India needs to aggressively invest in AI

Currently, it appears that the US and China are sort of dominating the AI race with frequent release of AI models such as those from Anthropic and Open AI.

These models have huge potential with regard to automating routine tasks and driving huge productivity in knowledge based jobs like content creation, coding, education etc. The workforce of tomorrow will have to learn how to use AI tools in the jobs. AI, if harnessed well has potential to uplift our GDP growth and improve quality of life for the humanity.

However, all this will require huge investments in electric power capacity, GPUs etc. We would need to increase installed power capacity to cater to rising demand from data centers which will cater to these AI services. 

Also, India is currently focussing on building applications on top of these foundational models. We feel that the time has arrived as we should start to invest in building small foundational models to cater to our requirements.

Why revenue sharing is the right payment mechanism for governments to adopt regarding telecom operators?

Allocating spectrum through auction is a fundamentally wrong method as it creates entry barriers for new entrants. Allocating spectrum through auction creates oligopoly/trigopoly type situation. The type of situation which we are seeing in India where we have Oligopoly with just 2 key players.  This goes against interest of consumers due to lack of competition. It leads to frequent price rise and consumers are at disadvantage due to lack of choice.

It is more prudent for government to go for revenue sharing mechanism as spectrum inherently has no monetary value. Its commercial value comes when it is used for wireless communication. The revenue generated from such operation is often difficult to predict and so unwise to get into spectrum related obligation by telcos. Howevr, the government across the counties and more importantly in India have chosen auction method and led to the dismal state of the Indian telecom sector where just 2 key private players have corned around 80% revenue markets hare.

Priorities for the Indian Government

India needs more focus on Health, Education and Infrastructure

 As India progresses ahead, the income inequality has increased over last 10 years across the length and breadth of the country. Common man have been found struggling for basic needs. It was seen in the case of reservation seats in the case of Indian Railways, or the rising incidents of cyber crimes affecting millions of people, or several cases of accidents in which several innocent people have lost their lives, or the ludicrous taxation system putting unnecessary burden on millions of people.

The government needs to get its focus back and prioritize top 20 issues which need to addressed in the 1st year. The government had a chance to refresh the administration by selecting fresh faces to head different ministries. However, in many cases, old hands have rejoined the administration. It would be still nice if they can set up an advisory body that can advise the ministers on key aspects. This time, the stakes are high as incumbency will rise with every passing year and this might affect reelection chances in 2029. The anger of the common masses over pervasive corruption is palpable and was seen in the last election in 2014

Consistency is the only way to bring real change

If a person wants to grow, he needs to get out of his comfort zone. He needs to embrace challenges and should not fear any one. As fear creates doubt and and impacts performance. The best way is to approach an expert in the government area and follow the directions given by him/her. He would need to ensure that the expert he follows is the right one. Initially, he might have certain motivation to proceed in this change initiative but ultimately it is the consistency which can bring about the change and the task can include activities like building a superb body, improving one's communication skills etc.

Remember, no gain without pain; and this is not just a proverb but a real phenomena. I would say that many people lose their motivation after few days but those who  are able to maintain even 75% consistency level are able to reach goals.  For people, who find it difficult to sustain motivation level for long, I would suggest to have smaller goals and then accordingly build towards larger goals. So, lets embrace challenges; go out of comfort zones and achieve our goals.

It can appear initially that our effort are not bearing any meaningful results. This usually happens in the beginning; but it just a matter of time before we get to see the fruits of our actions.  Also, I would advise to have child like enthusiasm to achieve ones goals in  faster way

Reforms in Taxation system

 The taxation system of India is a complete mess and  it increases the cost of compliance for individuals and businesses. The income tax laws of India are full of exemptions with significantly higher tax rates that promote tax evasion due to lack of clear rules. The government can increase existing tax slabs and reduce exemptions and this can also increase tax compliance with overall increase in tax collection

Similarly, many corporates are still using old taxation system with several exemptions. The government should accelerate the shift towards the simplified tax rate of 25.2%, which has no exemptions

It would be a big mistake if we omit discussing about the capital gain tax which are inconsistent across asset classes and sometimes point towards serious lack of competence in those officials framing these taxation rules.

We hope that the government understands that these complex web of taxation laws which has been created over last several years often results in wastage of time of citizens in understanding these rules and often breeds corruption

Emergence of Gig economy

 The emergence of digital India has supported the Gig economy in India as more and more workers embrace this idea that gives them greater flexibility to manage their time and certain working conditions. It helps workers to augment their income by taking such assignments which are generally temporary in nature. In most cases, such tasks( if related to IT sector) can be executed from remote locations, thus enabling workers to cater to demand from across the Globe. On the other hand, companies find it convenient to hire gig workers for routine tasks like admin/ delivery of goods, etc. during periods of seasonally high demand. Gig economy has its  own pros and cons. It helps a significant number of informal workers to participate in the formal economy in their own desired time slots. It helps companies to be adequately staffed to manage seasonal variation in demand without having to hire permanent workers. The disadvantages include concerns around data privacy of sensitive client data as gig workers come from various backgrounds. Also, many times, companies often make these workers work under challenging working conditions with little benefits. To summarise, Gig economy is here to stay and thrive and would provide a source of employment to people who cannot take up regular jobs.

Outlook for Indian Telecom sector for 2023

 I remain positive on the Telecom sector as  2G to 4G migration, increased data monetization and expected tariff hikes would support ARPU growth for telecom service providers in near term. Tariff hike of around 15-20% is expected in near future as telecom companies try to achieve more sustainable level of ARPU.  Bharti Airtel remains on strong footing with industry leading ARPU, growing subscriber base and excellent track record in business execution and is expected to deliver superior result going ahead. The financial condition of VIL remains precarious as it continues to lose subscribers and has the lowest ARPU in the industry (implying weak customer mix) and we expect it to underperform. It urgently needs massive capital infusion to augment its capex to catch up with peers in terms of network quality.  Reliance Jio is expected to maintain the steady growth trend in subscribers and ARPU, through the increase in subscribers might moderate going ahead.  However, at the sector level, there is overhang of 5G related capex for telecom service providers and it might adversely impact their free cash flow generation. Also, the telecom operators would have to come up with newer ways to monetize their investment in 5G technology. In terms regulatory provisions, we expect the draft Telecom bill, that consolidates three separate acts governing the telecom sector — Indian Telegraph Act 1885, Indian Wireless Telegraphy Act 1933, and The Telegraph Wires, (Unlawful Protection) Act 1950 to be passed by the Parliament in 2023.

Outlook on Indian IT sector for 2023

 I continue to be cautiously positive on the IT services sector as  it faces near term challenges due to macroeconomic concerns in the US and Europe (key markets of IT companies). This has led to more time in decision making on the part of clients and it can lead to near term moderation in deal booking/revenue growth. The clients have become cautious especially in sectors like Retail, Hitech and Mortgages etc. regarding evolving macroeconomic situation and many of them are trying to optimize their cost structure and consequently, we expect an increase in work volume related to cost optimization projects for Indian IT companies.  However, the current valuation of IT companies(down 30-40% from peak valuation) captures most of near term headwinds.  The medium to long term demand environment remains strong led by accelerated adoption of technologies such as cloud computing, artificial Intelligence, machine learning, etc.  by enterprises.  We expect employee hiring to moderate for most IT companies in near term as they focus on training/utilization of recently hired employees. The operating margin has mostly bottomed out for the sector and we expect EBIT margin should improve sequentially during Q3FY23 and Q4FY23, led by improving employee pyramid(amid increased fresher hiring) and positive operating leverage. The costs related to travel and admin have started coming back to an extent but IT companies should be able to manage these margin headwinds through  operational efficiency measures. We prefer Tier 1 IT stocks over Tier 2 IT stocks given that they are better placed to manage near term macroeconomic headwinds.

The emergence of world wide web technology

 The world saw the emergence of world wide web(www) in 1990 at CERN when Tim Lee, a scientist at CERN invented it for better document management at the CERN. He used a NeXT computer as server and demonstrated this technology. The initial version was a bit rudimentary and allowed users to only write. He also developed a web browser that allowed users to access web address. The developed of websites for common users picked up in 1994 and by that that time Netscape and Internet Explorer were leading web browsers. Web 1.0 was formally launched in mid 1990s

Web 2.0 came into being in early 2000s that led to the development of social media sites like Orkut, Myspace, Facebook etc. and it allowed an interactive environment whereby users could create content online and it led to proliferation of websites with user generated content.

Web 3.0 is expected to use technology that would allow users to execute  and create a personalised environment for users. It would make use of Blockchain Technology and AI, aided by increase in computing power

Spectre of recession facing the world

The supply side bottlenecks due to Russia/Ukraine war along with rising interest rates has the potential to adversely impact the global GDP growth rates for 2022/2023. This is also reflected in IMF revising down GDP growth estimates for countries across the globe. The European countries have already been hit hard due to erratic supply of gas from Russia. It is to be noted that European countries on average depend on Russia for 40% of their natural gas supply. 

Already, the world is facing shortage in supply of agricultural products especially wheat as Ukraine which is a major exporter of wheat globally has been hit badly in the war against Russia.

The rising interest rates by central banks globally has the potential to slow down investment activity. Also, its impact can be seen in slowing growth of mortgages in the US. Also, it can impact the capex plans of corporates globally.

The world economy is in very fragile situation currently and  a concerted effort need to be put in to protect the global economy from slipping into prolonged low growth phase as it can impact poverty alleviation efforts in Africa and Asia.

How Simplifying tax systems can generate value for India

The indirect tax system of India which was supposed to create a unified market throughout the whole of India with the implementation of GST, has only partially achieved its goals. The compliance processes with regard to GST remain complicated and its adds to the woes of businessmen. Similarly, the number of tax slabs in the GST system have added to endless confusion and litigation about exact tax slabs to which certain items belongs. India would do well with just  3 tax slabs in the GST system .i.e 5%, 15% and 25%. Rest other tax slabs cab be removed for the sake of betterment of this country.

Similarly, our direct tax system has several loopholes and provides several kinds of tax deductions. The rules are often difficult to understand and it leads to poor compliance. Some provisions are grossly mis-used. For example, Since agricultural income is not taxed, many dishonest people often report their ill gotten wealth as agricultural income. Also lot of deductions/ allowance only makes the process of tax compliance cumbersome. A simplified direct tax code can make the entire process easy to implement with better compliance. 

30 years of economic reforms

On 24th July, India completed 30 years of economic reforms which were initiated by our former PM, PV Narsimha Rao, in July 1991. Those reforms put and end to license Permit Raj and promoted greater private ownership of enterprises. It helped to boost the productivity of the Indian economy and gradually, India transformed from an economy of scarcity to an economy which is currently confident about its present and future.

It didn't happen overnight and there were some useful contribution from our former PM, Atal Bihari Vajpayee who made important contribution in infra building that led greater industrialization.  However, it would be honest to admit that the leaders since 2004 till 2021 have lacked courage and wisdom and have deliberately slowed the pace of economic reforms.

India is still far away from its true potential and a long road lies ahead of us and it would be in the interest of the country to strengthen economic reforms so that we can fulfil the aspirations of its people. Our per capita income is just a fifth of China currently, when we were at the same level in 1980. The type of politics and the corrupt politicians have betrayed us in our pursuit of prosperity and that is one area that needs to change for the betterment of nation! 

IT Industry get a new beacon of hope

 The covid19 Pandemic has accelerated the digital adoption across enterprises. Many organizations nudged by the new norm of WFH are going for transformation of core IT infrastructure. It includes not only cost saving IT interventions but IT strategies which can amplify the productivity of the organizations. This include AI driven decision making process and migration of software applications to cloud to streamline IT operation. It is being perceived by industry expert as once in a decade opportunity that can drive the growth of  Indian IT companies going ahead.

The clear impact of the Pandemic can be seen in the size of deals being signed by IT majors which has shown significant increase over average size of deals signed over last 2 years. It gives a strong indication of the growth momentum expected among top tier IT companies. 

Though, there is headwind of wage hike for FY22 in coming quarters, it is expected that IT companies should be able to broadly sustain the EBIT margin seen in Q3FY21-Q4FY21 over FY22, led by positive operating leverage and admin and travel expense still in control.

Though, the valuations have jumped for all these IT companies, it is expected that the should be able to sustain  these valuation multiples, if deal win momentum remains strong. We expect that Indian IT companies are able to use this opportunity to develop cutting edge solutions that will lead their transformation into top tier IT companies across the Globe.

Why self discipline is the key?

We all have heard that talent is overrated. The statement is true as we know countless stories of people with immense talent failing to achieve anything in life. This is because in most cases, the secrets to achieving anything meaningful is revealed to us by the nature when we devote certain amount of dedicated hours depending upon the magnitude of the problem. All real events are complex at the core and yet government by few basic laws.  This is the ultimate law of nature.  Moreover, the key tendency of Universe is to achieve a state of higher entropy which has higher randomness. This increase in disorder can be stopped only by apply external constructive force which helps to maintain higher energy (or low entropy state) to achieve anything. This external constructive force is nothing but state of self discipline which helps to maintain a state of high motivation and pinpointed focus towards the target.

So, self-discipline is the the utimate success mantra in this Universe, through which a person can achieve his goal through consistent effort towards a well-defined goal. This quality was the one on which our ancient rishis focussed in ancient times. But with the advent of the modern age, our generation finds it difficult to control themselves and often find themselves indulging in gambling, Non-veg food, procastination etc. and its leads to massive failures in life. Remember, a high degree of self-disciple is required to use our brain consciously for our benefit.

Crusade against superstitions

It has been around 20 years since we entered the 21st century. It's high time that we analyze our different religious practices with a critical bent of mind to remove various superstitions. The main purpose is to target our energy towards productive and right things rather than devoting our time towards destructive thought process or useless rituals.

I would like to mention the recent incident where an 18-year-old Muslim student beheaded a French teacher for showing the cartoons of Prophet Mohammed. It is an absolutely condemnable incident and the boy fully deserved the punishment as he was brutally killed by French Security Forces. There is no place for blasphemy related views in a modern civilization and this current thought process among  needs urgent reforms.

Similarly, Hindus should abstain from useless rituals and focus should be on establishing connnection with the almighty through every day generous deeds. Our focus should be on helping needy people, being kind towards animals and preserve the pristine plant life of the mother Earth. 

The reform in our religious practices is absolutely necessary so that we live a more meaningful life in full harmony with other creatures and leave a better planet for our coming generations.

Advent of Artificial Intelligence

 Artificial Intelligence has become a buzzword in recent times and has the potential to transform practically all sectors leading to a massive increase in productivity.  It involves gathering a huge amount of data about the current behaviour of a system and utilizing algorithmic framework and probabilist thinking to make the best possible decision under given circumstances. These computations are quite complex and require high computing power. For Example, the use of AI can help to decide the best possible crop combination depending on price, weather and the nature of soil. Similarly, AI can help in the diagnosis of patients based on the results of certain tests. The possibilities are just immense and the capacity of AI can be enhanced with increase in our knowledge of the nature of real world situations and the best way to replicate them through our code. Nowadays, Python, a computer language is often used in the design of AI based tools

At the fundamental level, its about making prediction based on current data set. It can help humans to increase the effectiveness of decisions which are required to be made in tough situations that involve complex set of data. It involves the use of principles from other branches of science, as two events can affect each other only when they are within a given light cone as specified by the General theory of Relativity. It also indirectly implies that we live in a causal universe with a high degree of deterministic nature, and the outcome can be easily predicted if one knows the initial condition and the laws governing the situation.

Population control laws

India urgently needs laws to check the rise in the human population that has emerged as a sort of unmitigated disaster. The rapid rise in population has led to the division of farmland into sub-optimal plots which are unviable. It has led to large scale migration of people from rural areas to cities in search of jobs and livelihood. These migrants often live in slums and face numerous hardships in the cities

The continuous rise in population has also led to the expansion of our cities and villages through the destruction of forests for developing new human settlements. It has often put humans in conflict with other animals and the entire ecosystem gets endangered. The large scale deforestation has led to rapid extinction of several species over the last several decades.

The massive population also puts pressure on natural resources such as water, air, mineral resources, wood etc.  The rate at which we have been consuming several resources like coal and crude oil would leave them completely exhausted over the next few decades. Moreover, the rising pollution in our natural environment is also due to the fact that we have been unable to manage our population growth and it has put the lives of several innocent people at risk.

Covid-19 Outbreak

This Covid-19 pandemic has forced us to think about our relationship with Nature. The old idea that we can control Nature and exploit it to our advantage will no longer work. In our pursuit of wealth, we have caused large scale damage to the environment, be it through mass deforestation or burning of fossil fuels. The time has come to reimagine our existence on this planet earth and try to adopt sustainable methods of living.

The increase in the human population can also be interpreted as if we have infected the Earth with manifold increase in our population over the last century. The large scale mining of mineral resources has damaged the flora and fauna of the Earth. Our Earth is losing species at an extremely fast pace and its life producing ability has taken a hit due to our activities. 

One positive thing out of this ongoing lockdown across the world is that the Nature has regenerated to some extent and animals can be seen roaming freely in open places. The level of pollution in our cities has come down and our rivers such as Ganga has neven been so clean in the last 40 years. We have to learn the lessons during this Pandemic and apply them to avoid such mistakes.

Covid-19-Flattening the curve

The pandemic due to the outbreak of Covi-19 has emerged as a major health emergency across the globe. Till date, around 1.2 million people, have been infected by this virus and more than 60,000 people have lost their lives. It is difficult to estimate the mortality rate on account of this illness as a large number of cases are asymptomatic and hence these cases often don't get reported but the mortality figure due to Covid-19 that is being projected in media is around 3-4%. It is widely believed that the mortality rate varies with the age group and the people over 60 years old are the most vulnerable group. Countries such as Italy have seen a higher mortality rate on account of a sheer spike in new cases that can overwhelm the healthcare system, leading to a large number of infected people unable to get proper treatment. The disease has crippled the travelling and tourism industry as people have been asked to stay at home as several countries have resorted to lockdown to prevent the disease from spreading.

It is a highly infectious disease and one person on an average infects more than 2 people per day under normal circumstances. Scientists have advised people to adopt "social distancing" as the only way to break the transmission chain of this disease. In this way, the virus can be contained within few groups and finally eliminated. We all have to come together in this fight against Coronavirus, which has emerged as a major challenge to humanity since World WAR II.

The performance of the NDA II -(2014-till date)

The NDA II assumed power on 26th May 2014 and they came with huge expectations as the Indian economy was counted among fragile 5 towards the end of 2013. The GDP growth had come down towards the end of the term of UPA II. The rising discontent against the UPA II had brought NDA II under, Prime Minister Narendra Modi, to power.

The new government was expected to accelerate the reform process but instead, it followed the incremental approach of reforms. The GDP growth remained at the rock bottom level and the government changed the calculation methodology in order to show a better economic performance. However, the lack of jobs and the closure of SMEs meant that this government has not been able to deliver on its economic agenda. The ill-conceived, Demonetization, backfired and led to falling credit for small enterprises. The GST system which was implemented in July 2017, was far from satisfactory and it choked the engine of India's economic growth. 

The government seems to be more focussed on its social agenda of Ram Temple, Triple Talaq, Article 370 and the Citizenship Amendment Act. The government needs to learn from its failures and it should stop trying to divert attention from pressing economic issues.