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Business Commentary/ Pritish Nandy

Excellence beats inflation

Almost 25 years ago I bought my first television set in Calcutta. It was called EC TV. It was a huge, ugly, black and white contraption made by some government undertaking and sold at an incredibly expensive price. The exact figure eludes me; but I remember that I had to pay for it several months in advance and, after some thirty-odd reminders, I finally got a backdated postcard informing me that my set had arrived in the company showroom and I could pick it up.

The very next day I turned up at the EC TV showroom in Alipore in a hired taxi, to pick up my television set, only to be told that the staff was out for lunch and could I come back the next day since it would take at least 24 hours more to get the paperwork right. What paperwork? I inquired. The bills and receipts were yet to be prepared, I was told. But I have already paid for the set in advance! I argued, outraged. But we cannot give you the television till the documents are ready, explained the only person in the showroom who had not gone out for lunch that day. In fact, he suggested, I return after two days. That way you will be 100 per cent sure you can take your set away, he said.

To cut a long story short, I did ultimately get my television. Not after two days; but one full week later. The fact that it packed up within a couple of months and had to be sent back to the showroom for diagnosis, after which I again had to pay in advance for the repairs, which took another six weeks, is another matter. The guarantee did not work because, I was told, it did not cover precisely those very parts which had packed up prematurely. I also had to go all the way to the workshop to pick up the repaired set.

But then, let me explain, this column is not about EC TVs. It is about the changing face of our marketplace and why the government must be banned by law from investing the tax payer's hard-earned money in businesses they cannot run.

Today, a state-of-the-art, branded colour television with an elaborate home theatre costs less than the EC TV I bought 25 years ago. Despite inflation. Despite the rising cost of components. Despite increasing expenses on advertising and brand management. If you are lucky, you can even get a deal with 25 movies thrown in free. As CVDs. Or a refrigerator and a washing machine. Yet dealers earn more than they ever did and the manufacturers make respectable margins. At least they do not go bust like EC TV did, despite selling such a rotten product at an absurdly high price. Why?

The reason is simple. Competition brings out the best in us.

Videocon and BPL came in from nowhere, knocked established giants like Philips off their perch and grabbed huge marketshare. Just as they were about to take it easy, in came Akai with its scheme-led marketing, offered such irresistible deals to the buyer, that it instantly seized mindshare. Marketshare was a natural byproduct. In less than one year, with wafer thin margins and huge promotions, Akai grabbed a dramatic share of the market and, also, strategically redefined the entire game by its buy-back schemes. Where they took back your old televisions and gave you new ones at huge discount. In some parts of India, they even gave away a free refrigerator if you bought a colour television. In others, they gave away a scooter. Making a colour television the critical product in a typical middle class home.

Videocon, smarting under attack, hit back with a cannier deal. It offered television sets for a price that buyers would get back after five years and keep the set as well. It was not consumer selling; it was financial packaging at its smartest. No wonder it did fabulously well! Sansui came in even stronger, offering a free washing machine and a free refrigerator if you bought their television. And what was the price of this television? Cheaper than what I paid for my black and white contraption 25 years ago.

But it is not just televisions. Look at cars. I still remember how anyone who bought an Ambassador took it straight from the showroom to a garage to get the glitches set right. The guarantees covered nothing. Like my EC TV, you paid for the car months and sometimes years before you actually got it in hand. Buyers had to exert influence to jump the queue, so that they could get a car slightly ahead of schedule. If you wanted a specific colour, you bribed the agent. If you wanted a car quickly, you bribed the agent. If you wanted a car that required no repairs, you bribed the agent. By the time you finished bribing the agent, you actually paid more than you pay for an off-the-shelf Maruti 800 today. Or what you will pay for the gorgeous Matise from Daewoo next month.

Here, too, the new players have defied inflation. They have brought down costs even as they have infinitely improved product quality and design. They have also brought into the market brands that no longer waste fuel, hurt the environment, cheat the consumer at every point. It is only the government that still buys Ambassador cars and we all know why. No one else is demented enough to do so.

What Akai did to televisions and Maruti to cars, T-Series did to music. I still remember the days when we bought cassettes for Rs 45. It took Gulshan Kumar to redefine the rules of the game. He hammered down prices and we soon saw cassettes selling at Rs 12. Others like HMV had no option but to stop fleecing the consumer. Even for CDs, T-Series brought down prices from Rs 500 to Rs 100, a huge gap that cannot be attributed to the quality of recording alone. It was actually obscene profiteering that was stopped.

Samir Jain did the same thing in newspapers by introducing what he called the invitation price. At exactly that point of time when the cost of newsprint rose globally, he cut the cover price of The Times of India and The Economic Times dramatically -- following Murdoch's strategy in Britain -- and mauled his rivals so badly that they were also forced to revise their cover prices, driving them into further losses. But readers were lucky. They got thicker, better newspapers at a lower cost than they had ever paid before. The Times of India came for Rs 1.50! The Economic Times at Rs 2!

Audio systems. Home theatres. Washing machines. Refrigerators. Radios. Computers. Printers. Fax machines. Duplicators. As competition grew, prices tumbled. Quality improved. The outcome of an open economy where the government has been forced to play a diminishing role. Where innovation and challenge has brought in new market forces to drive down costs, upgrade technology, sharpen the competitive edge of rival brands, hone excellence.

In the process, new brands -- some multinational, others desi -- are challenging the monopoly of the old rogues that flourished in a licence raj, where corruption and market manipulation yielded profit. Not technology. Nor excellence.

That is why every time I hear people talking about protecting our industries, I puke.

Protecting our industries means protecting our industrialists and that is not the job of any honest, self-respecting government. Business is meant for banias. The more they compete against each other, the more they brawl out there in the marketplace, the better it is for you and me. That is how prices fall, quality of products and services improve.

The other way is to kick the government out of business. It is not their job to make televisions or run hotels and airlines. This is not what we pay taxes for. The job of government is to govern. Not meddle in business. Millions of consumers and tax payers will benefit the day government stops fiddling around with things it does not know.

That is the key to liberalisation. Choice. Free competition. Letting our 200 million middle class enjoy the thrill and excitement of watching the market open up. Instead of allowing corrupt, inept government officials to decide what is good for you and me.

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