Tuesday 12 April 2016

How Does India Become Cashless?

Mainstream media was puzzled about a surge of physical cash with the public. The likes of which have not been seen since 2011 - a time of very high inflation. It seems the amount of currency with public has shown an almost 50% increase in 2015 - 16. Even though the RBI has hitherto maintained a position of net negative liquidity position with Banks. Specifically when it has been a year marked by its exact opposite - low inflation ! And furthermore sectors which are known to normally soak up cash like a sponge viz. retail, real estate, gold & jewellery etc, shown less than buoyant growth as compared to last year. It is an odd situation. Economists are chasing their tails trying to explain the phenomenon. And there are a slew of them from various quarters. And no consensus as such. An appealing and explanation was provided by the RBI Governor - elections in 4 State and 1 U.T! Which necessitates being awash in cash for obvious reasons, though not necessarily for the right ones ! And then there are some twists to the tale too. ATM withdrawals increased slightly,whilst average debit card transactions declined ! That sounds logical. So maybe people shelled out more cash. And did not use their card. To keep out of the tax net possibly! Also, since you get eight ATM withdrawals for free - you push for the most buck for your ATM punch ! “A Kitna Deti hai” moment for the value conscious ATM consumer! Paradoxically credit card transaction value doubled in last few years! Why is this so? Like for cheques, there are zero 'transaction costs' to the customer to make moves into hard cash. And coupled with "high compliance and administrative cost" for transparency in our day to day economic life . The inevitable is bound to happen - reliance on cash. And a substantial shadow economy estimated at 70 % of GDP (2013)! However,there could be much deeper structural and cultural reasons; (1) I would venture to say that the total 'money stock' in a predominantly 90 % cash economy like ours is generally indeterminate. Therefore when some of that comes under the surveillance radar of tax authorities or into the formal financial system for the very first time say via a surge in deposits into newly opened 200 million JDY accounts, sundry PO accounts to Post Office Bank accounts or new accounts in newly licensed Payment & Universal Banks. This makes for 'double counting' in M1, M2+ time and crafting of monetary policy trickier. . (2) With e.money uptake viz. prepaid/mobile wallets. The coming festival of lights could again see spike in currency with public. That would be conventional wisdom - perhaps more withdrawals from ATM to 'load up' the prepaid /wallet for redemption across a merchant network base. After all 40% of wallet popularity is in Tier 1 &2 cities where 'cash is king'. That can however change if Banks incentivise and encourage that the wallet be now directly loaded up from accounts and debit card. But many Banks are not encouraging their customers to do so with popular third-party wallets. Thus possibly styling the growth of wallets. The third party wallet cos, which include Telco's, have a much larger active base than the banks. Estimated to be 150 million plus. But Banks still prefer their own in-house prepaid card and wallets! The more the wallet is loaded up directly from the bank account or debit card via net banking,IMPS.etc. And more redemption is electronic. Less currency should be in circulation. On the other hand use of credit card (preferred option for mobile wallets) and cash from outside the Banking system to load up a wallet leads to an spike in other broad money indicators. Which when used in the formal measurable economy leads to an uptick in velocity. (3) One could also argue that the "stock" of "money under the mattresses" already circulating from "mattress to mattress" in exchange for goods and services in informal and formal economy. Does not get reflected in inflation - too much money chasing too few goods. This is the shadow economy at work. Or, flip side, inflation not explainable by money supply numbers, may be attributed to this shadow economy, money - stock- on- the- move (velocity). Lastly, I am going to use a term - 'technological deflation' - to explain the urban spend. Which is where online consumers clearly "get more, for less". Specially during festive season from Oct to Dec. Much of it CoD. But trying to match urban spending uptick to published GMVs of our favorite online e.marketplaces may give a false positive. In view of the discounts, cash backs, free offers at hand. This systemmic problem can be solved. If the prepaid card networks, wallet & UPI ecosystem - both Banks & 3rd party, play their roles. And B2C marketplaces guys get their payments leg electronfied. There ought be less of a mad rush to cash in time to come.

Monday 28 March 2016

The dilemma that is ' Net Neutrality '

Groucho Marx once said military intelligence is a contradiction in terms. The same could be said for net neutrality! A whole lot of column centimeters in mainstream and online space has been used up fulminating against a big fat social media company trying to get the internet to the next billion people on the planet — the digital have nots. They have a name for this. It is called Free Basics. The problem is about the term itself. Critics dont particularly see it as ‘free’, or want it to be ‘basic’.They sense a deeper agenda.Perhaps even a profit motive. And a big brother approach to acting as a self appointed gatekeeper as to what sites will be available. Is google or wikipedia going to be available? What about whatsapp? Will that co exist with hike ? What about other media and content sites? Will they get a free run? No pun intended! Then there is the question of why should only one preferred telco be chosen to offer this freebie. Why not a smogasbord of telcos. After all there are twenty two such in India itself. Just one telco will not get you the next half a billion. There are other fundamental issues. Is the net really neutral? Can it technically ever be? Can anyone at anytime, anywhere get as much bandwidth, speed and access to any part of the web for as little cost as possible. What about for absolutely Free ? Let me rephrase that. Can millions of people watch 4k high definition Games of Thrones at the same time or video conference with each other on their cellphones at the same time without significant degradation of service? The answer is ‘NO’. You will have to allow for differentiated pricing for speed and data. There cannot be uniform access and speed. Look at it this way. The internet is like your favorite expressway (that is if you could have one!). Now imagine at peak hour traffic or where the road capacity is limited compared to demand. What happens? A traffic jam. Gridlock. Call it what you want. You are now doing 10 in a 70 mph zone (If you are lucky). Suddenly you cant get as much road as you want, in the face of some unrelenting evening traffic. Whether you are on the way back home from your office in Gurgaon to Delhi or Upper Worli to Borivali or Bombay to Pune.The same happens in Manhattan and the City of London during peak office hours (of course the latter has a congestion tax to disincentivise folks taking their cars in) In short there are physical limits. There are a few ways out. If you use a Expressway. You can pay for a monthly pass and use an electronic tag to get through the less congested tag only turnpike (if you can get to one!) Or, you can use the old and much longer Bombay-Pune road and unruly inside roads and be free of any obligation at all.But move a whole lot slower and in a haphazard manner. The net is a bit like that. Someone has to build the capacity. Someone has pay for it (Unless it is the state e.g Connecticut which is planning to build a 1 GB/sec fibre network) It is not limitless. It is certainly not free. Whilst economists will tell you that the marginal cost will be zero for the nth customer. Someone has to pay for the capacity in the first place. It could be content guys, or customers, or both It cant be none. Else the carriers would go bust. (Unless the Internet company owns spectrum,lays its own fibre and is a internet company all by itself). So clearly sponsored sites meaning — Free (thats why the word sponsored) have to be subsidised by the internet company, and the revenue slack have to be taken up by paid customers —for non sponsored site access e.g amazon, medium, cnn, yahoo, expedia, flipkart, etc.Of course the aim of the telco would be that someday a free basics user could very well sign up for a paid one.And that would help. Whilst to get internet to the masses is a must. Innovative models have to be tried, tweaked and encouraged. People carried.Governments be on board.

Tuesday 14 October 2014

Innovation in payment banking

The innovative firms that have taken the first-mover risk in this new market may not necessarily be able to transform themselves in the new mould.

The payments space is one of the few happening spaces in the economy today, with a cash-out pilot currently underway for non-bank prepaid payment instruments (PPIs) and the Nachiket Mor committee’s recommendation of payments banks.

A couple of months back, Reserve Bank of India (RBI) governor Raghuram Rajan had noted, “The key to cheap and universal payments and remittances will be if we can find a safe way to allow funds to be freely transferred between bank accounts and mobile wallets, as well as cashed out of mobile wallets, through a much larger and ubiquitous network of business correspondents.” The question is, how is all this to be operationalized?

The basic proposition as laid out by the governor using banks and non-banks for payments and remittances is crucial for the way forward for inclusion and follows well established international practices. For the non-banks currently in the payments space, operationalizing the governor’s statement under the current framework would mean:

• Recognizing that mobile wallets issued by non-banks are synonymous with having an account in the cloud, that is a digital account.
 • While currently payments through PPIs have to have a bank account at least at one end of the remittance (either remitter or recipient), allowing funds transfer across bank and mobile wallet networks would call for a transition to an interoperable network
 • Allowing cash out/cash-in at designated retail outlets for mobile wallets would help resolve the current issues that customers face in remittance; this possibility is currently being tested under RBI supervision.

What about payments banks? Globally new laws are being framed to enable specialized payments institutions, e.g. Brazil did this last year in line with the European Union Payment Systems Directive of 2009. Under the same principle, the Mor committee has accepted the basic premise of separating payments from other bank functions and has brought in the concept of differentiated banking through specialized banks, e.g. payments banks, that are allowed to provide payments and deposit services but not issue credit. This is an excellent idea designed to rejuvenate the banking space. However, two recommendations in particular may need to be re-looked at so that the objective of encouraging competition and innovation in this otherwise traditional and moribund space is facilitated.

First, the recommendation that calls for existing PPIs to either apply for a payments banks licence or become business correspondents may push out some firms that have valuable experience. The innovative firms that have taken the first-mover risk in this new market, and have consolidated network aggregation may not necessarily be able to transform themselves in the new mould.

Secondly, the recommendation that can impact the existing PPIs is the minimum capital requirement of Rs50 crore. It is important to think through the capital requirement amount carefully as a well-capitalized company brings with it many advantages of professional management, fiduciary obligations, etc.

The quantum of capital needs to be debated: if too low, it could encourage fly-by-night operators; if too high, it could encourage innovative financial engineering. Till 1 April, there were no capital requirements for PPIs; RBI has recently stipulated a Rs5 crore capital requirement for new PPIs, while specifying that existing PPIs will be intimated separately. In any case, the jump to Rs50 crore to become a payments bank could seem slightly high for some existing PPIs.

 In the absence of any explanatory details for the number Rs50 crore, many questions can arise: is there a case for a lower limit for payments banks? Can existing PPIs be given some leeway, allowed to make a stepwise time-bound increase toward a capital target?

Further, while the Mor committee recommends the same Rs50 crore capital requirement for payments banks and wholesale banks, both have essentially different models. The former will not lend, while the primary role of the latter is to lend. The former can hold a maximum balance of Rs50,000 per customer, while the latter is only to be permitted to accept deposits larger than Rs5 crore.

With such basic differences, payments banks will definitely have a relatively economical cost structure compared with wholesale banks, making the case for a lower capital limit.

Putting these thoughts together leads to the question of whether we can think of having tiers in the future that will allow for non-banks in a limited role and encourage competition and innovation:

• Non-bank PPIs with a minimum capital base of Rs5 crore (as given by RBI). 
• Payments banks with minimum capital of RsY crore (where Y < 50). 
• Wholesale banks with minimum capital of Rs50 crore. • Scheduled commercial banks with minimum capital of Rs500 crore.

The message from RBI governor is to think differently, can we rise to the challenge?


Probir Roy is co-founder of PayMate and Sumita Kale is chief economist at the Indicus Centre for Financial Inclusion.



Do we really require Banks for Financial Inclusion?

India has tried several routes towards financial inclusion - Gramin Banks, Local Area Banks, Cooperatives, Micro Finance Institutions, Regional Rural Banks, Self Help Groups and of course Scheduled Commercial Banks with their Business Correspondent networks. Yet, access to any form of formal financial services is still restricted to less than half the population, clearly these routes have run their course. There are new moves in play now. The recent Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme to bank 5 crore households with at least one account, and 1.78 cr Rupay cards and concomitant freebies is yet another big step, in the same direction. Four crore accounts have been opened, showing the power of the intent, and inadequacy of previous efforts. However, this initiative has to be seen in the backdrop of Mor Committee report which called for fresh thinking and new directions “to provide ubiquitous access to banking products and services with a universal account”. Under the concept of ‘differentiated banking’, Payments Banks were identified as the instrument which will reach out to all financially excluded Indians. New banks along with other measures i.e. BC networks, Aadhar-linked accounts etc. would complement the efforts to bank the majority of the population in a short period. While this was a perfect grand plan, the PMJDY-RuPay mission was nowhere in that scheme of things! In the current scenario Payments Banks have their task more than well cut out in a manner not envisaged by the Nachiket Mor report. They will now have to a) collaborate with new and existing players by way of technology, platform, product, distribution, points of presence, merchant base, delivery channel, brand, etc to plug the crucial last mile, and b) board new customers for remittances, deposits, payments, micro financial services & DBT. Their ability to leverage cell phone technology to enable accounts mapped to Aadhar/ regular savings deposit/DBT etc. in a low cost and efficient manner will be key. One assumes that the sine qua non for Payment Banks was to bank the unbanked by bringing them into the formal financial system in some small way whether that be by small value- high frequency transactions starting with remittances and payments and moving up the value chain onto other micro financial products. It certainly is moot as to whether the PMJDY scheme has taken the wind out of the differentiated bank play. If indeed the JDY does manage to bank the unbanked and offer a few specific products from day one, then the market space for new banks is disturbed. Further if the Post office is given the first Payments or a Scheduled Banks license then the NPCI and Post office routes will more than address the market, leaving little space for other private non telco players to come in. After all the pet peeve of most analysts is how many bank accounts would a person or family want to open! Therefore, once one has decided to go down the differentiated path route, two things are important. Firstly, one can’t perforce have a ‘one size fits all’ regulation. One has to leave dispensation for encouraging innovation and flexibility whilst the new players feel the river bed one stone at a time. Secondly, the market space has to be attractive enough to allow for several players to come in and offer pan Indian services. One way the business case would be buttressed is allowing Payments Banks to become the official distributors of DBT – both Central & State. Quick back of the envelope calculations indicate that a Payments Bank with cell phone focus with 0.75 % of the DBT market share in terms of gross disbursement will have enough of a business case to make the concept viable from day one. As the program evolves and matures, it is quite possible that with larger reach and volume, this service could be delivered for even lesser ‘transaction fee’ than is envisaged i.e. 2-3 %, thus saving the exchequer a fair bit of extra budgeting requirements and reducing leakages significantly. Yet, for all this to happen, two things must change. First, a move from the traditional emphasis of a formal account in a regular bank to allow for a unique ‘virtual account’ (similar to a mobile wallet) linked to the Aadhar and mobile numbers. This virtual account, ‘Account-in-the-Cloud’, will have simplified KYC/eKYC as per RBI norms. Secondly, cash out must be allowed using established private players (FMCG, retailers, fair price shops, etc), to allow for network effects to kick in a la Tanzania with its 27000 agents for a population of 37 million. With this, direct cash transfers, payments or remittances can be done directly into anybody’s aadhar-linked account-in-the cloud, to be redeemed at merchant points for purchases or cash out, via the established private payment outlets. This is the RBI’s vision- anybody in India can transact with anybody anywhere at ease- and it can be done, but only if the policy makers use a fresh lens.

Thursday 6 February 2014

Defence Planning - A Ticking time bomb!

There is something faintly dubious when one reads about a recent report in a reputed publication (Business Standard, Feb 3,2014)  that the armed forces of India have two major problems (a) of every years capital budget , which as we all know is for acquisitions/procurement of weapon systems, hardware & platforms, just 5 percent is earmarked  for  new acquisitions (i.e Rs 2955 crores in FY 14), with the balance going for payments due on account for past years acquisitions & purchases, and  (b) even then, the  forces are just able to spend just 50-60% of that remaining balance capital allocation!

 Just for perspective for readers. The BMC pothole fixing & road maintenance budget for 2014-15 is Rs 2500 crores – nearly as much as the entire Indian Armed Forces capital budget.

Is this not a travesty for one of the worlds most admired professional military, and a favorite Institution of all Indians?

This is what we do in Information Technology (IT) when evaluating a technology. We look at TCO (Total Cost of Ownership) where capex, opex, upgrades, and almost everything (inclknown’hidden costs)is itemized, costed and then added up over its life cycle, and then matched off with alternative options. This by and large leads to a fairly correct decision – even with hindsight.

I wonder after decades of procurement and defence planning – basic principles which were ennunciated by Robert McNamara as Defence Secy,USA in the 60’s/70’s  such as Zero based Budgetting (ZBB) and Program,Planning & Budgetting System (PPBS). That these have  been given short shrift in the corridors of Sena Bhavan and South Block?

What is ZBB? Every year the entire budget is reviewed afresh line item wise, without any reference to the past sanctions or outlay. And as if it is a brand new budget, with no memory! It validates therefore whether there are increases or decreases in that particular line item from the last year. And what are the provisions to be made hence in current year – less, more or same.

PPBS – is a tool, which the US DoD uses for long range forecasting, to establish strategic priorities, by costing, tracking expenditures and achievements against this during a budget year or over its long range defense plan. I guess typically, your raising of a mountain strike corp, or carrier battle group (CBG) or new air command (SAC), etc would ideally be matched off with concomitant expenditures and achievements till date, and then prioritised.

So why are we not using these tools, or some Indian jugad variant of it?

The issue is  a cultural one. Armies generally measure their strength with boots on the ground. This is hardwired into their pride and their DNA. So opex is key. Navies and Air Forces are equipment, technology and  hardware intensive – so capex is key. Force projection for these two arms is a multiple of such capital assets, and not how many guys they have on their payroll!

Now you have between these three services lopsided ratios of capex:opex or teeth to tail ratios which are inherent in nature. And cant serve as a common reference point.

So what do we need to do ? Clearly defence planners (IHQ?/COSC/CDS?)  need to reconcile this.

So while an Army marches on its stomach and in their boots. It does not mean that all responses lie in that direction. For e.g the formation of the new Mountain Strike Corps (MSC)  for the China response. What ought to have be done is square off  with alternate plans & strategic options  viz cyber warfare, use of tactical battlefield ‘low yield’ nuke weapons, use of air force elements , long range missiles, satellite imagery, weapons & early warning, blocking off the Mallaca straits with Naval battle groups, getting staging/berthing  rights in Vietnam, Japan for maritime forces, etc, etc.

So for perhaps lesser revenue outlays (which is the pain point of the moment) it may be able to have more effective response while keeping the teeth:tail ratio sharp.

Thursday 21 November 2013

Inflation is a PIG!

What is PIG? In non-capital letters, of course we can define the animal – whether quadruped or human. But nowadays a new set of inflation measures are also known as PIG - Pure Inflation Gauges, as explained by Indian economists Dr Krishna Durba and & Dr Urjit Patel. Most of India's financial newspapers seem to believe that interest rates and inflation are inversely linked, and that you can slay the inflation dragon with the interest rate sword. I am not too sure. Over the period 2010-2013, the Reserve Bank of India effected over 13 policy rate hikes, but the Wholesale Price Index today is still rising at 6 per cent; the Consumer Price Index is in double digits; and food inflation at 18 per cent. And mind you, rupee twerking in a manner not seen even by Miley Cyrus (10 per cent movement either way in just a few days!). Clearly something is out of sync. Maybe inflation is no more just a monetary phenomenon, any more than monsoons are a rain event. And interest rate and inflation best share a correlation between the two, but that should not be confused for causation. There are three issues which need attention: What to target? a) Inflation (CPI, WPI, Core, etc); b) GDP; or c) external economy (rupee, current account deficit). Which policy instruments and methods to tag each target with? And what should these targets be? While the Reserve Bank has been looking at WPI, it is actually CPI which impacts the public. That is the inflation index it should target. If one goes by the PIG theory that food and energy does not contribute to inflation, then choosing between headline or core inflation is meaningless. Whatever is the appropriate target is par for the course. What inflation does is hose the feedback loop on negative sentiments. Businesses and firms are holding off on investments and projects, consumers are looking to alternate non productive assets. Credit offtake is low, and with little or no impact on output, prices and employment and the economy is in a tailspin of its own making. So while inflation targeting is necessary, focus on it solely as a panacea for economic ills is misshapen. Let me put it this way. India is an economy which is 50 per cent underground, where proper estimates of money supply and impacts of tightening and loosening is not known or measurable (think System D in France). India is still a 96 per cent cash economy with 12 trillion crores of M0 circulating in the economy, and just 50 per cent of all non-cash measurable split evenly between cheque and electronic channels. This formal economy cannot be a good approximate of the informal one. And therein lies the problem. A case in point is that even with a good monsoon and good agricultural output, prices of agricultural products are high, and imports are being resorted to. It would seem demand and supply forces are not working themselves through the system, and information is asymmetric on account of supply chain inefficiencies and distributional distortions. Growth is the critical factor – without it, we are seeing high inflation and unemployment. Better to have growth with inflation and employment. The rupee should be allowed to find its own level as it is a barometer of how the world economy views the strength of the Indian economy. Intervention by the RBI should be swift and determined if the rupee is under speculative stress. Not dictating the rate, but preventing volatility. Not by resorting to textbook tools but beating the speculators whether they be dealers, brokers, traders, arbitragers from within an institutional system or working within the dark anonymous shifting shoals of international finance. The problems of the rupee are not fundamental but on account of shorting and profit-taking by the gnomes of Zurich. The trade deficit or CAD is more addressable, and gold imports should be controlled rather than cutting off external remittances. On parallel, increasing the supply of dollars is important through foreign direct investment (FDI), share purchase by parent companies, exports, invisibles and de-risking on pure FII inflow is paramount. There are schools of thought where some are of the view that you need one policy instrument for one objective. Central banks have a toolkit for each policy instrument - for example, the repo rate, MSC, CRR, SLR, reverse Repo, etc. Sometimes, one signals a course of action with one instrument only to send the opposite signal with the other tools at ones disposal. Even if you don't use more than one instrument to tackle one goal – one must have congruence. A more critical issue is inflation targets - whether inflation should be 200 basis points behind growth, and growth set at 7.5- 8.5 per cent. This is what some economist call as NGDP targeting. In the USA the trilemma is a three way drift between inflation, GDP and unemployment – and in trying to find the sweat spot. In India it is just two - inflation and growth. Of course the third could be the fiscal deficit or even CAD. But just to keep things simple I have take these as the two main macroeconomic objectives on a merit order basis. Currently, with growth down, it is important to bake a larger cake. Inflation may be a concomitant. But it cannot be the determinant. Therefore some amount of inflation has to be tolerated and perhaps even encouraged for risk: return perceptions to play a role in freeing up animal spirits of enterprise and industry.

Monday 26 August 2013

Indian Navy - Future Ready

The ‘sea blindedness’ and ‘continental’ mindset of Indian political class and bureaucracy have hobbled us. The fact that colonial powers like Britain, Spain, Portugal, Dutch, and French conquered and commercially exploited us by sea is lost on them. These countries, if taken in totality, have less than half the coast line we have (7516 Kms). Yet we have been colonized more from the sea than from land! So, instead of becoming a sea faring nation and outward in outlook. India has remained inward looking and insular in nature. It is to the credit of naval planners that they have built true blue water navy inspite of this mindset in 60 odd years. All this with patience and perseverance, and mostly without the benefit of any higher political direction (no White Papers, or Defence Reviews; not even approval of the recommendations of committees convened by the GoI)One could argue that this perhaps has been a blessingin disguise! Of late there has been some soul searching on whether the recent submarine accident could have been avoided, or has there been any setback to the blue water vision by spreading oneself too thin - embarking on ambitious carrier, nuclear propulsion program and 30 sub plans. It would seem that the diversion of (scarce) men, money and material can either do one or the other well. But not all. Hence ‘overreaching strategic ambitions’. Not so. All professional and blue water navies have had to cope with (or rather learn to cope with) rapid growth during its ‘scaling up’ stage - from coastal/littoral and sea defense navy to a blue water one. Recruitment at entry levels have to scale up. Training, induction and infrastructure also has to keep pace to ‘feed’ and constantly update the various arms of the navy whether it be pilots, divers, electrical/system engineers, artificers, long course specialist officers, cooks, etc. During this phase different parts of the Navy tend to grow at different rates – some faster, some over decades. That is natural. For e.g. (1) the nuclear submarine propulsion programme was conceptualized in 1967 with a feasibility plan prepared by the Navy & BARC, and went thru several fits and starts till 1980. It was only in 1984 that the program got its due budget, focus and political mandate. And now has come to its logical fruition. (2) On the other hand the aviation wing came off the starting block faster than any other arm with the original INS Vikrant (1961) coming in very early in the navy’s evolution (this is Naval aviations 60th anniversary), and the vision for subsequently embarking upon a 2/3 carrier navy being in the pipeline from the late 80’s (3) The 30-sub plan also has also been in the making from the late 90’s. But delays in decision making have dogged this plan from coming in on time. At the end they have all come together rather nicely. Therefore In isolation and in totality, naval planners seem to have cut their cloth according to their long term vision – not too much, or too little. For a country which is still a developing one with numerous resource constraints, a noisy and often time’s fractious democracy with several competing forces for scarce means. This is creditable. Naval Vision 3.0 My view, and I have held this for some time now, that the Indian Navy needs ideally 3 Battle Groups (BG’s). Two being CBG’s. One for the Arabian, ME & Mediterranean regions HQ’d in Mumbai/Karwar (lets call this command as CinC,AMEN) . One for the Indian Ocean and Littoral States (CinC,IOR) HQ’d at Cochin/Karwar, and one for the South Asia & Far East (CinC,SAFE) region HQ’d at Vizag and Port Blair. I know the 2+1 is the carrier tasking policy, but there will be times when all three carriers will be in active operational simultaneously. And when, 2+ 1 kicks in, then the capital ship of the third Battle Group will be a Nuke Sub or amphibious assault ship/Helo carrier. These BG’s will not only be there for deterrence and defence of the homeland and expeditionary operations, but more importantly, to ‘fly the flag’ from Vietnam to Venezuela – where significant Indian economic & commercial assets and interests are expected to lie in within the next 20 years. The soft power that is talked about by all. And which China with its hospitals ships and visiting warships to areas of their interest have been doing for some time, and of course the western powers perfected to an art form over the last 300 years! The fly the flag activities will be cross subsidized by the MEA, since this will form part of its outreach and ‘winning friends’ program. If and when India gets to the high table of the permanent member of the UNSC, this will be a hygiene factor. And if the roadmap and intent is laid out in advance, then an enabling condition.