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Last but not the least, its a wellknown fact that the way to the Indian
heart is through the stomach. More than
one flier raves about the food (which, of
course, is free to boot) offered by the
airline; many describe it as a restaurant
at 35,000 feet!
Vistaras strong product offering
comes at a time when passengers are a
bit tired and disenchanted with
IndiGos, despite the airlines efficiency
and unerring consistency. The list of
cribs and those cribbing is growing.
To quote a frequent flier: Indigo is
becoming cheap (as opposed to lowfare); it used to be smart. It leaves you
with the feeling that it will do anything
to make an extra buck be it the fastforward service or the way it charges for
every extra kilo of baggage.
Some of IndiGos latest offerings
have partly failed to fly. Take for
instance, the new fast-forward service,
wherein by paying a bit extra you are
entitled to a separate check-in space and
your luggage arrives first at your desti-
you with courtesy and IndiGo with efficiency and hard rules. If you fly regularly, the IndiGo experience is quite
tough: long lines, average food, no leg
space, an efficient but soulless staff.
This is not to belittle what the largest
domestic private airline in the country
has achieved. Its large, loyal fan following remains almost intact. Its network
and punctuality hold it in good stead.
The product is mature, one that has
delivered under severe passenger scrutiny and remains consistent.
But in my view therein lies the danger. In the airline business, if nothing
changes, you may in fact stand to lose.
Passengers are a pretty fickle lot and
before you know it you find your loyal
base has eroded and flocked to the rival
as Jet Airways experienced first-hand
when Kingfisher Airlines first took to
the skies and the former whiffed its first
scent of real competition. The new kid
on the block has an unfair advantage
just on account of its newness. Its challenge will be offering what it does while
keeping a check on costs.
So whether they like it or not or
acknowledge it or not, rats are beginning to nibble at IndiGos doors. My
unsolicited advice: keep as keen an eye
on this battle as on the other one.
> CHINESE
WHISPERS
Growth and development in India will be governed by the way water is used and managed. On World Water Day, Romit Sen
and Kamal Vatta analyse how a proper framework can ensure the safety and sustainability of this resource
ater has been at the centre
stage of the development and
political debate. Growing
scarcity; increasing pollution; enhanced
competition, conflicts and trans-boundary water sharing issues have dominated the national discourse in current
times. Recent policies and programmes
of the central government indicate an
increased impetus on addressing some
of the major concerns facing the sector.
Given the complexities associated with
the management and governance of
water resources, an effective framework
on how we can better manage and use
our water resources appears challenging. However, certain fundamental
aspects need to be addressed if we are to
ensure the safety and sustainability of
this precious resource.
The first among these is a comprehensive assessment of water resources
in India. The last time a comprehensive
assessment of water resources for the
entire country was done was in
1999-2000. The planning of water
resources needs to be based on updated
data and it is time that a complete
assessment on water availability, use
and future demand is carried out.
A large share of our water needs is
met by groundwater. Groundwater
depletion has become a serious problem, with aquifers across the country
moving into the over-exploited zone.
There is a Budget allocation of
~6,000 crore for undertaking a major
programme for sustainable management of groundwater resources in 2016.
However, one must address the fundamental problem of limiting groundwater extraction. There are no exact estimates on the number of groundwater
extraction units in the country and the
CRYSTAL CLEAR A large share of our water needs is met by groundwater. Groundwater depletion has become a serious
problem, with aquifers across India moving into the over-exploited zone. The fundamental problem of limiting
groundwater extraction can be addressed by setting up more observation wells
been made in these areas and it is time
that efforts are undertaken to revive
these initiatives.
Water has an economic value in all its
uses and thus should be recognised as an
economic good. Therefore, suitable pricing mechanisms need to be developed.
Pricing of water has always been a politically sensitive issue but it is high time
we recognised the need to bring financial
stability in our water utilities. An important prerequisite would be to set standards for water pricing according to the
ability to pay. Pricing should be looked
upon as a critical input for activities such
as agriculture, industrial and domestic
use and as a means to increase the financial stability of water projects, which do
not exclude the provision of water to the
poor and the marginalised.
One of the arguments cited for the
current state of affairs in the water sector
> LETTERS
Regarding Henri
AXA stalwart would be
partial fix for HSBC
HSBC already said it plans to pick an
outsider to replace current chair
Douglas Flint when it makes its
choice next year. Now there is a suitable one on the market. Henri de
Castries, who recently joined HSBC
as a board member, on March 21
announced he was retiring as boss of
French insurer AXA. He could fit the
bill for the UK bank, at a push.
The Anglo-Hong Kong banks traditional way of appointing a new
chairman was simple: it just picked
the incumbent chief executive. John
Five-year slam
Chinas debt mountain
will get even bigger
Chinas debt burden is only going to
get bigger. Total borrowing has
grown rapidly to reach about 250
per cent of gross domestic product
(GDP) last year, raising concerns
about runaway credit. But pressure
to meet unrealistic economic growth
targets will delay any sustained
effort to bring debt back down.
The governments latest five-year
plan highlights the dilemma. Prime
Minister Li Keqiang pledged that the
worlds second-largest economy will
expand by at least 6.5 per cent a year,
in real terms, until 2020. Meanwhile,
planners expect total social financing a broad measure of private
sector credit to grow by 13 per cent
in 2016 alone. So even if inflation
reaches the optimistic target of three
Bond and Stephen Green both ance sector, and a 38 per cent negative
became chairmen, and while Flint total return for German rival Allianz.
wasnt previously chief executive, he Just over a fifth of AXAs life and savwas finance director. Even before ings business is in Asia, and premiHSBC was last year criticised
ums earned there have doufor enabling historic Swiss
bled since 2010.
tax evasion, this arrangeThe Frenchman wouldnt
ment meant its leaders
be a perfect fit. He has been
perceived ability to knock
in situ at AXA for over 15 years,
heads together was undera bit too long for comfort. He
mined by having been at
also has spent the last six years
the
bank
when
the BY GEORGE
as chairman and chief execuscrew-ups happened.
tive, which is even less ideal if
HAY
De Castries, who has been
HSBC seriously wants to iron
at AXA since 1989, would
out the wrinkles in its own
solve this at a stroke. His
governance. That said, theres
tenure has been a qualified success: much to be said for a global bank rootsince he took the helm in May 2000, ed in the UK and Asia hiring a contiAXA shares have recorded a total nental European outsider. De Castries
return of six per cent, against a seven isnt exactly a fresh face, but AXAs
per cent fall in the European insur- loss could be HSBCs gain.
per cent, debt will outstrip nominal take on a greater burden: official
GDP. Extend those trends, and bor- borrowing was about 44 per cent of
rowing will hit about 290 per cent of GDP last year, according to
annual output by 2020.
Breakingviews calculations based
Central bank Governor Zhou on data from the Bank for
Xiaochuan has expressed concerns International Settlements. Thats
about rising corporate debt levels well below the level in developed
but theres little sign that China is countries. However, this excludes
reining in credit. Banks extended borrowing by state-owned entities
new loans worth 3.5 trillion
and local governments.
yuan ($540 billion) in the
Moodys puts these continfirst two months of 2016, a
gent liabilities at between 50
third more than in the same
and 70 per cent of GDP.
period
of
last
year.
That leaves consumers,
Meanwhile, Chinese comwhose borrowings are just 39
panies are using domestic
per cent of GDP. So housedebt to help finance an BY PETER
holds have plenty of scope to
overseas M&A binge which THAL LARSEN
load up on mortgages and
totals nearly $100 billion
credit cards. A consumer
this year, according to
credit boom might help
ThomsonOne. Though a
deliver growth targets while
healthier stock market would allow also shifting the economy towards
corporations to deleverage by issu- greater consumption. Whoever does
ing more equity, the collapse of last the borrowing, however, debt levels
years bubble has made investors will keep rising. As in the rest of the
understandably skittish.
world, deleveraging will have
The government could perhaps to wait.
The authors are Reuters Breakingviews columnists. The opinions expressed are their own. For further commentary see www.breakingviews.com
Recovery of dues
With reference to Devangshu Dattas column, Rate cuts are not a panacea for all
ills (March 21), one of the root causes of all
> HAMBONE
economic peril is persisting loan delinquencies, which obstruct the smooth flow
of credit in the economy thereby
hampering investment, consumption
and demand.
In such a situation, any cut in policy
rates is worthless due to the inability of
banks to transmit the effects in time. Until
and unless a reversal occurs in the diminishing returns of banks, they wont be able
to transmit the effects of policy rate cuts
without a downward revision in the interest rates of deposits. In case banks take
this path, it would be at the cost of depositors; it would also adversely affect the
resource mobilisation of banks.
The current rate of interest on deposits
of various tenures is not justifiable when
compared to the cost of sustenance. It
will negatively impact the segments
dependent on interest earnings for
their livelihood.
The need of the hour is to focus on the
recovery of defaulted dues. For this a wellorchestrated collaboration between government, banking regulator, market regulator, legal system and banks is of
paramount importance.
V S K Pillai Changanacherry
BY MIKE FLANAGAN