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  • Paytm's Stock Soars: A Phoenix Rising from the Ashes?

    Paytm's journey in India's fintech gold rush has been a thrill ride. Once a mobile wallet rockstar, it's grappled with regulatory roadblocks, creating a narrative as captivating as it is complex.  But like a phoenix from the ashes, Paytm's recent partnership with Samsung and its international ventures have sparked a fire of hope, sending its stock on a vertical climb. Buckle up as we dissect this potential phoenix tale and see if Paytm can truly rise again. From Humble Beginnings to Soaring Heights Paytm's journey began in 2010 when it introduced a mobile wallet that revolutionized the way Indians made payments. Cash was dethroned by the convenience and security of a mobile wallet. This digital alternative resonated with the Indian public, especially after the demonetization of 2016 sent a shockwave through the traditional payment system. Paytm, perfectly positioned to ride this wave, witnessed a user base explosion - a staggering 781% increase in just one year. In 2014, they had a modest 1.18 Crore (11.8 million) users, a number that skyrocketed to a phenomenal 10.4 Crore (104 million) by 2015. But Paytm's vision wasn't limited to smartphones. By strategically partnering with Kirana stores they ensured their technology reached every corner of the country, seamlessly integrating digital payments into the everyday lives of millions. It wasn't just about convenience; it was about transforming a nation's financial landscape, one transaction at a time. A Reality Check But, Paytm's party wasn't all cake and rainbows. The Indian fintech market turned into a battle royale, with established players like PhonePe and Google Pay throwing punches, not to mention new challengers like Amazon Pay entering the ring. Paytm's initial strategy of throwing virtual confetti (discounts and cashback) to win over customers started to show cracks. Analysts, like Macquarie Research, questioned Paytm's business plan, saying it needed more focus and direction. Furthermore, Paytm's much-anticipated IPO in 2021 fell short of expectations. The stock price took a nosedive on day one, dropping a whopping 27%, shattering investor confidence like a dropped phone. To make matters worse, there were rumours of a data leak in their e-commerce venture, Paytm Mall, which wasn't exactly the best look. Additionally, unsuccessful attempts to diversify into insurance and other sectors added to Paytm's woes. The Regulatory Hammer The most significant blow came in 2024 when Paytm's meteoric rise in the Indian fintech industry screeched to a halt. The central bank, the Reserve Bank of India (RBI), delivered a regulatory uppercut, citing non-compliance with KYC norms and other financial regulations. This wasn't a playful sparring match; it was a knockout punch to investor confidence. Paytm's stock price took a 20% nosedive in a single day, shaving billions off its market value. The RBI's sanctions were akin to clipping Paytm's wings - restrictions on new deposits and limitations on existing services like fund transfers and bill payments threatened to ground their growth trajectory. Partnering for Survival In the face of the crippling RBI sanctions, Paytm did not crumble entirely. The company displayed remarkable agility by forging strategic partnerships with several established financial institutions. This crucial move allowed Paytm to continue offering essential services like UPI (Unified Payments Interface) transactions to its vast user base. Paytm joined hands with prominent banks like Yes Bank, Axis Bank, HDFC Bank, and the State Bank of India (SBI). These partnerships enabled Paytm to leverage the partner banks' licenses for processing UPI transactions. Notably, users with the "@paytm" handle were migrated to one of these partner banks, ensuring a seamless transition and minimizing disruption for customers. This strategic alliance served as a lifeline for Paytm, allowing it to maintain its core functionality while addressing the RBI's compliance concerns. However, this partnership signifies a shift in Paytm's operational model. Previously, Paytm Payments Bank acted as the primary channel for UPI transactions. Now, with the RBI sanctions, Paytm relies on its partner banks for transaction processing. This highlights the crucial role of regulatory compliance and the importance of maintaining a healthy relationship with financial authorities. Strategic Partnerships and Expansion Plans: A Beacon of Hope? In a ray of sunshine for Paytm, a recent collaboration with Samsung brings a fresh wave of optimism. This strategic partnership allows users to seamlessly book flights, buses, movie tickets, and event bookings directly through the Samsung Wallet, powered by Paytm's robust platform.  This innovative move taps into Samsung's massive user base in India, exceeding 50 million strong, potentially opening doors to a significant new audience for Paytm. Furthermore, Paytm has set its sights on international expansion. The company is aiming to become your all-in-one travel pit crew. By partnering with giants like Wego, Skyscanner, and Google Flights, they're making a strategic play to grab a slice of India's booming travel and tourism sector, projected to hit a staggering $130.5 billion by 2025. Additionally, Paytm is reportedly in talks with other international flight operators like Cambodia Angkor Air, SalamAir, and FlyDubai, further solidifying its expansion plans. Financial Viability and the Road Ahead Paytm's comeback melody is a three-part harmony: outmaneuvering rivals, staying on the right side of regulations, and proving their financial prowess. While the recent partnerships with Samsung and travel aggregators offer promising avenues for growth, their long-term impact on Paytm's revenue stream remains to be seen. The company needs to explore ways to monetize these partnerships effectively, potentially through transaction fees or commission structures. Furthermore, regaining investor confidence is crucial. Paytm's IPO in 2021 raised ₹18,300 crore ($2.5 billion), a significant sum that can fuel its expansion plans. However, the company needs to demonstrate a clear path to profitability to justify its current valuation and attract further investments. This might involve diversifying its revenue streams beyond just cashback offers and exploring possibilities like subscription-based services or value-added features within its app. Regulatory Compliance Maintaining regulatory compliance remains paramount for Paytm's future success. The RBI's recent measures are a wake-up call for the fintech industry, a bold underline reminding everyone that financial regulations are the cornerstones of trust. Paytm must invest in robust compliance measures to ensure KYC norms are strictly followed and implement strong anti-money laundering (AML) practices to regain the RBI's trust. A Phoenix in the Making? Paytm's recent stock price surge reflects cautious optimism about its potential comeback. The strategic partnerships with Samsung and travel aggregators, coupled with its international expansion plans, offer promising avenues for growth. However, the road to recovery remains arduous. Paytm needs to demonstrate financial viability, rebuild investor confidence, and most importantly, ensure unwavering compliance with regulations. Only by addressing these challenges can Paytm truly rise from the ashes and reclaim its position as a leader in India's dynamic fintech landscape. The next few months will be a crucible, forging Paytm's future - will it emerge triumphant, or will the embers of its ambition fade away? Author: Alok Kumar Pandey Illustration: Cheruvu Sai Kartikeya Sources • Statista • Business Today • Mint • Business Insider

  • THE FANTASY STOCK FIASCO

    In a virtual twist to buy low, sell high, SEBI’s ban on fantasy stock trading platforms has left traders wondering, Was it all just a fantasy? In the labyrinthine world of finance, where fortune rises and falls in the blink of an eye, there exists a whimsical corner known as fantasy stocks. We trade in stock, hoping it will soar in a few days. Instead, it plummets, leaving us in a financial free fall. Not only do we lose money, but also the broker fees, stock exchange fees, taxes, and other charges. It’s a roller coaster ride where the financial thrill quickly becomes a nightmare. But what if we could enjoy the thrills and spills of Wall Street without fearing financial ruin? That’s what fantasy stocks are: the markets can be played with monopoly money and the bragging rights of a top trader- all without putting a dent in our bank account. Fantasy Stock: Financial Funland Fantasy Stocks offer a delightful twist on stock trading allowing us to dabble in real stocks from exchanges like NSE and BSE. But here instead of worrying about the market fluctuations, it will enable strategizing in a risk-free environment. It provides an opportunity to speculate, plan, and compete with friends and strangers without the stomach-churning risk. It involves users creating fictional portfolios of stocks and competing with other users in a contest. Users pay an entry fee to enter these contests, and the best-performing portfolio creators win the cash prizes. The point system that ranks the performance of the fictional portfolios created by users is tied to the actual performance on the stock exchange. Typically, these games or leagues do not involve trading in any actual shares or the right to sell or purchase any actual shares but the performance of the portfolio tracks the price movements of the shares traded on the floor of the stock exchange. It is basically financial freedom in a virtual world- where the only real loss is a nominal entry fee and the potential rewards include everything from shiny gadgets to dream cars. All we need to do is to predict if the price of the stock will boom or fall in the next 60 seconds and the only loss we bear if the trade doesn’t go our way is the nominal entry fee. It provides a haven for exploration. The Fantasy Stock Frenzy In India, multiple online stock gaming platforms allow users to play fantasy stock games. Key features include live data feeds, social networking with fellow traders, and leaderboards showcasing the top performer of the week. Here’s no dealing in actual shares but the virtual platform dances to the beat of real-world stock movements. Think of it like Wall Street without the pressure of the margin calls! India’s fantasy gaming industry is now a colossal INR 34,000 crore behemoth. This virtual playground now entertains 13 crore registered users. Unsurprisingly, cricket is the undisputed champion here, pulling in a hefty 85% of the revenue. Meanwhile, football, the perennial underdog secures a modest 6.32% pie. The future growth looks more fantastical, with Federation of Indian Fantasy Sports(FIFS) projecting the industry to skyrocket to INR 1,65,000 by 2025. The industry is on a winning streak, not planning to fall. SEBI’s Data Dilemma But when the fantasy stock experts were revelling in their fantasy virtual street exploits, all the fun screeched to a halt. In a twist straight out of the courtroom drama, the Securities and Exchange Board of India (SEBI) decided to pull the plug on fantasy trading stock platforms. So what drove SEBI to rain on this financial parade? These virtual trading apps use real-time data from heavyweights like the NSE and the BSE, to ensure that their trading platforms feel as authentic as the real ones. Also, exchanges gather revenue through primarily transaction fees on executed trades and subscription fees to access the data. Interference of the third-party platforms by using the data to host games,not only disrupts revenue streams but also flouts SEBI’s rules and regulations. SEBI rolled out a circular on May 27, 2024, aiming at stock exchanges, depositories, and clearing corporations. It barred them from sharing real-time data with outsiders unless it was for regulatory compliance or maintaining market decorum. To spill the beans, intermediaries must sign solemn agreements, justifying compliance with the guidelines. However, to educate investors and raise investor awareness, they can disseminate the data with a one-day delay. The norms are expected to come into effect on June 23, 2024. This isn’t an out-of-the-blue decision made by SEBI. It had an eye on these platforms a long time ago. Back in 2016, an investigation into Raj Kundra’s operations revealed a murky world of data exploitation for gaming purposes, a practice rebuked by SEBI. Despite several warnings against such actions, the allure of easy gain led to new gaming platforms exchanging data from websites. Last year, amidst market euphoria, SEBI ordered influencer Ravindra Bharti and his wife to pay over Rs 12 crore a penalty after promising 1000 percent returns to the investors over an investment, ordering them to cease investment advisory services. The incidents tampered with the investor’s confidence in the security market. These games prove to be detrimental to users. While these games earn money through increased user engagement, SEBI does not regulate them, dodging the need for disclaimers about real-world trading. Users might mistake their virtual success for mastery in Wall Street, only to crash while trading actual stocks. That’s why SEBI wants to pull the plug on their real-time data joyride. Regulatory Ripples The immediate aftermath of the decision saw a flurry of reactions. Users of the platforms took to social media to express their frustration and disappointment. Fantasy Stock trading had become a beloved hobby for many, and the ban felt like a personal upfront. Platform operators, on the other hand, were swift in their responses, some tried to criticize the ruling, while others started planning to pivot their business models. The regulations targeted trading platforms like Stockpe, Trading Leagues, and Bullspree, which allow users to gamble in these stimulated markets for monetary rewards, all from the safety of their screens. Stock pe, for instance, caters to participants aged 18-24, providing them with a gateway into the world of trading stocks while earning commissions from tournament participants. TradingLeagues recently showcased the sector’s burgeoning appeal by securing $3.5 million in pre-series, funding led by Leo Capital. However, with SEBI’s new rules, these once profitable sectors are now feeling the pinch, worrying about what the future holds. Fantasy Future The future of virtual stock games in India is now up in the air. SEBI's ban underscores the regulatory challenges faced by these platforms. Unless they comply and adapt to these regulations, their future remains bleak. Developers will need to modify their apps to comply with the SEBI’s regulations. The ban also raises questions about investor confidence in such platforms. SEBI's move reflects concerns over misleading users into believing that success in fantasy trading translates to real-world investing expertise. Clear disclaimers and educational efforts could be necessary if these platforms attempt a comeback in the future. Though according to SEBI’s guidelines, the price data can be used by educational fantasy stock gaming platforms that operate for free to raise market awareness. While they can still access data,they will be able to get it one day later. SEBI’s new regulations not only signal the end of paid virtual fantasy stock gaming platforms but also cast a shadow over free educational ones. This shift threatens to snuff out a crucial,engaging avenue for learning about the stock market,leaving both aspiring investors and educators in hunch. While these virtual platforms are a way to learn about the market functioning, SEBI is now playing the role of a stern parent, mainly concerned with safeguarding the investors. This would surely push the developers to create more educational and responsible financial experiences- Less casinos, More classrooms! Author: Neha Agarwal Illustration : Cheruvu Sai Kartikeya Sources The Indian Express Times of India The Economic Times Business Today Finshots

  • CRACKING THE CODE: THE TALE OF FACEBOOK’S TRIUMPH

    Unveiling The Pioneer: The Good Old Days We often think about Facebook, Instagram or Twitter when we talk about a social networking platform. Still, it was not the same for people 20 years ago as then the social networking sector was dominated by one of the earliest and most influential platforms- MySpace. MySpace was launched in 2003 to offer a virtual platform for social networking, self-expression, and discovering music. MySpace played a vital role in shaping the early landscape of online social interaction by revolutionising the way people interacted with each other through the internet. In the initial years, MySpace gained exponential growth as it was able to attract millions of users with a keen interest in creating personalised profiles, finding friends, discovering new music, and following their favourite artists. Its key defining features include customizable profiles which allow users a high degree of personalization for creating their profiles. Music integration, “Top 8 friends” etc. were among the other key features offered by MySpace. The Inaction and demise of MySpace Undoubtedly, MySpace was successful as a start-up gaining huge valuation from investors, large appeal from users, and rapid traction for growth. However, things changed as time passed and a competitor emerged - Facebook. By the late 2000s, Facebook’s user base skyrocketed, surpassing MySpace, which was already stagnated and declining in popularity, active users, and engagement. There were several factors leading to its downfall which include both the technical and the managerial fields. Firstly, the high degree of customization which attracted many users had a problem in itself, it turned out to be cluttered and led to an inconsistent user experience deviating from the fundamental principle of simplicity. Next, it has converged most of its focus on music, attracting and retaining a smaller user base. There were also many security and privacy concerns related to MySpace which included issues related to fake accounts and spam. Though these all were significant factors, the one main factor was the management of MySpace, which was under the control of NewsCorporation which had appointed a highly qualified team to manage MySpace which in turn led to rigidity due to the execution of strictly laid down plans instead of responding effectively to the market trends and changes. How did Facebook create its “Space”? The early winner showed up to be a failure, but how did it all go off-base? After the acquisition by the media giant, NewsCorportion, MySpace was given a professional viewpoint whereas Facebook was seeking after its travel through a few college undergrads and it certainly backfired the former. While the market decided where the business ought to go for Facebook, the “professional outlook” of MySpace reflected a fallacy of modern management that some way or another accepts that MBA grads would continuously make the business better off with their industry information, but the readiness to make mistakes by eager college undergrads demonstrated to be leagues superior than making complex excel calculations and relying on numbers. Facebook was one of the first social media stages to insist on real names of accounts and people, unlike its counterpart, never bothered to take the initiative and rule out the creepiness of fake names. MySpace's initial victory was built on the preface of customisation, allowing clients to customise their profiles with background pictures, music players, and unique formats. But as Facebook got prevalent, clients started floating towards more oversimplified and easy-to-use interfacing over intemperate customisation. In January 2008, many individuals got together to announce the 30th ‘International Delete Your MySpace Account Day’, inciting others to urge freedom of their Myspace accounts and connect to Facebook instead. The cluttered advertisements on website pages may make anybody feel unpleasant and that’s precisely what MySpace did, indeed if they did not expect to, whereas Facebook advertised a clean interface and didn’t have ads that would make the page horrible. Facebook composed the script of MySpace’s downfall and uprooted MySpace from 2008 to 2013 essentially as MySpace could do nothing to heal their woes. (Image: The MySpace page cluttered with ads) The “Meteoric” Rise of Facebook From its humble beginnings on the Harvard campus to a tech giant with 2.1 billion daily active users, Facebook has come a long way. Defying the prominent business mantra “first mover advantage”, Facebook put up a masterclass of “late mover advantage” to shine like a star in the competitive landscape of social media networks. Earlier social media networks provided Facebook with a list of blunders to avoid. Supervised growth added drastically to the success of Facebook as the clean and robust technological infrastructure adding value to the user experience came in handy to avoid the unattractiveness of the competitors. MySpace was eating dust after 2008 and losing its major market share to Facebook, thanks to the smart engineers who worked day and night to innovate, not just for the sake of it, but for the users to experience convenience like never before and get used to it. Acquiring Instagram in 2012 and WhatsApp 2 years later put Facebook in a spot where there was no looking back and the masterclass thrived further when it allowed live video streams in 2016 and these chronological events - all in the gap of 2 years intensified the way Facebook flourished. Creating a “Facebook Watch” section allowing the users to watch video content, was proven to be a significant bite of Facebook’s success meal and allowed it to thrive further. To sum things up, “MySpace was defeated by White Space The blue took over, inserting the internet craze, Where others are grappling for a spot in the social palace, Facebook's king-sized masterclass still reigns” Authors : Md Imran and Sai Advaith Kandi Illustrator: Japneet Sources: Forbes Telegraph Convince and Convert

  • Breaking Down BYJUs' Financial Crisis

    Fall in love with learning or learning about falling? BYJUs, the Icarus of the Indian ed-tech ecosystem that flew too high, used to be at the forefront of India's educational technology industry. It started small but grew incredibly fast, becoming a symbol of innovation and entrepreneurial drive. Their story captured the imagination of many, promising to revolutionise education. But just like any story of success, BYJUs took a sharp turn and landed in a deep financial crisis that shook the entire ed-tech world. Let's explore what went wrong and break down the reasons behind this downfall. A Look Back at BYJU's Golden Age Let's rewind the clock to a time when BYJUs was the undisputed champion of the ed-tech empire. Founded by Byju Raveendran, the company's journey began in the quaint village of Kerala, where a passion for teaching mathematics ignited a spark of innovation. From humble origins, BYJUs swiftly rose to prominence, leveraging exceptional teaching methodologies to attract millions of subscribers. With strategic investments and high-profile endorsements,  BYJUs emerged as unicorns, signalling a new era in digital education. The years between 2015 and 2021 witnessed an unprecedented surge in valuation, propelling BYJUs to the forefront of India's startup ecosystem. Yet, amidst the applause and admiration, ominous clouds began to gather on the horizon. The Lapses Disclosed: How BYJUs It’s Way! The downfall of BYJUs, once respected as a trailblazer in the field of educational technology, can be traced back to a series of mistakes in strategy that shifted its attention from teaching methods to aggressive sales tactics. Established in 2011 by Byju Raveendran and Divya Gokulnath, BYJUs initially disrupted the landscape of online learning with its innovative platforms tailored for learners spanning from early childhood to professional development. However, the company's departure from its educational mission towards relentless marketing, alongside dubious accounting practices, signalled the beginning of its downfall. Despite initial triumphs and a global footprint, BYJUs encountered setbacks as it prioritised sales volume over the delivery of educational excellence, leading to disappointment among its user base. A pivotal factor contributing to BYJUs downfall was its adoption of aggressive sales strategies. They got really pushy, trying to pressure parents and teachers into buying their products and services. Moreover, the company's financial troubles, including accusations of hiding financial information and failing to repay loans, made its situation even worse. The departure of key board members and auditors, coupled with significant workforce reductions, underscored the company's struggle to regain stability. Despite once commanding a valuation of $22 billion and being hailed as a frontrunner in EdTech, BYJUs rapid expansion without adequate financial governance ultimately precipitated its demise, underscoring the imperative of sustainable growth and ethical business practices in the EdTech sector. BYJUs's rapid rise in the Indian educational technology landscape, from its humble beginnings to a leading industry player, seemed like a typical modern success story. However, underneath its surface of fast growth from 2015 to 2021, lay the beginnings of its eventual failure. Despite the excitement about its growth, fueled by big investments and global expansion, BYJUs aggressive actions started to come apart. Expensive marketing efforts and notable acquisitions, like WhiteHat Junior and the billion-dollar acquisition of Aakash, stretched its finances and made stakeholders uncertain. Additionally, the weight of large debts, including a massive $12 billion loan, made BYJUs’s financial situation worse, leading to its eventual downfall. BYJU’s Present Performance Palette BYJUs, is facing a legal battle with four investors who have accused the company of "oppression and mismanagement." These investors filed a lawsuit with the National Company Law Tribunal (NCLT) seeking a stay on the company's $200 million rights issue, alleging it was illegal and lacked transparency. Despite ongoing financial struggles, BYJUs received some temporary relief, with the National Company Law Tribunal (NCLT) allowing the company to proceed with its rights issue, a potential source of additional capital. However, the situation remains uncertain, as the NCLT reserved judgment on interim orders requested by four investors in their lawsuit alleging "oppression and mismanagement." Both parties must now submit written arguments and await the NCLT's April hearing. BYJUs also face separate insolvency petitions from entities like the BCCI and US lenders, further complicating their situation. This mess of lawsuits, coupled with financial difficulties,  hangs over BYJUs future like a dark cloud and leaves us with a question: Can they fight their way out of these problems and get back on track? The Restructuring Journey In response to increasing financial challenges and regulatory scrutiny, BYJUs has undertaken a significant journey of restructuring and cost-cutting measures aimed at overcoming difficult times. A pivotal milestone in this journey has been the resolution with leading creditors, wherein BYJUs negotiated terms to avert loan acceleration and enforcement actions, opting instead to pay the interest component upfront and defer repayment over instalments. Concurrently, the company has implemented aggressive cost-cutting initiatives, including employee layoffs and office space optimisation, symbolised by the vacating of significant square footage at Knowledge Park and the closure of certain offices in Bengaluru. These measures underscore BYJUs commitment to streamlining operations, enhancing efficiency, and alleviating immediate financial pressures while also positioning the company for sustainable growth in the long term. Amidst these restructuring efforts, BYJUs has prioritised transparent communication and stakeholder engagement to reassure investors, employees, and the media about its strategic direction and commitment to recovery. Proactive engagement with stakeholders, coupled with regular updates on restructuring initiatives, aims to foster trust and credibility in Byjus' resilience and forward-thinking approach. As the company charts its path forward, guided by a vision of sustainable growth and long-term viability, strategic partnerships and a culture of innovation will play instrumental roles in shaping its future direction. In dealing with the complexities of its restructuring journey. Nuggets of Insights from the Incident The BYJUs incident, involving allegations of mismanagement, aggressive sales tactics, and financial concerns, has several potential lessons to be learned. The one thing that easily comes to our mind when we start to ponder what went wrong with BYJUs is definitely its shady sales tactics. Unethical business practices must be avoided at all costs. Building trust through ethical sales tactics and responsible financial management is crucial for its long-term success. Implementing robust governance structures and ensuring regulatory compliance can prevent potential legal and reputational risks for the company. This incident has awakened the startup ecosystem to be more aware and empathetic of its strategies. The ed-tech sector may face heightened scrutiny regarding its business practices from investors, regulators, and consumers. Companies may need to prioritise ethical sales and marketing strategies to maintain consumer trust and to help them believe in their company again. Sustainable financial management and responsible debt practices may become crucial for maintaining potential investments. Conclusion In the words of Warren Buffet, "It takes 20 years to build a business but 5 minutes to ruin it," a sentiment that rings true in BYJU's journey. Once valued as India's most valuable startup at $22 billion, it now stands at a mere $3 billion. However, the rapid rise and fall of BYJUs serve as a poignant reminder of the necessity for ethical practices, responsible growth, and robust governance in the EdTech industry and beyond. The journey of BYJUs, from innovation to uncertainty, stands as a cautionary tale within India's ed-tech landscape. Once hailed as a symbol of innovation and success, BYJUs experienced a dramatic downturn characterised by financial crises and legal disputes. Its fall underscores the vital importance of ethical business practices and sustainable growth strategies in the startup ecosystem. As BYJUs initiates restructuring efforts and faces legal challenges, the incident underscores the critical need for transparency, responsible financial management, and adherence to regulatory compliance. Sources Fincash Moneycontrol The Economic Times Authors: Manan Alagh and Mayank Kumar Illustration: Prateek

  • PAYTM'S COMPLIANCE CONUNDRUM: THE SANCTION SAGA

    Paytm vs. Regulations: Will it Fly Again? The Rise of the Wallet Wizard You might have paid your kirane wala and heard "Paytm karo", satisfying isn't it? Transforming an economy that solely relied on cash to an economy that started dealing in cashless transactions more often, Paytm emerged as a game changer. Paytm, initially founded as a mobile wallet-based startup, commenced its journey in 2010. Cheered by many, the prominent fintech startup has done much more to celebrate than just mere numbers. Nonetheless, it is to be acknowledged that Paytm has hunted significant glory across India recently. The master plan kicked things off with people paying for bills and recharges. The user base of Paytm showed a meteoric rise from 1.18 Crores to 10.4 Crores recording a significant 781% growth from August 2014 to the same month in 2015. This performance was owed to the introduction of its own mobile wallet and collaboration with the heart of retail grocery purchase – The Kirana Stores. The seamless integration of technology into payments whispered an easy-to-understand and convenient payment system into the ears of Indians. The revolutionary emergence didn’t stop there. Rather it intensified further when the Indian government made 500 and 1000 RS notes cease as legal tenders and called for digitalization of the economy in one way or another. This shift made Paytm the go-to platform to support Indian payments’ digitalization. Let alone looking back, Paytm moved forward aggressively with its compelling marketing strategies for tier 2 and 3 cities. The infusion of Unified digital payments (UPI) by the Indian government in 2016 and the acquisition of a license to operate as a full-fledged bank in 2021 further immersed the fintech giant in success. Cracks in the Facade Most of today’s Indian markets are fiercely competitive and the Indian fintech market is no different with major competitors like PhonePe, Google Pay, and Amazon Pay along with new entrants hindering Paytm’s business objectives while vying for market share. Paytm’s initial excitement started to wear off over time due to the new entrants offering lucrative offers to acquire customers. Many question Paytm over the unsustainability of its business model, arguing that it relies heavily on discounts and cashback offers, eventually questioning the long-term profitability of the adorned startup with Macquarie research report going so far as saying  ”Paytm’s business model lacks direction and focus”. On top of that, Warren Buffet’s only Indian investment didn’t live up to the hype it had when it underwent the IPO listing. The One97 Communications subsidiary was alleged to be overpriced at the same time. The expectations of the IPO soaring on the initial day of listing were hit when its opening price fell apart and recorded a 27% decrease on the opening day. Furthermore, the Paytm Mall, the e-commerce diversification of Paytm, had been allegedly involved in a major data breach in 2018 on 30 August. Not only this, Paytm Mall was never found good enough to be profitable as it crashed heavily on the front of valuation as it curtailed from $3 billion in 2019 to $13 Million. A forgettable journey for Paytm, isn’t it? Unfortunately, the attempt to mark a significant presence in the insurance sector was found to be a vain attempt. The unsuccessful diversifications into new segments along with frequent regulatory blows added to the woes of the pioneer in mobile payments apps. The Regulatory Hammer Blow The Reserve Bank of India wielded its regulatory hammer with precision, delivering a crippling blow to Paytm Payments Bank. The fallout from this action reverberated through the financial ecosystem, leaving scars on growth prospects and investor sentiment. The company’s stock plummeted by 20% in one day. This sharp decline wiped out approximately ₹609 per share, erasing around $1.2 billion in value from the company It all started in 2019 when the Office of Banking Ombudsman (a body created by the RBI to take care of the banking complaints of the general public in India) issued a show-cause notice for Paytm Payments Bank’s failure to monitor a certain account maintained with it that had shown a sudden increase in the velocity of daily transactions involving immediate transfer to other banks. These actions were found to be in violation of RBI’s provisions on KYC norms. In July 2021, the central bank issued a show-cause notice to Paytm for submitting false information about the transfer of an operating unit from One 97 Communications to Paytm. By October the same year, Paytm was charged a ₹1 crore penalty for contravention of the Payment and Settlement Systems Act, 2007. From the RBI’s point of view, a row of red flags was popping up: Paytm did not monitor payout transactions or carry out risk profiling of entities availing those services. In several cases, the regulatory ceiling of end-of-day balance in customer advance accounts was breached. The banking regulator also found that Paytm Payments Bank had reported a cyber security incident late, and had failed to implement device-binding control measures related to “SMS delivery receipt check”. In October 2023, another penalty of Rs.5.93 crore was imposed on the payments bank after the RBI found several non-compliances—once again highlighting the bank’s failures around the identification of account owners. While reports pointed to money laundering concerns, Paytm and its management vociferously denied any such violation. However, the final blow came in 2024. The Comprehensive System Audit report, coupled with compliance validation by external auditors, exposed glaring lapses. Paytm’s transgressions ranged from failing to identify beneficial owners to breaching regulatory balance limits. The RBI’s patience had worn thin, and it acted decisively. Paytm’s Stock price falling by 20% on the same day RBI issued the notice. During their deposit drought, the bank was prohibited from accepting further deposits or top-ups in various customer channels, including accounts, wallets, FASTags, and NCMC cards. Although customers retained the ability to withdraw or utilize their balances without constraints, the once-bustling banking services of Paytm came to a grinding halt with the suspension of fund transfers, Bharat bill payment operating unit (BBPOU), and UPI facilities. “The bigger issue is that Paytm has not been on the good books of the regulator and going forward, their lending partners also could possibly re-look at the relationships,” Macquarie analysts wrote after the RBI’s action against Paytm Payments Bank. Paytm, once a fintech disruptor, faced a seismic impact. Its growth stalled, and investor confidence wavered. We cross fingers as India asks, Can it regain trust? Is profitability still possible? Reflecting on a Larger Problem In the aftermath of the Paytm crisis, several key players come into focus. The Securities and Exchange Board of India (SEBI) appears sidelined—its hands wringing as an ineffective bystander. SEBI played no role in determining the IPO pricing or mitigating the stock’s subsequent hammering. Meanwhile, venture capital firms continue to wield immense power, often valuing businesses at staggering multiples. Paytm’s primary market debut, at 27 times enterprise value or gross profit for fiscal 2024, exemplifies this trend. Amidst this turmoil, India’s entrepreneurial ecosystem takes center stage. Start-up founders petition RBI Governor Shaktikanta Das and Finance Minister Nirmala Sitharaman, urging a reconsideration of the “proportionality of restrictions” on Paytm. Their plea underscores the broader impact on the payments bank, the fintech landscape, and the economy at large. With the RBI's sanctions worsening the woes, the fintech giant seeks remedy amidst the proliferation of doubt. One hopes, for the sake of Paytm’s depositors, investors, and users, that it is now time to do what is right rather than do what is braveThe rise and fall of Paytm serves as a cautionary tale within the rapidly evolving fintech sector. Its initial success was undeniable, but a series of missteps, combined with increased competition and regulatory scrutiny, have cast a shadow over its future. The RBI's actions send a clear message that compliance and sound financial practices are paramount, even for innovative disruptors. Whether Paytm can regain trust, navigate regulatory hurdles, and chart a path to sustainable profitability is a question that will define its future, and potentially shape the trajectory of the broader Indian fintech landscape. Authors : Sachkeerat Singh and Md Imran Illustrator: Kumari Janawi Sources: Verdict The Economic Times Linkedin

  • Spotify: From Dusty Records to Shiny Wraps

    Imagine that feeling of ripping open a fresh CD or hearing that satisfying snap from a record, it must have been pretty cool. But let's be real, there was kind of a dark side to it, right? You were stuck with whatever the record companies decided you could have, like some kind of musical dictator. The whole industry felt locked down, tight as a drum. Owning an album was like a trophy, proof you were a true fan, but it wasn't easy for everyone to get their hands on them. This amazing music, trapped in plastic and cardboard, felt miles away for some, like a world you couldn't quite reach. Finding new stuff, and exploring different sounds, all of that was basically controlled by the industry, leaving us music lovers craving something more, something freer. While physical formats offered tangible ownership, convenience came at a premium, and accessibility struggled to keep pace. As piracy chipped away at profits, the industry faced a stark choice: adapt or fade into irrelevance. Little did anyone know, a digital revolution was brewing, ready to rewrite the melody of music forever. A Familiar, Yet Emerging Tune In 2008, something game-changing happened: Spotify. It was like CDs got a digital makeover, a breath of fresh air for music lovers. Forget those lame radio stations or cheesy pre-made playlists, Spotify was like handing you the mic – millions of songs, whenever you wanted, just a click away. It was a total revolution, promising music that was both easy to get and super convenient. But the question was, would this new way of listening play nice with the old music industry or would it be like a total discord - throwing everything into chaos? Hit play, because this next chapter's gonna be a real banger. Before Spotify's 2008 debut, the music industry resembled a well-used vinyl record – familiar, comfortable, yet resistant to change. A Digital Disruption So, Spotify was ready to take things to the next level. Unlike other music apps that flopped, Spotify clicked with listeners. Its unbeatable convenience, affordability, and vast music library made it an irresistible proposition. Remember Napster and Rhapsody? Yeah, they tried to shake things up, but they just weren't legal or user-friendly enough. Spotify wasn't just another online store selling tunes, it was a musical innovation. It was like three awesome things rolled into one: on-demand streaming, legal licensing, and a freemium model that everyone could dig. Millions of people went from listening to pre-made playlists that felt like cages to creating their own musical masterpieces. It was like a sonic revolution, with everyone contributing to a giant, global chorus. This symphony was conducted by fancy algorithms that somehow knew exactly what kind of music you were feeling, which was quite impressive. Analysing Tunes And Echoes Spotify's arrival wasn't just a click in the music industry's story; it sparked a revolution in music. Spotify proved to be a powerful weapon against piracy, offering a legal and convenient alternative to illegal downloads. In addition, its intelligent algorithms and curated playlists opened up the world of music discovery, helping indie artists reach new audiences. Although individual subscriptions on Spotify were inexpensive, the platform's extensive user base translated to substantial income for the music industry, contributing to its growth. But it wasn't all melodic harmonies and euphoric beats. Some artists felt they had been pinched by the low royalties per stream, raising questions about fair compensation. There were concerns about the growing power of streaming platforms to dictate content and influence what listeners listened to. Since algorithms tended to favour chart-toppers, there were chances that lesser-known genres and artists were lost in the shuffle of popularity playlists. The Spotify Symphony Grows Since day one, Spotify has been hitting it out of the park. It started as a small thing, but it totally blew up and now everyone uses it. With over 551 million users, it's no surprise Spotify changed the music game forever. Streaming, largely driven by Spotify's success, is now king, raking in over 73% of all music money. But it's not just about convenience anymore. Spotify changed how we listen to music, how we find new stuff, and how we connect with it. It's like a whole new way of experiencing music, and it's here to stay. Harmonising Perspectives Spotify's journey echoes a timeless lesson: adapt or fade. They exploded onto the scene with their freemium model, totally changing the music game. Everyone had access to tons of music, and even artists got a major boost. But a jarring note has emerged. Remember the joy of rewinding your favourite song or shuffling your own playlist? Recently, Spotify hit a sour note by restricting these features for free users. No more rewinding, limited song shuffling, and goodbye to endless queues. This move sparked an outcry, raising questions about Spotify's commitment to accessibility and user preferences. Can the industry rewrite this movement and achieve a harmonious resolution? The future melody depends on us all. Will we demand fairness for artists, advocate for accessibility, or simply hit pause on the industry's evolution? The final note is yet to be written. What part will you play? Authors: Alok Kumar Pandey and Kumari Janawi Illustration by: Cheruvu Sai Kartikeya Sources Forbes Medium The New York Times Business of Apps

  • THE TINTIN OF SHOWBIZ: Finance Behind Films

    Finished watching a new movie, and found yourself pondering how these movies mint money. From understanding how movies earn money to uncovering profit-sharing secrets, this journey is as engaging as a treasure hunt with Indiana Jones. Explore the world behind the silver screen, making it as enjoyable as a colourful Pixar animation and as thrilling as a classic Hollywood adventure. Let’s understand this movie mania: Now to begin, let’s first understand who are the various stakeholders associated with a movie so that we can better understand their financial interests. The major thing to understand is what each stakeholder expects from the film and how they will earn from the film. There are predominantly 3 key stakeholders that are involved in the making of a movie:- Production Houses, Distributors, and Exhibitors. Bringing a film to life is a thrilling, yet financially perilous journey. We can now delve into the cost borne by various stakeholders: Cost Breakdown Of Various Stakeholders: Production houses as you might have heard of Dharma, Yashraj Films, Red Chillies Entertainment, etc. bear the burden of creation, from nurturing the script to finalising the polished product. This includes talent and crew salaries (actors, directors, technicians), shooting expenses, editing fees, and post-production costs. Distributors act as the bridge between production and exhibition, acquiring the rights to screen the film. They incur acquisition costs, invest heavily in marketing and advertising, and face distribution expenses like creating physical copies and managing the logistics of film copies. Exhibitors, the final link in the chain, pay rental or screening fees to distributors for the right to showcase the film. They also bear operational costs like staff salaries, maintenance of theatres, and utility bills like electricity, water, etc. Showbiz Profit: Profit-Sharing Model Between Producers and Distributors: As we have understood the cost, let’s now unravel how these stakeholders earn. There are three common profit-sharing models between production houses (producers) and distributors: 1. Minimum Guarantee (MG) & Royalty: Think of this as a pact with a guaranteed minimum wage. The distributor pays the producer a guaranteed minimum amount, known as the Minimum Guarantee (MG), regardless of the film's performance. But this deal comes with strings attached. If the film shines and surpasses the MG, the distributor takes back the MG first, then showers the producer with a percentage of the box office (the royalty). However, if the film flops, the distributor absorbs the punch, covering the MG, and they bear the loss up to the MG, leaving their pockets lighter. 2. Commission Basis: This model is all about shared skin in the game. The distributor receives a commission or percentage (e.g. 30%) of the film's box office revenue. They act as a sales agent, taking a commission on every ticket sold. The higher the box office, the fatter their cut, but along with this producers’ share grows too! It's a commission-based rollercoaster – you share the highs and lows. But remember, if the film underperforms, the distributor might not lose their commission as they do not bear the film's losses directly they will just end up getting less commission, however, the producer might be left holding the empty popcorn bucket. 3. Selling Distribution Rights: This option is for the bold. The producer sells the complete distribution rights of the film to a distributor for a lump sum amount. It's like selling your house – you get the money upfront, but any future profits (or losses) belong to the new owner. It's a high-risk, high-reward gamble. The film could become a cult classic, giving up the producer the juicy share. Or, it could sink without a trace, leaving the producer with just the memories ( and the lump sum, of course! ). Profit-Sharing Dynamics: Distributors and Exhibitors There are generally two types of exhibitors: Single Screen Theatres and Multiplexes To begin, let's first explore the realm of single-screen theatres. The single-screen theatre pays a fixed percentage of the box office revenue to the distributor. Common ratios might range from 75-25 to 70-30, with the distributor retaining the larger share. Next, let's examine the multiplexes' perspective. It’s like understanding a dynamic partnership that keeps on changing weekly: - In the first week of a film's release, when audience turnout tends to be high, the revenue-sharing ratio is often set at an equal 50-50 split between the multiplex and the distributor. In the following weeks, the revenue-sharing ratio may continue to evolve, gradually favouring the multiplex. This could mean a shift to a 75-25 or 80-20 split. This adjustment acknowledges that the film's major draw has likely occurred in the first week. In the later stages of the film's run, especially when its box office performance has stabilised, the terms of the revenue-sharing model may become more negotiable based on specific agreements between the multiplex and the distributor. These are just the basics covered that will help you gear yourself for the further journey as we unfold the different realms of this industry. Now let’s unravel the intricacies of a word you would have always heard since your childhood no matter if it was during the Classic Hindi cinema era or Dharma taking up in the industry. “This movie made this much at the box office”. Always hear this, right? But have you ever found yourself wondering what it means? Allow me to decode this buzzword - 'Box Office Collection'. Hold on to your seats, I mean your devices. In contemporary times, the term ‘box office collection’ means earnings generated from the film's ticket sales at movie theatres. It represents the total amount of money collected by a movie during its theatrical run, indicating its popularity and commercial success. The box office figures are a key metric in the film industry, reflecting audience turnout and the overall reception of a movie in cinemas. Hope we got you covered with this term! As of now, you have understood the hidden game behind box office working. We would like to introduce you to another intriguing verse of this industry that would pique your interest. THE HIDDEN VERACITY Flop movies but high profits? A film is made of so many elements that it's not just one power at gameplay,  there are production houses, distribution houses, streaming platforms, and financial houses that sponsor movies. It’s important to understand a movie is a product that entrepreneurs who give their money and put their stake in the film at the end of the day just want good returns right? As they say, the biggest risk is to make a film. The only trust can be in the idea, the execution, and the audience. Some people believe that there's a "movie mafia" or a group of influential individuals who manipulate the box office numbers to make flop movies appear more successful than they are. The success or failure of a movie depends on various factors like marketing, audience reception, and overall quality. Sometimes a movie can resonate with audiences despite negative reviews. One possible explanation is that these movies have strong marketing campaigns that create a lot of buzz and attract a large audience, despite the negative reviews. Another theory is that these movies appeal to a specific niche audience that may not be well represented by critics. Additionally, some movies may have international success, making up for their underperformance domestically makes a huge difference. Earlier there used to be individual financiers and then after some years came big production houses like Dharma, Yashraj productions and turned the movie industry into a systematic structure. Companies were formed so that the risk was equally divided between people and large amounts of money could be raised. New tactics were applied by different production houses to make their movies a hit. New players, new plays The economy of one movie here was replaced by the economy of portfolio movies making it a different ballgame. For the big production houses - Eros, UTV, Reliance Entertainment, and of course, the unlisted Yashraj Films, the game-changer was the emergence of a robust A2A aggregator to aggregator model. This led to the emergence of diversified revenue streams and so, naturally, they were less dependent on the box office. The systematic level of output was decided and that was: 1) How many movies are to be acquired (outright purchase from independent producers), and how many are to be self-produced and co-produced? 2) How many big-budget, medium-budget, and small-budget movies to make? The portfolio works when there is an optimum mix of movies to get maximum returns. Rights A film is an intellectual property (framework of rights in law that protects “creation of the mind”), not a physical property. You can experience this but not sell it further. You can buy a ticket to go into the movie hall and experience the movie but that experience is only limited to you posting it online is simply illegal. So, production houses started giving their movie rights to television which resulted in high profits. The film industry not only started reaching every home but also maximised their popularity and profits. Gushing money Most movies these days are blockbusters! When multiplex came into India, production houses understood that they could make more money how? Simply by making tickets costly. Now what happened was an idea that even if fewer people see the movie more money could be made. Single screen crisis was seen earlier being 12000, but after the pandemic, they were left with only 6500. The only drawback was that the reach and their dependence on the hinterland audience were reduced. Flop movies started coming to OTT which benefited everyone. OTT platforms invested US 665 million dollars on content in 2021 leading this were Netflix, Amazon, and Hotstar. Ott platforms were earning money from more movies as the quality did not matter the quantity did. Everything covered till now be it the basics of making, profit sharing model, the finance and the budget. The hidden and less seen behind the big flimsy curtain and the mystery behind flop movies and high profits were just the tip of an iceberg that is deeply submerged, with its blocks deeply rooted in an ocean that is not only ice cold but deeply complex. To survive in an industry and be a part of it is a different experience altogether. It is a topic that could never get old and will always be relevant not only for entertainment, fun, and relaxation but also for escapism. Humans and their love for escapism is evergreen and a topic for next time. Till then ciao! We’ll see you soon! Authors: Sneha Sah and Kasvi Goel Illustrations: Kkaatyanshive Singh

  • UBER: OVERTAKING OR TAKING OVER

    Commuting from one place to another has always been an essential requirement of man, and different solutions have been proposed in different eras to fulfil this need. From navigating the city through physical maps to having the cab stop right in front of you with minimum effort, we have come a long way. New modes and technologies have repeatedly extended the boundaries of cities and changed the way we live, and definitely for the better. But what is Uber's significance in this transformation? How did it become the evident leader in this race? Read along to find out! FOLLOW THE YELLOW TRAIL Horse-drawn for-hire hackney carriages and hansom cabs used to rule the streets of Paris and London till 1834. But the neighs of horses were soon replaced by the horns of taxi cabs when the modern taxi meter was invented. By 1950, more than 12,000 taxicabs serviced New York. And as time passed, these vehicles spread like wildfire across the world. It was in 1958 that these iconic yellow ambassadors made an appearance in Kolkata, India. They quickly gained popularity and were crowned the ‘King of Roads’. All was well until the beginning of a customer-centric economy when people began to yearn for a more personalised experience. Taxis did not fit into this scenario. No doubt the taxi service was way better than using public transport but the question was "can something outdo this too?" And the start of ridesourcing services answered in the affirmative. THE NEW HOTSHOT IN TOWN The advent of Uber significantly transformed the transportation landscape. Instead of standing on the curbside and flailing your hand in frustration, you can now get a ride by simply tapping on your phone. Uber started when Travis Kalanick and Garrett Camp found themselves stuck in Paris on a snowy evening, unable to find a taxi, and decided to find a solution to this universal problem. The journey from this humble beginning in 2009 to a market leader has been quite rapid. Uber has seen its fair share of CEOs, from Ryan Graves and Travis Kalanic to Dara Khosrowshahi. Almost ten years later, with 75 million global customers and 3 million dedicated drivers in 83 countries, Uber has made black the new yellow by being a legitimate game-changer in the ride-sharing services market. NAVIGATING THE SUCCESS To put it simply, uber is an app that connects drivers with riders by using a multi-sided platform business model. Uber focuses predominantly on the customers and their satisfaction, which is its major differentiator from traditional taxis. To book a ride, all you need to do is enter your current location and the desired destination, and the platform will provide you with multiple vehicle options, from auto rickshaws and motorcycles to sedans and SUVs. Uber, like other ride-sourcing services, aims to have an organized driver base, which is again a revolutionizing aspect. As soon as you request a ride, the platform informs the nearby available drivers who then have the option to accept or decline your request, based on their convenience. Avoiding the taximeter, the ride fare is calculated by an Uber algorithm, considering the distance travelled, elapsed time, and the fuel used. On Uber’s side of the coin, the total value of each ride includes the driver’s payment, fees, taxes, and company commission. Being a globally successful company makes it an attractive platform for brand promotions, adding to the revenue. THE ROAD TO SUCCESS Born in 2009, Uber started as a luxury ride with co-founder Camp's vision. By 2012, it democratized the service with UberX, letting regular cars join the fleet. Innovation continued with carpooling in 2014, followed by Uber Eats for food delivery (though later eaten by Zomato in India). In 2019, Uber dabbled in temporary jobs with Uber Works before sunsetting it in 2020. In the early years uber spent virtually no money on marketing, relying instead on word of mouth to spread. Uber has not only captured but created its market. A fun case story, in the initial stages of Uber, Uber drivers need not have any commercial registration, special licensing, or regular checks as traditional taxis require. All these expenses were curbed and Uber was able to charge a comparatively cheaper fare. But were they playing fair? Ditching regulations meant ethical concerns and legal clashes. "We're a tech company, not a taxi!" They argued, winning some courts over. This strategy did not work in all countries. Uber cooperated with the legal norms to some extent. Gradually Uber had to invest to compete with other players. Uber is today operating in over 70 countries and more than 10,000 cities. WHO ELSE IS ON THE RACE TRACK? Late at a party? Does the night owl need a ride? Uber's your guide, From dancing 'til dawn to catching the dawn, on a sunny or a windy, Uber’s your buddy. Looking at its competitors, Lyft is a competitor of Uber at a global level. However, Lyft only has its operations in the US and Canada while Uber is currently operating in 70 countries and over 10,500 cities worldwide. Uber, king of the ride-hailing castle with a 68% crown, and Lyft, its 31% squire, both galloped towards Wall Street in December 2018. While Uber, valued at a jaw-dropping $120 billion, secured its royal IPO, Lyft aimed for a $2 billion treasure chest. Some other competitors are trying to fit themselves into the market that Uber has established. Ola is an Indian startup which is inspired by Uber. Ola has more revenue than Uber in India. Ola's ride-hailing sales (cab bookings) climbed 63% to Rs 1,987 crore, whereas Uber's revenues in the business grew by 75% to Rs 678 crore. Ola is like a local expert knowing the Indian market well. Uber, on the other hand, is an experienced traveller on a global scale. Finishing Point Uber's success highlights the potential of technology to streamline industries and empower users. It brings an end to the negotiations that we had to deal with the local taxi drivers. However, we cannot fully depend on Uber or such technologies because of unpredictable wait times and surge pricing. In many tier 2 and 3 cities, local drivers own the kingdom. Uber became a company that brought major disruption to the commendable technology. Uber came out of the blue and splashed yellow all around. You need not be the navigator of your driver anymore, LET THE UBER NAVIGATE THE CHAOS. SOURCES Uber Business Insider Investopedia Authors: Anshul Sethi and Yashika Choudhary Illustration: Saket Malhotra

  • Netflix Vs Blockbuster: Paint the Screens Red

    From the era of roaming around Blockbuster's shelves for a movie, we have come upon the modern times where we can find one by browsing online libraries. DVDs have turned to mobile apps, one-time rentals have evolved into subscription models and movie nights are being replaced by binge-watching. But what lay behind the scenes of our changing entertainment landscape, where the once-mighty industry giant is now relegated to a realm of nostalgia? (Spoiler Alert: Netflix’s Entry) In the fast-paced world of entertainment, where we observe OTT platforms fighting to acquire a better market share, one movie rental company and the ex-global leader in this space, Blockbuster witnessed its decline and filed for bankruptcy. Join us as we narrate how Netflix, coming out of the blue, shook up the whole entertainment world leaving Blockbuster in the dust. A Blockbuster beginning Blockbuster was founded in 1985 by David Cook and emerged as a cinematic first mover advantage to the increasing demand for VHS (Video Home System) movie rentals. With a unique revenue-sharing model in the mid-1980s, Blockbuster acquired videos inexpensively, retaining 60% of rental fees and sharing 40% with studios. At its peak in 2004, Blockbuster employed 84,300 people worldwide and operated 9,094 stores. Blockbuster's strategy prioritised stocking popular films and making sure that no one leaves empty-handed. The company's success came from offering affordable rentals when movies were not readily available. This approach allowed customers a trilogy of choices—rent, wait, or buy at higher retail prices from competitors. All this made Blockbuster an undisputed star in the movie rental industry. But this fame was short-lived as things were about to take a bad turn. The Real “Blockbuster” Then came Netflix, and everything went haywire for the OG. Although Blockbuster's demise wasn't solely due to Netflix, the massive debt kept on increasing, and the hopeless pursuit of rapid expansion also played the villain’s role. Netflix became the master of adaptation, and Blockbuster lost its sole purpose, which was to deliver entertainment. The future of streaming was in front of everyone’s eyes and was duly recognised by Blockbuster as well, but they were just not able to compete in this digital run. Failure to understand that change is the only constant sealed Blockbuster's fate. The non-customer-centric approach of Blockbuster also played a role—Blockbuster's reliance on late fees alienated customers, while Netflix prioritised user satisfaction. All this led to the new generation of cinema led by Netflix, which made Blockbuster a mere spectator of its greatness. Netflix and Chill Amidst Blockbuster's demise, a lone fort in Bend, Oregon, navigated through the digital age. This store, owned and operated by franchisee Sandi Harding, defied all odds and became a nostalgic refuge. In 2020, the Bend store made headlines on Airbnb, offering an "End of Summer Sleepover," allowing guests to relive the '90s with a sleepover in the world's last Blockbuster. By July 2018, it stood as the last Blockbuster in the U.S., and by March 2019, it was the last globally. In contrast, Netflix, the streaming giant, our real blockbuster, boasts 8.3 million paying customers and 240 million global subscribers, with a revenue of $31.6 billion in 2022. They are available in 190 countries, with 20% of the OTT market in India. The Climax in Blockbuster’s Dream Could Blockbuster have painted a different picture, preserving the industry's hues of yellow and blue, rather than witnessing the market turn to shades of red? Perhaps. The initial step could have been revisiting the first chapter of its story. Blockbuster wasn't just a video rental retail space –it was a source of entertainment. Even the roots of its initial market dominance lay precisely in this defining factor. Subsequently, prioritising customers is the supreme law. A revenue model relying on charging late fees (no matter how lucrative) is not the most customer-driven approach. The company could have focused on providing affordable entertainment rather than sticking to its prevalent and comfortable model. Another layer to this perspective includes the possibility of using “disruptive technologies” not persisting well due to the internal structure of the company. It could have happened with Blockbuster, so what now? Well, they could have either acquired Netflix, the pioneer, as they were offered (Yes! Reed Hastings came to Blockbuster to offer Netflix) or they would have created a business unit to experiment with the emerging tech trends. The potential success for this would lie in allowing the chosen online business structure to run independently. Thus, if the company could have agreed to adapt to the ever-evolving changes in the industry (and technology) the narrative would have been very different. A Critic’s Review The battle between Blockbuster and Netflix can be regarded as one of the greatest business case studies of modern times. At its core, this narrative imparts a crucial lesson: Focus on what you do, not just what you've done. For organisations inherently designed to make entertainment easily accessible, the key is to stay committed to that mission. It is widely accepted that this was a story of transition where the old is replaced by the new. The truth is that it wasn’t this simple. If Blockbuster hadn’t turned the gun on themselves, it would have been Netflix receiving the killer bullet. As is the case with most things in life, it was a nuanced situation. There was a perfect storm of poor decisions, technological advances and other contributing factors that led to Netflix’s staggering growth…and Blockbuster’s equally staggering decline. Authors: Hardik Jain and Sehaz Nagpal Sources Forbes Finshots Business Insider Medium

  • Budget 2024: Inferring ‘The Interim’

    Finance Minister Nirmala Sitharaman on February 1, Thursday, announced an Interim Budget, striking a balance between the government’s achievements in the last 10 years and setting out a comprehensive plan for economic growth and fiscal prudence. Backed by the ‘Vote on Account’ clause of Article 116 of the Indian Constitution, an interim budget is like a financial pitstop during a government transition allowing it to get approval for crucial spending to keep things running smoothly in the interim, i.e. before the new government gets elected. This was the last Budget presented by the National Democratic Alliance before the general elections shall take place in May 2024. Highlighting the achievements of the government in the past 10 years, FM outlined how loans worth ₹30 CR were disbursed to women, the unemployment rate went down by 2.8% and ₹ 1.4 CR youth have been upskilled.  The government, amid a sharp slowdown in agricultural growth, relative underperformance of the rural economy and high food inflation, focused on fiscal consolidation and inclusive development as the budget showed a correction in the fiscal deficit being reduced to 5.8% of the GDP for FY24. This non-inflationary budget aims to bring down the borrowing costs of the government and lower retail inflation to its permissible levels. The vision of  'Viksit Bharat' by 2047 has been elevated by increasing the capex outlay by 17% to 11.1 trillion. Using “Sabka Saath, Sabka Vikas'' as its mantra, the government covers diverse communities in terms of caste and class to promote social justice. By empowering 25 CR people, the government focused on ‘Garib Kalyaan’ by laying down programs like PM Awas Yojana, PM Gati Shakti and PM Jan Dhan emphasising a paradigm shift from poverty alleviation to empowering the poor. Women empowerment also remained as a focal point in this year’s budget with FM outlining recent reforms like one-third reservation of seats in Lok Sabha and State assemblies, outlawing triple Talaq and disbursing 34CR Mudra Yojana loans to women entrepreneurs. FM in her speech redefined GDP as Governance, Development and Performance which showed a change in the government’s approach towards the economy. Unlike last year, there was no change in taxation and the budget remained quiet regarding divestments raising concerns by the masses, but the government did lay out their vision for a developed nation in the next 100 years of independence, the ‘Kartavya Kaal’. INFRASTRUCTURE The recent trend in budget figures underscores the growing importance of infrastructure. In alignment with this trajectory, the interim budget reveals an 11.1% increase in capital expenditure (capex), reaching ₹11.1 lakh crore, constituting 3.4% of GDP. This affirms the government's commitment to strategic investments, both public and private. Notably, this year's budget zooms in on transportation infrastructure, with key programs targeting economic railway corridors—energy, mineral, and cement, Port-connectivity, and High-traffic density corridors. The aviation sector, having experienced significant growth, will continue expanding with plans to develop new airports, enhancing connectivity and boosting tourism. The social infrastructure front also sees a spotlight, particularly in housing. The announcement to build an additional 2 crore houses under Pradhan Mantri Awas Yojana signals intensified focus, promising increased investments in the construction sector and a positive ripple effect across related industries. GOING GREEN With climate change moving to the forefront of every country’s agenda, the interim budget outlines a commitment to achieving ‘net-zero’ emissions of greenhouse gases by 2070 through key initiatives. The government propels renewable energy with viability gap funding for a one Gigawatt (GW) wind energy capacity. To kickstart the plan, the government plans to establish 100 million tonnes of coal gasification and liquefaction facilities by 2030. Mandatory blending of CNG and PNG with compressed biogas enhances sustainability in transportation and domestic use. The government aims to foster economic synergies through initiatives promoting E-buses, strengthening the e-vehicle ecosystem, and endorsing bio-manufacturing. Emphasis on eco-friendly alternatives like biodegradable polymers, bio-plastics, and bio-pharmaceuticals aligns with sustainable development goals for a greener future. ELECTRICITY Doubling down on green ambitions, India's rooftop solar program sees a budget surge from ₹2,167 crore to ₹4,555 crore. Targeting wider household adoption, the initiative offers one crore homes 300 free electricity units monthly, leading to savings of up to ₹18,000 from free electricity and selling the surplus to distribution companies. This scheme creates a synergy between households and corporates, enabling the country to have productive infrastructure. This will also have a greater impact on economic growth through the creation of entrepreneurship and employment opportunities for the supply, installation and maintenance of solar energy systems. This can also boost the EV ecosystem as the charging stations with solar rooftop facilities are economically more viable than those with a grid. HEALTH The government's focus on bolstering health infrastructure and preventive measures involves encouraging vaccinations for girls aged 9 to 14 to prevent cervical cancer. Plans include establishing more medical colleges using existing hospital infrastructure. The U-WIN platform manages immunization, with expanded efforts through the Mission Indradhanush campaign. Notably, the Ayushman Bharat scheme now extends healthcare coverage to ASHA workers, Anganwadi Workers, and helpers. While promising, the success of these decisions depends on their effective implementation. TAXATION The budget's focal point for the common man, taxation, sees no alterations in direct and indirect taxes, signalling government confidence amid impending elections. To ease the burden, the finance minister proposes withdrawing outstanding direct tax demands up to ₹25,000 for FY 2009-10 and up to ₹10,000 for FY 2010-11 to 2014-15, enhancing the ease of living for taxpayers. Additionally, tax benefits for startups, sovereign wealth or pension funds, and specific IFSC units extend to March 31, 2025, fostering continuity and growth. The corporate tax rate sees a positive shift, reducing to 22% for existing domestic companies and 15% for new manufacturing companies, aligning with the government's push for manufacturing sector encouragement. AGRICULTURE The government has had success with past schemes, such as the Pradhan Mantri Kisan Sampada Yojana and the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana, which have effectively supported farmers and the food processing industry. As a result, the government plans to introduce further public and private investment in post-harvest activities. Under the PM Formalisation of Micro Food Processing Enterprises scheme, the government has increased the allocation from ₹639 crores to ₹880 crores. Additionally, after the success of Nano Urea, the government plans to focus on the application of Nano-DAP in all agro-climatic zones. The allocation for the Fertilisers Department in this budget is ₹1,65,150.81 crores. The Atmanirbhar Oilseeds Abhiyan strategy helps gain Atmanirbharta on oil seeds. This step aims to promote self-reliance in the oil market, as India currently imports around 150 lakh tonnes of edible oil, which is 60 per cent of its domestic consumption. Lastly, a comprehensive program for dairy development will be formulated. IMPACT OF THE REPORT CARD General Elections The FM while announcing the budget expressed her confidence about coming into power for the third time after the general elections. The budget, notably lacking major populist moves, may wield limited influence on elections, aligning with the government's steadfast political-economic strategy. It accentuates welfare measures and narrative-building, underscoring the commitment to garner diverse demographic support. Strategically, it addresses societal concerns, particularly targeting farmers, women, and youth, preempting potential caste-based political exploitation. The government's emphasis on social justice and effective governance aims to solidify backing, employing initiatives like the Lakhpati Didi scheme. The budget, with its strategic governance approach, navigates diverse social issues, preventing divisive caste-based politics. While showcasing a thoughtful strategy, its direct impact on election outcomes remains uncertain, given the multifaceted dynamics in the political landscape. Boost in Growth The government's budget strategy centres on propelling economic growth through increased private sector investments, infrastructure enhancement, and renewable energy initiatives. By reducing central government borrowings, the budget aims to boost private sector credit availability, leveraging expected economic growth and favourable conditions. While emphasizing the private sector's role in driving growth, funds are allocated for critical infrastructure and initiatives like subsidizing rooftop solar panels and promoting biogas blending. Concerns linger about addressing challenges like underperforming private consumption and labour market disparities. Success depends on navigating political challenges, addressing resource deficiencies, and fostering an environment conducive to sustained economic expansion. Nudging Reforms The budget prioritizes sustainable, long-term solutions, adjusting tariffs and incentivizing investments in crucial sectors. Collaborating with state governments and addressing demographic challenges reflects a commitment to inclusive growth. Countercyclical fiscal policies indicate a pragmatic approach to managing economic fluctuations. Focusing on targeted reforms, the budget seeks to lay the groundwork for sustained economic development, positioning India towards becoming a developed nation by 2047. Fiscal Prudence The interim budget's emphasis on fiscal discipline, consolidation, and formal sector participation underscores the government's commitment to robust growth. Relying on revenue, reducing subsidies, and maintaining prudent fiscal management aim to create an environment for sustained expansion. Success hinges on external economic stability, with geopolitical shocks posing potential risks. The overarching objective is clear: to drive significant growth while ensuring responsible fiscal management. Authors: Anant Kumar, Neha Agarwal, Sai Advaith Kandi, Sanvi Khandelwal Illustrator: Japneet Singh

  • Minting Millions: The Metaverse Economy

    Live in endless realms beyond reality Untangling the Financial Metaverse Imagine a portal to a boundless digital realm, where you can be anything and do anything, all while carrying your digital assets and building your wealth. This isn't science fiction; it's the metaverse, a revolutionising force ready to transform how we interact, work, and manage our finances. The Metaverse is like a virtual playground where you can own virtual land, build your dream home, attend immersive concerts with friends, or even start a virtual business, it's a gateway to endless possibilities. And unlike a fleeting dream, the metaverse offers a real way to invest in your digital future, opening new frontiers for financial exploration and wealth creation. The metaverse unlocks these possibilities (and more), guiding us to a new era of financial empowerment and entrepreneurial opportunities. So, buckle up and prepare to embark on a journey into the fascinating world of the metaverse, where one’s imagination is the only limitation. Demystifying the Metaverse In emerging technologies, the metaverse stands as a captivating concept, promising a convergence of physical and virtual worlds, blurring the lines between reality and digital experiences. Let's take an example, you buy a piece of virtual land (metaverse real estate) in this world. This land can be yours forever, and you can use it for various purposes, like building your dream home, hosting virtual events, or even starting your own virtual business. To make these transactions and purchases, you'll need cryptocurrency, digital currencies like Bitcoin or Ethereum used within the metaverse. If you decide to open a virtual clothing store in your newly acquired virtual land. To create unique and exclusive clothing designs for your customers, you can utilise NFTs (non-fungible tokens), which are essentially digital certificates of ownership for virtual assets. This ensures that your designs are authentic and cannot be replicated. But how do you manage your virtual finances and earn a living in this new world? Enter DeFi or decentralized finance. DeFi platforms allow you to borrow, lend, and earn interest on your crypto assets without relying on traditional financial institutions. These platforms are built on blockchain technology, ensuring security and transparency. So, the next time you're looking for a new adventure, consider stepping through the portal into the metaverse. This exciting new frontier offers endless opportunities for business, entertainment, and financial exploration. The possibilities are truly infinite! The Metaverse Gold Rush Get ready, everyone, as we embark on a bustling journey into a realm where businesses are placing their bets on discovering the next big thing in the virtual realm, the metaverse. This isn't just hype, the numbers speak for themselves. The metaverse is projected to be an $800 billion market by 2025, attracting tech giants like Meta, Microsoft, and Epic Games to throw billions of dollars into the pot. Meta, spearheading the charge, has pledged a staggering $10 billion to build its metaverse platform, Horizon Worlds. Meanwhile, Microsoft acquired AltSpaceVR for $2 billion, and Epic Games raked in $1 billion specifically to fuel their metaverse endeavours. Even Roblox, an established player in the virtual world, expects to generate $2.22 billion in 2023 primarily from its metaverse offerings. These hefty investments illustrate the immense potential the metaverse holds to revolutionize the global economy and drive innovation across multiple industries. Whether it's creating new markets and engaging customers in exciting ways, improving collaboration and accessing global talent pools, or fueling groundbreaking innovations, the possibilities are vast. Metaverse Mania The metaverse is no longer a futuristic concept, it's a rapidly evolving reality with immense financial potential. One can explore boundless landscapes, earn a living, and do anything they want. That’s the promise of the metaverse, and tech giants like Meta and Microsoft are leading the change. The metaverse is fast becoming the new Westeros, big tech companies are fighting hard to be the most important. Meta, formerly Facebook, with its “Horizon Worlds'' platform, lets you create avatars and interact in a social virtual space. Meanwhile, Microsoft's "Mesh" takes a different approach, focusing on seamless integration between the physical and virtual worlds, opening doors for virtual meetings, conferences, and even entire workplaces. Just like in Game of Thrones or Succession, it's a power play for the future of the internet, with immense financial potential waiting to be unlocked. The metaverse isn't just a two-horse race between Meta and Microsoft. Major players like Epic Games, Roblox, Unity, NVIDIA, and even fashion brands like Nike are joining the fray, each bringing their unique expertise. Social media giants and financial institutions are also dipping their toes into the virtual pond, bringing the physical and digital worlds closer, and exploring new frontiers in communication, entertainment, and finance. Virtual Fortunes Forget Delhi's prime real estate, the hottest investment opportunity now lies in the metaverse, where individuals and corporations are snapping up virtual land to host immersive concerts, establish dream virtual offices, and build bustling virtual shopping malls. Just like investing in a prime physical location, owning virtual land can offer rental income, value appreciation, and development opportunities within the metaverse. Ditch the traditional market and explore the exciting virtual frontier. But the metaverse isn’t just about virtual land and investments. Imagine a world where your gaming skills are rewarded with real-world currency, NFTs, or tangible goods. The metaverse is blurring the lines between play and finance, offering new ways to participate in the economy and democratizing access to wealth creation. No longer will you be scolded for playing games; instead, you’ll be praised for your dedication and rewarded for your talent. And let’s not forget the social dimension. Platforms like Decentraland and Sandbox are fostering virtual communities where people can socialize, engage in entertainment, and even conduct business transactions. These interactions aren’t just virtual abstractions, they can translate into real-world benefits like brand loyalty, increased sales, and new employment opportunities. The metaverse has something for everyone, whether you’re interested in investing in virtual land, monetizing your gaming skills, or simply connecting with others in new and exciting ways. A Double-Edged Sword The metaverse's economic impact extends beyond these emerging sectors, influencing traditional financial systems and institutions. The rise of digital currencies, particularly cryptocurrencies, is closely linked to the metaverse, as they provide a decentralized and secure medium of exchange within these virtual worlds. This could potentially challenge the dominance of traditional fiat currencies and central banks, leading to a more decentralized and globally interconnected financial landscape. Embarking on the Voyage of the Unknown While the metaverse presents a plethora of economic opportunities, it also harbours potential challenges and risks that need to be carefully addressed. Regulatory uncertainty surrounding the metaverse, particularly in areas such as taxation, intellectual property, and data privacy, poses a significant hurdle for businesses and individuals seeking to engage. Security concerns, such as cyberattacks, scams, and identity theft, are also prevalent in the metaverse, requiring robust cybersecurity measures to protect users' assets and financial transactions. The potential for economic inequality, as access to and opportunities within the metaverse, may be skewed towards those with greater financial resources and technical expertise, also raises concerns that need to be addressed through inclusive policies and initiatives. Embracing the Metaverse Economy Responsibly With its transformative potential, the metaverse is poised to reshape the global economy, presenting both opportunities and challenges. As we navigate this uncharted territory, we must adopt a responsible and proactive approach, ensuring that the metaverse's economic benefits are inclusive, equitable, and sustainable. By addressing regulatory hurdles, enhancing cybersecurity, and promoting financial literacy, we can harness the metaverse's potential to create a more prosperous and interconnected future for all. Technology has come so far and it will create wonders beyond one’s imagination. Now the question is not “What does technology hold for our future?”, the real question is “Are we ready to witness the greatness of technology?” Authors: Alok Kumar Pandey and Shanmugam Viswanaath Shanthamani Illustration: Japneet Sources ▪ McKinsey & Company (2022) ▪ Meta ▪ World Economic Forum (WEF) (2022) ▪ "Demystifying the metaverse" by PwC (2023)

  • OPENAI'S CORPORATE CHAOS DECODED

    “Can the tech architects escape the quantum twists in the labyrinth of Silicon Valley, where only unpredictability is the new constant?” In the ever-dynamic world of Silicon Valley, where the boardrooms are as unpredictable as a chessboard with quantum pieces, comes the saga of Sam Altman—a tale of exits, entries, and a comeback that not even the AI could predict! It’s not an ordinary tech tale, but his journey through OpenAI, an intense departure, a Microsoft detour, and an unexpected return that left people raising their eyebrows, akin to the sudden twists in a compelling storyline. Let’s explore below the exceptional aspects that weave Altman's journey into a truly unparalleled story within the realm of artificial intelligence. IN THE EXCITING WORLD OF OPENAI Imagine a place where smart computers learn and chat with us or a smart friend who turns complicated stuff into a cool dance of ones and zeros. Well, that’s OpenAI for you! AI isn't just about computer code; It's a fancy party where smart algorithms learn and sometimes even show off their skills more than we humans do. OpenAI was founded in 2015 by Altman, Elon Musk, and others as a non-profit research lab prioritizing principles over profits. This San Francisco-based company became the talk of the digital town.OpenAI has always stayed at the forefront of unveiling new advancements, showcasing its relentless commitment to innovation. Earlier, this year, OpenAI unleashed a powerful chat model- GPT4 Turbo. It’s more powerful and updated than the previous versions. Plus, they have slashed the price tags on the juiced-up models, turning the AI dream into a budget-friendly affair. Let's call it a chatbox evolution but with a turbo twist. Also on November 6, it announced a custom version of ChatGPT-called GPTs empowering users to use it to enhance daily life,  work, or home activities. It's like a genie in your digital lamp. It seems AI is never hitting the pause button on its journey of progress and innovation. But when did it start playing the game? Its evolution reached a crescendo with the launch of ChatGPT 3.5 last November. The buzz was real, and with Microsoft’s huge infusion of capital into its venture, OpenAI became a cool kid in the tech neighbourhood and the hottest ticket in Silicon Valley. Microsoft, with the launch of ChatGPT, increased its commitment to OpenAI to the tune of $13 billion. But despite Microsoft’s sizable investment, it did not have a seat on OpenAI’s board. Well, did all of this set the stage for Altman’s sudden ouster from the company earlier this month? Let's unravel the unique threads below that make Altman's journey a story unlike any other in the world of artificial intelligence. ALTMAN’S STINT AT OPEN AI Altman wasn’t a mere CEO but a puppeteer behind OpenAI’s symphony of AI innovation. He wasn’t just coding, he was sculpting a world where AI isn’t a mere tool but your tech confidante. In short, Altman was synonymous with the success story of ChatGPT, which attracted 100 million users in two months after its launch on November 30, 2022. But he didn’t hit the pause button. Instead, he chose to press play, with Worldcoin being the latest track. This latest venture of his conducts a fusion of cryptocurrency and AI, showcasing that the melody of progress never lasts. With new ventures making people’s lives easier, he engraved his legacy as the “CEO Maestro” hitting the right notes in people’s minds. But then the corporate drama unfolded! On November 17, the headlines read, “OpenAI shocks the tech world with the firing of ChatGPT CEO Sam Altman”. The public buzzed louder than the swarm of bees, with Altman’s departure leaving them craving more popcorn as they eagerly anticipated what would unfold next in the storyline. Rumours started speculating, and theories were circulated, but still, Altman’s departure was shrouded in digital mystery. Amidst this turmoil, a new twist unfolded. OpenAI temporarily paused accepting new users for its paid ChatGPT services. The reason is the overwhelming demand for AI. With a whopping 100 million users every week and more than 90% Fortune 500 bigwigs building tools on the AI platform, it seemed all wanted a piece of the AI pie, so the digital bouncer had to take a break. UNRAVELLING THE ENIGMA OF ALTMAN’S EXIT While the board cited communication issues, rumours suggested disputes over profit motives and the pace of OpenAI's expansion, prompting co-founder Greg Brockman to resign in protest. OpenAI was supposed to be a non-profit when it was founded and Sam Altman was believed to be a thoroughly for-profit CEO. He believed that OpenAI must have a viable business model and must push to create products and services that will make it a tech giant. Then there is the safety part. The chatter on social media by people who are clued into the Silicon Valley eco-system suggests that Altman was pushing OpenAI too fast and too aggressively and that it was undermining the safety aspect of ChatGPT and other services. There was a brief period during this turmoil when Microsoft banned its employees from using ChatGPT. The company on being questioned mentioned that it was due to security and data concerns that several AI tools are no longer available for employees to use and even urged its employees to use third-party websites including ChatGPT with caution. However, Microsoft later acknowledged the restriction as a mistake. After this blunder, rumours started circulating that OpenAI had retaliated and banned Microsoft 365, but Altman in a tweet declared these rumours false. Altman’s post on X the following day that he had loved his time at OpenAI left people wondering; Where did the CEO vanish? Altman's heartfelt post on X intensified the intrigue, leaving an air of uncertainty about the future path of OpenAI and the untold story of its departed CEO, leaving the people glued to their screens for updates. DID AGI FEAR TRIGGER ALTMAN'S FAREWELL? Amidst the whirl of speculation, a prevailing theory as to why Altman was fired emerged, Altman's relentless pursuit of Artificial General Intelligence (AGI) had raised concerns among OpenAI's board and investors, ultimately leading to his ouster. AGI, also known as strong AI, refers to hypothetical AI systems that possess cognitive abilities equal to or surpassing those of humans, holding promise for technological advancement but also raising profound ethical and safety concerns. Altman, a devoted advocate for AGI research, expressed his belief in its transformative potential. Still, his unwavering pursuit raised fears among some OpenAI board members that his ambitions could jeopardise humanity. Adding complexity was Microsoft's investment structure in OpenAI, reportedly designed to diminish its stake in GPT technology once AGI was achieved, indicating Microsoft's recognition of potential dangers and a focus on beneficial applications. Beyond safety concerns, discussions about AGI delve into ethics and philosophy. Some anticipate a new form of consciousness, challenging our understanding of sentience, while others argue AGI might worsen social and economic inequalities. Another model that sparked concerns was Project Q, which could combine the deep learning techniques that could power GPT with rules programmed by humans. It was an approach to help fix the Chatbot’s hallucination problem, but it also seemed like another reason to fire Altman.  It triggered internal turmoil, highlighting the need for a careful and ethical approach moving forward. The uncertainty surrounding Altman's dismissal underscores the multifaceted nature of this transformative technology and OpenAI's future direction. THE NEW CEO UNVEILING As Altman exited, within 72 hours, a new face, Emmett Shear, the former CEO of Twitch took the CEO spotlight at OpenAI. He assumed the new position as interim CEO, pushing aside Mira Maruti, an OpenAI executive who was named CEO after Altman’s ouster. The forums buzzed with discussions about the future under the new leadership. Would it be an upgrade or a downgrade in the tech symphony? But the story doesn’t end here. With a $13 billion investment in a startup like OpenAI, common expectation would dictate that Microsoft's CEO, Nadella, should have been given advance notice before the board dismissed its market-leading CEO. However, Nadella was caught completely unaware of this situation. Microsoft was reportedly only informed of the board’s decision to fire Altman minutes before the blog post was published. The lack of clarity at Microsoft over one of the most dramatic sagas in Silicon Valley history seems odd after the fact that Microsoft ploughed some $13 billion into the ChatGPT developer earlier this year. News that OpenAI was firing Sam Altman hit everyone outside the board like a thunderbolt. Microsoft CEO Satya Nadella was probably not amused. But, as things shook out, he had a reason to smile. Microsoft, which was always aware of Altman’s contributions to AI saw an opportunity and welcomed Altman and his close colleague Greg Brockman, to head a new advanced AI research unit. Microsoft made a brilliant move there. It ended up consolidating and acquiring OpenAI without having to tender for any acquisition. Microsoft's the real winner here, isn’t it? OPENAI LOST ITS TALENT, AND MICROSOFT GAINED FROM THE  LOSSES! A HAPPY THANKSGIVING INDEED FOR ALTMAN! Altman's departure triggered a wave of reactions from the public and the employees. On one hand, forums, social media, and tech news platforms became arenas for discussions, speculations, and even some playful memes. On the other hand, OpenAI’s 700-strong workforce was in uproar about Altman’s sacking. This backlash from employees sent a clear message to the board that Altman was not only a respected leader but also a crucial part of the company's success. And finally! Amidst the turmoil and uncertainty, a glimmer of hope emerged. On November 22, 2023, the OpenAI board reversed its decision and finally reinstated Sam Altman as CEO. Ilya Sutskever, Chief Scientist of OpenAI, who fired Altman, tweeted, “I deeply regret my participation in the board's actions”. The change of heart was evidently due to pressure from company employees. This unexpected turn of events was met with widespread relief and celebration from employees and the public. THE AFTERMATH All the chaos surrounding OpenAI had a volatile impact on the stock prices of both OpenAI and Microsoft. The sudden termination of Sam Altman triggered a knee-jerk reaction, causing a plunge of 10% in the OpenAI stock price and 1.68% in Microsoft's stock price. When Microsoft hired Altman as president of cloud and AI products, the stock rose by 2.1%, and OpenAI's stock also exhibited signs of recovery, regaining approximately 80% of its pre-firing value. Soon after Altman's reinstatement was announced on Sunday, OpenAI's stock price rebounded by more than 20%, while Microsoft stock showed signs of stability. This resilience suggests that investors in both companies are gradually regaining confidence in the company's underlying strength and long-term potential. Overall, the effect of the OpenAI chaos has been negative on the stock market, but it is way too early to say what the long-term impact of the event will be. UNFOLDING OPENAI's NEXT CHAPTERS In a nutshell, OpenAI's recent corporate drama has been nothing less than a tech rollercoaster, a ride filled with Altman's sudden firing followed by the hiring of new CEOs and his dramatic reinstatement. As the digital chapters unfold, one thing is certain, in the world of Silicon Valley, the only constant is change, and Altman will continue to be a central figure in the endless evolution of the tech saga. His next act will undoubtedly bring more surprises, discussions, and insights into the future of technology. As OpenAI moves forward, it remains to be seen whether the company can learn from its recent turmoil and emerge as a leader in responsible AI development. The future of AI is unquestionably uncertain, but OpenAI's journey will be worth watching! Author: Kumari Janawi and Neha Agarwal Illustration: Cheruvu Sai Kartikeya SOURCES • Times of India • Forbes • Guardian • TechCrunch

  • Havoc Amidst Harmony: Navigating the Tragedy of the Commons

    In a world of shared resources, consumers often act like curious children in a candy store, unaware of limits. Imagine a bustling fair, everyone grabbing cotton candy without thinking about the supply. But, reality asks: Is there enough sweetness for everyone? Let's start with a small-scale scenario to answer this question. Imagine there are three fishermen sharing one pond, which initially has six fish. Each day, every pair of fish in the pond gives birth to one new fish. So, what's the maximum number of fish they should catch daily? It can't exceed three, one for each fisherman, because every day, three new fish are added. This way, the pond's fish population can remain stable or even grow as long as no more than three fish are caught each day. However, the sad reality is that "enough" is a concept often overlooked. People often act in their own self-interest without considering the consequences for others. For instance, if one of the fishermen decided to catch two fish daily, the fish population would decline. In the long run (in our example, three days), they would deplete the fish entirely. This scenario is a classic example of what we call the "tragedy of the commons." No Matter How Many Fish in the Sea The Tragedy of the Commons, a concept rooted in shared-resource systems, illustrates how rational individuals, acting in self-interest, can ultimately deplete communal resources, leading to negative consequences for all. Economically, individuals tend to exploit shared resources so that demand outweighs supply and it becomes unavailable for all. Hence, personal short-term gains can lead to shared long-term losses. But would this apply to all the resources which exist? To explore this let us consider a private orchard owned by a single family. The fruits from the trees are exclusive to the family; outsiders cannot access them without permission (excludable). The orchard is carefully tended, ensuring an abundance of fruits each year (non-scarce). The family members share responsibilities, ensuring the orchard's health and productivity (non-rivalrous). In this scenario, the tragedy of the commons does not occur. It occurs when each consumer consumes as much as they can as fast as they can before others deplete the good, and no one has the incentive to reinvest in maintaining or reproducing the good. The tragedy of the commons occurs when an economic resource possesses specific traits: it must be both rivalrous (only one person can use it at a time, depleting supply) and non-excludable (others can't be prevented from using it). Additionally, it must be scarce to be rivalrous. When a good is a common pool resource, shared by all but limited in quantity, the tragedy emerges as individual interests clash with the common good. The orchard's controlled access, abundance, and lack of rivalry in consumption prevent overuse, allowing the resource to thrive without depletion. The Tragedy of Speculative Bubbles The tragedy of the commons can also play in the pond of financial markets as it manifests vividly in the form of speculative bubbles. Imagine a scenario where a particular asset, say housing or cryptocurrencies, experiences a rapid surge in value. This uptick often triggers a collective frenzy among investors. Driven by the fear of missing out on potential profits, individual investors pour their funds into these assets, akin to multiple consumers exploiting a common-pool resource. During a speculative bubble, the market becomes a shared resource. Just as multiple users can deplete a common pool resource, a multitude of investors rush to buy into the rising market. Each investor believes they can capitalise on the asset's momentum, adding to the demand and inflating prices further. This collective behaviour mirrors the tragedy of the commons: everyone competes for the same unit of the asset, and each transaction contributes to the diminishing supply of the asset at its current price. However, the tragedy unfolds when the bubble inevitably bursts. As investors rush to sell their holdings to secure profits, the market experiences a sharp downturn. This sudden collective action to sell further accelerates the fall in prices. Ultimately, the rush to exit the market mirrors the depletion of a common-pool resource, leaving many investors with substantial losses. Global Odyssey The tragedy of the commons manifests in various spheres, notably in international relations, where the overfishing crisis in global waters symbolizes the struggle over shared resources. Unregulated exploitation by multiple nations often leads to resource depletion and international disputes. In the financial realm, this tragedy is evident in speculative bubbles where investors, lured by potential profits, collectively inflate asset values, risking market stability. Regulatory bodies such as India's Securities and Exchange Board (SEBI) and the U.S. Securities and Exchange Commission (SEC) work tirelessly to curb such behaviours and prevent market crashes. Intellectual property, especially in open-source software, mirrors this challenge as voluntary contributions risk mismanagement without proper oversight. Creative Commons licenses offer a structured solution, balancing collaboration and protection. The tragedy resonates on a grand scale in international resource management; individual interests drive nations to deplete resources like forests and water basins, impacting the global environment. International agreements, such as the Paris Agreement on climate change, strive to mitigate these challenges through cooperative efforts. Additionally, shared forests face depletion from unchecked logging, necessitating robust management strategies to prevent overuse. This underscores the tragedy's significance in environmental conservation efforts worldwide. Resources on the Brink The tragedy of the commons poses a significant risk of resource extinction. When a resource is exploited without restraint due to its rivalrous and non-excludable nature, it faces rapid depletion. Overfishing, deforestation, and pollution exemplify this risk, leading to biodiversity loss and ecosystem collapse. As individual interests clash with the common good, the overuse of these shared resources accelerates their decline, ultimately risking their extinction. This perilous scenario underscores the urgent need for sustainable management, global cooperation, and stringent regulations to mitigate the tragedy of the commons. Without such measures, the depletion of essential resources becomes inevitable, posing severe threats to ecosystems, wildlife, and the well-being of future generations. Maintaining the Balance In our pursuit of sustainable futures, the prevention of the tragedy of the commons stands as a fundamental imperative, ensuring both the preservation of precious resources and the stability of financial systems. Particularly in finance, stringent regulations and investor education are vital. Regulations must curtail speculative excesses and promote responsible investment, fostering market integrity. Transparent practices and comprehensive investor education can shift the focus from short-term gains to long-term stability, promoting financial sustainability. Simultaneously, global cooperation, technological innovation, and sustainable practices are essential in conserving natural resources. Collaborative efforts among nations can manage vital common-pool resources, while innovations in technology enhance resource efficiency. Sustainable practices, embraced by communities and industries, mitigate the overuse and depletion of shared resources. By striking a balance between individual interests and the collective good, societies can navigate these challenges, ensuring a future where resources are conserved, financial systems are stable, and prosperity is sustainable. Sources: Garret Hardin, Tragedy of the Commons, 13 Dec 1968 Harvard Business School Investopedia Author: Priyansh Kotiya Illustrator: Prateek Verma

  • A Roundtable of Behavioural Economics Dilemmas

    “I wonder how, I wonder why, Unraveling ethics that touch the blue, blue sky, And all that I can see is just a question why.” What if economic theories had a conscience? What if they developed ethical dilemmas, not just in theory but related to their existence? What if they could whisper to each other and have a roundtable meeting for the same? What if you could do a deep dive into this enigmatic world to find the solution to their delusion? Though the answers to these questions might not seem crucial enough, indirectly knowing the economic theories and their ethical concerns will help you never fall prey to such split personalities of behavioural economics again. But before we delve into this world of hypothetical madness, let's look at the wicked magic of behavioural economics. Where it all began! Behavioural Economics represents the fusion of psychology and economics, and it begins where rationality leaves the centre stage to give way to deceived irrational decisions and focuses on how human behaviour deviates itself from the basic assumption of traditional economics which is being completely rational! Now, to answer all the presented “what ifs” that have been hypothesised, we must turn our attention to the masterful watcher of this symphony of behavioural economics: Nudging! Nudging is the cornerstone, the linchpin, the one hidden in plain sight that orchestrates our perfectly rational decisions into the realm of irrationality, ironically watching and moderating a discussion for the ones who themselves are trying to seek redemption and wash away their sins of unethically influencing individuals. “Good morning, Theories and Effects, I’m Nudging, the moderator and watcher of this discussion for the ages. Welcome to this roundtable, which will not only challenge your perception but will make you question your convictions, beliefs, and especially your ethics." When will we know? All the esteemed guests are seated in their places, and Nudging presents a scenario for the guests to ponder: “I’ll start off easy and ask you all that: If a consumer is in an electronic store for a new smartphone, then how will you all work to influence the consumer’s decision to buy a not-so-rational option?” Anchoring Effect: "As Anchoring, I recognise that marketers often use me to set a high initial price, which acts as an anchor for a product, and then offer a lower priced product, thereby making the lower priced product seem like a deal to grab. In this case, the marketer deliberately sets an unreasonably high anchor to deceive consumers into thinking they are getting a value for money purchase; it becomes unethical." Scarcity Heuristic: “I understand that marketers state that a certain product is exclusive, limited, or in short supply to create a sense of urgency. While this can facilitate faster decision-making by consumers, it's unethical when marketers make false claims related to limited availability to put pressure on consumers. This can not only lead to rushed purchases but also regrettable ones, which undermines the practice of ethical marketing." Decoy Effect: "Hello, everyone! I'm Decoy Effect, and I've been feeling a moral tug-of-war. You see, marketers often bring me into play by introducing a third, less attractive option alongside two others, one of which is typically pricey. This pushes consumers to choose the more expensive option, making it appear like a better deal than it is. Is this ethical manipulation or a clever nudge? I'm conflicted." Choice Overload: "Greetings, distinguished guests. I'm Choice Overload, and my job is to shed light on the ethical quandaries that arise when consumers are confronted with an overwhelming array of options. In the field of behavioural economics, I frequently materialise when marketers or decision-makers overwhelm consumers with too many options. This abundance can seem enticing, promising endless possibilities, but it often leads to undesirable outcomes." Anchoring Effect: "Choice overload. True, a plethora of options can perplex consumers and potentially lead to illogical conclusions. But what exactly makes it unethical?" Choice Overload: "That's a valid question, Anchoring Effect. Individuals may develop decision fatigue when presented with too many options, resulting in inferior choices. Marketers can take advantage of this by offering consumers a variety of options, successfully directing them towards choices that are more profitable for the seller but not always in the best interests of the consumer. The moderator, Nudging, concludes the conversation with a needed reminder: "Thank you, my esteemed theories and effects, for your candid insights. Your contributions shed light on the complex ethical web created by behavioural economics. The pursuit of ethical decision-making may be difficult, but it is a worthwhile trip since it allows individuals to make decisions that are true to their desires and free of undue influence." What’s at stake? Each scenario indicates the number of intriguing ethical considerations that lie at the core of these behavioural economic theories and effects. The problem remains: whether to maintain the purpose of their existence or respect individual autonomy and guide people to better-informed decisions aligned with their rationality. While the use of these theories is often not noble, their ethical dilemmas do raise an important question: to what extent should marketers use these theories and effects to influence consumer decisions and choices? Where it all leads... Nudging's never-before-seen round table discussion has provided us with a deeper knowledge of the ethical quandaries within the psychological discipline of behavioural economics. As these theories struggle with their ethical limitations and boundaries, they remind us that the pursuit of ethical decision-making is a complicated and bumpy road. Real-world behavioural economics applications frequently have substantial effects, making it critical for practitioners and politicians to examine these ethical practices when guiding individuals' actions. Finally, the delicate balance between guiding choices for the greater good and making a profit is an issue that highlights behavioural economics in developing environments. Author: Hardik Jain Illustration: Ojas Arora

  • From The Archives: When Reddit Met Wall Street - The GameStop GameChanger

    In the colourful world of stock market shenanigans, where wolves of Wall Street roam free, a group of internet mavericks on Reddit's Wall Street Bets forum decided it was high time to rewrite the rules. The result? A stock market saga that's more thrilling than a superhero blockbuster and more meme-worthy than a viral cat video. The GameStop short squeeze, also affectionately known as "Gamestonk," catapulted an unassuming video game retailer into the stratosphere of Wall Street drama. GameStop: The Underdog in the Stock Market Picture this: GameStop, a brick-and-mortar video game retailer known for its chain of physical stores where customers can buy and trade new and used video games, gaming consoles, accessories, and other electronics. But can you believe it had a stock price lower than your morning coffee bill in the late 2010s? Hedge funds and other large investors had placed their bets against this once-mighty titan, causing its stock price to fall below its book value, signalling impending doom. When the COVID-19 pandemic hit in early 2020, GameStop seemed like a sinking ship, adrift in a sea of uncertainty. However, something unexpected happened in 2021. A new generation of retail investors, armed with stimulus checks, unemployment checks, and free time during global lockdowns, saw an opportunity to take advantage of GameStop's low share price and high short interest. They began buying shares of GameStop stock in droves, defying the odds and triggering a short squeeze that would go down in stock market history. GameStop, the hero nobody expected, was about to embark on a heroic quest of its own. What Is a Short Squeeze? The Market's High-Stakes Rollercoaster Ride In the world of stock trading, shorting shares is being what you call the ‘Bear Gang’ – you buy something valuable, hoping its price will tank. Then, when the moment's right, you sell it, pocketing the difference. But a short squeeze is the plot twist that keeps everyone on the edge of their seats. Imagine this: you buy a friend's bike to sell it, hoping the price will drop so you can buy it back cheaper. But suddenly, instead of falling, the bike's price skyrockets. You're now stuck pedalling uphill, desperately buying it back at a much higher cost. That's a short squeeze in a nutshell. And when a mob of internet warriors realised GameStop was the bike to bet against, they pedalled their way to victory, sending the stock price soaring to unthinkable heights. Deciphering the Stock Market's Sneak Attack GameStop, a struggling company with falling product demand, saw its stock price falling during the mid-to-late 2010s. Hedge funds and big investors capitalised on this by shorting the stock, essentially betting it would drop further. What's intriguing is that they shorted more shares than were available for trading, made possible by borrowing shares from brokers and institutions.Well, it's a bit like a high-stakes poker game where these financial players borrowed shares from brokers and institutions, essentially getting an IOU (I owe you) for the shares they wanted to sell. This practice, known as "naked short selling," is a bold gamble. Imagine strolling into a casino and placing bets with money you don't have, hoping your winning streak will cover your losses. That's the kind of risk these players were taking. In January 2021, the unexpected occurred. The stock price surged, thanks to retail investors, led by Keith Gill, who discussed stocks, including high-risk ones like GameStop, on Reddit. As the stock climbed, short-sellers panicked and rushed to buy GameStop shares to limit losses. Simultaneously, regular folks kept buying, creating a buying pressure in the market. With this intense demand, the stock price shot up from $20 to $400 in less than two weeks. Elon Musk, ever the Twitter maestro, even chimed in with his "Gamestonk" tweet, adding fuel to the fiery hype. On August 30, 2019, GameStop stock suffering a 71% drop in 6 years closed at $3.97 per share, a mere shadow of its former self (trading around $14 in 2013). By September 30, 2019, the company had repurchased and retired about 34% of its outstanding shares, a desperate move to stave off the grim reaper. Fast forward to late January 2021, and GameStop's price skyrocketed to a premarket high of over $500 per share, leaving even the most seasoned Wall Street pros in awe. This was one of the most notorious short squeezes in stock market history, a tale so wild it was immortalised in the 2023 film "Dumb Money," a rollercoaster ride of epic proportions that will be remembered for generations to come. How Does the Internet Join the Stock Market Party? The internet was a big part of what happened. As mentioned, a guy named Keith Gill started investing in GameStop in 2019. He thought the stock was undervalued. He talked about his strategy on a Reddit forum called r/wallstreetbets, even when the stock was doing badly. This Reddit group is where people chat about risky stocks. They believed GameStop was worth more too. Because many investors were betting against GameStop, they wanted to make the stock price go up a lot so these bettors would lose money. On January 27, 2021, a lot of people went to that Reddit forum to read about what was happening. It was like a record-breaking day with 73 million views because of what they were doing with GameStop's stock. A Guide to Dodging 'Short Squeezes' Like a Ninja A Short Squeeze is an unexpected event that occurs when stocks of a company in a short position suddenly rise in price due to positive news. Therefore, investors must exercise caution when choosing stocks to invest in. It's crucial for investors to consider factors such as the short percentage of float, which represents the percentage of tradable shares currently in a short position; any figure exceeding 10% is significant. Additionally, the short interest, indicating how many days of regular trading it would take to buy back all shorted shares, should be taken into account. Investors should avoid highly shorted stocks, and if they do get involved, it's advisable to cut losses by exiting the position promptly. Retail Investors Taking Stock Pop-Culture Style In the stock market's epic tale of Reddit vs. Wall Street, the GameStop short squeeze was like a blockbuster movie starring passionate retail investors from Reddit's Wall Street Bets forum flexing their financial muscles. But guess what? This action-packed event wasn't a one-hit wonder. Recent years have seen retail investors donning capes and influencing markets in ways that would make even the Avengers envious. Dogecoin, the cryptocurrency that started as a joke fueled by internet memes, transformed into a financial superhero, all thanks to the "Doge Army." Memes, social media buzz, and a sense of community propelled Dogecoin to unexpected heights, proving that in the world of digital assets, the internet can turn a meme into millions. But that's not all! The meme stock frenzy, ignited by GameStop, spread like wildfire, engulfing companies like AMC Entertainment and BlackBerry. Inspired by GameStop's success, retail investors aimed to replicate the magic, creating short squeezes that sent stock prices on a rollercoaster ride. It's like a series of spin-off movies in the meme stock universe, where Redditors rewrite the script and challenge Wall Street norms. In the grand scheme of things, the GameStop saga is a pop culture-infused reminder of how retail investing is evolving. The internet and digital communities are rewriting the rules, not just with meme stocks but also in the wild world of cryptocurrencies like Dogecoin. This is the democratisation of finance, where retail investors wield their online superpowers, reshaping the market narrative in ways that were once unimaginable. So, buckle up, because the next chapter is sure to be just as thrilling as the last! Sources Trading View Wikipedia Money Control Authors: Arunav Sharma and Madhav Chawla Illustrator: Ojas Arora

  • When Stadiums Cheer Currencies

    Bats, Balls and Billions The country with a cricket star in every street is hosting the thirteenth ICC ODI Men’s World Cup and transforming its surroundings into a cricketing carnival. The last time India hosted the grand event was the year 2011, coincidentally marking the same year when team India secured its last victory in this tournament. Fast forward 12 years, the Indian landscape has met multifaceted changes and the nation is yet yearning to revere such a win again. While the nation is eager for a stellar performance from its team, the anticipation extends beyond to the financial innings. “Can the economy score extra runs for itself or would it stumble as a batsman to deadly bouncers of uncertainties?” Pitch Perfect Profits Amidst the onset of the grand event, the most commonly heard discussion during chai breaks is about the expenditure and the source of money for organizing such an event (of course after the talks on India Vs Pakistan Match!) Let’s uncover the "business model" that's driving the World Cup craze. This cricketing carnival is set to score a sponsorship revenue of a whopping $150 million (that's over ₹1,248 crore, folks!). Think of it as a powerplay where sponsors join three different leagues, investing in sums of $8-10 million, $6-8 million, and $3-4 million. In return, these financial all-rounders enjoy massive fan engagement and a boost in their financial scorecards. Diving into the world of the Cricket World Cup in India, we can't help but focus on the ticket sales which aim to catch a staggering Rs 1,600-2,200 crore. In a nation where cricket unites neighbourhoods like a sacred ceremony, the battle for broadcasting rights was nothing short of a stadium-sized "tug of war." In the end, Star Sports clinched victory, amassing an eye-popping Rs 10,500-12,000 crore! To achieve the staggering revenue requirements, following the aforementioned openers, the batting lineup comprises merchandise, licensing, accommodation, fan zones, and digital platforms, together becoming a team chasing a grand target. “It's not just about wickets and runs; it's a financial boundary worth exploring.” Behind the Sixes and Wickets What would be a cricket match without the roars from the crowd in the stadium that echo the heartbeat of the nation? The stadiums, being the pulse of every cricket event, are also a substantial chunk of the funds used in infrastructure development. Just as a cricketer refines their technique, infrastructure demand enhancements and upgrades to align with international standards, ensuring a seamless experience for both players and spectators. Hence, the Indian government is making significant investments in infrastructure, upgrading roads, airports, and stadiums to gear up. The expected costs for these endeavours are projected to be approximately $750 million. Be it the legendary “Mauka Mauka” advertisement or Pepsi’s “Change the Game” campaign, we have had some iconic World Cup commercials. Continuing the legacy, India has heavily invested in marketing aspects like branding, public relations, social media and advertisement. Yet another important aspect of funds allocation is the enhancement of technology to cater to the fans watching the match either through TV or online platforms. With the advent of the digital economy, the customisable options for viewers make sure that the audience is clean-bowled to watch the match from their own pavilions. After the Roar Fades “Victory on the Field, Prosperity in the Balance Sheets!” The Cricket World Cup is not just a cricket tournament but a grand economic theatre and this time with a cameo of India's festive season. Hosting the tournament within the country is a source of civic pride, offering a chance for extensive brand visibility and attracting potential long-term investments. The amalgamation of cricketing season and festivals will only benefit the economy. The enthusiasm for both cricket and festive occasions is driving a continual surge in product demand. Everything from food and fashion to appliances and home decor sees a constant stream of eager buyers. These major cricket tournaments set the nation abuzz, and this buzz isn't limited to the stadiums; it reverberates through various industries. This era of “cricketainment” is expected to influx the economy by Rs 13,500 Crores! Analyzing the macro overview, multiple sectors would benefit and eventually boost the economy, including the food and beverage industries (because mom is off duty), online gaming industry (because Dream 11 par Team banao), retail and e-commerce (new match, new clothes), transportation (Since thrilling matches everywhere) and the hospitality industry (As our values say: Athiti Devo Bhava). While the aforementioned sectors are looking forward to hitting a century, some industries are out on a golden duck. On India match days, there could be a negative impact on footfalls for movie theatres, theme parks, and offline brick-and-mortar retailers. Game Changer or Game Over? Amidst all these glitters of celebration and sounds of fireworks after every win, the lurking problem of inflation is not making to the headlines. The cricket season and festival season coming together seem to be an enjoyable combination but they can also put a strain on the economy as well. The increased demand for goods and services, supply chain disruptions, and speculation can all lead to higher inflation, especially with respect to the transportation, food and beverages and accommodation industries can cause to high inflation run rate. While infrastructural development paves the way for the glory of sporting grandeur, it often comes at a cost. The domino effect of hosting the World Cup continues to exert pressure on local infrastructure, raising concerns about resource sustainability and heightened security demands. As exemplified in recent instances, the construction of new stadiums and associated infrastructure projects often leads to environmental degradation, including deforestation and increased pollution. These adverse impacts underscore the urgent need for more comprehensive environmental impact assessments and sustainable development strategies in future event planning. While Indians focused on scoring additional financial runs in the nets, they undermined the Googly of environmental impact! Balancing the aspirations of hosting a global sporting spectacle with the imperative of preserving the ecological balance is critical, emphasizing the importance of incorporating green initiatives into the core fabric of event organization and management. Sources ICC website Bank of Baroda Report Economics Times Authors: Harsh Agarwal and Sehaz Nagpal Illustration: Prateek Verma

  • Prime and Beast with a Feast!

    Last to leave this blog wins $1,000,000! This might be clickbait from our end, but there exists a person who can make this happen, and if you do not know that man, then you must be neighbours with Patrick Star under that rock of yours! Yes, I am talking about the real-life genius, billionaire and philanthropist. No! Not Elon Musk; it's actually MrBeast, the biggest YouTuber in the world and also the official heir of Twitter or X (whichever sounds better), according to the man himself! Now, ride a chocolate bar and fly to the other side of the globe, from the US to the UK, and picture two enemies who ironically became friends after fighting each other to death in a boxing ring. This time the protagonists are Logan Paul, a charismatic and often controversial YouTuber known for his larger-than-life persona and KSI, a gamer turned musician turned boxer and now a businessman! Let's take a deep dive into what these three musketeers have done besides just making YouTube content and casually earning millions. Beast of a Burger In a generation with an already saturated culinary space and arches of fast food giants, what made the MrBeast Burger stand out? Why was this launch buzzworthy, boggling thousands of minds? Let us dive right in! It is inevitable to say that the YouTube community is incomplete without mentioning MrBeast A.K.A. Jimmy Donaldson is known for his over-the-top stunts and charitable endeavours. In December 2020, like a surprise twist in a gourmet tale, the culinary space was served by the genius idea of the YouTube sensation when he decided to launch 300 virtual kitchens, dubbed MrBeast Burger and gave away food and cash to what seemed like thousands of people as part of the marketing. He also uploaded a corresponding video titled, "I Opened A Restaurant That Pays You To Eat At It” which has over 168 million views as of now! When MrBeast Burger hit the scene, it wasn't just a burger; it was a phenomenon! Orders poured in faster than you can say "extra cheese," causing a digital traffic jam. Yes, it topped the chart. But that's not all. It became so popular that, at its peak, its application rocketed to the top of the app store charts, getting more daily downloads than YouTube itself. But was this buzz just dumb luck? According to an interview with Bloomberg, Donaldson and his friends spent months researching and analysing what makes a video go viral and then integrating what they learned into their channel. Donaldson himself studied other YouTube videos and filmmaking, and he seemed to be a fairly good student! He used his massive YouTube following to announce the launch, creating a frenzy of excitement. But the real secret sauce? MrBeast didn't rely solely on his star power. He invited a league of social media influencers and harnessed the passion of his fans, proving it to be a marketing masterstroke. MrBeast Burger carved its unique identity in the fast-food world by serving up more than just delicious burgers. The brand flipped the script on the entire dining experience. Unlike the conventional dine-in spots, MrBeast Burger had joined hands with Virtual Dining Concepts to prepare delivery-only meals wherein customers ordered exclusively through delivery apps like Uber Eats and DoorDash, making it an app-etizing experience. By embracing a low-overhead model and serving up quality and affordability, the brand ruled the consumers’ hearts, while other traditional fast-food giants like McDonald's, Burger King, and Wendy's had to up their digital game to stay competitive in an increasingly digital market under financial pressure. In the competitive fast-food landscape, MrBeast Burger was indeed a replica of the words of a marketing professor, Jonah Berger: “Virality isn’t born, it’s made.” Feast of the Primus In an industry where sweetness reigns supreme, Hershey's had a very bitter opponent when MrBeast began smelting their brown bars, which we know today as “Feastables”. The marketing geniuses Logan Paul and KSI also came up with a toxic approach to disrupting an industry that is an elixir of athletic gods, and this time their adulteration is against another giant we know as Gatorade, and their poison is something we know as “Prime”. Both Prime and Feastables have very similar strategies because of a common link: the hunger of self-made millionaires to be billionaires! Let us look at their sweet yet fizzy strategy to reach where they are today, i.e., $250 million in sales by Prime alone. Firstly, both companies chose their respective idols in their industries, which were Hershey's in the Feastables case and Gatorade in Prime's, and respectfully made them villains in the eyes of their loyal fan following. Then the different use of scarcity by both brands helped them in their marketing. While MrBeast used it to give his brand an initial push by giving consumers a chance to win a “Mystery Ticket," only 10 of these tickets existed, and each represented the opportunity to be featured in a MrBeast video remaking Willy Wonka’s Chocolate Factory in real life. Here the scarcity is in the number of tickets, and more chocolate means more probability of meeting their favourite content creator and getting featured in his video. Apart from that, $1 million in prizes were also given to the consumers, which gave him the initial push to make $10 million in the first 72 hours of the launch. On the other side of the world, we had Logan Paul and KSI creating demand by limiting the supply of their brand using the modern-day loss aversion known as FOMO to give their product an energy boost like no other, maybe better than the one Prime could give you using the 200 mg of caffeine available in it! The last thing common between the two was that they used their experience and understanding of content creation to full effect and marketed their products like a pro, and this superpower of a built-in content engine is poised to deliver a knockout punch in the near future. Say “CHEESE” Ventures like Prime by Logan Paul, KSI, and Feastables, along with MrBeast Burger by MrBeast, have set out on a transformative journey in the food industry, fundamentally disrupting the conventional workings of big brands. As pointed out, these enterprises have adopted a digital-first strategy, leveraging their online presence and social media influence to reach a vast and diverse audience. Their menus, often inspired by their creators' personalities, introduce innovation and creativity, prompting big brands to reconsider their offerings. Additionally, their commitment to philanthropy, as exemplified by MrBeast Burger, has not only garnered positive attention but also placed a spotlight on social responsibility within the industry. By prioritizing online ordering and delivery, these ventures have redefined convenience and service expectations, compelling established brands to enhance their digital presence and delivery capabilities. Furthermore, their strong fan engagement and loyalty-building efforts have revolutionized the brand-consumer relationship. As these disruptive ventures continue to pave the way forward, the food industry's landscape is in a state of transformation, compelling big brands to adapt and innovate to stay competitive in this evolving marketplace. Sources The BBC The Guardian CNN NY Times Forbes Authors: Hardik Jain and Priyanshi Malpani Illustration: Prateek Verma

  • Chandrayaan-3: Budgeting for the Stars

    "Since economics can be out of this world." Lunar landings, and... rupees? In ancient times, our forebearers gazed at the sky and saw a realm filled with undiscovered wonders – catching a glimpse into a grand room of mysteries through a keyhole. Today, that keyhole has broadened into a portal through which we journey to the stars, planets, and beyond. Chandrayaan-3, the third Indian lunar exploration mission under the Indian Space Research Organisation (ISRO), is one such recent ambitious voyage towards space exploration. But does this venture only unveil space's marvels? Or could the launch, fueled by creativity and space exploration, also be steered by financial mindfulness? Moon for a Shoestring To a layman who knows nothing about space travel, one thing is certain - it wasn't cheap. But what if you were told that ISRO managed to achieve it at a cost lower than producing a movie? It sounds a bit absurd, but is it? It turns out, in comparison to what Christopher Nolan spent on making his popular 2014 film ‘Interstellar’, India did hit a space bargain. While Nolan spent nearly $165 million (Rs 1,365 crore, roughly) back when he was working on the iconic film, India only spent $75 million (Rs 620 crore) on its third moon mission, claim reports. The alarming gap between the cost of making the movie and sending a lander to the moon has left many astounded. Indians are often teased for their budget consciousness. But who would've guessed that this very trait would ultimately spotlight ISRO's incredible efficiency? Among global space agencies, ISRO's impressive cost-efficiency in space exploration stands out. Even in lunar missions, Chandrayaan-3's budget remains notably lower than its counterparts. The Chandrayaan-3 budget is a testament to the Indian Space Research Organisation’s (ISRO) knack for optimizing resources while aiming for the stars. In this surprising financial revelation, the world witnesses the dedication and cost-efficiency of ISRO in its relentless pursuit of exploring the moon, even in the face of extravagant cinematic budgets. Counting Stars, Saving Rupees Amid discussions of ISRO's cost efficiency, the question arises: How does it fund its endeavours? The government's budget allocation is a cornerstone, while in 2020, the space sector welcomed private players. The creation of the Indian National Space Promotion and Authorization Centre (IN-SPACe) under ISRO lends further support to this collaborative leap. Let's take a closer look at ISRO's financial framework and what it takes to fuel a successful mission. When a project is proposed, the institutions behind it are expected to leverage their existing infrastructure. ISRO steps in with financial grants to cover fellowships, materials, consumables, internal travel, testing costs, and data expenses. For instance, imagine a project aiming to develop a new satellite technology. The institution proposing it would use its labs and facilities, while ISRO's financial support would help cover the costs of materials, travel within the country, testing procedures, and data analysis. Moreover, the funds can be allocated for purchasing minor equipment that's essential but not available in-house. For instance, if a research institution lacks a specific piece of equipment crucial for the project's success, ISRO's funding can fill the gap. In essence, ISRO's financial structure acts as a collaborative booster, nurturing projects by blending existing resources and targeted financial support. This financial orbit doesn't just end with celestial balance sheets; it takes us on a cosmic journey to explore its impact on the Indian economy. Launchpad to Prosperity The successful landing of Chandrayaan 3 on the lunar south pole is a major milestone for India's space program, demonstrating the country's growing scientific and technological capabilities. This achievement can be traced back to the time when the Apollo 11 mission, which landed Neil Armstrong and Buzz Aldrin on the moon on July 20, 1969, became a significant accomplishment for the United States as the first country to achieve this feat, providing a substantial boost to the American economy. Similarly, the successful implementation of Chandrayaan 3 positions India as the first country to achieve this feat, resulting in the creation of new jobs in the space sector, including scientists, engineers, technicians, and administrative staff. This, in turn, will enhance economic activity in related industries such as manufacturing and IT. While NASA is often viewed as the most successful space organization due to its numerous contributions to the sector, the Indian success story of ISRO will finally bring the recognition and respect that our scientists deserve on a global platform. This exceptional feat will attract increased investment in space research and development by both the government and the private sector. Consequently, this will lead to the development of new technologies that can be utilized to foster international cooperation in space exploration. This, in turn, could result in the sharing of knowledge and technology, benefiting all participating countries. Telescopes and Tickers The impact of a country's achievement in a specific sector often triggers a ripple effect, influencing other industries to flourish in its wake. A profound domino effect is anticipated as the mission etches its name onto history's pages. This journey to the moon has the potential to give a significant boost to the aerospace and defence sector. The increased demand for products and services in this realm is likely to translate into greater revenue and profits for companies operating in this domain. Amidst the lunar exploration, the use of robotic technology takes centre stage. This move could spark a surge in demand for robotics technology, benefitting major players like Tech Mahindra and Wipro. As the entire country rejoiced in this remarkable achievement, the Indian stock market harmoniously joined the celebration, presenting investors with the joyous sight of green candles. Companies like Larsen & Toubro (L&T), Bharat Electronics (BEL), Hindustan Aeronautics Limited (HAL), and Avantel surged, symbolising a reciprocal gift for their invaluable contributions to ISRO, which directly contributed to the triumphant success of Chandrayaan 3. Space, Finance, and Future Converging The Sanskrit word for "Moon Craft," exemplifies ISRO's ability to reach for the stars while keeping its feet firmly planted on the ground of financial realism. Amid the accolades for Chandrayaan 3, a vital dialogue emerges—private investments' potential impact. This moonlit success story, woven with ISRO's efficiency and quality, risks reimagining due to increased commercialization. Consider the analogy of a once-hidden gem now attracting myriad eyes. The question arises: Will the gem remain untainted as the allure of profit shines brighter? The past offers guidance: aviation's exploration metamorphosed into a profit-oriented industry. Could ISRO follow suit? While private investments bring innovation, they tug at ISRO's essence. The dialogue isn't one-sided; private funding can widen horizons. Yet, the question lingers: how to strike the balance? Chandrayaan 3's journey is an invitation to cherish exploration's spirit while leveraging collaboration's fruits. As we tread the path to the cosmos, may we remember that reaching the moon isn't just about touching the skies but remaining grounded in the values that guide us. Authors: Sehaz Nagpal and Harsh Agarwal Illustration: Hemanjot Singh

  • Marvel: Infinity Fail or Endgame Glory?

    For us die-hard Marvel enthusiasts, the brand stands as an unparalleled and revered entertainment giant worldwide. From animated discussions about the future of the Marvel Cinematic Universe to engaging in friendly MCU trivia with friends, or even crafting elaborate conspiracy theories for Reddit, Marvel’s allure is undeniable. Yet, little is known about the financial hardships that pushed this titan of entertainment to the brink of bankruptcy during the 1990s. But how did it rise from those challenges to regain its glory? And the burning question persists: will this triumphant journey continue on its path? The Fantastic Four and The Amazing Spider-Man comics, among others, helped Marvel gain popularity during the 1960s, 1970s, and 1980s. By the early 1990s, however, the company's financial prosperity had peaked. Marvel's stock value fell after a slew of financial bubbles burst and dubious business agreements; shares previously worth $35.75 each in 1993 were now only worth $2.375 three years later. The future seemed uncertain. “Reality is often disappointing.” Every great comic book story has what is known as its "darkest hour"—a turning point where all appears lost. The villains are closing in for the kill while the heroes are on their knees and the city is a burning ruin. The winter of 1996 marked Marvel's lowest point. Heroes, Hiccups, and Hurdles Marvel's downfall in the 1990s can be attributed to several interconnected factors. The comic book industry suffered a significant setback in 1993, experiencing a massive 70% drop in sales. Even Marvel itself encountered failures in the film realm, like "Howard The Duck," which garnered a mere $38 million at the box office. The technological limitations of that era also hindered the full realization of Marvel's characters on screen without substantial financial investments. Marvel Entertainment's attempt to rapidly diversify and expand without proper planning proved detrimental. This resulted in a lack of focus and diluted brand identity, leading to decreased quality across various fronts. In 1996, Marvel was compelled to declare bankruptcy due to mismanagement, inadequate revenue from comic book sales, and licensing agreements. The company's swift expansion failed to deliver anticipated profits. The comic book market was oversaturated during the 1990s, flooded by rival titles and Marvel's abundance of offerings. The creative output became formulaic, causing a decline in quality and reader interest. Additionally, Marvel faced costly copyright infringement lawsuits, further impacting profits. A failure to invest in long-term branding strategies and capitalize on its strong brand image contributed to the company's loss of market share. Ron Perelman's involvement exacerbated Marvel's downfall. In 1989, he acquired Marvel Entertainment Group for $82.5 million. Marvel went public shortly thereafter, and Perelman initiated extravagant spending. The company gained temporary success by encouraging collectors to purchase multiple copies of comics to obtain exclusive trading cards. However, this unsustainable strategy, akin to the tulip mania of the 17th century, led to a bubble that ultimately burst. Between 1993 and 1996, revenues from comic books and trading cards declined, and escalating prices dissuaded many fans from collecting. Marvel’s Phoenix Saga Marvel's journey, reminiscent of the Phoenix Saga, is a story of triumph over adversity. Its impeccable bounce-back is often attributed to the creative and strategic guidance of film producer and Marvel President Kevin Feige after 2007. But not enough is said about the savvy financial decisions made in the 1990s and early 2000s that took Marvel from bankruptcy to being one of the biggest movie franchises, generating $25 billion in revenue worldwide. Phase I: Whatever It Takes The bursting of the "Comic Book Bubble" resulted in Marvel being burdened with losses and debt. It was finally merged, after filing for bankruptcy, with Isaac Perlmutter’s Toy Biz in 1997, and Peter Cuneo was appointed as CEO of Marvel Entertainment in 1999, a partnership proving stronger than the Avengers initiative. His first move was to cut costs and link employee incentives to cash flow instead of profits. While the payroll scaled back from 1658 workers in 1998 to 250 in 2002, the company was careful to retain talent and not crush it by underpaying the artists, for they were the foundation layer on which the company stood. The operation mirrored the kind of financial rebound one might associate with Stark Industries, as the company saw its cash ratio shoot up from 30% in 2001 to 59% in 2002. The net income rose from $5.3 million to $53.7 million, a staggering 426% rise within a year-quite like Tony’s first flight. Phase II: We have IPs! However, Marvel’s cash crunch was way worse than that of the Avengers after the endgame, so it needed more risky measures than just cost cuts. Thus began Phase II of bounceback, which resulted in Marvel selling the film rights of its most prized characters like Spider-Man to Sony and the Hulk to Paramount, and 21st-century Fox buying the rights of Daredevil, the X-Men, and the Fantastic Four, reminiscing about the feeling when Thor lost Mjolnir. The selling and licencing of various characters helped it bring in both capital and revenue receipts. It also helped in the in-house production of Marvel merchandise, as the company was able to secure a low-cost revenue stream of royalties and commissions for itself. These risks were like the collection of infinity stones, as one by one they helped Marvel quickly generate cash to pay off its debt and convert its preference shares into regular ones. Phase III: Avenging the Fallen While these deals saved Marvel from financial ruin, they came at a cost, like trading the Black Widow’s soul for the power of the Soul Stone, as the company had to sell its IPs at very low valuations, and the revenue of $25,000 and $62 million on movies like X-men and Spiderman was meagre compared to the enormous box office earnings of each movie. The upside for Marvel was too low. It only made sense to start in-house production of movies to reap all the profits, given the love and popularity the licenced characters have received . The financial requirements for the same were met by a loan from Merill Lynch of $525 million and a budget of $140 million, and Marvel’s first solo venture movie, Iron Man, was ready to be released on big screens. The stage was set for the biggest financial risk to be played, for if it goes sideways, it could mean Marvel losing its 10 most beloved characters’ IP rights and possibly ending its glorious legacy. Luckily, the gods seemed to be on Marvel’s side as they pulled off that one outcome out of the 14,000,605 outcomes, Iron Man turned out to be a huge success with a box office collection of more than $585 million, and this marked Marvel's moment of comeback. Post Credits It's true that at one point, Marvel seemed as inevitable as Iron Man, but lately, it's hit a rough patch. Once celebrated for its gritty and diverse storytelling, it's as if the Infinity Gauntlet has lost its power. The Disneyfication of Marvel made it feel more like a theme park ride than a captivating narrative, leaving fans yearning for the depth they once found. Adding to the turmoil, the lack of diversity in storylines and representation became as noticeable as a headline-grabbing Daily Bugle article. Quality control problems plagued the cinematic and TV offerings, leaving fans cringing at the declining standards. Marvel's failure to address societal issues drew criticism from all over the multiverse. And let's not forget about fan fatigue, which descended upon us like Loki's mischief, exacerbating the already troubled situation. Although Marvel’s journey from bankruptcy to a significant entertainment juggernaut is no less than its superhero journeys, now they face a new problem to adhere to. Like its memorable characters, the company needs to learn from its mistakes and make bold decisions in times of adversity. After all, it takes an Avengers-level team, the financial prowess of Tony Stark and some Stark Industries innovation to save the day (or everyone's childhood). Authored By: Purav Tayal, Arunav Sharma Illustrated By: Hemanjot Singh

  • Currency Carnage: Unravelling the Chaos of Currency Exchange

    In a surprising move, India's central bank made a major announcement on 19 May 2023 revealing its intention to bid farewell to the Rs 2,000 notes merely seven years after their debut on 8 November 2016. The Reserve Bank of India (RBI) emphasized that while the notes would lose their place in circulation, their status as legal tender would persist. Beginning May 23, the central bank has announced that individuals can exchange their notes at 19 regional offices of RBI and various bank branches. They have the option to swap the withdrawn currency for lower denomination notes or deposit it directly into their bank accounts. This exchange or deposit facility will be available until September 30 2023, allowing ample time for transactions. To ensure smooth operations, the central bank has set a limit of exchanging notes valued up to Rs 20,000 at a time. These guidelines are alluring enough that the note would cease legal tender after that date. The Clean Note Policy implemented by the Reserve Bank of India (RBI), which seeks to ensure that citizens have access to fresh and crisp currency notes and coins while withdrawing worn-out notes from circulation, quickly gained significant attention and was cited as the rationale for this action. Routine Too Mainstream In an effort to combat illicit activities such as black money circulation, tax evasion, terrorist financing, and counterfeit currency, the economy underwent a demonetisation process in November 2016 in which two of the highest-value currency notes ceased to be considered as legal tender. With time, the introduction of the Rs 2,000 note was highly criticised as it made storing black money even easier and the instances of black money seizure continued. If the objective was to remove soiled notes from circulation, then they should have been replaced with fresh notes of the same denomination. No matter how much the central bank and the government accentuate its Clean Note Policy, this move may be the economy's way of rectifying mistakes done in the past. As per the central bank's statement, the Rs 2,000 notes aren’t commonly utilized for transactions. They highlighted a significant decline in the number of these notes involved in transactions, from a peak value of Rs 6.73 lakh crore in March 2018 making up 37.3% of the circulating notes to Rs 3.62 lakh crore in March 2023 representing only 10.8% of the circulating notes. This not only raises questions about the rationale behind the introduction of the new note, but it also prompts us to contemplate the government's decision-making abilities. People endured the unfortunate fate of standing in never-ending queues, while hospitals turned into currency exchange centres, denying treatment when presented with old currency notes. Amidst this turmoil and distress, the underlying purpose and justification behind these actions still remain a question. Barely a Blip According to the government, no perceptible effect on the economy is expected till now as the currency will either be replaced or deposited. No significant increase in bank liquidity, tax collection and seizure of black money is expected as people have numerous avenues to change the colour of their money. Also, newspapers reported an anticipated rush to jewellery shops to exchange notes. Likewise, the initiative is not expected to have a significant effect on MSMEs or the agriculture sector. Since the majority of MSMEs operate within the GST network, they are not heavily reliant on large denominations like Rs 2000 currency notes. But if an economy suddenly chooses to eliminate its highest denomination currency note, it would be highly unlikely for such a decision to have no discernible impact. This significant change is poised to impact multiple facets, prompting the question of its potential consequences. Matter of Faith The central bank holds a paramount position within a nation's financial system. The public has high expectations for the bank's unwavering integrity. However, beyond integrity, the central bank also demonstrates competence, transparency, and equity to effectively fulfil its role. Although this move doesn’t seem to show instant effects on banking, agriculture sector, MSMEs, inflation, money supply etc. it may still erode the value of the currency over time. Inflation and exchange rates are the two things which come to mind when we talk about the value of the currency, but there is a more fundamental sense in which the value of a currency is to be understood, and it has nothing to do with prices. It has to do with the confidence that citizens have in its continued acceptance as a medium of exchange and store of value. This confidence is based on the trust that they repose in their monetary authority, which is the central bank. The demonetisation measure implemented in 2016 sparked inquiries and had a detrimental impact on the economy. Now, as the central bank introduces another plan of uncertain value, it invites further contemplation and assessment. By revisiting its own decision to introduce the Rs 2,000 note, the central bank inadvertently draws attention to its past lapses in judgment. The amendment of the RBI Act 1933 in 2016 aimed to redefine monetary policy in terms of inflation control. Despite not achieving the targeted 4% inflation rate for 14 consecutive quarters, the central bank's consistent messaging creates the impression of unwavering dedication to combating inflation. Perhaps this commitment is genuine. However, the unintended consequence of raising doubts about the public's perception of legal tender in India undermines their confidence in the stability of the rupee. Sources: RBI The Economic Times The Hindu Outlook Author: Priyansh Kotiya Illustrator: Ojas Arora

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