The Evolution of the UK's Financial Sector

Over the centuries, the UK has established itself as a financial hub, with London emerging as a centre for international trade in the early 18th century. The Bank of England, established in 1694, played a crucial role in providing greater liquidity in the national marketplace and supporting the growth of foreign trade.

In 1986, the London Stock Exchange underwent significant changes when it was deregulated, an initiative that became known as the "Big Bang". This event marked the introduction of electronic trading, eliminating face-to-face trading mechanisms and resulting in a surge in trading activity. The Big Bang led to the merger of brokers, jobbers, and merchant banks, and created a free-for-all trading environment that attracted several international banks to London. The Big Bang is credited with creating a significant number of millionaires, and it has left a legacy in the form of a robust financial infrastructure that has cemented London's status as a leading global financial hub.

During the same period, the London Interbank Offered Rate (LiBOR) was established as a benchmark interest rate used to set the cost of borrowing for financial institutions around the world. LiBOR was established in 1986 as part of a broader set of reforms known as the "Big Bang" that deregulated financial markets in the UK. The purpose of LiBOR was to serve as a benchmark interest rate that reflected the cost of borrowing for banks in the London interbank market. The rate was determined by a daily survey of a panel of banks, which submitted their estimated borrowing costs for various currencies and maturities. LiBOR quickly became a widely used benchmark rate for financial contracts, including derivatives, loans, and mortgages, and played a key role in facilitating global financial transactions.

The 1990s saw the UK's financial sector continue to grow, with the emergence of hedge funds and private equity firms. By the 2000s, the UK's financial sector had become increasingly globalized, with strong foothold of international banks.

However, the global financial crisis in 2008 led to increased regulation of the financial sector and a renewed focus on risk management. And in 2021, the Financial Conduct Authority (FCA) announced that LiBOR will be phased out by the end of the year, reflecting changing attitudes towards benchmark interest rates. The changing attitude came as a result of several scandals and concerns over the manipulation of these rates. In this context, LiBOR had come under scrutiny after allegations of rate-rigging by several large banks. This resulted in a loss of confidence in the benchmark and a dire need for a replacement.

In conclusion, the UK has a long history as a financial centre, with London establishing itself as a hub for international trade and finance. The development of the Bank of England, the creation of the London Stock Exchange, and the introduction of electronic trading and LiBOR have all contributed to London's status as a leading global financial hub. However, challenges such as the global financial crisis and concerns over benchmark interest rates have also prompted increased regulation and scrutiny of the financial sector.

 * The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

Elon Musk’s ‘Twitter’ dream and the measures taken to realize it

 

Elon Musk bought Twitter for cash consideration of US$ 44 billion, paying $54.20 per piece. After months of legal tussles, deal was finally sealed in October 2022. Musk announced that he plans to promote free speech and create open algorithms to showcase transparency. In his investor pitch, he made tall claims to increase annual revenue from US$ 5 billion in 2021 to US$ 26.4 billion in 2028. He further anticipated the user base to grow from 217 million in 2021 to 931 million in 2028. However, to realize his vision, he has resorted to aggressive measures like job cuts and charging customers for verified accounts, attracting a strong public backlash and co-ordinated trolling attacking by resentful users. This post attempts to lay down a summarized view on steps taken by Elon Musk to remodel the business

1)     New appointments and series of layoffs: Musk has handed pink slips to 50% of Twitter’s staff in order to drive cost efficiencies. His acquisition of Twitter has led to interest bill of US$ 1 billion which makes it imperative for him to cut costs on a war footing. Additionally, being the sole director of Twitter, he has also dissolved the board and fired series of leadership including CEO Parag Aggarwal (CEO), Ned Segal (CFO) and Vijaya Gadda (Head of Legal, Policy and Trust). Furthermore, he has also brought in team of associates as enablers to grow the business including his personal attorney and tech investors 

2)     Setting the table for a stream of recurring revenues: The users of verified accounts will have to pay US$ 8 per month to keep the blue tick (sign of a verified account) next to their name. With this, Twitter will attract a slew of recurring revenues of US$ 40.3 million annually and is expected to reach above US$ 400 million as of 2028 (Assumption: 0.2% of total twitter user base consists of verified accounts; This figure is expected to reach 0.5% as of 2028)

3)     Additional features: Musk wants to transform Twitter’s user interface into different customized versions across customer preferences. He has backed a user suggestion wherein one of the versions can include a conducive space for organized debates and spats (only for verified users). Additionally, he also wants to include user feedback to Twitter posts in form of ratings.

4)     Revival of Vine?: Vine was six-second-long video sharing application, which was acquired by Twitter in 2012 and later discontinued in 2016. Elon Musk conducted a Twitter poll for a consumer opinion on whether he should revive Vine or not. The poll results concluded with 70% of respondents in favour of the Vine comeback. However, Musk needs to evaluate this decision, considering a fierce competition from the existing giants: Tiktok and Youtube in this space

5)     Transforming the application into a super app: Lastly, Musk plans to transform the social media platform into a super application. In future, Twitter can also include features like instant messaging and digital wallets (Elon Musk can bring his core expertise from his initial ventures – Paypal, a digital wallet). Furthermore, he also wants the platform’s algorithm to be open source, making way for public review and modification. Furthermore, he desires to chart a blockchain-based future for Twitter wherein users can add their messages to the blockchain for a small fee which can insulate the posts from bots and spams.

* ThThe opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

3 must-haves for India to chart its own transformational growth journey

 As my first in post in year 2022, I decided to lay my idea on the fundamentals that India need to revisit in order to have a strong growth trajectory. However, this post does not try to slice and dice the economic data. Instead, it attempts to revisit the foundation that needs to be addressed to make growth an inherent process, more than an objective.

So, here are my 3 must-haves for India to chart a transformational journey

1)     Address the ‘Brain-Drain’ issue:

 One of the key issues that needs resolution is the brain-drain problem. Graduates from leading institutes settle abroad, looking for better education, good employment opportunities and high salaries. As per Global Wealth Migration Review, 2% of high-net worth individuals settled abroad in 2020. This dynamic creates worrying levels of vacuum of quality talent in India. There are few advantages as well as India observes strong flow of remittances (USD 87 billion) in 2021. However, the cons clearly outweigh the pros in this scenario

As a solution to this issue, India needs to explore options to create equal and strong educational frameworks that create nationwide skilling movement. It is imperative to focus on bridging gaps between academia and corporates by identifying relevant skills for today. With good opportunities opening up, we can see a decline in the brain drain activity in subsequent years.

2)     Foster Innovation:

India jumped two positions in Global Innovation Index prepared by World Intellectual Property Organization (WIPO) in 2020. Currently, India stands at 46^th position on this index. However, there are still significant degrees of freedom to build up on India’s innovation capabilities. Currently, the total patents filed in 2020 stood at 37,880 which is up from 15,914 back in 2011. This showcases strong push by Indian government and companies to bring new ideas to the growth story. However, breakthrough innovations at grassroot level sometimes go unnoticed with this patent filing mechanism. It is up to the government to tap into this so as to explore newer possibilities to its fullest depth. In this regard, the corporate and academia should be empowered to support India’s rural core by providing funding, technical know-how, marketing, branding and patent filing avenues to ensure that these innovations appear on radar going forward.

3)     Imbibing principles from India’s ancient heritage:  

This point may seem a little off-track given the fact that we are discussing on ways to grow economically. Believe it or not, India’s spiritual heritage is replete with principles on how to manifest abundance, growth, peace and harmony. In the age of dynamic change, it is important for us to imbibe principles which can give us required clarity and strength to work towards our growth. The new way of life can help us to navigate the complexities with fluidity and work to achieve the larger purpose.

 

With this, I will conclude by saying that India’s economic goals cannot be achieved without strong and focused individual contributors and thus it is necessary to nurture and develop talent across all levels.

 

Thanks to Tata Group, Air India finally gets their old pilot back

 

Struggle to find a buyer comes to an end

1)     Air India arrived in Tata Sons’ cockpit after relentless struggle by Indian Government spanning two decades to find a suitable buyer for distressed airline. For strategic disinvestment, the Government had reserved the ask price to be around 12,906 crores. Tata Sons bid price came to be around INR 18,000 crore, successful overpowering the bid by SpiceJet’s Ajay Singh for INR 15,100 crore.

2)     Tata Sons will now have 100% ownership in Air India along with complete stake in Air India Express (Air India’s international low-cost arm) and 50% stake in the ground handling joint venture. Further, Tata Sons will also own brands like Indian Airlines and Maharajah.

3)     Of INR 18,000 crores bid by Tata, 15,300 crores will be Air India’s debt component taken by Tata. Remaining 2,700 will be the cash paid to the government. 44,000 crores of remaining debt in Air India will be transferred to a special-purpose vehicle (SPV)

The Timeline

1)     The airline was bleeding cash since its merger with Indian airlines back in 2007 amounting to loss of INR 20 crore per day. With this, gradually, Air India started reeling under a mountain of debt amounting to INR 60,000 crore (2020)

2)     In 2019, Indian Government issued a de-facto approval for creation of SPV named Air India Assets Holding Ltd. Furthermore, they had decided to transfer the INR 29,464 crore of total 43,000 crore debt (2019) to the SPV. This led to 90% of total debt being government-guaranteed.

3)     Air India faced enormous turbulence since the initial decision by government to opt for a stake sale. In 2000, NDA Government led by Atal Bihari Vajpayee tried to sell a minority stake of 40%. However, rising resistance for privatization by trade unions led to this plan coming to an abrupt halt.

4)     Eventually, NDA Government hiked the stake sale to 76% in 2018 and to 100% in 2020, further inviting expression of interest from potential bidders

5)     Furthermore, in October 2020, Government relaxed limitations for buyers, providing them the discretion to fix the amount of Air India’s debt they wanted to absorb.

Way forward for Air India

1)     Currently, Tata Sons will own 84% share in Air Asia (Market share: 5.2%) and 51% ownership in Vistara (Market share: 8.3%). Combined with Air India’s market share of 13.2%, Tata can have strong strategic position in India’s airline industry with 27% market share, second in position to Indigo

2)     Tata Group will further seek to implement few measures in the airline including debt refinancing, negotiating high-cost vendor contracts, refurbish old aircrafts and set up an able leadership team to give Air India a strategic pathway. Tata Group has brought in TCS as technology partner to remodel the technological capabilities.

3)     However, concerns are still looming with Air India staff with respect to salary arrears, salary cuts and staff accommodations. Now, it’s for us to see the Tata Group’s response to these apprehensions.

* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

 

Chip Shortage: A New challenge to the automotive industry

I

nitially, in the spring of 2020, when COVID-19 pandemic swept across Europe and US, leading automotive players like General Motors, Ford Motor and Volkswagen took immediate measures to halt the production lines to being in tune with the receding demand. Forecasting a possible slowdown, carmakers cancelled all the chip orders which are usually required for driver assistance and navigation control systems. With this, semiconductor producers assigned their vacant production capacities to cater to other end markets like smartphones, laptops and other appliances. With Work-from-home and Learn-from-home models of operation gaining momentum in pandemic, it was evident that demands for smartphones and laptops had gained significant steam. Gradually, automotive industry also observed a reset in demand slowdown with pent-up demand and began to send in their orders to the chipmakers. With a gloomy future laying ahead, buyers started to stockpile the chips with rising uncertainties caused by US-China technology tussle.

This has put tremendous stress on the manufacturing capabilities of the semiconductor companies who are now unable to cater to the sudden rise in demand. Wafer fabrication plants are fine-tuned and are running 24 hours a day for 7 days a week. Setting up additional production lines is not easy as it requires entire year to commence operations and billions of dollars’ worth of investment. Besides, significant disruptions to the supply chain, fire in chip factory in Japan and halting of production due to winter in Texas, United States has further aggravated the issues. Currently, vendors are quoting lead times as long as 32 weeks for the delivery of chips, as per Andrew Feldman, CEO of a chip startup named Cerebras Systems.

Leading automotive companies are attempting to perform some serious damage control in order to cater to the global car demand. General Motors are building light duty full-size pickup trucks without the fuel management module. It has further extended production cuts to its three North American plants. Elon Musk has also introduced alternative chips to Tesla’s production capabilities. It has also considered rewriting the vehicle’s software to accommodate the alternates. The chip shortage is expected to wipe off USD 2 billion from Ford Motor’s 2021 profits. To keep the business afloat, Ford is also launching flagship F-15 pickup truck and Edge SUVs with absence of certain parts. However, chip shortage has led to significant price gains in the global used car market, also recording purchases equal to the new cars.

In case of the chip manufacturers, there lies an uphill task for them as well as they look to remodel and restructure their manufacturing processes to this ballooning demand. Taiwan Semiconductor Manufacturing Company, Limited (TSMC), a major player involved in production of up to 80% of chips worldwide, has announced an investment of USD 2.87 billion to set up additional production lines at its fabrication plant in Nanjing, China. Furthermore, Intel also has decided to allocate resources, particularly for automobile segment, which it had remained distant from until now. It has investment pipeline of USD 3.5 billion to expand its wafer fab in New Mexico, along with array of funds channeled to its plants in Arizona, Oregon, Ireland and Israel.

However, in future, buyers need to optimize their supply chain and operational efficiencies in order to avert a similar mishap going forward. Essentially, companies need to leverage on digital solutions like Big data, artificial intelligence and machine learning for efficient demand forecasting and production scheduling. NXP Semiconductors, a European chip maker is now working directly with automotive part suppliers like Bosch in order to understand future demand scenario. Buyers and sellers need to set up digital platforms in order to collaborate for seamless exchange of data including production schedules, order pipeline, demand forecasts, supply-chain data and many more.

This chip shortage, expected to snowball in 2022 as well, is a harbinger for companies to reinvent their procurement and production models to evade such aftermath in future. Data, being one of the strongest tools at their disposal should be analyzed to predict better outcomes. 

* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

India’s COVID-19 Update – April 2021

1)     The arrival of second wave of COVID-19 in India was duly expected but the momentum with which the wave has ravaged the country is beyond contemplation. The daily infection numbers are harrowing with peak of second wave shooting up by at least 250% of the peak last observed in September 2020. India alone accounts for almost 10% of the total COVID-19 infections at global level.

2)     The Government of India has pulled up its socks announcing lockdowns and mobility restrictions across different states. Further, the eligibility criteria for vaccination drive was also expanded to accommodate people above 18 years of age. However, with the current shortage observed at different vaccination centers, it will be quite a remarkable feat if India manages to pull it off effortlessly.

3)     Currently, medical infrastructure in India is only equipped to inoculate only 3% of the country’s population. India is able to vaccinate only 3 million people daily, which comes to 0.2% of the Indian population. With this speed, it is nearly impossible to inoculate entire country by November as previously assured by the Government

4)     Indian healthcare structures are crippled with mounting cases and hospitals are widely reporting shortage of patient beds and oxygen cylinders. There is significant amount of news pouring in of companies beefing up their oxygen production. However, main issue lies in providing the required logistical support. In 2019, India’s oxygen requirement was 700 metric tons per day. This figure eventually spiked to 2,800 metric tons during first wave in 2020. The second wave reported further spike in demand to the tune of 5,500 metric tons per day. Furthermore, an oxygen tanker can carry only up to 15 tons of oxygen. About 3 hours each are required for filling the tankers and transferring them to hospital’s storage units, apart from 24-36 hours required in-transit. Therefore, it is imperative that more tankers are added to existing portfolio to strengthen the logistics and cater to overwhelming demand.

5)     The Government has connected internationally with governments in United Kingdom and Germany for procurement of oxygen cylinders. They are also attempting to fast-track the regulatory controls for procuring the international approved vaccines.

6)     As we approach the end of April, the state governments should to stay clear of lockdown-infused solutions and instead come up with more creative approaches to curb the spread of virus. Micro-containment zones, rapid testing and efficient frictionless vaccination delivery can gradually lead to the peaking infection rates into a nose-dive.

 * The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

 

Unlocking India’s AI potential

 

The digital transformation has changed the way the business leaders look at company’s operations. With data being a strong back-bone of every decision made in corporate board-rooms, companies are striving towards achieving AI-powered data models to achieve the coveted strategic direction. Artificial Intelligence (AI), being a strong disruptive force in digital revolution, is a combination of technologies which are aimed to mimic highest level of human intelligence.  A study conducted by McKinsey showed that highest incorporation of AI was towards increasing revenues by optimizing inventory-management, pricing, promotions, demand forecasting and customer-service analytics. As a concept, artificial intelligence is not a modern-day concept. Greek, Chinese and Egyptians contemplated on inanimate objects coming to life as intelligent beings. However, the term ‘artificial intelligence’ was officially coined in 1956 during a conference at Dartmouth College in United States. The scientist John McCarthy opined that in future, human thinking abilities can be simulated by computer algorithms which like, human beings can learn based on their own experiences. This led to a revolutionary disruption as many technology companies and academic institutions across the globe invested their resources in building strong AI-powered programs. Eventually, AI started to feature in gaming, medical and research domains. Globally, there are several strides in field of AI with countries like China and United States channeling billions of dollars to fund research to sharpen their technological prowess.

To join this bandwagon, India’s think tank ‘NITI Aayog’ drafted a National AI strategy in 2018 to focus on unlocking opportunities in economy’s key focus areas. The panel has identified healthcare, agriculture, education and smart mobility to be key economic engines to remodel using latest AI tools. Having said that, implementation of AI programs can reach far beyond these sectors. With that, I will run through some sectors to highlight some potential opportunities for AI and developments achieved so far

Healthcare:

Healthcare in India is complex especially in rural and neglected corners of the country where the basic wellness facilities are denied due to a host of issues. India’s Ayushman Bharat initiative promises a healthcare insurance for secondary and tertiary hospitalization across wider coverage. There is strong opportunity to implement technology solutions to increase the healthcare coverage, by introducing digital medical records to be accessed remotely.  Deep machine learning algorithms can help in clear diagnosis and identify future outcome of diseases, leading to further prevention. Artificial intelligence, being what it is, can learn from the millions of patient case studies and sharpen its diagnostic abilities over time. In 2018, Microsoft and Apollo Hospitals had entered into a collaboration wherein Microsoft would provide the appropriate technological models to derive insights from Apollo’s patient data. As mentioned earlier, there is a strong shortage of medical professionals in rural areas and leveraging digital solutions can help in a robust disease management.

Agriculture:

Despite our strong efforts to move away from agri-based economy towards other industries, 60% of Indian population is involved in agriculture and allied activities. With this, every year, agricultural domain faces multiple issues including land degradation, deteriorating water tables, soil infertility and pest resistance. Hence, it is imperative to relook at this segment as a potential opportunity to bring in artificial intelligence and machine learning solutions.  Furthermore, startups are recommending robotics and drone-based solutions to analyze soil types and weather in order to run in under AI-ML models to derive actionable insights for the farmers. Use of technology can enable farmers better access to new farming techniques, insights, markets, appropriate credit and insurance. In 2019-20, Indian agri-based startups raised more than USD 1 billion through a total of 133 deals. An adequate support from the government can help more startups emerge within the ecosystem.

Education:

I have to admit that education is one of my personal favourites where I would love to see ground-breaking digital solutions for enhanced learning experience. Like major segments, majority of issues faced by India’s education landscape are focussed in rural areas. With an unavailability of adequate infrastructure, teachers are majorly faced with a heterogeneous group of students having variations in age and learning abilities. To add to this, Indian education system is heavily leaning on rote rather than on application. It is common knowledge that many students drop out due to unavailability of funds, poor educational infrastructure and unwillingness to learn. E-learning solutions have been an emerging trend in India but its reach in rural corners is questionable. AI may not completely replace teachers but it can be an enabler to manage a heterogenous group. The e-learning solutions equipped with strong statistical algorithms can help customize the learning and help student learn at their own comfortable pace. Statistics coupled with AI can also help predict outcomes for student drop-out rates, helping the e-learning solutions draft an alternative learning plan for students to follow. The AI-ML technology can also be used to create an interactive gamification experience for students to learn conceptually.

Smart Mobility:

Nowadays, India’s urban population needs smart mobility solutions to enable a convenient and faster transport mechanism. Transport is spine for India’s urban economic development and India needs strong solutions for an enhanced connectivity. Autonomous vehicles are something India is not ready for immediately. However, automotive companies can invest significantly in developing suite of autonomous technologies as a potential alternative for the future. These technologies, even though not implemented on immediate basis, can prove to be of an economic advantage to the country. Such technologies can act as a stage for further international partnerships with industry and academia. AI technology can also address the impending issues of traffic congestions and road fatalities by employing algorithms to divert the traffic in areas of heavy bottlenecking. Shared mobility being the new trend today can be an initiative for startups to come up with AI platforms which aid ride sharing and travelling in faster and cheaper manner

With the threat of coronavirus pandemic looming over businesses, it is essential for corporate and government to relook, remodel and restructure its digitalization initiatives. The Government has partnered with National e-Governance Division, Ministry of Electronics & IT and Intel India to roll-out a program for youth to act as a guiding force to develop an innovative tech mindset. The Union Ministry of Communication and Information Technology set the stage for young growth companies to showcase their AI-based platforms to the world. The challenge was termed as AI Solution Challenge, aimed for increasing the out-of-box thinking catering to key growth sectors of the economy. In October 2020, Telangana government locked synergies with International Institute of Information Technology, Hyderabad (IIIT-H), the Public Health Foundation of India (PHFI) and Intel India to launch Applied AI research center to develop AI-based use cases to solve population-scale issues. These are handful of initiatives which the government has brought to table to foster growth and collaboration in field of AI.

However, despite the throttle, there are several obstacles on the journey to a holistic AI implementation across target segments. Currently, there are handful of institutes which are specialist in developing AI platform. The Government needs to identify the potential academic institutions and energize them with appropriate funding, partnerships and degrees of freedom to experiment on AI algorithms. Also, for a successful deployment of AI across sectors, we need a robust database of raw data. Currently, data collection mechanism in our country is extremely poor and the Government needs to take proper steps to enable robust aggregation of live data. That said, even if we have to assume a smooth implementation, the fear of unknown is expected to persist with AI expected to take over several employment opportunities. Eventually, this will definitely demand the employees to upgrade their skillsets and capabilities. 

Ultimately, it’s just the question of are we ready yet?

 

 

 * The opinions expressed in the article are personal and do not represent the opinions of the organization I work for *