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 Economics
Why can't continents be single 04
markets like the EU?

How to tackle stubborn inflation 08

Why India can't afford a delayed 13

Census anymore

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 Why can't continents be single
markets like the EU?

When the Second World War came to an end in 1945, it left a large part of the
European economy in ravages. There was severe inflation. By 1948, wholesale
prices were 200% higher in Austria and 1,820% higher in France than they had
been before the war. The French government devalued the Franc by 80%, making a
5,000 French Franc note practically worthless. For context, you could buy at least
1,500 grams of gold with that kind of money in the early 1900s. Countries like
Germany were staring at a complete collapse of their monetary system. The barter
system of buying goods with goods was back. And people often used cigarettes as
money.

The European economy naturally needed a pick-me-up. And it was in the 1950s

04
that Belgium, France, Luxembourg, Germany, Italy and the Netherlands began
economically cooperating with each other. They laid the foundation for a free
economy. And soon, more countries were attracted to the idea of a single market.
This means that countries within this market could freely trade with each other.
Most of them used the Euro as their common currency. Even people could move
across most borders for work or travel without restrictions.

If you were to rank the EU on the list of top global economies today, it would be at
number 3 and easily worth $16 trillion. It’s 27 countries strong and goods, services
and money can move freely across most of these countries. There’s more choice, so
more competition and fewer rules for other countries to comply with. So if
countries outside the EU want to sell to an EU country, they just have to adhere to
one standard rather than 27 different ones.

Okay. So if a single market can transform economies so much, then why don’t we
see more of such cooperation among other countries, you ask?

Well, we do have a few countries that are trying to emulate the EU but with little
success.

There’s the North American Free Trade Agreement (NAFTA) which almost failed.
In 1994, the US, Canada and Mexico signed a pact to eliminate trade barriers. But a
29% drop in manufacturing employment in the US between 1993 and 2016 meant
that it partly blamed the agreement for its job losses. The theory is that these jobs
may have gone to folks from Mexico, hitting the brakes on NAFTA in 2018.

South Asia has a similar story too. In 2006, 8 South Asian countries namely
Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka
entered into a free trade arrangement called the SAFTA (South Asian Free Trade
Area). Their goal was to liberalise trade among each other. But it didn't move the

05
needle much.

To put things into perspective, even a decade after this agreement, trade amongst
the SAFTA countries remained insignificant at about 3–6% of global trade. On the
flip side, its Southeast Asian counterparts like Singapore, Vietnam and others
which had a similar trade agreement called the ASEAN (Association of Southeast
Asian Nations) saw tremendous growth. By 2017, their inter-regional trade
progressed to about 25% of global trade on average.

So why do you think NAFTA and SAFTA almost failed?

You see, being part of a single market needs one simple trigger ― unity. And it all
depends on how much countries can trust one another to promote each other’s
economies. And both these agreements may have lacked that. For SAFTA, tariffs
were a dampener of sorts too. Trade was pulled back by something called a
sensitive list. There were hundreds of products in this list that couldn’t be traded
between these countries without additional tariffs. Countries failed to lower taxes
while trading with each other. So imports and exports naturally stagnated.

But let’s just keep that aside for a bit and look at what would happen if all South
Asian countries were a single market. Well, unless you’ve been living under a rock
you know that our neighbours Pakistan and Sri Lanka have struggled to tame
inflation levels in the recent past. And a unified market may have helped them
here.

We could simply look at the UK to understand this. In 2020, the UK officially

severed ties with the EU. This may have been responsible for about a third of UK
food price inflation since 2019, adding nearly $9 billion to Britain’s grocery bill.
And that’s simply because the country had to cope with additional checks to keep
an eye on what was entering or leaving its borders. In the South Asian context,

06
unrestricted movement of goods and services could help flourishing economies like
India share their resources with countries like Pakistan or Sri Lanka without too
much red tape.

But here’s the thing. The UK remained a part of the EU for nearly half a century.
And it could, because it shared a common culture with the rest of the lot. But single
markets could be hard to build when there’s a cultural and political divide. It just
makes communication difficult and increases conflicts. And with SAFTA, you know
that’s a problem.

Countries also lose their individual power to negotiate with countries outside of the
single market that they’re part of. For instance, India intends to reduce its
dependence on China. But maybe Sri Lanka or Pakistan cannot. In a scenario like
that, a single market could be a distant dream, no?

That’s pretty much why economies might still be struggling to achieve significant
success in their hopes for a single market.

But there’s still hope for Africa. The continent has been trying to create a $3 trillion
borderless market to reverse its poverty and inequality trends with AfCFTA
(African Continental Free Trade Area). Its bounty of products like coffee, sugar and
dry fruits could help its nations trade as a single market with others. But progress
has been slow and it could take a couple of decades for the continent to take the
shape of a single market. So yeah, if and when that happens, maybe we could see
how other aspiring economies could borrow a cent from its success story too.

07
 How to tackle stubborn inflation

Price rises are just a part of life.

The other day, I went to the market to buy fish. And after buying a kilo, my wallet
was practically empty. No money left for veggies. It’s a sting we all feel.

But it’s not just a problem for you and me. It’s a headache for the RBI and the
government too. Economists call it inflation. And while they’ve been trying to make
it more bearable for us, they’re kind of stuck. They just can’t seem to control it as
well as they would like to.

So, what’s the solution, you ask?

08
Well, one idea floating around is to simply remove food from the inflation
equation.

Wait… what? That might sound crazy, we know. But it’s not some wild theory.
Serious analysts are considering the idea and even the latest Economic Survey
makes a mention of this. And while it might seem nonsensical at first, hear us out.

Inflation has two main components.

First, there’s core inflation, which covers stuff like education, clothing, rent,
healthcare, transportation and other household expenses. Notice anything
missing?

Yup, food and fuel aren’t included here.

The second part is non-core inflation, which is where food and fuel come in.

Put these two together, and you get the headline inflation, also known as the
Consumer Price Index (CPI).

For years, the RBI has been trying to get a grip on headline inflation. Back in 2016,
the RBI and the government agreed to aim for a 4% inflation target. The idea was
to have a roadmap to keep price rises under control, with a tolerance range of 2%
above or below this target.

And to hit this target, the RBI has been raising interest rates, especially since the
pandemic. Raising rates makes borrowing more expensive, so people and
businesses spend less. In theory, this cools down prices. And it sort of worked.
Inflation dropped from 6.2% in FY21 to 5.4% in FY24.

09
But here’s the catch. Despite the efforts, the RBI just can’t seem to hit that magical
4% target. The main culprit?

Food!

See, inflation can happen in two ways.

First, there’s demand-pull inflation. This is when there’s a lot of demand for
something, so prices rise because people are willing to pay extra. Think of flight
tickets. The more people want to fly, the more prices go up.

But then there’s cost-push inflation. This happens when prices rise due to external
factors like increased costs of labour or transportation.

And this is exactly what’s happening with food prices. Even basic staples like
onions, tomatoes and potatoes are getting more expensive, not because people are
suddenly eating more of these foods, but because of things like erratic weather,
heatwaves and supply chain disruptions. No matter how high the prices climb,
people still need these essentials. It’s a supply problem, not a demand one.

Now, if you take food out of the inflation equation, the RBI has actually been doing
pretty well. To put things into perspective, core inflation dropped to 4.3% in FY24,
a four-year low. And that played a big role in bringing down overall headline
inflation, which was the lowest among emerging market and developing economies
(EMDEs).

But even though food prices have calmed down a bit, the RBI still can’t cut interest
rates to boost the economy. Lowering rates would help businesses expand by giving
them better access to capital. But the RBI has kept rates steady for nearly a year
and a half now (since February 2023 to be precise).

10
That’s because it can’t just say, “Hey, core inflation is under control, let’s start
cutting rates.” If it does that, people will have more money to spend, which could
push up prices again, especially with food prices already high. And the RBI would
be back to square one.

It doesn’t stop there. Rising food prices are also affecting other things. For
instance, when food gets more expensive, households feel the squeeze, so they start
asking for wage hikes. And when employers raise wages, they need to make more
money to cover the cost, which pushes prices up again. It’s a vicious cycle.

That’s why some analysts suggest removing food from the inflation targeting
framework altogether.

But hold on Finshots… Isn’t food a huge part of household spending? Haven’t you
seen the latest Household Consumption Expenditure Survey? You better have,
because it’s you who said that rural households now spend about 46% of their
money on food, and urban households spend close to 40%. So how can anyone
seriously suggest kicking food out of the inflation targeting framework, when it’s
such a big chunk of our expenses?

Actually, you’re right. And we had the same thought too.

But here’s the thing. The CPI is calculated by looking at how much households
spend on close to 300 different items and services, each with its own weight
depending on how important it is in the average household’s budget. And here’s the
kicker. The CPI basket includes outdated stuff like horse cart fares, prices of video
cassette recorders and costs of audio and video cassettes. I mean, who uses that
anymore? So, yeah, the CPI basket is a bit outdated.

The same goes for food. The weight assigned to food in the CPI has been stuck for

11
over a decade, all thanks to the previous Household Consumption Expenditure
Survey which was conducted over a decade ago. Back then, rural households
allocated nearly 53% of their expenses on food, and urban households spent 43%.
But those numbers have dropped since. So based on that, the CPI’s current 46%
weight for food is a bit exaggerated.

That’s why, instead of removing food entirely, maybe it makes more sense to just
update the weight assigned to it in the CPI calculation. And guess what? The
government is already considering this.

Will tweaking the food weight in the CPI really help the RBI control inflation
better? Or is removing food from the headline inflation framework the smarter
move?

We’re not economists, but here’s one thing we know. Whatever they do won’t
magically make our groceries cheaper. Even the RBI governor himself isn’t
convinced that it’s wise to take food out of the equation entirely.

But at least fixing the weights and the basket could give us a more realistic picture
about inflation.

12
Why India can't afford a delayed
Census anymore

If you grew up in the 90s or early 2000s, you may remember the census (from
2011). Maybe a friendly enumerator knocked on your door, asking questions about
your household — how many people lived there, your education level and if you
have access to basic amenities like a washroom.

Fast forward to 2024, and here we are, gearing up for another round of this
once-in-a-decade ritual.

But this one’s a little late — actually, three years late. Sure, you could blame it on
the pandemic and the government’s intention to shift from pen-and-paper to
digital tabulation, but this delay is more than just a minor inconvenience. In fact,

13
it’s causing some serious complications.

So, why does the census matter so much, you ask?

You see, the census is not just a routine headcount of the population. It’s like the
ultimate data treasure trove. It shapes how we understand our country — who lives
where, how cities are expanding and what kind of social policies need tweaking. It’s
the bedrock for everything from planning welfare schemes to building political
strategies.

To get the full picture, you could take a quick trip down memory lane to past
censuses. In 1991 and 2011, for instance, the numbers revealed something
shocking. There was a steep drop in the child sex ratio in states like Punjab,
Haryana and Gujarat. In simple terms, people were aborting female babies and in
favour of male children. This disturbing trend forced the government to step in.
They introduced the Pre-Conception and Pre-Natal Diagnostic Techniques
(Prohibition of Sex Selection) Act in 1994 to crack down on female foeticide. And
by 2015, the Beti Bachao Beti Padhao campaign came into play, tackling gender
bias head-on.

Or you could consider the rapid urbanisation trend captured by the 2001 and 2011
censuses. That data prompted governments to launch initiatives like the JNNURM
(Jawaharlal Nehru National Urban Renewal Mission) in 2005, followed by the
Smart Cities Mission and AMRUT (Atal Mission for Rejuvenation and Urban
Transformation). These were all aimed at making Indian cities more liveable,
sustainable and well-managed.

Plus, census data isn’t just about numbers. It’s key for deciding how resources get
distributed. The education department, for example, depends on this data to
support states with lower literacy rates and the Finance Commission decides how

14
to allocate funds.

But here’s the problem. Today we’re still stuck using data from the 2011 census
because the 2021 census got delayed. And this means that the outdated
information is now impacting a wide range of thing.

For starters, food security could be at risk. Just look at the NFSA (National Food
Security Act), which promises subsidised food grains to two thirds of the
population. This ratio though, is based on the 2011 census data. But since then,
India’s population has grown significantly, meaning over 10 crore people may now
be missing out on this essential support.

Deccan Herald even puts a face to this problem. It says that in 2019, a single
mother in Delhi applied for a ration card. Five years later, her application is still
‘waitlisted’ because the outdated census data hasn’t been updated, meaning she
and many like her can’t access subsidised food grains under the PDS (Public
Distribution System).

This isn’t just a bureaucratic hiccup, it’s the difference between putting food on the
table and going hungry for many vulnerable families, including migrant workers
and the elderly.

And it doesn’t stop at food, employment is at stake too. The MGNREGS (Mahatma
Gandhi National Rural Employment Guarantee Scheme), which provides wage
employment to millions of rural households, also relies on census data to allocate
funds. Without updated figures, the scheme struggles to serve its purpose
effectively, potentially leaving countless households in the lurch.

Then, there are critical issues like migration, urbanisation and demographic
changes. States like Maharashtra, Karnataka, Tamil Nadu and Delhi, which see a

15
large influx of migrant workers, are forced to make policy decisions based on
obsolete numbers. That’s like trying to navigate a fast-moving city with a
decade-old map. It just doesn’t work.

Another interesting thing is that census data does more than just count heads. It
also validates other key surveys.

Take the Household Consumption Expenditure Survey, for instance. It’s conducted
every five years to track how families spend their money. The Periodic Labour Force
Survey examines job trends quarterly in cities and annually in rural areas. The
National Family Health Survey evaluates health metrics to guide healthcare
planning.

These surveys use samples to represent the whole population, but the census covers
everyone, providing a crucial check on their accuracy. This process, known as
“triangulation of data”, involves cross-checking information from various sources to
ensure reliability. In short, reliable census data ensures that these surveys give us a
true picture of the economy.

And finally, there’s the matter of delimitation. Think of it as the process of

redrawing electoral boundaries directly tied to population shifts captured by the
census, whose results will be out by 2026. By then India’s population is expected to
reach 1.46 billion and this data will be crucial for reshaping electoral constituencies
to ensure fair representation. For instance, Karnataka might see its Lok Sabha seats
increase from 28 to 36, while Uttar Pradesh could jump from 80 to 128 seats. But
Kerala, with its more controlled population growth, might see a slight reduction in
its Lok Sabha seats.

Without accurate census data, this crucial political process could be based on
outdated assumptions, leading to unequal representation and resource distribution.

16
So, what’s the solution?

Well, it’s pretty straightforward. We need to prioritise getting the census back on
track because as you’ve seen, the stakes are too high to let it linger. Accurate data is
the foundation for almost everything in the economy. The sooner we complete the
census, the sooner we can start fixing the gaps it’s left behind and build policies on
solid, up-to-date information rather than outdated numbers.

In a rapidly changing country like India, the cost of delay is simply too big to
ignore. Besides, seeing that countries like the UK, China and the US have managed
to complete their censuses despite severe COVID outbreaks, should push us to act
faster. So yeah, the long due 2021 census isn’t just a formality, it’s a necessity.

Until then, the nation waits, ready for the numbers that will shape its future.

17
 Policy
What's in a state's special 19
category status?

The Economic Survey 2024 Explained 24

Does reserving jobs for locals 30

make sense?

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 What's in a state's special
category status?

India just formed a new government a few months ago. And with all of the buzz
around the election, there was new talk in town ― “Special Category Status” or SCS
for states.

Think of SCS as a status that makes economically or geographically challenged

states eligible for some extra financial support from the central government. This
could be in the form of a higher share of funds from its central kitty and/or
additional tax benefits.

It started way back in 1969 when the then Finance Commission felt that a move
like this could help India’s border states (who constantly had to live with the fear of

19
infiltration), economically backward states, states with a sizable tribal population
or even newly carved out ones that would need some time to transition.

And right now, there are two states that think that they fit the bill.

To begin with, you could look at Bihar, one of the long contenders of the SCS.

Most of its economic output comes from agriculture, an activity highly vulnerable
to droughts, floods and other natural disasters. And limited industrial development
compared to other Indian states, means that folks in Bihar have limited job
opportunities beyond agriculture itself.

Thanks to past policies like Freight Equalisation, which ensured that the central
government subsidised the transportation of minerals and raw materials to a
factory set up anywhere across India. This meant that a tonne of coal would cost
the same in a place like Bihar from where it was mined or in Mumbai (then
Bombay) where it was used. It incentivised companies to set up industrial locations
closer to the coastal trade hubs or markets in other parts of the country, leaving
states like Bihar behind.

Carving out Jharkhand off from itself over two decades ago was another nail in
Bihar’s coffin. It lost whatever little was left of its industries and mineral resources.

That explains why Bihar today is India’s poorest state in terms of how many people
have access to cooking fuel, electricity, homes and bank accounts. Despite pulling
out nearly 7% of its people from poverty between 2021 and 2023, nearly a third of
its population still remains poor.

This sorry state of affairs seeps into the state’s finances too. It hasn’t been able to
up its educational infrastructure, improve its low literacy rates or even its

20
healthcare facilities because the government can’t really make much money off of
taxes or other revenues from its poor population. For context, just about 30% of its
revenues come from its own taxes. This implies that it has to heavily rely on
transfers from the central government to keep its economy ticking.

Then you have Andhra Pradesh, another state in the SCS queue. Its economic
situation isn’t as bad as Bihar’s. But losing Hyderabad, its central economic hub to
Telangana, which was carved out of it a decade ago, meant losing significant
revenue sources and a skilled workforce. Most of its projects and development
came to a standstill. And it also fell short of funds to build its new capital,
Amaravati. And this imposed a huge financial strain on the state, widening its debt
to about 30% of its state income or Gross State Domestic Product (GSDP) from
about 24% when Telangana was still part of it.

And these two states think that SCS can be a magic spell that can pull them out of
the realms of poverty and debt.

But here’s the thing. 2014 marked the end of the SCS. And that meant that leaving
out the 11 states of Jammu & Kashmir (now a Union Territory), Himachal Pradesh,
Uttarakhand and all the North Eastern states that already enjoyed the SCS, the
government wouldn’t freshly confer this title to other states anymore.

The reason to halt this privilege was simple. SCS isn’t something the government
can offer for a short while. It’s a long term commitment. Because if states got a
taste of it, they’d come back asking to continue the benefits until they were stable
enough to run their economic engine on their own. And that would add up to the
central government’s expenditure, taking a toll on its finances.

Instead, the central government was ready to share more of its revenues with
states. Simply put, it earlier divided 32% of the money it made through taxes and

21
other income with them. But it now upped that to 42%*. Not just that. If states
suffered a financial crunch and they couldn't spend on development, the centre
would even offer a grant to make up for the shortfall.

So why aren’t Bihar and Andhra Pradesh happy with that offer, you ask?

Well, you see, a SCS could mean that 90% of the funds they need to run centrally
sponsored schemes would come from the centre’s coffers, as opposed to just 60%
for other states. We’re talking about schemes like the mid day meals to
underprivileged school children, employment guarantee for rural folks or even the
National Health Scheme. States will only have to put in 10% of their money to keep
these schemes running. They can even carry forward unused funds to the next year,
something other states aren’t allowed to do.

And the best part? SCS states even enjoy tax concessions that might attract more
companies to set up shop there.

A one-time financial grant won’t come with the same benefits. The higher tax
devolution that the central government offered wasn’t going to solve the problem
either, because it’s something all states would share. And that made it seem like
only a SCS could turn the fortunes of states that aren’t able to cope economically.

But wait… If the SCS can’t be freshly doled out to states anymore, then how can
states even vie for it?

They can, simply because here’s what we didn’t tell you earlier.

One of the reasons behind discontinuing the SCS in 2014, was that the central
government abolished the Planning Commission and replaced it with the NITI
Aayog. While the Planning Commission was a body that had the authority to

22
impose policies on the centre or states and even allocate funds between them, the
NITI Aayog was just a think tank, whose role was limited to advising the
government.

This meant that it was now optional for the government to allot states the coveted
SCS. And if it wants to, it can always take advice from the NITI Aayog and revisit
this arrangement. Doing that though, can be an expensive affair. And that’s why it
keeps telling states that they can’t get a SCS tag because the Planning Commission
doesn’t exist anymore.

But with a coalition government at the helm after a decade and the states of Bihar
and Andhra Pradesh having more say, will the SCS debate be reignited once again?

We’ll only have to wait and see. Until then…

*Currently, India shares 41% of central taxes with states. But around the time SCS
was discontinued, it shared 42%.

Note: The Story has been updated to mention the context of the percentage of tax
devolution between the centre and the state. Also, an earlier version of the story
mentioned that the Planning Commission was a constitutional body. But the
Planning Commission was actually an extra constitutional body, not mentioned in
the constitution. We regret the error.

23
The Economic Survey 2024 Explained

This year’s survey has its fair share of interesting observations.

So let’s get straight into it.

The most controversial aspect of the report can be traced back to a few lines in
Chapter 2.

We won’t quote the excerpt here. But it simply says a lot of new, young investors
are jumping into the stock market because they've seen prices going up and think
this will continue. They might be a bit too optimistic, expecting huge returns
without fully understanding that the market can go down too. And if people were to
liquidate their savings and deposits in an attempt to make money off the stock

24
market, this could have real life implications for them and the banking ecosystem
too. After all, if banks can’t mobilise deposits, that could affect borrowers and so
on.

This has got a few people talking. Is it true that people are funnelling their savings
to the stock market?

Well, kind of. This has been a spectacular year for Mutual Funds with total assets
under management growing by nearly 35% to ₹53 lakh crores. This means that
India is increasingly warming up to the idea of fully embracing financial markets.
However, some investors have also found an opportunity to sell their holdings
(thanks to the spectacular rise in stocks) and park it in Real Estate investments.

In 2023, residential real estate sales in India were at their highest since 2013,
witnessing a 33 per cent growth, with a total sale of 4.1 lakh units in the top eight
cities.

25
Now you could look at this data and argue that some of the household savings is
moving away from banks. But you could also argue that this is a smart
diversification strategy. This money is going into mutual funds. It’s going into real
estate. And it’s what people in most developed countries do.

So this is a cue for banks to improve their offerings. Maybe it’s time to up the
interest on savings deposits instead of moaning about the fact that people are
looking out for their own best interests.

Okay, next on to inflation. There’s nothing really significant here. India managed to
control inflation better than most countries since Covid. Yes, you had the
occasional rise in prices–tomatoes, tur daal, milk, but you could pin most of it
down to adverse weather conditions. This has been a feature of India’s inflation
story. Bad weather translates to higher prices and the report accurately notes that
the government may need to promote the cultivation of pulses in more districts
(and in areas with assured irrigation facilities). And maybe also invest in better
storing and processing facilities to stop all that food wastage.

There is also an interesting mention about edible oil. The domestic consumption of
edible oils has been increasing faster than production, leading to increased import
dependence. And yeah, that does not bode well for our future. So we probably need
to look at that.

Then there’s the stuff around employment. Employment prospects in India have
improved no doubt. Almost every indicator points to this aspect. But there is the
elephant in the room. Only 4.4% of India's young workforce is formally skilled. This
means that most young workers have not received formal training or education
specific to their jobs. And this can be a big problem, especially considering India’s
economic growth hinges on realising the potential of its young workforce.

26
Will AI play a role in this?

The economic survey doesn’t make any categorical conclusions. But it does offer
some perspective.

It quotes the example of David Ricardo (a British economist) and his evolving
views on technology and labour during the early Industrial Revolution. Initially,
Ricardo believed that machinery wouldn't reduce the demand for labour. However,
after observing the impact of technologies like the power loom, which replaced
artisan weavers and reduced their wages, he revised his stance. By 1821, Ricardo
suggested that if machinery could perform all tasks, it might eliminate the need for
human labour altogether.

What's the moral of the story?

Well, perhaps the authors of the Economic Survey feel like we should be
increasingly careful of deploying AI solutions in the workforce lest it replace
human labour altogether.

Maybe there’s a need to strike a balance here.

There’s also a very important mention about unpaid work.

This invisible domestic work performed by women, which is usually neglected

while calculating the labour force and the GDP, has been variously estimated as
highly valuable yet invisible. But according to a recent report, it seems the
economic value of women’s unpaid domestic and care work in India is 15 – 17 % of
the GDP. That’s a lot isn’t it?

The document also places an explicit focus on climate change. Now there’s a lot to

27
unpack here obviously. But considering this is a quick explainer in a 3 minute
newsletter we will stick to one interesting detail we encountered —water
conservation efforts.

In Navanagar, Gujarat, declining water levels due to farming led to unsustainable

salt levels in the groundwater, making agriculture unprofitable. To address this,
local farmers, with support from the Water Resource Department and the Gujarat
Green Revolution Company, rejuvenated the village pond by connecting it to the
Guhai Dam. They deepened the pond, built a sump for water storage, and installed
water lifting facilities, bearing the cost themselves. They also introduced a piped
water system and adopted drip irrigation, significantly increasing crop diversity
and productivity while reducing water and power usage. This is an example where
the community worked with public officials to solve a real problem precipitated by
humans and climate change.

Also, needless to say, India aims to grow economically while reducing carbon
emissions, which means balancing higher energy needs with cleaner, sustainable
sources.

The document also spends considerable time extolling the virtues of the
government and the progress we have made in many spheres of life. There isn’t
much criticism or internal reflection if you were hoping for that kind of thing. But
there is a beautiful passage that does offer some sage advice.

In the Preface the authors note -

The Indian state can free up its capacity and enhance its capability to focus on
areas where it has to by letting go of its grip in areas where it does not have to.
The Licensing, Inspection and Compliance requirements that all levels of the
government continue to impose on businesses is an onerous burden. Relative

28
to history, the burden has lightened. Relative to where it ought to be, it is still a
lot heavier. The burden is felt more acutely by those least equipped to bear it –
small and medium enterprises. It holds them back, leashes their aspirations,
and, in the process, holds the country back. On the face of it, it does not seem to
matter because the economic growth rates are good, and there are visible signs
of progress. But, we will never know the counterfactual: “what it might have
been”.

Quoting the Ishopanishad the authors note - “Power is a prized possession of

governments. They can let go of at least some of it and enjoy the lightness it
creates in both the governed and the governing.”

29
 Does reserving jobs for
locals make sense?

You probably already know that the state government in Karnataka wants to create
jobs for locals by reserving half or more private jobs. Now, this may not mean that
people moving to Karnataka won’t get jobs. They just need to live in the state for at
least 15 years and know Kannada, the local language. If they meet these criteria,
they’re considered locals, no matter where they originally come from. Essentially,
it’s a preference for people of the state.

But this begs the question ― Do these domicile-based job reservations make sense,
especially in the private sector?

Well, there are three ways to look at it.

30
For starters you could look at it through the constitutional lens.

See, Karnataka isn’t the first state to come up with this idea. States like Haryana,
Maharashtra, Madhya Pradesh, Andhra Pradesh and Jharkhand have tried
introducing similar laws before. But many of these laws have either been struck
down by the courts or haven’t been implemented yet.

You could look at Haryana’s law that reserved 75% of private sector jobs for locals.
Last year, the Punjab & Haryana High Court quashed it, saying that the law created
unfair discrimination among citizens and labelled it ‘unconstitutional.’ Despite
that, the Haryana government challenged this in the Supreme Court, and the case
is still pending.

These laws often run into trouble because of constitutional protections accorded to
the people of India.

1. Article 14 (Right to Equality) - The Act unfairly discriminates against

non-locals.

2. Article 19(1)(g) (Freedom to Practice Any Profession) - It restricts the right to

work anywhere in India.

3. Article 16(2) (Equality of Opportunity in Employment) - It imposes

unreasonable restrictions based on residency.

Besides, there's an old Supreme Court ruling that suggests that total reservations
shouldn’t exceed 50% of available jobs or posts. Sure, this ruling was about
caste-based reservations, but it also sets a precedent for domicile-based
reservations.

31
So, when you look at it constitutionally, there are quite a few issues with these
kinds of ideas.

Then there's the economic perspective.

A local person who may not be the best fit for the job could be hired over a more
qualified non-local. This can lead to a shortage of skilled workers in the state.

It also makes it tough for businesses. They have to follow state laws, and not
complying could mean hefty fines and penalties. Plus, the cost of compliance goes
up as businesses might need to consistently prove to the government that they're
following the rules.

The biggest issue, though, is investment. Policies like this can scare away capital
investment, making the state less attractive to investors and hurting its economic
prospects in the long run.

The proof is in the pudding. In FY23, Haryana, once a hot spot for investments,
especially in skill-driven sectors like automobiles, saw a sharp decline. Its share of
new investment projects in the country dropped to a six-year low of 1%, down from
almost 3% the year before. Total investment outlays in the state fell by 30% from
nearly ₹56,000 crore in FY22. This decline pushed Haryana from the ninth-best
state for new investment projects to the thirteenth rank in a rather short span of
time. And this drop may have had a lot to do with the introduction of Haryana’s job
reservation law, which was later quashed by the state’s High Court.

In Karnataka’s case, the real estate sector might take a hit. Over half of the mid and
senior-level employees who come to Karnataka from other states invest in local
property.

32
Plus, there's the construction labour market to consider. Real estate developers in
Karnataka already face a shortage of construction workers, with about 80% coming
from outside the state, mainly from places like Jharkhand, Odisha, and Bihar. And
a reservation for locals could disrupt this crucial workforce.

So, instead of boosting the state’s economy, such a law might actually open a can of
worms and do more harm than good.

And finally, you could look at migration trends to see if Karnataka really needs a
law like this.

See, despite the constitutional issues, laws like these often emerge due to political
pressures and might be drawn up hastily without a keen eye for details.

Take Maharashtra, for example. In 2008, the state government mandated that
private companies receiving state incentives reserve 50% of supervisory jobs and
80% of non-supervisory jobs for locals. Even though data in 2019 showed that
locals held 84% of supervisory jobs and 94% of non-supervisory jobs, the
government still pushed for more local representation. This suggests that such laws
might be more about political relevance than actual need.

Then you could look at the migration data. About 4% of India’s population lived
outside their state of birth according to the 2011 census. Even if that's the latest
available official figure, it's over a decade old. And more recent data from the
Centre for Economic Data and Analysis (CEDA) in 2021 showed that Delhi had the
highest percentage of interstate migrants at 65%, followed by Goa, Meghalaya,

Arunachal Pradesh and Punjab. Karnataka was much lower at less than 10%. So,
it's safe to say that interstate migrants aren’t taking away a large number of jobs
from local residents in Karnataka at least.

33
So, if the government wants to bring in such a law, maybe what’s needed is some
thorough data analysis to see if it is really necessary. Or maybe even look for better
ways for the state to create jobs for locals without relying on reservation laws?

For instance, the state could incentivise the growth of local industries and train
locals with the necessary skills. The government could even engage with industry
representatives to understand the skills they need or employ think tanks to analyse
future job trends. This could help the government adjust the education system to
prepare locals for these jobs and could ensure they get jobs based on merit, not just
because of a reservation.

But this is easier said than done.

34
 Capital Markets
An explainer on IPO 36
financing

Is SEBI’s new asset class for you? 41

Is India’s stock market riding 47

too high?

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 An explainer on IPO financing

Imagine. The IPO market is red-hot. There’s a new company that’s going public
every other day. And the share price pop on the listing day is insane. People who
invest are making sacks of money.

But the desire to make even more money sets in. People aren’t happy with just
sacks. They want money by the truckload. So they turn to leverage, or in simple
words, they begin to borrow money to invest. They want to invest huge sums of
money to maximise their absolute gains.

And they don’t typically go to a bank and ask for a personal loan. Rather, they turn
to their wealth manager or a Non-Banking Financial Company (NBFC) that offers
this niche service. It’s something called IPO financing.

36
If you want to see this in action, you just need to look at the HNI (high net worth
individual) segment of popular IPOs. You’ll often see that segment getting
oversubscribed by 100 times and more. And that’s usually thanks to these loans
they get. For instance, in July 2021, there were a bunch of IPOs trying to raise a
total of ₹18,400 crores. But people bid a gargantuan sum of ₹8.86 lakh crores! And
around 98% of that money came from these IPO-linked loans!

Heck, do you remember the spat between Ashneer Grover and Kotak Wealth
Management from 2021?

Well, that was due to a tussle regarding IPO financing. Or the lack of it.

Nykaa, the beauty and fashion startup, was preparing to go public. And everyone
was excited. It was a profitable startup which was quite rare. And investors
anticipated a huge pop on listing. Now Grover wanted Kotak to loan him a
whopping ₹500 crores to take part in the IPO. And he says Kotak backed out at the
last moment and he lost the opportunity to make a killing.

But wait…how do these entities even have that kind of large sums of money to lend
out to these HNIs?

Well, they usually don’t have that much money just lying around. So they have to
resort to borrowing the money first. They do this by issuing something called a
Commercial Paper (CP). Think of this as an extremely short-term bond that they
have to repay in about 7 days.

So they launch the CP, entities such as liquid mutual funds buy it, and that money
then goes into financing these IPO bets for the HNI risk-takers.

And this entire exercise of IPO financing can be quite lucrative.

37
See, no one’s guaranteed a full allotment in an IPO. It’s a lottery. It all depends on
how much people are interested in the IPO and subscribe to it. The greater the
subscription, the lesser the chances of investors getting what they wanted. And
while the NBFC or wealth manager pays an annualised interest of around 5% on
the CP, they charge quite a hefty interest on these IPO loans — up to 20%. That’s
quite a spread.

Also, it doesn’t matter whether the HNI gets an allotment or not, they will still need
to pay interest on the entire amount borrowed. *

So yeah, when the IPO market booms, it’s quite a jolly time for these IPO financers.

Okay, but isn’t this a risky proposition for the NBFC, you ask? There are massive
sums of money involved at the end of the day. And there’s no collateral or security
involved in the loan.

Ah, so this is where the NBFC might do something else. They expect the investor to
operate on their terms. This means they take a power of attorney (POA) for the
demat account and the bank account of the investors. They control the whole
process — right from lending money into the bank account, making the IPO
application, selling the stock, pocketing the gain or taking a loss. Everything. That
reduces the risk a bit.

The Reserve Bank of India (RBI) pulled up an entity that was a big fish in the IPO
financing pond — JM Financial.

Why though?

38
Well, there seems to be a few glaring issues as per the RBI. Apparently, JM
Financial doled out IPO financing against meagre margins. Meaning that it gave
clients excessive leverage. Also, the RBI seems to have a problem with the POA
practice since JM Financial controls the bank accounts of customers.

The RBI says that JM Financial is in violation of regulatory guidelines. And then
even mentioned the dreaded G-word — governance issues.

So the regulator laid down the gauntlet and told JM Financial that it can’t indulge
in IPO financing anymore amongst a bunch of other stuff.

Now we don’t know exactly what went wrong because other NBFCs also resort to a
POA and meagre financing margins. But one speculation is that NBFCs like JM
Financial have flouted an RBI rule.

Around the time of the Nykaa IPO, the RBI was getting worried about the massive
amounts of money at play here. So they issued a diktat saying that no customer can
borrow more than ₹1 crore to finance an IPO application. Gone were the days of
the Ashneer Grover-type ₹500 crore loan.

But Moneycontrol says that NBFCs have ignored the rules and are lending out
more. Could JM Financial have done that too?

Another rumour doing the rounds as per the Economic Times is that JM Financial
has also been inflating the IPO subscription numbers.

What do we mean?

Okay, so during the IPO, entities can simply submit incorrect applications. For
instance, it might mention multiple PAN card details which will eventually lead to

39
the application being rejected. But it will still reflect as a subscription during the
IPO period and can make things look rosy.

And maybe by showing HNIs the public interest in the IPO, the NBFC could even
nudge the investors into relying on IPO financing to participate.

Yeah, it’s quite a dubious practice.

Now JM Financial has categorically refuted all these allegations. They claim clean
corporate governance too.

But the RBI doesn’t think so. Also, maybe even the Securities and Exchange Board
of India (SEBI) will have something to say about this matter. And who knows,
every other NBFC involved in IPO financing will be jittery about what’s to come.

40
Is SEBI’s new asset class for you?

Durga is a retired banker. Life’s been good to her, and she’s happily settled into this
phase. But she’s not one to sit idle, especially when it comes to her savings. With
₹10 lakhs in hand, she’s searching for an investment that could help cover her
grandchildren’s college expenses in a few years. As a banker, she’s already put
enough into fixed deposits (FDs) and is now hoping for something with higher
returns.

Mutual funds seem like a promising option. But just as she’s mulling it over, her
friend throws a curveball. “What if the market tanks because of some unexpected
event? You could lose more than just the returns. You might not even get your
money back”, her friend warns.

This friend then suggests an alternative, a scheme run by a chap named Lena Bhai.
41
Apparently, Lena Bhai promises a foolproof investment plan with a guaranteed
20% return every year. And the best part is that Durga’s money not only stays safe,
but her grandkids’ education fund is secured too. It sounds perfect, and Durga,
fully convinced, is ready to meet Lena Bhai and invest.

But here’s the catch. If you’ve been following the markets, you’d know that Lena
Bhai’s scheme is way too good to be true. No legitimate investment can guarantee
such high returns without some serious backing.

In fact, SEBI (Securities and Exchange Board of India), the market regulator,
doesn’t allow mutual funds or any investment schemes to promise assured returns
unless the sponsor or Asset Management Company (AMC) legally agrees to cover
these returns. And this has to be clearly disclosed to investors upfront too.

So, who exactly is this Lena Bhai?

Most likely, he’s just another scammer preying on individuals like Durga. At least
that’s what she realised when she read the news a few days ago about how SEBI is
going after unregistered and unauthorised investment products just like Lena
Bhai’s.

And that’s how she also stumbled upon what she was looking for – a new asset
class that fits most of her requirements.

See, SEBI has finally given the green light to a new asset class that it had proposed
back in July. And now that everyone’s buzzing about it, she’s eager to find out what
this is all about.

If you’re curious too, think of it as an investment product similar to mutual funds,

but designed for those with a decent amount to invest ― just not enough to afford

42
the high-end services of a professional portfolio management service (PMS).

See, mutual funds allow you to start investing with as little as ₹500 a month (or
even ₹100 in some cases). It’s a great way to dip your toes into the investment pool.
But the world of PMS is often out of reach for everyday investors, requiring a
minimum investment of ₹50 lakhs or more. That’s a hefty sum reserved for the
wealthy, who can afford tailored investment strategies across various assets like
stocks, bonds and gold.

Now, picture SEBI stepping in with a solution designed for those of you who fall
somewhere in between. That’s what this new asset class specifically targets ―
investors with between ₹10 lakhs and ₹50 lakhs to invest. It’s for those who are
willing to embrace a bit more risk than traditional mutual funds allow.

And just like mutual funds, this new asset class will have its structure, but with a
slightly different approach. Instead of categorising funds based on the type of
stocks like large-cap or small-cap schemes, it will instead be organised based on the
different investment strategies fund houses employ.

Source: SEBI
43
Imagine a fund called Long-Short Equity Fund, for instance. This clever fund
follows a strategy to profit from both rising and falling stock markets. So say if the
fund managers believe the IT sector is set for a boom, they’ll buy stocks in that
sector, going long. But if they predict that the banking sector will falter, they’ll bet
against that sector and adjust the portfolio accordingly. This strategy allows them
to benefit regardless of market conditions and gives investors the potential for
gains in any scenario.

Then there’s the exciting prospect of an Inverse ETF/Fund. This type of fund is
designed to make money when the market or index (a benchmark that tracks the
performance of a group of stocks) it tracks declines. Essentially, it seeks returns
that move in the opposite direction of the benchmark index. So, if the index drops,
this fund could rise in value, offering a unique way to hedge against market
downturns.

Until now, if you wanted access to such hedging strategies, you’d have to consider
Alternative Investment Funds (AIFs), which typically required a minimum
investment of ₹1 crore.2

But with these new investment strategies, you not only get a variety of options but
also the flexibility to choose how often you want to withdraw your money. Whether
it’s daily, monthly or even annually, you can customise the withdrawal frequency to
fit your needs. This flexibility also helps fund managers manage liquidity, ensuring
that they can buy or sell investments without putting undue restrictions on you as
an investor.

Besides, the units of these investment strategies could even be listed on stock
exchanges, especially for those with a withdrawal frequency of more than a week.
This means that you could potentially sell your units on the exchange if the need
arises, giving you even more options.

44
“Wow!”, you might think, “...SEBI really knows what it’s doing!” And you won’t be
wrong if you think that way. SEBI is indeed making some clever moves.

But before we get too carried away, let’s also take a moment to delve into the
inspiration behind these innovative ideas.

Actually, these types of alternative investment asset classes aren’t new. They’ve
proven effective in other countries too. For example, in Europe, you have hedge
fund-lite strategies, basically liquid alternatives wrapped in mutual fund like
packaging. These strategies came up in response to the Global Financial Crisis in
2008, as investors looked for solutions to diversify their portfolios. And similar
concepts have made waves in the US and Australia, with the goal of protecting
everyday investors’ portfolios just like hedge funds do for the wealthy folks.

But here’s the thing. These liquid alternative funds haven’t exactly been stellar
performers. To put things in perspective, in the 2010s, they averaged less than 2%
in annual gains, falling short compared to most other types of investment funds.
Sure, they didn’t lose money, but their returns were too low to justify their
existence.

The challenge was that liquid alternatives often struggled to keep pace with the
broader stock and bond markets. That’s because stocks and bonds have something
called “beta”, a measure of risk. And they typically provide returns over time
without requiring much skill to manage. On the flip side, liquid alternatives need
skilled management to truly shine or do better than the average benchmark
returns.

And if you look at the current mutual fund market in India, you’ll see that this
could be a problem simply because just around 17% of total assets under
management (AUM) are passively managed, while the rest are actively managed

45
funds. And with this new asset class requiring more active management, it raises
questions about whether it will be able to outperform benchmark indices as
investors hope.

There’s proof to back this up too. Professor M Pattabiraman of IIT Madras

crunched the numbers to analyse the performance of actively managed mutual
funds since 2006 and found that only about half, or even fewer, managed to beat
the index more than 70% of the time.

And since actively managed funds come with a higher expense ratio, meaning you’ll
pay fund managers more to manage your money, this isn’t exactly the kind of track
record you’d like to see as an investor. And while past performance might not be
the best predictor of future returns, it’s certainly something to consider before
diving headfirst into this new asset class, no?

So yeah, this new asset class could be a ray of hope for investors caught between
the world of mutual funds and PMS. But it’s not a magical fix for higher or
guaranteed returns.

As we wait to see if investors like Durga take the plunge, the question lingers ― will
these new options deliver the results everyone is hoping for?

46
 Is India’s stock market riding
too high?

Let’s talk about stock market crashes.

Even if you haven’t lived through one, you must have definitely heard or read about
the big ones: the dot-com bubble in 2000 or the global financial crisis of 2008.
Those events rocked the global economy, wiping out wealth and destabilising
markets for years.

But behind these crashes lies something that’s often mentioned in the financial
world: the Cyclically Adjusted Price-to-Earnings (CAPE) ratio, also known as
Shiller’s P/E.

You see, back in 2000, right before the tech bubble burst, the CAPE ratio for the
47
U.S. stock market hit a record high. It peaked again in 2007, right before the global
financial crisis struck.

So, why are we talking about it today?

Because the CAPE ratio for Indian equities is today sitting at a hefty 43 times.1 And
that’s dangerously close to where it was before the 2008 crash. Add to that the fact
that foreign institutional investors (FII) have pulled nearly $7 billion from Indian
stocks in October alone.

So, should we start panicking? Is another market crash on the horizon?

Well, it’s complicated. You can’t just look at one number and call it a day.

So, let’s break down what this CAPE ratio really means and how it fits into the
bigger picture.

Even before we do that, let’s zoom in on the recent rise in Indian stock markets.
The BSE Sensex and Nifty 50, India’s major stock indices, have been on a steady
climb. And when stock prices go up way higher, they often outpace company
earnings making stocks more expensive. By “expensive,” we’re referring to the
price-to-earnings (P/E) ratio, which compares the price of a stock to the company’s
earnings.2

Let’s say a company has a P/E ratio of 25. This simply means investors are willing
to pay 25 times the company’s earnings for a share. It’s like paying ₹25 for
something worth ₹1. A higher P/E ratio often means that people are hopeful about
the company's future; therefore, they’re paying more than what’s actually worth
today. But a higher P/E can also mean that the stocks are too expensive for what
they're actually worth.

48
Right now, the Nifty 50 is trading at a P/E ratio of about 24.7, higher than its
10-year average of 23.4. Economists call this "irrational exuberance," meaning the
market might be too confident, setting itself up for a fall.

Here’s an easy way to understand this: imagine you’re at a market with two
identical items. One costs ₹100, the other ₹120. Why the difference? Let’s say the
more expensive one is from a popular brand that everyone is talking about, so more
people want it, even though both items are exactly the same.

This is what happens with stocks, too—demand, along with factors like investor
sentiment, growth expectations, and market conditions, drives up the price, even if
the value hasn’t really changed. For example, investors may be willing to pay more
for a company if they believe it has strong future growth potential, even if its
current earnings don't justify the high price.

And that’s what’s happening with markets today. Prices are rising faster than the
actual earnings.

But the P/E ratio only tells us what’s happening in the short term. If we want a
longer-term view, we turn to the CAPE ratio.

So, what’s the CAPE ratio, and how is it different?

Unlike the P/E ratio, which focuses on one year’s earnings, the CAPE ratio smooths
things out by averaging earnings over the last ten years and adjusting them for
inflation.3

It was popularised by Robert Shiller and John Campbell in 1988 as a way to

smooth out short-term fluctuations and better assess a stock’s value over an entire
business cycle.

49
To read it is simple: when the CAPE ratio is high, stocks are probably overpriced.
When it’s low, they’re likely undervalued.

Sounds straightforward, right? Not quite. Because the CAPE ratio has its
limitations too.

For one, it assumes that the stock market’s composition stays the same over time.
But we know that markets evolve.

Just look at the U.S. stock market. Tech giants like Apple and Microsoft have grown
massively over the past decade, yet the CAPE ratio still includes earnings data from
when these companies were much smaller players.

And then there’s the issue of stock buybacks. Companies often buy back their own
shares, which reduces the number of shares available and makes their earnings per
share look better without actual growth. The CAPE ratio doesn’t take this into
account, which means it can sometimes give a distorted view of the market.

And comparing CAPE ratios across countries can be misleading too. U.S.
companies have experienced stronger earnings growth and more buybacks than
Indian companies, so comparing them directly isn’t entirely fair.

Now, India’s CAPE ratio is high, which indicates that stocks here are expensive.

Why?

Well, for starters, India’s economy is growing faster than many other countries,
making it an attractive destination for investors. It’s like a trendy new restaurant
and everyone wants in.

50
And India’s growing weight in global indices like the MSCI is attracting more
institutional money, driving up stock prices.

So, even though the CAPE ratio is high, there are reasons for it. India’s growth
story is compelling, and investors are paying a premium for it.

But hey, the Indian stock market is also the second-most expensive in the world
after Greece!

So, does that mean a crash is coming?

Not necessarily.

Critics argue that the CAPE ratio is based on historical data and doesn’t always
predict future crashes. And as we know, the markets evolve, and past trends aren’t
always a reliable guide.

Even Shiller, the creator of the CAPE ratio, started looking at another metric
during the pandemic—the "Excess CAPE Yield."4 This compares stock earnings to
returns on inflation-adjusted government bonds. If bond yields are low, investors
are more willing to pay a premium for stocks, even if they look expensive.

So, where does that leave us and the Indian stock markets?

See, a high CAPE ratio might suggest that stocks are overpriced, but it’s just one
piece of the puzzle.

And because the markets never move in isolation, you also need to consider other
factors, like growth trends and how companies are returning value to shareholders.
The market’s changing, and so should the tools we use to understand it.

51
Clearly, the CAPE ratio is more like a weather vane than a crystal ball. It signals
trends, but it won’t predict the future.

The markets might drop. Or they might soar.

In the meantime, we’d do well to pay heed to what the legendary investor and fund
manager Peter Lynch once said… “No one can predict with any certainty which
way the next 1,000 points will be. Market fluctuations, while no means
comfortable, are normal.” and… “You only need a few really big stocks in a
lifetime to make a lot of money”.

52
 Business & Startups
VC firms play musical chairs 54

Did Amazon spy on Flipkart 59

and others?

The Big 4 problem in China 64

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 VC firms play musical chairs

Here is a simple way to think about the model of a Venture Capital firm.

1. Raise money from investors by telling them about the opportunity to invest in
hard-to-access private companies.

2. Find exciting young startups that spin a great story of potential growth and
invest in them.

3. Wait for a long time. Typically, it takes 5+ years to sell these portfolio companies
at a higher valuation — either to another investor or in an IPO. Then, deduct
hefty fees and return the monies to the investors.

Repeat the cycle.

54
But sometimes, things go wrong. The economic environment turns ugly and exiting
companies at lofty valuations can be hard. The startups make losses so an IPO is
out of the question. Big investors vanish as they turn cautious and wait for better
times and clarity to emerge.

I mean, India was a classic example of this in 2022. Foreign venture capital interest
in Indian tech startups had fallen by 40%. Only 8 tech companies chose to IPO
during the second half of the year compared to nearly 24 tech companies during
the previous year.

The struggle for an exit was real.

Now if you’re a VC firm stuck in this situation, it means you can’t find an exit at the
right price and the investors start knocking on your doors demanding that their
investments be returned. After all, you did promise to make good on the promise in
5 years. And you know that while investors might forgive a slightly lower return,
they’ll punish you if you fail to return money on time. Word will spread and no one
will want to invest in your funds again.

That’s when you’re struck by a brainwave. You simply launch another fund.

Yup!

You raise fresh money from a bunch of investors — call it Fund B. And instead of
scouting for a new idea, you just stick all that money into buying out the existing
portfolio from Fund A. That way, you get to return cash to the old set of investors
and they won’t complain anymore. And the new investors will get to own a
portfolio that you claim will be a multibagger.

This, folks, is what’s known in the industry as a continuation fund. And VCs are

55
flocking towards this exit strategy.

Here’s the Financial Times.

One of Silicon Valley’s most prominent venture capital firms, Lightspeed

Venture Partners, is seeking to use a private equity-style structure [continuation
fund] to sell $1bn worth of start-up stakes and free up cash to return to
investors.

And in the past 5 years, continuation funds have risen from a $5 billion industry to
well over $70 billion today.

But it’s not all kosher. As the strategy gets popular, investors are pointing out the
problems too.

For starters, there might be a pricing or valuation problem.

Research firm Raymond James crunched the numbers and found something
shocking. Say a VC had initially valued a startup in its portfolio at $100. But when
it launched a continuation fund to buy out this stake in the startup, it would sell it
at say $90. In fact, 42% of continuation fund deals happen at a lower valuation.

So you could say that the older set of investors are being short-changed quite often.

Now you could argue that the investor could choose to remain an investor in the
new fund too. They could hope that the market environment soon changes and they
get better exits. But that simply means they get locked in for another 5+ years
without knowing the end outcome anyway.

It also raises another question — of fees.

56
Let’s say the VC fund invests $10 million across 10 companies. There are two ways
they make money. They charge an annual management fee of around 2% on $10
million for all the operational activity and salaries they need to pay their staff. And
then, over time the portfolio value grows to a neat $1 billion. Now when they sell
this portfolio and make an exit, they’ll charge a performance fee of 20% on these
profits. Think of this as a bonus for their business smarts.

It’s the famous 2 and 20 model.

But what if you could sell this $1 billion portfolio to yourself?

Then it’s a bonanza. See, when you exit the portfolio, you can’t charge a
management fee anymore because someone else has bought it. But now, your new
fund can continue to charge the 2% fee. And this time, you can charge it on the
entire value of $1 billion.

That’s quite a finance bro move, eh?

And when you finally exit it for good from Fund B, you’ll probably get to charge
another 20% performance fee too.

Finally, you could even make the argument that it’s an easy way for the VC firm to
extend the life of dud investments. It can palm off these startups to its new fund.
And it will only have to worry about the consequences of the decision later i.e.
when 10 years later, it’s time to exit investments in Fund B.

Think of it as ‘evergreening’ bad investments. Just like how banks keep lending to
companies that are on the verge of defaulting on their loans. It’s simply a way to
push the bad news for another day.

57
And that’s why some folks in the asset management world are likening this to a
pyramid scheme. You know, where you use fresh money from new investors to pay
out old investors. Just that there is an actual underlying business in the case of a
VC firm.

So it’s actually more of a game of financial music chairs, no?

Anyway, it’s still early days for continuation funds. We don’t know what the end
outcome will be yet. We don’t know if regulators will clamp down on this
burgeoning industry. We don’t know if investors will protest against them and ask
for better structures.

But for now, you know the good, bad, and ugly of this new VC playbook.

58
 Did Amazon spy on Flipkart
and others?

Amazon might have landed in hot soup.

The Wall Street Journal published an investigative report which claims that the
e-commerce behemoth was spying on its rivals.

How, you ask?

Well, let us tell you how ‘spying’ works in the corporate world.

Say you’re running a brand selling sneakers in India. You’ve studied shoe design
and manufacturing. And to get a pulse of the market, you often conduct surveys to

59
understand what customers are looking for.

But occasionally, you’ll also assess how your prospective rivals are doing. You’ll
browse through their website and see the listings and prices. You’ll pop into the
stores to evaluate the customer buying experience. If they launch a new pair of
sneakers that are flying off the shelves you’ll buy it too and maybe tear it apart to
figure out what the secret sauce is.

If you grow to a large size, you might have set up a team dedicated to doing this.
You might call it the ‘Benchmarking’ team.

It’s all part of market research. Or what the industry would call competitive
intelligence.

And there’s nothing wrong with it. You could call it spying but you’re simply using
public data to stay one step ahead of your competitors. It’s not illegal.

But you know when that becomes a problem?

When you see a rival put up a post saying they’re hiring senior personnel and you
recruit someone to work as your spy. Yup, you’ll ask them to apply for the role and
cross your fingers in the hope they’ll get selected. If all goes to plan, you then have
a mole in the rival company who can get access to documents detailing secret
projects and internal strategies. And then feed you this information on the sly.

That’s spying. That’s corporate espionage. And that’s illegal.

So, what did Amazon do?

Okay, in 2015, Amazon was tweaking its business model. It was focusing more on

60
getting third-party sellers to sell their wares on the platform. It was doubling down
on its own logistics and delivery fleet. And it had an internal ‘Benchmarking’ team
that was tasked to get a sense of what its rivals were up to and help Amazon sort of
copy tactics.

But, rather than simply talk to people or comb through earnings reports, the team
had another idea. They wanted to set up a company called Big River Services
International. Think of it as a seller that would sell a bunch of eclectic stuff — shoes,
beach chairs, and Marvel t-shirts. And Big River would list as a seller on rival
e-commerce marketplaces such as Flipkart. On Flipkart, it sold wooden home
decor stuff under the brand Crimson Knot. And this would give them an insider’s
view to figure out pricing algorithms, how shipping and logistics worked, and even
payment methods.

The Big River team would then pass on the information to Amazon’s
Benchmarking team who could then tell leadership how to better Amazon’s own
services.

On the face of it, that doesn’t seem too bad. And Amazon believes its rivals do the
same thing too. But the problem as per some lawyers is that if you misrepresent
who you are just to get trade secrets, you can be taken to court.

Did Amazon do that?

Well, as per the WSJ, “Team members attended their rivals’ seller conferences and
met with competitors identifying themselves only as employees of Big River
Services, instead of disclosing that they worked for Amazon.” One of those rivals
was eBay which apparently held a conference to give sellers on its platform some
‘exclusive information’.

61
Now what WSJ doesn’t specify is if those ‘teams’ were directly from Amazon posing
at Big River. Or whether they actually worked at Big River. If it’s the former, it’s a
misrepresentation. If it’s the latter, a lawyer would argue it’s not a problem.

But wait…Amazon apparently did assign two email addresses to a lot of folks
working at Big River. One which was a non-Amazon one for external
communication. And one linked to Amazon so that they could email folks internally
without a problem.

That seems a little suspect. And it makes it sound like Amazon was using moles,
no?

And guess what?

When the Blue River folks created reports that they wanted top Amazon executives
to see, they didn’t email them. Rather, they printed it out and handed it over.

And you know that quite often when people try circumventing the regular digital
trail, they’re up to something dubious.

Maybe what makes the whole thing worse is that Amazon even seems to have had a
ready reckoner on how to react in case the news of Big River even became public. It
was a crisis management tool that was ready to use.

Why would you need a preplanned response if you didn’t think you were operating
in a legal grey area?

And this isn’t the first time Amazon’s corporate espionage tactics have been
questioned this year.

62
WSJ published a separate story adapted from a book that was published. And it
talks about the time from a few years ago when Amazon wanted to launch its own
food brand.

So it hired an employee from a really popular department store called Trader Joe’s.
And it didn’t tell her what her project at Amazon would be. It was only when she
got to Amazon that she figured that they wanted her to spill the Trader Joe’s’ trade
secrets — Amazon wanted to know which food items sold well and even the margins
on the products.

Now Amazon did fire the folks involved in resorting to these tactics so that’s a good
thing.

But it just goes to show that this probably won’t be the last time we’re hearing the
words ‘corporate espionage’ and ‘Amazon’ in the same breath.

63
 The Big 4 problem in China

The Big Four auditing giants—Deloitte, PwC (PricewaterhouseCoopers), EY (Ernst

& Young), and KPMG are in hot waters in China.

According to a Reuters report published, the Chinese Finance Ministry is

tightening the noose around them. It is concerned about the quality of the work
these firms are doing for the local Chinese companies that have appointed them as
auditors.

Why is the Chinese government concerned, you ask?

Look, the primary responsibility of a financial auditor is to offer an unbiased

assessment of a company's financial statements. The goal is to catch problems like
inflated revenues, risky loans, excessive borrowing, and the like early on to prevent
64
probable financial misinformation.

However, the government is now sceptical about whether the Big Four auditing
firms are genuinely committed to uncovering dubious activities in the companies
they audit. As a result, the government has been bombarding these firms with a
barrage of questions and asking them to produce a mountain of documents.

Now, you might be wondering why is the Chinese government acting so paranoid?

Well, because these efforts are intended to prevent another Evergrande-like crisis!

So let’s take it from the top.

In the mid-90s, Hui Ka Yan, the founder of China’s property behemoth,

Evergrande, embarked on a journey that would make him one of China's wealthiest
individuals.

By taking on substantial debt available at dirt-cheap rates, Hui expanded the

company’s reach with thousands of real estate projects across China.

Eventually, the company went public in 2009, and by June 2023, it had owned
land reserves totalling 190 square kilometres.

It is safe to say that Hui’s ambitious vision and aggressive expansion strategies
quickly made Evergrande China's second-largest property developer.

Other than the easily accessible credit, what helped Hui and Evergrande was the
cash at hand that came from pre-selling homes. For context, in 2021, nearly 90% of
homes in China were sold before they were built.

65
So yes, this strategy kept the cash flowing for years, allowing Evergrande to
purchase new land and start new projects continuously.

Everything was running like clockwork.

But the tide actually turned against Hui and Evergrande in 2020 when the
government, concerned about the sky-high debt levels in the property sector,
clamped down on what it saw as reckless lending.

In response, it introduced the "three red lines" policy, which limits debt-to-asset,
debt-to-equity, and cash-to-short-term debt ratios. You don’t need to know what
these ratios are. But think of them as numbers that measure a company's financial
health and stability, ensuring they don't take on too much debt compared to their
assets, equity, and available cash.

And guess what?

Evergrande breached all three red lines. Thereafter, the government and the banks
closed all the debt taps for the property giant, leaving Evergrande and other
developers scrambling.

By 2021, Evergrande, which thrived on debt and revenues from pre-sales, could not
repay interest on its staggering $300 billion debt.

It formally defaulted in December 2021, marking the start of a liquidity crisis. In

other words, they had no money at hand.

And here is a thing about China's property market: It contributes between 20% and
30% to China's GDP.

66
And therefore, Evergrande’s downfall had a domino effect, threatening to
destabilise the broader real estate sector and, by extension, the entire Chinese
economy.

And it’s not over yet. The repercussions of Evergrande's fall are still unfolding. For
instance, prices for new homes in Chinese cities dropped by 1.3% year-on-year in
August 2023, reflecting the turbulence in a sector that once drove China's growth
and prosperity.

Now here’s the kicker. PwC was Evergrande's official auditor for almost 14 years
until it resigned in early 2023. Precisely during the period when the company was
accumulating those massive debts.

Apart from the mountain of debt, Evergrande, through its subsidiary Hengda,
engaged in various accounting malpractices to inflate its revenues by
approximately $78 billion between 2016 and 2020.

And this created a misleading picture of Evergrande's financial stability and

growth.

Investors believed the company was more profitable and stable than it actually was.

With inflated revenues and assets, Evergrande secured more loans and funding.
Not only this, but the misstatements also initially boosted market confidence in
Evergrande, driving up its stock price.

Now, as an auditor, PwC was responsible for reviewing Evergrande's financial

statements and ensuring they accurately represented the company's financial
health.

67
But it never once raised a single concern, and this let Evergrande continue its
fraudulent activities.

And as a consequence, the Chinese Finance Ministry has held PwC responsible for
failing to disclose Evergrande's real financial health.

Not only this, but PwC must also pay a hefty fine.

Here is an interesting fact: PwC made 400 million yuan from Evergrande and its
subsidiaries in 14 years and now likely must pay a 1 billion yuan fine! That’s over
₹1,100 crores.

And do note that this thing with PwC is not an isolated case.

Here is another instance.

Deloitte was also fined $30.8 million last year for failing to properly assess China
Huarong Asset Management's asset quality. And there are other similar instances
where the Big Four firms didn’t disclose the actual financial health of the
companies they were auditing in China, causing substantial financial fraud and
thus harming the Chinese economy.

So it’s no wonder then that the Chinese government is fighting back.

Chinese companies, especially state-owned enterprises, are now relieving PwC of

their duties and switching to other auditors.

Also, China's stock market regulator has fined Evergrande Group 4.2 billion yuan
(about $580 million) for allegedly falsifying its revenue and deceiving its investors
and lenders about the company's financial health.

68
And as you may already know Evergrande is being liquidated in a bid to recoup
what’s left. But the question remains: Will the Big Four firms be able to regain the
trust they once wielded in China?

Well, we will have to wait and see.

69
 Environment &
Sustainability
What the heck is eSoil? 71

Do Indian elections care about 75

climate change?

Will renewable energy replace oil? 79

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/ bit.ly/3YNM8wg
 What the heck is eSoil?

What if we tell you that stimulating a plant’s roots electrically can help it grow
faster?

That’s what scientists in Sweden discovered anyway. All you need is water,
nutrients, and something called a substrate. Think of it as a surface that roots can
attach to. Then you pass the electric current through the substrate and voila, the
plant blossoms. In fact, these scientists found that barley seedlings grew 50% faster
in 15 days.

And since there’s no real soil involved in this, they’re calling it eSoil.

But how did they even come up with such a peculiar idea, you ask?

71
Well, it’s not a new idea really. It dates back to at least 600 years before the
common era. Some wise folks observed that despite the dry weather along the
Euphrates River, lush green gardens grew up the walls of an ancient city called
Babylon. We’re talking about the Hanging Gardens of Babylon. The plants here
didn’t have soil. But their roots absorbed nutrients from the river nearby ― similar
to a pulley system of drawing water from a well.

And many centuries later, precisely in 1937 an American scientist Dr. William
Frederick Gericke figured out that this water-based farming strategy worked
wonders. It just needed the addition of some chemicals to help it along. This way,
plant roots could utilise nutrients more efficiently than when grown in soil. And he
coined the term hydroponics for this form of agriculture — part hydro which was
Greek for water, and ponos which meant labour.

After all these years, you’d imagine the world of hydronics was due for some
innovation, no? And that’s probably come in the form of passing the electric
current through a suitable substrate material.

But why’s this a big deal?

You see, every year we add roughly 83 million people to the world’s population.
And that means the earth will be 10 billion strong by 2050. So there has to be a way
to feed this growing population.

Sure, we’re trying to increase food production and improve its global distribution
by pooling resources so farmers across the world have better access to fertilisers
and new farming techniques. But here’s the thing. All of this needs vast spaces of
agricultural land. Now, close to 40% of the global land surface is agricultural. And
we use a third of that — 1.5 billion hectares — for crops. In case you want to picture
it, that’s nearly 3 billion football fields. Yup, quite a lot to imagine. But even that is

72
shrinking, thanks to the growing population. More people not only means more
food but also more infrastructure development. So cropland naturally gets eaten
up. For context, between 1961 and 2016 the global cropland area has fallen from
about 0.45 hectares to 0.21 hectares per capita. We can’t just wake up one day and
reverse that.

Besides, food insecurity has also been on the rise since 2018 because of climate
change. Global warming influences weather patterns, causes heat waves,
unseasonal rainfall and even droughts. To make it even worse, the pandemic and
the Russia-Ukraine conflict took their toll on food production. The cost of growing
food, distributing it and feeding people shot up. This means that over 828 million
people around the world go to bed hungry every night today.

Now while researchers constantly try to whip up new crop varieties that are
resilient to climate change, increasing food production is still a challenge.

That’s where hydroponics could make a mark — No agricultural lands, no fertiliser

and no soil too. The much talked about vertical farming could see a boost. Vertical
farms are buildings filled with a lot of hydroponic systems that grow crops in an
indoor, temperature-controlled environment. And it’s already live in Dubai, a city
that imports 85% of its food. The 330,000-square-foot facility can produce over
900,000 kilos of leafy greens annually. And these hydroponic systems need just
10% of the amount of water that traditional field crops require because the water is
re-used easily. So in a water-scarce world, that’s a plus.

But wait… won’t all these manmade structures require a lot of electricity for
lighting, water and air pumps and other systems to control humidity and
temperature? That's true, which is why eSoil tries to solve these very problems.

You see, typical hydroponic systems use mineral wool as a cultivation substrate.

73
But making it is quite an energy-intensive process. It’s also not biodegradable. On
the other hand, eSoil uses cellulose and another conductive material that doesn’t
suck too much energy. In fact, the researchers titled their paper - "A low-power
bioelectronic growth scaffold that enhances crop seedling growth." Low power
being the key word.

The only problem is that it's still just one paper. We don't know if this will scale or
whether other scientists can replicate this success. It's still very very early days.
Also, even if it did scale, how will the world pool in the investments needed to
further its use. Because it’s the low-income countries like those in sub-Saharan
Africa that need this kind of stuff. How will eSoil and hydroponics work here
considering the initial investments can be sizeable.

Well, hopefully we will figure out a way to do just that before its too late.

74
 Do Indian elections care about
climate change?

Over 64 crore people voted in the world’s largest elections. That’s 1 out of every 13
people living in the world.

But here’s something we may not have spoken of enough throughout this long-lived
frenzy ― climate change.

Sure, political parties may have touched upon climate change in their election
manifestos. But talking about climate change in India doesn’t grab votes. And that’s
because voters normally tend to prioritise issues that have an immediate effect on
them like development, social welfare and employment.

75
That’s exactly why you’ll see that the conversation about climate change often goes
missing from the country’s electoral debates despite acute water shortages, erratic
weather and rainfall patterns. In fact in some parts of India it was hard to step out
to vote amidst extreme heat waves.

It also explains why just about 0.3% of the questions asked in the parliament relate
to climate change or why India has just 1 out of over 700 political parties which
focuses on the environment.

But elections mean large gatherings, canvassing, campaigns, advertisements and

even people commuting to and back from their polling stations. This implies a lot
of transportation, waste generation and of course pollution. So it’s not something
you can overlook.

To put things in perspective, if every Lok Sabha constituency uses an average of

1,000 vehicles for election-related work for just a month, each consuming about 15
litres of fuel per day, the entire campaign across India could burn about 244
million litres of fossil fuel or 660 million kilograms of CO2. And removing that
could take at least 2 crore trees.

Then you have the impact of campaign flights and helicopters which are the most
preferred mode of political campaigning. This year the demand for helicopters rose
by about a third from the last elections in 2019. And that’s not a great look,
especially when most of this demand came from two leading Indian political
parties.

If you look at the US presidential elections in 2016 for instance, emissions from
just one candidate’s campaign flights were equivalent to the annual carbon
footprint of 500 Americans. So you can imagine the environmental impact the
increased demand for helicopters in India has left behind.

76
Add to that the impact of other election related events, and the carbon footprint
can be massive.

So what are we doing to address this, you ask?

To begin with, in 2019 the Election Commission of India (ECI) came up with the
concept of green elections. It directed political parties and their candidates to use
eco-friendly materials while printing campaign banners.

Because you see, political parties traditionally rely on environmentally harmful

PVC (polyvinyl chloride) flex banners to promote themselves. And 99% of these
single-use plastic banners end up in landfills.

This year too, it asked political parties to reduce carbon footprint by using public
transport and carpooling for their campaigns. District election officers were also
instructed to set up polling stations by consolidating them in such a way that it cut
the distance travelled by officials and voters didn't have to travel over 2 km to cast
their vote.

Then you have electronic voting machines (EVMs) ― an innovation that has
actually helped a little bit. Despite 2004 being the first Lok Sabha poll to use EVMs
in all its 543 constituencies, the idea of electronic voting dates back to the late
1970s. Back then, the country voted using paper ballots which not just lengthened
the counting process but also had quite a significant environmental impact.

For context, the last parliamentary election that used paper ballots required close
to 10,000 tonnes of paper. That’s equal to cutting down over 1 lakh fully grown
trees. EVMs came in and changed that. They didn’t just save paper but also were
light machines, even lighter than ballot boxes, that ran on batteries. And that
meant that they reduced a vehicle’s payload, translating into lower fuel

77
consumption and emissions while being transported.

But here’s the thing. EVMs aren’t all that green. When connected to the VVPAT
(Voter Verifiable Paper Audit Trail) machine that keeps voting trails, they use
paper too. And disposing of these papers could be environmentally harmful.
Thanks to a metal coating which ensures that the print on them lasts long enough.

Besides, green elections aren’t a norm. They’re just directives or optional guidelines
to promote environmentally friendly electioneering practices. And despite some
states like Goa setting up eco-friendly election booths with biodegradable materials
crafted by local artisans for their Assembly elections, you can’t really make up for
the huge bulk of carbon emissions across the country without etching these
practices in stone.

You could look at Kerala as an example. After the ECI advised against the usage of
hazardous plastic material, its High Court actually imposed a ban on flex and
non-biodegradable materials used for elections. Wall graffiti and recyclable paper
posters emerged as alternatives.

To sum it up, elections are important. And we can be incredibly proud of the way
the elections were conducted this year while applauding the efforts of hundreds
and thousands of people who made it all happen. However, we hope that future
elections don’t have to impose such a massive burden on the environment.

78
Will renewable energy replace oil?

There’s so much talk about renewable energy these days that it seems the green
future is already here. Nations, businesses, and even everyday consumers seem
convinced the world is on track to ditch oil for good.

But just then, ExxonMobil, the world’s top publicly traded oil company, throws a
curveball. They predict that even if every new car sold by 2035 were electric, the
world would still be chugging on 85 million barrels of oil per day by 2050 - the
same as in 2010.

Yep, you read that right!

And Exxon isn’t alone. Even BP, known for all its green ambitions, expects oil
demand to peak by 2025 but still expects 75 million barrels per day by
79
mid-century.

So why isn’t oil going anywhere anytime soon? Especially when more electric
vehicles (EVs) hit the roads every day.

Let’s break it down.

Sure, EVs are taking over. India wants 30% of its vehicles to be electric by 2030,
and other countries like Norway are already there, with 80% of new car sales being
EVs last year.

But the kicker is that road transport is only part of the story.

Oil powers much more than cars. Think about planes, cargo ships, and heavy
industries like steel and cement. These sectors are tough to electrify. For example, a
Boeing 747 burns 30,000 gallons of jet fuel on a 10-hour flight. But imagine trying
to power that with a battery. It would need to be so large and heavy that the plane
might not even take off.

The same goes for cargo ships. These giants burn tons of fuel daily. But having
powerful batteries to move them across oceans is still a far-off dream.

And while hydrogen and biofuels are being explored, they’re far from mainstream.
Companies like Airbus are working on hydrogen-powered planes, but we’re talking
about prototype stages. The shipping industry is also eyeing alternatives like
hydrogen, ammonia, and electricity, but full-scale adoption has yet to occur.

Plus, oil isn’t just fuel. You see it in plastics, chemicals, and pretty much every
other product we use daily. So moving away from oil means reimagining entire
industries, and that takes time.

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And then, there’s the digital revolution, which we tend to think of as clean and
futuristic. But Artificial Intelligence (AI) and digital services are gobbling up energy
faster than we realise. Yup! By 2030, power consumption from data centers could
jump 160%. Every time you search on Google or ChatGPT, you’re burning
electricity. Multiply that by billions of users across the globe, and suddenly, the
digital world isn’t as “green” as you’d like.

And guess what powers a lot of that electricity today? Oil!!!

Of course, with climate change looming, renewables seem like the perfect solution.
In fact, solar energy is now 90% cheaper than a decade ago, and wind farms are
popping up everywhere.

But here’s the catch: they’re not always reliable.

Take North America’s solar farms. They only generate power just about 20% of the
time because the sun doesn’t always shine, and clouds can block it out. The same
goes for wind energy. No wind, no power. Even countries like Germany, which has
invested heavily in wind and solar, still rely on backup fossil fuel plants to prevent
blackouts when renewables fall short. And while battery storage is improving, we’re
still far from being able to store enough energy to power cities during long
stretches of bad weather.

Now, the solution to this whole mess could be nuclear energy! And it’s already
gaining some popularity.

Countries like China are expanding nuclear power to cut down on coal and gas, and
the US is exploring Small Modular Reactors (SMRs)—a safer, cheaper form of
nuclear technology. And France has been a nuclear power success story for
decades, with 70% of its electricity today coming from nuclear plants.

81
So yes, unlike solar and wind, nuclear energy provides consistent, reliable power -
rain or shine.

Yet again, there’s a downside. Building nuclear plants is expensive, and safety
concerns linger, especially after incidents like Chernobyl and Fukushima. Still,
France shows that when done right, nuclear energy can be a game-changer in
reducing reliance on fossil fuels.

But the interesting bit is that even with all this growth in renewables and nuclear,
oil will remain crucial.

In fact, ExxonMobil has sounded the alarm: without ongoing investment, global oil
supply could fall by 15 million barrels per day within a year. That’s a big gap. And if
that happens, oil prices could skyrocket by 2030.

Plus, keeping oil flowing isn’t cheap. Exploration costs have doubled, and
oil-producing countries have had to raise prices to cover the expense. Without
investment, existing oil fields could dry up faster than expected, leaving the world
scrambling for alternatives.

So, what's the answer then?

See, transitioning to renewables and EVs is a great idea. But it can’t solve
everything.

We still need reliable, clean, and affordable energy. And right now, no single source
checks all those boxes.

The future will likely be a mix of energy sources—oil, renewables, and nuclear.
Renewables will take a bigger role, especially in electricity and transportation, but

82
oil will still be critical for industries that can’t easily switch to cleaner alternatives.

So, while an all-renewable future sounds tempting, the reality is far more complex.
ExxonMobil’s predictions may seem gloomy. But they remind us that oil still has a
role to play, at least for now.

The real question isn’t whether we’ll move away from oil. But how fast, and which
energy sources will step up when we do.

What do you think?

83
 Technology
What the heck is AI Washing? 85

Are flex fuel hybrid EVs 89

the future?

Is India 6G ready? 93

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/ bit.ly/3YNM8wg
 What the heck is AI Washing?

Hindenburg Research published a scathing new report about accounting

manipulation at a company. Yup, we’re talking about the same Hindenburg that
clashed with Adani.

Its latest target?

An American multinational company called Equinix that claims to be a global

leader in the data centre market. This means that it has a significant market share
in the business of leasing out space to its clients so that they can house servers or
network hardware.

And in the past year, its valuation has seen a 30% increase to $80 billion.

85
But guess why investors are hyped up?

Well, it’s because Equinix has been telling people, “Hey, AI and machine learning
will require more power at data centres. And we’re going to sell them the power for
their needs. So our revenues are definitely going up.”

And Hindenburg isn’t quite buying that AI hype. The research firm believes that
Equinix does not have enough power capacity to power any of this AI demand. So
Hindenburg thinks Equinix is simply trying to ride the AI bandwagon by making
false claims.

That folks, could be a classic example of AI washing!

It’s a new con in town where companies create false hype about their AI capabilities
to attract investors and drive their valuations higher.

And the phenomenon is picking up pace globally. The US Securities and Exchange
Commission (SEC) slapped a $400,000 penalty on two investment advisory
companies Delphia (USA) Inc. and Global Predictions Inc. for AI washing.

While Delphia claimed to use AI to predict which companies and trends were about
to make it big so that it could invest in them before everyone else, Global
Predictions boasted of being the first AI-regulated financial advisor.

But here’s what the SEC Chair Gary Gensler said when the SEC uncovered the truth

We find that Delphia and Global Predictions marketed to their clients and
prospective clients that they were using AI in certain ways when, in fact, they
were not,

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 …

We’ve seen time and again that when new technologies come along, they can
create buzz from investors as well as false claims by those purporting to use
those new technologies. Investment advisers should not mislead the public by
saying they are using an AI model when they are not. Such AI washing hurts
investors.

So why are companies AI washing and how did it even come to this, you ask?

Well, if you remember, 2023 was the year of AI hype. And chipmaker Nvidia was a
big winner in the AI gold rush. That year its stock price soared 239% because
everyone wanted Nvidia’s powerful graphics processing units (GPUs) to run
advanced AI models.

Besides, the ChatGPT-driven generative AI buzz that kicked off in 2022 pushed
investors to pump in $29 billion into nearly 700 generative AI deals. That’s a
massive 260% increase in value from the previous year! And everyone wants to get
on the AI bandwagon. Big Tech and VCs (venture capitalists) don’t want to miss
out on the returns from what AI can do in the future.

And that means companies will be tempted to talk up their AI capabilities to drive
up their revenues and attract funding from investors too.

In a way, it’s quite reminiscent of instances in the past.

For instance, the most recent one being the metaverse mania. Everyone predicted it
would be the future of the internet. Facebook even renamed the parent entity to
Meta in October 2021 to signal its ambitions. And by March 2022, the word was
mentioned 552 times by 170 companies. It was double the mentions of the previous

87
year and you can bet that many of them may not have harboured serious metaverse
ambitions. They might have just wanted to show that they were getting with the
times too.

Then you had the dot com craze of the late 1990s where companies randomly
added “.com” to their name to attract investors.

Yup, finance professors from Purdue University published a study of 95 companies

that added “.com”, “.net” or “Internet” to their names during the dot com craze.
And interestingly, they found that on average, the stock prices of such companies
increased 74% five days after their name change announcement, as compared to
five days before.

And even after the dot com bubble burst, researchers found that the gains that
these companies had made with the name change remained. It was permanent!
And the researchers called this phenomenon ‘striking’.

If you rewind even further to the 1920s, you’ll find something similar. Airplanes
were the shiny new thing back then. And investors got quite manic about it. They
all wanted a piece of a company called Seaboard Airlines. Only later did they realise
that the company was in the railroad business.

So yeah, AI washing could be history repeating itself. And investors better be

careful or they’ll get their fingers burnt in the rush to catch the AI bus.

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Are flex fuel hybrid EVs the future?

Picture this. You are off on a road trip with your friends. As you drive, you notice
that you’ll soon run out of fuel. You switch to the electric mode, seamlessly
transitioning to the electric motor, which takes over powering your car. The ride
remains smooth and your friends barely notice the change.

You then spot a fuel station up ahead, pull in and refuel. Although you have the
option to pick regular ethanol blended petrol, you pick ethanol 100 or an
alternative fuel that’s almost completely ethanol with just a little bit of petrol and a
binder thrown in. Once the tank is full, you switch back to fuel mode, this time
running on ethanol. You hit the road again with the electric mode ready as a
backup. The car vrooms along efficiently on the ethanol. And you feel good
knowing that you're using cleaner fuel.

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This isn’t just a figment of our imagination. It could actually be a reality in the near
future. Thanks to Nitin Gadkari, the Union Minister for Road Transport and
Highways, who flagged off the Toyota Innova HyCross, the world’s first flex-fuel
ethanol-powered EV (electric vehicle) last year. This car not only runs on an
alternative fuel but can also operate in EV mode. And vehicles like these could be
the future because the Minister has even batted for halving GST (Goods and
Services Tax) on them recently.

Now we know what you’re thinking. EVs, ethanol blended fuel, hydrogen or even
biogas powered cars and now flex fuel hybrid EVs ― India has so much on its mind.
And everything seems to have a promising future. So with its finger in every pie,
which idea is it even going to pursue?

Okay, let’s break that down.

Look, India wants to reduce its GDP emission intensity by 45% by 2030. Simply
think of it as the total amount of greenhouse gas (GHG) emission we want to cut
for every unit increase in GDP (or the value of all the goods and services the
country produces). And since 40% of India’s pollution comes from vehicles, it’s
important to cut down their emissions.

How do you do that?

Well, your first thought would be to go electric. But EVs aren’t really great for the
environment in their current form. And that’s because the massive batteries that
power these cars require a lot of nickel, cobalt and lithium. And mining and
refining these metals emit a lot of greenhouse gases. Not just that. The electricity
that charges your EV comes from fossil fuels since 80% of it comes from burning
coal.

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And that simply means that switching to an alternative fuel could be the way out.
But doing that isn’t easy either. You can’t scale up biogas fuel simply because it
comes from feedstock and India doesn’t have enough of it. You can’t whip up
hydrogen based fuel either, because it’s expensive and lacks infrastructure.

This means that it might be easier to slowly lean towards flex fuel vehicles that use
a cleaner fuel source and are scalable too. Ethanol blended petrol is exactly that. It
comes from fermenting the sugar in the starches of grains like corn, barley or
sugar. And since India is the second largest sugar producer in the world after
Brazil, it makes complete sense too.

Look, Brazil has been mandatorily blending its petrol with ethanol since 1976. And
it has successfully been able to convert 90% of the country’s light-duty vehicles into
flex-fuel ones. So it sets a great example for another developing country like India.

But here’s the thing. Even if India wants to achieve 20% of ethanol blending in its
fuel by 2025, it’ll need to produce 1000 crore litres of ethanol annually. But in the
Ethanol Supply Year 2022-23 (ESY), which runs from December to November, we
were only able to produce about half of it. So scaling that will take time as well.

So what’s the most viable option?

Yup, you guessed it. Hybrids!

Look, hybrids are a cusp between a petrol or diesel-powered engine and an electric
motor. They don’t need an extensive charging infrastructure like pure EVs as they
can be recharged by regenerative braking. This simply captures energy during
braking to recharge the battery. They’re more environmentally friendly than EVs
too, because while regular petrol cars emit 244 grams of carbon dioxide per
kilometre of use (gCO eq./km), EVs emit just 187 gCO eq./km. And hybrids emit

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even less at 167 gCO eq./km.

So it’s a win-win. And if that’s the case why go with just a hybrid? A flex fuel hybrid
EV could obviously leave a lower carbon footprint.

But could flex fuel hybrid EVs actually become the future of India’s auto industry?

Well, they could. But they’re not without their challenges either.

For starters, these vehicles won’t come cheap. Ethanol blended fuel is corrosive. And
with regular use, it can damage a vehicle’s engine. That could mean more serious
problems like rusting and even degradation of fuel quality. Not just that, these fuels
have a lower energy, which means lower mileage and increased running costs by as
much as 30%. Their supply isn’t as extensive as regular fuel either. Sure, flex fuel
hybrid EVs have an electric motor to offset that. But these cars have to be engineered
differently for that, leading to higher costs. So it could dampen buyer interest.

Then there’s the problem of food security. Look, as of now India’s ethanol relies on a
part of the food grains coming from its central food pool. This is actually meant for
distribution among underprivileged citizens. Sure, we’re scaling up ethanol
production. But that cannot happen without more land. This essentially means that
we’ll have to clear more land to grow ethanol producing crops. It’s called land use
change and it could result in a higher carbon footprint. You could look at the US for
instance. Corn ethanol produced in the US leaves a carbon footprint at least 24%
higher than regular petrol. Thanks to fertiliser and land use changes required to
grow corn.

So yeah, solving these problems is something we’ll have to think of before aspiring to
mass produce flex fuel hybrid EVs. Otherwise, it’s almost like coming full circle, isn’t
it?

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 Is India 6G ready?

A few weeks ago, Elon Musk once again dazzled the world by unveiling some
futuristic tech — driverless cars and humanoid robots that seemed straight out of a
sci-fi movie. But these technologies are real, and they’re coming sooner than you
might think. The potential is enormous too, from cars driving themselves to robots
doing human tasks, and the future looks increasingly like one where machines and
humans interact seamlessly.

But let’s pause for a moment. Why are we talking about Tesla’s innovations here?

Because none of this futuristic tech can exist on a large scale without one crucial
element - networks. Super-fast, reliable networks capable of handling huge
amounts of data.

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And that’s where 6G comes in.

You’re probably familiar with 5G — maybe you’re even using it right now. But 6G?
Well, that’s about to take things to a whole new level. While 5G is still rolling out,
6G is expected to be fully deployed by 2030, promising 100 times faster speeds and
near-zero lag in connection (called network latency). So, we’re talking about a
world where AI-driven machines and entire smart cities operate in perfect
harmony.

And that brings us to India.

Turns out, India has some pretty big ambitions when it comes to 6G. We rank in
the top six globally for filing 6G patents.1 And the government has set a bold target
— to secure 10% of global 6G patents in the next three years.

And patents do matter a lot in this context. Think of it this way. Owning patents in
6G is like holding the keys to the future. It allows countries and companies to set
global standards, charge licensing fees, and even influence how the technology
develops. So, for India, securing these patents is about shaping the very
infrastructure that will drive the next wave of technological innovation.

It also wants to contribute one-sixth of global 6G standards by 2027. To make this

happen, the government launched the Bharat 6G Alliance, a network of
stakeholders driving research and development. The vision is to create a nine-year
mission (from 2022 to 2031) to fund 6G in three phases, and lead to field trials and
global standard contributions in the next few years.

But the big question remains: Is India really ready to lead the 6G race?

To answer that, let’s start with a simple explanation of what 6G really is.

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Imagine 5G as a motorcycle — it’s fast, efficient and pretty cool. But 6G? That’s a
jet plane. It’s 100 times faster than 5G and designed to support everything from
AI-powered robots to holographic communication and autonomous vehicles. So it’s
not just about faster internet speeds; it’s about creating a world where everything is
connected in real-time. Or in simple terms, a world where remote-controlled
factories, self-driving cars, and smart wearables that communicate with your
senses will be the norm.

But all this tech needs infrastructure, research and a highly skilled workforce to
back it up.

And here’s where things get tricky for India.

See, building a 6G network isn’t just about flipping a switch. It requires massive
investments in infrastructure. While India has made impressive strides in rolling
out 5G, we’re still not fully prepared for 6G. Right now, India has about 4.5 lakh 5G
Base Transceiver Stations (BTSs) from over 29 lakh BTSs in total. This
infrastructure connects mobile devices to cellular networks. But for 6G, we’ll need a
whole new level of infrastructure — fiber optics, satellites and technology that can
handle higher frequencies.

Then there’s the issue of research and development. For 6G, the Indian
government has allocated ₹10,000 crores for 6G research over the next decade.2
That’s a decent start, but when you compare it to the ₹38,000 crores ($4.5 billion)
committed by Japan and the US, it seems relatively small.3 And let’s not forget
China, where the telecom giant Huawei started work on 6G in 2019 and spent over
$22 billion on R&D in 2021 alone.4 So, India is going to need to step up its R&D
game if it wants to stay competitive. Because it’s not just about building
infrastructure but also about developing the cutting-edge tech that will power 6G.

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But perhaps the biggest hurdle is the skills gap. Building and maintaining a 6G
network requires a workforce of highly trained engineers, AI specialists, and
telecom experts. And right now, India’s education system isn’t fully equipped to
produce the talent needed for this massive leap in technology. Although we have
about 1.5 million engineering graduates every year, 48% of those remain
unemployed.5 And that leads to the talent migrating to better tech enabled
countries. That also explains the highest rate of economic migration of the
workforce in the world. So, the bottom line is that we’ll need to focus on upskilling
our workforce. And we’ll need to do it fast.

There’s also the issue of sustainability. Since most of the 6G supporting

communication devices will be battery-powered, they can have a huge carbon
footprint. So, as India pushes for carbon neutrality by 2070, balancing the energy
demands of 6G with our sustainability goals is going to be a major challenge.

And then there’s cybersecurity. With faster networks come more sophisticated
cyberattacks. As 6G rolls out, India will need to significantly ramp up its
cybersecurity measures. Otherwise, we could face a wave of data breaches, fraud
and other cyber threats that will put citizens at risk.

So, where does all of this leave us, you ask?

India’s progress in 6G patents is promising, but we still have a long way to go. A
2021 study by Japan’s Nikkei and Cyber Creative Institute revealed that China held
40% of 6G patents, while the US held 35%. India, meanwhile, accounted for just
1.5%. That’s a big gap.6

On top of that, China also leads in setting global standards for 6G technology.
India, by comparison, is lagging behind. For context, if a country wants to shape

96
the future of 6G, it can't just sit on the sidelines. It needs to be part of the technical
committees and subcommittees of the International Organization for
Standardization (ISO), which brings together standard bodies from 160 countries.
And a Geneva Internet Platform study found that as of 2021, India was only part of
400 such committees, while China was involved in 732.7

So, does this mean that India’s 6G dreams are doomed?

Not quite. Because 6G is crucial for India’s future. It will power smart cities,
automated industries and revolutionize sectors like healthcare and education for
the world’s most populous nation.

Besides, don’t forget that 6G will be built on the infrastructure and capacity
established by 5G networks. And India has been on fire with its 5G rollout, setting
up over 4,00,000 stations in the first 15 months which is faster than any other
country. The excitement is clear, with telecom giants like Bharti Airtel and Reliance
Jio gearing up for the 6G era. Even new players, like Adani Network, are stepping
in through telecom spectrum auctions, ready to join the action.

Public-private partnerships will also be key to accelerating 6G development, and

India has already started collaborating with nations and experts on this front.

So yeah, India’s ambitions for 6G are bold, but filing patents and setting targets is
just one piece of the puzzle. To truly claim a seat at the global 6G table, the
foundational bits — skilled labor, cutting-edge infrastructure and strong R&D, need
to fall into place.

The numbers show progress. Mobile connections in India have skyrocketed from
904 million to 1.16 billion, broadband users have jumped from 60 million to 924
million and the fiber optic network has expanded from 11 million to 41 million

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kilometers. So India seems to be on the right track.

But it’s not just about the scale. It’s about how quickly we adapt.

We’ve still got about six years until 2030, the year when 6G is expected to roll out.
And if India’s rapid adoption of 4G and 5G is any indication, we just might find
ourselves leading the charge when the 6G curtain rises.

And we hope to see that in reality in 2030.

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 Health
A new regulator for nutraceuticals? 100

Is India getting unhealthy by the day? 105

Can the Care Economy boost women’s 109

workforce participation?

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A new regulator for nutraceuticals?

The Indian nutraceuticals market was valued at about $4 billion in 2020. But it
could jump by 20% every year and burgeon into an $18 billion industry by 2025!

For the uninitiated, a nutraceutical is a dietary supplement that contains bioactive

agents from plants or herbs that are supposed to promote wellness. Confused? Well,
we’re talking about those melatonin gummies you pop for a good night’s sleep, the
biotin pills that claim to improve your beard and hair, the protein powders, the
immunity boosters and the period pain busters.

They come in fun packs whose labels say that they’re made from natural ingredients
like fruit and herb extracts or some extra vitamins that help supplement your diet.
Basically, stuff you don’t need to worry about before consuming. And some surveys
indicate that over 70% of Indian households consume these dietary supplements.
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So how did Indians fall in love with nutraceuticals?

1. For starters, over 40% of Indian adults lead a sedentary lifestyle. This means
that they’re physically inactive for long hours owing to busy work schedules. And
that could translate into hormonal imbalances in the body. Besides, working
long hours also means not being able to eat a balanced diet. So that could cause
vitamin or nutrition deficiencies which we try to make up using other means.

2. Some nutritionists believe that the food we eat today isn’t as nutritious as it used
to be. For instance, the quality of Vitamin C in tomatoes today may not be the
same as it was 30 years ago. That’s because fertiliser overuse, contamination or
over cultivation may have poisoned the soil over the years, inhibiting its ability
to provide enough nourishment to the food we grow. And maybe that has
nudged some of us to turn to supplements.

3. Then there was the biggie — the pandemic. COVID-19 brought people closer to
proactive healthcare. There was a new-found interest in health, wellness and
disease prevention. People like you and me began reading up about
nutraceuticals on social media and other places on the internet. Their
ingredients weren’t as hard to understand as pharmaceutical labels.

Also, a renewed push to revive our traditional Ayurvedic medicines during this
time meant that the wellness industry also capitalised on this. They simply had to
promote ‘natural’ products and it would fly off the shelves. Products like
Chyavanprash became super popular again.

But there’s a problem. 7 out of 10 Indians seem to take these supplements without
consulting a doctor.

And as per Dr. Preeti Chhabria, the Director of Internal Medicine at

101
Sir H. N. Reliance Foundation Hospital, this unfettered popping of wellness pills
isn’t a smart idea. For instance, if you keep popping an iron supplement because
you think it’s good for you, you could end up with too much iron than what your
body actually needs. The iron will be stored in your body, especially, in the liver,
and can cause diseases like cirrhosis. Even Vitamin D for that matter. If you end up
with an excess, it can lead to a toxic buildup of calcium in your blood and cause
bone pains.

But despite these inherent risks, these colourful and flavourful nutraceuticals are
easily available over the counter. And you don’t need a prescription to get your
hands on them. You can buy them off an e-commerce website, an airport store or
really anywhere.

And you can imagine that the government and regulators aren’t happy with how
things are turning out. They want to salvage the issue before it gets out of hand. So,
a few days ago they formed a panel to consider bringing nutraceuticals under the
embrace of the country’s drug regulator CDSCO (Central Drugs Standard Control
Organisation).

Currently, nutraceuticals are classified as food. They’re not drugs. That’s why
they’re regulated by the FSSAI (Food Safety and Standards Authority of India). So
they don’t have to go through rigorous phases of clinical trials or product testing
before getting a formal regulatory approval. As long as they don’t claim to cure any
diseases and have approved ingredients in the permissible quantities they’re good
to go.

But with rapid growth come problems too.

A couple of years ago, the Association of Consumer Protection (a non-profit

organisation run by former FSSAI employees) conducted a nutraceutical and

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health supplement survey. And they found glaring issues of misleading claims and
even dangerously high levels of nutrients. For instance, vitamin D supplements
contained more than 8 times the prescribed recommended daily allowance of
International Units (a unit used to measure the activity of vitamins, enzymes and
hormones).

Also, when the FSSAI themselves conducted their study from 2019 to 2022, they
found that nearly 5,000 samples of these supplements were unsafe, over 16,500
were substandard, and about 11,500 labels were misleading!

That’s the abysmal quality of nutraceuticals that many Indians have probably been
putting in their bodies!

So yeah, tightening the screws on nutraceutical oversight and regulation doesn’t

seem like a bad move, eh?

But you can bet that there’s going to be pushback.

For instance, nearly a decade ago the FSSAI was dragged to the Supreme Court for
an advisory it issued. It wanted manufacturers to get a recipe-by-recipe clearance
for products even if the ingredients were safe or already approved. But the top
court refused to allow such a mechanism as the FSSAI didn’t have the authority to
analyse products as good or bad. It suggested that the regulator strengthen the
labelling and packaging rules instead.

Then in 2015, regulators also wanted some multivitamins to be brought under the
definition of drugs. But that didn’t quite materialise.

So you can be quite sure that the industry will lobby against a change even now.

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They don’t seem to be happy that the government didn’t take them into confidence
before conducting such a review. Especially since the first set of regulations
governing nutraceuticals only came about only in 2016 and things are still falling
into place. And not to forget that even global markets such as the US treat
nutraceuticals as food and not drugs.

So yeah, with the government trying to turn nutraceuticals into a $100 billion
industry by 2030, we’ll have to wait and see which regulatory route they opt for.

104
 Is India getting unhealthy
by the day?

We’re in the midst of a national crisis no one’s talking about — obesity.

In 1990, there were only 0.4 million grossly overweight children aged between 5
and 19. But cut to today, that number has jumped to more than 12.5 million
overweight children.

That means over 3.5% of children in the country are now overweight.

That’s what a rather alarming study published in the international medical journal
The Lancet tells us.

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And this isn’t the first time we’ve seen these scary stats.

See, every 3 years or so, India conducts a National Family Health Survey (NFHS).
It discusses things like sanitation, hygiene, household wealth, insurance coverage,
domestic violence and education. But they don’t stop there. They even cover other
inane items like the number of mosquito nets in use.

Yup, it’s one of the most comprehensive ways to figure out the health indicators at
the ground level. So when the NFHS tells us something, we have to believe it right?

And the previous NFHS result revealed the same story about childhood obesity.
And pointed out that even adult obesity rates are soaring.

Crazy, huh?

Now you’re probably thinking that this is solely an urban and a middle-class
problem. After all, that’s the segment who’ve perfected the art of a sedentary
lifestyle where we sit on a chair for 10 hours a day. Then we Netflix and binge-eat
on food swimming in oil that’s brought to our doorstep with just a couple of clicks
on the phone. We love processed and unhealthy food.

So if we look at rural numbers, things should be starkly different.

But unfortunately, that’s not quite true. While the problem is more prevalent in
urban folks, over 19% of the adult rural population is overweight or obese
according to the NFHS data. And this number was just 2% way back around 1990.

Now there might be a couple of reasons to explain this.

Some research indicates that as more and more towns emerge, the distance to

106
villages has reduced. And with that urban proximity comes a change in dietary
practices in these villages. They begin to consume more processed foods too. For
instance, the latest Household Consumption Expenditure Survey revealed that
while rural households allocated 4.2% of their expenses to beverages and processed
food in 1990, that number is now higher at 9.6%.

And the end result is that for every reduction in kilometre between a rural and
urban area, 3000 rural women might become at risk of obesity.

Unfortunately, our urban areas seem to be exporting obesity to the rural segments.

But here’s the other bit… even our public health policies might be to blame.

For decades now, the government has relied on a Public Distribution System (PDS)
to provide rations to folks who need them. And typically, the food basket in the
PDS is carbohydrate-heavy — wheat and rice. A significant part of our population
can buy them at low prices or get them for free and they end up consuming more of
these food stuff. And some research suggests that these refined cereals are linked to
the obesity problem these days.

But you could look at how people source their calories. Unhealthy fats, sugars and
processed food are extremely popular in the country because relatively healthy
foods often tend to be more expensive. And the cost per calorie falls rather
precipitously when you look at the unhealthier stuff.

As per an article in Bloomberg from a couple of years ago, if you decide to buy
green leafy veggies, you have to typically pay 29 times higher to get the same
amount of energy that you could’ve got from oil. Or the calories from a pumpkin or
mango will cost you 10 times more than their equivalent in sugar.

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So all this unhealthy consumption creates another problem too — hidden hunger.

What we mean is that we might satiate our appetite with enough calories, but we
don’t meet the hunger needs for nutrition. Over 70% of Indians are believed to be
protein deficient. And heck, even the nutrient content that we’re supposed to get
from our rice and wheat has fallen drastically due to our farming methods. And as a
result, our body remains deficient in vitamins or minerals like Zinc.

Obesity and nutritional deficiency — it’s a double whammy.

And this could have a significant economic impact on the country.

We’re already bearing a cost of 1% of our GDP. And if unchecked, some estimates
say it will double in the next 3 decades.

Now if you’re wondering how the costs can be so high, it’s simple. There’s the direct
cost, of course. This is the money spent on getting diagnoses and treatment either
by the patients or borne by the government as subsidised healthcare.

But the indirect costs are often invisible and even greater — there’s time spent on
seeking healthcare which would involve a patient and a caregiver; there’s reduced
productivity at work, people calling in sick more often; there are the missing
workdays; and even premature death that translates into years of potential
productive life that the economy loses.

So yeah, maybe it’s time the country took the upcoming obesity epidemic quite
seriously.

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 Can the Care Economy boost
women’s workforce participation?

You’ve seen it – nurses tending to the elderly, nannies watching over toddlers, and
domestic helpers managing the daily grind of household chores. These roles, which
are paid and recognized, form the visible side of what’s known as the “care
economy”.

But there’s another side to this economy that often flies under the radar: unpaid
care work. This includes everything from cooking and cleaning to care of family
members— crucial labour that keeps families and communities functioning but
doesn’t show up in the formal economy.

So, why are we talking about this today? Because a recent report highlights how

109
investing in and formalizing India’s care economy could do wonders for women’s
participation in the workforce.

But how exactly would that work? And to answer that, it’s important to first
understand why women’s involvement in the economic workforce is critical.

The World Economic Forum (WEF) states that closing the gender gap in the
workforce could boost a country’s gross domestic product (GDP) by up to 35%. And
for a country like India, where the female labour force participation rate (FLFPR) is
far below the global average, this is a huge deal. In simple terms, FLFPR is the
percentage of women aged 15-59 who earn wages by working outside their
households. And right now, only about a third of Indian women are part of the
workforce—compared to the global average of 47.8%.

For a country with India’s demographic and economic ambitions, that’s a gap
worth closing, no? So how do we bridge this gap?

This is where the care economy comes into play. It could be the key to closing the
gender gap and increasing the FLFPR. In economic terms, "care economy" might
sound niche, but it covers both paid and unpaid care work— from professional
caregiving to the household tasks and the help in local businesses that keep things
running.

But all of that work doesn’t get accounted for. Because although the FLFPR in India
has increased from 23.3% in 2017-18 to 37% in 2022-23, a whopping 37.5% of this
total share is “unpaid help in household enterprises” - which is simply the rate of
women who are not paid for the work they do. And that doesn’t even include the
domestic work.

On average, Indian women spend 5.6 hours a day on unpaid care work, while men

110
chip in just 30 minutes. This ‘time poverty’ leaves many women with little energy
or opportunity to pursue paid employment. And that explains the low labour force
participation rate for women in India.

If we put a monetary value on this unpaid care work, it would account for about
15% to 17% of India’s GDP. But since it happens outside the formal economy, it
often goes unnoticed and unmeasured.

But here’s where things get interesting. Looking ahead, by 2050, nearly 350 million
people in India will be over the age of 60, and millions of children will still need
care. This demographic shift will shoot up the demand for childcare, eldercare, and
other care services. And that’s where the care economy could make a massive
impact.

According to the International Labour Organisation (ILO), with the right public
investment, India’s care economy is a treasure trove waiting to be unlocked, and
the nation could create 11 million new jobs by 2030. And nearly 70% of these jobs
could likely go to women! And this isn’t just a pipe dream. Scandinavian countries
have already shown us what’s possible when you invest in the care economy.

Take Finland, for example. Most women there do paid work, but the government
understands the challenge of balancing a job and family. So, families with
preschool children have the option to receive financial support for raising their kids
at home, and there’s also paid paternity leave to encourage dads to take on
caregiving duties. And Finland doesn’t stop at kids - they also support people who
care for their elderly or disabled relatives with a monthly stipend. Other
Scandinavian countries offer similar programs, proving everyone wins when you
formalise and invest in care.

Now, we get it—replicating this kind of support in India is no small feat, given our

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population, wealth imbalances, and other factors at play. But let’s take a closer look
at what’s already happening in India’s care industry.

India’s public spending on the care economy is currently less than 1% of its GDP.
Increasing this could bridge gender gaps and unlock a new economic sector,
creating more jobs in care services.

The Federation of Indian Chambers of Commerce and Industry Ladies

Organisation (FICCI FLO) is already pushing for this. They’ve got a plan covering
everything from better leave policies to subsidies for caregivers. They’re talking
about market-based financing for parental leave, gender-neutral leave options,
flexible work setups, and more investment in care infrastructure, like
Public-Private Partnerships (PPPs).

But it’s not just about money. India also needs to invest in the people doing the
work. Formalizing care jobs and providing skill training could lift millions of
women out of low-paying, informal work and improve the quality of care services
across the board.

And it’s not just the government that needs to step up - businesses can play a role,
too. In Vietnam, for example, a footwear company reduced employee turnover and
saved $537,000 annually by setting up an onsite kindergarten.

And we’ve got success stories in India too. The Self-Employed Women’s
Association (SEWA) has been running childcare services for 2.1 million informal
workers across 18 states. Parents cover just 10-15% of the costs, with the rest
coming from private donors, SEWA ventures, and government funding. It’s a
shining example of how community-driven support can make a huge difference for
working mothers.

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So, can the care economy boost workforce participation in India? Well, on the face
of it, yes. With the right investments and policies, India could create millions of
jobs, close gender gaps, and boost economic growth.

The question is, are we ready to seize this opportunity?

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 Jargons
Assets Under Management 115

Graham Number 116

Put Option 117

Simple Moving Average 118

VIX (Volatility Index) 119

HNI 120

Neutral Interest Rate 121

Blue Chip Stock 122

Standing Deposit Facility (SDF) 123

Marginal Standing Facility (MSF) 124

Block Deal 125

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 Infographics
Interim Union Budget 2024 127

Quick Commerce in India 128

India's Balance Sheet with the World 129

How much do you pay for an iPhone? 130

India's Digital Payments Landscape 131

State-wise Inflation in India 132

Who dominates the UPI market in India? 133

India's GDP Through The Years 134

State-wise Registered Investors 135

Income Inequality in India 136

Internet Users In India 137

Unemployment Rate In India 138

SENSEX: 1986 vs 2024 139

Young Investors in Stock Markets 140

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