The Economic Legacy of Atal Vajpayee - Red Ribbon Asset Management Plc

The Economic Legacy of Atal Vajpayee: A Solid Foundation for Growth

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The boy from rural Gwalior had given up studying Law during the turmoil of the Partition Riots, but Law’s loss proved to be India’s’ gain because Jawaharlal Nehru quickly spotted something special after listening to his maiden speech in Parliament House a dozen or so years later: “This young man will be our Prime Minister one day”. And of course Nehru was right, because that boy from Gwalior was Atal Bihari Vajpayee, who died last week at the grand old age of 94. History has rarely given one man an opportunity to shape the economic future of a nation, but the modern Indian economy was to take root under Vajpayee’s three periods in office. The fact that India is now an economic super power owes a great deal to his foresight.

Vajpayee became Prime Minister in 1998, immediately after the seminal administration of Narasimha Rao, which had taken the first faltering steps towards opening India up to the new global economy. After decades of Central Government stasis and only six years of economic reform, small wonder that most of the subcontinent’s business community were initially sceptical about Vajpayee’s ability or appetite to continue to roll out the Rao inspired anti-protectionist and anti centralisation initiatives. Not least because the Mandarins running the BJP’s parent body, his own party were pretty much protectionist and statist to a man (and they were all men).

But Vajpayee had never been a subscriber to Protectionist Politics, and he defied all expectations by not only continuing with the Rao agenda but expanding it with all the enthusiasm of…well, with all the enthusiasm of a politician used to getting his own way despite established party orthodoxy. Think Margaret Thatcher in a dhoti.

Vajpayee laid radical foundations for modern and deregulated Insurance and Banking sectors in India and for increased foreign investment in India’s real estate markets. He had also removed all quantitative restrictions on imports by 2002, replacing them with a framework of domestic tariffs referable in particular to the all important agricultural sector (Brexit minded politicians in the United Kingdom care to might take note). In a few short years his Administration had also radically extended capital markets and significantly reduced the State’s involvement in public sector banks. But most of all, perhaps more than any of his other contributions to India’s economic resurgence Vajpayee totally revolutionised the subcontinent’s Telecoms Sector in ways that we are still coming to terms with today.

In short…no Vajpayee, no Flipkart.

Vajpayee set up a National Task Force on Information Technology and had the foresight to bring onto it pioneering entrepreneurs including N.R. Narayan Murthy (now of Infosys) and Azim Premij (now Wipro): people, in short, who actually knew what they were doing. How’s that for revolutionary? And the result was the New Telecom Policy of 1999, which introduced new licensing protocols making it easier and more attractive for private interest groups to enter the market, at the same time deliberately backing the State away from crucial decisionmaking. Can you imagine that ever happening on the subcontinent before 1991?

And from the perspective of 2018 we can now see the true scale of these changes. In 1991 only a little over 2% of India’s population had access to telecoms technology, that figure is now over 90%. The fastest growing large economy on the planet also has one of the most fluid and innovative technology markets anywhere in the world, driven by an increasingly urbanised and youthful population that views the mobile phone and the tablet as their shopping instruments of choice. They have Bill Vajpayee to thank for that.

One way or another, it was certainly all a very long journey from Gwalior.

Nobody understands India’s potential for growth better than Red Ribbon Asset Management, which has placed the subcontinent at the heart of its investment strategies since the company was founded more than a decade ago. With an unrivalled knowledge of local market conditions, the Red Ribbon Indian Equities Fund offers a unique opportunity to share in that potential.

Red Ribbon CEO, Suchit Punnose said:

I have often thought that an economy opens out fully over a thirty year cycle, beginning with the removal of barriers to trade and expansion of domestic markets from central government control; moving into a second ten year period of market adjustment and recalibration as those changes take root, and then into a third decade of explosive growth. We saw that happen in Russia and in China and now we are seeing it happen in India: we are now living through this third decade of explosive growth on the subcontinent which has seen it become the fastest growing large economy on the planet.

But we should never forget the importance of those first two decades, laying a solid foundation for what comes after is a key part of the process, and neither should we forget that in India’s case the guiding hand for most of this period was the hand of AB Vajpayee. We have a lot to be grateful to him for.

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Eco Hospitality India - Red Ribbon Asset Management Plc

Eco Hospitality as part of India’s Climate Change Agenda

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What exactly do we mean by Eco Hospitality? McDonalds has its own unique take on things, announcing plans to serve rice at tourist resorts on the subcontinent: rice with extruded cheese or spicy packet sauce. Take your pick. And PepsiCo India has a global sustainability agenda as well, planning to reduce the size of its Lays and Kurkure snacks in a valiant effort to “limit the company’s global footprint”. No sign yet of any plans to reduce the price of the smaller bags though. But beneath these slightly risible gestures there is a serious point. We have all witnessed the cruel after effects of the recent monsoons in Kerala, which have displaced hundreds of thousands and claimed the lives of hundreds more. And global warming is widely identified as a key factor behind the unusually heavy rainfalls.

So its welcome news that with or without extruded cheese on our rice and smaller bags of crisps, the subcontinent is already working at the forefront of global climate change policies, especially since the United States withdrew from the Paris Climate Accords last year, and India certainly knows what Eco Hospitality means because Eco Tourism is now an integral part of its economy.

Take one small example: operating at the epicentre of this month’s flooding in Kerala, the Tourism Department announced an initiative last month which will literally light up tourist spots by installing solar powered street units, including along the entire length of the beautiful Kovalam Beach where LED lighting systems link the seashore to local thoroughfares. The solar units are also hooked up to the Internet through a mobile app that will monitor power usage and report in if units are damaged or tampered with. It all costs Rs 31 Lakh but will save the State much more in electricity costs and, much more importantly, will help preserve the State’s precious environment for the future. There are also plans to extend the project to Varkala and Akkulam.

It might seem slight and insignificant given the scale of the recent disaster, but when Kerala recovers (as it will), it is one step further forward towards addressing the environmental issues that contributed to last week’s events. And on any basis it’s a lot better than extruded cheese and a bag of crisps.

Another good example of an Indian business looking to work in harmony with its environment is Lemon Tree Hotels where every hotel in its chain on the subcontinent will now adopt a stray dog from the local area and give it a home in the lobby. As history tells us, small steps can make a difference if we take them together. And as Eco Hotels has also demonstrated with its innovative “green hospitality” brand, the concept doesn’t just make environmental sense: it makes good commercial sense too, with lower operating and capital costs factoring into a leaner business model. Lemon Tree’s shares jumped 2% in a single day on 17th August, so the model is obviously working.

Red Ribbon Asset Management is the founder of Eco Hotels, the world’s first carbon neutral mid market hotel brand, offering “green hospitality” as part of a progressive roll out across India which is designed to build and expand on economies provided by the platform in conjunction with explosive growth in the Indian tourism sector (and mid market hotels in particular). The brand offers sustainable living without compromising on standards of hospitality and will cater for commercial and recreational travelers alike.

Red Ribbon CEO, Suchit Punnose said:

I think we were all shocked to witness the scale of the devastation that has unfolded in Kerala this month, and our best wishes and sympathies go out to all of those who have been so severely affected. But it is right too that we try to understand the reasons behind this, the worst monsoon flooding in India for more than a hundred years and its difficult to resist expert suggestions that global warming and avoidable harm to the environment could well be a major cause. So it is obviously important that we should try to do something about those long-term trends as well.

I am proud that India is working at the cutting edge of climate change policies across the globe and, in however small a way, those policies will I am sure help to make Kerala a safer and more secure, even more beautiful place to live in the future. Eco hospitality is a vital part of that equation for an area which is so heavily dependant on international and domestic tourism. As the article says, small steps taken together can change the world.

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India Blockchain capital of the world - Red Ribbon Asset Management

India as Blockchain Capital of the World

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In June this year at the London Business School, the Chairman and Managing Director of Egypt’s Commercial International Bank anticipated his Regulator’s response to any attempt to pursue the Blockchain strategies he and others (rightly) believe to be key to the future of international banking: the Regulator, he smiled, would shoot him. Hisham Al Arab is no stranger to firearms, having fronted down an armed contingent of workers in his banking hall in the aftermath of the Arab Spring, but it’s unlikely he would take any such threat from the Regulator seriously. But he was right to highlight the significance of regulatory drag as a key feature of emergent Blockchain technologies, and also right to look across admiringly at burgeoning technology markets in India, which are rapidly making the subcontinent the Blockchain capital of the world.

All of which might seem a little odd given the Reserve Bank of India announced on 6th April this year that the subcontinent’s Banks should stop offering services to crypto exchanges and crypto related businesses. That, however, was merely a strident coda to last year’s demonetization policy and on closer analysis the directive was always going to be more of a pause than a full stop. Since the Union Budget was delivered in April, India has made huge strides to becoming a world leader in Blockchain technologies and no Government (or Central Bank for that matter) can afford to ignore this practical reality. Mr Al Arab was right to be envious.

And of course Blockchain technologies have profound implications for Central Banks too as they strive to remain relevant in a digital world. The Reserve Bank has since adopted a much more nuanced and structured acceptance of digital business platforms and, crucially, their regulation all of which is helping bring to fruition Prime Minister Modi’s vision of a digital subcontinent: what is now being characterised as the Internet of Value.

For example, the Modi Government is currently backing an initiative using Blockchain technology to manage its own agricultural subsidy programme. The National Institute for Transforming India, an influential Policy Think Tank on the subcontinent, has now signed an MOU with Narmada Valley Fertilizers that will both improve the efficiency of distribution of resources in this hugely important sector and also improve transparency of the overall subsidy process. That has been made possible through Blockchain technology.

And hard on the heels of this announcement Telangana’s Technology and Electronics Department also last week signed an agreement to launch India’s first Blockchain District: structured specially to incubate start ups in the sector as well as developing a variety of strategies designed to resolve market issues including future regulation. Telangana’s IT Minister wasn’t coy in expressing the scale of his ambition: “It is a huge step in reskilling the future. Blockchain experts will be our crown jewels, working together to make India the Blockchain Capital of the World”.

And as a still further example, more than 24,000 farmers in Guntur have bartered their land as part of an initiative by the newly formed state of Andhra Pradesh to pool 53,000 acres for construction of a new capital city at Amaravati: the whole complicated process is based on Blockchain technologies which are streamlining every stage of the transfer process, circumventing the existing creaking system of paper based land registration. The new digitised registry also reduces the risk or malevolent intervention and increases transparency. It would not be possible without Blockchain.

So a lot has changed since April. The Government, far from distancing itself from the technological economy, is now fully embracing the required changes and putting its full weight behind India’s Blockchain revolution…and it won’t need a gun to get its way.

Red Ribbon CEO, Suchit Punnose said:

I think we were all a little surprised at the Central Bank’s announcement in April this year, delivered shortly after similar comments were made by the Minister of Finance as part of the Union Budget debate (no surprise there), but as the article rightly points out this was not so much a policy imperative as a straw in the wind. The Minister and the Bank were in truth putting down a tough marker on their resistance to crypto markets becoming an outlet for money laundering after demonetization, and quite rightly so. But neither Government nor Bank can afford to ignore the importance of the Blockchain sector.

Events since April have proved that they haven’t in the slightest ignored its importance.

With initiative after initiative now being actively supported and indeed promoted by the Modi Government, there is every reason to believe India will indeed become the Blockchain capital of the world. Blockchain technologies are steadily and irreversibly being placed at the heart of the subcontinent’s powerhouse economy.

As I have said before, there is no doubt that the key innovations Blockchain has to offer will fundamentally change the way that we all do business in the future and I’m very proud that Red Ribbon will now play a part in that process. As the article rightly says, India is now at the forefront of key developments in the Blockchain and Crypto Currency sectors and I want our investors to be able to share in the exciting opportunity that offers.

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Interest Rates India - Red Ribbon Asset Management

Interest Rates: What the Reserve Bank of India can teach the Bank of England

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Inflation, as it happens, is also attracting considerable attention not only on the Monetary Policy Committee of the Bank of England but also at the Reserve Bank of India which anticipated recent events in Threadneedle Street by raising its own interest rate to 6.5%. That came hard on the heels of a hike of 0.25% in June, which was the first rate increase on the subcontinent for more than four years. And given the two Central Banks now appear to be moving in ever closer lockstep on the issue, it’s no surprise that the smart money in the City is on Urjit Patel to replace Mark Carney as Governor when the first overseas national to hold the position returns home next year to spend more time with his money. Urjit Patel is currently Governor of the Reserve Bank and his own three-year term ends next July. Mark Carney’s time is up next June, so If nothing else, it looks like good timing.

And should Urjit Patel eventually end up in the hot seat he could do worse than draw some lessons from the underlying reasons that are driving inflationary growth in India at the moment, which stand in stark contrast to those troubling the former mother country. As a seasoned economist he might also remind himself of the old adage that there is no inflation in a graveyard: consumer demand can only fuel inflation if consumers have something to spend.

The UK’s headline inflation rate of 2.4% is barely driven by consumer spending at all for the simple reason that domestic consumers have very little surplus income to spend. Such pressure as there is on that front is driven rather by the biggest rise in UK consumer borrowing since the global financial crash of 2008. Of much greater importance is the increased cost of imported goods due to a weakened sterling coupled with (inevitably) ongoing fears over Brexit, so the decision to raise rates last week had much more to do with bolstering the value of sterling going forward (although, in the light of market movements in the aftermath of the announcement, that may itself be something of a triumph of hope over experience).

Now lets take a look at India.

Last’s week’s 0.25% rate rise on the subcontinent was primarily a response to rising crude oil prices on international markets. India has spent 12% more on imported oil since April this year, reflecting an upward pressure in key prices and, to a certain extent, a 3% depreciation in the value of the rupee against the dollar over the same period (dollars being, of course, the lingua franca of oil). But that’s nothing in itself to be worried about because there’s a reason why India is buying all this extra oil: it is (quite literally) fuelling the economic expansion which is now expected to see India’s GDP grow by 7.25% this year; and with limited reserves of its own the subcontinent is bound to be vulnerable to adverse price movements on global markets. That is a necessary cost of its startling economic success.

And as for the other element of the inflation equation, we hardly need reminding of India’s unprecedented surge in consumer demand. With the fastest growing population on the planet, an increasingly younger demographic and steadily rising rates of average income, very little of this is leveraged with debt (unlike the UK) but India’s annual consumer inflation rate still hit 5% in June (the eighth month in a row that it has exceeded the 4% medium term inflation target). But again, that is hardly a cause for significant concern either, bearing in mind that the RBI target has an upper tolerance of 6%, which is above the current inflation return. After all, there’s no inflation in a graveyard.

So unlike the Bank of England, the Reserve Bank of India (although pursuing a similar monetary policy) has in reality simply trimmed its inflation projections rather than run scared of them, confident in the knowledge that it is not only still working within existing tolerances but also harnessing unprecedented economic growth. That’s why it has been able to maintain its well-rehearsed policy of neutrality: encouraging growth and keeping inflation under control. Urjit Patel might not be able to take that particular policy with him if he comes to London next year.

Red Ribbon Asset Management has placed India at the heart of its investment strategies since the company was founded more than a decade ago, and nobody understands the subcontinent’s potential for growth better than Red Ribbon. With an unrivalled knowledge of market conditions on the subcontinent, the Red Ribbon Private Equity Fund offers a unique opportunity to share in the potential of the fastest growing large economy in the world.

Red Ribbon CEO, Suchit Punnose said:

I had heard that Urjit Patel was being tipped to take over as Governor of the Bank of England when Mark Carney moves on next year, and for my part I think he would be an excellent choice. Certainly it would be a matter of great pride for every Indian to see him take the helm and build on his policy experience on the subcontinent, perhaps even (as the article points out) adding some of the subcontinent’s current economic sparkle to the UK economy.

And it is also interesting to note the radically different reasons for the Central Banks in each country making virtually the same monetary policy announcements in virtually the same week. Inflation is not always an enemy of sound economic growth, and in India’s case it seems rather to be an inevitable product of its own success. As the article says, there’s no inflation in a graveyard.

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Sustainability On The Subcontinent: Making It Happen

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In 2014 the World Bank reported that environmental factors including air and water pollution, deforestation and natural disasters were costing India more than $80 Billion a year (just over 6% of its GDP). In addition to the human tragedy involved, that is something we would do well to remember particularly bearing in mind the severe flooding in the Northern Indian States at the moment. If nothing else it demonstrates the inescapable connectivity between the wider economy, local communities and the environment: a dynamic which sits at the very heart of Red Ribbon’s Mainstream Impact Investment Strategies for its Indian Market Portfolio.

But, of course, ongoing issues of poverty and rural poverty, in particular, have inevitably attracted more attention from Prime Minister Modi’s Government outside the prism of specific natural disasters such as those presently being experienced. In 2012, for example, just 36% of India’s population had access to rudimentary sanitation facilities.

For this reason, much of the discussion on sustainability in India has tended to focus on improving social inclusiveness; bringing the population at large and the rural population in particular up to a common standard. That ideology is certainly at the heart of recent Government initiatives on Green Energy Generation where a key focus was the need to bring sustainable, reliable electricity supplies to India’s rural poor for the first time.

In 2014 the Indian Government also launched the Swachh Bharat (or Clean India) Campaign as part of a five-year effort to improve sanitation on the Ganges and other heavily polluted rivers with the aim of making India clean by 2019 and both Domestic and Multinational Companies have proved important partners in delivering sufficient traction for the Project.

There’s a particular fiscal reason for that as well.

In 2013 India became the first country in the world to introduce a mandatory Corporate Social Responsibility programmes (CSR) which requires some 8,000 companies doing business in India to invest at least 2% of their annual profits in CSR initiatives; and as a result of that programme more than $2 Billion a year is now being invested in poverty reduction programmes as well as social and environmental initiatives The legislation also requires companies to make the relevant investment, wherever possible, in their local communities.

All of which is, of course, admirable and the resulting investment is certainly working its slow way into the roots of the Indian Economy, but is this really what we mean when we talk about investing in sustainable projects? All too often, fiscal incentives of this kind can give rise to a tick box mentality at an executive level, treating sustainability as just another (necessary) cost of corporate compliance. But it can be so much more than that. Profound and resilient long-term change is much more likely to be achieved by decoupling economic growth from it’s “adverse social and environmental consequences”; favouring investment in businesses that do not regard sustainability as a compliance exercise, but as a means of securing a competitive advantage, a resilient business and long-term financial sustainability”

That’s what Mainstream Impact Investment is all about.

Mainstream Impact Investment Strategies recognize the importance of the delicate balance between communities, the wider society and the environment at large; driving effective sustainability by tapping into mainstream market economics and delivering long-term, resilient change in the process; not just by way of one-off projects that are fiscally attractive in the short term. That is why Red Ribbon Asset Management has placed Mainstream Impact Investment Strategies at the centre of its Portfolio Management Policies. Delivering above market rate returns as well as sustainable, positive change in the process.

Read about the World Bank Report here:
Read about the Indian Corporate Responsibility Programme here:…/handbook-on-corporate-social-responsibility-in-india.pdf

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.