The size of the all cash economy at the bottom of the pyramid in India

 Background Information:

Only 1% of India's population pays income tax. The tax rate slab in India is 2.4 lacs for adults for the current financial year. Agriculture , which is a tax exempt sector, employs  about 57% of India's population. This means that of the remaining 43% of the population, 42% earn less than 2.4 lacs a year.

The Trigger:
On 8th November, 2016, something changed in India. By some estimates, 85% of our currency became invalid overnight.

The queues since then - mostly composed of the underprivileged, made all of us uncomfortable. Some of them had been paid to stand in that line. But a lot of others were there because they were a part of an all cash economy. 

As time passed and the queues did not get any shorter, it set me thinking about the real size of the cash economy at the bottom of the pyramid. How much cash is really there at the bottom of the pyramid, that is not entering the system at all? (And is, therefore, black money)? 

So, this morning, I did some back of envelope calculations, hoping to get some sense of the all cash economy that hides at the bottom of the pyramid 

The bottom of the pyramid has its own hierarchy(see note below). 

For my analysis, I decided to focus only on the primary income generators, as a reliable measure of  cash at the bottom of the pyramid. This is because B and C re-use the cash generated by A. They may add to the size of the economy, but I am interested in the size of the cash chest alone. The size of the economy will be about 2 or 3 times the size of the cash chest as the money gets recycled.

Determining the Set of Primary Income Generators
After this, I zeroed in on some occupations where I have some idea of the margins, daily income, ticket size et al. 

Methodology

I just followed very simple back of envelope calculation. So, average order/ ticket size, no. of orders per day, margins (because according to Indian tax law, business is allowed to deduct expenses before arriving at income) and no. of working days per annum. 
For monthly workers, I used average income per month, plus additional income (bonuses, overtime etc). 

At first, I couldn't believe the numbers that appeared on that screen. So I did some more changes - reduced the working days, reduced the no. of tickets per day and so on. Even with all the changes, at the most conservative, this is how it appears.

That number in INR Today is 562590 Million INR. i.e.,: 562590000000 or 562 Billion INR.

Notes:

1. This analysis is only for a few selected occupations. 
2. The number of 1000/2000/5000 vendors per city is obviously very low. 

3. The hierarchy at the bottom of the pyramid:
A. Primary Income generators
These are the people who generate income from the economy and bring it to the bottom of the pyramid. Think: Vegetable vendors, pan wallas, small grocery shop owners, dhobis, malis, parking stand boys, domestic staff,  other service providers. In the money cycle, think of this as the point at which wealth enters the bottom of the pyramid.
B. Secondary Income Recyclers
These are the people who then use that money to support the bottom of the pyramid economy. Think landlords, service providers to the poor, alcohol thekas et al.

C. Consumers
These are the people who have the spending power at the bottom of the pyramid. Think home decision makers, consumers et al. 

4. No. of cities in India as in 2011: 497. I have used the number of 450 for this analysis.

The continuity of Indian civilisation

 Here are the characteristics of a period in Indian history. Can you guess the period that is being described?

1. The civilisation was, at its core, a mercantile civilisation, where money was the prime objective of existence, and other things, like house in a good location, access to good civic facilities, the derivatives of that core objective.
2. There was a mature political and civic structure. This was a civilisation that was not given to petty internecine wars. They had the maturity to design and build political systems for scale.
3. Environment was not high on the political agenda. Nor were farmers given importance in the political establishment or the decision table.
4. The mature political structure ensured that small and large kingdoms lived in relative peace, with very little need for wars. Much of the state's budget went towards civic work and administration. Wars were rare and when they happened, decisive.
5. Education was a priority. This ensured the continuity of traditions and knowledge across many centuries - largely unchanged. But the knowledge imparted in this educational system had the best lessons of the past and encouraged readers to develop those ideas before sharing them with a larger world.
6. Cities, esp capital cities, were well planned.

The answer is: Every single Indian civilisation, dating back to the earliest known - the Saraswati Valley, has displayed these characteristics. India is not a successful democracy just bcs of the founding fathers of our constitution. India is a successful democracy because our political journey started with democracy - Janapadas and evolved into monarchy. 

Womens Day 2021

 

It was a pleasure and a privilege to be a part of this esteemed panel! 

Business Secrets of the Marwaris

 This will put in bullet points as we grasp from the various articles and books on the subject: 

Network, Network, Network 

When a Marwari child reaches earning age, he is put in tutelage with a relative or a friend. When they reach a new land, they are immediately taken in and supported by the local community there until they are able to support themselves. 

It may be nature, but a lot of it is nurture 

I have said this often and will repeat - the Western world is finding (again) the importance of giving children more than academics - of giving them real productive work where they can see the outcome of their actions. Indian communities have always made children a part of their work. If it is a trade, the child is taken on the rounds. If it is collections, the children go with the father. If it is a factory, the children grow up there, visiting at least once a week. If it is craftsmanship, children help the parent as soon as they can walk. Work is literally all around them in growing up. 

Family comes first 

I asked a Marwari friend - we Punjabis can never work with our families. We end up fighting. How do you do this? How do you work consistently with other family members? 

Her reply has stayed with me ever since - We have deep respect for our family members. No matter how much loss it means in business, we never let our elders feel bad. And we always keep family members happy. Since its the same business, people don't usually let ego come in the way. But if it does, we assuage the ego first, because relations are for the long term, business decisions are short term. 

Education 

Almost all Marwari children are educated well. This helps them, imho, understand emerging business trends and create networks that help them leverage these emerging trends. 

The most undeniable aspect of Marwari businesses is their longevity. That longevity is not possible without agility and proactive management of the business environment. 

Insistence on education may have a lot to do with it. 

Pioneering and risk taking 

The first people to buy sick jute mills were Marwaris. The first people to move to Calcutta and establish a trading base there once the port was set up were Marwaris. The first people to move out of Marwar and become financiers to the Mughal emperors were also Marwaris. 

If you look at Marwari businesses, quite a few of them would have started something new. Pioneering or risk taking is inherent to all businessmen. That is how businesses are built. But in this case, we combine the pioneering spirit with the ability to garner a community quickly, and we see a very good result. 

That thing called corporate culture 

In corporate grapevine, they are called the lala companies - companies that  are family owned and loyalty to the head is instinctive and personal. As family members join the business, some of the loyalty is also inherited by them - wives, sisters, children, cousins, everyone. 

The corporate culture is driven by loyalty and a sense of family. If an employee has a personal emergency, they would do something that no one can imagine in an MNC - they would request to meet the big boss directly, and the big boss would, after hearing of it, approve whatever it is that would help the employee. There is no question of involving HR, system adherence, etc. 

In fact, this is something I have observed, time and again, in Indian businesses - the family is an inherent part of the culture. The family is the most important unit - of the founder, and of every single employee.

Financial Control and instruments 

There is an acute sense of accounting for every penny. Financial control is typically much tighter. But, things like maker-checker or processes or accounting standards etc are not what lead to this tightness. It is the CEO's familiarity with the flow of money. 

The Marwari financial instruments were also much more evolved than their counterparts. The Hundis were the first negotiable instruments, long before the term was coined.  

Talent Pipeline

A direct result of the network and community angle was the ready availability of talent and a talent pipeline. The youth was assured of jobs and the business was assured of talent. Further, there was minimal risk of white collar crime because your entire social circle, your family, everyone worked with you. 

I think that while this aspect may have diminished in recent times, a trip to the industrial/ trading belt will show that people still maintain 25-30 years of tenure with the same organisation. The children may fly the nest, but there is still a security cover should they need it. 

Philanthropy 

Like most Indian communities, the Marwaris also believe in philanthropy. Much of that money is spent on generally accepted causes - temples, girl children, health, education of the underprivileged. There is a concept of a welfare state that comes from the very Indian idea of Sarbat ka Bhala / Vasudhaiv Kutumbkam. But this philanthropy ensured a certain basic minimum level of existence for most people in the region. I have some conjecture about how this led to the creation of a pro business environment, but better to write that after the research. 

Social capital and a brand

What is the secret of the fat Marwari weddings where the hidden wealth oozes out in all forms and fashions? Why do Marwaris spend so much on a specific festival or occasion? It is to build social capital.

If success in business is a direct consequence of one’s social capital, festivals and special ceremonies are the means to earn the capital. It is noted that the exchange happens on goodwill in the market of diamond and precious stone trading in Jaipur.

Bibliography

 Check How Marwari People Are Born For Business And The Secrets That Make Them So Good (edtimes.in)

How do we address the Knowledge Vertex?

 We talk about 21st Century Skills and 21st Century Attitude to work. The third part of that triangle is 21st Century Knowledge.

The importance of that hit while reading Priyanka Singh's edition this morning. It explains cryptocurrency in a phenomenal, easy way. But while reading the edition, I realised that the Knowledge vertex of the Attitude - Skills - Knowledge triangle is missing in our lives.

This Digital First generation is being taught by us - an analog first generation. The millennials are making an amazing new dynamic world, but who is teaching that to their peers and juniors?

Many children in the world don't know about GPT-3, yet they cannot be expected to not know as they enter the job market - IT or not. Because 'citizen developers' are now also expected to develop apps.

Not just that, many of us in the older generation HAVE to learn and keep ourselves updated, just to stay relevant.

I really believe that addressing the Knowledge Vertex will not just create more aware citizens, but also more conscious ones. Its not about content on the internet like leaves in a grocery market. Its about creating channels where the right information reaches the right recipient in a format that works for them.

How do we solve for that?

#ThoughtsforTomorrow

About culture, strategy, and money

 Culture eats strategy for breakfast. Money eats culture for lunch and dinner. 

The first part of this quote we have all heard. 

The second part is that magical thing that explains how children love abusive fathers rather than caring mothers. I'll be honest. That was what drew me to the power of money. The Tata story with Jaguar came later. 

Of course, money, like any tool, is only as good as the tools person using it. The father who pays both his kids 50 k a month as pocket money knows how to use the tool to his advantage. The moral aspect of it is not in question here. There is a tool. The father has it. And he uses it. 

Likewise, an acquiring company flush with funds finds that the team is more than wanting to embrace the culture of the new company with gusto that is enviable. Another company might find 

#Cynical, but just my experience. 

Oh, the beauty of introspection!

When WA decided to postpone its policy by 3 months, I decided to move anyway. Because one does not remain with the butcher just because the slaughter is postponed. 

Moving away from WA is not a choice any more. 

But, as expected, most ppl in my network did not want to move. 

The same thing happened when WA was bought over by Facebook. I had tried to move then, with no success. 

This time, the only difference was, that people have moved. But then, Whatsapp came up with that masterstroke, let's postpone for 3 months. 

The universal law of inertia took over and ppl said, ok, why should we move now? 

Well, the answer to that was pretty obvious to me: One does not stay with the butcher because the slaughter has been postponed. 

But more importantly, this universal law of inertia forced me to face 2 important questions: 

1. What do I value more? Privacy, or network? 

2. What is the optimal size of the network that i really want? Not what Marksman Z , Larry Page and Co, and Bill Games have created for me. What do I want? 

The answer to the first was a no-brainer. 

For 2 elections now, Facebook has directly decided who the President of the United States should be. 

After the first election, I had asked, "If Facebook decides who the next president of the United States is going to be, is the US still a sovereign nation?" 

After the second, we know that they are not. 

So, yes, even if I am the lone dissenting minister in the court of some Indian king in the 1740s, even if I am the lone dissenting citizen, privacy clearly matters far, far more than the network. 

2. What is the optimal size of the network that I really want? Not what Marksman Z , Larry Page and Co, and Bill Games have created for me. What do I want? 

This is a surprise. When I really, really thought about it, I realised that the REAL networks for me are still small. 

Let's ask that question: How many of these Whatsapp networks, Facebook friends, etc., do you call when you are a in jam. I realised, NONE. 

For practical advice, I might go to some WA groups, but if they are not there tomorrow, that is fine too. 

It is great fun to see pictures of people's kids and vacations. But over many years, it has not brought me closer to them in any real sense. (2)

For search, I have used DuckDuckGo and not Google, for over a year now. And here is the real surprise: Contrary to what Google has you believe, personalised search results are NOT better than standard search results served by DuckDuckGo. In fact, they are *&@$ worse.(1)  

So, really, when I thought about it, I realised that I will be much, much happier in a world full of people who have the maturity to have discussions without getting personal, people who actively invest in positive thoughts, and in building each other up.  It is GREAT to be brutal about cutting out people who add an atom of negativity to life. 

I scrolled through the Facebook groups - do you know how many groups were retained? 4 out of 150. 

Scrolled through the Whatsapp groups - 3 out of over 100 were retained. 2 of these are the child's school groups, which I cannot exit. Which means that effectively, ONE out of my hundreds of WA groups were of real value to me. 

Can you imagine how much time i have wasted over the years? 

And so, having thought through this clearly, one feels so sweetly liberated and happy. 

It is time to let go and watch more Netflix! I recommend The Social Dilemma. Very Highly. :) 

Endnote

As a consultant, we tell our clients - Our job is to ask you the right questions, so that you arrive at the right answers in the shortest possible time. So: 

I would urge you to ask yourself the same 2 questions - 

1. What do I value more - privacy, or network? 

2. What is the real network that YOU want? 

Good Luck! 

Footnotes

(1) There was this day when I was doing a story on edible oil exports from India. Usually, when researching such stories, i go to the website of the trade association and pick up the numbers from there. In this case, i searched Google for the Association of Edible Oil manufacturers of India - 3 pages of search results and NOTHING. Then, i tried DuckDuckGo. First search result was the right one.  

(2) Facebook: I have added many colleagues as friends, and consequently become better friends with them. Some new friends have come from Facebook groups. And some real friends are from Blogger. This necessitates a loss of privacy, bcs unless you discuss your real thoughts, you cannot connect with others. 

BUT, the converse is also true. Many people I value have stopped being friends with each other  - stopped being real friends because of stupid virtual online debates. 

Both Facebook and Twitter have hit the world with  hate campaigns that are both malicious and unprecedented. Yet, NOT ONE country has been able to sue them. Not one country has been able to bring them to justice. If that is not Colonisation 2.0, I dont know what is. 

These hate campaigns are not, to be fair, their main agenda. Their main agenda is engagement. Because of the way the human brain works, we engage more with negativity than with positivity. 

It is our own brains that taught the AI to give us hate campaigns. 

 

I want good, warm networks. I want to be surrounded by people who actively prefer positive content to negativity. 

(3) Tangent: In a flood, a twig is swept away by the force of the water. It is not the fault of the twig, but the twig moves with the water. As the water reaches livestock, the twig enters the eye of a lamb and blinds it. Floating in a flood of negativity is not the twig's fault.  The twig did not, in all probability, realise that it was a part of a flood and was going to be a weapon. It did not even think itself capable of being a weapon, being just a twig and all that. But the twig is responsible for blinding the lamb.