In today’s newsletter, we talk about Dr Manmohan Singh’s scathing commentary on the state of Indian economy and Flipkart’s foray into food retail.


The Story

On Monday, Dr. Manmohan Singh wrote a scathing opinion piece on the state of economic affairs in this country. The only problem is that the article is over 1200 words. So clearly this calls for the Finshot simplifier and here’s a dumbed-down version of the article.

The economy is in bad shape. The growth numbers are truly staggering. People aren’t spending on consumables and job growth is pitiable. But beyond the statistics, there is a deeper problem at hand here. Mutual trust and self-confidence are the two key ingredients that foster economic growth. However, both lay in tatters today.

The problem lies in the government's policy of treating entrepreneurs and business folk with suspicion. You can’t hope to promote growth if risk-takers live in perpetual fear. And it's only compounded by the fact that there seems to be no real recourse for them to talk about their grievances. Even policymakers with reasonable suggestions are being shunted away. This won't end well. So it is imperative that we bridge the trust deficit and promote policies that inspire confidence.

In fact, we must act quick because we seem to be stepping into dangerous territory now. Prices are rising once again and demand is at an all-time low. This equation is deeply counter intuitive. You’d expect prices to rise on the back of booming demand. But when they rise despite a gloomy economic outlook its cause for concern. Economists call this stagflation — a condition characterized by slowing growth, rising prices, and high unemployment levels. And if we don’t take corrective measures we might have to witness it firsthand.

The bottom line is that you can’t bully the Indian economy into submission. It's too big for that now. You most certainly cant fudge numbers to make it seem as if India is thriving. Also, using media as a tool for propaganda won’t work. So its high time we start paying attention to the immense opportunity presented to us and seize it immediately. Oil prices are low. China’s growth is slowing down. So it's on us now to time to boost investments, exports and release those Animal spirits.

I think we got the gist of the article here. However, if you want to read the full draft, you can do so by clicking here. On to the next story then.


FarmerMart is here

In other news, we are hearing that Flipkart is setting up a new entity — FarmerMart to operate its food retail business. We are talking about food, groceries, milk, vegetables, the whole lot. And considering Walmart now controls Flipkart it kind of makes sense, I suppose.

So will Flipkart disrupt the market once again?

Well, maybe.

While there is considerable market potential here, it’s safe to say that Flipkart is a little late to the party. Consumers have been using Bigbasket and Grofers for a while now, and it doesn’t seem as if they are desperately trying to make the switch. Think about it. Groceries are often frequent purchases for most households and repeat orders are commonplace here. And customers often tend to stay very loyal to their preferred online grocers unless they screw up massively. So Flipkart will have to find a way to seduce loyal customers away from the incumbents. Then there is the price game. Maybe Flipkart can just use its deep discount model to bring new customers to their fold. Or maybe they are simply betting on their captive Flipkart user base to start trying out groceries. Why not?

But it’s still going to be a lot of work setting up the hyperlocal supply chain. You can’t transport tomatoes over long distances the same way you transport TVs. That simply wouldn’t work. With grocery delivery, you have to build relationships with local producers and manage to set up transport and logistics that can support this kind of operation. Individual order values are low and delivery costs can be steep. However, if there’s anybody who can challenge the status quo and trouble the good folks at big basket and Grofers, its Flipkart.

So yeah, we will just have to wait and see how things pan out I guess.

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