Microsoft's Acquisition of LinkedIn

It was really exciting to read about Microsoft acquiring LinkedIn for an astronomical sum of $26 billion, translating to 91 times LinkedIn's current EBITDA!!

Well, the basic calculation of Satya Nadella and his team behind this acquisition is to boost sales of Microsoft's Office 365 and Dynamics, to the LinkedIn users, numbering 35 million in India alone.

I am reminded of Microsoft's acquisition of Hotmail in 1999, for a princely sum of $400 million dollars!!! Would anyone care to put a value to Hotmail today?

While the maths behind arriving at a valuation of $ 26 billion is best left to Satya and his team of negotiators, the key question which should now be uppermost in the minds of Microsoft's top brass is :

"How can we convince the various users of LinkedIn to move beyond their key objectives of career moves and networking with like minded professionals, to considering Office 365 and Dynamics as the best of its kind in the field of cloud and CRM space?"

Well, the dominance of Gmail in the email space is well known displacing Hotmail from its premier position. Satya and his team need to be vigilant enough not to let history repeat itself.

Union Budget 2016-17

Post presentation of the budget, the stock markets crashed by over 150 points today, because perhaps they reacted negatively to the 10% tax proposed on dividends earning on Rs 10 lakhs and above per year, and secondly, they were perhaps not convinced of our ability to maintain the fiscal deficit at mandated level of 3.5% of the GDP.

But after hearing the MoS Jayant Sinha's explanation behind the confidence of maintaining this figure, I am convinced that this figure of 3.5% is not too ambitious.

I am not  surprised that today,  the stock markets have rebounded sharply once the fine print became clear to everyone. Yes, coming to the proposed 10% tax on dividends, it is only fair that super rich contribute more generously to the exchequer, and 10% is not a heavy dose of tax.

Focus on rural sector reforms primarily through 100% FDI in food processing, major thrust on infrastructure mainly through roads and railways outlay of over 2 lakh crores, encouraging voluntary disclosure of unaccounted wealth, and low cost housing have been among the key pluses in this budget.

Being a student of Economics, all I can say that this budget aims at process reforms within our system within the constraints imposed by the global scenario, political considerations, and the crying need to boost the rural economy. It is not aimed at effecting massive liberalization a la 1991 budget, presented by the then FM Dr. Manmohan Singh.

Yes, as suggested by Mr. Swaminthan Aiyar in Times of India two weeks ago, wish the FM had imposed heavy custom duty on beedis as well, besides legalizing betting on cricket matches and taxing the same. When betting on horse racing is legal, why can't betting on cricket?

The million dollar question of what this budget has for the key segment of our society, the middle class? Well, apart from the hike in rental allowance and the major thrust in the low cost housing, the only thing which our middle class can look forward to is a highly improved macro environment which offers promising and stable job opportunities to the educated lot, besides a highly conducive environment for those desirous of fulfilling their entrepreneurial ambitions.

All said and done, the devil would now lie in - effective execution of the various provisions in the budget, favorable monsoons this time, global crude prices, and above all stability and improvement in the highly fragile global environment.

GDP Growth of eight per cent when exports are down by five percent

It was a real treat to watch Ruchir Sharma's interview yesterday on NDTV 24x7, which was moderated by Dr. Prannoy Roy. He made a brillant analysis of the top 10 economic trends in the world economy during the last year, and his prognosis for this year, which unfortunately was not too encouraging.

One of thew key prognosis made by Ruchir was - if our exports have shown a decline of 5% in the last year, how can we expect our overall GDP to grow by 8%?

Point well taken. But the answer lies in agrarian reforms, and specifically aggressive push to the farm-to-fork policy, whereby the farmers are encouraged to sell directly to the ultimate consumers through well established mechanisms, thereby ensuring better remuneration for themselves and lower prices for the final consumers.

It does not need too much of an imagination that, while the overall food inflation would see a marked decline, the overall food production would also get a boost, thanks to the market driven incentives for the farmers, who would not have to rely on the government sponsored minimum support prices, to determine their cropping patterns.

In the ultimate analysis, we should aim to become the food basket for the world, which would be a key catalyst in our overall growth story.

Of course, this simple synopsis of the suggested remedy to Ruchir Sharma's malady, requires among other mechanisms, bold political initiatives of wiping out the intermediaries, who are neither serving the interests of the farmers nor of the final consumers.

Watch out Facebook

During the course of social interactions, a key question asked is, "Are you on Facebook, or Linkedin?" If the answer to this question is in the affirmative, then the next logical response is, "OK. I'll send you a friend request right away, and the connection is made right away via smartphones."

Gone are the days when exchanging business cards,or looking for a pen and paper to note the contact details of other person, was in vogue.

But notwithstanding this new narrative in establishing connections from offline to online, with the expectation that one could reach out easily to others via such social media platforms, what begets a serious considerations is the transformation in such social media itself, especially in Facebook.

Today, it seems to be rivaling one of its biggest competitors -Youtube, by pushing videos to its users, which may or may not be as per its users requirements.

Few years back, it was a strong conviction that, a presence and being active in such social media sites were a critical minimum requirement to stay relevant and prosper in this omni potent digital world. But today, individuals terminating their Facebook accounts, and some existing users drastically reducing the frequency of their logins do not raise eyebrows. Anything which once captured the imagination of millions has to succumb one fine day, to the ever potent 'law of diminishing returns.'

Mark Zuckerberg and his team would do well to remain focused and clued on just one question, "How can Facebook make a positive impact on the lives of its users?"

A broad question no doubt, but can be the only critical factor for it to remain steadfast in this ever growing world of startups, which can beat even the well established giants in their own game.

Terror Attack in France

if the raison d'etre behind the formation of the European Union was common economic benefits vide a combined European Market for all the members, then the glue which can provide the much needed adhesive today to it, would be the common threat from terrorist attacks.

The EU should view the dastardly attack in France as an attack on it as a whole, and should form a combined front against terror emanating from any part of the world.

Indian diplomacy should adopt a proactive approach, of being a key catalyst in this united front against terror to EU, by providing them vital inputs on terror. Yes, this should be a highly subtle diplomacy without any grand public statements.

The dividends from such a diplomatic initiative can be easily guessed.

Fifty Years Later - 1965 War

While observing the 50th anniversary of the 1965 war, which despite ending in stalemate, can be considered a victory by us, as we managed to thwart Pakistani designs of wresting Kashmir away from us, notwithstanding our severe limitations of having to spread our military resources to guard against the Chinese who had inflicted a humiliating defeat on us just three years ago.

Yet, it would be worth reflecting on the following:

a) What were the reasons for us being caught off guard by the Pakistanis this time, and that too just three years after the bitter experience with China?

b) What was the role played by the erstwhile Soviet Union and the US to end the war?

c) Haji Pir pass in Pakistan was captured by our soldiers after engaging with the enemy in a hand-to-hand combat, and according to one media report our Army Medical Corps posted close to the Haji Pir pas even ran out of the crucial morphine injections to give temporary relief from pain to our injured soldiers. But much despite the reservations expressed by our Army , our leadership returned the Pass to Pakistan at time of signing the Tashkent agreement.
What were the compelling circumstances behind overruling the reservations of our Army?

d) The key objective behind Operation Gibralter and Grand Slam was to wrest Kashmir from us. Did the Tashkent Agreement settle this issue once for all, or was this crucial issue ignored as seem to be evident otherwise?
It was the second attempt by Pakistan to grab Kashmir by the use of force after the failed 1947-48 war. Tragically, we were condemned to suffer the this failed attempt by Pakistan,more than three decades later in Kargil.

e) The Tashkent Agreement was brokered by the erstwhile Soviet Union and the US, and not by the United Nations, thereby making the role of the United Nations redundant in 1965 itself , where Kashmir was concerned. Then why do we not emphazise this point in our discussions with Pakistan? Above all, the Simla Agreement which was executed in 1972 makes a subtle reference to the LoC as the de facto international border with Pakistan,

f) And above all, the most notable defeat for Pakistan was its closest ally China keeping away from engaging us simultaneously, some thing that could have changed the outcome completely. Some credit does go to our covert diplomacy with China those days. Of course, this is an assumption.

Indo-US Nuclear Deal - Some Thoughts

The much touted Indo-US Nuclear Deal signed by the Manmohan Singh government  in 2005, was stuck because while India gave the operator the right to make supplier liable in the case of nuclear disaster, Washington raised the demand for tracking the US nuclear material in the Indian programme which amounted to bilateral safeguards that were not envisaged in the India-US agreement. Japan raised the same demand which stalled the possibility of stitching up an agreement ahead of PM Modi’s visit to Tokyo last year.

It is in this backdrop that PM Modi and President Obama set up a contact group consisting of – representatives of two American companies GE and Westinghouse, and from the Indian side the officials from the law ministry, Nuclear Power Corporation of India Ltd (NPCIL), Department of Atomic Energy (DAE), and Foreign Ministry were represented.

The key fallout of the agreement reached by this group was that - while the Indian side dropped its insistence that the supplier of a reactor would not be held liable in the case of a nuclear disaster, the US administration let off its insistence on the issue of tracking nuclear material and agreeing to obtain data from the IAEA.

The resolution of the nuclear liability issue had its impact across the board with the US agreeing to speed up the process of securing India membership of the four technology control regimes – Nuclear Suppliers Group, Missile Technology Control Regime, Wassenaar arrangement, and the Australia Group.

Undoubtedly, besides the US, India can now look forward to cooperation and bilateral arrangements on atomic energy with other important nations such as Japan, Australia, and Russia etc. Not to ignore the fact that by securing the above coveted technology control regimes, India would be able to access the latest technology on these areas which would be in our long term strategic interests.

Considered in isolation, this deal is indeed a boon for India, as not only do we get access to the technology for meeting the demands of clean energy which is environmentally friendly, but it also ends our technological isolation which dates back to 1974 ever since we conducted the Pokhran explosion and declared ourselves to be a nuclear state. And all this despite we not being a signatory to the Non-Proliferation Treaty, which has been a major stumbling block to  our official entry in the Global Nuclear Club.

                              

But sadly enough, we have been the tragic victims of the world’s biggest industrial disaster in Bhopal some three decades ago, and to compound our worries, the tragedies of Chernobyl and more recently Fukushima which revived the memories of the nuclear holocaust in Japan during the second world war, have only strengthened the voices of the anti-nuclear lobby in our country.

While industrial accidents though best wished away, are indeed grim realities, which cannot be ignored. Thus, some aspects of this arrangement reached with the US recently, deserve attention:

• The major responsibility and liability in the case of nuclear disaster rests with the operator which is NPCIL, a PSU that is owned by the Government of India or indirectly by we the taxpayers of India. Not surprisingly, the annual premium payable by NPCIL for all its 21 reactors has been pegged at Rest 90 crores or more than Rs 4 crores per reactor. In contrast the suppliers such as GE and Westinghouse have to shell out Rs 1 to Rs 3 crores per reactor. Thus major liability has been shifted to NPCIL
• The Rs 1500 crores worth insurance pool has been created in which the insurance PSUs contribute Rs 750 crores and Government of India the rest. Thus, indirectly again, we taxpayers are financing this entire insurance pool,
• The liability provisions will kick in only if the damage spreads beyond 1.6 km of the reactor. Thus, who shall be liable in case the damage is well contained within 1.6 km? Of course no one else other than NPCIL,
• It was agreed by the contact group that a distinction would be drawn between a supplier and a fabricator. When an operator places an order specifying the design, material to be used, and all relevant technical specifications, the firm executing the order will not be considered a supplier but a fabricator. By definition, therefore, fabricators will not be liable under the law. Experts say most NPCIL contracts would fall under this category. Given zero liability for such fabricators, what would be the compelling reasons for them to ensure zero defect reactors built with the state of art technology? Our government should mandate the elimination of fabricators and instead insist upon direct business deals with the suppliers. Furthermore, before placing orders for reactors, a joint team of NPCIL and DAE officials should insist upon foolproof safeguards in those reactors taking note of the Chernobyl and Fukushima disasters besides enlightening themselves of all the possible loopholes which can be hazardous/dangerous.
• From a commercial perspective, it would be well within the business interests of suppliers like GE and Westinghouse to handhold NPCIL where the operations of its reactors are concerned. Particularly, they could place their experts at the NPCIL sites where their reactors are deployed.
• And above all, a detailed and meticulous preventive maintenance and monitoring plan needs to be worked out jointly by the suppliers  of the reactors as well as NPCIL and DAE in consultation with the IAEA to prevent even a minor incident which can raise eyebrows out here, as well as in the rest of the world, with regard to the desirability of the nuclear energy.

As a footnote, it cannot be overlooked that despite the convincing arguments put up by the opponents of nuclear energy, we just can’t wish away nuclear energy as a major source of clean energy, besides the desirability of us being an official member of latest technology regime, something which has been denied to us for four decades.