Tuesday, April 14, 2009

How to Monitor Revenue being earned at Far Away Kiosks?

There are many public/private initiatives where performance has to be monitored in far flung areas which are difficult to approach let alone monitor. We faced a similar situation in one of the places where I was working. Our project was to successfully run over 2000 ICT enabled kiosks in rural areas of Himachal Pradesh. These kiosks were supposed to be run by local level entrepreneurs and we were responsible for setting up the infrastructure and making various services available at the kiosk. The kiosks were set up in one of the most inaccessible terrains of Himalayas and of course had its own set of difficulties. Kiosks were there to disseminate different kind of G2C as well as B2C services to their respective panchayat (a collection of around 6 villages) population.  Thus each panchayat was supposed to have one such kiosk.

Now let's understand what exactly were we trying to monitor. We wanted to monitor 
1. What kind of services are being used in each panchayat. 
2. How much is the kiosk operator earning from each service. 
Services included printing, photocopy, Internet access, fax, online booking of railway/bus/airline tickets, e-education, Gov. forms (like birth/death certificate, land records, etc.), et al.  Some of these services were provided completely online through a portal provided by us and there were appropriate provisions to monitor their usage. However, many other facilities like printing, photocopy, fax, scanning, selling of gov. forms, etc were few of the services which were extremely difficult to monitor. We could have never found out how much is the operator earning through these services and they incidentally were supposed to be the most popular services. 

Now how can we measure the usage of such services as accurately as possible to gauge the actual earnings from each kiosk? Of course here is an assumption that the operators will understate their earnings and their are plethora of reasons to support that but I will not go into details discussing them in this post.

Well, to take care of the revenue earned through printing, photocopy, scanning, internet access, et al can be monitored through technology. For example, there are Photocopy/Printing machines available which keeps a count of number of printed/photocopied pages, etc. But the problems were
1. Who will go to each centre to note down the readings? Even if machines are intelligent enough to automatically mail the readings online, still the function can be easily manipulated or better put the machine offline while using it. 
2. These machines were way over our budget.

So what else can we do? Install cameras and monitor what is happening in each kiosk? Nope, surely an impractical idea.
This is the plan I proposed. Well not 100% secure but it uses a combination of incentives and punishments to get as close as possible to our goal. 
We can use two approaches in tandem.
1. We know that each kiosk has a different set of population to cater to and not all kiosks can earn similar revenue. We planned to divide all the panchyats on the basis of per capita income and population. Thus in a way we tried to measure the earning potential of each kiosk. Based on this data we made multiple categories and grouped together kiosks with similar earning potential. Our idea was to ask each kiosk operator to declare their earnings through each service themselves. Of course in the absence of any tangible monitoring system specially in case of print, photocopy, internet access, scan, selling of gov. forms, etc the operators were free to declare a deflated earning. So we brought in a clause of performance monitoring which stated that if an operator's declared monthly earning goes "below 20% of the average earning stated by the operators of his category" then he will be put in the warning zone and he will have to improve performance or be ready for eviction. In the absence of knowledge about the kiosks which fall in each category, its difficult to collude and declare revenue figures close to each other every month to evade falling in the eviction zone.
2. Introduce value cards for every customer of the kiosks and allow the card to be used across over 2000 kiosks all over the state. Inform every customer that every transaction done, no matter how small, adds up value points on their card and the points can be redeemed for cash, gifts, etc. This gives the incentive to the customer to feed in the information about each and every transaction against their value card. This will urge customers to ensure that all their spending in the kiosks are fed into the system by the operator. 

Thus a simultaneous implementation of the above options brought us close to estimating the true business being done by each kiosk.

Saturday, April 4, 2009

"New bill to curb traffic violations": Delhi Gov. Will it Work?

How to effectively implement traffic laws?

There is no denying the fact that violation of traffic laws is rampant across India. Well, Delhi has its own share of problems too and Delhi Government looks determined to put things right this time. To achieve the same, the newly elected Delhi Gov. has come up with the plan of hiking penalty charges for breaking traffic laws. For instance, the new Bill proposes to hike the fine for jumping red lights or not wearing seatbelt from Rs 100 to Rs 500. It is also proposed that parking in no-parking zones would invite a fine of Rs 1,500 instead of Rs 100 at present and so forth.

So how much is this going to help?

To find out if this is an effective solution we first need to understand the problem in detail. The problem is not only a lenient system which doesnt adequately penalize the violators but also an ineffective law enforcement agency (traffic police). No matter what happens on road, an offender knows that he can easily bribe the traffic police personnel and get away. The problem is that by hiking the penalty we are giving even more reasons to the offender to bribe the policeman rather than paying up the fine. For a fine of Rs. 100 an offender used to pay Rs 10-20 to get off, for a fine of Rs 500 he will now perhaps offer Rs 50-60. Surely the offender would try even harder to evade the hiked penalty. Under such circumstances how can we ensure proper implementation of traffic laws? Surely an increased penalty would also mean an increased bribe and a bigger dent in offender’s pocket and thus a bigger deterrent. However, this is surely not enough. It would never be able to bring desired results.

What incentive can we give an offender so that he prefers to get punished rather than bribing? I don’t see any particular way of doing that until and unless penalties are made too lenient which is surely unacceptable. Thus offenders will always find a way to escape fine by bribing policemen till policemen are ready to accept the gift.

Well, then can we influence the policemen to reject the illicit offers? Of course one option is to use technology to better monitor whatever is happening on the road as well with the policemen. However technology is expensive and its implementation will surely take time. So let’s forget technology for now. Well, just like we have heavy penalties for traffic rule violators, similarly we can have even heavier penalties for policemen found guilty of taking bribe. Also make sure that penalties are not only monetary but also career threatening for greater impact. But who will catch the corrupt policemen? Non-Gov. agencies can keep a vigil but still not an easy solution to implement. Another option can be to incentivise giving a ticket, say through sharing a portion of revenue earned through penalty with the police personnel. But this method can’t be overstretched as it might lure policemen into penalizing innocents for their own benefit.

So we have tried heavily penalizing offenders for breaking traffic laws and also traffic policemen for accepting bribe. However, this still doesn’t seem to be enough. Can we also introduce a system which ensures more cases to be booked rather than let off through bribes? I believe there lies another option in numbers and statistics. How about finding out the average number of violations, in say Delhi, each day? Can we break down the result in the type of violation, area in which committed and time during the day when rules were broken? There are numerous NGOs, NPOs and even Bhagidari which can collect this impartial data specially related to seatbelt, jumping red lights, rash driving, parking in no parking zones, use of mobile phone while driving, et al. It is for everybody’s benefit to regularly monitor this data. To begin with, we can take an average number of violations of each type, committed on each day in each area. Then we can ask the law enforcement agency to at least ensure that we bring to books at least 60% of the violations happening each day in the respective areas. This figure can be increased gradually. This will not only give invaluable regular inputs about traffic law violations happening across the city but also ensure that majority of them are brought to books rather than ending up in bribes.

Of course even the combination of all three options pointed out above can’t ensure a perfect system but it can surely be a step towards an improved system with lesser loopholes.


Tuesday, March 31, 2009

Deflation to last?

Deflation the way ahead?

Last year we have seen Inflation peaked but now with so much happening are we moving towards DEFLATION or may be an Econominc depression like 'The Great Depression" of 1929? 

As India's Inflation rate is currently at 0.44%, which is 32 year low, are we all set to move into negative inflation (Deflation) When there are reports about the Fiscal deficit going to touch 14%, growth at 4.6% etc. 

Thoughts welcome...             

Thanks to Siddarth Tyagi for raising this question... 

Well no points for guessing tht today in India we av both high supply n dwindling demand to contribute to lowering inflation or staring deflation... though i don't see it as a big concern bcos... 

1. We already had a very high and over inflated base in d boom time...
2. India is still growing at a healthy rate
3. Gov. is already out with big stimulus packages and the multi million $ election saga is about to start
4. Implementation of 6th pay commission

However, western economies will still take some time to recover and get back to their buying mode... so indian exporters r likely to bear the brunt for bit longer... but thr is an increasing liquidity in the indian market (as visible from the points 2, 3 & 4 above) which should encourage the producers to look towards domestic consumers... thus maintaining supply, as the demand is likely to increase in the domestic mkt... well this is something tht shud ideally happen... thus maintaining the supply near flat and slow, subsequent increase in demand wud av resulted in a gradual shift from deflation (for few mnths) to inflation (may b frm d last quarter of 2009)...

But i suspect tht it wudn't happen this way rather producers will b over cautious. We will soon see producers cutting down on supplies to counter deflationary trends... though demand is likely to soar with increasing liquidity in d domestic mkt... This situation will mean a quicker and steeper change in commodity prices and my 5 pence on India crossing the trough (lowest point of inflation curve) and getting into inflation right frm d month of July-Aug 09.

For more views click 
http://www.linkedin.com/answers/finance-accounting/economics/FIN_ECO/393594-5100076?browseIdx=0&sik=1238529999125


Bhasker Siddharth Linkedin Profile

Public Profile: 
http://www.linkedin.com/in/bhaskersiddharth


Full Profile: 
http://www.linkedin.com/ppl/webprofile?action=vmi&id=20768582&pvs=pp&authToken=EVcZ&authType=name&trk=ppro_viewmore&lnk=vw_pprofile

Sunday, November 30, 2008

Free Market: Definition

What do you mean when you say "I believe in the free market"?

Television pundits often say "I believe in the free market" but it isn't at all clear what is believed when this is said.

Thanks again to William for raising this query.


I think I can say that the core definition of free market should be “a market economy based on supply and demand only; where buyers and sellers, the only two entities, transact freely based on a mutual agreement on price”. Rest everything added to the definition is superfluous. The word “Government” is almost inevitably used in the definition of FM. The emphasis on this word isn’t required in the definition. Rather we should understand that government is just an example of external control which takes the market away from being governed by pure supply-demand law. This control can come from even inside the market, through buyers and sellers, for example from coercion between buyers, sellers or buyers and sellers. What the word government symbolizes is a control which interferes with the free functioning of market.


To recapitulate, none of the buyers, sellers or any external agency should have the power/ability to influence a FM economy which in turn should be ruled only by supply and demand.


Here I would like to add that more often than not the reference of "Free Market" is made only when it is being suggested that the market should not be influenced by any force which undermines the supply and demand principle.
When the pundits use FM they usually try to emphasize that they want any external interference or influence to be removed from the market.


Visit the below link for a very informative discussion on the above topic.

 http://www.linkedin.com/answers/finance-accounting/economics/FIN_ECO/365554-2378437?browseIdx=12&sik=1238529999126&goback=.ama

 

Is lower interest rate need of the hour?

Lower interest rate for helping industry in India

Yesterday, we found all industry leader asked lower interest rates to help big companies.

As far as a non financial person, I understand they are asking for consumer loan at lower interest rates so consumer can borrow from banks and buy their products.

In this economic crisis, pushing the demand on borrowed money is safe or dangerous ?

US people rides [sic] on borrowed money for long and that trigered sub prime crisis - will history get repeated here in India as well?

What can happen is

few job cuts -> people without monthly income -> can't pay EMI (irrespective whether loan is at higher interest rate or lower) -> banks are in trouble because of bad debts

is demand of industry leader is justified for lower interest rate ??         

Well intersting question posed by Vikas ...

My take :

Let’s first understand what has happened to the Indian economy. Has anything so grossly wrong happened to our economy? I don’t think so. If you follow the financial results then u will see that still most of the companies have shown rise in profits in successive quarters. However, their stock prices are going down. Y is this happening? 

Western financial institutions with very high exposure to sub-prime loans went bust. These companies were highly leveraged. Now many of them have gone bankrupt and others have been left bleeding. They had to liquefy their assets to pay back their debts and they had no choice but to pull out from their money from the Indian market. That is exactly what they are doing n it’s not bcos now they av lost confidence in Indian corporate but they av no other choice. 


Well, as the market came down crashing due to FIIs so did the confidence of Indian domestic investors. Also as your asset prices drop so does your tendency to splurge. This is simple phenomena. Thus demand goes down. So we need to understand here is that there is no real problem with the Indian economy. May be I should just repeat what Paul Krugman always says “Bad things can happen to good economies”. This is the time when Gov. should act to boost demand. There is nothing wrong with Indian corporate… 


So here I support slight lowering of interest rates to boost domestic demand. In any case our interest rate is still high compared to western economies. You might say that it will trigger inflation. I would say it will not. The inflation we saw in recent past was more bcos of the cost push (soaring oil prices and bullish commodity market which pushed prices). Now commodity market has seen correction and oil is trading low as well… So there is not much reason for a cost push inflation. Moreover, we are already seeing a drop in demand which will need an adequate boost and it isn’t likely that this boost in demand will suddenly go so high that it will bring demand pull inflation.

Now when the question of inflation is out, let’s see the scenario of job cuts that you have pointed out. If you notice we have heard of job cuts in int’l markets primarily in the financial sector. I haven’t heard of too many layoffs in IT/Auto/Manufacturing, etc . In India, Jet and Kingfisher (KF) have gone for major layoffs (Though now they av reinstated their employees). I believe their situation has got more to do with the cut throat competition in the aviation industry, low operating margin and soaring oil prices. They have hundreds of crores of unpaid bills to AAI and oil co. To add to it, KF is again a very highly leveraged company. So what can happen in such period is that losses of a not so financially sound firm can get amplified.
These are minor fall offs of a global financial crisis. So my suggestion would be to cut interest rate, boost demand. It would not trigger inflation. There is nothing wrong with Indian corporate across sectors. Indian banks are sound. They are transparent. Top 10 Indian banks have less than 2% of NPAs. Even few job cuts can’t derail this economy.

BTW u just need to wait and watch, the interest rates will come down sooner than later. There is no way RBI will let liquidity crunch in global market disrupt our economy so easily.

Free Market

Can economy in free fall in "free-market" system reverse the course on it's own without some external intervention?

Catch some good discussion at 

http://www.linkedin.com/answers/finance-accounting/economics/FIN_ECO/378467-11211089?browseIdx=3&sik=1238529999125&goback=.ama

Friday, October 31, 2008

Sectors to look for in Recession

what sectors of a country's economy is less adversely affected by any economic downturns?

Some of the sectors which came out at top (after a discussion on Linkedin) were Defence, Food, Pharma, Agro, Consulting and Infrastructure. However, I don't particularly agree with Infrastructure being untouched by recession...

Check some interesting discussions on the topic at

http://www.linkedin.com/answers/finance-accounting/economics/FIN_ECO/369082-19311410?browseIdx=8&sik=1238529999125&goback=.ama


http://www.linkedin.com/answers/management/business-analytics/MGM_ANA/350239-512811?searchIdx=0&sik=1227196565242&goback=.asr_1_1227196565242

Thursday, July 31, 2008

Russia Recognizes Independence of South Ossetia and Abkhazia. Will Cooler Heads Prevail, or is the Confrontational Escalation with the West now Inexorable?

http://iht.com/articles/2008/08/26/europe/27russia.php

On a deeper level: It should be noted that while some argue primarily economic interests at stake here, nonetheless, both sides are arguing primarily "humanitarian" concerns. Have we now irrevocably entered the era of "humanitarian wars"? And, if so, what does this forebode for the future, when all over the globe, there are "humanitarian issues" just waiting to explode? 

Thanks Trevor for your question.


Well I believe that this step of Russia was neither due to economic nor humanitarian reason. I am not so naive to believe that Putin would shed thousands of dollars on war for humanitarian reasons. Also a small region of South Ossetia can't bring any economic benefit to Russia.The reason I see behind this is the old wounded Russian pride... Russians lost not only the super-power status but also lost vast regions which they controlled for decades.... What Russia wants to show all those newly independent countries which were formed after the disintegration of USSR that they need the support and protection of Russia to survive and thrive... and without the help from Russia they can't grow...This is also the reason why Russians don't want NATO interference in many of the break away countries because Russia doesnt want them to get help from any other agency but itself... Russia wants to make them realize that breaking away from USSR was an inherently wrong decision and they now either have to suffer or show allegiance to Russia....
I also don't see Russia directly or indirectly confronting the west European nations. They don't gain anything by doing so. Russia or erstwhile USSR have never shown any noticeable ambition on west european nations... (except for probably spreading socialist governance). I don't foresee any major conflict in near future between Russia and west europe which can't be settled through talks/negotiations...


"Pride" here has lot of negative connotations, like unreasonable and inordinate self-esteem, A sense of one's own worth, and abhorrence of what is beneath or unworthy of one; lofty self-respect; Proud or disdainful behavior or treatment; insolence or arrogance of demeanor; haughty bearing ...
Russia has not yet been able to accept the reality that it has lost the status and power but it doesn't want to let go...
So this is what Russia's pride is...


More more views click on 

http://www.linkedin.com/answers/international/international-law/INT_ILW/305518-23979812?browseIdx=16&sik=1238529999126&goback=.ama

Monday, June 30, 2008

China's PPI>CPI... WHY?

What do you think about China's PPI >CPI?

Thanks Tiger for your question.

Well producer's cost has to come to consumers until and unless it is absorbed by some other external agency, say gov. I dont think this is what is happening in China. Its just a matter of time when CPI will start reflecting rising PPI....
But we also need to keep in mind the basket used to calculate PPI and CPI. May be the items such as food grains, which form a very integral part of CPI and is also given high weightage in the calculation of CPI isn't showing very high rise in prices or may be gov is taking appropriate measures to keep their prices down. Thus this can be another reason for lower CPI.
Well Harsha also pointed out an interesting observation. Well the reason might b this:
If you see China's growth. it has grown in and around particular areas and provinces (like mushrooms in different parts usually east coast). This is because of their SEZ policies which particularly pushed those areas to prosperity. But they av an interesting policy of having export oriented SEZs. Thus these SEZs get all sorts of tax breaks (almost zero taxes) but they can only export the produce and they cant sell it in the domestic market. This is because the gov doesnt want to cannibalise the domestic markets. Thus if they want to sell the same product in China, they have to pay very very high taxes which then means higher prices for consumers. This can just b one reason but i seriously dont think tht chinese currency is over valued.