Flying Coach in India, Part 2

Okay, maybe I was being too positive about flying in India in my last report. Not that the rest of my experience was bad, it just wasn’t as pleasant as the first leg. From Bengaluru (Bangalore) to Kolkata (Calcutta), and from there to Delhi, I flew JetLite, Jetair’s budget airline.

Bangalore’s relatively new airport is already too small. There’s construction going on to expand it. Meanwhile, it’s crowded – at least it was early in the morning, when I was catching the first flight out. Each airline was checking in all its flights in one line, which would be fine if they had enough time – but they didn’t, and so they were calling the passengers for the earliest departing flights to come forward. People with luggage carts tried to wend their way through the crowd, adding to the confusion. Once checked in, though, I went through security fairly quickly. It’s separated into Ladies and Gents, which seems to work reasonably well.

Everywhere in India, sparrows – once the commonest city birds — are in decline. I was delighted, therefore, to find a flock of them have taken up residence in Bangalore airport. The maintenance people may be less delighted; the glass partitions have wire spikes along the top, presumably to discourage the birds from perching on them and streaking them with their droppings.  This sparrow clearly didn’t get the message.

Jetlite had less legroom than Jetair, but was tolerable. They served no meals, but had sandwiches for sale for Rs180 (about US$3.5) –  tea sandwiches between crustless slices of bread, not the American-style monsters.

Kolkata airport looked old and tired. Unlike Delhi, the ladies’ loo was appalling. Most of the stalls had squat-toilets, and none had any toilet paper. I believe the airport is due for a re-model, and it could certainly use it.

So I’d say it was a mixed experience. However, loos aside, not much different from the experience of flying in the US. With fewer security hassles, and added sparrows.

A couple of days later, I flew out of Delhi to return to the US. The only remarkable thing was two levels of security. We went through general security. Then we went through security at the gate all over again (the main difference seemed to be shoe-removal – not normally required by Indian security). Then, as we boarded the aircraft, they checked our passports again.

I flew United. The flight was packed, the food was ordinary, and my seat didn’t recline. I thought wistfully of Jetair.

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Flying Coach in India

Here I am in India, flying from Delhi to Bangalore to Calcutta. I’m doing the research to update my India Business Checklists book, published in 2009 by John Wiley. I have the rights back, and plan an updated limited edition in 2013.

So, back to the flying. “Business class,” recommended a US-based friend. “It’s bad enough flying around India.”

It isn’t, at least so far. I flew Jetair, economy, from Delhi to Bangalore, and I have to say that economy in India is way better than business class in the US.

This was my experience:

Checking in was painless, and so was security. I didn’t have to remove my shoes or belt or go through x-rays or physical pat-downs; instead, a young woman ran a wand over me, and was done in a minute. I headed for my gate.

Delhi airport’s new terminal is enormous, with too few travelators.

(Click here for Delhi Airport: The Good, the Bad and the Mucked Up – my report from a year ago.)

Still, walking is good for you, so I grumpily trekked all the way to Gate 51, in the distant suburbs of the airport, passing some rather depressing airport art – life-size statues that looked like they were cast in cheap resin.

The gate had no shops nearby, but it did have a Pepsi vending machine. The same kind that spat out my rupee-notes the last time.

This time, it accepted the notes… but the packet stuck in the machine. I thumped the glass, nothing happened. Then I noticed the number to call blazoned on the top, so I pulled out my cellphone and called.  Unlike last year, it was answered promptly. “I will send someone in five minutes,” they promised. I sat down to wait. Almost immediately, a small truck pulled up. (Yes, the airport is large enough that they have trucks trundling through the corridors.) Two men jumped out. One handed me the stuck package, the other checked the stacking so it wouldn’t happen again. Elapsed time, maybe 4 minutes. Kudos!

Significantly less grumpy, I boarded the flight. I had the window seat I’d requested. The middle seat was empty, and the gentleman in the aisle seat courteous. There was actual leg-room; even though the passenger in front of me had reclined his seat, I had space to move.

The flight was only a little over two hours, but they served a snack, with choices of vegetarian and non. It was catered by the Taj inflight kitchen. Given the Taj’s reputation, I expected the food to by hygienic and tasty, and I wasn’t disappointed. The flight attendants were solicitous, as though they actually wanted passengers to be pleased with the service.

At Bangalore airport, they didn’t have an air-bridge, but three coaches arrived in quick succession to ferry us to the terminal. My suitcase arrived soon after I did. I was approached by a number of people going “taxi, ma’am?”  but I ignored them and made my way to a taxi queue being ably managed by a young man in uniform.  The taxi knew where to find my address, and 90 minutes later, I was home. (Bangalore airport seems to have been inspired by Narita or something… it’s practically in another city.)

So: I get the impression that India’s rebooted air travel to version 2.0, the better one than the current US version 3.0 that includes intrusive security, junk-food for purchase on-board, harried attendants, and overbooked flights.

Yes.  Flying economy in India is way better than flying business in the US.

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A Legal Can of Worms

There’s a proposal to change India’s tax laws regarding foreign acquisitions… going back, retrospectively, to April 1962. That’s probably before some of the people dealing with the consequences were even born.


I’ve been reporting here about the Vodafone case: The dispute between the European cellphone company and the Income Tax authorities. It ended – I thought – in January 2012.  (If you want to go back to my posts on the subject, they’re here and here and here, in reverse chronological order.)

In brief, the European company Vodafone’s Cayman Islands subsidiary acquired a Cayman Islands subsidiary of Hutchison, a Hong Kong company. The assets consisted mainly of shares in an Indian cellphone company and the transaction took place in Mauritius. Vodafone used its new acquisition as the basis of their growing Indian operation.

The Indian government believed capital gains taxes were due on the transaction. Ordinarily, these are paid by the seller (which actually makes the gains). But Hutchison was out of reach; it had left the country. India’s Tax department went after Vodafone instead, saying it should have deducted capital gains. Mauritius is well-known as a tax haven, and the Tax people argued that they had the right to pierce the veil and recognize the transaction as a sale of Indian assets. Vodafone argued that no taxes were due since the whole transaction had been offshore, and anyway, if the Tax authorities wanted to pursue anyone, it should have been Hutchison.

The case ping-ponged back and forth through a long-drawn-out and much-watched legal process. In January 2012, the Supreme Court finally ruled in favor of Vodafone. Whatever one’s views of the outcome, I thought it was proof positive that India still has a functioning legal system. “I have to say,” I wrote at the time,  “I’m pretty impressed with how it’s all played out. Both sides have had their say, in great and excruciating detail. There’s a decision that clarifies the law. India’s legal system has actually worked like it’s supposed to.

With legal underpinnings in many other Asian countries being questionable, it was a strong showing. I found it encouraging, especially since India’s rank in the World Bank’s Ease of Doing Business study has been slipping.

(I wrote about that here).


Buried in India’s 2012 annual Finance Bill that goes with the Budget was this bombshell: a proposal to tax transfers of Indian assets, even if the transfer took place overseas – retroactive to April 1962. According the Wall Street Journal, Finance Minister Pranab Mukherji didn’t even mention it in his budget speech.

But of course it was going to come out, and quickly. The budget in India generates a feeding frenzy of analysis. I’ve been part of it. In the old days, someone would go to pick up a copy at midnight, as soon as it was available. Now, the Indian government posts it on the web.  Overnight, people start to pick it apart, and by the next morning, the first reactions hit the press (and these days, the blogs). Of course it takes a few days to work out the details. Then the lobbying starts, because until it’s adopted by Parliament, the Finance Bill is a proposal, not hard-baked into law.


The main point of a rule of law is predictability. People living in a society governed by rules, rather than raw power or influence, need to know what the rules are. If they’re changed, they change going forward. Not, it seems, in India.

The transfer of Indian assets among overseas companies by way of tax-spared transactions has increasingly become a loophole. The Vodafone case highlighted it because of the large numbers involved.

I can see why the Indian government would seek to close the loophole. But… retroactive changes to the law are dangerous, because they undermine the predictability that is the whole point of having a law at all. Closing the loophole going forward does make sense, though companies wouldn’t like the additional taxes.  Closing it retroactively makes India look like one of those countries where the law doesn’t count for very much.

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A Tale of Three Packages

Packaging. It’s what first draws the eye to a product, and I have to confess there are times when I’ve bought a product simply because the package was intriguing. This was true of the wine we recently ordered at a Vietnamese restaurant.

Let me say the wine was… well, it was wine. (Note to my friend Akbar: Don’t bother.) But the packaging was intriguing because this is the first time I’ve seen wine sold in a single-serve plastic “wine-glass” and sealed with a foil that you peel off.  They have a basic selection of the most popular wines: Merlot, cabernet, chardonnay, pinot grigio, riesling, and a white zinfandel (which is, of course, pink). It’s a clever idea. They’re trying for easy and hip. It’s positioned opposite beer-cans, perfect for a picnic where you don’t want to carry wine-glasses. Throw a few of these into the hamper, and you’re good to go. It’s not the cheapest wine going – for that, you’d probably want the Two-buck Chuck from Trader Joe’s (which is actually quite drinkable). But the packaging is unique. Thus far.

At an Indian grocery store, I picked up a completely different product: Godrej Shaving Round. It looked like the packaging hadn’t changed in 50 years. If that’s true, it makes a lot of sense; since it’s an extremely low-price product, some of the consumers in India would be older and illiterate. Having an easily recognized package would be an advantage. (It cost 99 cents in Sunnyvale; it’s a fraction of that in Mumbai.) Besides looking old-fashioned, it also looks cheap, advertising again that it’s not a fancy expensive shaving soap. And the packaging probably is cheap, so despite the small pack size, it doesn’t add much to the product cost.

Finally: the star of our New Year party was a package that managed to be extremely modern and yet hark back to its roots: Coca Cola. It’s the classic glass Coke bottle, re-imagined in aluminum.

This picture doesn’t do it justice. It just looked elegant, getting the full value of the material. It had a matt finish with a luster. (It actually looks much better with the cap on, but I didn’t get that picture.) It’s smaller than most pack sizes available for Coke, which enhanced the effect. Kudos for a great design, Coke!

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IIM/A Ranks 11th in the FT Worldwide Business School Rankings

For the second year in a row, the Indian Institute of Management, Ahmedabad, (IIM/A) scored 11th place in the worldwide Business School Rankings from the Financial Times of the UK. These are annual rankings of the 100 best business schools in the world. The news, even for those who don’t read the FT, was relayed over all the IIM discussion groups and social media. It’s my old school, and of course I was interested.

Some of our classmates were skeptical. “But IIMA is ahead of Chicago, Berkeley, Kellogg, Duke and Dartmouth?” said one. “As much as I want to root for our alma mater, this doesn’t make sense, sorry.” Others agreed. “…does not make sense,” someone else said. “IIMA reputation western countries is still close to non-existent.” Another chimed in,”…and IIMC is not even on that list? That list lacks validity!

Of course a ranking is all about methodology, and so with the help of yet another classmate, Navendu Vasavada, I had a look behind the numbers.


The bottom line is that even though they looked at 20 indicators (including how international a school was, participation by women, and published research), FT gave the heaviest weightage to two factors:

  • The average salary of the alumni and alumnae three years after graduation, and
  • How much those salaries had increased from before they went to business school to the year of the study – a sort of ‘value-added’ kind of measure.


Since this survey was international, the salaries were of course originally reported in a number of different currencies.  To allow for comparison, the FT converted them all into dollars. But they didn’t use the official exchange rate. Instead, they used the Purchasing Power Parity (PPP) rate published by the IMF.

The PPP is a measure that takes into account the difference in the cost of living in various countries. If a basic middle-class life-style costs $50,000 in the US, but half that in India, then a salary of $100,000 means different things in those two countries. This would mean, for an Indian school, that the average salary calculated in US dollars would be around 2.4 times higher than at the official exchange rate. So a salary of Rs1000,000 would be roughly US$21,000 at an official exchange rate of Rs 48:US$1, but about US$50,000 using PPP. (These numbers are approximate.)

In calculating the weighted average salary, first they left out everyone who had gone back to school and was a full-time student. (So people working on FBAs and PhDs would be out.) They also left off anyone working in the non-profit sector or in public service. They dropped the highest and lowest salaries for each school. FT also adjusted for the sectors in which the respondents worked, since there are massive sectoral differences in remuneration. Then they averaged the salary data for each school across the two most recent years (in this case, 2011 and 2010).

On a PPP basis, IIM/A alumni three years out had an average salary of $175 thousand – ranking right after Harvard’s $178 thousand and Stanford’s $192 thousand.


The second most important factor they looked at was how much these salaries had increased from before the alum entered business school – which would have been 4-5 years earlier, depending on whether it was a one- or two-year program. This seems to reflect how much an MBA from the school improves the prospects of the average student entering it, and may be a surrogate indicator of its credential value. [Edited to add: Of course, since they did not control for the increase in non-MBA salaries, it would also include a component of how much salaries in general were rising in each market.]

IIM/A alumni also showed a sharp increase in salary from before entering the institute to three years out: 140%. This compared with 129% for Stanford, and 122% for Harvard.

However, here it wasn’t such a clear leader: The Indian School of Business showed a 177% increase; the National University of Singapore, 185%; and Peking University (Guanghwa), 201%. In fact, IIM/A only ranked 10th out of the top 100 schools on this score.

IIM/A also scored very high on “Career Progress Rank,” where it came in 1st.

On all the other indicators based on alumni ratings, it didn’t do so well: 29th in Value for money; 17th in placement success, and 92nd in “Aims achieved.” It came in 10th for “alumni recommended rank.”

And, I’m sorry to say, on the “soft” criteria (all reported by the school)  IIM/A performed dismally. It has the lowest percentage of women students (6%); no other school has single digits here.  Schools in the top ten had percentage ranging from 22% to 44% women students.  Even Indian School of Business had 29% women. Very few international faculty. Not much by way of research or publication (ranked 94th).


How come, then, that IIM/A and Indian School of Business and SP Jain Institute (Dubai and Singapore) were in the top 100, and IIM Calcutta was not?

I don’t know for sure, but perhaps either the Institute or its alumni did not cooperate. The survey needed a minimum 20% response from the 3rd-year alumni of the school. It’s possible that enough IIM/C grads didn’t send in their answers. (Or that the school doesn’t keep track of them closely enough to have their addresses!)

[Edited to Add: This is probably true of IIM Bangalore too.]


I think it’s pretty clear what fuels IIM/A’s success in the ranking is one factor more than any other. It’s the average salary, converted at the PPP rate. Most of the other stuff hurts its rankings rather than helping.

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Vodafone vs Indian Tax Department… Finally, a Win

So the saga seems to have ended. Vodafone’s foreign transactions were truly foreign, India’s Supreme Court says. That’s $2.7 billion the company doesn’t have to pay.

Those who’ve been following this blog might remember the story.


Hong Kong company Hutchison owned a stake in its Indian cellphone joint venture with the Indian company Essar, and it wanted out. It held its share in a Cayman Island subsidiary. This it sold to an eager buyer, the European company Vodafone, which was looking to get into the Indian market.  Vodafone also had a Cayman Island subsidiary, which bought the Hutchison shares in the cell-phone company for $11.1 billion in 2007. The deal was done,  and everyone went home happy. No taxes were due in India, they believed, because the whole thing was transacted offshore.

Except that the Indian Tax Department came after Vodafone for $2 billion in taxes. It wasn’t really an offshore deal, they claimed, there was an Indian nexus. Taxes should have been withheld.

Nonsense, said Vodafone. It was legally offshore. Besides, if anyone did owe taxes, it would be the now-unavailable seller, Hutchison. Not the buyer. Technically, they were correct.

The question was, would India’s courts allow the Tax Department to argue that it was a technicality-as-eyewash?

They did. The Tax guys went to court; much of the battle was about whether the Tax authorities actually had jurisdiction over this transaction. It’s been a longish battle, some of which I chronicled here.

At the time, things didn’t look good for Vodafone. The Bombay High Court had already ruled against them. They’d been asked to place funds in escrow in case they lost. The case went up to the Supreme Court.


The Supreme Court, which had explicitly allowed this case to continue, finally gave its ruling today: The Indian Tax authorities don’t have jurisdiction over the overseas transaction. There was no “Indian nexus.” Vodafone don’t have to pay anything; they’ll  get back, with interest, the funds they have in escrow.

With that behind them, Vodafone can get on with running their business in India. They need to. They took a $3.4 billion hit to earnings in 2010 from increased competition. From their website: “Vodafone India was impaired by £2,300 million primarily due to intense price competition following the entry of a number of new operators into the market.”

I have to say, I’m pretty impressed with how it’s all played out. Both sides have had their say, in great and excruciating detail. There’s a decision that clarifies the law. India’s legal system has actually worked like it’s supposed to.

It also proves that it’s never over until it’s over.

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India: A Telling Corruption Study

Transparency International (TI) has published their annual survey of corruption perceptions — how corrupt various countries are perceived to be. As usual, India does not fare well. What’s particularly disturbing, though, is what the data now reveals.

TI publishes two things: a “score” which, on a scale of 1-10, measures corruption, and a rank out of however many countries were evaluated – 183 countries in 2011. A score of ten would be excellent, but no country gets that; New Zealand tops with a 9.5 (and the US gets only a 7.5). On that scale, India gets 3.1, which gives it a rank of 95 out of 183 countries, in company with Albania, Kiribati, Swaziland and Tonga.

Two years ago, when I wrote about the same study, India’s score was 3.4 and its rank was 84 out of 180 countries. At the time, I wrote: “Indian corruption seems to be improving gradually – but perhaps not as fast as in other places.”

I was wrong.

What is now noticeable, with the extra two year’s data, is that there’s actually a trend that started in 2008. In the wrong direction.

What I’ve done in the graph is show a normalized rank to adjust for changes in the number of countries TI has evaluated.  That’s the red line, and lower is better. Here, India’s position initially improved. I’m guessing that the newly-added countries each year tended to score low, thus pushing India’s normalized rank up. The number of countries grew from 90 in the year 2000 to 183 in 2011.  But by 2008, the number of countries in the study had stabilized around 180… and India was drifting down in the rankings.

The green line is the score for India. There, higher is better. There did appear to be a very gradual upward trend there too – which ended in 2007. Since then, it flattened and then started to slide.

China hasn’t got much better than it was in 2009 – it had a score of 3.6 and a rank of 79. It’s kept the same score in 2011, but that’s yielded a rank of 75.

Posted in Asia, Doing Business in India, Economy | Tagged , | 2 Comments