BANKING SECTOR AND ITS CHALLENGES

Banks are the lifeline of an economy and play a catalytic role in activating and sustaining
economic development of the nation. A strong banking sector is one of the essential
prerequisites in the quest for growth . However, at the present juncture, Indian banking industry
is under turmoil and is dragging down the Indian economy. Following are some challenges
faced by the Indian banks which require immediate public and government attention:

1. Worsening Asset quality:
   The biggest nightmare of India’s banks is the rise in Non-Performing Assets. NPAs are the loans
   which are not repaid back by the borrower. Thus, a loss for the bank. According to IMF, 36.9%
   of the total debt in India is at risk while, Indian banks have the capacity to absorb only 7.9%
   loss. So, if these debts turn bad, banks may land into a major liquidity crunch. Hence, it is
   imperative that the banks must adopt a prudent approach. They must start acknowledging
   stressful accounts beforehand, make a certain provision for them and reverse it when the
   account becomes satisfactory and starts paying. Staying in denial mode does not help,
   especially in today’s interconnected world where regulation making has become global and so
   has the public scrutiny. Equally important is that the Banks should assess the borrowers
   thoroughly before granting loans and should act strictly against willful defaulters.
2. Capital Inadequacy:
   Capital Adequacy Ratio is an important indicator of the financial position of banks. It measures
   how much capital a bank has. Higher the CAR, better it is, because it enables the banks to
   improve their shock absorbing capacity, governance and risk management. However, the
   money kept aside as capital cannot be used for any other purposes including lending. In the last
   few years, CAR has declined steadily for Indian banks, especially for public-sector banks. With
   the ever-increasing NPAs, the fund-raising power of the banks has deteriorated. If banks do not
   shore up their capital soon, some could fail to meet the minimum capital requirement set by the
   RBI. In such a case, they could face severe issues.
3. Unhedged forex exchange:
   Unhedged foreign exchange leaves the investors at the risk of currency fluctuation. The volatile
   fluctuations in the forex market have the potential to depress the books of Indian companies
   who have heavily borrowed abroad. This stress can affect their ability to pay back debt to Indian
   banks. As a result, the RBI wants banks to ensure that the companies they lend to do not
   expose themselves to unnecessary debt in dollars.
4. Balance sheet management:
   In an apparent attempt to post higher net profits, banks often try to avoid provisioning.
   However, the first step towards resolving a problem is to acknowledge its existence. The
   problems which are swept under the carpet are never countered but are made complicated with

time. While lower profits will make a headline for a day or two, in the long run higher provisions
would add strength to the balance sheet, and credibility to the bank’s financial statements. Also,
investors are wise enough to understand that the Management is sincere about repairing the
balance sheet which would help in the long-term. The objective of optimal utilization of capital
has to be necessarily kept in mind while evolving balance sheet management
strategies.

6. Employees and technology:
   Today, youngsters are replacing the elder, more-experienced employees in banks at the lower
   level whereas the higher posts still continue to be held by the elder and more experienced
   officers. This is generating a virtual vacuum at the middle level. This eventually has an adverse
   impact on banks’ decision-making process as middle management plays a critical role in
   translating the top management’s strategy into a workable action plan. Hence, a proper balance
   needs to be maintained.
   Moreover, the need of the hour is that the banks – especially PSUs- need to embrace
   technology to offer better products and experience to its customers. Businesses are slowly
   moving online and e-commerce is the preferred choice of the gen-next customer. With this,
   challenges like cybercrime need to be dealt with strongly. With the growing penetration of
   computers and smartphones, the challenge before the PSBs is to upscale their
   capabilities, train their employees on the new technologies to benefit from the possibilities that
   adoption of technology can open up.
7. PMJDY and beyond :
   PM Jan Dhan Yojana scheme was a success. The numbers speak for themselves. More than
   14.5 crore accounts were opened. However, for making this success a master stroke for the
   Indian economy, all of us have to ensure that the window of opportunity that has been
   presented by the opening of such a large number of accounts, is not put to waste by not
   allowing the accounts to turn inactive. The entire financial inclusion banking ecosystem must
   progressively develop, if the momentum gathered under the PMJDY exercise has to be
   sustained for the all-round benefit of all stakeholders.
8. KYC norms —
   The instances of fake e-mails directing the receipt to make payments to certain bank accounts
   as a precondition to receiving prize or lottery from abroad, have become quite rampant. It is
   surprising that even well-educated individuals are falling prey to such unscrupulous offers. Most
   of this
   money is being transferred through banking channels and obviously, there is a deficiency in
   KYC compliance. Money muling is another common occurrence which highlights deficiencies
   in risk categorization of customers and monitoring of transactions. Therefore, consistent
   monitoring of transactions, and effective KYC Compliance along with financial literacy is
   necessary to curb such instances.
9. Increasing competition from financial technology companies :Financial technology (FinTech) companies are usually start-up companies based on software toprovide financial services. The increasing popularity of FinTech companies like Paytm are disrupting the way traditional banking is performed. This creates a big challenge for traditional banks because they are not able to adjust quickly to the changes — not just in terms of technology, but also in operations, culture, and other facets of the industry. These are challenging times for the banking sector. It is obvious that the Indian banks should double their pace to re-establish themselves. The aim of becoming a Five trillion economy by 2025 can be attained only if the banking sector starts leveraging the opportunities quickly and smartly. The Indian banking sector stands in dire need of reforms.

By Anjali Lalchandani

RANKED CHOICE VOTING

Mr. Ram Nath Kovind is the 14th President of India and was elected in the year 2017. The election of Mr. Kovind is special not only because he is the second Dalit president of India but also because he is the first president to be elected by the method of Ranked Choice Method (RCV) in India.
Ranked Choice Voting is a popular electoral system that allows voters to rank candidates by their preference on their ballots, which means they can submit ballots that list not only their first-choice candidate but also their second, third and so on. It is used by the US organization Fair Vote to refer to the use of ranked ballots with specific counting methods either instant-runoff voting for single winner elections which is used in Australian state and federal elections, or single transferable vote for multi-winner elections which is used for national elections in Ireland and Malta.

HOW IT WORKS
Assume that there are four candidates for Chief Minister in Delhi. The table below presents the first-preference vote totals for each candidate.

In the above example, no candidate won an outright majority of first-preference votes. As a result, the candidate D with the smallest number of first preference votes is eliminated. The ballots that listed candidate D as the first preference are adjusted, raising their second-preference candidates. Assume that of the 75 first preference votes for candidate D ,50 listed candidate A as their second preference and 25 listed candidate B. The adjusted vote totals would be as follows:

On the second tally, Candidate A secured 51.22 percent of the vote, thereby winning the election.
RCV ensures that the winner has the majority of voters by taking into account their preferences, apart from the first choice. It could also streamline the election process, making it less expensive, more efficient and fair. While the RCV system makes the process of determining a winner more complicated, the most important advantage of this approach, according to its proponents, is that it leads to better results. It can lead to less negative campaigning. Less divisive political environments can also have the effect of helping female, minority, centrist and third-party candidates.
Also, the opponents of this system contend that it is not a democratic approach and that it won’t solve election problems. RCV advocates argue that plurality system doesn’t always reflect the true will of people. It can lead to vote-splitting among candidates with similar positions, resulting in a candidate who is less popular overall being elected. There is also a fear that ranked choice voting can be used by interested parties to game the system.
Indian democracy is often marred by corruption, scams and political fights which lead to frustration among the Indian voters, This disaffection and frustration is largely to blame for the fact that we have too many elections being decided by too few people—a consequence of low turnout, and of a system that allows for a candidate to sail by without even convincing a majority of those who decide to cast a ballot
India’s is the world largest democracy and we have to set an example for why RCV is an important first step to empowering voters; by giving them more choice and more representation in elections.

By Ridhi

HOW RCEP HURTS INDIA THE MOST?

The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between the members of ASEAN, India, China, Japan, Australia, New Zealand and South Korea. The pact aims to cover trade in goods and services, intellectual property, investment, etc. The 16 prospective signatories accounted for half of world population, about 39% of world GDP and about 40% of world trade.

INDIA’S TAKE ON JOINING RCEP
India has decided to not join RCEP since its initial demand was rejected by the other RCEP nations. India has stated that the agreement was unacceptable in its current form and did not accommodate India’s concerns and “core interests”. PM Modi himself stated: “Whenever I try and gauge India’s interest in light of her joining RCEP, I do not get an answer in the affirmative; neither Gandhiji’s policy of self-reliance nor my wisdom allows me to join RCEP.”
Commerce and Industry minister also lauded PM Modi for his “bold and courageous decision to not join RCEP, since it was against our economic interests and national priorities.”
Our government view on RCEP certainly puts India in a strong, negotiating position that it hitherto lacked in its previous trade agreements. This has cost India in all of its earlier trade agreements, which it had signed without much demands and negotiations. Such unfair deals had increased India’s import without little growth in export. With the glooming threat on its treasury and a surge in its import bills, India should look into analysing its earlier trade agreement with major trade blocs and countries. Joining RCEP would increase India’s import bills that in turn would deplete its foreign exchange reserves. And depletion in foreign exchange reserves is ever good for any economy.

WHY INDIA REFUSED TO JOIN RCEP?
In the backdrop of current economic slowdown its best for India to pull out of the trade agreement. There are many points to support the fact. First, no mutual gains seem to be made for India. The ASEAN market, along with the Japanese and Chinese markets are highly competitive and enjoys low cost of labour, particularly in Vietnam and Indonesia. Also flexible laws for doing business, lower corporate taxes and better logistics system give these markets an upper hand in merchandise goods than that of India. On the other hand, India’s domestic industries are not competitive vis-à-vis ASEAN, Japan and China for merchandise goods. India’s domestic industry is still at infants levels and needs protection to become globally competitive. Sectors like textile, dairy, farming, metal and ore, electronics, rubber,etc would face stiff competition from other RCEP members if India had opened its market for free trade. One way these potential losses in RCEP market on merchandise front can be compensated by gains in services. But absence of commitments from other RCEP countries for the same pushed India into a backseat.
Second, according to NITI Aayog report, India was unable to utilise from its trade agreements from major countries and trade blocs. The FTA utilisation by India has been abysmally low between 5 and 25 percent. Even after signing trade agreements with major trade blocs, India’s exports have increased only marginally while its imports has increased multi-fold. Its deficit, after signing FTAs with ASEAN, Sri Lanka, Korea and Japan, has almost doubled in the last five years – from $54 billion in 2013-14 to $105 billion in 2018-19. Moreover, India’s net exports to countries without a trade agreement were only marginally lower than its net exports to countries with FTAs. In contrast, the imports from countries with trade agreements were substantially higher, pushing India into a trade deficit.
Third, India major concern on becoming a dumping ground for China has staked its claim on snubbing RCEP. Due to US-China trade war, China is searching for a potential market with huge population and consumer demands so as to support its export-oriented industries.
Besides, China has adopted an aggressive control over export-import circuit. It has changed the trade equation with the ASEAN countries after inking ACFTA- standing for ASEAN-China free trade agreement- in 2010. ASEAN-6 (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) had a trade surplus of $53 billion in 2010 which has turned into a trade deficit of $54 billion in 2016. In retrospect, India has demanded to keep trade barriers for china to which it has trade deficit of about $54 billion out of $105 billion in 2018-19.
Fourth, farmers and dairy industry is protesting against India’s joining RCEP as their industries
would be affected by the global competition from Australia and New Zealand. Both the countries have higher productivity in agriculture and dairy while India still lacks resources to remove inefficiencies in agriculture and dairy. With trade barriers remove in agriculture and dairy, Australia and New Zealand would take over the Indian market.
Lastly, the present economic slowdown demands for a push to domestic manufacturing through incentives. The Indian government is trying to bring economic reforms in the hope of increasing investment and manufacturing. Opening the domestic industries to global competition while they are still at infant level may be suicidal, given how Indian government take steps to boost its flagship programme “Make In India”.

CONCLUSION: India cannot afford to join RCEP in its present form. Its key demands for trade restrictions on
China and closing its economy, if flooded by foreign goods were rejected by RCEP members.
However, they had kept doors open for India, should India change her mind. At this point, its manufacturing is at the lowest level, so it is best for India to make its industries resilient and
to stay away from such trade agreement that can hamper these growth prospects. Also, India should form a separate trade agreement with China such that its trade deficit could change into surplus. Taking advantage of the trade war, India can become an investment hub for Chinese companies with the hope of entering large markets like India. Besides, India can continue its negotiations with other RCEP nations and can bargain for opportunities such as more trade in services and minimum investment. Clearly, India’s withdrawal has made RCEP less effective than at its developing stage. Its world trade share and GDP share have reduced significantly. Therefore India should advantages of large population and large consumer
demand to its favour. It is time for Indian government to financially support domestic industries at their infant stage so to minimize their cost and make them efficient enough to capture domestic and global markets and once these industries have expanded withdraw the support. This investment expenditure would certainly help India tackle the ongoing
slowdown and China’s impending threat.
As a country with huge population, India can be benefitted from a pact with connects major economies of the world just like EU. Although RCEP seems a right move in the right direction, it undermines India’s position and is more of a roadmap to china than to ASEAN or other countries. Hence, RCEP is a deal for the future but not for the present.

By Priyanka Bora

US-IRAN CONFLICT : Are we headed for the World War III ?

• OVERVIEW:
On 13th January 2020, The Commerce Society of Shri Ram College Of Commerce organised a Round Table Conference for its members on the very happening topic “US-Iran Conflict: Are we headed for the World War III ?” The participating members represented the stakeholders namely, The United States, Iran , Iraq, China, Saudi Arabia, United kingdom, India and the Members of the International Press.

• SETTING THE WHEEL OF RTC IN MOTION:
The RTC came to near end with every country taking their stance. India, UK and Saudi Arabia took neutral stand demanding peace to prevail while The US and Iran had their own opinions and blame game throughout . However, Iraq and China supported Iran throughout questioning US intentions.

• COUNTRY IN QUESTION: UNITED STATES OF AMERICA

The US terming as a defensive action stated their reasons to kill Qasem Soleimani, the Iranian general terming it as a correct decision as they could not let any harm to their citizens as they believed he was a threat to the US and was fueling civil wars. They could not wait till the mishap would happen. Talking about their earlier contract, US said they withdrew because Iran started importing weapons to other countries breaching contract. They even stated that Soleimani was a threat for world even though he may be a hero for his own nation . On an all, The US completely stated the attack as a defensive and correct measure.

• SCHOOL OF THOUGHT: IRAN

Iran of the view that it was a pre emptive strike reminded about 1950 when US destroyed its democracy by overthrowing its democratically elected Prime Minister, Mossadegh and restore Mohammed Reza Pahlavi, the last Shah of Iran. They said that US had no proofs and criticised the imposed sanctions on installing democratic system. Iran alleged US of harming their interest by destroying their democracy through sanctions and stated that every person is not good in US after Trump stating Iranian as terrorists. They feel threatening their cultural sites is unethical saying what US did is illegal.

• OPINION OF IRAQ STAKEHOLDERS:
Firm in its decision from the very beginning, Iraq supported the vary views of Iran but also said that both the countries need to maintain better relations and should find the midway for the ongoing problems so that the economy do not affect. The country standing against the killing talked about the domino effect. However, through its way Iraq also did not support the sanctions put on Iran and even condemned the US tweet “Iran will never have a nuclear weapon”. Against the exceeded authorised US troops it held US responsible for the political instability. It even raised a question as to why US did not go for an another procedure against the General Soleimani.

• STANDS OF THE OTHER NATIONS:
India of the view that War was not a solution kept it neutral way standing against the US sanctions on Iran pointing out Why are all the countries thinking of War and not about peace. But Surprisingly on their instant if US forces it to stop imports from Iraq, they held with keeping up with the Import from Iran, keeping friendly relations with all through better deals and communication.China of the rational view supported Iran condemning the ongoing situation and wanting both the countries to safeguard their interest, be at peace and even asked how US can justify its claim as the biggest economy. However, it said that the country believe in peace and diplomacy. UK declaring itself as an ally of US, was of the view that killing was in good faith and war only brings destruction and even questioned the inability of Iran to bring stability in its own country. But UK also pointed that it was necessary for US to follow legal procedure concluding that it will always be a believer of peace in the world. Moreover, Saudi Arabia mentioning brotherly relations with Iran raised its voice against the US as it didn’t inform about the situation although they were in the same alliance. They are also against Iraq for disrupting its oil facilities due to sanctions on Iran.

• THE QUESTION-ANSWER TIME:
Beginning with the session where the members of The International Press and the Stakeholders questioned and demanded clarifications , the first stakeholder questioning US, which was clearly under-prepared with its clarifications to every question- the country is sensitive about its citizens and everything done was mainly a defensive action justifying whether the attack on General Soleimani or breaking international law. It also clarified that The attack was not a political move by Donald Trump for gaining popularity for elections. However, it made a controversial remark at the end by terming General Soleimani as a “terrorist” and rejecting peace until the terrorists are removed from Iran. Iran on being asked about China supporting it said that it is looking for better trade relations and communication with China, which may be of advantage during the US-China trade war. Moreover, India went on with its decision of importing oil from Iran and Iraq even after its ally US forces it to go for other countries.

• CONCLUSION:
The RTC brought forward the vary personal, political and economic interests of the different stakeholders. The views of Iraq and Iran mainly concentrated towards the withdrew of the sanctions imposed by the US on Iran in order to avoid retaliation against US by Iran. India along with UK, China and Iraq raised their concern to end the ongoing feud and wanted both US and Iran to come at peace to favour their own economic interests. Saudi Arabia, on the other hand, wanted to save its own economic interests of not getting its oil import disrupted by any. In nutshell, All the stakeholders believed that this Conflict is not a start to any World War III instead both these countries should come at peace, rethink over their decisions as there is no mistake of Common man who may be affected from this feud to which US concluded that It rejects peace until the terrorists are removed from the country.

OPERATION TWIST

Since the last couple of weeks, a seemingly clandestine code name
“Operation Twist” has been trending everywhere, from the Internet to the
business pages of newspapers and magazines. Well, this is no covert mission
of the Indian Army, but a tool being used by the Reserve Bank of India to
stimulate the bond market.
Originally, Operation Twist was the name given to a monetary policy
tool by the US Federal Reserve which involves simultaneous buying and
selling of government securities through open market operations (OMOs). It
was first used in 1961 in the US, when the economy was recovering from
recession post the Korean War, to strengthen the US dollar and hike liquidity
in the economy. In order to boost spending, the Federal Open Market
Committee (FOMC) tried to flatten the yield curve, which would reduce the
excess compensation that bondholders would earn for the added risk of
holding bonds for a longer tenure. Another instance of Operation Twist was
seen in 2012 when it was used by the US Fed to revive the weak economy.
The policy was so effective that it reduced the yield on a 10-year treasury to
a 200 year low.
The term yield is used to describe the amount of interest or dividend
earned on a particular investment over a particular period of time. Another
pertinent term is the Yield Curve. It is the graphical representation of
interest rates on debt instruments of different maturities. It shows the yield
that the investor can expect to earn by lending money for different periods
of time. Traditionally, yield curves have been upward sloping, indicating
higher return on longer term securities, due to the higher risk involved, by
locking in the investment for a longer period of time.
Operation Twist basically targets changing the shape of the yield curve by
synchronous buying and selling of Government bonds. The policy has got its name from the way it twists the upward sloping yield curve i.e. short term
yield rises, while long term yield falls simultaneously.
On the same lines, recently the Reserve Bank of India bought 10-year
government securities worth Rs.10000 crores and sold four shorter-term
government bonds worth Rs.6825 crores in the first tranche. In the second
tranche, it bought Rs. 10000 crores of G-Secs and sold Rs. 8501 crores of
shorter-term bonds. The RBI has once again decided to undertake the third
tranche of the operation on January 6th, 2020. However, one question is
pertinent here. Why did the RBI have to undertake such a step?
Well, this measure was taken in the wake of the inability of the RBI to
revive the economy by reducing the Repo Rate. Although the Repo Rate has
been reduced by 135 basis points till now since February 2019, the
transmission has been dismal and banks have reported a decline of just
40-45 basis points in their weighted average lending rates. The reduced repo
rate is not translating into reduced lending rates by banks because the Repo
Rate is the rate at which banks receive short term funds from the RBI. Thus a
reduction in the Repo Rate might lead to a fall in the interest rates on the
short term loans, but when the banks need to lend money for long periods
like 10, 20 years, they will be more prudent and unwilling to reduce interest
rates, especially considering the increasing NPA problem with the Indian
banks.
Even the compulsory linking of bank lending rates to an External
Benchmark, like the Repo Rate did not lead to the furtherance of the RBI’s
objectives. Moreover, a reduction in the Repo Rate will only reduce short
term interest rates. However, to boost the economy, investments in long
term, fixed assets need to be increased. Another reason was the increasing
public concern over fiscal slippages and rising inflation, which lead to an
increase in the 10-year G-Sec yields to a high of 6.8%. This has an impact on
bank lending rates as well. If the 10-year G-Sec yield rises, the banks
increase their lending rates, which hurts retail borrowers.
A cumulative effect of all these reasons was the recent measure taken
by the RBI, due to which the long term interest rate fell from 6.8% to 6.57%.
This leads to flattening of the yield curve and induces people to buy more
and more fixed assets such as houses, automobiles etc.
One might argue that with the already increasing inflation, the RBI buying
Rs. 10,000 crores of Government Bonds would further lead to increased
inflation, as it would print money to buy these bonds. This is where another
‘twist’ in the tale comes up! In an attempt to reduce the inflationary
tendency of the action and to remove extra liquidity from the system, the
RBI sold short term G-Secs.
However, according to some economists, the measure is not free from
its loopholes. It could demotivate foreign investment. It may increase the
interest rates for short term loans that hurts the profitability of financial
institutions that want to make short term investment of one to five years.
The alternative to this measure could be that RBI must promote banks
to find out methods to reduce interest rates. It should strive to increase
competition among banks to promote financial inclusion and will help boost
the economy, by offering competitive lending rates to the retail borrowers.

By Shreya Raj

PATANJALI: RAPID RISE & FALL?

‘Patanjali’ – a brand whose product is available today in almost every house of the country. This company has marked its presence known to almost the entire 1.2 billion population of our country and has been one of the fastest growing FMCG Company in India. It has its headquarters and manufacturing units at Haridwar, Uttar Pradesh. Being founded by Swami Ramdev and Acharya Balkrishna, Patanjali follows a combined approach of technology, yoga and ayurveda. It has a brand valuation of INR 30 billion and accounts for around 5 % of the FMCG industry. The sales of the company have doubled almost every year since 2013 and it has become the major disruptor in the FMCG industry in India.

Not everyone gets such huge success and not everyone is able to be successful throughout. Patanjali was a huge game changer in the FMCG sector but will it be consistent in maintaining it? Let us find out the story behind its success and whether it still continues to grow in the race or has started facing depressions?

It all began back at the time when Baba Ramdev appeared on the televisions as a spiritual yoga guru providing the people with free yoga exercises and techniques, and also having long discourse transactions with people. His preaching became more popular and he became an approachable saint by the Hindu population. With these things in background, his friend Acharya Balkrishna making use of Baba’s growing popularity came up with Patanjali Ayurveda Limited (PAL) with the use of his ancient Ayurvedic knowledge and the blend of modern technology. Patanjali entered into the market with a wide range of Ayurvedic medicines and later on diversified into the consumer goods category, attracted by the low entry barriers in the segment.

Patanjali currently produces 700 different types of products ranging from Natural Health Care, Natural Food Products, Ayurvedic Medicine, Herbal Home Care, and Natural Personal care. Some of its most popular products include Patanjali Dant Kanti, Patanjali Kesh Kanti, Patanjali Chyawanprash, Pantanjali Ghee and Patanjali Honey among others.

PAL was able to establish its business from scratch in a few years, thus gaining huge market share and posing a major threat to the big established multinationals in the industry. Patanjali followed a combined approach of low prices, natural and pure proposition and ‘swadeshi’ positioning to conquer the Indian population. One of the major reasons for its success was also its distribution strategy. PAL follows a twofold distribution strategy. Firstly, it makes its product available through its own retail outlets to establish a wider consumer base and once it has been established, the products are then made available to the public through general retail and pharmaceutical stores to cater the demand. For instance, in Delhi-NCR, Patanjali initially established its own ‘Chikitsalayas’, ‘Swadeshi Kendras’ and ‘Aarogya Kendras’ where it provided free medical consultation services through its own certified ayurvedic doctors. This attracted the early adopters segment among the middle class population and increased the sales of its ayurvedic medicines. A certified and trustworthy medical service in the name of Patanjali being free of cost provides greater footfall through word of mouth to friends and relatives. These stores provided an easy access for other products introduced by the company to the consumers. Thus, once the consumer base for the product got established, PAL shifted on with its product to the general trade stores which also helped the company in maintaining its goodwill in the market. Baba Ramdev as the brand ambassador for Patanjali is another major advantage as he is the portrayer of health and wellness among the Indian masses due to his association with yoga and ayurveda since years. Patanjali also follows a pricing strategy of charging around 20% less than its competitors. The company also has an innovative R&D facility combined with the latest technology in order to cater to the latest needs which is also noticeable from its decision to sell its products on E-Commerce platforms.

Patanjali recorded a sales turnover of Rs.10,561 crores in FY 17 and Baba Ramdev in a press interview said, “We have created capacity of Rs 50,000 crore and we are racing ahead now. Our target is to beat HUL by next year”. However, this target seems unachievable because as per the data records of Patanjali it has recorded the same sales in FY18 as it had in FY17 and thus it remains far away from beating Unilever which records an annual turnover of approximately Rs.30000 crores, three times the current turnover of Patanjali. There are many reasons for the low growth year faced by Patanjali. The increasing competition in the FMCG sector through introduction of herbal and ayurvedic products by Unilever where it relaunched its Ayush brand of Ayurvedic personal products, and also the massive changes in tax filing due to imposition of GST have also impacted the growth of Patanjali.  As per some industry experts, the reason for this downfall is the huge diversification into different product lines by the company. The company should have its focus on specific high growth and high margin segments. The stock renewal process in the retail shops has adversely gone down which forces the consumers to shift to other brands due to unavailability and thus losing on to trust and brand loyalty from consumers.

Baba and Acharya Balkrishna have future plans of entering into the textile industry and open 100 Patanjali Paridhan stores, but the question is ‘Will it succeed?’Patanjali should now follow the advice of the industry experts and focus on capturing the market share of specific core products from its competitors rather than constantly increasing its portfolio. The low sales growth year was an alarm to Baba Ramdev to rethink upon his decisions and for us to know whether Patanjali still continues to be the disrupting force in the FMCG industry.

CPEC: THE DAWN OF A NEW DUSK?

BY ARADHANA PANDEY

An ambitious project that took root under the umbrella of the  One Belt One Road initiative, the China Pakistan Economic Corridor (CPEC) envisages to change the dynamics of the geo political ties between China and Pakistan, but, one issue that has made everyone scratch their minds still stands to be whether the whole project would really integrate Asia or is it just the beginning of a huge wreck for these nations? Would it actually change the face of the Pakistani economy or is it just China looting Pakistan under the guise of friendship?

Read on as the article unravels right before you whether the project is actually a mutually beneficial development move or just a mere gambit.

AN OVERVIEW:

A framework of regional and economic connectivity, the China Pakistan Economic Corridor, is basically a cluster of infrastructural projects encompassing a large network of highways and railways which would span across the length and breadth of Pakistan.Thus, with the development of a plethora of transportation networks, energy projects and special economic zones the herculean project aims to modernize and strengthen the economy of Pakistan at a fast pace and also, transform, to a huge extent, the geo political and economic relations between China and Pakistan. Integrating all provincial capitals into the economic mesh, the corridor seeks to achieve regional consolidation, harmony and economic development.

THE CPEC TIMELINE:

• THE ROOT PHASE (1950s)

The long journey of the CPEC might seem hard to believe to some, but, trust us when we say that it was more than 70 years ago when the plans for a corridor stretching from the Chinese border to Pakistan’s deep water ports on the Arabian Sea took birth, back in the 1950s.

• THE CEASE PHASE (2002-2006)

Again, China’s interest in Pakistan’s deep-water harbour at Gwadar rekindled when in 2002, it began constructions at Gwadar port which was completed in 2006. But, as fate would have it, this expansion ceased soon after owing to the political instability in Pakistan consequent to General  Musharraf’s fall and the infamous conflicts of the State with the Taliban militants.

• THE REBOOT PHASE (2013-2017)

Luck finally started shining for Pakistan when in 2013, the then Pakistani President Asif Ali Zardari and Chinese Premier Li Keqiang, in order to enhance mutual connectivity, agreed on a  memorandum of understanding regarding the China–Pakistan Economic Corridor. Formalised operations started on the $46 billion agreement by late 2016, when the first cargo train departed from Yunnan, launching the direct rail route and sea freight service between China and Pakistan. And much to China and Pak’s joy, it cut the logistics cost by not less than 50%! Reports show that as of September 2017, more than $14 billion worth of projects were under development.

• THE PRESENT STATUS (2018)

The CPEC Summit in Karachi this year threw light on the major milestones that the project has accomplished so far.

1. POWER

The project boasts of two power projects completed in Sindh, two commercial ports, the opening of Keti Bunder. Added to this, with the construction of various wind power projects under the program, the potential of 300 MW of power has been created. In hydropower sector as well the capacity of 30,000 MW of energy has been generated.

2. LOGISTICS AND TRANSPORT

The summit also deliberated upon a separate Ministry for Logistics and Transport to look into the massive demand in this field. Thus, the initial phase of the early harvest program has successfully concluded with these developments.

3. INDUSTRY AND AGRICULTURE

Now, all eyes are on the second stage ( the ‘long term plan’ of the CPEC), which has a major thrust on industrial activity and agriculture, and is estimated to wrap up by 2025.

The long term plan, currently underway , which aims to give a definite and final shape to CPEC, if executed at a smooth and fast pace like the first stage, would surely foster new and efficiently shared trade communities not only between Pakistan and its all weather friend China, but also with some other neighbouring nations as well.

THE LANDSCAPE SETTING OF CPEC:

The corridor mainly takes into account less developed regions into the folds of active development, like- Gilgit-Baltistan, Thar region, and Gwadar). Along with the land routes between the deep-sea port of Gwadar, famously referred to as the gateway of CPEC, Pakistan to Kashgar in Western China, the project also includes a significant portion of the sea-based Maritime Silk Route. This network would connect China, quite easily and cost-effectively, through Gwadar to the broader Indian Ocean, the Gulf states and East Africa, all the way to Mediterranean via Red Sea, thus with north Africa and Europe. Hence, the trade and transit linkages developed under the CPEC would not only upgrade and expand the existing Pakistani infrastructure, but also provide China with alternate routes to other global regions, in a very cost effective manner.

AREAS OF COOPERATION UNDER CPEC:

The Ministry of Planning, Development, and Reform of Pakistan, with its Chinese counterpart- National Development and reform Commission, the focal authorities for administering the whole project have identified the following fields which the CPEC project encompasses:

• Communication technology and connectivity (including roads, rails, fiber optic cables, oil and gas pipelines)
• Energy infrastructure (including new energy constructions, conservation methods)
• Agriculture (including spatial structures and functional zones)
• Industry (including construction of industrial parks, and new manufacturing units)
• Social Sector (including education, tourism, poverty alleviation, media)
• Financial cooperation
• Environment protection (at key areas along the corridor)

MONEY METRICS OF CPEC:

Launched as a  $46 billion project back in 2013, the flagship project has today crossed the $62 billion mark. Weighing all the costs on the monetary scale, the entire project stands at a valuation of $75 billion, all set to transform the face of Pakistan’s economy.

At the beginning of previous fiscal year 2017-18, Pakistan had estimated receiving $1.6 billion in Chinese loans and grants for about one and a half dozen projects. The actual disbursement exceeded the target, but the number of projects that received about 90% of loans was only three – Sukkur-Multan motorway, Thakot-Havelian motorway and Orange Line Metro project, Lahore. In total, seven infrastructure projects received loans of $1.8 billion and four of them were related to CPEC, the flagship project under the strategic Belt and Road Initiative of China. Things seemed to be fine in the beginning when Pakistan had pegged all its hopes about repaying all the debt burdens and loans with the huge return on investment that the project was expected to bring, but, as costs swelled and so did the loans, events took a sharp downturn.

SPIRALLING DOWN THE CPEC DEBT TRAP

Skyrocketing debt burdens, struggles for bailouts, and a highly skewed balance of payments. Add all these and throw a shaky economy into the mix, the result you get? What else but, Pakistan. Time and again, Pakistan has proved it that its economic cycle begins with a bailout package from its friend nations, IMF or any international banks and then again, the cycle comes to a halt when the loans get exhausted after being used in a very inefficient way, following which pleads for yet another bailout start the whole chain altogether once more.

Little did Pakistan know about how volatile things could get with its ‘irreplaceable all weather friend China’ when much to the economy’s distress, the results of June 2018 revealed its exports to stand at $23.22 billion while, imports exceeding $60 billion. Pak’s USD reserves also have shrunk to mere $8 billion, enough to provide for no more than two months of imports.

Prior to this whole havoc that has fallen on the Pakistani economy today, Pakistan’s PM Imran Khan had often been quoted as saying how if given a chance to form the government, he would end the nation’s habit of going to the West with a ‘begging bowl’ and  how he’d commit suicide if the economy ever has to ask the IMF for a loan. Sadly, all of Khan’s claims and statements crumbled just like a house of cards, when in October this year, the dire economic crises that Pakistan was undergoing through compelled the government to seek assistance from the IMF.

As Syed Talat Hussain very aptly put it, “The boasts of the past were just a plan to capture power, but, now that the capture is complete, the begging bowls are out- with great pride, of course.”

SAUDI ARABIA AS THE NEW ENTRANT: DEAL OR NO DEAL?

Going to IMF was indeed the last resort, when neither China nor Saudi Arab came to Pakistan’s rescue. Saudi Arabia did enter into talks for investments in Gwadar’s oil refinery and Balochistan’s port  this year, but, the air was cleared when Pakistani authorities denied the partnership. But, here, what did not come into light was China’s intent behind the revocation. Think about it, why would China agree on adding a partner that is known as the most vital non-NATO ally of the US in West Asia and is known for backing US interests? Also Saudi investment in Balochistan, which shares a border with Iran, might lead to concerns raised by Iran. That would bring China directly or indirectly into the Saudi-Iran issue and furthermore could act as a source of sectarian conflicts in Pakistan. Thus, for both the parties, the deal was a 100% no- no.

WHERE DOES CHINA STAND IN ALL THIS?

Alarming, isn’t it, how despite claiming their bilateral relations to be “higher than the heights of the Himalayas and deeper than the depths of the Arabian Sea.”, China just replied with a blatant ‘no’ to another much needed bailout of the Pakistani economy, which might just be it’s strategy to portray itself as a ‘sincere and unselfish’ nation which does not indulge in any sorts of debt trap diplomacy.

Since the very inception of the project, China has always defined it as a “win- win” situation for both the parties. Of course, this ‘win- win’ cent per cent translates into ‘win twice’ for the Chinese economy in all aspects. By far, CPEC has only pushed Pakistan into the brink of bankruptcy and China has only played the role of forcing Pak to buy it’s equipments for the project, hire Chinese labourers majorly, and has provided Pakistan with zero technological assistance or help. Proving true the frequent accusations by the West of China leveraging huge loans it holds over less developed economies across the world in order to snatch their key assets and increase its military intervention, China might just have ignited the trail of Pak’s economic depression.

In the case of Sri Lanka it was the Hambantota Port, and now all eyes are turned towards Pak whether at all, it would be the Gwadar Port this time.

AT THE CORE OF ALL CHAOS

Stuck in between a pool of soaring debts, shredded reserves and high tensions, Pakistan has definitely got a long list of problems that go well beyond its bad macroeconomic management. It is the money China is lending under CPEC, which Pakistan then uses to pay for imports from China that are then utilized on CPEC projects. Machinery imports alone from China in the first two years of the project raised the current-account deficit by 50%. Topping it all up, right after the government announced the its decision to seek a bailout package from the IMF on the night of October 8, yet another set of challenges greeted Pakistan, starting with a  stock-market loss of more than 1,300 points, losing almost 270 billion rupees ($2 billion) of its capitalization.
The very  next  day, the  rupee plunged about 7% compared to it’s previous day’s close of 124.27 to the dollar, as reported by Bloomberg.
The IMF has indicated that the average inflation rate in Pakistan might hit 14% by June next year – a level that if reached could result in interest rates peaking to 15% and the economy drastically slowing down.

THE ROAD AHEAD

It goes without saying that without structural changes of the sort that lenders like the IMF demand – and which Pakistan, for one, has constantly postponed – crises such as the one it now faces are inevitable. Only after Pakistan begins to export more to the world will it be able to pay for the investment it needs for developing the transport, energy and industrial sectors without depending on any other country.  And in order to enhance its exports it can deliberate and work upon duty-drawdown schemes, increase the availability of short- and long-term credit to exporters, simplify the regulations related to exports, and take steps to improve cooperation among exporters and between the government and business actors.

IN A NUTSHELL

Some might call it China’s strategy of predatory lending and debt-trap diplomacy, but, one thing which no one would deny is that if weighed, CPEC is turning out to be much more favourable to China while it is only bringing more and more challenges for Pakistan.  The journey indeed has been a rocky one for Pakistan, but, now also, if actions are steered in the right direction, the nation would be able to jump over a number of bottlenecks that might befall in future.

Better late than never, Pakistan.

ARTIFICIAL INTELLIGENCE: OPPORTUNITIES & THREATS

BY AKASH AGARWAL

Half a century ago, most people would have refused to believe that we would have cars that are capable of driving themselves, machines and robots fighting on the battlefield or for that matter Amazon’s Alexa as an intelligent voice controlled assistant in our homes. Yet, all of this has become possible.

If there are two words that summarize the epitome of advanced technology, then they indisputably are – Artificial Intelligence. Within the last 50 years, Artificial Intelligence has grown at an exponential rate. This is something to be proud of for the human race which is leaving no stone unturned to realize the greatest potential in technology. However, at the same time, Artificial Intelligence raises some pertinent issues which may cause more harm than good. Before we discuss some of these issues, let us first understand what exactly Artificial Intelligence is.

John McCarthy, who coined the term ‘Artificial Intelligence’, defines it as a branch of computer science that aims to create intelligent machines and computer programmes.

The core problems of artificial intelligence include programming computers for certain traits such as:

• Knowledge
• Reasoning
• Problem solving
• Perception
• Learning
• Planning
• Ability to manipulate and move objects

Recently, tech giants like Facebook and Google have created their own AI labs to produce robots capable of learning to play video games without any instructions. No other point in history has seen this much engagement in the development of artificial intelligence.

The major cause of AI development is Big data. As the name suggests, in a layman’s terms, it refers to a lot of data; the data which has never existed before. In 2012, IBM estimated that an average human being leaves around 500MB of digital data on the internet every day. If we plan to backup one day of data that humanity produces and we print it out on an A4 size sheet with the font size 12 and stack it up from the surface of Earth then it will reach to the Sun and back four times over.

Remember the FIFA World Cup of 2014? Germany had some really amazing victories against legendary teams. The German team’s coach Hansi Flick said that he had spent the past two years analyzing the opponent’s every move. He had done more research ahead of their matches than perhaps any team in the history of soccer using Big Data to devise a strategy on the basis of it for his team.

That amount of Big Data is a source of learning for AI as the experience of an AI machine depends on the amount of data.

Concerns:

Since AI equips machines to perform such complex issues, it is natural to feel worried that it may overtake humans for the performance of most jobs. It is a well-known fact that industrial robots have already taken most of the jobs in manufacturing plants. Obviously, in near future more advanced industrial robots will occupy even more jobs. But what is threatening is that, robots might not just take up menial jobs such as that of a worker in a factory, but also intellectual jobs, like assistants, secretaries, managers or even some accountants.

Any exhausting, dangerous or repetitive task might eventually be performed by robots. It’s estimated that between 35 and 50 percent of jobs in existence today are at risk of being lost to automation in the next 20 years. Repetitive blue collar jobs might be first, but in time everybody will be at risk.

So, if Artificial Intelligence is inevitable, then how should the policymakers deal with the unemployment that it is expected to cause? If machines would perform everything and people do not get jobs to earn money, then how would they sustain themselves? One of the solutions which some economists suggest is Universal income. Everyone on this planet shall be given a fixed amount of money for sustenance irrespective of any work done by them. However, this creates more problems than it solves. What about all the free time? What about the feeling that you’re useful for society and helping other people? What about a purpose of your life?

Despite all this, we need to acknowledge that AI has proved to be immensely useful to us in various ways –

1. Agriculture:

AI monitors weather and informs about the field, crops, the health of the plant etc. Drones help to scan the area, help to find any human errors and inform about future problems.

2. Industries:

Industries prefer robots because of fast, efficient and cheap work. Moreover, there are some jobs that are dangerous for humans, whereas for robots, there is no risk of life.

3. Hospitals:

AI has proved to be a blessing for hospitals and medicines. AI is used for taking various clinical decisions and spotting any issues in the human body through highly digitalized machines and producing medicines for diseases such as Cancer.

Conclusion

In my opinion, whether you see Artificial Intelligence as a boon or a curse, the fact is that it will continue to grow as tech giants continue to invest more into research and development. There is no doubt that AI will replace most of the mechanical jobs in the world today. However, it will also create jobs that require complex decision-making. The key is to adapt according to the changing times. Our society should adapt in a way so people would be educated in areas inaccessible to AI due to the inherent limitations of technology.

However, there is certainly a dire need to pay attention to the boundaries which need to be drawn around AI. Otherwise, it would not take long for AI-empowered, deadly machines to wipe off human beings from earth through catastrophic attacks.

COBRA EFFECT: WHERE THE SOLUTION IS THE PROBLEM

BY HRITIK SINGHAL & DEEKSHA GUPTA

Right from birth, we start to see connections in the world around us. A meal cures hunger; sleep relieves tiredness; problems have causes, and eliminating the cause will yield a solution. But the first thing that comes to your mind is not always right.

The term ‘Cobra effect’ was coined by Horst Siebert, a German economist and professor, based on an incident in India during the British colonial rule. This famous anecdote describes a scheme during the British Raj when Indian subjects were paid by the government if they brought in dead snakes. The scheme was aimed at addressing the problem of an increasing number of cobras in the city.

Guess what happened next? Soon, the enterprising Delhiites were breeding cobras. When the government found out, they scrapped the bounty scheme, whereupon the cobra breeders set the snakes free. And the cobra population went up, not down.

This came to be known as the Cobra Effect, which is a phenomenon that occurs when an attempted solution to a problem actually makes the problem worse.

 Rationale Behind Cobra Effect

We humans tend to form mental models of the way that cause and effect are related. Our mental models exert an incredibly powerful influence on our perceptions and thoughts. They determine what we see, tell us what events are important, help us to make sense of our experiences, and provide convenient cognitive shortcuts to speed our thinking. However, they can lead us astray. Most of our cause-effect experiences involve very simple, direct relationships. As a result we tend to think in terms of ‘linear behaviour’. In reality as we observe the world is much more complex.

When an action is taken, the intended outcome may occur, but a number of unexpected outcomes will always occur. While an unexpected outcome can be beneficial, however such probability is very rare.

Real World Applications 

A similar incident occurred in Hanoi under French colonial rule. When Hanoi was under French colonial rule, they discovered that their villages had a rat problem. So, the regime created a bounty program, similar to that of the British cobra program, that paid a reward for each rat killed. To get paid, people would provide a severed rat tail and get a little cash. Colonial officials, however, began noticing rats in Hanoi with no tails. The Vietnamese rat catchers would capture rats, lop off their tails, and then release them back into the sewers so that they could procreate and produce more rats, thereby increasing the rat catchers’ revenue. It’s fascinating to observe how this problem keeps on repeating over and over again. Policies that seem entirely sensible can lead to unintended – and sometimes unpleasant – consequences.

Delhi has earned the tag of being the most polluted city in the world, outstripping the Chinese capital Beijing, known for its record pollution levels. Owing to the toxic air that Delhi is breathing, the Odd-Even road rationing scheme will be back in Delhi in 2017.

Under the scheme, cars with license plates ending in an odd number and even number are allowed to ply on alternate days. The scheme aims to cut down vehicular traffic by half, thereby reducing air pollution. But it didn’t solve the problem. Because public transport is unreliable, inefficient, unsafe and dirty-looking and the extra burden on the public, the odd-even scheme although it is effective in the short term, it is not a long-term solution as it resulted in people opting to buy a second car with an odd or even number depending on the other car they own.This increased the number of cars in the city and what was worse, the older cars acquired a value because their license plates ended with specific numbers. This worsened the pollution as the older cars were more polluting. Apart from the VIPs, politicians, Supreme Court judges and defence vehicles, women drivers, CNG vehicles were also exempted from the Delhi odd even rule.This was the ‘legal’ route—it appears that this policy also led to a black market in fake CNG stickers: stiff penalties and more policing were required in such cases.

Taking another example of the US Anti-Drug Policy, the US government spends tens of billions of dollars every year to stop addictive drugs from reaching its populace. Its prisons are full of drug dealers and drug addicts. The intention behind all this is to reduce the availability of drugs in the market however, all that money spent does nothing but increase the price of drugs and profit margin for those folks, who have an incentive to smuggle it across the US border. No matter how risky the US government makes it for smugglers and drug dealers to do whatever they do, the addicts can still buy the drugs. The more they try to stop it, the more they fail owing to the Cobra Effect.

In the contemporary era, the cobra effect of discounts offered by the e-commerce companies has also surfaced. E-commerce firms equate unrealised revenue with lost revenue. This means that products that have been added to the cart but not purchased in a long time are considered a ‘loss’. So, in the heydays of GMV-led start-up valuations, the top marketplaces offered 30–50 percent discounts on the products (fashion mostly) in the cart that were over 30 or 60 days old. These were sent as direct push notifications to users. The premise was that since the buyer had shown strong intent to purchase the product, there was high probability that, given a considerable incentive, the user would buy the product at the now heavily discounted price. Moreover, it helped these start-ups achieve sales targets and unlock more value from each user. The strategy worked particularly well in the initial days. That is, until the consumers figured out the pattern. In a highly price-sensitive environment, this became a question of “is this product worth waiting 60 days for?” It surely did for the fashion category at least. That pair of sneakers could wait two months as you already owned at least one pair.  What happened here is that users who would have otherwise bought the product at the regular price (and immediately), were now willing to wait for 60 days or more to receive a massive discount on that product. This strategy initiated by e-commerce firms therefore ended up altering consumer behaviour permanently.

Countering The Cobra Effect

If we want to avoid being the victims of the Cobra Effect, we need to reduce the number of unexpected outcomes. For that, we need to improve our intuitions concerning the operation of cause and effect in complex social-ecological systems. Developing methods to help us visualise and understand the cause and effect relations in complex systems is of great importance. We need ways to progress beyond the linear thinking. In particular, we need to understand the concept of feedback and appreciate the dominant role it plays in determining system responses to management initiatives.

WHAT IF OIL DISAPPEARS?

BY AYUSH BANSAL

 

The first word that comes to our mind when we think of ‘oil’ is lifeline. Isn’t it? Oil, is quite simply the backbone of modern life. It’s in the food we eat, the houses we live in and in the cars we drive. Indeed, it’s the most important commodity, the economic fuel of the world. Over the last 150 years we have taken out about a trillion barrels from the Earth, and most experts forecast that the equivalent of another trillion should still be there for us to extract.

But imagine one day that you wake up to a breaking news story that reads something like “Oil reserves across the world run dry!”

The immediate reaction would be to stock up on petrol or diesel. And subsequently, you would drive your car or motorcycle to the nearest petrol station, where you would witness a never-ending line of vehicles. The pump owner would have instructed the workers to shut down for the day, as he is smart enough to realise that he is now sitting on a resource more valuable than gold or diamonds. You would drive from one pump to the next, and if you are lucky to find a relatively quiet one, you’ll get the fuel at probably a hundred times the normal rate. You don’t care about the price, since scarcity seems to be telling a more horrified story about the future.

It has been one day since the news broke.  Across the oceans, huge tankers carrying millions of barrels of oil are on the move, but not in the usual direction. In the wake of the crisis, Russia and Saudi Arabia have called back their ships. In the meantime, the government gives a statement that it has a safety reserve of 36 million barrels that would be used for emergency services like hospitals. By the third day, the coal extracted from mines across the country lies in wait for trains to arrive and take them to power generating units to be converted into electricity. But the trains don’t come as they have not able to refill their diesel engines. Meanwhile Power stations have used up almost all their reserves and hydro power stations are breaking down in the absence of lubricating oils. And the nation begins to go dark.

Without electricity cooling water doesn’t reach nuclear reactors and finally the generators go down, and so do the reactors. Commercial flights are grounded and people across the world are stranded. The government continues to use its reserves to keep lifesaving critical services up and running. By now the International trade has come to a stop. Every country is on its own now. The economic fallout is rapid; the growing, widespread panic forces the government to halt stock trading. All of a sudden, two trillion dollars of oil stock become worthless; more than a million people directly employed by the oil industry lose their jobs, and are reduced to having to find their way home by any means necessary. The uncertain economic future also forces thousands of manufacturing plants to shut down immediately, which sparks protests from the millions employed in the industry who also lose their jobs. The government conducts relief efforts, dropping food in areas most affected but it is not possible to satisfy every human basic need in the crisis. Armed gangs patrol supply routes and raid households to get a hold on what little is left.

Oil exporting countries such as Saudi Arabia and Iraq are the worst affected. Fresh water is scarce and now the food imports have stopped and ultimately, Saudi Arabia uses what it has left to desalinate sea water to grow food crops. Things become even worse in Saudi Arabia, which is in the midst of an economic disaster. 90 per cent of their income from exports came from oil, with all that gone the country collapses into ruin. With no ships docking at the ports, the entire population suffers. This is just a glimpse.

In the middle of this crisis there is one nation- Brazil, where vehicles would continue to run as Brazil is one of the few countries where a large number of vehicles run on ethanol. In terms of bio fuel production, the Brazilians are decades ahead of the Americans and other western nations. Across the vast agricultural lands of the Earth, farmers take inspiration from Brazil and start planting sugar cane to speed up the production of ethanol.

A world without oil forces governments around the world to make tough and brutal decisions. In this case, should they tell the farmers to plant crops for food or fuel?

Now coming back to the reality:

There is popular theory in the context of Oil- the Peak Oil Theory. It began in 1885 with a warning by the State Geologist of Pennsylvania that oil was a temporary phenomenon, and undoubtedly, we have been repeatedly warned about the crisis of oil. In 1920 the director of the U.S. Bureau of Mines warned that in the next two to five years, oil production will start to decline. Similar concerns were expressed at the end of World War II. Again, in the 1970’s a former chairman of the Atomic Energy Commission told that “We are living in the twilight age of Petroleum”. An eminent earth scientist, Marion King Hubert predicted that children born in 1965 would see all the world’s oil used up in the lifetimes.

Hubert’s theory was embraced by a retired geologist, Colin Campbell, who wrote in 1996 that oil production would peak in 2000. Advocates of ‘Peak Oil’ maintain that we have used a trillion barrels of oil, have a trillion left which at the present rate of usage will last 40 years. Others in the industry are of the opinion that we have three trillion barrels left. All the above facts seem to be scary but ignorance could be even more harmful.

The government should realize that future is at stake and it needs to lead the nation towards sustainable life. Biomass, Ethanol and vegetable oil should be suggested as alternatives to fossil fuels and their share in total production should be expanded slowly and gradually. The global community should take effective implementation of the clauses of Paris Summit and other global initiatives that are associated with improving climatic conditions as well as those policies that encourage the nations to shift from non-renewable energy to renewable sources, thereby reducing the dependence on oil.

Global community, regional relations and the nation itself are the key pillars that could avoid such virtual and scary phenomena to become a reality episode of one’s life. Now, it’s we that need to decide the course of our lives.