To have a brand name coined and seeing it going places beyond boundaries of space and time is indeed every copy writer’s long cherished dream. He dreams to boast of the brand name even after his retirement and wishes to see his grand children appreciating the name in their heydays. But it’s not as easy a task as he dreams. David Ogilvy finds the copy writers as a species with the longest gestation period. It may take days, weeks and even months crossing the deadline limits to land on a perfect brand name that really matters. Even if one finds it as a bolt from the blue, nobody knows what the future has in store for the proposed nomenclature. How dangerous Zika affected Tata? Tata Motors, the Indian Automobile giant, who was in the forefront of realizing the average Indian citizen’s dream of owning a car at the price of a motorbike, now finds it in trouble with a recent nomenclature adventure that misfired. Tata’s latest hatchback model was named ‘ZICA’ as an acronym for ‘ZIPPY CAR’ and preparations for an extravagant launch was being made in the pipeline. The cases of ZIKA Virus reported in South America casting a shadow of fear over the world about an imminent outbreak of a potential epidemic with no cure (at least for the time being) now poses a threat to the proposed name ZICA as both the names of virus and car are pronounced alike. Tata Motors in a press statement announced that it has decided to rename the brand empathizing with the hardships being caused by the recent ‘Zika’ outbreak across many countries. But as per schedule, the car will be showcased at the Auto Expo 2016 with no name change and the company expects to land on a perfect replacement within one or two weeks to give a new lease of life to the otherwise threatened entity. Tata is not the first victim Dreaded diseases were considered one of the major culprits in drastic face saving brand name changes happened in yesteryears too. In 1970s, one of the most popular brands among appetite suppressing caramels was AYDS which had campaigns all over US with the then famous slogan ‘AYDS helps you lose weight’. There is no prize for guessing which disease prompted them to change their brand name to Diet AYDS (Aydslim in UK). Even the name change failed to save the brand and the company downed it shutters very soon. In 2013, Belgian chocolate-maker changed their name from Italo Suisse to ISIS as it no longer had much association with either country, according to a Reuters report. A decision it soon regretted in 2014 as the Islamic State of Iraq and Syria (ISIS) started releasing horrific videos of beheadings and murder on YouTube. It led to stores refusing to stock their chocolate till the company decided to quickly ditch the name and adopt Libeert, the family name of the company’s owners, for their chocolates. Such setbacks are not so rare in Automobile Industry. Global giants like General Motors, Ford and Honda were victims of naming bloopers which cost them dearly. In 1971, Ford couldn't understand why their Pinto model wasn’t selling in Brazil. After some research, they found out that “Pinto” in Brazilian is slang for “tiny male genitals.” Similarly GM’s Chevrolet Nova was a failure in Spanish speaking countries because it translates to "It Doesn't Go". Who wants a car that fails at its sole job? In 2001, Honda intended to release a car known as the Fit in Asian markets as the Honda Fitta on the European market. However, in Swedish, fitta means female genitalia. Honda then rebranded the car as Honda Jazz. Many Multinational companies have suffered similar setbacks from time to time. Many of them saved their face by changing the brand name while many others were forced to withdraw the brand itself from the market or was totally wiped off. The question ‘what’s in a name’ is of no value when it comes to naming a brand. So be careful, we really don’t know what connotations may come!
Posted by RP on 26 December
As per the prediction by Goldman Sachs and CLSA that oil may fall to $20 per barrel levels if US shale production is not controlled and with Iranian oil getting back on track following the lifting of sanctions, coupled with the low demand globally. The immediate impact on India will be positive since the current account imbalance will further reduce, and finance minister Arun Jaitley will get another oil bonanza of the sort he has got this year—with crude oil prices falling from an average of $85 for FY15 to $50 for FY16, Jaitley will get an additional R65,000 crore through additional imposts on oil; a fall to $20 in FY17 will afford him the chance to do this again, though the magnitude will be proportionately lower. Given the economy is likely to continue to be weak, Jaitley is likely to continue to spend the money on additional capex as opposed to routine expenditure though just the additional expenditure on the pay panel and the defence force’s OROP will cost around R1 lakh crore extra, or around 0.7 percentage points of GDP. The larger implications of cheap oil are, however, less comforting. Since sub-40 oil means a weak global economy, exports will suffer even more and, with economies in the Gulf badly affected, there could be an impact on India’s $65-70 billion of annual remittances. More problematic is the likely impact on India’s crude oil production since the public sector ONGC’s break-even cost is around $40—that means a significant part of its expansion plans, such as the $6-8 billion for the 98/2 field could get pushed back a few years. Given this, it is amazing that the government is locked in a court battle with its largest private-sector producer Cairn India over not extending the latter’s production sharing contract—Cairn’s average oil production cost is $20-22 for existing fields and while it will rise for new exploration, break-even costs will be lower than for ONGC. Not only has the oil ministry not taken a decision on extending Cairn’s contract in the Rajasthan basin, it continues to charge a cess on production that was fixed at a time when crude was trading at over $100 as compared to today’s $36—the cess was raised from R1,800 per tonne to R2,500 in 2006 when oil prices rose from $35 to $65, and then again to R4,500 in 2013 when prices crossed $100, but was not revised downwards as it should have been automatically; that means domestic oil producers pay a cess equal to around 26% of current crude oil costs. This makes production uneconomical and means it is cheaper to import. More shocking, while the government dithers over lowering this unjustifiable levy, other countries like the US, the UK, Russia and Argentina are improving their fiscal terms in order to ensure oil producers don’t slash their exploration budgets dramatically—most oil firms have reduced their exploration budgets in the face of collapsing oil prices. A useful lesson for oil minister Dharmendra Pradhan is that long periods of low-priced oil are followed by long periods of high-priced oil since it takes several years for oil to flow after the investment cycle resumes. If India doesn’t do its best to ensure exploration investment remains at a certain base level—the government is also locked in a legal battle with Reliance Industries on gas pricing—it will be caught short when crude prices start rising and local production stagnates.
Posted by RP on 17 December
The fact that the government got a mere Rs 3,770 crore worth of declarations for black money held overseas when it opened a one-time compliance window in October seemed to suggest estimates of money stashed away in Swiss vaults was vastly exaggerated. To support the assessment is the fact that the talk of black money flowing out of India has been accompanied, over the decades, with talk of it coming back into the country through the participatory note (PN) route. At the same time, assuming there is something to the Global Financial Integrity (GFI) numbers used by the BJP’s top brass to estimate Indians have $462 billion stashed overseas, some perspective is required. For one, at $83 billion, the number given for illegal forex outflows for 2013—mostly through under-invoicing exports and over-invoicing imports—represents just 4.4% of India’s GDP. More important, with the amount being siphoned out rising 4.3 times between 2004 and 2013, this underscores the importance of focusing on money being siphoned out right now as opposed to worrying about the past—as both GDP and trade rise, the amount allegedly being siphoned out also rises dramatically. That is why it is important that customs officials have a robust database to compare the value of both exports and imports on a 24×7 basis, and such databases are easily available globally. The Indian Customs Valuation Database Project was initiated to develop a real-time, electronic database in respect of goods imported at all customs stations in India. “The idea is to provide instant access to the combined data, duly analysed and flagged by the Directorate of Valuation (DoV), to all assessing officers for their use as an effective tool to check under-valuation and valuation fraud so as to safeguard customs revenue,” the Central Board of Excise and Customs has outlined as the objective of the database. But the Tax Administration Reforms Commission (TARC) in its report has pointed out that data management and sharing has been a major problem in the revenue department. While there is a need to create a unified and robust data collection, dissemination and sharing within the revenue department, as suggested by the TARC, utilisation of various global platforms and organisations providing important trade pricing data through this window is critical for this exercise. Trade data exchange windows in the East African Community, European nations and also trade facilitation agreements, have succeeded in curtailing loss of substantial customs revenue on account of trade mis-invoicing, and there is no reason why India can’t do the same to curb illicit outflows and raise customs revenue that can be utilised for development.
Posted by RP on 14 December
The inking of a Memorandum of Understanding between India and Japan on civil nuclear energy is significant. Its significance goes beyond India-Japan bilateral relations, as do its implications, not least of which is the mobilisation of the much-vaunted United States – India Nuclear Cooperation Approval and Nonproliferation Enhancement Act. The MoU signed by Indian Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe, was positioned as being about more than just commerce — “Japanese private investments are also rising sharply,” said Modi — and clean energy; but also a sign of mutual confidence and partnership for a secure world. "No friend will matter more in realising India's economic dreams than Japan. We have made enormous progress in economic cooperation as also in our regional partnership and security cooperation," said Modi after signing the deal. On his part, Abe said, "We have taken relationship to a new level." Now onto the Americans, and on his India visit in January 2015, President Barack Obama spoke about how six years after his predecessor George W Bush and then prime minister Manmohan Singh signed a nuclear deal, the countries were finally “moving towards commercial cooperation, consistent with our law, our international legal obligations, and technical and commercial viability”. It is the factor of ‘commercial viability’ that has held back the India-US relationship since GE-Hitachi and Westinghouse (owned by Toshiba) — the two biggest manufacturers of nuclear reactors in the US — are controlled/owned by Japanese companies. And until as recently as March this year, Japan opposed the India-US nuclear deal on the grounds of the ‘tracking’ clause — which the US had withdrawn during Obama’s visit, even after the prickly issue of ‘liability’ had seemingly been resolved. With Saturday’s signing of an MoU on civil nuclear energy between Modi and Abe, two bottlenecks could swiftly be removed. First, India no longer has to choose between slightly obsolete Russian nuclear technology and expensive European Pressurised Reactors from French manufacturer Areva. The added option of American nuclear technology manufacturers and indeed Japanese ones will mean competitively-priced nuclear reactors for India. With India’s growing energy demand and drive towards green energy, nuclear power will play a huge role in the years to come. Secondly, Tokyo’s signing of a nuclear agreement with New Delhi also sends out the message that Japan backs India’s membership in the dual-use technology denial regimes — the Missile Technology Control Regime, the Wassenaar Arrangement, the Nuclear Suppliers Group and the Australia Group. Membership of these groups, something India has been chasing for a while, has clear benefits: Access to uranium for starters; decision-making power on issues of export control and non-proliferation; and a boost to India’s hopes of permanent membership in the UN Security Council. However, there is another factor that must be borne in mind, and that is the Japanese pro-nuclear lobby. After four years of intense protests in the wake of the Fukushima reactor disaster, the reactor was finally restarted in August this year. The lobby is clearly powerful, but despite a bullish pledge earlier this year that 2015 would be the year reactors across the country are restarted, Abe knows that the Japanese public at large will not stand for this. Ultimately, the notion that the signing of the India-Japan nuclear deal is strongly linked to keeping Japan’s nuclear manufacturers afloat, is hard to shake. So too is the idea that Tokyo’s concerns about a nuclear deal with New Delhi — liability, tracking etc. — have been outweighed by its own economic concerns. For better or worse, the deal has been signed. What India, Japan and indeed the US do with it remains to be seen.
Though the bailable warrants issued by the Delhi High Court against the promoters of Micromax in a royalty infringement case should be a wake-up call for those trying to cock a snook at the law, the real issue goes far beyond this. In this particular case, after hearing Ericsson’s arguments—it said Micromax refused to even negotiate the Fair Reasonable And Non-Discriminatory (FRAND) terms it was offering—the court ordered Micromax to pay the royalty. While Micromax didn’t do this, Ericsson alleged its promoters set up another company to assemble phones—and since this company was not covered by the original court order, it didn’t pay any royalty either. While the courts will, eventually, resolve the issue, paying FRAND royalties actually helps manufacturers. Unlike normal patents that exclude others from producing an item, a FRAND gives firms like Micromax—by definition, FRAND means licensing to everyone—access to hundreds of patents at a reasonable royalty and allows them to produce a phone in no time. And given how firms like Ericsson spend around $5 billion annually on R&D, the royalties are critical. While many firms argue the royalty rates are exorbitant, especially when you add them for various components, this is not correct. For one, there are no cases of royalty rates exceeding 5% of the value of the handset for all patents put together—in the Ericsson case, it is just 1%. Two, except in the case of semi-knocked-down (SKD) kits imported from fly-by-night manufacturers in China, royalties are paid by the Chinese firms anyway and are therefore built into the import price—if the phone was made here, though royalties would be paid to MNCs, the government could collect a withholding tax on this. Indeed, since India levies a 12.5% countervailing duty (CVD) on imports of phones where there is no value added, these firms are paying more in terms of import duties than in terms of royalties—it is a different matter that many importers manage to evade the CVD despite importing SKD kits where there is little local value addition, though that is something that the customs is trying to fix. Indeed, with imports of phones already around $18-20 billion, that’s a lot of forex being wasted and a lot of CVD being evaded. Apart from saving forex by manufacturing phones in India, the ultimate solution to the royalty issue is for Indian firms to have their own patents—in mature markets, most big manufacturers cross-license their patents and save on costs. But since manufacturing will not take place as long as firms can continue to import SKD kits while avoiding paying the CVD, no meaningful R&D is likely either. Indeed, while the government imposed the 12.5% CVD on mobile phones in the last budget to attract manufacturers like Foxconn to do value addition here, as long as SKD-importers get away, a Foxconn is unlikely to do much business here. One way out, next February, is to put a mobile-phone-type CVD on printed circuit boards (PCB) as well—this will finish off the SKD market and ensure firms import parts in completely knocked down (CKD) condition; ‘populating’ the PCB, to use manufacturing jargon, means adding around 10% value in India; over a period of time, Indian manufacturers will move up the value chain, doing more design work as well as creating their own patents. Finance minister Jaitley took the first step in promoting electronics manufacturing in India last year, he needs to take the next one now.
Most reactions to the news that Facebook founder Mark Zuckerberg, and his researcher-spouse, Priscilla Chan, will, in the course of their lives, give 99% of the stock they hold in the social media company, currently valued at $45 billion, to a charity controlled by them, have either been wildly celebratory or churlish in their criticism. While it is true that the Chan-Zuckerberg household—with their new-born daughter, Maxima, whose birth marked the announcement—is the current star of the expanding universe “philanthrocapitalism”, critics are speculating about possible motives, from tax dodging to influencing public-policy. Many argue that, had Chan-Zuckerberg encashed the stock, they would have had to pay a capital gains tax that would have aided many government-run welfare programs, as would have a sizeable estate tax, had they willed the stock to their descendants. Also, as per US tax law, the couple will receive credits equal to the stock’s market value on the day they donate it to the Chan Zuckerberg Initiative, a limited liability corporation (LLC). Some of these credits can be rolled over to protect income such as Zuckerberg’s yet-unearned salary from Facebook. Though this cover will only be partial, the sum involved could be huge. Moreover, the LLC structure will give the couple a significant say over what causes the charity endorses, meaning even if the Initiative starts out as non-partisan, the money involved in philanthrocapitalism guarantees donors a greater sway over public policy than ordinary citizens. But if we go by the precedents set by Western philanthrocapitalists—the phenomenon is, by no means, a rarity elsewhere; India, for example, has the Tatas, among others—the Initiative could leave the world a better place. The exemplary work done by the Bill & Melinda Gates Foundation, especially in curbing HIV/AIDS, shows Chan-Zuckerberg the path to changing the world.
Though RBI monetary policy review retained its FY16 GDP forecast at 7.4% and Jan-March 2016 inflation at 5.8% – with a mild downside risk to both – it has done well to not cut rates after the 50bps of front-loading in September. It is true CPI inflation rose to 5% in October from 3.7% just two months prior to that, but that was more related to the base effect since CPI had dropped a lot in the same period last year – more realistic CPI numbers will emerge after December. This is something RBI has also hinted at when, in its review, it said “the Reserve Bank will use the space for further accommodation, when available, while keeping the economy anchored to the projected disinflation path … to 5 per cent by March 2017”. There are, however, too many wild cards for RBI to be sanguine. For one, as RBI itself says, the rabi sowing data along with the poor reservoir situation means the government’s food management will have to be very good. While the past suggests this may well happen, the Seventh Pay Commission (SPC) will be a lot trickier. The RBI is optimistic about how this will be handled – the direct impact on aggregate demand, RBI says, “is likely to be offset by appropriate budgetary tightening as the Government stays on the fiscal consolidation path”. If that is indeed true – which is why it is important to wait for the Budget – that is good news, though it would have its implications for the consumption-led growth most are banking upon. The SPC impact, it is true, will be lower than the previous one since there will be less arrears, but it has to be kept in mind that government emoluments rose from 2% of GDP in FY08 to 2.9% in FY10 (due to the staggered, but large, arrears) and finally settled at 2.5% of GDP after a few years. Apart from the salaries, it is the pension impact – especially the one-rank-one-pension type of recommendation – that is the most worrying. As SPC points out, the department of posts has 4.6 lakh employees according to one official source, 2.1 lakh according to another while SPC itself puts the number at 1.9 lakh – imagine what this will do to the pension bill. There is, also, the impact on teachers and PSUs that will follow the SPC award and, in a year or two, the states will also follow. Worse, unlike the case in FY16 where falling oil prices allowed the government to net 0.3% of GDP by way of additional taxes, FY17 is unlikely to afford such easy solutions. Waiting for the budget will give RBI clearer signals.
New Delhi: The very noble purposes of patent laws are to protect and encourage innovation. A patent is primarily a right granted to anyone who invents a new, useful and non-obvious process. The government is taking a hard look at revamping the country’s patent office. That’s all the more important for driving the Make-in-India initiative. But for that it has to ensure that our patent laws are in sync with that of the US. All along, India has been arguing that its patent protection laws are in keeping with WTO norms and are aimed at preventing ever-greening of patents that MNC pharma firms are indulging in. According to a recent report, the Department of Industrial Policy and Promotion (DIPP) is all set to reduce the time for approving a patent application from the current 5-6 years to 15 months, and for trademark applications from 13 months to just one month. To achieve that, the Controller General of Patents Designs and Trademarks (CGPDT) has hired 459 additional patent examiners. That’s important as there were 2,26,339 patent applications pending as of July 31 this year. On an average, around 43,000 patent applications are filed annually. After accounting for those that are withdrawn, around 38,000 patent applications need to be examined. With the additional staff, CGPDT will be in a position to handle 60,000 applications soon and close to 1 lakh applications in the next 2-3 years. To ease the process, the patent office also plans to do away with the charge levied for withdrawing a patent application. With around 15% of the applications getting withdrawn, that too will ease the processing of patents. Once that happens, the stage is well set for local entrepreneurs to get their own patents quickly.
Posted by NN-spl corre:
For 2015, the redesigned Chevrolet Volt has won the award for Green Car of the Year the second time in its two-generation history. According to the Green Car Journal editors who voted, the 2016 Volt stood out for its technology, extended electric driving range, and overwhelming efficiencies compared to the field. Chevrolet Volt was selected from five finalists. Ron Cogan, editor and publisher of Green Car Journal, described the new Volt as “a milestone” that improved upon “an already technologically advanced ‘green’ car and delivering what buyers have longed for, including an impressive 53-mile driving range on a single charge.” In addition to these advances, Cogan went on to praise the Volt for its styling, onboard electronics, and addition of the fifth seat in the back. For the Chevy Volt, the 2016 Green Car of the Year honor continues a streak that began when the first-generation model won in 2011. This time around, the Volt was the only car with a long-range electric vehicle power train. Rounding out the list were the Audi A3 e-tron, Honda Civic, Toyota Prius, and Hyundai Sonata, the last of which has a plug-in hybrid variant for 2016. With diesel models running for cover as of late, the Volt delivered an all-around package that judges could not deny, even with the impressive fuel economy specs the new Prius and Honda Civic boast. In fact, this award is just the latest accolade in what could become a heavy haul for Chevy. Earlier in November, the 2016 Volt landed the Kelley Blue Book Best Buy for the electric and hybrid category. Priced below the outgoing model, the redesigned edition features more power, increased range, and an EV-like economy that makes it a true value for new car buyers. The key to understanding the second-gen Volt is to think of it primarily as an electric vehicle. Whereas the first edition offered 38 miles in electric mode, the jump to 53 electric miles means most drivers will make 90% of trips without gasoline. In fact, in the largest electric vehicle study to date, researchers found Volt drivers ahead of Nissan Leaf drivers who had a pure EV at their disposal. Chevy has estimated that driving frugally, you can travel 1,000 miles between fill-ups with this car. That means the new model will do even more in a marketplace that yearns for workhorses in the EV segment. According to drivers, critics, and most journalists, the 2016 Volt ticks all the boxes. Given the fact it will be released nationally in spring 2016, Green Car of the Year may be the latest of many awards the new Volt receives in the next few months.
In an attempt to give investors, both in India and abroad, time to come to terms with new reality – plan to phase out corporate exemptions and deductions – finance minister Arun Jaitley has adopted a commendable strategy of announcing the plan before next budget session. In his budget, Jaitley had announced that the reduction in the corporate tax rate from 30% to 25% over the next four years would be done in tandem with corresponding phasing out of exemptions and deductions. While this will remove uncertainty and confusion over the government plan, prior consultations with the industry is a good idea as good tax law is about certainty and not taking taxpayers by surprise. Under the plan, all profit- and investment-linked or area-based deductions will be phased out for both corporate and non-corporate tax payers. The Central Board of Direct Taxes (CBDT) has also clarified correctly that the provisions having a sunset date will not be touched and there will be no alteration to either advance or postpone the sunset date. All fresh investment that will be made in India will now have to be made on the basis of the inherent strength of the project—the size of the domestic market or advantages of manufacturing here and exporting—and could, perhaps, be boosted by some sops offered by state governments. This is a bold gamble since removing the exemptions—as high as Rs 62,400 crore in FY15—could make many capital-intensive projects look unviable. Indeed, many of the big-ticket investments planned by governments in the past, such as special economic zones (SEZs) and national investment manufacturing zones (NIMZs) which are even bigger, or low-cost housing has been predicated on large tax concessions. The gamble, however, may turn out to be a winning one since, in the past, surveys have shown that several firms that have come into the country came in because of India’s inherent advantages, and were happy to get the tax advantages, but these were not the deal-clinchers. Indeed, not having investment sops will also make negotiating the tax regime a lot simpler, and long-term investors should look upon that as a positive. Removing the tax sops is also a recognition of the fact that India has a lot more advantages that it did not have before. In the past, even if tax sops were given, few firms would want to, for instance, manufacture mobile phones in India—but now that there is a market of nearly a billion phones already, the lure of the replacement market is huge; and skilled and low-cost labour makes exports an option. In the case of the automobile sector, similarly, as Suzuki first showed, there were important cost savings to be made by manufacturing here and exporting. In the defence industry, it is the allure of the huge domestic market that will drive investment, not the tax sops. While many corporates will argue that the moves could result in a loss of investment, the finance minister will do well to stay the course.
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