Category: Views

Test- A Decade of PoSH Laws — hits, misses, and key learnings

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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<p><span style=”font-weight: 400;”>Bhanwari Devi’s brutal gang rape arising out of and during the course of her employment, and the subsequent PIL that was filed, are possibly amongst the seminal moments in the modern history of the women’s movement. In terms of impact, while we are only at the 10 year mark of the Prevention of Sexual Harrassment Act (PoSH Law) and 26 years post the <a href=”https://en.wikipedia.org/wiki/Vishakha_and_others_v_State_of_Rajasthan”>Vishaka judgement</a>, this could be comparable to the successful anti-Sati campaign of <a href=”https://en.wikipedia.org/wiki/Raja_Ram_Mohan_Roy”>Dr Raja Ram Mohan Roy.  </a></span></p><p><span style=”font-weight: 400;”>So what has this law really done? The PoSH Law has set up a mechanism that allows women to file complaints of sexual harassment with a committee (the Internal Committee or “the IC”) that comprises employees and an external member. Armed with the powers of a civil court, the Parliament has effectively replaced the ordinary civil court with the IC. </span></p><p><span style=”font-weight: 400;”>Not too many women were comfortable approaching the civil court with instances of sexual harassment to seek civil redressal, so the PoSH law and the redressal mechanism was a welcome relief for many women employees. The other key aspect is that the law mandates training and sensitisation of the IC and the workforce. After a slow start, corporates have now taken this seriously and, on an annual basis, make it a point to conduct training and workshops.</span></p><p><span style=”font-weight: 400;”>Let’s take a quick look at what’s worked and what we could possibly do better.</span></p><p><strong>Hits</strong> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>1. <strong>Increased awareness of sexual harassment:</strong> The PoSH law has played a significant role in raising awareness of sexual harassment in the workplace. This has led to a greater understanding of what constitutes sexual harassment and the consequences of engaging in such behavior. Concepts like consent and quid pro quo are now being seriously discussed and debated across offices in our country.</span></li> </ol> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>2. <strong>Proactiveness of courts:</strong> The Supreme Court (SC), in particular, has been proactive in interpreting the law and issuing directives, particularly in instances where there has been sluggishness in implementing the law or providing clarity. This has ensured that corporates implement the law.  </span></li> </ol> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>3. <strong>Discreet reporting mechanisms:</strong> One of the greatest benefits of the PoSH law is that it has established clear, accessible and discreet reporting mechanisms for those aggrieved of sexual harassment. This has made it easier for the aggrieved  to come forward and seek redressal.</span></li> </ol> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>4. <strong>Strict penalties for perpetrators and the organisations:</strong> The law has imposed strict penalties for perpetrators of sexual harassment. This has acted as a deterrent and has helped to create a safer workplace for all. </span></li> </ol> <strong>Misses</strong> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>1. <strong>Challenges in implementation:</strong>  While large and mid-size corporates have been fairly quick to implement the law in letter and spirit, quite a few smaller organisations have been tardy.  Cost has been touted as the primary reason for only paying lip service to implementation of the law. This has made it much tougher for the aggrieved to access justice. </span></li> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>2. <strong>Lack of clarity in certain provisions:</strong> Despite the SC’s proactiveness some of the provisions of the PoSH Act require greater clarity. For example, is payment of compensation by the Respondent mandatory?, should employers sit on ICs?, the status of internal appellate bodies, are just a few that come to mind.  Some states are yet to even appoint appellate authorities, thereby delaying justice for both complainant and respondent, whoever wants to take up the matter on appeal from the IC’s recommendation.</span></li> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>3. <strong>Delay in appointing District Officers:</strong>  Even a decade after the passing of the PoSH Law, District Officers haven’t been appointed in all Districts, therefore, there is a lack of pressure/follow up on entities to comply with the Act. </span></li> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>4. <strong>Inadequate protection for marginalised groups:</strong> Marginalised groups, such as women from lower socioeconomic backgrounds, migrant workers and LGBTQ+ individuals, may face additional barriers in accessing justice under the law. This is due to factors such as lack of awareness, language barriers and fear of retaliation. </span></li> </ol> <strong>Key Learnings</strong> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>1. It is increasingly clear that the mandate of the Law asking for continuous training and sensitisation has worked very well.  Now the ball is in the court of the government to ensure that this is consistently monitored by the District Officer and non-compliant organisations are penalised.  </span></li> </ol> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>2. There are still areas of the PoSH Law that require greater clarity in terms of implementation of the Law. The Government needs to hold consultations with the different stakeholders, and make suitable amendments to the Law and the Rules.  </span></li> </ol> <ol> <li style=”font-weight: 400;” aria-level=”1″><span style=”font-weight: 400;”>3. Greater thought needs to be given to thinking through strategies to address the specific challenges faced by marginalised groups in accessing justice under the law. This may include targeted outreach, translation services and culturally sensitive training programs.  </span></li> </ol> <strong>Conclusion</strong></p><p><span style=”font-weight: 400;”>It is clear that the PoSH Law has made significant strides in enabling aggrieved women to access the levers of justice. However, as with all laws, the PoSH Law also needs to keep pace with the constantly evolving corporate landscape. The Government needs to review and make suitable amendments to ensure that there is consistency and uniformity in the implementation of the Law. </span></p><p>&nbsp;</p><p>—<em>The author, Antony Alex, is Founder &amp; CEO of Rainmaker, India’s leading culture and compliance learning solutions company. The views expressed are personal. </em></p>

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Legal Digest: Why a common description word can’t claim or violate trademark

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Case 1:  ‘Silk’ is a common description of paint hence no trademark violation

In Berger Paints India Limited v JSW Paints Private Limited, the Calcutta High court refused injunction against JSW’s Halo Silk trademark sought by Berger whose brand Berger Silk it contended was in the market for a very long time. 

To be sure, Berger Silk is a registered trademark but it can’t be dissected into Berger and Silk so as to deny usage of silk as described by a competitor.  Halo Silk didn’t cause confusion in the minds of lay buyers by being deceptively similar to Berger Silk. 

It is now a settled law that words occurring in dictionaries as well as in common usage are not eligible for trademark protection.  Silk, matt, gloss and satin are the most common adjectives used by paint manufacturers and no one can claim exclusivity to such descriptions, ruled the Court.

Case 2: Sexual perversions forced on a spouse amounts to cruelty and ground for divorce 

The Kerala High Court recently in X vs Y (true names hidden) matter held that sexual perversions practised with mutual consent is the private affair of the couple but the one forced upon by husband on wife or the other way round amounts to cruelty entitling the spouse to divorce on grounds of cruelty. 

Cruelty hitherto has been interpreted to include mental torture as well but this judgement must be hailed as breaking a new ground.  Oral sex may be kosher but if it is revolting to one of the marital partners, the other spouse cannot impose his will on her or vice versa. And if he or she does, the spouse is entitled to divorce on the grounds of cruelty.

Case 3: TCS on liquor bottles not mandated by law

In the Tamil Nadu State Marketing Corporation Ltd (TASMAC) vs Deputy Commissioner of Income Tax (DCIT) — the issue before the Madras High Court was whether TASMAC was derelict in not collecting tax at source as per section 206C of the Income tax Act on amount realised from the sale of empty bottles were concerned—the Madras High Court agreed with the appellant’s contention that it did not sell bottles but merely liquor.

Section 206C was introduced to prevent tax evasion by the hard-to-tax segment of any business. Liquor has always been perceived to belong to this genre which is why section 206C roped it in together with the presumptive taxation scheme obtaining for kit. 

TASMAC performed its duty by collecting 1% tax from the supply of liquor to the successful bidders in the auction but was hauled over coals for being derelict in not collecting tax on the sale of empty bottles.  The Madras High Court agreed with the appellant’s contention that it did not sell bottles but merely liquor.  It did not furthermore own the bottles.  It was thus absolved of the responsibility to collect tax at source on bottles even under the artificially elongated definition of scrap.  

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Midair Musings | Akasa’s 150 aircraft order — why it’s a sign of intensifying competition and immense market potential in Indian skies

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s youngest airline Akasa Air announced a widely anticipated order with Boeing for 150 737Max Aircraft at the WINGS Airshow. The order comprises the 737 MAX 10 and 737 MAX 8-200 with deliveries through 2032. This is in addition of the late Rakesh Jhunjhunwala-promoted airline’s existing order of 76 aircraft of which 22 aircraft have already been inducted and deployed.

With Akasa’s latest order, India’s airlines collectively have more than a 1000 aircraft to be inducted by the end of the decade and it is hoped that competition in the skies will intensify giving consumers additional options and help stakeholders with balancing risk.

Reflecting the immense market potential

The new order will help Akasa position itself towards capturing a portion of the passenger and cargo volumes in India, which is to be the third largest aviation market, by the end of the decade. Air travel demand out of India continues to be strong and the 2024 traffic volumes are estimated at 160 million domestic and 73 million international passengers. This is all set to grow to 300 million and 100 million respectively by the end of the decade.

The growth shows no signs of stopping and with India’s macroeconomic elements aligned, the country is on track to register 6% to 7% GDP growth for several years ahead. Consequently, aviation growth in the mid-teens is bound to follow. And airlines— both domestic and foreign — are keen to capture the market potential.

In addition to macro-economic factors, infrastructure also continues to see exponential change. For aviation alone, the country has seen operationalisation of more than 140 existing airports; a host of policy changes, including the National Civil Aviation policy of 2016 (NCAP), have been implemented; tax policy changes for MROs; the regional connectivity policy namely the Ude Desh Ka Aam Nagarik Scheme (UDAN); a revision of the Aircraft Act of 1934; setting up of GIFT city as an avenue for aircraft financing; the sale of Air India; and a strict stance on bilateral access to foreign airlines (for now). 

To accommodate growth, airport capacity has been gradually expanding and the fleet of approximately 700 civilian aircraft is expected to double by 2030. India currently has 1.5 aircraft on order for each aircraft flying and the OEMs including Boeing, Airbus, CFM and GE have already announced significant investments for setting up ventures in the country. It would seem all indicators point to a continued ascent. 

India’s market structure warrants a 3rd alternative player 

The current market structure for the Indian aviation market is one where 2 airlines namely Indigo and Air India control more than 80% of the market. Akasa entered this market 17 months ago and steadily made a name for itself and now sits on approximately a 4.5% market share. Yet, both Indigo and Air India have structural advantages that Akasa will have to overcome. As such the orders may be the easiest part of the process. 

The challenge also stems from the fact that India’s airlines fly in a sea of sameness with similar networks, similar financing structures and similar business models. To succeed cost competitiveness is a must and the scale and operational integrity of the dominant player makes it a challenge for others to succeed. For Akasa the challenge will be to put out a product that is at the most competitive in costs and one that is consistent. This is easier said than done given the marketplace challenges with talent, with management of infrastructure and with profits.

For Indian aviation as a whole, numbers paint a picture of a double-edged sword. While order books are strong, the fact remains that return on capital for the industry as a whole is negative and losses for the past decade have been well north of USD 15 billion. Profits let alone a consistent stream of profits are the exception rather than the norm and the industry continues to consume capital at rates that surprise even the most seasoned investors. Intense discipline, decisiveness and dedication in equal measure are all required for success. Whether or not the industry delivers this as a whole and whether Akasa can do the same is yet to be seen.

Akasa has to deftly navigate its way through an intense marketplace

Akasa enters an arena where on one end there is a well-capitalised, profitable and dominant airline in Indigo followed by a well-capitalised, yet to be profitable and patient airline namely Air India. On the other end is an airline with a fragile financial position but its own order book and a bid to takeover a now grounded airline (which if successful helps consolidate almost 10% of the market). Aviation growth notwithstanding, margins are thin, profitability is elusive and the difference between profit and loss is the degree to which costs are aggressively attacked and revenues are unapologetically captured. The intensity is expected to only deepen. 

Akasa has positioned itself as a low cost carrier (LCC) and arguably, India for now does not have any true low cost carriers (LCCs). This as the traditional low-cost elements including secondary airports, direct distribution, asset strategy, talent strategy and network focus are constrained. Whether or not Akasa can change this remains to be seen. But by equal measure, Akasa has been the airline that has surprised naysayers. Whether it is the founding just after the pandemic in late 2021, launch just 8 months thereafter at a time where aviation stood significantly damaged; or the rapid scale up to 4% of the market within 12 months after launch; or the latest order 17 months after launch.   

The announcement of the order itself is evidence of India’s strengthening position in aviation. Traditionally aircraft orders are announced at the legacy airshows – Paris, Farnborough and Dubai. This is one of the first orders of this magnitude that was announced at the Indian airshow WINGS.

The CEO for Akasa commented at the airshow, “This large and historic aircraft order puts Akasa on a path of becoming one of the top 30 airlines in the world, by the turn of this decade.” An ambitious goal and one that all well-wishers hope is achieved. Yet also a goal that requires a laserlike focus given that the marketplace is as intense as it has ever been and one where there is a unique shape and structure of demand and unique structural challenges. For now, the day belongs to Akasa and we wish the airline well. 

—The author, Satyendra Pandey, is Managing Partner of the aviation services firm AT-TV. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Midair Musings | Here’s the outlook for India’s air travel in 2024

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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2024 seems to be on track to become the best year for Indian aviation. With the provisional estimates of more than 150 million domestic and 68 million international passengers taking to the sky in 2023, the total air passenger traffic is predicted to be well north of 225 million in the coming year.

Yields continue to be strong and a confluence of factors notably consolidation within the airline sector, significant weakness of competitors and OEM supply chain challenges means that there is strong demand chasing limited supply. The euphoria will only be tempered by input costs, VISA processing times, operational challenges and overseas competition. For the year ahead, all data and patterns point to the fact that travel demand will continue to be strong,  and the outlook for air travel out of India looks extremely strong. 

Domestic travel – dominance of metro’s to continue 

Domestic travel in 2024 will continue to be dominated by the six metropolitan cities of Delhi, Mumbai, Bengaluru, Chennai, Hyderabad and Kolkata. Together these account for more than 55% of all passengers with Delhi leading the charge followed by Mumbai and Bengaluru.

The economy class passenger dominates the skies with business and premium economy together accounting for less than 5% of the total travel demand. Interestingly Tier2 and Tier3 cities will continue to see an increase in premium demand and in associated bookings. If 2023 patterns are to be followed, the cities of Kochi, Lucknow, Bhubaneshwar, Srinagar, Udaipur witnessed consistent demand for premium offerings (business class and premium economy) through the year.

 With newer destinations like Ayodhya already being included in domestic networks and enhanced airport capacity in Goa, Port Blair and Tiruchirappalli – the domestic traveller is set to have a better travel experience (albeit a more expensive one).

For now, with only two airlines – namely, Vistara and Air India – with a business class offering, the ability to capture the premium will continue to be dependent on schedule. Interestingly both airlines are owned by the Tata group and set to merge and in time this could also open up space for a domestic competitor with a similar offering.

Airline-wise the market for 2024 will continue to be dominated by Indigo which ended 2023 with an average market share north of 60%. This was followed by the Tata owned airlines namely Air India, Vistara, AIX Connect (erstwhile AirAsia India) with a market share of 26%.

Challenges with capacity driven by supply chain challenges impacting OEMs, engine issues on the Pratt and Whitney engines, the insolvency of GoFirst (yet to be resolved) and the weakness at SpiceJet are forecast to continue. Together these mean a variance of almost 150 aircraft from planned capacity. But the capacity shortfall is likely help keep yields strong. That too in an election year. And in a year where the travel base is only forecast to return stronger. 

International travel – Middle East and N. America traffic to drive revenue

 International travel trends may have significant surprises in store. Starting with the sheer volume of travel to the shape of travel to the patterns of demand. As has been the case for several years, the Middle East will continue to dominate the traffic flows with upto 47% of all India originating international traffic headed to the region. Within the Middle East region, Dubai will continue to be a clear leader capturing almost 12% – 14% of the traffic.

For 2023, Dubai had a confluence of factors aligning including VISA policies, hotel capacity, costs and an exponential growth in events. Compare this to London and Singapore, which attracted 4% – 5% of the total international travel demand but the reasons were much different. For Singapore, it was a combination of point to point and onward traffic mostly towards Australia and Oceania while for London it was driven by diaspora demand. These patterns are forecast to continue. 

The international traveller is likely to see additional offerings as Indigo and the Tata owned airlines led by Air India expand their international networks, Akasa starts its international operations and SpiceJet counters with offerings of its own. Air India will also continue to revise its offerings and the jury is out on Indigo and whether its newer aircraft will have a dual configuration, leveraging its position to service premium demand. 

Looking at the traffic spread across continents, and forecasts for 2024, Europe will continue to be dominated by London with upto 30% of traffic originating in India and flying to Europe headed there followed by Paris capturing 10% of the Europe bound traffic. The United States will continue to be dominated by New York followed by San Francisco each capturing 10% of the Indian originating traffic headed to the USA and newer cities like Dallas which have seen a growing Indian diaspora population are likely to be included in airline networks.

India originating traffic headed to South East Asia will continue to be dominated by Singapore and Bangkok with the former capturing 30% of the traffic and the latter approx. 22%.  Similar to last year, countries like Vietnam and Nepal will likely continued to attract significant traffic due to a combination of pricing, policies and popularity. 

Finally, looking at overseas hubs and traffic originating in India connecting via hubs, Dubai again is likely to lead followed by Doha and Abu Dhabi. Majority of the traffic connecting via these hubs has traditionally been bound to N. America. The weakness of the European hubs with regards to traffic originating from India is slowly but surely coming to the forefront. And with Air India focusing on an international strategy that effectively bypasses hubs and with Indigo increasing point to point international flying, the share of India originating traffic flown by Indian carriers is set to increase.

The premium segment: lots of work ahead

The most fascinating aspect of air travel demand and perhaps the most perplexing will continue to be the premium segment. In the domestic segment, this continues to be very small and AT-TV estimates that the premium demand (including premium economy) is less than 5% of total demand. But due to the pricing this commands and the impact on revenue this cannot be overlooked. 

In the year ahead, the premium demand in the international segment will continue to be driven by specific routes. On a total capacity basis this demand is less than 10% of total demand. But on specific routes, the flown premium demand can be north of 15%. This is both a function of capacity, traveller profiles on the route and pricing.

Given the potential that this segment holds the rewards in the future will accrue to airlines that can develop and position a product fit for purpose. And in 2024, as Air India starts to ramp up its product offering, a competitive response from overseas airlines is all but certain. Into this mix will also be enhancements to frequent flyer programs, to complimentary offerings and most importantly to the growing premium economy segment.

—The author, Satyendra Pandey, is Managing Partner of the aviation services firm AT-TV. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View | The revenue glass—half empty or half full

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The revenue from the Goods & Services Tax (GST) continues to post impressive growth figures—₹1,64,882 crore was the gross revenue collection for December 2023.

This was a 12% year-on-year growth; the April to December revenue for 2023 being ₹14.97 lakh crore as against ₹13.40 lakh crore in the same period the previous year. The average monthly gross GST collection was ₹1.66 lakh crore in the first nine months of 2023-24.

The robust GST performance did seem to rub off on direct taxes—or given the close cooperation between the Central Board of Indirect Taxes (CBIC) and the Central Board of Direct Taxes (CBDT)—it could be the other way around.

The gross direct taxes collection touched ₹17.18 lakh crore for FY24 up to January 10, 2024. This was a 16.77% YoY growth. Net Corporate Income Tax grew by 12.37% and net personal income tax by 27.26%. This would suggest a better exchange of data between the two Boards leading to better compliance.

And just as one was celebrating this excellent all-round performance from both CBIC and CBDT comes the press release of the Directorate General of GST Intelligence (DGGI). The DGGI has in 2023 detected 6,323 cases involving evasion of duty of ₹.1,98,324 crore representing a 119% (YoY) increase in the detection of cases.

As the press release states, the ‘DGGI unveiled significant GST evasion in diverse sectors like online gaming, casinos, insurance sector, secondment (import of manpower services), fake input tax credit (ITC) among others’. There was also a voluntary payment of ₹28.362 crore; 140 ‘masterminds’ were said to have been arrested.

Yet another press release reveals that special drives were launched by the DGGI and the State/UT undertakings across the country on the issue of non-existent/bogus registrations and issuance of fake invoices without any underlying supply of goods and services.

This drive resulted in the detection of 29,273 bogus firms involved in suspected evasion of ITC of around ₹12,036 crore. The data reveals that the most ITC fraud cases were detected in Maharashtra, followed by Rajasthan, Delhi, Haryana, and Uttar Pradesh. Thus, despite increased technology, data analytics, and risk management technology, it would appear evasion continues unabated.

The CBDT has in, another press release spoken of 8.18 lakh crore Income Tax Returns (ITR) having been filed in 2023-24 up to December 31, 2023. This is 9% more than the ITR’s filed for assessment year 2022-23.

At first glance, this is most impressive. But as the Finance Minister has in a reply to a question in the Lok Sabha mentioned, only 1-2% of the Indian population pays income tax and declares earnings above the non-taxable income.

This was the year 2018-19. Of course, the total population includes a large chunk not liable to pay any income tax, for instance, those below the age of 18 years and those whose income is less than ₹5 lakh. However, the fact remains that only a miniscule percent of the population pays income tax.

As Prof. Arun Kumar points out in an interesting analysis of the ITRs—nearly 68% of the persons who filed returns paid nil tax; then there were several persons who paid TDS but did not file a return. Effectively he points out only 0.68% of the population paid income tax—out of these 0.016% declared an income above ₹1 crore and had a share of 38.6% of the taxable income.

The two Boards have undoubtedly been doing a valiant job in curbing evasion as the detections reveal. Further, steps have been taken to rationalise the tax structure, simplify processes and simplify compliance. There has been a relentless focus on technology, digitisation, data analytics, and the sharing of information across agencies—all these have undoubtedly been showing results.

However, juxtaposing the various data elements ibid, it is evident that there is a serious tax gap in the country or to put it more bluntly, there are far too many persons evading taxes. It is well accepted that what is detected is but a small percentage of what is evaded; and not all of what is detected stands the test of adjudication and appeal.

We are simply not collecting all that we should be getting. India’s tax to GDP ratio which represents the tax revenue concerning the GDP (gross domestic product) is low. The Government’s ability to finance its expenditure is determined by this; a higher ratio indicates a wider fiscal coverage, more revenue, and less dependence on borrowings. India’s tax-to-GDP ratio according to the Union Budget estimates for FY23, was estimated to be 10.7%; the OECD average is in the mid-30s. Obviously, there is a lot of catching up to do.

What then needs to be done? Enforcement can check evasion but never completely stop it; ultimately policy interventions are the answer. Simplification of processes which make it easier to comply should be a regular exercise.

While it is difficult to arrive at an ideal rate of taxation, policymakers should constantly strive to achieve a rate wherein the taxpayer concludes it makes better sense to comply than take the risk of evading. Close interaction with the industry, the ordinary taxpayer and enforcement agencies is a must to understand ground realities.

Technology should constantly be sharpened, and risk parameters built to detect abnormalities and throw red flags. The Boards should invest in recruiting data analytical experts to work closely with the department. There is a serious trust deficit between the taxpayer and the departments-this is a bridge which needs to be crossed one step at a time.

The field formations are key in this process and can make or break the best of policies. So constant training and sensitising the field formations is a must. Far too much time and energy is wasted in litigation—the amnesty schemes which effectively punish the honest taxpayer are never a good option. As the receipt budget shows, too much ‘revenue’ is blocked in litigation. The departments should ensure they seek to collect only what is due.

The citizens need to be aware of the ill effects of evasion—loss of revenue for the government which can otherwise be used in development and social projects, loss of jobs, generation of black money which can be used for nefarious anti-national purposes; they need to be encouraged to pay their taxes and participate in nation building. The PM’s very influential Mann Ki Baat can be an effective vehicle to drive home this message.

All this and much more has to be done if we are to reach our ambitious targets of becoming a $5 trillion economy in five years or achieving $2 trillion in exports by 2030.

— Najib Shah is Chairman (retired) of the Central Board of Indirect Taxes & Customs. Views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zoomed Out | This is why central banks unlikely to cut rates so soon

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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There seems to be an eager anticipation for the cycle of rate cuts to begin. Inflation rates have come down from the highs that it has seen in most economies. Though inflation has crept up slightly in countries like India, with a similar expectation for the EU and the US when the rates are released, it has not moved out of the comfort zone. This is a relief, but will this lead to cuts in interest rates, which are hovering at highs not seen in decades? Not so soon.

While the reports on inflation are promising, central banks will not start the rate cut cycle until they are doubly sure that inflation has been truly tamed and there is no chance of it surging back. At the beginning of this cycle, when inflation rates started increasing, most central banks were slow to react and hoped inflation would be transitionary. They faced criticism, and the Federal Reserve Bank acknowledged the mistakes.

Also Read: Expect US Fed to be cautious with rate cuts; prefer India over China, says Ed Yardeni

So, it is likely that now they will be more cautious and would not want to cut rates prematurely to see inflation come back again. What makes their job even more difficult is the heightened uncertainty, and from multiple sources across the globe. 

The beginning of the inflation cycle can be traced to disruptions in the global supply chain due to COVID-19. This gave false hope to many that this episode would be transitory and prices would stabilise quickly as the supply chain bottlenecks went away.

High interest rates likely for longer period

One important aspect this analysis failed to take into account is that we live in a world where uncertainty is high and persistent. More importantly, there are several sources of uncertainty — Ukraine War, Hamas-Israel War, US-China relationship, deep polarisation in polity across countries, high debt levels of governments, climate change risks, etc.

These stochastic events can amplify the impact of individual shocks on prices and economic performances of countries. This also makes forecasting almost impossible. It is hard to see how the large-scale economic forecasting models, used by the central banks and others, can accommodate so many varied shocks concurrently or even consecutively.

As such, the central banks will have to wait longer to be convinced that inflation has come down permanently and is unlikely to go up in the near term before they reduce interest rate. So, interest rates are likely to be higher for a longer period of time than optimally needed. This will have implications for growth in the world economy and countries, particularly emerging economies like India, will need a strategy to deal with it.

What the countries shouldn’t do

Let us start with what countries should not do. Even though there is a risk of continuing with higher interest rate longer than needed, central banks should not reduce interest rates prematurely.

This can lead inflation to resurface and can become more challenging and take much longer to manage, as we have seen it happen in the 1970s. The cost to the economy can be substantially higher in that case. 

What they must do

High up on the list of what countries must do is to coordinate on monetary policies across economies. In today’s globalised world, where inflation has become far more synchronised across not only advanced economies but also emerging economies, a concerted effort is needed.  If monetary policy changes are asynchronous, then transmission of monetary policy changes in one jurisdiction can impact other countries, particularly emerging economies. 

What countries should also coordinate on is to help firms diversify their supply chains. This can happen when the barriers to trade across countries are reduced. In recent years there has been a renewed interest in signing bilateral and multilateral economic cooperation treaties. This has both advantages and risks.

The biggest risk is that if such treaties lead to fragmentation and the emergence of disjointed trading blocks, that will not help in the fight against inflation or ensure growth for the world economy. On the other hand, if this opens up opportunities for firms and enables them to take advantage of their comparative advantages, then it may lead to lower prices and higher growth. 

Finally, of course, what can help is if we can get to the root of some sources of uncertainty and are able to eliminate them.  In particular, the potential for substantial global impact on the world economy hinges greatly on nations’ capacity to diminish conflicts and ease geopolitical tensions.

—The author, Dr. Partha Chatterjee, is a Professor of Economics at School of Humanities and Social Sciences, Shiv Nadar University, Greater Noida. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Leaders Speak | This is what the FMCG industry has in store for 2024

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The fast-moving consumer goods (FMCG) industry will undergo a transformative phase in 2024, shaped by the aftermath of several global events and changing consumer dynamics. The surge in online consumer goods demand accelerated by the pandemic, is prompting FMCG companies to adopt direct-to-customer approaches and prioritise digital channels for distribution.

Concurrently, sustainability emerges as a pivotal trend, with major FMCG players aligning their strategies to meet the growing demand for eco-friendly products. This shift in consumer values, coupled with an increased focus on conscious living post-pandemic, is influencing the FMCG sector to cater to products that contribute not only to nutritional needs but also overall health. As 2024 unfolds, these trends will guide FMCG organisations in adapting and innovating to meet the evolving expectations of consumers.

Anticipated to be catalysts for business growth in 2024, the following trends are poised to significantly impact brands within the industry:

Sustainability

The sustainability trend in the FMCG industry is poised to gain further momentum. With heightened consumer awareness of climate change and environmental impacts, companies are increasingly scrutinised for their social responsibility. As a response, FMCG firms are expected to intensify efforts not only in reimagining product presentation and packaging but also in the conscientious selection of materials used in production.

Foreseen as a prominent trajectory for the upcoming year, FMCG companies are projected to expand their offerings of compostable, recyclable, and reusable packaging to meet the growing consumer demand for eco-friendly choices. This shift is not confined to the realm of food but is expected to encompass various non-food items such as cosmetics and cleaning products, reflecting an industry-wide commitment to sustainability and ethical sourcing.

Healthy snacking

The industry is expected to witness a sustained focus on conscious snacking, striking a delicate balance between health and taste. This trend is likely to be fueled by the growing preference of the working population for convenient foods that are not only tasty but also high in nutritional value.

The key drivers for this trend include the rising demand for on-the-go snacking options that are both ready-to-eat and ready-to-cook, offering a combination of flavour, health benefits, and ease of consumption. As consumers increasingly prioritise a holistic approach to well-being, the convergence of taste, health, and convenience is anticipated to define the snacking sector in 2024.

Genuineness and authenticity

In the fast-paced landscape of the consumer goods, a notable trend for 2024 centres around consumers’ heightened awareness of product ingredients. With a focus on making swift and informed choices regarding nutritional content, consumers are actively scrutinising product formulations.

The prominent driver behind this trend is the growing emphasis on realness and authenticity — the values deeply cherished by today’s consumers. The quest for products perceived as natural, believed to be beneficial for personal well-being and the environment, has surged. This authenticity drive manifests in an increased demand for products boasting free-from claims and streamlined ingredient lists. 

Adjusting economic realities

Consumers, grappling with the repercussions of price inflation, are proactively trimming their expenditures on food and beverages. This shift toward recessionary spending habits signals a decline in buying bigger family packs and replacing it with smaller packs. However, this does not translate into a willingness to compromise on quality.

In an effort to navigate this economic landscape, consumers are adopting resourceful strategies such as minimising food waste and capitalising on promotional offers. Brands poised for success in 2024 should focus on packaging innovations to extend product shelf life. Additionally, providing personalised promotional offers tailored to individual needs will be crucial for FMCG brands in meeting the evolving preferences of budget-conscious consumers.

Artificial intelligence

In the ever-evolving landscape of the FMCG industry, AI-powered solutions, particularly Machine Learning (ML) and Natural Language Processing (NLP), are emerging as a prevailing trend, creating substantial opportunities for innovation. Notably, voice-based systems stand out, providing continuous consumer support for product exploration, coupled with recommendation engines that deliver personalised product suggestions.

The incorporation of these AI-based solutions reflects a prominent trend, enhancing the overall customer experience and contributing to heightened satisfaction and increased retention for FMCG companies.

Big data & analytics

In a dynamic shift, FMCG companies are actively harnessing the power of big data to fuel innovation and competitive edge within the industry. As consumer data becomes increasingly accessible through online shopping, brands are venturing into innovative approaches to foster stronger relationships with customers and extract valuable insights from their behaviours.

FMCG analytics serves as the driving force, delving into customer preferences and behaviours, providing companies with profound insights into their purchasing habits. The integration of big data solutions and analytics in the FMCG sector empowers brands to optimise communication strategies, ensuring more personalised experiences for customers and creating a pathway for enhanced engagement in the ever-evolving landscape.

Blockchain

In the competitive landscape of FMCG, brands are increasingly leveraging blockchain technology to establish a distinctive edge. The adoption of smart contracts and blockchain traceability emerges as a key trend, enabling FMCG companies to identify and promptly address supply chain bottlenecks.

This trend extends beyond operational efficiency, with blockchain providing enhanced transparency for consumers. Shoppers can now effortlessly trace the origins of their purchases, fostering a sense of trust and accountability. Additionally, blockchain platforms introduce cryptocurrencies and innovative loyalty programs, reshaping how consumers collect, exchange, and redeem points. This trend is anticipated to not only elevate operational efficacy but also to redefine consumer-brand interactions in 2024.

Conclusion

In this dynamic landscape, FMCG companies are poised to navigate a future marked by innovation and responsiveness to consumer needs. The convergence of sustainability, digitalisation, and heightened customer experiences forms a strategic foundation, while the e-commerce boom propels brands toward a digitally connected future.

Artificial intelligence and Big Data fuel insights, while the emerging trend of 3D Printing promises a sustainable revolution. As the FMCG industry embraces these forward-looking trends, it charts a course towards a more interconnected, sustainable, and customer-centric future in the ever-evolving marketplace.

—The author, Manish Aggarwal, is Director, Bikanervala Foods Pvt Ltd. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How India can seize its moment to become the world’s third largest economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The year 2024 begins at a critical and delicate juncture. While the global economy has managed to stave off recession, albeit narrowly, it has suffered significant volatility and unpredictability during the past year. Devastating conflicts have stoked geopolitical fractures, economic fragmentation and financial turbulence. 

With new global challenges emerging, urgent progress is needed to address existing vulnerabilities, including fragile energy and food security, inclusive growth, and the intensifying climate emergency. Effective multilateral cooperation is key for the world to come to a common understanding to tackle these interlinked issues. 

Amidst a challenging global scenario, India has emerged as a significant economic and geopolitical power. Its actions in the coming year could lay the groundwork for the country to become the world’s third largest economy in the next five years and a developed nation by 2047, setting an example on inclusive, sustainable economic growth, digital development and climate action.

2023 marked a landmark year for India as it assumed the presidency of the world’s highest profile global economic assembly, the G20, and showcased its economic prowess and diplomatic finesse to the world. 

India’s emphasis on a rule-based international order, advocacy for collaboration to solve common issues, and commitment to upholding democratic values positions makes it a stabilising force in an increasingly complex global geopolitical landscape. Importantly, India also helped herald a new dawn of multilateralism where developing countries take their rightful place in shaping the global narrative by mainstreaming the Global South’s concerns in international discourse. 

Also Read: India growing faster than any other large economy, says President, World Economic Forum 2023

The notable achievements during India’s tenure — the inclusion of the African Union into the G20; the launch of critical multi stakeholder partnerships such as the Global Biofuel Alliance and the Global Initiative on Digital Health; the progress on United Nations Sustainable Development Goals (SDGs); the reform of multilateral development banks; and the scaling of digital public infrastructure – demonstrate its ability to build consensus to address global challenges collectively and effectively. 

The World Economic Forum, through its centres and initiatives, actively supported India’s G20 agenda and contributed to key thematic areas including energy and health.

Also Read: India’s G20 Success: Unanimous adoption of declaration highlights consensus-building prowess

On the economic front, India has been a key growth engine for the world, contributing 16% to the global growth in 2023. The country’s growth rate of 7.2% in fiscal 2022-2023 was the second-highest among the G20 countries and almost twice the average for emerging market economies that year. 

India’s efforts to maintain stability and enact structural reforms have contributed to its economic resilience in the face of global challenges. Investments in upgrading infrastructure and connectivity, including projects like the Bharatmala highway programme, the Sagarmala project for port-led development and the Smart Cities Mission, are transforming the country’s landscape and playing a pivotal role in the country’s economic advancement. 

India began laying a solid foundation for a more digital economy over a decade ago with the launch of its national identification programme, Aadhaar, which uses biometric IDs to establish proof of residence. Today, with a burgeoning tech industry, the country has become a key centre for innovation and technology services, not only boosting economic growth but also positioning India as a key player in shaping the future of the digital economy. 

In the face of escalating climate-related concerns, India also plays a key leadership role in the global fight against climate change. Through the launch of the Mission LiFE of Lifestyle for Environment, coupled with a concerted push for Green Hydrogen, India has demonstrated a firm commitment to a growth trajectory that balances economic advancement with ecological responsibility. 

India has also launched the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, and proposed a global grid for renewables. A major announcement made by Prime Minister Modi at COP28 in Dubai was the introduction of the Green Credit Initiative as a substitute for carbon credits.

Moving forward, fulfilling India’s national and global ambitions will require strategic policy making to tread the delicate balance between economic growth, social development and environmental sustainability. India’s demographics will be advantageous to its growth story only if coupled with broad labour market reforms and human development measures to skill one of the world’s largest workforces and address youth unemployment. 

Continued broad-based policy initiatives and structural changes focused on inclusive growth, sustained revival in domestic consumption demand, and rapid adoption of new and emerging technologies to enhance productivity will be critical. Additionally, India must continue to engage in multilateral forums to address global issues such as health crises, economic disparities and geopolitical tensions. 

The world is now witnessing a nation on the rise, with a booming economy, and a commitment to inclusivity, sustainability, and international collaboration. India is poised to play a defining role in shaping the future of the global economy in 2024 and beyond.

— The authors, Sriram Gutta and Suchi Kedia are Head (India), and Community Specialist (India), respectively at World Economic Forum. The views expressed in this article, which was published as part of the World Economic Forum Annual Meeting 2024 discussions, are their personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zoomed Out | Insolvency Code — this is the impact of the SC settlement on personal insolvency of corporate guarantors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The much-awaited approval from the top Constitutional Court in India was finally here, paving path for financial creditors to relay back on the fast-paced bad debts resolution track laid by the government’s masterstroke law — the Insolvency and Bankruptcy Code.

The Supreme Court of India in November settled the cloud around the provisions of personal insolvency of Corporate Guarantors, through Dilip B Jiwrajka vs. Union of India case, which had put to hold legal recovery action by various lenders in the country’s leading NPA cases.

The Insolvency Code which started its journey in the country around the end of the year 2016 has had a stellar performance and with the latest judicial recognition, the Code may just establish itself the one-stop solution for corporate defaults in the country.  

Also Read: Zoomed Out | These are the five pending bankruptcy cases important for India’s credit market

The Insolvency & Bankruptcy Board of India (IBBI), the statutory body regulating and monitoring the Code in India, had notified the rules for action against personal guarantors to Corporates on November 15, 2019. However, since the who’s who reached the Apex Court impugning their validity, the said provisions were shadowed by poor results.

Statisticians at the IBBI reveal around a 300%  jump in recovery using the said provisions with a mere ₹23.10 crore recovered in first quarter of 2023 to ₹91.27 crore in the second quarter even though there had been a status quo on all the pending proceedings due to the awaited decision in the Supreme Court case.

With the provisions being held as constitutionally valid and the lenders in the country gearing up, these numbers can grow exponentially now, especially as a rhetoric number of around 2282 applications against personal guarantors were pending before different Company Law Tribunals across the country which may now proceed uninterruptedly.   

Personal insolvency provisions

On the hind side, multiple sections of the economy argue that with the upholding of the personal insolvency provisions, the role of the Code in terms of resolution would be pivoted as the said rules are heavily concentrated on recoveries.

Conventionally, the resolution of stressed corporate entities has always been emphasised as the corporates enjoy a different legal entity whereas, the personal insolvency regimes are targeted for recovery of debts. The two are ultimately congruent for boosting the overall credit liquidity and ensuring credit enhancement. This will ultimately help boosting the overall economy and facilitating easier access to capital for businesses and individuals. 

From a creditor’s standpoint, undoubtedly, the provisions of personal insolvency would have a deterrent effect on the personal guarantors but the varied routes for efficient escapism in this deterring landscape may be explored by the erring guarantors including the creation of trust with the specific intention of avoiding the creditors, entering the benami transactions, misusing the interim protective/moratorium measures.

Also Read: SC issues notice to Centre on pleas challenging provisions of insolvency and bankruptcy code

Non-cooperation with Resolution Professionals, improper alienation of personal assets, determination of priority of Code viz-a-viz other statutes where existing attachments/ decrees already issued/passed etc., are also such escapism. Thus, these routes would have to be either taken care of either by policy ramifications or through procedural buyouts. 

 However, a thorough analysis of the relevant provisions also highlights certain technical lapses which may be infested by guarantors under the personal insolvency provisions, vis-à-vis the provisions under the Corporate Insolvency Resolution Process (CIRP).

Firstly, the interim moratorium kicks in the moment the application is filed, wherein all the existing or fresh proceedings in relation to debt are stayed or barred, creating it a safe haven for seeking shelter or breather from attachment under other statutes like PMLA, GST etc., especially the white collar crimes under the pretext of submitting frivolous or sham repayment plans without having an actual intention to repay or with the intention to immediately alienate the personal assets to third parties, trusts etc. for defrauding the creditors.

For corporate entities, various judicial pronouncements have already created a homogeneous environment for different laws to act and to safeguard from probable misuse.  

Secondly, another long road lies ahead in the difficulty in collation of information in respect of personal guarantors which might highlight with much gravity as the individuals might be inclined to delay the process due to the benefit of interim moratorium.

Due diligence/ information collation of any corporate entities is comparatively easier due to stringent rules of MCA, SEBI and other information/regulatory depositories. However, in Indian jurisdiction, discrepancies like limited disclosures by individuals, declarations on self-sworn basis, existence of parallel economy of black money, non-availability of comprehensive information in one portal, delays in responses from departments, non-cooperation by individuals, protracted litigations etc., would warrant approach to individual departments like information, taxation or revenue departments etc.

This can sometime jeopardise the entire bankruptcy process. It would therefore be interesting to witness the evolution as stringent checks would have to be introduced at each place and seamless data collection processes would have to be ensured to calibrate the individual insolvency with Indian lines. 

Thirdly, the identification of assets of individuals can pose a major challenge in the smooth implementation of the personal insolvency provisions as our country is quite infamous for its benami transactions.

Also, understanding the syphoning off funds in fraud cases in individual books might become the iceberg as in these cases and might warrant additional skills on part of Resolution Professional or additional disclosure requirements, centralization of records or information by various authorities. Going forward, it is expected that a revamped statute to cure the menace of such transactions would soon be rolled out to aid and ease India’s world rankings especially, when India is committed to become a third largest economy by 2027.

Further, there have been questions in legal fraternities regarding the multiple criteria of jurisdiction of forums for initiation of insolvency of an individual and there might be high probability of multiple proceedings before different jurisdictions in India’s vast geographical landscape. As far as initiation of CIRP is concerned, there is a single objective test for evaluation of jurisdiction of a corporate entity, and minor amendments or statutory tweaks may be required for this aspect of the Code. 

 Conclusion

The judicial pronouncement is another step towards bringing the pragmatic cultural shift in how India is making it easy to do business with safeguarding the interests of creditors, supporting the bonafide entrepreneurs and at the same time penalising the unruly ones.  The future implications and potential challenges are acknowledged but with the IBBI already having set landmark examples of promptness, the same would be addressed by judicial or legal framework as this is just an entry pass for doors of recovery through the personal insolvency route.

—The author, Anjali Jain, is Partner & Head (Insolvency & Restructuring Practice) at Areness. The views expressed are personal.   

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Midair Musings |Boeing 737MAX 9 — why the Alaska Air incident a source of much discussion and global action

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On Friday, January 5, an Alaska Air’s Boeing 737 MAX 9 aircraft had an inflight accident that is the source of much discussion now. After take-off as the aircraft was climbing, the mid-cabin exit door panel came off at approximately 16000 feet forcing an emergency landing. With 177 souls on board, the aircraft landed safely and within hours, there were deft actions from the airline, from the manufacturer and from the regulator, including a grounding of the fleet type, and mandates for additional checks.

Also Read: Boeing takes first step to ungrounding the 737 Max 9 after mishap

Almost all agree that several things aligned whereby the aircraft (after the door mishap) returned with all crew and passengers safe. As with any aviation incident, it is too early to speculate given the technical nature of the incident and the ongoing investigation. Evenso, given the exacting standards of aviation safety, impacts of this are likely to flow through. 

Boeing 737 MAX 9

The Boeing 737 MAX is an evolution of the Boeing 737 aircraft. It was developed to have increased range and capacity and thus required a longer fuselage and the option for additional fuel tanks. It made its roll-out and debut in the first half of 2017 with the test flight in April that year and display at the Paris Airshow.

The 737MAX 9 traces its origins to the Boeing 737 which is often referred to as an industry workhorse and the most sold aircraft in aviation history. However, it was also a topic of much discussion emanating from the two fatal flights in 2019 which had led to a global grounding of the 737MAX fleet and a subsequent recertification.

The aircraft involved in the accident, a Boeing 737MAX 9, was fairly new and had come off the production line just 2 months earlier. The aircraft in question had a mid-cabin door plug which came off resulting in the door separating and consequent decompression. 

While the investigation is ongoing and the plug has been found, the root cause analysis may take a while. But given the current scenario and the advent of social media the regardless of root cause there is likely to be impact. 

Global impact — situation to evolve as new information emerges

As a result of the accident, Alaska airlines grounded their entire 737MAX 9 fleet of 65 aircraft. Further, the US regulator — The Federal Aviation Administration (FAA) — ordered the temporary grounding of certain Boeing 737 MAX 9 aircraft operated by US airlines or in US territory and issued an Emergency Airworthiness Directive (EAD).

The EAD mandates that airlines inspect affected aircraft before further flight indicating, “the FAA is requiring immediate inspections of certain Boeing 737 MAX 9 planes before they can return to flight.” Concurrently, the National Transportation Safety Board is investigating actively and has already found the door plug that is a critical element to the entire accident. 

With the EAD, the present estimates are that this will impact approximately 171 airplanes worldwide. All roads are leading back to the regulator and the original equipment manufacturer (OEM).

While, an Alaska Airlines statement notes that; “While we await the airworthiness directive (AD) inspection criteria from the FAA and Boeing, our maintenance teams are prepared and ready to perform the required inspections of the mid exit door plugs on our 737-9 MAX fleet. The 737-9 MAX grounding has significantly impacted our operation. We have cancelled 170 Sunday flights and 60 cancellations for Monday, with more expected (in the following days). “

For other countries, the groundings and decisions will unravel as more information starts to flow. And also as other country regulators analyse the situation and weigh it against their own risk processes.

For instance, in India, there are no airlines flying this particular variant of the aircraft. Evenso, hours after news of the accident, the Indian regulator (DGCA) mandated a check of all overwing exit doors on the 737MAX aircraft. These are flown by 3 airlines namely SpiceJet, Air India Express and Akasa. The checks were completed on Monday.  

Commercial impact – still too early to say

The commercial impact of the 737MAX 9 accident is extremely hard to predict. Because this will also be driven by the spread of information and/or misinformation. Already, speculative analysis is abundant on what is a fairly technical issue. But given the exacting nature of aviation safety and the built in redundancy, a serious cause for concern is valid. 

For now, no airlines have reported a drastic fall in forward bookings (usually a tell), nor have there been any other links found to any other incidents globally. Evenso, one just has to search for the volume of information that is permeating through merely 72 hours later and this is the demand cycle and commercial cycle that is the new normal. If everything checks out, it will just be business as usual, but a spark here or there could trigger virality and those consequences will fall to the entire aviation ecosystem which is just about ready to emerge from the pandemic and report a fairly good year.

For Boeing, it is one more challenge in a series of challenges. Interestingly, because it has happened with the Boeing 737MAX variant, which had an extensive recertification process, this would have come as a shock and surprise.

Boeing CEO is addressing all employees today (Tuesday) for an all-employee safety meeting, while its annual leadership retreat has been cancelled. Boeing’s own statement indicates that this is to, “focus on our support to Alaska Airlines and the ongoing National Transportation Safety Board (NTSB) investigation, and any of our airline customers experiencing impact to their fleets.”

—The author, Satyendra Pandey, is Managing Partner of the aviation services firm AT-TV. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow