocks it in his shop. These promotions result in losses for organised retailers and gains for the small shops.”
The guidelines for FDI in retail impose limitations too. Outlets can be opened only in cities with a population of one million and above; 50% of the investment should be for backward linkages. These are tough conditions to meet.

Also, the regulatory and procedural hurdles are not going to be easy for foreign investors to manoeuvre around. Even a simple food-processing unit needs anywhere between 15-20 licences/permissions from agencies/authorities such as electricity, pollution control, labour, fire safety, panchayat, taluka, weights and measures, etc. They are needed and should be there. But the way they are monitored and the way the system operates, it is very difficult to start and operate a project.

The retail pie is obviously very big and everyone can benefit from it. But it’s only fair to give the consumers a choice. If a Wal-Mart or a Tesco is more efficient and offers cheaper products, then why should the customer suffer? Whether they will be able to do so is a big question; but it is worth giving them a chance for the sake of the consumer.

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Make best of deft NEFT

This article was originally published in Postnoon on October 26th, 2012, Co-Author: Anuj Hetamsaria


A few days back, I had counseled Mr. Mukherjee about mobile banking, in the context of transferring funds from one account to the other. Today he came to me with further questions with regards to funds transfer.

Mukherjee: Professor, the relationship manager at the bank told me that funds could be transferred via NEFT. What is this NEFT?

Nicky: NEFT stands for National Electronic Funds Transfer and it facilitates the transfer of funds across different branches of the same bank or different banks. It is easy, cheap, safe and fast.

Mukherjee: I am sure it comes with its own set of requirements!

Nicky (smiling at the cynicism): Oh yeah! You will need to provide to your bank, the Account Number and name of the beneficiary, the name, address and IFSC (Indian Financial System Code) of the beneficiary’s branch.

Mukherjee: Where do I get all these details from?

Nicky: The person to whom you want to transfer the money to, that is, the beneficiary, should be able to help you with this. All these details will be found on the cheque book of the beneficiary. IFSC code can also be found out on RBI website and from the bank branch. Care must be taken to ensure that these details are provided to your bank correctly, to avoid transaction errors.

Mukherjee: What is this IFSC? I have never heard of it before?

Nicky: According to wikipedia.com, IFSC is an alphanumeric code that uniquely identifies a bank branch for participating in NEFT system. It is an 11-character code with the first 4 alphabetic characters representing the bank and the last 6 characters (usually numeric, but can be alphabetic) representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to route the messages to the destination banks / branches.

Mukherjee: So I can transfer funds using NEFT at any time of the day or night and any day of the week?

Nicky: Not really. You cannot transfer funds on bank holidays, like public holidays and Sundays. From Monday to Friday, the facility is available between 9 AM and 7 PM and on Saturdays, between 9 AM and 1 PM. There are eleven hourly settlements between 9 AM and 7 PM on all weekdays and five hourly settlements between 9 AM and 1 PM on Saturdays. The money will be credited to the beneficiary’s account on the same day or at the most next day in case the message is sent during the last batch of settlement. If the amount is not credited within the specified time then the same must be reported to the banking authorities and proper follow up of the same to be done.

Mukherjee: You did tell me that it is cheap. But can you offer some specifics on charges?

Nicky: Well…My bank changes Rs5/- per transaction if the amount is less that Rs 1 lakh and Rs 25/- if the transaction amount is more than Rs. 1 lakh.

Mukherjee: Hmmm, that’s really not much. Thank you Prof.

Mobile Banking

This article was originally published in Postnoon on October 19th, 2012, Co-Author: Anuj Hetamsaria


Mukherjee was pacing furiously at the lounge of our building when I arrived after a long day. He generally waited for me there when he wanted to ask me something. He was an impatient man and I knew from experience that I did not have a choice. I will have to answer his questions before I was allowed to proceed to the elevator. Reluctantly, I asked him the reason for his anger.

Mukherjee: I had to transfer money to my daughter studying in Delhi for her college fees. It was urgent. I went to the bank so that I could take out cash from my account and deposit it in her account.

There was a long queue at the teller’s counter. At 1pm the teller got up and went for his lunch. I waited for half an hour for him to return. After he came back and when my turn came, he refused to let me withdraw cash with my PAN card as the amount was more than Rs50,000. I was not carrying my PAN card. By the time I came back home, took my PAN card and reached the bank again, the bank had closed. My daughter is furious with me. I am furious at the teller. Overall, I am very upset.

Nicky: Why do you need to go to the bank to transfer the money? Aren’t you registered for mobile banking?

Well you must get registered for it then. This time, you don’t have a choice. You will have to go to the bank again tomorrow morning and deposit the amount in your daughter’s account. But you must immediately apply for the username and password for mobile banking. In future, you can transfer the money to her through your mobile.

Mukherjee: Really? Is it simple? What are the things that I can do using mobile banking?

Nicky: Ofcourse. Mobile banking is becoming popular by the day. You need not wait in the queue. You need not confront any rude tellers. You can transact sitting anywhere and at anytime. You can check your account balance, see transaction history, transfer money, pay bills, etc.

Nicky: Mobile banking is very safe, if not 100 per cent. But then, nothing is 100 per cent safe! Once you register, you will get a Mobile Money Identifier (MMID). It is a unique user ID which the bank gives you. You also have a Mobile PIN, that is, a password. This MPIN needs to be changed at regular intervals for safety purposes. There are always issues like viruses attacking your mobile. But they are rare occurrences.

Mukherjee: Will this work on my mobile?

Nicky: I don’t know that. You must have a phone that is compatible with the software/application that your bank uses. The customer care of the bank will help you download the necessary software and will also be able to guide you on compatibility issues. Your phone number will be linked to your bank account number.

Mukherjee: Is it free? Or is mobile banking free?

Nicky: Well… mostly its free. Only a few may charge a small fee. But even if there is a small fee, its worth it because it saves time and effort or physically going to the bank.

Life Cycle Ride

I went through an amazing experience this Sunday. It was a ride to Darewadi on Satara Road with a group of Germans who completed their journey of 10,000 kms on Bicycles. They started their journey from Germany in April 2012 and completed their final leg of 10,000 kms in Pune last week. They have travelled all the way from Europe via Iran and Pakistan to India. Darewadi is 30 kms away from Pune. The to and fro distance to be covered on bicycle was 60 kms.

We began our cycle ride at 7.00 am on Sunday, 14th October 2012. We were 20 of us including the cyclists from Germany. The journey began from Rajaram Bridge on Sinhagad Road.

It was early morning. Two of my fellow cyclists chatted with me for a while and left me behind. I was a little disappointed and thought they could have waited for me, could have gone a bit slow. I felt as if I should leave this journey at once. But then I looked behind and said, ah, there are people behind me. Great Deal! Let me push the pedal hard.

We reached the bridge connecting a valley after taking a turn from Sinhagad Road. The journey started becoming interesting. A bus full of children waved at us which was so motivating, I was glad I did not mind others going ahead of me at the start. I realized I was so foolish, it was not about going first; it was about finishing the journey.

Thanks to the mountains, Sun rays were not reaching us yet. And guess what, Maoushmi, the only girl of the elite group of four German Cyclists, meets up with me on her Bicycle who was on her way to complete final few Kilometers to make it a 10,000 kms mark. I chat with her for a while and push the pedal harder. She tells me a few experiences of her journey in Alps and Iran. It further boosts my morale.

Now we are in the great tunnel connecting us to Shinde Wadi on Satara Road. I have travelled through this tunnel umpteen number of times in the Car, closed windows and AC on. Never felt the real thrill of the Tunnel all this time. I entered the tunnel and felt as though there is so much darkness ahead. Life brings you surprises all the time to make it interesting and entertaining. The cars were rapidly moving past me and all cyclists were pushed to the wall to form a queue automatically. We followed each other without any competition or complex. It was not cyclist against cyclist any more but it was cyclist against automobiles.

The tunnel was unending. It was full of carbon emission and felt I might die due to suffocation. I was remembering if I did anything right to be remembered by others if it was my last breath. And here ended the tunnel. All of us relieved with fresh air and bright sunlight. So the good hours were back. We headed to Satara Road with rejuvenated enthusiasm and double the speed. All of us reach our next halt to receive water bottles which was like nectar to us and Peanut bars. Then I have a greater surprise. I am told now we are leaving the smooth highway which we travelled all along and taking a turn inside which is a village road. I try to find the road. There are more pits than the road. I take a deep breath and say “Oh my, charge up lady, you have a tough task ahead”. We begin our journey on a single lane so called village road. The people are coming from the opposite side and I hear a German saying Kshama Kara in Marathi, a synonym to Sorry. He says, to me, he finds the traffic of India amazing. Slightly embarrassed I say yes it is crazy. He then says, I go mad in Germany when people do not decide whether they want to go or not. Instead here in India, everyone wants to go and wants to go very fast. I laugh but in the heart of heart salute him for his positive attitude.

Then we reach the steep Ghats. This is deadly. Most of us are not able to cycle now. We hold our bicycles and keep pushing. We reach the peak and then with a slight slope and one turn we enter Village Darewadi. Villagers welcome us with drums and all the pomp up but more warmth. After spending two hours with them we descend our journey back home. Total 30 kms.  On bicycle. 30 more for the return journey.

I am amazed at the descend of the same Ghats which I hated so much while climbing. I am almost flying now. I am at the top of the world. But I do apply brakes and try to remember the hardships I had to keep my feet grounded.

Same journey back home. However, feel so relaxed and triumphant. I feel proud of completing this cycle rally. It does not matter to me now, whether I am first or last. For that matter I am actually pedaling very slowly because, I do not want to give up now. I have the backup van right behind. It is tempting me to decide against pedaling. But I gather all my courage and pedal though the peaks, tunnels and amazing slopes.  Afternoon sun is burning us now. But it is a journey back home hence nothing matters. And here I complete my final mile with accomplished feeling, light heart, heavy legs and numb arms.

Life is also a long cycle rally. It is more important to finish it than secure first place. There will be scary tunnels, bumpy rides and difficult ghats. But there will be easy slopes too. There will be people who will go ahead of you, but there will be more who will be close behind. It is more important to look at it positively and thank the almighty for whatever he offered. Sunshine or Darkness. Sunshine for a reason to smile and Darkness to wipe your tears without letting others know.

Contributed by Dr. Ashwini Sowani (Faculty & Placement Coordinator IBS Pune)

How to prepare when you have less time

Hi there,

How you plan and spend your time, is key to your test preparation.

In some inevitable situations – you may find yourself in a stage – when you are a few days away from test date. Things may get on your nerves in such situation.

Here is how to tackle it?

1. If you have trouble staying alert when you study. Then take a power nap.

2. If you are getting less sleep than normal – do not coffee, or energy drinks. Instead go for Banana or Apple. It will give you energy and do not make you jittery.

3. Try to get a friend – who has already prepared – to help you. It will be a win-win for both of you. Your friend will be able to revise and retain – and you will get needed info in a fraction of time.

You can quiz each other and answer each other’s questions as you go along. Some people find this a distraction, so see if it works for you.

4. Try simple exercise – like running up and down stairs. It gets your blood flowing, and makes your mind work better.

5. Take frequent, short breaks. Breaks help you stay alert, and they can also prevent burnout. Take a 10 minute break for every 50 minutes of work.

6. Drink plenty of water. It helps you to think and most importantly it hydrates you. Remember that caffeine is a diuretic. If you have been downing coffee in order to study for your test, you need to re-hydrate yourself.

Good luck.
IBS Admissions Team

How to make study interesting and fun

We secure our friends not by accepting favors but by doing them.Thucydides (471 BC – 400BC)

Hi there,

Hope your preparation for IBSAT 2013 is on course.

Studying at times can get boring.

Here are some ideas to make it interesting and fun.

1. Study area: Make sure you study area has good lighting and and is cozy. Make sure you have a clean desk. An uninviting study area can make you distracted and lower your productivity.

2. Be organized: Make sure you almost everything you need (like pen, paper, calculator, bottle/glass or water..) – as you sit down to study. Getting up every time to find and get a small time will make you less productive and focused.

3. Stay motivated: Think about what it will mean for you if you do well in your studies. How will it make you feel? If you keep the end result in mind it will help you stay motivated.

Also check out inspiring books and quotes. Take a printout of your favorite one – and paste/pin it somewhere you can see it while you’re studying.

4. Get a friend along: Studying with a friend can also make things fun. Having a friend over can mean you can share notes and tips. These tips can lead to better scores especially if you and your friend motivate each other.

Having a friend to prepare with can be an added motivation or it could be distracting, remember to choose your approach based on your personal learning style.

If you have any friends who have MBA aspirations and have not applied to IBSAT 2013, ask them to apply here –> www.ibsindia.org/apply

Preparing and coming to take test with a good friend can make things a bit easier 🙂

Good luck!
IBS Admissions Team

How to prepare for an online test.

We must use time as a tool, not as a crutch.John F. Kennedy (1917 – 1963)

Hi there,

Hope you are on track with your test preps.

IBSAT, that you have registered for, is a computer based test (CBT) – so are many other tests.

As with any form of test, you need to practice well.

Here is how to do it,

1. Use scratch paper: As the MCQs (multiple choice questions) are going to be presented on a screen, you may not be able to see all the information onscreen at one time. Having a scratch paper will allow you to jot down details, formulas, etc. while you look at other areas of the screen. This is going to save you a lot of up and down scrolling.

2. Take mock test: Mock tests help you become familiar with the test interface. Take as many mock tests as you can before the actual test. By doing it – you will learn to focus on questions/test instead of the format of the test.

3. Practice with an alarm clock: Some MCQ tests have an actual clock on screen that counts down. This can cause some serious anxiety if you’ve never taken a test with a clock in your face all the time. Try a few practice runs using a clock or watch.

4. Know the Rules Up: Don’t be complacent about the format. Take the few minutes to find out the scoring system and any details you can about the multiple choice question format, and how the computer handles it. It’s one less thing to worry about on test day.

Good luck, IBS Admissions Team

Discipline and Dispute in Credit Cards

This article was originally published in Postnoon on October 5th, 2012, Co-Author: Anuj Hetamsaria


Two days after our conversation on credit cards, once again there was a message from Sethu, blinking on my desktop. I put my coffee down with one hand and clicked on the Gtalk tab with the other. Even though taking a credit card is mostly harmless if one is disciplined in its use, Sethu is so suspicious about anything even remotely modern, that he is difficult to convince. He has more doubts before he applies for a credit card.

Sethu: I have heard that some of the shopkeepers charge an additional percent if the payment for purchases is made by credit card. Is it true?

Nicky: While most shop keepers or service providers do not charge anything extra, a few do charge about 2.5% extra if you pay by credit card. Also, some of them may not accept payment through credit card if the bill amount is very small, typically below Rs250 or Rs200. So, the ideal thing is to pay by cash if the shop keeper or the service provider charges an extra fee for payment through credit card.

Sethu: Hmmm…what about payments to online stores? Do they charge anything extra? Are they secure?

Nicky: Most of them don’t charge anything extra. Site like flipkart.com, ebay.co.in or irctc.co.in have very secure payment gateways and credit cards are immensely helpful in making online payments. However, you have to be very careful with your credit card details like card number, cvv code, expiry date etc. Because, anyone who has these details, can make a payment online. It is a good practice to take benefit of services like mobile alerts. This will help you identify any payment that you did not make, immediately. You can then report misuse of the card to the bank and block your card to prevent further misuse.

Sethu: All this is fine. But don’t you think that credit card encourages people to buy things they don’t need?

Nicky: No. I don’t think so. You cannot blame credit cards for lack of planning and discipline.

Sethu: You are right. But what if there is a dispute regarding either the credit card bill or charges or benefits?

Nicky: All banks have a well established grievance redress mechanism. Small issues can be settled at the customer care officers level. For the others, you may approach the bank branches, or write to the appellate or banking ombudsman. However, you too have to be careful about not signing any blank application forms or documents, provide correct details to the bank officials, take everything from the bankers in writing about the charges and the benefits, keep copies of all documents that you submit to the card issuer for your future reference, don’t share your card pin or password.

Sethu: Thank you Nicky. I feel more comfortable now regarding applying for a credit card.

Smart users stand to gain

This article was originally published in Postnoon on October 5th, 2012, Co-Author: Anuj Hetamsaria


I have known Sethu since at least a decade. A manager at a Multi National Company, Sethu always had strong opinions against the growth of internet, internet banking, credit cards etc. He is the kind of person who feels that these developments compromise on security and lack personal touch. I was surprised when he recently pinged me on Google talk to discuss credit cards! He was contemplating taking up a credit card finally.

Sethu: Nicky, I know you are going to say that I have finally converted. Well you can say so. Credit cards have become so popular now a days that I am forced to rethink my beliefs. And honestly, I have also started to feel that it is safer to carry a credit card than cash. Since you carry many credit cards, I thought you would be the best person to tell me a bit more about them.

Nicky: You are right. Credit cards are not only safer, but they also provide credit facility for as much as 50 days if you time your purchases well. A number of banks also offer cash back, discount, bonus and reward benefits on the purchases using their card.

Sethu: The banks offer either VISA or MATER CARD mostly. Isn’t there an Indian gateway?

Nicky: Ah…the swadesi! You are in luck. The National Payments Corporation of India launched the indigenous RuPay in March 2012. You can take up a RuPay card through banks like SBI, BoB, BOI, Axis Bank, etc. RuPay is all set to give tough competition to VISA and MASTERCARD in India and abroad.

Sethu: Oh that’s nice. But how do I decide the bank?

Nicky: Compare factors like joining costs (if any), annual maintenance cost, interest rate on rollover, cash withdrawal limits and charges, reward points, special benefits etc. Credit limit being offered by the bank may also be a deciding factor. Different banks adopt different policies in calculating limits extended to the customers. Steady income, income range, good credit history, etc. are some the factors the banks look at.

Depending on these, they will offer to you an appropriate card. It could be gold, platinum, titanium, classic, world, etc

Sethu: I have heard that the rollover facility come with very steep interest rates?

Nicky: That’s right. But you should not use your credit card as a means for longer term loans. You must have the discipline to pay on time. Also, you should not use your credit card for cash withdrawals. As the free credit period is not available on cash withdrawals and interest is charged on them from the day of withdrawal, till it is paid back in full. These facilities are available, but they should be used only in the event of an emergency requirement, not regularly.

Sethu: Thanks Nicky. I think I am now ready to apply for a credit card, albeit, after some research!

Your feedback! Share your thoughts or Ask anything.

Hi there,

Hope you are doing great.

This is for those who recently registered for IBSAT (IBS Aptitude Test).

Writing to confirm that registration process and subsequent communication has been smooth for you.

If we can help in any way, please feel free to ask.

Please get in touch in one of following ways,

Committed to make IBSAT a smooth experience for you.

To share feedback or if you need any help related to your application – feel free to write to online@ibsindia.org

Good luck!

IBS Admissions Team