Community and Second Hand Car Market

I never knew a parallel auto industry exists in New Delhi till last Thursday when for the purpose of some project research my colleague Saswata and I spent almost half a day in Mayapuri. I was astonished to see the strength of innovation that exists in India because of the entrepreneuring grey matter originating from the "Jugaad" zones of our brains.

Mayapuri, a place in West Delhi is marked by a wide array of shops that are dealing with all forms of second hand motor, auto components. It is also creating a value out of these second hand components. We realized that when we saw a jeep which looks like a new car. Some investigation revealed that the engine of that car is from Japan (a second hand engine), the tyre is from United States. I could not believe that a car can look so fresh and new even after its components are second hand and have been imported. The entire Mayapuri market is informal and unorganized and the health, safety aspects of the people working over there seemed to me of an issue of grave concern. But here, I wont get into all these. Rather, I would share another observation that was found in Mayapuri.

Most owners of all the second hand car manufacturing and motor shops were from Punjab. This was a real life example of how a certain community which can develop certain skill over a long period of time can understand the business of that sector. People from punjab have always been good mechanics, drivers and they understand the functioning of auto parts. Many of them, through historical land and family lineage have got exposed to the mechanics of how machine components of tractors, heavy vehicle cars behave. It is this exposure that have helped them to accumulate a skill over the years to understand how second hand car and motor components can be further reused. They have understood to create value out of these second hand components.

History and exposure of communities plays an important role to establish market share in a certain business. I was seeing the real life example of that. What was making me more surprised is the strength of human skill that each community of our country possess. We just need to provide the right environment, platform, infrastructure for these skills to be nurtured and bloom more. If we can really do that, with the big companies supporting the informal segments having their innate human skills, we can even have our own second hand car manufacturing industry which can meet the domestic market as well as the ones in other countries of South Asia, Latin America and other countries of South. We have the biggest strength to do that! Our strength lies in the continuous supply of innate human skills and craftsman/craftswomanship (disobeying the gender biasedness!) within our country.

Visit to Mayapuri not only revealed an entire new world but also made me realize our strengths and challenges as a nation. But, I am sure that the future is only towards the brighter side for us and for many of the people working in Mayapuri who possess skills no less than a highly qualified engineer working in the factory of Maruti/Honda/Hyundai. Its just that, we need to bring them together and exchange the skills in a similar platform which will do wonders. And when that happens, the next time during the visit to Mayapuri, I will feel more proud to be an Indian!

Learning bidding games from metro station

Every time, when the journey in metro from Jorbagh to its destination at Vaishali station comes towards an end, a feeling of repeatative memories arise. These memories arise, because most of the time when I come out of the Vaishali metro station, I see a real life example of competitive bidding games. It happens between the rickshaw drivers who are competing amongst themselves to catchhold of new passengers who will travel to various points of Ghaziabad from Vaishali metro station. The auto drivers come, bid for an auto customer by offering prices for certain destination points in Ghaziabad.

Auto drivers start competing amongst themselves and try to bid the lowest prices for any destination to win a customer. But last few months' observation shows that there is a lowest price below which auto drivers wont go even when they are competing amongst each other to win a customer. These base prices are different based on the distance of the place from Vaishali metro station. It also depends at what time in the night people want to go to these places from the Vaishali metro station. Generally after 10 p.m., the base prices are jacked up even if the auto drivers are bidding and competing. This is because in the base price the night charge is incorporated.

However, it is important to understand what determines this base price of auto drivers in a competitive bidding game where they are trying to win a customer. If the customer knows to what extent auto drivers' offer base prices can be reduced then sometimes the base price just goes down by Rs. 10.

Interesting number, isnt it! Why just Rs.10 and not Rs.5? Are the auto drivers ready to sacrifice Rs.10 in a competing game because for that amount of money sacrifice they can still accomodate the cost. Or is it the psychology to win against the peers is so high amongst the auto drivers that none of them reduce the base price by Rs.5 but rather by Rs.10? But, if the customer can read all these situations, most of the time in such a competiting situation, the customer is able to reduce the base price of the auto driver by Rs.10 and can be in a beneficial situation.

I have not come to any conclusion after observing these bidding games. I am sure, these kind of bidding games are happening in many of the other metro stations in New Delhi where most of the auto drivers are standing outside the metro stations. But surprisingly, outside the Jorbagh metro station, I have observed that the bidding games and competitive atmosphere between the drivers donot exist. They are more organised, stand in a line and are not competing amongst themselves to win a customer. So is it so, that the absence of prior organized structure of dividing the customer segment amongst the auto makers creating such competing bidding games amongst them.

Moreover, there can be a psychological window too for analysing what leads to these games. It will also be interesting to know driven by what psychology these auto drivers get indulged in these competing games that sometimes lead to a reduction in the base price. We also need to ask ourselves that what psychology of the auto driver leads them to sacrifice Rs.10 in the base price.

I dont know any of the answers to the doubts of my mind, as I need to observe a little more in the metro stations to arrive at some findings which are situational, time, context specific. May be some more indepth, time varying and segment specific research amongst these auto drivers at different points of metro stations will give future directions!

Interdependence of monetary, trade policy and inflation: time for prioritised policy decision making

News of depreciation of rupee against dollar has been hovering all around for some time. An exchange rate where 1 dollar has become equal to INR 54 has been raising concerns amongst the policy making fraternity. It is raising worries about the state of Indian economy. Depreciation can raise cost of importable items and add to the existing current account deficit of the country. This will therefore affect the balance of trade and can reduce the net earnings of the country from merchandise trade. Further, if many of these importable items are used in the production of domestic goods, then a depreciation of exchange rate can raise the cost of those goods and can further contribute to rising rate of domestic inflation. Rise in the price of domestic edible oils owing to depreciation and contributing to the increase in domestic inflation is an evidence of such a relationship.


Is our country ready to accept such a rise in the rate of inflation owing to the currency depreciation. Before pondering on this, let us try to find out certain causal facts behind this depreciation. According to some experts in the financial sector, this depreciation is happening owing to the rise in buying of dollars by investors following the Eurozone crisis. Increase in the exposure of the Indian economy to the global capital volatility through partial capital account convertibility, complemented by Eurozone crisis can therefore affect exchange rate and capital account with a subsequent impact on the trade balance. Such partial capital account convertibility regimes can also reduce the monetary independence of the country and cushioning of the economy against global capital volatilities.


However, the counterparts will say that capital account convertibility is required to increase capital investments and improve the balance of payments by creating healthy capital account balance.

But in a situation where the world has been witnessing financial and sovereign debt crisis, is it prudent enough to be exposed to such risks! These risks not only affect the trade balance, but can also affect domestic inflation of a country like India at this juncture. So on a priority basis, in the policy making front, certain actions are required. Some of them are listed below -

a) An integration of the monetary and trade policy

b) Reduction of the merchandise trade deficit of India by reducing imports


c) Reduction of the dependence of domestic goods production on importable items in order to delink domestic inflation from currency depreciation.

These measures will have to be taken through lot of coordination across the policy makers dealing with trade, monetary and macro policies. Different ministries and RBI have to be an integral part of this coordination process. In today's context, for an emerging economy like India, any global and national policy challenges have cross cutting influences on each other. So addressal of those challenges need more coordinated and integrated response of policy making to safeguard the country from global risks, continue the domestic growth path as well as maintain the balance of the economy by reducing challenge of inflation that hits pockets of every Indian. But the question is - Are the policy makers listening to this important call for coordinated action?

Is "Anna" - "Anna" because of popular Hindi films?

Since I read an article in "Social Change, December 2009: Vol.39, No.4, pgs 504 - 527", titled "Reviving Gandhi and the utopia of Hind Swaraj in popular Hindi films", an itching was happening to raise this question which has been chosen as the title of this blog piece.

The article in Social Change went through the minute facets of certain Hindi films like - a) Sardar, b) Veer Savarkar, c) The Making of Mahatma, d) Hey Ram, e) Maine Gandhi ko Nahin Mara, f) Lage Raho Munna Bhai (LRMB), g) Gandhi My Father and explains how each of these films have built a conscience of Indian masses about the ideologies, principles of Mahatma. The article also raised questions about how these Hindi films have contributed in building the conscience of Indians about Gandhi as a Mahatma and Gandhi as a human being.



Hindi films in India have a strong penetration effect on the imagination of Indian masses apart from the regional films. It builds the world of imagination of the Indians which also helps in constructing their consciousness. Popular films like LRMB contribute to a larger extent in reaching out to the people all around us. Precisely the article on social change explains how LRMB was made to demystify the notion of Gandhism for even a Chaiwallah when Raju Hirani discovered that a Chaiwallah he had interacted didnot know who was Mahatma .





It is over here, I give a pause and think for a while. Immediately what I feel is that popular Hindi films also therefore have made "Anna" - "Anna". You must be thinking why I am saying so. For the time being let us accept that popular hindi films like Lage Raho Munna Bhai builds the imagination, consciousness of common Indians about Mahatma and creates an innate wish inside them to live with the imagination of Mahatma. This conciousness and imagination strikes the proper emotional chord when in the present day people of India see the practice of Gandhism through another protagonist Anna.





So is it so that Anna helps the imagination and emotional chord related to Gandhism in the minds of the Indians to stay alive. However, this emotional chord of an image of Gandhism has been created by popular Hindi films which has a strong effect on the subconscious of common Indians. Hence can we say that if these Hindi films would not have been made, a particular sustaining popular image of Mahatma would not have been there with the present India. Does that mean with the absence of that popular imagination and conciousness within the present India, Anna would not have been able to hit the emotional chord of so many Indians all around us.



Does that mean - "Anna" is "Anna" because of popular Hindi films? I really donot know. However, it would be worthwhile to see how popular communication medium like Hindi films play a major role in building a belief and thought process across class segments of India by building a particular world of image, conciousness, imagination regarding a popular personality.

“AAP LOG HO TO ANDHERA NAHI RAHEGA” – A SCRATCH NOTE ON TRUST, COLLUSION

In the course of continuous travel through villages in Sualkuchi, Hajoe, Nalbadi, and few other places within Assam in one day, this above title line became the recollected quote of the day. This quote came from a villager in Nalbadi. It was directed to franchisee operations of a local NGO that has brought trust and hope in the life of villagers. The trust is that as long as the NGO and franchisee operations are there, life in the village will not be without light.

According to villagers, franchisee operations have ensured better electricity provision of services for them. Inspite of that, franchisee operations are also facing the problem of hooking, pilferage in the lines that provide electricity for these people. According to comments made by local people, this pilferage is often happening owing to collusion between local lineman, feeder maintenance engineer, certain officers and the police force. In some cases, meter damages are also happening in local circles. It is however not clear whether any other agent is also engaged in meter damages that is hampering the proper revenue collection and metering of electricity at the local circles of operation. There is a need for monitoring at the local circle to enhance the success of operations within these local circles.

Collusion between these people facilitates pilferage and villagers are often being deprived of timely, quality power supply. Now, the question is - Can we stop this collusive activity to sustain the trust of people on franchisees and in the power delivery systems which has developed over the years?

Incentives in the form of giving power to the agent engaged in the collusion to stop this activity can be thought of as one of the ways. Will information disclosure norms to stop bribe taking and collusive behavior be a way to reduce this activity ensuring better power supply for villagers? There is no definite answer to this because it is not clear why these agents will disclose the act of theft when it appears that implicit support from the existing agents of institutions exists. However, one should remember that there are honest, dishonest people on both sides and people who want faster provision of electricity to villagers are also fighting against this implicit support.

However, there is still a need for institutional reforms which can be the first step. Such reforms have to bring in effective monitoring and coordination at the local circles between all agencies engaged in the delivery of power to remote villages. All institutions have to join hands and work together giving each other space and showing faith on each other in the journey of providing electricity to villages through franchisee operations.
The contention is that policies should be enforced which in no ways should allow the trust of the people to go down from the system of power delivery through franchisee which has developed over a time of 5 years. Rent seeking, lapses in an institutional system would always try to hinder the infusion of efficiency in delivery of services. It will happen more when new mechanisms, operations will reduce rent seeking volumes of the agents (who were earlier reaping rents) from the system. However, policies should prioritise the welfare of villages/villagers who become the beneficiaries of these service provisions. This should be done by checking rent seeking activities. It might not be reduced immediately as bribes, collusive corruptions cannot be stopped overnight. It will continue to exist as long as human race exist because corruption is a form of living of human beings. However, policy pragmatism has to be there to check and reorient it in a way so that beneficiaries in the villages are not harassed in owing to the existences of these loopholes.

Sometimes that pragmatism for checking and reorientation can come in the form of legalization of information disclosure of collusive corrupt practices through provision of incentives. However, they have to always be supported by strong institutional and governance reforms at each level that deal with the implementation of any policies. These will be required for larger development of people in the villages through means of basics like power supply. Such provision will enhance the trust of people and then more people will quote in the way with which this scratch note started. At this juncture, when our country is marked by rifts between the have and have nots in the extreme rural areas, the decision and policy makers have no room for complacency to loose this trust that has developed and been developing amongst the villagers through some of the government schemes across India.

“Harassment Bribe” and “Inflation”: An Integration

Inflation can be caused by both demand and supply side factors. Monetarists often give a view that cutting demand driven expenditure through reduction of supply of money into an economy can curb inflation. However, inflation is not only being driven by demand side factors. Bottlenecks in the supply of goods can reduce the good availability and can lead to a price increase. Supply of goods can also go down with a rise in the cost of production of the goods. Some of the factors that hinder supply of goods are production shortfalls, enhancement in the cost of inputs used for producing goods. This can further translate a rippling effect on prices of goods. Goods supply into markets can also be hindered if the distribution networks between sources of supply to markets via mandis, wholesaler, and retailer are not working properly. It might not work properly, if hoarding happens and prices are hiked up artificially by hoarding. This hike in price of goods arising from artificial hoarding and inefficient distribution networks can contribute to inflation.

People and agents can be engaged in this artificial hoarding to earn bribes and premiums from wholesalers, retailers who finally channel the goods into the market from where common people buy. Agents can harass buyers at certain points of the value chain like in mandis, wholesaling outlets to give money and get the goods at a higher price premiums by artificially raising prices at every intermediary stage of the total value chain.

This kind of rent seeking through artificial hoarding can be seen as a corrupt practice. It can be viewed as a corrupt practice by a group of people who does not supply adequate agricultural goods at the right, real prices for mass consumption. They are doing this for satisfying their own money and profit making greed through artificial hoarding even though there is enough supply of goods at the ground by the farmer. Further, if they ask for bribes and money from buyers at certain points of the distribution network to streamline the goods supply to market, it can be seen as a form of harassment bribe demanded by these agents.

Agents who demand these bribes in the economy can further collude to increase rent seeking over a period of time. However, fall outs of this rent seeking can be felt in the inflation and in the burning pockets of common individual who goes to the market and buys essential agricultural food grains for daily consumption. Having said all these, let us now look onto the mainstreaming of the above said points into the context of the Indian economy.

If we see the high rate of inflation in the Indian economy, one fact which immediately comes out is the contribution of high price of agricultural goods (arising from supply side factors) in the overall inflation. Data suggests that such contribution is high and owing to such a supply side contribution demand side factors and monetary measures are not the right means to tackle inflation. Once we pause back and ask why the price of these goods are rising in the Indian economy, we get some inconvenient directions.

In the recent past, we did not have a large amount of production shortfalls in pulses, food grains, agricultural goods (like sugar) but still their prices have been soaring high facilitating a double digit inflation. Then, why these prices are rising. Here we come to face the fact that how in Indian economy, hoarding of agricultural goods have artificially raised the prices. These hoarding practices suffer many times from the type of harassment bribes we have mentioned above. We also see large amount of food grains which are rottening in warehouses while the prices of those food items are soaring high. Seeing all this we can realize that distribution networks, agent behaviours in such distribution networks fraught by collusive, corrupt practices of rent seeking can be some of the major contributory factors.

It is over here, we have to think whether legalization of such harassment bribe will also lead to a reduction of corrupt rent seeking practices finally leading to lessening of inflation in the economy.

Lets say, we bring a law in our country to disclose information of the amount of rent premium earned by agents within the value chain of agricultural goods through artificial hoarding, collusion and any harassment bribes. People who will disclose the information will be given an incentive to keep a certain amount of the value of agricultural good which was hoarded or related to which which the harassment bribe was exchanged.

Will this ensure that these agents will disclose the value of hoarded goods with respect to which harassment bribes were exchanged? Once they disclose such information, can it be ensured that some amount of harassment bribe reduction will happen in the economy which will thereby free the artificially hoarded goods leading to better distribution of goods. Such supply side inefficiency decline can then contribute to a reduction in inflation. In reality, the mechanism might not be so simple as it sounds over here in this write up.

For realization of translation of reduction of this inflation from disclosure of information, institutions, warehouses, transportation infrastructure and distribution agents have to function effectively to ensure that the goods reach the wholesalers, retailers at the right point of time to reduce any artificial supply shortfalls and price hikes. An independent supervisory body has to regulate this functioning.

However, the regulatory body might not be able to control the political economy of the bribe creation, rent seeking business in the agricultural value chain of the Indian economy. It might happen that existence of rent seeking, harassment bribes within value chain of an agricultural good can be beneficial for the financial kitty of a political party. Elections, political parties and the business of running a political organisation can be funded through the money that comes out of the rent seeking activities within the agricultural value chain. So political parties might want to maintain the bribes, rent seeking activities even though it hurts the common people through rising prices.

If now we ask that – “Has this been happening in any agricultural goods”? Well there are no such empirical evidences, but situation of some sectors sometimes raise a feeling inside us that many such things are happening under the carpet in select agricultural goods. If they are happening, will not a capture of the regulatory body by the political party take place? If such a capture happens, then in such case even if there are information disclosure norms of harassment bribes, defined roles of regulatory bodies, reduction of inflation won’t happen. Or we will require another “Fasting” by social reformers to reduce inflation in food grains by checking corrupt practices in the value chain of the agricultural sector. I think, India’s strong democracy supported by probable and needed new set of reforms in our institutions determining domestic governance will find an answer before any such second round of fasting happens. And this time those reforms will be brought by players of our governance systems viz. politicians, bureaucrats, leaders at each and every level.

When does a gardener teach us about development?

It was 19th September, 2011. The place was a tram station in Geneva. We (which included Nitya, George and myself ) were waiting for a tram to reach WTO (World Trade Organisation). All of us had reached Geneva on that day and had to reach WTO immediately for a session at WTO Public Forum. But, I didnot know on the way to WTO, I would understand the concept of development, the exact definition of which has always been unclear to me.

While we were waiting for a tram to come, suddenly like from nowhere a well built person with short head phones walked across and introduced himself to us. He was wearing a black leather jacket and looked smart in the outfit.

His sudden appearance in the station and his self initiated introduction to us was not very usual. I had a feeling that his appearance was something like the famous apple falling down incident which made Newton discover the concept of gravity. Well, here none of us discovered any concept related to physics. Neither was he an apple. But through the short introduction I came to know something. And that something was nothing short of Newton discovering gravity with the falling apple.

Here was a man who like an apple arrived suddenly and made me realise the concept of development. This person who was well above 60 was a gardener and is living a life with his grandchildren and following his aspirations to travel around the world. He suggested that he is very fond of India and thats why he introduced himself to us after realising that we might be from India. He has been enthralled with the travel to South and South East Asia, land of Buddha at an age of mid 60s (which emerged from the appearance though I didnot ask the age) and is happy to live the life this way.

Question which arose in my mind, is why he has been able to do so. How many gardeners in India will be able to do that! I guess, the answer to this question might not be too optimistic. So this man put us in front of a mirror where we could see what does development mean and how can we call a country developed!

Essentially, it is a state of a country, where every individual even the ones who are belonging to any job or working occupation (it can be blue, white, gardener or anybody) gets the freedom to follow his aspiration and live through his/her aspirations without facing challenges in a social system. The mirror to which I got exposed also taught me that there is a long history through which this state of affairs of development can be reached in a country. And in that journey, several factors like culture, institutions, policies, people, governance mechanisms and so many other unmentioned ones will play a major role.

Will every gardener at far off corners of our country be able to follow their aspirations in the same way as him? I was asking this question to myself. And the more I was asking, it was becoming clear - what development means to a human being and to a nation. I guess, this was till date, the best development economics training session that I have attended. And it was a session that was offered by a gardener in Geneva, Switzerland.