labor law in india

Suspension of Labor Law in India in The Wake of Covid 19

By Banking No Comments

Suspension of Labor laws During Covid 19 Pandemic

In its pursuit to provide impetus to the faltering and battered economy, in Covid, several States in India had effectively brought about an ordinance to exempt compliance from certain labor laws amidst the pandemic. Such suspension was brought about to emphatically provide more flexibility to employers and businesses.

This flexibility was provided in order to help curb the effects of the Covid – 19 induced lockdowns that had weighed heavily on the industries and businesses. It is to be noted that labor codes or laws significantly provide much-needed social security measures for workers. Though one might argue that these measures effectively assist in boosting the economy, concerns regarding the protection of the rights of the Indian labor force, too surface which need to be paid attention to.

what is labor law
In a series of events, the state of UP was seen promulgating the ordinance namely the ‘Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020’. This particular ordinance had effectively led to the exemption from compliance to the majority of the labor law in India for an extensive period of three years.

Similar steps were also seen to be taken by other states which had positively issued notifications to grant certain exemptions under the factories act of 1948 and Industrial Disputes Act of 1947. This period had also seen an extension in working hours for a period of exhaustive three months.

As aforementioned, UP saw the biggest suspension of adherence to the labor law in India, which was made possible through the suspension of the majority of the key labor law in India and rules in the states. But it is to be strongly noted that not all labor laws were suspended during the unprecedented times.

employment law

Barring certain provisions relating to security and safety of workers under the Factories Act, 1948 child labor, the Building, and Other Construction Workers, Maternity Benefit Act, equal remuneration act, Employee’s Compensation Act, and the Bonded Labour System (Abolition) Act, 1976; all other laws were suspended in the State.

Thus, given the nature of the laws that were exempt from being suspended, it can effectively see that even amongst the chaos and mayhem in the economy, the health and the welfare of the workers were not forgotten or taken for granted.

With the crippled financial standing of the urban and rural workers, protection of the rights and welfare of the labor class should be a top priority for the government, which, one can argue, is committed to.

suspension of labor laws
But given the aforementioned description of suspension of certain labor law in India, this gives rise to an inquisitive query, will not the suspension of laws for the welfare of the labor affect the wellbeing of the workers in the state? It is to be noted that the suspension of laws comes with certain requirements and rules that need to be adhered to.

For example, businesses and industries are stringently required to keep the record of the workers including all the details like names and other intimate details of all employed workers shall. This shall be done electronically on the attendance register, such as prescribed in Section 62 of the Factories Act, 1948.

On the other hand, the industries have been strictly instructed to pay workers fairly, where no one will be paid less than minimum wage as prescribed by the UP Government.

In fact, to maintain the availability of funds to the workers through the harrowing times of the Covid 19, the wages of the workers shall be effective within the time frame limit that has been prescribed under Section 5 of the Payment of Wages Act, 1936.

One might even state that the government has taken staunch and solemn steps for digital inclusivity by stating that the wages to the workers will be paid only in their bank accounts.

On the other hand, as aforementioned, the safety and the security of the workers will be intact as the provisions under the Factories Act, 1948 and the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act of 1996 which strongly relate to safety and security of workers, will remain applicable.

Thus, to rest the debate about the compromise of the welfare of the workers, the government has given serious thought to the repercussions and effects of the ordinance that it has promulgated.

Given the harrowing, odious toll on health that the pandemic has initiated, the government has made it stringently mandatory that the workers shall not be allowed or required to work for more than eleven hours per day.

Thus, in totality, the Ordinance by the state governments had made the key labor law in India strongly relating to workers and those concerning the industrial dispute, trade unions, occupational safety, contract workers, etc. defunct for a considerable period of time.

The rationale behind the suspension of laws has been that it is a pertinent need of the hour. This is increasingly needed in order to give concessions to ongoing and new industrial businesses, establishments and factories.

Though this certain move heavily tries to revive the economy through the revival of businesses and industries, it cannot be denied that it has attracted widespread criticism on the ground that the promulgation of the Ordinance leads to infringing of the rights of the workers.

labour law compliance
What remains now is to be seen and scrutinized is how the reality of the implementation of such laws plays out in the economy. It will also be interesting to witness whether such an ordinance will be challenged in the Indian courts. Since the precedent has been set, it can be anticipated that other States are likely to follow in a similar direction to suspend/relax labor law in India in order to attract investment.

asset monetization

Putting Asset Monetization on The Track

By Other No Comments

Asset Monetization and Positioning on The Track

The pandemic has worsened the government’s finances to survive the arduous times of the public health care crisis in India. This has led the government monetization to run a fiscal deficit that might not materialize well for the fiscal health of the economy.

The government, in order to provide impetus to the economy, has unveiled a constructive, expansionary budget that will help raise funds. In addition to an expansionary budget, it has been witnessed that an asset monetization scheme too will contribute to replenishing the empty coffers of the government.

It is to be noted that NITI Aayog is effectively and intensely pushing the ministries to considerably accelerate the Union government’s asset monetization plans. This is being pursued to credibly and diligently achieve the current fiscal’s target that has been set by the government at the amount of Rs 88,190 crore.

asset monetization plan

Given India’s recent finance history, such a humongous fiscal deficit target set by the government is a delineating behavior from the precedent practices of the fiscal health of the economy.

Various ministries are being monitored to implement the crucial program by the Cabinet Secretary to emphatically ensure that part of the monetization plan is swiftly implemented and the targets are hit. If the monetization plan or the procedure is to be broken down, it entails the creation of new sources of revenue by substantially and efficiently unlocking the value or potential of the investments that are made by the government in public assets.

asset monetization policy

These are primarily focused on the public sector undertakings, which have not been yielding substantial or appropriate returns and are in desperate need of revamping in order to realize their utility and potential in the economy.

Thus, the government, in the recent budget, has come forward to unlock the lost potential and underutilization of such assets to raise revenues and thus replenish the emptying financial coffers of the government.

It is no news that government-regulated investments are usually seen as inefficient. Thus, in order to counter such a discrepancy, the government has invited the private sector to increase participation in the brownfield projects.

The plan has been efficiently concocted to make the aforementioned assets value-accretive, through substantial and efficient operation.

But what role do the ministries play in such a scheme of events devised by the government? It is to be noted that various brownfield assets that have been chosen include roads and the power sector where the concerned ministries are in charge.

Thus, these ministries are being forced or motivated by the government to complete their targets, as the petroleum, Railways, sports, and mining industries seem to be behind schedule. As a matter of fact, the railway ministry has been accused of being the biggest “laggard” after a change of guard. However the same cannot be maintained for all the industries in the market.

This is due to the impressionable and appreciable role that has been played by the Real Estate Investment Trusts and Infrastructure Investment Trusts or InvITs in the road and power projects.

In addition to the aforementioned real estate investment funds and the infrastructure investment trusts, public-private partnerships (PPPs) are also being highly preferred as the modes for asset monetization. This case can be scrutinized in the railways which account for humungous 25% of the Rs 6 lakh crore of assets that have been identified to be monetized.

According to the reports, it has been conjured that such PPPs will effectively help redevelop 400 railway stations around the countries. Other tasks at hand of PPP also include 90 passenger trains that need to run, leasing of the track on dedicated freight corridors, etc.

In the PPO agreement, in the specific case of the passenger trains, there is a model concession agreement that is in place to strategically operate these trains for a period of 35 years. This is being effectively achieved in return for an upfront payment.

In order to incentivize the private players, the private partner has been enticed with offers stating that the concerned parties have the right to collect fares and avail of the Railways’ maintenance infrastructure. Though, given the great incentive that is being provided by the government, the Railways is still falling behind in meeting the target that has been set for it at Rs 17,810 crore this fiscal.

This has led to a strategic revision in the policy and the terms that are being formulated to attract more participation from private players in the market.
One might ask what is the use of increased incentives, given the fact that private players will apparently witness spectacular profits which will definitely guarantee their participation? It is to be noted that undivided attention of the private players is needed for the Asset monetization plan.

The plan will effectively take off only when and if the private sector is on board. Thus, the delays which might come with expected profits, cannot be afforded. Therefore utmost transparency needs to be ensured for such participation. There must be a balance between risk and reward, between private and public interests.

It is to be noted that the ambitious, innovative project of the government will be seriously fraught with difficulties if the various projects that are cornered, have the participation of a few private parties.

Thus, in totality, it can be stated that the government’s incentives and undivided participation of the private players in the market are critical for the success of the asset monetization plan drafted by the government.


Also, Read Intellectual Property Rights

what are gig workers

Protect Gig Workers, But Don’t Disrupt Gig Economy

By Other No Comments

Protecting Gig Workers and Gig Economy

Everyone knows that the odious tussle between the employers and the gig workers has reached the courts. A response has been demanded by the apex court from the Centre to a PIL that was effectively filed by the Indian Federation of App-Based Transport Workers (IFAT).

The IFAT has strongly put on the table its demand which effectively includes much-needed pension, health insurance, social security benefits, pension, and cash transfers amounting to Rs 1,175 per day. These have been demanded for the app-based drivers and Rs 675 per day effectively for others.

gig workersThe timeline for such cash transfers has been provided till December 31. The association has also argued that the cash transfers can also effectively continue till the pandemic subsidies to support its workers, who have been hard hit by the arduous pandemic.

Do the demands of IFAT end here? It is to be noted that there is more to the story. In fact, most importantly, the IFAT wants gig workers to be recognized as unorganized workers. This should be done as per the Unorganized Workers’ Social Welfare Security Act of 2008.

Tipping scale in favor of the gig workers.

  1. Globalization has integrated economies around the world, so much so that Westernization has found its huge impact on the policies and laws in the eastern and developing countries like India. Precisely due to this reason, given the dramatic turn of events in some Western economies, the scales appear to be tipped in favor of the gig workers in the Indian economy.
  2. To quote an example, in a turn of recent events in the UK, the Supreme Court had emphatically upheld an earlier ruling by the employment tribunal. This ruling had stated that the 25 drivers who had effectively filed a case against Uber were employees and not mere contractors.
  3. But what was the impact of the same, you might ask? It is to be noted that this landmark decision by the supreme court had earned the drivers a minimum wage, pension, and holiday pay.
  4. Thus, one can argue quite well that the welfare of the workers was upheld in the UK. Given that UK, a western country, that upholds the moral of capitalization, held the judgment in favor of the workers, India, being a welfare economy, is all the more required to abide by the rules of welfare and prosperity.
  5. In fact, the topic of the welfare of workers has taken the European Union by storm as a draft proposal to make companies like Instacart, Uber, and Amazon effectively categorize their gig workforce as employees.
  6. This will positively lead the corporate giants to provide the workers more benefits, which is especially the need of the hour given the financial standing of many workers in the economy has been crippled by the onset of the pandemic.
    But has the welfare trend caught upon all the western nations?
  7. Apparently not. Platform companies in the US have been successfully able to stall such welfare legislation, but AB5 in California has been vehemently and emphatically aiming at reclassifying the gig workers as employees.
  8. Thus, one can pliantly state that the tide is turning. The turning tide in the US can be guaranteed by the fact that it is being seconded by the US labor secretary Marty Walsh, who has been working towards recognizing the workers as employees.
  9. The main reason given for the same is that the humungous profits being accrued by the corporates In America should be trickled down to the workers as well.
  10. This has led to the blockade of the Trump era rule of classifying gig workers as of individual contractors in America. Thus, America might emphatically encounter a paradigm policy shift for the gig workers.gig economy in india

Upsetting news for the economics of aggregators

  • Though, one can argue that the legislation will be a welcomed step for the gig workers, can the same be stated for the employers? Apparently not. In Fact, the legislation might come as a piece of upsetting news for the economics of aggregators.
  • This is mainly due to the fact that such legislation will lead to higher operating costs and will definitely pressure the profit margins of the corporates. Given that the corporates love profits, the introduction of such legislation is sure to upset many money-mongering entrepreneurs and CEOs.
  • The operating cost is anticipated to shoot up mainly due to the fact that permanent employees can be twice as expensive as contract hires. Though, given the propensity of enactment of such legislation, the Platform employers will effectively try to point out the strength of their model.
  • This strength of the model lies in the fact that it provides an ability to the corporates to use the services of large numbers of workers. Thus, this leads to timely payment for a specific task for many workers in the economy, and this way they are emphatically and efficiently paying for the specified job done during the defined period.gig economy workers
  1. Thus, this ensures productivity and efficiency of the gig workers in the economy and subsequently keeps the costs down. Given the aforementioned argument, is the legislation the need of the hour?
  2. While one cannot deny the arguments being put forward by the corporate workers, it cannot be forgotten that a big section of gig economy workers belongs to the more vulnerable sections of society.
  3. Thus, they have a higher need for a stable income and much more than subsistence wages. Given the remunerations that are being paid to the workers are not enough to sustain the pandemic or the livelihood of the workers.
  4. Also, /another problem that poses itself in such a scenario is that such informal contractual agreements don’t hold up well in a court of law.
  5. Thus, even though employers might insist and assert that flexibility in the workplace is a humungous advantage but the truth lies in the fact that in a country like India, workers strongly prefer to be employed with one company in return for assured benefits. Thus, will the scale tip in favor of the gig workers? Guess, we’ll have to scrutinize as the matter unfolds.


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new rbi norms

New RBI Norms For Asset Classification & Loans

By Banking No Comments

New RBI Norms For Asset Classification may Increase NBFC’s Bad Loan Pile

rbi guidelines for nbfc

As per the new RBI norms, in a turn of dramatic events, the bad loans of India can be acerbated to an excruciating degree. According to the reports, non-banking financial companies (NBFCs) may witness the rise of bad loans after March 2022. This mainly comes after the Reserve Bank of India recently clarified an up-gradation of non-performing assets.

The Case Of RBI and NBFC’s

According to the recent recommendations, the Central bank has come forward with the agenda that the loan accounts that are classified as NPAs may be upgraded to ‘standard’ assets.

Though, it is to be noted here that it will be only if the entire interest and principal are paid by the borrower.

non banking financial services

Also, according to the notification, this will also apply to both banks and NBFCs. It is worthy of mentioning here that most of the NBFCs use to upgrade gross stage-3 loans to gross stage-2 loans.

Thus, one can emphatically state that the rule that has been pronounced on the up-gradation of bad loans will certainly lead to a rise in NPAs reported by some NBFCs.

On the other hand, it is no news that ambiguity in the banking sector leading to inefficiency is a persistent matter, and the latest announcement aggravates just that.

One can effectively argue that there could be some ambiguity with regard to the classification of such accounts that strategically are part of the dues that may have been cleared.

The crux of the new legislation states that NPAs currently classified as stage-2 but now could be classified as stage 3 NPAs also.

Therefore, as a matter of fact, this could lead to an increase in provisioning against such accounts.

NBFCs in India follow the Ind-AS guidelines, under which delinquent loans are classified as gross stage-1 (loans overdue by up to 30 days), gross stage-2 (loans overdue between 31 and 89 days), and gross stage-3 (loans overdue for over 90 days).

There is no categorization of standard and non-performing loans for NBFCs under this system.

asset classification norms
In a report on Monday, Kotak Institutional Equities (KIE) said as market practice, all NBFCs have preferred to have a uniform definition for non-performing loans and gross stage-3 or 90 days past due (dpd) loans.

“However, NBFCs may choose to have parallel reporting under Ind-AS and regulatory filings to RBI. Our preliminary discussion with market participants suggests that NBFCs may not go for parallel reporting and continue the current practice (uniform definition for non-performing loans and gross stage-3).

Hence, gross stage-3 loans will likely increase,” KIE said.
Some analysts are of the view that while bad loans may rise, the regulatory clarification may not have a significant impact on provisioning.

Prakash Agarwal, director and head – financial institutions, India Ratings, and Research, said non-banks will report higher NPAs, especially in small-ticket unsecured loan asset classes. “However this is unlikely to have a significant impact on the provisions for the NBFCs and hence P&L (profit and loss) may not get impacted much,” he said.

On the other hand, Agarwal expects that the co-lending market could get a push from the new norms on asset classification.

“This would give a fillip to co- lending as the norms of banks and NBFCs will be aligned. This was one of the important issues that were a cause of challenge for co-lending,” he said.


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Nationalization of banks in comparison to Covid effects on the Indian economy

By Banking No Comments

Nationalization of banks in comparison to Covid effects on the Indian economy

If there are two things that have grabbed the political attention of the masses in India, it has to be the odious covid 19 pandemic that ravaged the already battered economy and the nationalization of the public assets.

Public assets, time and again have been a touchy subject for the masses of India. This is especially is true given the widespread notion or belief that government assets are invariably and emphatically public assets. The government assets have been the talk of the town for two specific reasons.

First is the selling off of the public’s property and heavy corporatization of the banking sector and secondly, the government’s close relations with the Ambani-Adani. With outrage pouring in from the masses the idea has become a contentious issue of debate.

Government’s inspiration

But what exactly inspired the government’s decision for disinvestment in the economy? The answer to the question lies in the arrival of the pandemic which severely affected and crippled the finances of the government.

With the need for robust public finance and expenditure in the economy, lower expenditure and finances spelled trouble for the battered economy.


Thus, in order to finance the needs of the economy, the government innovatively thought of disinvestment of the public assets on which it could cash on.

But is disinvestment such a bad though Afterall? It is to be noted that privatization might actually ramp up the efficiency of the asset which had been reductant under the government’s rule.

With higher NPAs in the public banking sector, the introduction of healthy competition can lead to the revamping of the banking sector.

What more pertinent reason for such a disinvestment spree can be? Given, the circumstances of the pandemic which the banking sector weathered, NPAs were reported to surge. Mortarium on payments and easy lending had put immense pressure on the banking sector.

Though many banks did reduce their NPA ratio, that was merely due to the act of writing off of the loans from the financial books.

As a matter of fact, RBI’s Financial Stability Report of 2020 effectively and emphatically foresaw a huge surge in the Gross NPA ratio of the banking sector.

This was projected to be at a significant 13.5 percent for the month of September for the financial year 2021. The NPAs were projected to heavily surge from 7.5 percent in September 2020.

nationalizationWhat made the Indian banking industry suffer the wrath of the covid more than the other countries was due to India’s despicable legacy of bad debt even before the COVID-19.

Thus, one can strongly argue that as the odious variants of the virus despicably assailed the country which had pervasive and floundering health sector, the already battered pre-pandemic financial infrastructure, cracked and worsened.

The aforementioned situation is even more exacerbated for the public sector, which is inefficient even under normal circumstances.

Thus, the government’s solemn decision to privatize certain banks and cash on them has some merit to it. With increased efficiency and losses, one can effectively expect the better performance of the sector in the economy which is in the nascent stage of recovery.

However, taking an ill view of the banking sector too can be a biased opinion. With strict, increased monitoring, the immense increase in market capitalization in the stock market, and the introduction of stimulus packages, there is hope that green shoots for the sector and the economy are a possibility.

This can be effectively corroborated by the fact that throughout 2020-21, SCBs’ RoE and RoA sustained a positive rise of an impressive 6% in March 2021 on their CRAR.

In fact, the GNPA and NNPA ratios too displayed signs of stability over a period of time, which spells good for the economy.

As aforementioned, last year, the moratorium on compound interest, which was sanctioned by the RBI, had a despicable effect on the bank’s finances.

But it is to be noted that contrary to the earlier inferences, banks are now much better equipped to manage profitability. Their resilience in terms of higher recoveries and as higher capital buffers too has been improved.

Thus, one can maintain that the moratorium and the pandemic did have a silver lining for the banking sector.

Thus, in totality, disinvestment, which has been a petulant topic for the public, can be a step in the right direction for the industry.

Given the immense importance of the banking sector in the economy, which drives the demand and the investment, its timely resolution is the need of the hour.

If this required extreme means, one should brace themselves for the inevitable.

Thus, one should not be much abrasive or unappreciative of the scheme the government is concocting for the banking sector.

As for the future, one can only be patient to witness what the scheme will offer for the industry and how will impact the economy in the long run.

Landmarks Happened for Hospitality Industry in India

By Hospitality No Comments

Landmarks For Hospitality Industry in India

It is no news that the hospitality industry in India has been weathering the covid storm and is critically passing through a critical, unprecedented phase.

This has been specially made arduous for the industry to cope ever since the Covid-19 pandemic has come into the picture. The hospitality sector in India specifically saw a large loss of revenue.

To put the assertion in terms of statics, the RevPAR (Revenue per available room) for the industry had seen a massive decline during the first three quarters of the financial year 2020.

growth of hospitality industry in india
Even though the pandemic led to the ravaged hospitality sector in India, the silver lining that came with it cannot have been missed or ignored. But what kind of silver lining was offered during the Covid-19 you ask?

The odious pandemic had offered an incredible opportunity to the hospitality sector to fine-tune and ensure operational efficiency.

Such operational efficiency of the highest standards could have been achieved in the important departments such as HR, finance, engineering housekeeping, beverage, and food. This could have been efficiently achieved through the best-in-class training and stringent adherence to all brand standards.

hospitality sector in india
Given the fact that covid had presented various opportunities for the sector, one can state that the hospitality sector in 2020 and 2021 had achieved many milestones and landmarks. This was made possible through many innovative products that led to the reshaping of the hospitality industry.

The government has been sagaciously working for the advancement of the hospitality sector in India. The Maharashtra government had effectively conferred ‘industry’ status to the state’s hospitality sector. This was a major step in the revival and the renewal of the sector in the state.

The industry status emphatically allows the hospitality establishments in the state to be levied electricity charges and rates, property tax, water charges, development tax, increased carpet ratio, and non-agricultural tax at industrial rates.

This efficiently results in a reduction of the operating costs for the hospitality players in the state that provides impetus to the battered sector in the state. In fact, it is highly expected that the government will significantly reduce industrial tariffs which will further boost the industry in the state.

tourism and hospitality industry in india
Another landmark decision that was taken by the government in the financial year 2021 was that it had significantly reduced pre-establishment licenses for the sector from 70 to 10. Given the cumbersome licensing hassle that the establishment has to go through, which effectively affects its efficiency, such a step is welcomed by the hospitality sector.

Given, what all is being achieved in the state of Maharashtra, other states are bound to take cognizance of what is being done and follow the suit. This could definitely be the harbinger of change for the industry which will have a significant impact on its fortunes, which at the moment are faltering.

Talk about the technology integrated economy in India and the hospitality sector has been making a sagacious use of the same. A landmark that had been easy to achieve by the hospitality sector was the integration of Smart In-room Technologies Smart in-room technology.

This certain technology has taken the hospitality industry by storm. With a high percentage of over 20% of hotels worldwide already on board, this top-notch innovation in the hotel industry in India will certainly lead to the reinvigoration and reshaping of the hospitality sector in India in the next decade or so.

Gone are the days when lounging in the hotel meant services available at your disposal, any time and any day with no need of serf service. Self-Serve Tech Serf Service Technology has made an imprint on the hospitality sector.

The hospitality industry has emphatically come a long way when it effectively comes to automation of services, and it is here for all the good purposes. Thus, with automation integrated hospitality sector, automated check-ins and checkout options are now the norms.

Though the phenomenon has been long due, one can effectively state that the arrival of covid has fastened the process of transformation from manual services to automated services.

But one might ask what is the most efficient and beneficial innovation or landmark that has been integrated into the industry? The answer to that has to be the use of robots in the Hospitality Industry. This is an area where a lot of innovations have taken place and has huge potential to boost the industry.

Given the fact that the Indian hospitality sector will be contesting against the world hospitality sector and will face stiff competition more than ever, it is absolutely no wonder that technological innovations are now ruling the roost in the industry.

This will emphatically help the industry to stand out in a sea of competition. In fact, a series of robots have been introduced by the HOSPITALITY INNOVATIONS. Today 11 introduced a series of robots tailored for the hospitality industry.

It is no news that India is one of the fastest-growing travel & tourism (T&T) economies in the world. This is mainly due to its immense, diverse landscape and rich heritage. Its cultural diversity emphatically and significantly attracts tourists from across the country and the world.

impact of covid-19 on hospitality industry in india

However, if one closely scrutinizes the sector, it might not be hard to notice that the sector has still not tapped into its full potential.

This is especially true for leisure tourism, which lacks mainly due to the lack of good quality hotel infrastructure in the country and low technological advancement of the same.

But, given the aforementioned technological advancement that has been achieved by the sector, one can argue that the hospitality sector is on the road to advancement and improvement which is much needed by the industry.

Though, highly capital intensive and the high cost of capital makes investment in the sector quite cumbersome and unattractive, the government’s efforts to attract the same are needed in the industry.

It is to be noted that the sector is a major contributor to the country’s GDP growth and consequently employment, thus its revival is of the essence and required.

To make the sector more appealing and easier to work in granting infrastructure-lending (infra) status to the sector, which is in fact a long-pending request by key stakeholders, will be a first step on the path of growth.

Thus, will the government take cognizance of the fact that work is needed in the most crucial sector in India? I guess we’ll have to wait and see.


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Is Government’s Arrival in The Indian Telecom sector a Boon or a Curse for It?

By Telecom No Comments

Analysis of Government Arrival in The Indian Telecom Sector

Something has been committed by the Indian telecom sector that no analysts or experts had anticipated. Well, many might anticipate or might be concocting certain political blunders, this instant, the action is too complex and strategic.

The Indian government, in a recent turn of surprising events, has entered the telecom sector by picking up a stake in a telecom operator. This certain telecom operator was on the verge of a collapse just a few months ago that had wreaked havoc in the sector.

Thus, given the debilitating circumstances under which the government has come to rescue, a certain message by the government should be made clear.

Through such a takeover, the government has proved that it solemnly wouldn’t want the Indian telecom sector to become a duopoly. Here it is to be noted that the duopoly players could have been the Reliance Jio and the Airtel.

indian telecom sectorHaving stated the government’s response to the dying ambitions of the Vodafone, how did the market take the news? The market response, at best, can be described as disappointing and averse. This has been corroborated through Vodafone Idea’s shares dipping by as much as 19% in early trade after the brutal announcement was made.

This clearly suggests the market’s subdued enthusiasm over the government’s entry as a shareholder in the market.
But what could have led to such an averse and spooky behavior that was displayed by the market yesterday?

It is to be noted that the market is emphatically asking a single question: was there really a need for the government to take over yet another telecom?

History bears testimony to the fact that government-led organizations’ are a euphemism that is used for an unattractive, unprofitable, and low on efficiency organization. Thus, various questions are being raised on the government’s ability to steer the ship of Vodafone Idea.

This also comes after the government-run BSNL performance that hasn’t gone up the ladder of success for quite some time now.

telecom industry in indiaAre such fears unwarranted?

  1. But are such biased fears unwarranted? Many analysts would like to argue that this does not have to be the case. This is specifically due to the fact that such pessimism is unwarranted if the government will not meddle with the management of the Vodafone Idea.
  2. In fact, many experts will also like to present the opinion that perhaps such a takeover will actually prove to be useful for the stakeholders.
  3. This can be beneficial for both Vodafone Idea and BSNL MTNL’s subscriber base and the investors as a whole. There is a sound argument that if the two entities namely the BSNL and the Vodafone are merged, this could prove to be a timely profitable venture, especially with the arrival of the 5G era in the country.
  4. The pair can make a great match given BSNL’s pan India wired coverage and the Vodafone Idea’s wireless coverage. This could optimistically complement well each other and assist both the giants to make a competitive pair in the sector, giving the competition to the rivals Reliance Jio and Airtel.
  5. What can materialize into a successful story is the realization of synergy gains that can be due to the act of asset sharing agreement on 2G, 4G & later 5G.this could emphatically prove to be successful as the two companies will have an effective chance to leverage each of their assets and use their customer base to expand.
  6. This will emphatically and significantly help Vodafone to clear off its balance sheet and avoid the interest costs by effectively and strategically clearing the path for its profitability.
  7. However, it is to be noted that everything is easier in the theory than on the ground level. This too is true for the situation of Vodafone in the telecom sector.
  8. It might be delightful to narrate the synergy gain analysis, but it is quite easier said than done. With the government having a seat at the management table, things can go fairly south, quite quickly, just as it had been anticipated to go up.
  9. Where many are of the opinion that the government’s takeover can be a worse remedy for a dying Vodafone, very few have their faith in the government’s ability to turn the enterprise into a profitable venture.
  10. The government doesn’t only face the problem of a dying dream but also of different cultures that need to be integrated if the government wants to amalgamate an Indian company and a global company culture.
    telecommunication sector in india
  11. It is to be noted that the telecom sector in India has come a long way since 1991. The 1990s are the times that remind us of the Monopoly of state-run MTNL, BSNL, that had captured the market.
  12. Such a scenario can be seen playing out even today with the threat of Reliance -Jio and Airtel to capture the market burgeoning every day. Though, many might argue that since JIO’s inception Data prices have plummeted but given that it might be heading towards the monopoly position, such graces can in no time vanish.
  13. Certain legality issue that has come to the fore, with the government’s involvement in the sect
    or. It refers to the government’s role as a regulator and as a buyer and provider of service in the same sector.
  14. With the government governing the sector with its laws and regulations and also acting in the capacity of being an investor in the two largest telecom giants, can it be trusted to play fair and square? Certain analyst
  15. indian telecommunication servicesand experts have cast their doubts on the issue of the government playing two roles at once in a sector.
  16. Many fear that with increased inefficiency, the sector will also witness undue advantage through policies to nurture the same. Maybe the government will act responsibly, and the precedent will be set. But can such a motive be positively achieved; one has no choice but to be a bit dicey about it.
                                         But who will be responsible for the funding?
  17. Given the aforementioned fears and doubts that linger upon the leadership of the government, another unsettling fact has to be Vodafone’s urgent requirement for funds to expand its network capabilities for the 5G era.
  18. Though the recent tariff hikes might have eased the arduous nature of the problem, this is a temporary solution for the short-term cash flow crunch. Given, Vodafone’s odious conditions, it sure needs more than just a short-term CAPEX boost.
  19. Thus, before Vodafone is made a success story, its empty hollow coffers of opportunities need to be filled with conviction, Capex, and strategy.
  20. Will the government be able to work in the favor of the Vodafone Idea’s stakeholders and investors? Perhaps, it is something we’ll have to wait and watch, as the next few months will prove to be highly critical for the telco’s future.


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IPO or M&A? How Venture Capital Shapes a Startup’s Future.

By Corporate Law No Comments

Understanding Venture Capital Funding Process

Startups are the new burgeoning fashion of the finance world. It is no news that varied startups in the economy have taken the economy by storm.

With many registering high profits,  IPO the startup culture in various economies, in the west and the east have been blooming. With millions of ventures sprouting in the economy, its funding process garners importance and has drawn itself into a heated debate.

venture capital

The heated debate around the topic is due to the fact that entrepreneurs rarely know who will ultimately own their startups. There are various ways a startup is funded in the economy. A startup that is effectively funded by Venture capitalists, tends to work with the same group of partners.

This usually leads to a faster exit that is sought after by the investors by selling the company to a larger one. In contrast, to the VCs, startups that are emphatically funded by a VC, exit potentially through a splashy IPO is demanded.

It is no news that funds are strategically required to sustain the fledgling business or to ramp up the output. Therefore, a cash injection, from any source, can go a long way in sustaining a business much longer or launching a critical, new product in the market.

ipo in india

However, it has been found through various studies that the founders usually don’t put much thought into what alternate funding mechanisms have to offer. Thus, they effectively fail to recognize the importance of scrutinizing and examining investors’ relationships that might eventually find themselves relinquishing their ventures to a much larger profit-mongering acquirer.

Thus, strategically knowing the details of what actually is at stake with both outcomes is important and imperative.
The main rationale that runs behind the reluctant attitude of the founders not to get to know the alternatives is that many founders are mostly interested in the amount of funding and whether the venture capital is well known or not.

Thus, decisions are made on the basis of popularity and amount of funding, which according to many analysts is a wasteful approach.

According to the study, it has seen found that of the 16 percent of the startups that have been acquired, the main motivator of investment and negotiation of like-mindedness in business to ensure stable returns and not what such kind of investing have to offer both the parties.

Such kinds of relationships in businesses have been termed “focused successes” because they effectively deliver a venture mostly to a well-resourced owner.

venture capital funding process

It is to be noted that going for such an approach usually leads to repercussions in the form of pressure that the founders will have to yield to coordinate with the plans of an aligned investor group. in fact, any many cases, it has been witnessed that the founders have to effectively give up control of the startup’s vision.

This can be due to the demand of the investors that lead to founders taking a step back altogether after a larger company takes possession. With such uncanny and unwarranted behaviors, it is usually seen that such businesses fall apart.

On the other hand, one can also effectively argue that venture capitalists who don’t strategically or effectively work closely together tend to actually hold on to startups longer.

Thus, the tradeoff for the founders is emphatically between the infringement of the power in the startup and the investors who might outlive their utility in the venture.

According to the reports, if an investor clings to a startup for a longer time, it is usually four and a half years on average.

entrepreneurs and ventures capitalists

Though one might argue that becoming a publicly-traded company can actually bring about more attention, profits and can effectively retain the original management team, the high risks of failure for such ventures that are backed by such syndicates is a fact that cannot be ignored.

Thus, as aforementioned, though for most entrepreneurs, it might be just about the term sheet or how much equity they can retain from such investing, usually, the structure of the alternatives, which is a kind of hidden variable, has huge implications.

Though the degree of collaboration between two parties gives off mixed signals, there are instances that such investments might actually prove much more beneficial than the repercussions aforementioned. The pool of investors might help the firm pool together resources and provide hefty, important connections within an industry.

This might seem like a promising opportunity that many firms or startups might want to explore. On the other hand, we also witness a more diverse investor group that might be willing to give founders more leeway in decision-making.

Whatever be the case, founders need to understand and interpret the pros and cons of such investment relationships and who they get in bed with. Such decision-making is mainly motivated by their solemn take on their companies and what they aspire for the same, which should be made clear before committing to various popular VC funds.

Though, a quick cash injection might seem enticing, ultimately, the structure of relationships matters, which most probably is overlooked.


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Future-Amazon: Delhi high court stays arbitration proceedings in Singapore Tribunal till February 1

By Cases No Comments

future amazon dispute
Future amazon dispute doesn’t seem to settle. This has been made clear through a recent turn of events where a two-judge bench of the Delhi High Court, in a significant move has stayed the arbitration proceedings between Amazon and the Future group.

It is to be noted that the proceedings were being conducted before the Singapore Arbitration Tribunal, which has been halted until further orders.

The appeal by the Future group was being heard by the two-judge bench headed by high court’s Chief Justice DN Patel. The appeal was strategically and effectively made after a serious setback had been born by the Kishore Biyani-led companies before a single-judge bench.

It is worthy of mention here that the larger bench of the high court has emphatically observed that the prima facie case is effectively in favor of the Future group.

Here the high court has noted that there is a prima facie case that has been made out in the favor of appellants. Moreover, if the case is to be scrutinized, it can be stated that the balance of convenience is tipping heavily in favor of the appellants.

future retail supreme court hearing
This aforementioned reason and rationality have led the high court to effectively agree to hear the appeal. Thus, on serious merits, the Delhi high court has stayed the proceedings till February 1. While the government has acted on the Singapore front, the Delhi high court has also emphatically stayed the single judge’s order that had dismissed the Future group’s idea.

To talk about the rationale which has been quoted by the high court, “interest of justice” has been cited as the main reason for such a stay. It has been empathically observed that it would be blatantly butchering the interest of justice, if a stay was not granted as aforementioned the balance of convenience also tends to lean in favor of the Future group.

One can highly admire the swiftness and conviction with which the Future group is moving to file its appeal before the courts. This shows a sense of urgency and importance in the actions of the Future group that is going the last mile to defeat Amazon’s stubbornness or rather a solemn pledge to destroy its functioning and chances of survival.

This fact can be corroborated by the fact that the appeal before a larger bench of the Delhi High Court was filed by the future group within a day from a single-judge dismissing.

It is to be noted that the single bench had dismissed the Future’s plea seeking a direction for the Singapore tribunal to hear the conglomerate’s application for arbitration termination on priority.

future amazon proceedings
The drama surrounding the Future- Amazon dispute dates to the issue of Future Retail Ltd entering into a strategic asset sale deal with the Reliance Industries led by Ambani. This was vehemently contested by Amazon which has led to an odious and crippling stay on the asset sale deal, which remains in place to date.

The main factor that had led the future group to contest against Amazon was brought about by the stay that was put in place by the competition commission of India that had suspended its earlier approval to the investment deal between Amazon and the Future Coupons Pvt Ltd.

This has led the Future, time and again, during the course of its hearing, to seek a direction for the tribunal to at least hear its case on arbitration termination first.

This has been countered by Amazon yet again which has argued on the grounds that despite CCI’s approval, the arbitration clause and agreements survive and proceedings cannot effectively and emphatically be terminated.

The main reason for the same is that it has been recognized by the CCI as well that the proceedings of arbitration are effectively independent and different from each other.

On top of this, Amazon has issued a clarification that the Singapore tribunal has not strategically or blatantly refused to hear the termination application. In fact, it has been agreed to accommodate the same after the scheduled agenda that has been set out for January 5 to 7 is categorically over.

reliance future amazon dispute
The odious history: revisited.

As aforementioned, the legal battle that is long drawn is due to the asset scale discrepancy between Future and Reliance that was contested by Amazon. But what effectively was the main factor that empowers Amazon to contest the deal?

It is to be noted that it was claimed by Amazon that its deal with Future Coupons effectively prevents Future Retail too, in the capacity of being a related party, from effectively and strategically entering into any agreements with certain entities that are competitive in nature to Amazon.

This also included the Mukesh Dhirubhai Ambani group which was involved in the asset sale with the future group. Thus, Future Retail claimed that it was not bound by the deal between Amazon and Future Retail’s promoter firm.

This had led to the halt in the asset sale deal between India’s two leading retailers which was stayed by the emergency arbitrator in October 2020. But is there any end to this corporate legal drama any soon? Guess, we’ll have to wait and watch.

pharma innovation

Fueling Pharma Innovation: Govt’s Draft R&D Policy to Welcome, Inclusive Step Forward

By Other No Comments

Fueling Pharma Innovation

The Indian pharma sector garners much attention during the odious times of the detestable pandemic. with low investments in the sector, one can witness declining utility of the same.

The Indian pharma sector hence needs to discover and create a pipeline of new molecules that will effectively help the sector become a fully original innovation-driven industry.

innovation pharmaceuticalsThe pharma industry can be developed on the facets of innovation that involve a considerable level of risk. The risk in the sector is due to the fact that innovation demands the cost of technology and the cost of long gestation period.

With the aforementioned costs comes the cost of new capabilities and even the cost of failure. Factoring in all the costs that might be incurred, the cost of setting up an innovative pharma sector is incredibly high.

Therefore, given the humongous cost, the risk-taking that needs to be inculcated in the process can only be achieved within an enabling ecosystem.

innovation in pharmaceutical industry
Given the immense costs mentioned above, it is to be noted that funding will definitely be one of the biggest and prime drivers of innovative R&D in the pharma sector. Given that investors have a huge potential to build an impressive ecosystem, another stakeholder that has an important role is the government, startup and tech entrepreneurs and regulators, academia, private funders, etc.

This is apparent due to the fact that most major and innovative discovery in the pharma sector has been made through government spending.

We are quite aware of the fact that some of the biggest and most influential historic pharma discoveries made around the world have successfully succeeded in a large part due to the continued government funding.

the pharma innovationThus, given the government’s increased and necessary involvement in the innovative development of the sector, some thought should be put into the restoration of policy incentives. These efforts can be attributed to the weighted education in R&D expenditure and patent box.

On top of enhanced education and inculcation of skill sets in the workers, the government can also emphatically incentivize the right kind of projects with real potential to succeed and which have the right amount of capacity that will definitely have a significant role to play in the future.

On the other hand, private equity funding and private spending through venture capitalists, etc. too can prove beneficial for the development of the aforementioned, innovative ecosystem. Given that healthcare and pharma assets have been presumed as enticing by the private lenders, one can positively expect great enthusiasm amongst the private investors.

pharmaceutical innovations

It is to be noted here that investing in assets from the early discovery stage might be beneficial for the investors compared to late-stage acquisition as these can contribute immensely to the R&D successes.

Thus to quantify the gist of the argument stated above, it can be emphatically stated that with the right kind of government or private support, academia, or start-ups, the pharma sector in India can grow to newer heights in efficiently and effectively identifying the unmet patient needs in the sector.

This can be possible due to thorough research in concentrated sectors which can help in better conditionalities of the sector, given its vital role in the pandemic.

Having talked about the need of the sector, one cannot emphatically deny the contributions of the government and academia throughout the years to make the pharma sector a possibility. It is no news that funding is required for the innovative R&D constitutes which is a central pillar for the innovative industry that the R&D is.

To provide policy support, the landmark Indian Patents Act of the year 1970 was enacted to turn things around for the Indian pharma sector. It is to be noted that this effectively and efficiently has assisted in the genesis of the effective Active Pharmaceutical Ingredients (API) and generic formulations.

Thus one can argue that the policy support through the government has greatly facilitated innovation and efficiency in the pharma sector. In fact, the road to spectacular discovery in the sector has been opened through the regulatory landscape that effectively lays down unambiguous timelines and accountabilities that sagaciously support clinical trials in the country.

Talking about the industry-academia contribution towards the pharma sector, one can state that not much has been achieved. But the same is prevalent around the world such as in Israel, the United States, Japan, and others. These countries can staunchly corroborate the fact that corporate academia does play a phenomenal pivotal role leading to spectacular pharmaceutical innovation in the industry.

innovative business ideas in pharmaMentioning the requisite role of the policymakers in the industry, the Creation of innovation hubs in the country, through motivating the right talent is always an overlooked, but important aspect that needs to be scrutinized.

There is an immediate need for try facilitation of a national hub for the aforementioned aspects of the government to coexist and facilitate synergy.

Taking all these factors into consideration, the recent draft of the R&D policy is under consideration. Such a formidable step is heartedly welcome and an inclusive move by the government of India.

It is also emphatically a much-needed realistic view and address of the present-day and future requirements of the country battered by the pandemic.

It is, in fact, yet another step towards the mutually responsive partnership that is bound to be formed between the government and the pharma industry. Thus, will the R&D policy be able to bring around the change? It is something we’ll have to wait and watch


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