Saturday, October 25, 2014

How to make ink

[Ever since I visited the Volkswagen assembly line in Wolfsburg as a student in the 1960s, I have been a connoisseur of factories. I have been to few factories as fascinating as those of Hindustan Ink, now called Microink. This was published in Business Standard of 29 April 2003.]

The pride of Gujarat

Ashok V Desai

I was picked up at Santa Cruz airport and driven over to the old aerodrome which has now become a helipad. From there a helicopter took me north over the volcanic hills and the banana gardens to Vapi. There we landed next to an emerald green cricket field. Just ahead was a nine-hole golf course, and behind it, nestling in the lap of a hill, a palace with three domes. It was called a guest house, but it had all the comforts of a luxury hotel – including a circular swimming pool under the middle dome. I was visiting a company that had grown as fast as any IT firm in the 1990s. And it produces ink.
I counted eight factories – five in Vapi, two in Daman and one in Silvassa. The first thing that struck me about all of them was the space, cleanness and lack of clutter. I generally expect a certain degree of disorganization in an Indian factory – materials lying around, broken machinery put on one side, humans lounging without a purpose. None of that in Hindustan Inks factories. Although inks leave their mark everywhere, all areas except loading areas were remarkably spick and span. Every factory gave a sense of space. And every worker was engrossed in something. The processes were similar; everywhere, ink was being cooked in containers. The containers were small – say, 8’x6’x4’ for speciality inks – and huge – as big as a few rooms – for that mainstay of printing, black ink. The plants in Daman, which are more recent, looked more like modern office buildings. There was a beautiful garden in front of them. SAP had recently implemented enterprise resource planning for the entire complex, which produces 60,000 shades for 5,000 customers; now, a salesman in Delhi can enter a customer’s order, and tell him in how many days the inks will be delivered. There is a record of every pigment ordered by a customer, and Hindustan Inks can make sure that he gets exactly the same shade as he ordered many months ago.
I had always thought that ink making was a pretty simple process: you took some pigment and mixed it with some solvent to make a liquid. Actually, colour is only one dimension of an ink. More important than its look is the purpose for which it is going to be used. It may be used to print on various surfaces – paper, metal, glass, plastic or ceramic. Each has variants of texture and absorptivity. Next comes the kind of finish one wants – sharp or soft, smooth or grainy, bright or dull – these are not alternatives but spectra along which variation is possible. Thus an almost infinite range of varieties of ink can be imagined.
Ink-makers’ general approach is to make pigments – resins – on  a large scale, but to mix them into usable inks in small plants closer to clients. Many small ink-makers buy the pigments and concentrate on mixing them for clients. Hindustan Inks prepares inks in a finally usable form in its factories around Vapi and ships them across the country – and increasingly across the world. Instead of powders, it produces what are called flushes – ink concentrates dissolved in the medium – the “vehicle” – in which they are going to be finally used. That gives it the headache of supplying the precise requirements of thousands of customers; but provided it can do so, it also puts it in direct touch with final users and gives it a considerable hold on the market – a third of the Indian market. And production of flushing inks reduces material requirements by 15 per cent, and gives a superior product. The matching of customers’ demands has been made much easier by the introduction of ERP.
Hindustan Inks and other group companies are run by a family with a penchant for extreme letters of the Roman alphabet – Anjum, Yunus and Zakir. The vision is Yunus’s. After looking at the plants I went to see him. There was not a single piece of paper in sight. I asked him, “Do you do any work?” “Sometimes,” he said, “I get together with half a dozen people who have been with me for a long time, and we talk.” “What about?” I asked. “We talk about what to do in the coming years.” “And what about managing your companies?” “I don’t have to worry about that,” Yunus said, “I have very good line managers.”
He does not recruit them; he grows them. Most people joined him in their youth, and few have left. Almost all are graduates of unknown colleges like Yunus himself. I met one – manager of a restaurant in Daman – who had left Hindustan Inks. I asked him why he had left. He said it was a mistake. A friend had lured him into starting a business which failed; now he would like to go back to Hindustan Inks.
The thinking about the future has paid off. It is behind the company’s growth rate of over 50 per cent a year. It has led to the setting up of a subsidiary in the US in 2000, managed by locally recruited, experienced industry specialists, which broke even within two years. It accounts for the fact that Hindustan Inks is the lowest-cost producer in India despite the fact that it is using only a third of its capacity.
I asked Yunusbhai how he kept his capital costs so low. He said that every piece of machinery had been locally fabricated; that kept costs low, and if a machine gave any trouble, its maker could come on his bike from Vapi in 15 minutes and set it right. What did the local mechanics know about ink technology, I asked. He said that the entire technology was overseen by a consultant from Baroda who was only a few hours away.
I asked Yunus whether it was not extravagant to bring me by helicopter from Bombay. No, he said. Any company the size of Hindustan Inks would have an office building worth a billion Rupees in Bombay. He did not have one; with the money he saved, he could run a number of helicopters if he wanted. And customers from abroad would not much appreciate being put up in the Taj. But when they were flown to Vapi by helicopter, and kept in the palatial guest house, they felt they had been special guests.

Although I am hardly likely to be buying ink, I was much impressed by Yunus Bilakhia’s business sense – and also his humanity, his patriotism and his ambition. He is so Gujarati in so many ways. He is comfortable speaking in Gujarati; English is still a foreign language for him. He is unassuming and has no airs. He has oodles of common sense. He does not waste money. He trusts people. These are the characteristics I associate with the Gujaratis I know. Today, when Gujarat has become notorious for violence and prejudice, it is heartening to know that the essence of Gujarat continues to live somewhere.

Friday, October 24, 2014

Blessings of occasional and partial knowledge

[The visit of a cocky foreigner made me think about what I was doing and how well I was doing it. This column was published in Business Standard of 22 April 2003.]

Embarrassed by India’s success?

Christopher Woods, chief strategist of CLSA, has for long been a regular visitor to this country. At least once a year he comes and notes down what I have to say about the Indian economy. Soon after his last visit in March, he gave an interview to Business Standard. That itself is unusual; most foreign financial firms jealously guard their intellectual acquisitions. They absorb all information and views, which they then sell to clients at huge prices. So I was surprised to find Woods scattering wisdom free to our readers. What he said, however, surprised me more. He felt that the Indian reform process had gathered critical momentum; “[T]his is despite the skepticism of many of the capital’s ultra-negative intelligentsia, who have inherited from the British a talent for cultivated cynicism.”
That recalled our recent meeting. I had conveyed to him my view of the BJP government’s economic policies – at his request on a busy day, free of cost. Since he has come so often to see me, I assumed that this sort of interrogation was useful to him in his work. I did not undergo it to dampen his optimism about the Indian economy; if I had known he had made up his mind, I would have spared myself the time – and him his irritation.
But his interview made me wonder if I was too negative on India. Certainly, when I was in the finance ministry, I felt that the Indian journalists who came to interview me were misanthropes. Some were habitually distrustful, some malevolent; most were neither. But by and large, Indian journalists looked for dirt rather than facts, and for views rather than analysis. Foreign correspondents varied in their level of knowledge. But most would come after doing some homework and ask very specific questions. One or two were so good that they made me feel I was walking on eggs; I looked forward to their visits. There were some great Indian journalists too – Swaminathan Aiyar was the best. Admittedly, it was my job to put a positive spin, and healthy skepticism towards what I said would not have been out of place. But we in the ministry had a consistent picture of the economy, and even a critic would have found it valuable to understand our reasoning. The best milked me of facts and analysis and then wrote what they liked; the worst sought a headline, right or wrong.
I wondered if, after nine years of journalism, I too had become negative and cynical. I have a less clear picture of the government’s economic strategies today than when I was in the government, because I do not have the resources to construct one. The basic way a journalist would get the picture is by reading statements, speeches and reports. I read the Economic Survey and get no sense of strategy. I read the Commerce Ministry’s export strategy, and found it focused on commodities and embedded in the past. In his many speeches, Yashwant Sinha almost always said the right things, but I found no connexion between what he said and did. Jaswant Singh talks too little. I know only one major speech by him, to the Indian Banks’ Association in Bombay; he said basically, I want you to lend to such and such of my constituents.
I have from time to time had friends in the government, but have not necessarily been better informed because of them. They were eager to defend, and reluctant to explain. Some were very good friends before they got strategic posts and after they left them, but became poor communicators just while they were in those posts. Manmohan Singh and his principal officers spoke with one voice because they were united in thought. There was so much articulation of policy on file, in the minister’s speeches, in documents which he invariably read through, that one could speak with confidence for the ministry. Today’s officers, however good they might be, cannot, because the ministers are not capable of understanding and developing policies – and do not have the confidence in the officers to leave policies to them.
How then can one function as an economic journalist? I try to make up for lack of official inputs by reading newspapers. The great thing about India is that so much leaks out of the government; if one reads newspapers carefully, one generally gets the picture. The difficulty is that the picture does not emerge out of day-to-day reading of newspapers, for they do not give the background and do not connect up stories. There are no economic magazines with a broad sweep. Economic and Political Weekly comes closest, but has too few facts and too much opinion (except on monetary policy). So what I do is to sit down once in three months and read through the quarter’s newspapers – those that I respect.
That reading gives me an idea of where the action is and where it is tending. But it still does not give me the impression that Woods has – that the reforms process has gathered momentum. One can make a list of the “reforms” being done – sale of a PSU, introduction of state VAT, freer foreign exchange for exporters, reduction in import duty on hair oil, etc etc – and derive an impression of a process. But reforms must have a macro objective; the objective would define what is a reform and what is not, and whether it is significant or not. I see no overall end-result that this government wants to reach; instead, I see the enormous damage it has done by, for instance, borrowing ever more, raising agricultural import duties, and making government expenditure ever less productive. I just do not see the momentum of reforms. I see the unrelenting momentum of instinct for survival and greed.
Some of Woods’s cheer comes from the performance of the Indian economy; it must not be mixed up with the quality of economic policy. The Indian economy is surprisingly resilient; it reacts positively to small stimuli. But as Dharmakirti Joshi showed in his article in Business Standard last week, every industrial boom after 1996 has been short, modest and narrowly based. We do not know about the current one yet; but there are enough historical grounds for skepticism.

My remit is to write for the Indian reader. I cannot make her happy by telling her India is doing better than Burundi or Colombia. In any case, it is not my job to cheer her up, or to make her buy pharmaceutical or software shares. I am employed because someone thinks my judgment of economic affairs is good; my job is to give the reader an honest, serious personal view. So I am afraid that for the moment I do not see an alternative to cultivated cynicism. But I hope to make my cynicism amusing.

The return of colonialism?

[The Americans learnt to hate Saddam Hussein so that they could have a reason to take over Iraq. But all industrial countries have a problem for which there is no domestic solution, namely the burden of caducity. This column was published in Business Standard of 15 April 2003.]

Gerontocracy and the invasion of Iraq

Most auto-rickshaw drivers in Delhi are young – in their teens or twenties. Apparently, many passengers do not pay, and the drivers have to be tough enough not to be intimidated. So I was surprised that the driver of a rickshaw I took recently was gray-haired. Not only old but sick: he had dark shadows around his eyes, and seemed to be about to drop off to sleep. I asked him whether he was drinking or sick. He said he had a gallstone. I told him that he was obviously in pain, and should have an operation soon. He said that he could only afford to go to a government hospital, and that it was very difficult to have an operation in one. I thought that his life may be short and painful.
It was not very different in the Roman empire 2000 years ago. The average longevity then was 35. It was most unusual for someone to live beyond 50. There were some occupations where age did not matter; that of Caesar was one. But in most, it was unusual for anyone to be working over 50. Those that had accumulated wealth and reputation by then could become wise men, and join the senate or write history. The rest lived on someone’s mercy.
Things are different in advanced countries today. The British Queen writes a letter to every centenarian on his birthday congratulating him or her and wishing her or him an even longer life. But she no longer signs it personally; instead, the signature “Elizabeth R” is electronically reproduced. The day is not far when the number of letters the Queen has to dispatch will exceed a thousand on an average day.
Today, the average age to which people live in advanced countries is more than twice what it was in imperial Rome; but the retirement age has advanced only from 50 to 60 or 65. The result is an enormous rise in idle people. An idle mind is a devil’s workshop; but so is an idle body. It is amazing in how many ways a geriatric body can malfunction. The result is a huge rise in resources required by the old and the sick. Provision for the old commonly takes 10-20 per cent of the income of advanced countries; medical care takes another 8-15 per cent – and a good deal of it is care of the old.
The Romans did not believe in looking after the old. Those that were rich enough hired servants or bought slaves to look after themselves; the rest died of improvidence if they were foolish enough to live into old age. But advanced countries no longer allow that. All of them provide for state pensions that support old people reasonably well. It is another matter if the old fall sick; in that case, the quality of care a state gives them varies considerably from country to country. But in no state are they likely to die because they are not able to look after themselves; they will be looked after to the end.
But the number of old people is rising in all countries; and with it, the state-financed retirement-to-grave welfare systems are beginning to fail. Old people are worried. In Holland, the Old People’s Party brought down the government when it tried to limit their benefits. Elsewhere they have not gathered the strength and the numbers to influence politics. But they will; it is only a matter of time.
State pensions and medical care are one alternative; the other two are that private employers fund their employees’ pensions and that old people live on their savings. Employers, like governments, are feeling the pinch, and are cutting the cost. They do it in two ways: they are changing over from pensions that depend on the employee’s last salary to those that are determined by his accumulated contribution; and they are cutting down their own contribution to pensions and encouraging employees to contribute more. So the net effect of penny pinching, whether it is by governments or employers, is the same: that people have to save more for old age.
When people retire, they stop doing anything productive, but continue to consume; in whatever way old people are cared for or care for themselves, their consumption must come out of other people’s production. Savings are not accumulated consumption; they are only accumulated claims to consumption. The extent to which consumption goods can be stored and used later is limited; most of old people’s consumption must come out of surplus production by the young. The very survival of the old implies transfer of goods and services to them from the young. And the burden of that transfer is increasing as the proportion of the old increases at the expense of the young.
The young could bear that burden without reducing their own consumption if their production were going up. Rise in productivity, brought about by innovation, has been the hallmark of industrial countries for over two centuries: so much so, that economists take persistent technological change as what distinguishes advanced countries from “developing” countries.
But productivity in Japan has not increased for over a decade now. It has been crawling at snail’s pace in Germany. Its growth has slowed down in the entire industrial world. The only exception was the United States, which saw a tremendous burst of productivity increase in the 1980s and 1990s. But the bubble burst in 2000. Now productivity is crawling in the US as well – and there is muted fear that the Japanese disease may hit the US.
If productivity ceases to increase, inter-generational transfers will become a zero-sum game: the growing number of old people can be fed only by reducing the consumption of the young. It will not matter even if state pensions and medical care decline and are replaced by private savings; that will only change the distribution of benefits amongst the old. However the old are supported, their growing numbers will mean a declining standard of living for the young.
Is there no way both the young and the old can live better? There is: they should acquire slaves. Arabs in their years of prosperity brought invariably younger brides from India, Germans from Thailand, Americans from Russia. Soon after the “liberation” of Russia, there used to be organized tours to introduce single Americans to attractive Russian women. But sooner or later, the imported slaves exploit the laws of their host countries and become free. Even sooner they cease to be willing slaves.

A better way would be for a country to acquire colonies. Colonies are no more willing servitors than concubines. But their exploitation can be efficiently organized; and they can be subjected to different laws from their conquering countries. Maybe realization of this is behind the subjugation of Iraq. Oil will soon get cheaper for its conquerors.

Beefeaters and shapely women

[I have always been fond of Latin America - when I visited it more often in the 1980s, I had picked up a bit of Spanish and Portuguese as well to make the visits more interesting. José Goldemberg was a member of the Energy Research Group that I coordinated for IDRC in the 1980s. Twenty years later, he had moved from being a scholar to a minister; so I visited him in his lair, which seemed surprisingly modest to someone used to our ministers. This column was published in Business Standard of 1 April 2003.]

Sao Paolo revisited

Last week I revisited Sao Paolo after 17 years. When I was last there, my friend José Goldemberg was professor in the University of Sao Paolo. Everything interesting in science that was happening – and at that time Brazil was in the forefront of renewable energy and alternative technologies – seemed to be centred on the USP in Sao Paolo or COPPE in Rio de Janeiro. At petrol pumps there were special hoses for what they called olio verde – green oil – which was really unpotable alcohol. Olio verde is is still there, but my friends told me it was an expensive mistake. Now it is our turn to repeat the mistake. Thanks to Ram Naik, we all have to buy petrol contaminated with 10 per cent alcohol. And for whose benefit? That of the sugar barons. And of the politicians of UP and Maharashtra who lean on sugar mills in times of need.
Soon after we parted, José Goldemberg became president of the USP. From there he went on to become Brazil’s minister of science and technology. Now he is minister of environment in the state of Sao Paolo; he said modestly that because he was honest, the politicians found it useful to have him around. Anyway, visiting him was a more pleasant experience than visiting one of our ministers. There were none of the security paraphernalia that surround the latter. A female gatekeeper allowed me in as soon as I told her who I was. The taxi could enter and be parked in the compound. And Goldemberg had just two secretaries.
My other friend, Antonio, learnt a lesson after his third or fourth marriage; now he is into his nth relationship. Not with the one I had met a couple of years ago, but with altogether more intelligent and literate Francesca. Francesca is out of her first marriage. Her husband and she had lived long years in London doing their respective Ph Ds; as they entered their working lives, they found it easier to do without each other. Antonio has Paula, a daughter from his penultimate marriage, who prefers to live with him rather than with her mother in Panama. She is training to be a psychologist; as part of the training, she goes and gives company to poor patients in a public hospital, which mixes up patients with physical and psychological ailments together.
Leno, Francesca’s son, lives a more complicated life. On Mondays and Wednesdays he lives with his mother; on Tuesdays and Thursdays he has swimming lessons in a pool closer to his father’s place, so he stays with his father. Not a bad life, except that his father and mother live too far apart for him to have a dog. I recommended a chihuahua to him; he can then carry it around in his pocket.
Sao Paolo looks like a western city – full of high-rise buildings, wide avenues and motorways criss-crossing the city. But for a first-world city it has some surprising features. As one walks around the city center one finds someone selling a pair of shoes, another a stack of 78 rpm records, a telephone, or a computer keyboard. Some people have got through everything saleable, so they just sit around and ask passersby listlessly for money, without much expectation. At one place there was a queue of a couple of hundred people; they were apparently queuing for a job.
Francesca herself is looking for another job, but she is not queueing for it; she is going about it systematically. She showed me a list of a dozen jobs she was pursuing. She had applied for none; she had been recommended by her friends. She had put down asterisks against three or four; in those cases she had got access to the presidents of the companies or institutions and was going to meet them. Unemployment in Sao Paolo, I was told, was running at 20 per cent; with so many people hanging around, fair or impersonal selection procedures hardly stood a chance.
In Sao Paolo there are traffic jams in the air sometimes; there are too many helicopters. Sao Paolo has the highest number of private helicopters in the world. I was told they belonged to people who did not want to be kidnapped. (That, apparently, is also the reason why everyone who can afford it lives in a high-rise building. Security is cheaper if a large number of rich people share it; and to have a helipad on top, you need to build a tall building.) For getting kidnapped can not only be expensive, but dangerous. My hotel provided a helipad; endangered moneybags could come, have dinner and fly back unmolested. They could even hop across the street to a restaurant which has a sign saying that there are only two places in the world where the cow is sacred – India and the restaurant. The restaurant specializes in beefsteaks. But beefsteak is relatively straightforward. Brazil’s national dish is feijoado. It consists of a bean soup with various parts of the cow, such as the tongue, the tail, the udder and – well, I had better stop there. The cow is most likely to be of Indian descent, for Brazil has 10 times as many Ongole cattle, bred from stock once imported from India, than India has.
Apart from beefeaters, Sao Paolo is also famous for shapely women, for Brazil is the world’s champion in breast enlargements. And for those that do not need to acquire curves, there are gyms that promise to increase their height, and clinics that promise to alter their looks. Men do not change their appearance, but they make up for it by talking a lot impressively. No wonder Paulistas change partners so often; there is so much temptation around that they get distracted.
Just like Calcutta, Madras and Bombay, which have lost their neo-Gothic character to haphazard commercial development, Sao Paolo is scattered with beautiful classical and colonial buildings, dwarfed by boring skyscrapers. Fundaçao Escola Comercial Alvaro Penteado, which invited me to Sao Paolo, has a beautiful building from the beginning of the 19th century. It is engaged in a tug-of-war with the municipality, which wants it to renovate the façade; the school says it will do so only if the municipality removes the kiosks in front of the building.

For those who are put off by the cow’s members, raw fish is just the thing. Sao Paolo has excellent Japanese restaurants, for Brazil has a million and a half Japanese. However, I would go all the way to Sao Paolo just for its caipirinha. The barmen mix sugar with crushed lime, and pour rum on it. It is so smooth – and so deceptive – that every time I had it, it knocked me out. These Paulistas, they certainly know how to make their guests feel at home.