The McDonald’s Delhi story !

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So just a few days back I was with my cousins , as we were celebrating Rakhi and the youngest of the lot my two brothers of 6 and 7 repeatedly kept on saying that they wanted to go to McDonalds , and we had to repeatedly answer them that they were closed and they would have to try a different place.

This stance got everyone to ask that why exactly is McDonalds closed in India . So here is the answer .

In India McDonald’s is a 50:50 joint venture between McDonald’s India Pvt Ltd (MIPL) and Westlife Development in south and west India (261 McDonalds and 121 McCafes ) and Connaught Plaza Restaurants Ltd in north and east India.  But there are issues revolving around CPRL which have eventually led to this closure which date back to 2013 .

In 2013, McDonald’s had voted against the re-election of Mr.Bakshi as managing director of Connaught Plaza ( due to their own internal tussle as per which the US brand believes that Bakshi was cheating them), following which Bakshi challenged his removal in the Company Law Board (now the National Company Law Tribunal ), accusing McDonald’s of mismanagement and oppression.

The same year, McDonald’s revoked its joint venture with Connaught Plaza and invoked arbitration against Bakshi. It has been pursuing arbitration against Bakshi in the London Court of International Arbitration. This was challenged before the Delhi high court.
On 23 December 2016, Justice V.K. Shali prohibited any change in the shareholding of the Indian arm of the company. This order was lifted by the two-judge bench in July.

Separately, under an order passed by the Company Law Board on 16 September 2013, McDonald’s was directed to maintain status quo over the shareholding pattern and right of call option, which is still in operation.

In June this year , McDonald’s shut 41 of its 55 restaurants in Delhi following its failure to renew their health and eating licenses. which resultantly happened due to a unstable management .The National Company Law Tribunal (NCLT) in second week of July reinstated Vikram Bakshi as managing director of CPRL. Leaving a unclear picture for the spectators on whos right and whos wrong.

So now the BIG question remains how McDonalds will revive itself in India , with competition everywhere , with Indian brands also joining the fight( Haldiram and Nirulas ) . Because at the end of the day its your presence that matters because if your shutters are down , customers would eventually go and try the next best thing , which might topple your brand eventually  .

So do these tussles actually help anyone ? Does a management fiasco really satisfy the end goal for which a company is made ?

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IndianEconCourse – Module 1

DISCLAIMER: Chief Economic Advisor Arvind Subramanian has in collaboration with IIT Delhi started a course on “CONTEMPORARY THEMES IN INDIAS ECONOMIC DEVELOPMENT AND THE ECONOMIC SURVEY “. I would be doing a write-up based on every module. Hope that it’s informative.

MODULE 1: GLOBAL AND INDIAN ECONOMIC HISTORY

To understand today’s economic scenario we need to understand the economic history of India and of this huge world. World history comprises of 2000 years divided into 3 parts. Malthusian stagnation for 1000 years and then coming out of it and entering into industrialization. Coming out of Malthusian stagnation saw a period of divergence of North America and Western Europe from the rest of the world( they had a rise in standard of living).Asia started catching up the 1980s and hence convergence began.

There is a famous concept in economics of reversal of fortune. In the 1500s the countries which were rich have now become poor and those who were poor than have become rich now. India a case of it. During 1500s the richest dynasties were Ming China, Mughal India, and Aztec Mexico.

As per World Banks definition India is a lower middle income nation ($1026-$4035) and China is an upper middle income nation ($4036-$12475). Poverty with context to India is an important factor but we need to remember that 1$ can help you getting more in India than In the US. This concept is purchasing power parity as per which poverty line is defined as $1.90(PPP) per day.

Since WWII only 13 nations have transitioned from low income countries to high income status. China is stuck in the middle income trap and India is in the low income to middle income bracket. Some of those 13 nations are Singapore, Hong Kong, Ireland, Israel and Korea.

There’s a famous curve the elephant curve which states the Indian and Chinese middle class and the super-rich in advanced countries have done well. In contrast the poor in poor countries and the middle class in rich countries have done poorly.

Indian independence comprised of three thinkers: Gandhi, Nehru and Patel. Nehru ji believed in industrialization and importance of state. Gandhi ji believed in self-reliance, a small independent communities and was anti industries. Patel was pro agri and business. Though at the end of the day we ended up following Nehruvian ideology because that was what the Indian market wanted. As per Bombay Plan of mid 1944 leading industrialists proposed state led industrialization and protection from foreign companies.

Every economy goes through 3 stages agriculture, manufacturing, and service sector. China being a communist state extracted savings from agriculture to finance investment. Whereas India couldn’t do as due to Patel we had made agricultural income tax free. Hence there was a Cruel Choice in front of India Freedom OR Growth? Hence India ended up having low savings. In the early 1960’s we used to get aid from western countries as we were there darling because they wanted democracy to succeed. Then we had one more Cruel Choice Consumption today OR consumption tomorrow?

India started having a equity phobia towards large businesses. Due to self-reliance nor did they let too much imports and with the help of licensing they even did not let domestic industries grow.

Our economic history can be divided into 4 phases

1. 1950-1980 when we had 3.4% economic growth and 1.3% per capita growth rate.

2. 1979-2003 5.5% economic growth and 1.3% per capita growth rate

3. 2003-2011 7.6% economic growth rate and 6.1% capita growth rate

4. 2011- present

India introduced reforms in 1991 but various economists believe that we had started leaving the Hindu growth rate of 2-3% from the 1980’s only. India and china had a turnaround in growth at the same time it’s just that they grew faster. In 80’s India opened up internal market but in 90’s it opened up the external market.

FDI basically refers to proving high skill technology and finance. India not only imports it but also exports it. We as a country are doing skill intensive activities in manufacturing in comparison to China. In regarding to portfolio investment China is much more closed than us.

To access the videos click on the below links!

https://www.youtube.com/watch?v=Yym8_1vqNvU

https://www.youtube.com/watch?v=1Yo_JxNZZu8

https://www.youtube.com/watch?v=EyblGHK2uYQ

Goods And Services Tax

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It’s a uniform tax on goods and services uniformly taxed across the country (in our case India). There are two kinds of taxes direct and indirect taxes. In direct the individual pays the amount and in indirect intermediaries pay with the help of final consumer. All these direct and indirect taxes have been added in the bucket of GST (customs being an exception). It was introduced officially in parliament in 2006. It already prevails in 140+ countries and France was the first nation to introduce in it 1954.

GST symbolizes a single tax structure though India would be the only nation adopting Dual Tax Structure. Hence paving way for CGST, SGST AND IGST. In GST tax is applied on consumption rather than on manufacturing. Hence the central govt would be reimbursing those states (Maharashtra, Gujarat, AP, & Telangana) who are big powerhouses in manufacturing and would be losing revenue due to GST for the next 5 years with the help of cess to be applied on luxury goods and tobacco.

BEFORE

Good                        100

central exercise     10

subtotal                   110

vat @14%                15.40

Total                      125.40

AFTER

Goods                 100

CGST  @10%       10

SGST @14%         14

Total                    124

The decision making body formed is GST Council whose Chairman is the Finance Minister. It would help in removing the cascading effect which means it would remove tax on tax .it would reduce tax on manufacturers. Competitors won’t have advantage due to location. Petroleum products, liquor and electricity have still been kept outside the purview of GST though they make 40 % of trade. It will help in the fight towards inflation, tax evasion, and black money.

Movement of goods intra state would lead to payment of SGST and CGST. Movement of goods interstate would lead to payment of IGST. Canada, Australia, New Zealand are rent countries to adopt GST. Under GST there will be a system of input tax credit, under which tax already paid by one intermediary won’t have to be paid by the other intermediary which would lead to proper keeping of bills. Indian GST has a multi tired rate structure comprising of 0%, 5%, 12%, 18%, 28%, and 28%+ cess.

Its rollout is stated on 1 st July and naysaying states like West Bengal and Kerala have also agreed to role a bill till then or pass an ordinance .

 

 

 

SNAPCHAT: REAL TRUTH BEHIND THE NEWS THAT GOT INDIANS TOGETHER

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We all know that person who was once a friend of ours (that too for a short period of time) who when left us spilled our secrets too along the way. The same is the case with Snapchat and its ex-employee Anthony Pompliano who worked with them only for a short time span of 3 weeks. Prior to this stunt he had worked with Facebook. And after snapchat had worked with Brighten Labs Inc. from which he was fired to due to poor performance! Against which also he had filed a case of fraud.

Maybe Evan Spiegel said it maybe not, but there is no constructive evidence to prove it. And the funny part is that the person behind these allegation is someone not worthy to be trusted of his statement.

So all those who are backlashing snapchat should step back a min and Google the actual facts.

These were allegations made when snapchat was a private company. Now it’s a public company listed on the NYSE. That’s why they guarded the allegation back then in 2015 but now they have nothing to hide.

P.S.: personal view point!

​THE LINCHPIN CALLED JIO FOR THE TELECOM SECTOR

India has an ever growing 2 billion telecom (telephone, mobile) subscribers. Before Jios majestic arrival prices and connectivity both soared. But Jio tried changing that on both the spheres. Its entrance into the telecom sector has led to a massive ripple effect. India’s 2nd and 3rd largest operators Vodafone India and Idea Cellular have agreed to a 1.5lakh crore deal which will make them world No. 2 after China Mobile. Airtel is no longer number 1. Telenor has decide to exit India by it being acquired by Airtel. There is a prediction of 1 million jobs being lost in one of the most sought after sector in our country. The industry’s never ending debt is going to surpass 4,60,000 crore
Every story has two sides and so does this one. Jios entry has made access to internet that to 4G every man’s ability. Competing companies have started lowering their ever increasing prices. Jio has made its place in a matter of 7 months in a highly competitive and price sensitive market, with a few problems such as denial of POI (Point Of Interface) due to which its competitors face a fine of 3050 crore levied by TRAI.

But on the other hand the competitors claim that they did abide by the telecom guidelines to be followed when a new entrant enters the market. Impact of lower tariff and hence decline in revenue of telecom operators would lead to a delay in their spectrum payment. Airtel claims Jios plan to be “a strategic business tactic adopted to enhance market power with the objective of eliminating competition which it has succeeded to a large extent during the quarter Oct to Dec 2016 itself,”

I personally believe that Jios extravagant entrance to telecom sector has had its positives and negatives. But too many freebies never end up on good terms in the cycle of economics, capitalism and a consumer friendly market.

THE GREATEST TRADE EVER BY GREGORY ZUCKERMAN BOOK REVIEW

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“There is no intoxicant more dangerous than cheap money and excessive credit “- Benjamin.M.Anderson

So as you might have guessed from the cover above this book is about someone who ended up making huge bucks. Well to clear the mystery, Greg Paulson made $4billion in 2007 by betting against the housing marketing (his bet was that housing market would collapse like chunks of dominoes). It was the largest one-year payout in the history of financial markets.

This book overviews those who ended up making money when everyone around the world was losing it. Famously called as the 2008 FINANCIAL CRISIS”.  It revolves around GREG PAULSON, MICHEAL BURRY, PAOLO PELLIGRINI, GREG LIPPMAN, ANDREW LAHDE and JEFFREY GREENE. The ones who understood that something was wrong when everyone else was throwing bonus parties. That the financial industry was growing at a faster pace than the economy itself (a kind of financial alchemy being at work).

To me it cleared the landscape of the 2008 downturn and the years preceding it. How these few people could see and ascertain what others were oblivious about. It relays a time in the western financial world where even a kid in 4th grade qualified as a borrower. After the dotcom bubble in early 2000’s interest rates were reduced which led to excessive borrowing giving way to the housing bubble. There was a casino active at the world stage.
The book goes deep into numbers. Explaining thoroughly. The inside story of Bear Sterns, Deutsche bank, Morgan Stanley and many more are veiled out. It reveals how one side believed that the economy would grow to great lengths and another small group feared a dangerous downturn.
This books a must read for the ones who breathe and taste finance, who would love to understand the history of finance a bit better and for the ones who believe you can always be amateur and scale great mountains. And the book doesn’t bore at all.

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