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Air Travel Can Give You A Bagful of Worries

So, now come to the point --- how could we say that the rich are great people. No, they are not great people who can’t ever sympathize with the suffering of the poor.

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By Salil Gewali

I will drop here a bombshell. I know this might get many run away from the airport runway. No wonder, these days with delight we travel by air pretty often. Usually, we load ourselves with expensive personal items. Well, before we check-in, we do hand over all our precious luggage to the Airlines. Do you know what might happen if your bag containing a great many personal items gets lost in the transit? You will be very disappointed to know this. You might probably be paid just puny Rs 2000/- to Rs 4000/- as “compensation” —- almost like the cost for a bagful of “potatoes”, please mind, cost of the expensive bag excluded. This amount also comes to you only after putting in much effort. Who will compensate for your personal luxury items in the bag? Practically no one.

It was a nightmare for my friend Mr. Sharma (name changed..) whose bag was lost by GoAir airlines on 11 May 2018. He journey was from Bagdogra to Guwahati. And it is still a nightmare for him since he lost a small laptop which was inside the bag. More than other items, the loss of a laptop with its invaluable data has devastated him.

Airlines
Don’t ever trust any public grievance offices from New Delhi, they don’t even pick up the phone calls.

Since that fateful day, he has written more than 10 times to the Civil Aviation Ministry, New Delhi. But all futile exercise. Don’t ever trust any public grievance offices from New Delhi, they don’t even pick up the phone calls. For Mr. Sharma, the only achievement after so much of struggle is that the Airlines raised the compensation from Rs 2000/- to Rs 5000. Poor Mr. Sharma thought the Airlines will have a sense of compassion to understand his ordeal. But the language of humanity hardly moves them.

 Now let’s evaluate the case other way round. Suppose, Jehangir Wadia, the CEO/owner of GoAir, wants to visit Shillong and puts up at the hotel of Mr. Sharma himself. Suppose Mr. Sharma’s servant lost the baggage of Mr. Wadia? Could Mr. Sharma tell without a sense of guilt to Mr. Wadia that my servant has lost your bags in the first place? What would be the action and reaction if Mr. Sharma would just give Mr. Wadia Rs 2000/- as compensation?

Airlines
Air travel can give you a bagful of worries

 I know Mr. Wadia would go mad and spew fire upon Mr. Sharma. He will also immediately find ways to file a case against Mr. Sharma for his utter NEGLIGENCE. And, I’m dead sure, with the help of competent lawyers, Mr. Wadia would demand the “pound flesh” of Mr. Sharma. So, now come to the point — how could we say that the rich are great people. No, they are not great people who can’t ever sympathize with the suffering of the poor. Their “humanity” within has long been stabbed to death by their greed. Therefore, they can be unsympathetic to other poor people and keep making money. Is the richest man in the world — Jeff Bezos, owner of AMAZON, not now being heavily criticized for being unusually unkind to his own employees? He has been blamed for “chaotic conditions” in the workplace, utter lack of occupational safety and low wages. Hope you can figure out the usual character of rich men from here.

 Or else poor Mr. Sharma’s letters of grievance would have been heard immediately as those business companies promptly respond the calls from prospective customers.  Alas, now Mr. Sharma has no option but to face the ordeal of the major loss.

 Oh dear regular fliers, so don’t be under the illusion that you are in a “democracy”. You, in fact, are literally in the regime of “capitalism”. Laws are made to save “Shylocks of the modern times”.  All poor citizens have to slog and beg around for survival.

Salil Gewali is a well-known writer and author of ‘Great minds on India’.  Twitter: @SGewali.

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India Grapples with Credit Issues

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants

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India, Credit, Issues
Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point. Pixabay

As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower to the lenders is unable to do so efficiently. Recent news whereby credit downgrades have just preceded defaults by Non-Banking Financial Companies (NBFCs) is a case in point.

While the framework utilised by the rating agencies that has led to a delay in ratings relaying the correct credit information to market participants is partially to blame for the inefficacious credit transmission mechanism, issues around rating agencies are only part of the problem. For sure, rating agency regulations must be improved, but we must also realise that “credit market frameworks” are much more than ratings.

We must realise that credit ratings have limitations in terms of predicting credit cycle ups and downs. This phenomenon isn’t limited to just India but is a global feature. The inability of the credit rating mechanism to adequately price in and predict the credit cycle implies that a multi-pronged approach is needed to ensure that the credit quality transmission mechanism works effectively. Essentially, India needs to develop other features of the credit market that will assist market participants in gauging credit quality, thereby reducing the risk of a “jump-to-default” scenario we have witnessed repeatedly over the last 12 months.

Indian policymakers need to start working on a framework that will allow a liquid and deep secondary market to develop in credit products. Credit products here refers to the entire universe of lending, including bonds, loans and other instruments. Market pricing of products and risk and therefore increased participation by investors will help in “price discovery” of the credit quality. Constant pricing of credit risk and the concomitant information and structure that entails will imply that lenders will have a better information set with which to make informed credit decisions.

India, Credit, Issues
As India grapples with credit issues, one of the primary factors that needs analysis is the broken transmission mechanism that relays credit quality to market participants. In common parlance, the transmission mechanism that provides information regarding the credit quality of the borrower. Pixabay

A market that allows for secondary liquidity, albeit even small amounts to start with, will also incentivise borrowers to manage their credit profile better. More importantly, a secondary market for credit instruments will go a long way towards avoiding the bunching of credit as it happens in today’s market. A credit market has a cycle, and without the existence of a robust secondary market, in expansionary credit cycles, poor quality credit gets excessive access to capital. On the contrary, once the credit cycle contracts credit access for all businesses is diminished to a great extent.

We must work towards breaking the above trend that has plagued the Indian economy significantly. A secondary market for credit instruments will incentivise both lenders and borrowers to behave in a way such that the entire available pool of credit goes towards the most optimal usage.

Policymakers also need to start utilising vehicles similar to Real Estate Investment Trusts (REITs) or Infrastructure Investment Trusts (InvITs) to allow for the pooling of credit instruments. While debt mutual funds exist in the market, the aim of the new “credit pooling vehicles” will be to enable institutional investors to access credit instruments across the spectrum, and not just limited to certain corporate bonds. Access to vehicles that allow for greater liquidity and transparency will go a long way in increasing the capital availability and investor participation in Indian credit markets.

As India looks to boost economic growth, it is essential to realise the credit interlinkages in the economy. To boost exports, a primary aim in India, credit access will be a vital component, if not the most important. If credit is constrained by inefficiencies in the credit information transmission mechanism and therefore leads to inefficient lending in the real estate sector, then it is essential to realise that not only is the real estate sector severely affected but so are other areas such as exports. Primarily, an improved credit framework will lead to both higher availability of capital and credit availability at more affordable rates.

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Credit markets, like all businesses, will move in cycles. Indian policymakers must aim to start building on the blocks that will allow credit downturns to be less severe and shorter. The ability to provide the market access to better information and investment structures will go a long way in improving credit pricing, and thereby credit access. (IANS)