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Tag: 🔍Insights

  • Victoria’s Secret – The Rise, Fall & Resurrection

    The well-known American lingerie, clothing, and beauty retailer that has been known across the globe for its high visibility marketing and branding, Victoria’s Secret has been struggling since the year 2016. Remaining at the helm of high fashion for over 20 years, the brand succumbed to the dual pressure of shifting consumer preferences and faulty business practices by the brand’s leadership. However, by May 2020, the brand remained the largest lingerie retailer in the United States with over 1070 stores spread across the country.

    The Beginning
    1982 – The L-Brands Takeover
    The 1990s Decade
    The New Century
    Disaster Strikes
    The Rise From The Ashes
    Conclusion

    The Beginning

    Victoria’s Secret was the brainchild of Roy Raymond and his wife Gaye Raymond. It originated from Roy’s experience when he went to purchase lingerie for his wife from a department store.

    He said in an interview – “When I tried to buy lingerie for my wife, I was faced with racks of terry-cloth robes and ugly floral-print nylon nightgowns, and I always had the feeling the department store saleswoman thought I was an unwelcome intruder.”

    His experience propelled him to study the lingerie market for the next eight years and, finally, on June 12, 1977, Victoria’s Secret was born. Borrowing a total of USD 80,000 – half from family and the balance from the bank, Roy established a store in which men would feel comfortable buying lingerie. The brand opened its first store in the Stanford Shopping Center in Palo Alto, California. The name was an oblique reference to Queen Victoria and the associated refinement of the ‘Victorian Era’.

    Roy Raymond - Founder, Victoria's Secret
    Roy Raymond – Founder, Victoria’s Secret

    At the time when Victoria’s Secret came into existence, the US undergarments market was dominated by pragmatic clothing that was often sold in packs of three at department stores by leading brands of the time like Jockey, Hanes, and Fruit of the Loom. Niche products like high-end lingerie items were found only in specialty shops.

    The first year of business saw the brand earning gross revenue of USD 500,000. It financed expansion as the business grew to add four new locations and a mail-order operation. He also launched the famous Victoria’s Secret renowned catalog. By April of 1982, the brand was recording USD 7 million in annual sales with 55% of the revenue generated from the sales of the catalogs, and was a minor player in the underwear market. The trade described the business as ‘more burlesque than the main street’. However, the company was also on the verge of bankruptcy.

    1982 – The L-Brands Takeover

    The founder of L-Brands, formerly Limited Brands, Leslie Wexner, was a rising star in the world of business and built himself an impressive empire. By June 1982, L-Brands was listed on the New York Stock Exchange and a month later the company acquired Victoria’s Secret’s six stores and its catalog for a total of USD 1 million.

    Leslie Wexner - Victoria's Secret
    Leslie Wexner – Victoria’s Secret

    Under Wexner’s leadership, the brand flourished as he focused on creating a store that was women-focused. Intent on bringing the aesthetics of the European Lingerie market, Wexner began creating an affordable version of the very upscale European brand ‘La Perla’. His version looked luxuriously expensive but in reality, was affordable.

    Wexner’s strategy catapulted the brand to become the largest lingerie retailer in the US by the early 1990s. The brand expanded its presence to 350 stores and recorded annual sales of over USD 1 billion.

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    The 1990s Decade

    This was a decade of the brand cementing its reputation and image. The company also expanded its product repertoire by launching its line of fragrances in the year 1991 followed by cosmetics in 1998. It was in the year 1995 that Victoria’s Secret began its famous annual fashion show spearheaded by Ed Razek, the company’s Marketing Director. It was in 1997 that the concept of Victoria’s Secret ‘Angel’ was formulated, which then, became the iconic style featuring the Angel Wings on the company’s annual fashion show. This fashion show became the mainstay of the company’s image for the next 23 years as it rose to achieve a cult-like status.

    Victoria’s Secret Fashion Show Opening Models (1998-2016)

    By the year 1998, the brand’s intimate apparel market share had risen to 14%. In the years 1999 and 2000, the then-CEO Cynthia Fedus-Fields delivered the highest profits for the brand before stepping down from her position.

    The New Century

    At the turn of the century, the new CEO Sharen Jester Turney of Victoria’s Secret Direct for Catalogue began to re-vamp the catalog image to boost its lagging sales. The idea was to upscale its imagery that would appeal to an upscale consumer. A similar change was initiated across the brand stores by Grace Nichols, CEO of Victoria’s Secret Direct, which saw the apparel styles moving away from the prominent and evocative styling of 1800s England.

    Under their leadership, the brand’s presence grew within the United States to 1000 stores that accounted for almost one-third of total sales in the intimate apparel industry. Turney took over as the CEO of the company in the year 2006 and the brand thrived with her at the helm for nine years as sales increased by 70% to reach USD 7.7 billion.

    Disaster Strikes

    In the year 2016, Turney stepped down as the CEO and Leslie Wexner succeeded her as the interim CEO. Wexner made some quick changes to the brand operations. He discontinued the use of the print catalog and certain categories of apparel like swimwear to focus solely on lingerie which was, at one time, the core business. He also split the brand into three parts – Victoria’s Secret Lingerie, Victoria’s Secret Beauty, and Pink and established each as a business function with its CEO. This move proved to be disastrous as sales dropped by 7.4% which continued through 2017.

    Net Sales of Victoria's Secret from 2010-2021
    Net Sales of Victoria’s Secret from 2010-2021

    The downward trend continued in 2018 that became worse with Ed Razek’s controversial and derogatory comments about transgenders and plus-size models. This led to a 40% stock decline in that single year causing the brand to close 53 stores in the US in 2019. Chief Marketing Officer, Ed Razek also resigned and by that year’s end, the brand announced the permanent closure of its annual fashion show.

    The Rise and Fall of Victoria’s Secret

    But the company’s troubles were far from over. By February 2020, reports surfaced indicating a culture of bullying and harassment within the company. An expose published by The New York Times showcased ‘the culture of misogyny’ and cast aspersions of sexual misconduct on Ed Razek, the long-time influential executive of the brand.

    Within the next year, by February 2020, the company had announced a 55% equity sale to Sycamore Partners for USD 525 million which fell through by April 2020 as Sycamore Partners cited the pandemic as the reason. In January 2021, the shareholders of the parent company L-Brands, filed a complaint in the Court of Chancery of Delaware, blaming Leslie Wexner for creating an atmosphere of misogyny, bullying, and harassment that devalued the brand.

    The Rise From The Ashes

    L-Brands, spun off Victoria’s Secret as an independent business by August 2021. The company’s new management and ownership implemented policy changes that have proven to be beneficial to the brand. The brand reported an increase in sales in 2021. By November 2022, Victoria’s Secret had acquired Adore Me, a lingerie brand based in New York, for USD 400 million.

    Conclusion

    The brand began with a vision to make lingerie shopping easier for men. From there it evolved and underwent many changes. For several years, it sat at the very pinnacle of success. However, it failed to identify changing trends and consumer preferences and hence did not make the necessary shift at the right time. The management’s ideologies and conduct also hindered the brand from adapting to changing times. The new management has a tough road ahead to restore the brand to its former glory. Time will bear witness to how the company makes itself relevant to continuously changing market trends.

    FAQs

    What led to Victoria’s Secret’s declining sales in recent years?

    Factors such as changing consumer preferences, increased competition, controversial marketing, lack of inclusivity, and COVID-19 have led to Victoria’s Secret’s declining sales.

    What steps has Victoria’s Secret taken to address its past controversies?

    Victoria’s Secret changed leadership, rebranded to be more inclusive, discontinued Angels, and partnered with women-led businesses to address past controversies.

    What does the future hold for Victoria’s Secret?

    Victoria’s Secret is focusing on inclusivity, body positivity, e-commerce, and new marketing strategies to attract younger consumers in its efforts to re-establish itself as a leader in the lingerie industry.

  • Save Now Buy Later – The New Fintech Business Model

    A new breed of startups has introduced an innovative payment method that incentivizes consumers to save for big ticket purchases while avoiding a debt trap. This concept is called SNBL – Save Now Buy Later.

    The SNBL financial strategy is a concept that works around saving money by setting aside a particular sum on a regular basis, building up savings and then using that money to make a big-ticket purchase at a later date. As new and nascent as the concept of SNBL is globally, it is garnering strong attention, especially in the fintech industry due to its model that combines saving, spending and investing simultaneously.

    Globally, many startups offering the SNBL concept have generated high interest from investors. Accrue Savings, a fintech startup in New York raised USD 25 million in January 2022 in a fundraising round that was successfully led by Tiger Global Management. In December 2021, Simpl, an Egyptian startup raised USD 6 million that was led by Beco Capital, A15 and Global Ventures. India, too, has witnessed a spurt of startups in the SNBL financial space like Multipl, Omnicard, Hubble Money and Tortoise.

    The Working Of SNBL
    Advantages Of SNBL
    Challenges Of SNBL
    SNBL – Value Proposition For Brand Partners
    Conclusion

    The Working Of SNBL

    The fintech platforms that offer SNBL options for their consumers first tie up with various businesses and brands offering various products from travel packages to consumer goods or electronic goods. Individuals interested in purchasing any particular product beginning depositing a specific sum of money with the merchant every month. Once the goal is achieved the money is then returned with added incentives like cashbacks, market returns and brand-specific incentives.

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    These startups have adopted different working models, each effective in its own way. Hubble deposits the money in an escrow account with the partner bank and also offers a discount on purchases from the platform. Such a savings scheme allows the individual to receive discounts from merchants that crystallize on purchase. Multipl, on the other hand, is a SEBI (Securities & Exchange Board of India) registered investment advisor that allows individuals to invest money in suggested portfolios through mutual funds. This gives the freedom of choice to the individuals of purchasing from third party merchants or to withdraw the money for personal use elsewhere. The platform also offers the choice of saving directly with the merchant and also avail the discounts from them. Another platform, Tortoise, operates by holding money with a payment gateway and remit the merchant directly upon purchase.

    Advantages Of SNBL

    The post covid-19 era saw an increase in savings awareness across the globe and the growth of SNBL startups coincides beautifully with this growing sentiment. The idea of savings versus credit is essentially about safety versus risk. This resonates with India as the country has a strong savings culture.

    Vignesh Ramanujam, Partner at Lok Capital resonates this idea and says – “It is just that earlier, the startup focus was not there to weaponize savings as an instrument to improve our financial well-being. If one is able to marry savings with a specific purpose, then one can create a huge market as there is enough demand and supply.”  He also added that merchant segregation will play a key role.

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    The nascent market of SNBL has below set of advantages:

    No Debt or Loan

    It allows consumers to purchase high value or luxury goods without falling into debt through credit card purchase or a bank loan.

    Assured Brand Cashbacks and Discounts

    An SNPL sale honors a predetermined cashback or discount that is not dependent on any particular bank or credit card usage. This particular model is also free of any on-going sales or offers due to its confirmation of any offer or discount.

    SNBL – A Savings Perspective

    Working on the principle of a reverse SIP, the SNBL model estimates the amount of money required for a specific future aspirational purchase. It, then, gives the individual the amount that needs to be saved every month to finally reach the goal.

    Challenges Of SNBL

    Delayed Gratification

    SNBL is a time specific savings plan that allows the individual to gradually accrue the total money required for an aspirational purchase. Hence, it can take a few months or years, depending on the value of purchase and the monthly saving capacity to reach the final goal. This leads to delayed gratification for the consumer and not suitable for people who need products instantly.

    Safety of the Invested Sum

    The concept of SNBL is new and not all the fintechs within this space offer mutual funds as a savings option. Businesses where the money is in escrow, the risk of rescinded offers from either the merchant or the SNBL platform itself is high.

    Rohan Agarwal, SEBI RIA and Co-Founder of Moneyjar says – “Given that not all platforms are using mutual funds to invest interim savings, the safety and reliability of the platform and associated merchants becomes a big issue with SNBL. Therefore, it is important to ensure platforms handling customer funds communicate clearly and accurately how the user funds are handled until the intended purchase is complete.”

    Suitable for only Aspirational Purchases

    The current features of SNBL platforms are supportive of aspirational purchases in segments like travel, electronics or gold. The benefits of SNBL in the essentials and regular use items market like groceries, education and utilities payments are not yet fully explored. However, building savings in these categories through SNBL might be more appropriate going into the future.

    SNBL – Value Proposition For Brand Partners

    As valuable as the concept of SNBL is for the end consumers, it presents a few key value propositions for the participating brand partners as well.  Some of the important advantages for the partners are –

    • Reduced cart abandonment rate
    • Assured sales with higher visibility into future cashflow
    • Customer acquisition cost is comparatively lower
    • Cuts through the question of affordability due to the saving proposition of the platform
    • Increased top-of-the-funnel conversion with integrated goal planning
    • Able to offer a debt free shopping experience to the end customer

    Conclusion

    As a new category in the emerging fintech market, its path to success is still new, untraveled, and presents unique challenges. However, as a business model it presents a win-win scenario for all participants increasing its potential tremendously. Another existing advantage is that every aspect of this business is regulated by a different governing body. Hence the structure already exists. All that remains to be seen is how the market for SNBL emerges and grows in the future.

    FAQs

    How does SNBL incentivize consumers to save?

    SNBL incentivizes consumers to save by offering rewards, discounts, or other benefits for reaching savings goals toward specific items.

    Can SNBL help consumers avoid falling into debt?

    Yes, SNBL can help consumers avoid falling into debt by encouraging them to save money for big purchases instead of relying on credit or loans.

    What types of purchases are ideal for SNBL?

    SNBL is ideal for big-ticket purchases such as electronics, appliances, furniture, or any other item that requires saving.

    What startups are currently offering SNBL?

    Some startups offering SNBL include Hubble, Multipl, and Tortoise. However, there may be others in different regions or industries.

  • What Is Creator Economy & How Is It Driving India’s GDP?

    A software-facilitated economy created on platforms like YouTube, TikTok, Instagram, Facebook, Twitch, Spotify, Substack, OnlyFans, Tiki, and Patreon that allows creators and influencers to earn revenue is known as the Creator Economy.

    As the internet evolved over the years, so did its use. The virtual universe of the world wide web became the home of not just users and consumers, but creators. Individuals turned producers managing their own brands. This resulted in revolutionizing the way content was produced, distributed, and consumed. And the Creator Economy came into being.

    How Did It Start?
    The Working
    Business Models of Creator Economy
    India & The Creator Economy
    Conclusion

    How Did It Start?

    It was Paul Saffo from Stanford University who suggested that the creator economy came into being in 1997 as the ‘new economy’. Creators during that time were people who worked with animation and illustrations, although, with no discernible marketplace infrastructure to generate revenue. It was YouTube that coined the term ‘creator’ in 2011 that, at the time, applied to individuals who were famous on the platform. The term has rapidly gained popular acceptance and now applies to individuals who create online content. Hence, the creator economy is defined as an economic system built by independent content creators who are connected to their audience and businesses via the internet. The content created can be in the form of text, podcasts, music, videos, digital books, games, etc. This content can be monetized by sharing it on ad-sponsored platforms, partnering with brands, charging subscription fees, providing services, and much more. Some examples of content creators are TikTok stars Charlie D’Amelio, PewDiePie, and Addison Rae.

    YouTube: The Birthplace of the Creator Economy

    The Working

    The umbrella of the creator economy covers an entire ecosystem encapsulating creators, consumers, advertisers, and other stakeholders that significantly affect the way content is created, distributed, consumed, and monetized. The stakeholders within this realm are –

    1.      Creators also known as infopreneurs who engage in creating various types of content on a variety of topics to build and engage their audiences and monetize their creations. These creators can be Vloggers or Bloggers who give information and advice on specialized topics, Entertainers using their skills of writing, creating music or expressing through other art forms, Guides and Experts sharing their knowledge on products or services and Celebrities who use their popularity to create content.

    2.      Consumers are the target audience of the creators who engage with them or follow their opinions for entertainment or information. Consumers also support creators monetarily through content subscription.

    3.      Platforms are used equally by the creators and consumers to engage with each other. These are third party facilitators that help creation, distribution, consumption and monetization of content. YouTube and Instagram are examples of such platforms.

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    4.      Businesses advertise their wares and services through content creators. Partnering with influencers allows these businesses a direct access to their target audience. It also helps to make marketing campaigns effective. Influencers earn highly from brands through this partnership.

    5.      Tools are solutions that help the stakeholders to create and distribute content and also provide valuable performance insights to creators and businesses.

    Business Models of Creator Economy

    As new and emerging as this economy is, it has introduced innovative business models that has allowed successful career sustainability for creators. Off the many business models that have sprung around this economy, some commonly successful ones are –

    1. Platform Revenue Sharing

    As the most popular business model with the least barrier entry, it is used by creators who enjoy a significantly large following and want to diversify their earning sources. Creators monetize their content by earning a portion of the advertisement revenue that is generated from their channel pages and posts.

    2. Affiliate Marketing

    As the name suggests this commission earning based model helps both the creators to generate revenue and the businesses to generate credible leads. Through this business model, creators share coupon codes or special links that they receive. These are then tracked by the platform to ascertain if such leads have converted into actual sales.

    3. Product Placement

    This type of business model works on brand partnerships where creators and influencers are paid to use or feature brands and products in their content. Creators are remunerated for mentioning the products and services and providing website links in their content. Product Placement model is preferred by influencers who enjoy a large following as their fees per mention depends on their audience reach and penetration.

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    4. Brand Sponsorship

    This model works on exclusive contracts between a business and the influencer. The influencer agrees to exclusively promote the business or brand by featuring it in their content.

    5. Subscription

    There are several platforms like Instagram that offer a subscription based business model. This entails viewers paying a subscription fee to watch exclusive content, live streams and videos which are otherwise not accessible. This type of business model presents a great opportunity for creators to grow their direct fan-to-creator revenue.

    6. Self-Brand Offering

    There are creators who also launch their own products and services including accessories, clothing lines, bags, purses, etc that helps them in generating revenue and establish their own separate business that is sustainable.

    India & The Creator Economy

    Between the years 2018 and 2022, startups within the creator economy in India have raised USD 2.5 billion and as per reports, it is growing at a CAGR of 25%. The main reasons behind its growth trajectory are flexible office hours, remote work and renewal of passion pursuits.

    According to Tamseel Hussain of Livemint – “Doctors are joining the creator economy and creating shows on various health issues, farmers teaching other farmers organic farming through story telling or even brands enabling their own community members to share powerful stories instead of going to influencers.”

    The driving indicators of the Indian creator economy’s growth potential are the fundamental changes in consumer behaviour, consumption patterns and the increasing number of first-time creators showcasing their talent.

    Reiterating this Tamseel Hussain said – “The rise of affordable smartphones and internet-access packages, coupled with digital media, has made being a creator easier. The capacity of hungry audiences demanding a variety of content is also a massive driver. Today stories are everywhere, from social media platforms to televisions, OTT, offline screens and even food and shopping apps. This is changing the landscape for the creator economy, especially in smaller Indian towns and cities, by building new opportunities for creators and offering unique stories to people where they spend the most time.”

    The already growing creator economy was, then, disrupted by the outbreak of the coronavirus pandemic. The severe lockdowns pushed imaginative boundaries as creators flocked the digital space showcasing a wide variety of talent and monetizing their content.

    What is also fuelling its growth is the increasing penetration of digitization of the rural areas of the country. It is widening prospects that is ably supported by cutting-edge technology. The rapid expansion of the Tier II and Tier III cities of the country means that more than 100 million new creators are expected to join the creator community further adding to the growth of the creator economy.

    Conclusion

    The rapidly growing creator economy is also facing obstacles and challenges. However, the constant technology evolution is quickly answering those challenges making the future look very promising. The creator economy of India is set to scale with people able to generate revenue doing what they love and connecting with their roots. It will be interesting to watch how the evolution shapes in the coming years.

    FAQs

    What is the Creator Economy and how is it transforming the way people earn a living?

    A software-facilitated economy created on social media platforms that allows creators and influencers to earn revenue, transforming the way people earn by providing opportunities for self-employment and income from a direct audience.

    Who are the key players in the Creator Economy and how do they generate revenue?

    The key players in the Creator Economy are creators and influencers who generate revenue through sponsored content, merchandise sales, and direct audience support such as tips, subscriptions, or paid memberships.

    What are some popular platforms that are driving the Creator Economy, and what kind of content is most successful?

    Popular platforms driving the Creator Economy include YouTube, TikTok, Instagram, and Patreon. Successful content includes video content, tutorials, lifestyle, and entertainment.

  • What is Earned Media & What is its Value

    The entirety of the media rests on three main pillars – Earned Media, Paid Media, and Owned Media. Paid media refers to digital and analog advertising that includes social media, newspapers, and billboards. Owned media is any material that is published directly by the brand either as the company’s blog or through its social media channels. Earned Media is a term that refers to the publicity that is gained through efforts that are promotional in nature. The material is usually filtered through third parties like journalists, bloggers or end consumers.

    Examples of Earned Media in the offline space include news media coverage, ratings and reviews in traditional media outlets, consumer-to-consumer conversations about products including advice and referrals, or product demonstrations by consumers to other consumers. Online earned media include publicity mentions in digital media outlets, online WOM (word of mouth) referrals, posting on online communities or social networks, and online ratings and reviews.

    Benefits of Earned Media
    Challenges of Earned Media
    Earned Media Value(EMV) and Why it Matters
    EMV Calculation
    Effective Usage of Earned Media Value
    Conclusion

    Benefits of Earned Media

    There are many considerable benefits of earned media. Some key advantages include –

    Brand Exposure

    Earned media can boost organic brand exposure through word-of-mouth communication, cross-channel engagement, further research through search engines or social media, and last but not least conversion. Earned media has the added advantage of converting a customer even after the passage of time after consuming content.

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    Brand Loyalty

    Existing customers of a brand feel an enhanced connection with it after reading positive coverage and reviews thus converting them to organic ambassadors that further endorse the brand.

    Brand Credibility

    Positive reviews, organic brand endorsements, and brand representation in authoritative outlets lend further credibility and trustworthiness to it. It legitimizes the brand’s position in the market

    SEO Advantage

    The search engine rankings of the brand receive a substantial boost as brands earn backlinks on credible sites with a high domain or page authority.

    Earned Media: What Is It and How Do You Get It?

    Challenges of Earned Media

    The many advantages of earned media are also peppered with a few challenges. There is ample traffic on the web, hence making it difficult to cut through the noise with a compelling brand-centric story that contributes in terms of ROI (Return of Interest). Secondly, it becomes difficult to track the individual sentiments of each reader without conducting in-depth interviews to understand their takeaway from the PR material. Hence, quantitative results for earned media are difficult to demonstrate.

    Earned Media Value(EMV) and Why it Matters

    Earned Media Value or EMV is a metric that helps brands to quantify the monetary value of their marketing and PR activity. It also helps companies to evaluate the effectiveness of their earned media initiatives. This evaluation considers users’ social interaction with brands, including shares, likes, and comments on social media, blog posts, and ratings on review sites.

    EMV Calculation

    There is no standardized way to calculate earned media value. However, one common method to calculate EMV is to apply the formula that multiplies the total number of impressions by the average cost per thousand impressions (CPM) by an adjustable variable like recall rate or the number of likes and shares. The word ‘impressions’ refers to when a user sees the campaign. Hence the formula for calculating the earned media value would be –

    💡EMV = Impressions x CPM x Adjustable Variable

    Effective Usage of Earned Media Value

    Earned media value is an important KPI when tracked along with other metrics like influencer community size and share of voice. It can be used by marketers to benchmark the impact of individual posts, influencers, products, and campaigns on brand awareness and reputation. It is the single most established metric for performance benchmarking within the creator economy and the social media marketing space. Earned Media Value provides companies and brands with invaluable data that helps in making business decisions that improve strategy and approach contributing to lasting growth.

    Conclusion

    Although considered by many as a vanity metric, earned media value is especially important to brands because it captures all earned media and all content that is not created by the brand itself. Earned media has the capacity to increase trust among consumers and drive serious sales conversions. In addition, the creator economy is growing and so is the importance of influencer marketing. Robust influencer programs seem to be the most effective way to increase the volume of earned media, subsequently increasing the earned media value.

    FAQs

    What is earned media, and how does it differ from owned and paid media?

    Earned media is unpaid publicity, owned media is content a brand controls, and paid media refers to digital and analog advertising.

    What are some examples of earned media?

    Some examples of earned media include:

    • Media coverage
    • Social media mentions or shares of a brand
    • Featuring reviews or photos on social media
    • Influencer endorsements
    • Word-of-mouth referrals or recommendations from satisfied customers or clients

    What role does social media play in earned media?

    Social media enables users to share opinions and experiences about a brand, which can lead to earned media.

    How can you measure the effectiveness of earned media?

    There are several ways to measure the effectiveness of earned media:

    • Media coverage
    • Social media mentions
    • Website traffic
    • SEO performance
    • Brand reputation
    • Sales or conversions

  • India on the Rise: Achieving a $5 Trillion Economy

    After 75 years of independence from the British Raj, India has emerged as the fastest-growing and fifth-largest economy in the world. By the year 2020-2021, India’s per capita income has increased to INR 1.28 lakh. By August 2022, the country’s Foreign Exchange Reserves amounted to USD 572.97 billion and its GDP (Gross Domestic Product) rose to USD 3.5 trillion. India aspires to reach a USD 5 trillion economy by the year 2024-2025.

    Economic History
    Current Economic Status
    Way To USD 5 Trillion Economy
    Challenges & Obstacles
    Conclusion

    Economic History

    At the end of the 1st millennium BC, India was one of the largest economies around the globe which ended around the beginning of British rule. Under British rule, India experienced decentralization as well as the cessation of various craft industries. This coupled with accelerated economic and population growth in the west led to a steep decline in India’s share and by independence, the country’s GDP had been reduced to a mere 4.2%. India’s global industrial output also reduced from a towering 25% in the 1700s to a mere 2% in just a little over 200 years. The British left India in dire straits, dealing with a collapsing economy, poverty, high inflation, and an utter state of confusion.

    Post-independence, India adopted five-year plans concentrating on centralized economic and social growth programs. The first five-year plan focused on agriculture and irrigation and aimed to boost farm output and the second, launched in 1956 advocated rapid industrialization with a focus on heavy industries and capital goods. However, this caused the funds to be taken away from the agricultural sector leading to food shortages and inflation. In the 1960s Indian economy was worsened by the wars with China and Pakistan and the political instability within the country. This led to the devaluation of the Indian Rupee. Then, a little over two decades later came the oil crisis in 1991 resulting in a balance-of-payment crisis for the country. The global economic crisis of 2008 left the Indian economy deeply scathed and the country’s fiscal deficit rose to 6.4% of its GDP in 2009-2010.

    However, two economic events that have assured a place in history were the demonetization of 2016 and the implementation of the Goods & Services Tax (GST) in 2017. Demonetization was aimed at flushing out black money and striking out corruption and the introduction of GST introduced a uniform tax rate across all states paving the way for easier compliance.

    Current Economic Status

    Since the beginning of the 21st century, India’s annual average GDP growth has been around 6% to 7%. Between the years 2013 and 2018, India surpassed China and became the world’s fastest-growing economy. The country is the third largest unicorn base globally, being home to 100 unicorns that are collectively worth USD 335 billion. The country is also the third largest by PPP (Purchasing Power Parity) with an estimated USD 11.75 trillion.

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    Way To USD 5 Trillion Economy

    The country currently has strong economic fundamentals and is well on the road to becoming a USD 5 trillion economy. Various factors are working in favor of the country. These factors are –

    Diversified Economy

    India enjoys strong trade relations with many other countries. Its economy is well-diversified with healthy roots.

    New Technology Adoption

    In the past few years, India has quickly adopted newer technologies, especially in the manufacturing and financial sectors. This has led to higher quality and reduced production costs driving profitability. It has also led to increased investment in innovation.

    India's Gross Domestic Production
    India’s Gross Domestic Production 

    Increasing Off-Shore Opportunities

    As devastating as the effects of the covid-19 pandemic were, it has favored India, as the working culture shifted to remote teams. This led to developed nations finding it more cost-effective to work with people living in India.

    Young Average Age Population

    India’s youth population is the largest globally at approximately 356 million. This represents a high 64% working population that contributes to the country’s growth in GDP and per capita income.  It also presents a high consumer base for companies to thrive and grow.

    Shift to Renewable Energy

    India’s dependency on energy imports has lessened considerably with almost 40% of the country’s installed electricity capacity coming from non-fossil fuel sources. This has reduced operational costs for businesses and individuals.

    How India Will Take Over the World Economy In 10 Years

    Challenges & Obstacles

    India’s fast growth has persisted even in the face of the globally crippling pandemic coronavirus. The country, however, is facing several challenges on the path to becoming a USD 5 trillion economy.

    Supply Chain Bottlenecks

    Developed economies resorted to distributing cash to households to combat the debilitating effects of the pandemic. The supply-chain bottlenecks resulting from the pandemic have also not eased. These have led to soaring inflation across the world, which is exacerbated by the ongoing Russia-Ukraine war.

    Interest Rate Increase by the Federal Reserve

    The Federal Reserve has increased the interest rates to combat rising inflation. However, these threaten economic growth and may cause ripple effects within India.

    Strengthening Dollar to Indian Rupee

    The US Dollar is consistently strengthening against the Indian Rupee adding to inflation and can have a negative impact as India purchases oil and other imports in this currency.

    EU Energy Crisis

    The ongoing war between Russia and Ukraine has led to a severe energy crisis in the European Union. This acts as a growth inhibitor.

    China’s Covid Policy

    At one time, leading the global economic growth, China has continued to announce restrictions due to its zero-covid policy making international trade difficult.

    Conclusion

    India’s growth is unprecedented and its march is strong and sure. However, challenges like generating employment, curbing inflation, increasing foreign direct investment into the country, and maintaining macroeconomic stability must be successfully dealt with to make a USD 5 trillion economy a reality.

    FAQs

    How does the Indian economy compare to other economies in the world?

    India is the world’s fifth-largest economy by nominal GDP and the third-largest by PPP(Purchasing Power Parity).

    What are the key policies and initiatives taken by the Indian government to boost economic growth?

    The Indian government has implemented policies such as Make in India, Atmanirbhar Bharat, Digital India, Start-up India, GST, FDI liberalization, Pradhan Mantri Jan Dhan Yojana, and Swachh Bharat Abhiyan to boost economic growth and development.

    What is the role of foreign investment in India’s economic development?

    Foreign investment has significantly contributed to India’s economic growth by providing capital and technology, improving productivity, and creating jobs. The Indian government has implemented policies to attract foreign investment, which has increased exports and skills in various sectors.

    What are the main sectors driving economic growth in India?

    The main sectors driving economic growth in India are services, agriculture, and manufacturing.

  • Rupee vs. Dollar – Journey Since Independence

    The US Dollar is the most commonly held currency in the world today holding over 60% of global foreign reserves. All the countries across the globe, including India, measure their currency values against USD in the global market. The fluctuating value of any currency against USD 1 is called the exchange rate.

    Global trade is possible because of the existence of exchange rates and it is an important determinant of any country’s economic prowess.

    Value Before Independence
    INR Journey Post Independence
    Conclusion

    Value Before Independence

    It has been 75 years since India became a free country. Since then, the country’s currency has been on a roller-coaster ride against the US dollar. There have been various reasons for the largely downward trajectory of the INR’s journey including economic reforms, geopolitical issues, and even international issues. Currently, the Indian Rupee’s value against USD 1 is approximately INR 82.

    It all began with the Bretton Woods Agreement in 1944 which required each country to measure its currency against the US Dollar. The dollar itself was convertible to gold at the rate of USD 35 per ounce. Being a part of this agreement, India followed the par value system of relative exchange rates. As the country was under British rule, INR value was derived from the British pound which was GBP 1 equaled INR 13. Similarly, GBP 1 equaled USD 2.73, which roughly translated to USD 1 equalling INR 4.76.

    History of Indian Rupee vs US Dollar

    INR Journey Post Independence

    The journey of the Indian Rupee against the US Dollar can be mapped in different phases since India won independence.

    Phase I – From Independence to the 1960s

    India gained independence from British rule on 15th August 1947. It was a time of great turmoil as the country’s economy was in shambles. In a bid to jump-start the economy, the first prime minister, Jawaharlal Nehru adopted the five-year plans from Russia and began consistent loan borrowing in the 1950s which substantially increased in the 1960s.

    However, even with increased borrowing, the country’s economy was facing a budget deficit which was further aggravated by the two wars in the decade. The first was the Indo-China war of 1962 and the second was the Indo-Pak war of 1965. Then struck the natural disaster of drought in 1965-1966. All of these added to increased spending on defense which reached a high of 24.06% of the total government expenditure.

    Also, by 1966, the Indian Rupee finally moved away from the rate comparison of GBP 1 equalling INR 13 to a direct comparison with the US Dollar. All the economic upheaval of the previous years led the then Prime Minister to devalue the Indian Rupee to INR 7.50 against USD 1, which till then, had held a constant value of INR 4.76 against USD 1. This devaluation, in return, led to cheaper exports and expensive imports resulting in sharp inflation.

    Phase II – Reduced Oil Production by OAPEC – The 1970s Decade

    This was a decade of two major changes. First, the Bretton Woods Agreement collapsed in 1971, which meant India adopted the fixed rate system, linking its currency exchange rate to the UK Pound Sterling. A couple of years later, in 1973, the Organisation of Arab Petroleum Exporting Countries (OAPEC) decided to reduce oil production. By 1974, the INR value further deteriorated to INR 8.10 against USD 1 in reaction to the oil crisis. In a bid to ensure stability and to its currency and to ensure that the increasing disadvantages of associating with a single currency were curbed, the Indian Rupee was pegged to various other currencies as well.

    Phase III – The 1980s and 1990s

    The two decades of the 1980s and 1990s were politically unstable for India. The assassination of Prime Minister, Indira Gandhi, in 1984 reduced foreign investor confidence in the economy. A few years later, in 1991, the Soviet Union collapsed, which was, till then, a crucial trade partner of India. This led to a sudden and large export fall. The Persian Gulf nations had doubled crude oil prices just a year prior leading to India facing a serious balance of payment crisis. The fiscal deficit of the country decreased to 7.8% of the GDP and the interest payment rose a whopping 39% of the total government’s revenue. Furthermore, the WPI inflation within the country was around 14%. The country was on the brink of bankruptcy and had no choice but to further borrow money from IMF (International Monetary Fund) against its gold reserves.

    This severe economic crisis of 1991 was dealt with by the then government by further devaluing the Indian Rupee and by 1992 the exchange rate of USD 1 was INR 25.92.

    Phase IV – The 21st Century

    The Indian Rupee’s decline continued into the new century and by 2002 it was valued at INR 48.99 against USD 1. However, this also proved to be a turning point in the country’s economy as Foreign Direct Investment (FDIs) increased within India and sustained till 2007 when the Indian Rupee appreciated reaching INR 39.27 against USD 1.

    Unfortunately, the global financial market collapsed in 2008 ending the upward trend of the Indian Rupee and by 2009 it fell to a record of INR 51.75 against USD 1. Contributing global and domestic factors saw the INR further fall to 56.57 against USD 1 by early 2013.

    Three years later, in an effort to combat corruption and black money within the economy, the Indian government announced demonetization which discontinued Rs. 500 and Rs. 1000 notes with immediate effect. This led to almost 86% of the country’s currency being invalid adversely impacting consumption patterns, investment, and income. It was also a major push to a new digital India, thereby increasing cashless transactions. However, in 2016, the value of the Indian Rupee further decreased to INR 68.77 against USD 1.

    Last but not least, was the global economic crises that followed in the wake of the coronavirus pandemic of 2020 and the ongoing war between Russia and Ukraine. Currently, the exchange rate of the Indian Rupee against the US Dollar is approximately INR 82.7.

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    Conclusion

    The journey of the Indian currency against the US dollar is also a testament to the economic journey of the country since independence. Being one of the fastest-growing economies today and also one of the top 5 in the world, India is in a strong position of recovery. It will be interesting to watch how the Indian currency fares against the US dollar in the coming days.

    FAQs

    What factors affect the exchange rate between the Indian rupee and the US dollar?

    Several factors can affect the exchange rate between the Indian rupee and the US dollar, including:

    • Interest rates
    • Inflation
    • Economic performance
    • Political stability
    • Trade balance
    • Capital flows
    • Monetary policies

    How has the exchange rate between the Indian rupee and the US dollar changed over time?

    The exchange rate between the Indian rupee and the US dollar has varied over time due to economic and political factors. The rupee has appreciated and depreciated against the dollar at different times, influenced by global economic conditions, monetary policies, and geopolitical events.

    How do changes in oil prices affect the exchange rate between the Indian rupee and the US dollar?

    Oil price changes impact India’s import bill and can affect the exchange rate between the Indian rupee and the US dollar. Higher oil prices lead to a higher import bill, putting pressure on the rupee, while lower oil prices can support the value of the rupee.

    What is the role of the Reserve Bank of India in managing the exchange rate between the Indian rupee and the US dollar?

    The RBI manages the exchange rate by intervening in the foreign exchange market, using monetary policy tools, and managing India’s foreign exchange reserves.

  • Nikola Motors Fraud Explained

    A company that was founded nine years ago, in 2014, and named in the honor of Nikola Tesla, Nikola Corporation, was, ostensibly, in the business of manufacturing heavy-duty commercial battery electric vehicles, fuel cell energy vehicles, and energy solutions.

    After presenting several vehicle concepts between the years 2016 and 2020, leading with a natural gas-fuelled turbine-electric semi-truck, it went public on 4th June 2020. Nikola Corporation also went ahead and delivered its first two battery-electric trucks in December 2021, known as Nikola Tre. However, by September 2021, the Securities and Exchange Commission and the Department of Justice had already launched an investigation into allegations of security fraud by its founder and former CEO Trevor Milton. It was at this time, that the unraveling began.

    The Beginning & Growth
    Unraveling The Fraud
    How Nikola Surged Ahead
    Who Is Trevor Milton
    Conclusion

    The Beginning & Growth

    Trevor Milton founded Nikola Corporation in Salt Lake City, Utah in the year 2014 and announced that 5000 Nikola One hydrogen-powered glider trucks would be built by 2016. They were to be built by Fitzgerald Glider Kits in Tennessee. By the year 2019, Nikola had acquired 389 acres of land in Coolidge, Arizona for a total of USD 23 million. The company announced that the factory construction work was slotted to begin by 2020, truck construction a year later, in 2021, and by 2023, Nikola would be fabricating 35000 to 50000 trucks per year.

    By March 2020, Nikola Corporation and VectoIQ Acquisition Corporation, announced a merger that resulted in the combined company, NKLA, being listed on the NASDAQ exchange. The Nikola stock began trading on 4th June 2020, a day after the merger was officially completed. Within the space of one week, Nikola shares doubled as the investor’s interest heightened leading to a continuation of betting on the growing potential of electric transport. This was followed by the company beginning to take order reservations for the truck, even though customers had as yet not even seen a prototype.

    The growth continued and by August 2020, Nikola Corporation reached a valuation of USD 13 billion. On September 8, 2020, Nikola Corporation entered into another strategic partnership with GM (General Motors). The partnership stated that GM would acquire an 11% stake in Nikola and also nominate one member to Nikola’s board. Consequently, GM would also begin the production of Badger and supply fuel cells and batteries to Nikola, globally. Unsurprisingly, this resulted in Nikola’s stock increased by 50% as the announcement was received with enthusiasm.

    Unraveling The Fraud

    It all began with the short-seller firm, Hindenburg Research releasing a report on 10th September 2020 that outright accused the company’s founder Trevor Milton of perpetrating ‘an intricate fraud’. Trouble mounted when this report was confirmed by Financial Times and Research Enquirer that showed a Nikola One rolling down a slope using the natural force of gravity instead of onboard propulsion. In response to these claims, Nikola stock fell by 10% and the GM stock took a hit of 4%. Within a couple of days, by September 12th, Nikola stock witnessed a sharp drop of 36%.

    As outraged as Nikola was with these claims and threatening legal action against Hindenburg, its troubles were far from over. These claims had interested the US Attorney’s Office for the Southern District of New York. September 14th saw reports stating that the Securities and Exchange Commission had begun investigating allegations of fraud against Nikola Corporation, followed by the Department of Justice beginning its investigations a day later.

    Within a week, by September 21, Trevor Milton resigned from his designations as Executive Chairman and Founder while the share price of Nikola continued to drop surrounded by news of the allegations. This was quickly followed by unraveling partnerships and further share price fall.

    Nikola Motors Fraud

    BP (British Petroleum Company PLC) canceled a potential partnership that would have developed hydrogen refueling stations for Nikola’s EV trucks. November 2020 saw GM backing away from the proposed deal to buy an equity stake in Nikola Corporation as well as canceling the production of the Badger electric pick-up truck. A month later, another announced partnership with Republic Services was terminated. This partnership was in formation to jointly develop zero-emissions garbage trucks.

    How Nikola Surged Ahead

    By February 2021, Nikola rallied a little and publicly canceled Powersports unit and its plans to produce them. However, they stated that by the fourth quarter of the year, their intention was to produce between 50 and 100 Nikola Tre Vehicles. In June of the same year, Nikola Corporation invested USD 50 million in a new hydrogen factory to produce fuel for semi-truck fuel stations. The effort was to be spearheaded by Wabash Valley Resources. A month later, by July there was an announcement to add five new class 8 truck dealers in Arizona, Texas, Colorado, California, New Mexico, Delaware, Florida, Maryland, and Virginia.

    Who Is Trevor Milton

    Trevor Milton – Founder Nikola Motors

    Trevor Milton was born in Utah and is one of five siblings. He pursued a career in sales and marketing after opting to drop out of Utah Valley University. Milton’s career included various businesses that began with his first venture, an alarm sales company called St. George Security and Alarm. He exited the business for USD 300,000. He immediately launched an online classified advertisement website that sold used cars. However, the company failed and eventually closed. He launched dHybrid Inc., which was in the business of retrofitting commercial trucks with engines that could run on natural gas. It ran into trouble with an investor that resulted in the company closing down. He then launched dHybrid Systems which, according to his claim, was purchased by Worthington Industries. It was after this, that Milton founded Nikola.

    Following the allegations and investigations into him, Milton surrendered himself and pled not guilty to all charges leveled against him. However, in June 2022, Milton was charged with additional wire fraud, and by October 2022, was found guilty of one count of securities fraud and two counts of wire fraud.

    Conclusion

    In July 2021, when Trevor Milton was indicted, Nikola Corporation said – “We remain committed to our previously announced milestones and timelines are focused on delivering Nicola Tre-battery electric trucks later this year from the company’s manufacturing facilities.”

    A little over a year later, by August 2022, Nikola announced the acquisition of the battery company, Romeo Power. The process was completed by October 2022. It remains to be seen how the company executes the upcoming opportunities.

    FAQs

    What is the Nikola Motors fraud scandal?

    The Nikola Motors fraud scandal involves accusations that the electric truck maker, Nikola Corporation, misled investors and the public about its technological capabilities, and achievements. Nikola denied the allegations and launched its own investigation.

    What was the role of founder Trevor Milton in the fraud scandal?

    Founder Trevor Milton was accused of making false statements to investors in the Nikola Motors fraud scandal. He resigned after the allegations emerged.

    What actions did Nikola Motors take to address the fraud allegations?

    After the fraud allegations were made, the company denied the accusations and launched its own investigation into the matter. The company’s Board of Directors formed a special committee to oversee the investigation.

    What is the impact of the fraud allegations on Nikola Motors’ stock prices?

    The fraud allegations caused a significant drop in Nikola Motors’ stock price. While the stock price has since recovered somewhat, it remains below its peak levels from earlier in 2020.

  • Pakistan’s Economic Crisis – Explained

    The Islamic Republic of Pakistan was formed in 1947 after the partition of the British Indian Empire. The country was, initially, a dominion of the British Commonwealth until 1956, when it drafted and framed its own constitution. Ranked among the emerging and growth-leading economies through its rapidly growing middle class, the country’s political history since independence is characterized by periods of significant economic and military growth as well as economic and political instability.

    Pakistan is geographically, ethnically, and linguistically diverse and is a member of the United Nations, the Shanghai Cooperation Organisation, the Organisation of Islamic Cooperation, the Commonwealth of Nations, the South Asian Association for Regional Cooperation, and the Islamic Military Counter-Terrorism Coalition.

    Current Economic Crisis
    Bail-Out Loans & History
    Talks With IMF For Loans
    Conclusion

    Current Economic Crisis

    It was Pakistan’s rising economic crisis that led to a political stand-off between the then Prime Minister Imran Khan and the current Prime Minister Shahbaz Sharif, who took office in April 2022.  However, the country’s economy has been steadily dwindling as its forex reserves fell to a 9-year low reaching below USD 3 billion in early February 2023. The country’s currency, the Pakistani Rupee, has seen a steep fall to reach Rs. 271.50 against one US dollar. Inflation within the country is at a 48-year high with just enough foreign reserves to cover imports for less than a month. The country’s consumer price index in January 2023 had increased by 27.6% and the wholesale price index increased by 28.5%.

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    Unsurprisingly, the rising inflation has led to an exponential price increase in essential commodities like wheat, onions, gas cylinders, etc. To add to its woes, the oil companies of the country are on the verge of collapse due to the ongoing economic crises and its currency devaluation. This has also led to a lot of petrol pumps running out of fuel disrupting everyday life. The breakdown of the national electricity grid of the country also led to nationwide power outages, specifically affecting Karachi, Islamabad, Lahore, and Peshawar.

    Pakistan’s rising expenses are adding to its troubles as the country’s high borrowing led to total debt and liability of Pakistani Rupees 59,697.7 billion in FY ’22. This amount was approximately 89% of the country’s total GDP. Unemployment and poverty are proving huge hindrances to food, healthcare, and wages for the citizens of the country.

    Bail-Out Loans & History

    By the year 2008, Pakistan’s external debt was Pakistani Rs. 6435 billion. Being an election year, Pakistan People’s Party came to power in that year and during its five-year tenure, increased the country’s debt by 135% to reach Pakistani Rupees 15096 billion by the year 2013. This amounted to 64% of the country’s GDP. A large increase in this debt was domestic with external debt increasing by 22%. Hence the external debt which was at USD 42.8 billion in 2008 reached USD 52.4 billion in 2013.

    Pakistan’s Economic Crisis Deepens

    The elections of 2013 brought Nawaz Sharif to power under whose rule, the external debt increased by 226.8% from USD 52.4 billion to USD 75.3 billion. The primary reason for this debt increase was the China-Pakistan Economic Corridor through which Pakistan procured loans from China and, in return, awarded contracts to only Chinese companies. This also resulted in high imports from China. Imran Khan came to power in 2018 and subsequently added to the increasing external debt to USD 110.6 billion during his rule.

    As per IMF data, it has disbursed 21 loans to Pakistan over the years, the first request emerging from the country as early as 1958. Since then, IMF had agreed to disburse a total loan amount of USD 31.73 billion of which USD 20 billion has been disbursed through different transactions like Stand by Arrangements (SBA), Extended Fund Facility (EFF), Extended Credit Facility (ECF) and Structural Adjustment Facility Commitment (SAFC). An IMF loan is released in these different installments based on certain norms that are set by the lender.

    Talks With IMF For Loans

    Nathan Porter, leading the IMF mission began talks with the Pakistan government represented by their finance minister, Ishaq Dar, on January 31st, 2023. The talks failed to reach a satisfactory conclusion for Pakistan regarding its immediate requirement of USD 1.1 billion loan amount to prevent the country’s bankruptcy. The country is on the verge of defaulting on its external liabilities and is heavily dependent on the IMF’s loan. The loan amount is a part of the USD 6.5 billion loan program. IMF said – “Virtual discussions will continue in the coming days to finalize the implementation details of these policies.”

    Conclusion

    As inflation mounts and poverty rules the country, Pakistan is in dire need of monetary help from the IMF. However, this loan is also feared to increase inflation and price hikes for the common citizens of the country, further increasing their burdens. The ongoing Russia-Ukraine hostilities are adding to rising inflation around the globe as well. It remains to be seen, how the current government of Pakistan handles the ongoing economic crisis.

    FAQs

    Why is Pakistan in an economic crisis?

    Pakistan’s economic crisis is caused by economic mismanagement, political uncertainty, high inflation and energy prices, and urgent foreign debt payments.

    What role can international organizations, such as the IMF, play in helping Pakistan navigate its economic crisis?

    IMF and other international organizations can help Pakistan by providing financial assistance, technical expertise, policy advice, and coordination to support economic growth, but such assistance may come with conditions that could be politically and socially difficult to implement.

    What impact has the economic crisis had on the daily lives of Pakistani citizens, particularly those living in poverty?

    The economic crisis in Pakistan has made it harder for people, particularly those in poverty, to afford basic necessities like food and healthcare due to rising inflation, unemployment, and expensive imported goods.

    What is the impact of the economic crisis on Pakistan’s job market?

    The economic crisis in Pakistan has led to rising unemployment rates, limited job opportunities, and job losses in the manufacturing, construction, and public sectors.

  • Can the Airbus-Boeing Duopoly Be Broken?

    The term ‘duopoly’ essentially refers to the intense competition between the European multinational Airbus SE and the American Giant Boeing Company within the jet airliner industry. Both companies are in the process of designing and manufacturing civil and military aerospace products. Between the two companies, Boeing is currently leading the market with a market share of 52%, closely followed by Airbus with 48%.

    Formation of the Duopoly
    Can the Duopoly be Broken?
    Conclusion

    Formation of the Duopoly

    Companies that began to grow, and expanded quickly became market leaders and fierce competitors. The origin of the duopoly could be attributed to a series of mergers and acquisitions within the global aerospace industry. A deeper understanding can be gleaned from understanding the journey of both these companies independently.

    Why Airbus and Boeing Dominate the Sky

    The Boeing Company

    Initially founded as Aero Products Company in Seattle, Washington in the year 1916 by lumber industrialist William E. Boeing, it was renamed Boeing Airplane Company a year later. The company initially supplied military aircraft for World War I. The company was also engaged in ferrying mail due to its profitability. In the year 1928, William Boeing formed another company named Boeing Airplane and Transport Corporation. He renamed it United Aircraft and Transport Corporation in 1929. United Aircraft and Transport Corporation went on an acquisition spree of several aircraft makers including Avion, Chance Vought, Sikorsky Aviation, Stearman Aircraft, Pratt & Whitney, and Hamilton Metalplane.  In 1931, the group merged its four small airlines under one umbrella – United Airlines.

    Boeing 777X
    Boeing 777X

    The Airmail Act, which came into force in 1934, effectively prevented companies from simultaneously delivering mail and manufacturing airplanes. This resulted in the company restructuring itself and United Aircraft and Transport was dissolved and three separate entities emerged from it – Boeing Airplane Company, United Aircraft, and United Airlines.

    Between the 1960s and 1970s Boeing Airplane Company went on an expansion spree beginning with purchasing Vertol Aircraft Corporation, which was the biggest independent helicopter manufacturer of the time. Subsequently, it diversified its business interests into different industries like outer space travel, marine craft, agriculture, energy production, and transit systems, slowly and surely gaining a monopoly within the industry.

    Since then, the company has consistently grown by partnering with Russian, Ukrainian, and Anglo-Norwegian organizations in 1995, to create Sea Launch that provided commercial launch services to geostationary orbit from floating platforms. It also acquired the satellite segment of Hughes Electronics in 2000. Boeing also completed its merger with McDonnell Douglas in August 1997. By 2001, Boeing moved its corporate headquarters from Seattle to Chicago and by the year 2018, it opened its first factory in Europe at Sheffield along with a research partnership with The University of Sheffield.

    Airbus SE

    The European multinational aerospace corporation primarily with three major divisions – Commercial Aircraft under Airbus S.A.S., Defence and Space, and Helicopters. The company was launched in 1970 as Airbus Industrie GIE as a pan-European (countries included were Germany, France, Britain, and Spain) effort to combat the rising Boeing monopoly globally.  The company got its first break with the A300 in the year 1977. Registered in Leiden, Netherlands the ‘SE’ in its name means ‘societas Europaea’ which, essentially, allows the company to be registered as a European corporation as opposed to a national corporation. Through various corporate changes and restructuring, the company got its present name, Airbus SE in the year 2017.

    Airbus A380
    Airbus A380

    Building on the resounding success of its A300, which also essentially decimated its competition within the continent, the company launched the A320 which continues to enjoy commercial success even today. By the 1990s, commercial airline manufacturing was already a duopoly between these two giants, that continues to this day.

    Between 2007 and 2016, both companies were fiercely competing with each other with Airbus receiving 9985 new aircraft orders and delivering 5644 aircraft and Boeing receiving 8978 new aircraft orders and delivering 5718.

    Can the Duopoly be Broken?

    Boeing and Airbus have dominated the commercial aviation market for almost three decades. Valued at approximately USD 190 billion, this market is considered to be the biggest and the most profitable in the world. Even though over time both these companies have faced issues with their aircraft, these giants together occupy 99% of the global market for large commercial airliners.

    Although possible, the duopoly is extremely difficult to break due to various reasons –

    1.      The global market for medium and large commercial airlines is not big enough to support more than 2 players.

    2.      The entry barrier within the business is extremely high in terms of capital, expertise, and talent requirement not to mention the consistent operational maintenance required.

    3.      Initial investment recovery period is very long.

    4.      Business trust is extremely difficult to build in this industry that already has players with a proven track record.

    Having said all this, the new Chinese passenger jet made by the aerospace company COMAC and named C919, showed itself off on its maiden flight at an airshow in November 2020. With its feature and its lower operating cost, it can, ultimately, make its place on the global stage and give stiff competition to the duopoly of Airbus and Boeing.

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    Conclusion

    When it comes to aviation, safety is paramount in whichever airplane flies in the skies. Hence, whichever player, be it a new entrant or a veteran, can offer a safe flight will win the global war. The duopoly can very well become a triopoly within the next decade.

    FAQs

    Who is bigger, Airbus or Boeing?

    The Airbus A380-800 is the world’s largest passenger aircraft with a maximum capacity of 853.

    Boeing’s most popular commercial airplane model is the Boeing 737. It has been in production since 1967 and is widely used by airlines around the world.

    What is the name of the fighter jet that Boeing manufactures for the US military?

    The name of the fighter jet that Boeing manufactures for the US military is the F/A-18 Super Hornet. It is a twin-engine, supersonic, all-weather fighter jet used by the US Navy and Marine Corps.

    The name of Airbus’s most popular commercial airplane model is the Airbus A320. It can seat up to 240 passengers.

    What is the name of the Airbus aircraft that is currently the world’s largest passenger airliner?

    The name of the Airbus aircraft that is currently the world’s largest passenger airliner is the Airbus A380. It is a double-deck, wide-body, four-engine aircraft that can carry up to 853 passengers in a single-class configuration, making it the largest commercial aircraft in the world.

  • The Rise of Organic Food Brands in India

    An agricultural system that avoids the use and application of man-made fertilizers, pesticides, growth regulators, and livestock feed additives produces organic food. The label on the food packet that reads ‘organic food’ is a reassurance to consumers that toxic pesticides, synthetic fertilizers, and genetically modified organisms (GMOs) aren’t utilized in meal production, and the cattle have now no longer been fed antibiotics. In addition to this, organic food is also an assurance that strict cultivation standards have been adhered to concerning the impact on soil, water, and air. Organic food cultivation is a great support for environmental protection.

    India introduced the organic farming policy in 2005. Since then, organic foods’ public profile has been continuously rising as more and more consumers see the connection between diet, health, and the environment.

    What Drives the Indian Organic Food Market
    Market Overview
    Best Organic Brands, Foods, and Distribution Channels
    Challenges Faced by the Indian Organic Food Market
    Conclusion

    What Drives the Indian Organic Food Market

    The Indian government’s strong support for organic farming is acting as a catalyst for the rise in demand for organic food. The government is providing financial support to farmers who are adopting organic farming, under various government schemes like the Mission for Integrated Development of Horticulture (MIDH), National Food Security Mission (NFSM), Rashtriya Krishi Vikas Yojana (RKVY), National Mission for Sustainable Agriculture (NMSA), etc.

    The major factor driving the growth of organic food in India is the increasing awareness about health in the country. The rising demand for organic food is due to the attention that Indian consumers are now giving to the nutrient content and the quality of the food they consume. Moreover, the increasing consumer expenditure on health and wellness products is also driven by strong economic growth, urbanization, and rising income levels.

    Organic Brands Bloom in the Indian Food Market

    Market Overview

    While still in its nascent stages, the Indian organic food industry has a promising future. It has received a major boost post the covid-19 pandemic. Currently, India ranks first in Asia and fifth in the world with 23 lakh hectares of land under organic farming as per the Organics International Report of 2021 by IFOAM (International Federation of Organic Agriculture Movements).

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    The Indian Organic Food Market has steadily grown from USD 200 million in 2018 to USD 820 million in 2020. The omnichannel presence of organic food stores has also registered huge growth due to consumers moving to digital grocery shopping. While the pre-covid revenue split of the organic food brands was 5% online and 95% in-store, this number went up to 20% online and 80% in-store during the peak of the pandemic.

    In the future, the organic food market in India is expected to exhibit a CAGR of 25.25% between the years 2022 and 2027.

    💡
    Sikkim is India’s first fully organic state.

    Best Organic Brands, Foods, and Distribution Channels

    The idea behind the consumption of organic food is to go back to survival basics which prompted sustenance on natural food. Organic Food brands in India have grown over the years and registered the highest growth in the pandemic and post-pandemic era. The best domestic organic food brands that have withstood the time and quality test are –

    1. Organic Tattva – Brand owned by Mehrotra Consumer Products Pvt. Ltd.
    2. 24 Mantra – Brand owned by Sresta Natural Bioproducts Pvt. Ltd.
    3. Praakritik – Brand owned by Praakritik Natural and Organics LLP
    4. Organic India – Brand owned by Organic India
    5. Pure and Sure – Brand owned by Phalada Agro Research Foundations Pvt. Ltd.
    6. Nutriorg – Brand owned by Rattan Organic Foods Pvt. Ltd.
    7. Nourish Organics – Brand owned by Nourish Organics
    8. Adya Organics – Brand owned by Adya Organics
    9. Avadata Organics – Brand owned by Avadata Organics Pvt. Ltd.
    10. Pro Nature – Brand owned by Pro Nature Organic Foods Pvt. Ltd.

    Through these brands, various types of organic food items are now freely available in the market through Hypermarkets, Supermarkets, Specialty Stores, Convenience Stores, Online stores, and other channels.  The organic food item list consists of –

    1. Organic Beverages
    2. Organic Cereal and Food Grains
    3. Organic Meat, Poultry and Dairy
    4. Organic Spices and Pulses
    5. Organic Processed Food
    6. Organic Fruits and Vegetables

    Challenges Faced by the Indian Organic Food Market

    As growth-oriented the organic food market is within the country, it faces real challenges in terms of scalability, growth, and market share.

    Limited Awareness

    The current level of prejudice in Indian society has made organic food a status sign and luxury rather than a basic staple. The word-of-mouth publicity has increased awareness about the word ‘organic’ but not as a sustainable solution.

    Choice of a Lower-Priced Product

    The Indian consumer is price sensitive. This is also because of the huge variance in disposable income capability. This means that the automatic choice of product is led by price than quality, resulting in a large fraction opting out of the organic food market products.

    Non-Friendly Retail Market

    Retailers, understandably, prefer to fill shelves with fast-moving products. The lesser-known organic brands do not get premium shelf spaces or even a large amount of shelf space. This creates a gap between the buyer and the seller of organic foods.

    Traditional Farming Habits

    The results of chemical fertilizer-driven farming are quick and lucrative. Farmers are wary of the results of the organic way of farming. This is, however, slowly changing as the Indian government is taking steps to support farmers who are shifting to organic farming.

    Demand and Supply Gaps

    The supply of organic foods, currently, is not in tandem with the demand. Many times, the gap is quite visible with more supply than demand, or more demand than supply. This gap needs to be covered and balanced so as to even out the demand-supply scenario.

    Conclusion

    The Indian Organic Food Market has a long way to go. Currently, it is highly fragmented with the presence of several small and large players competing for price and quality. However, the past few years have seen organic brands gaining the spotlight and popularity. In the coming years, India is set to not only register growth in Organic Food brands but also innovatively deal with the challenges posing in front of this industry.

    FAQs

    Which organic food brand is best in India?

    The top organic food brands in India are –

    • Organic Tattva
    • Prakritik
    • Nutriorg
    • Organic India
    • Nourish Organics
    • Adya Organics
    • Avadata Organics
    • Pro Nature
    • 24 Mantra
    • Pure and Sure

    Pesticides and chemicals in Indian agriculture contaminate water and soil. To address this, companies are emphasizing organic farming, which promotes food security, improves farmers’ livelihoods, and eliminates harmful chemicals.

    Is organic farming the future of India?

    Organic farming has seen a drastic overall development in almost every crop type due to an increase in awareness of food security and environmental safety. Health-conscious consumers today will support the growth of the organic agricultural sector in many ways.

    What are the challenges faced by the Indian Organic Food market?

    A few challenges faced by the Indian Organic Food market are –

    • Limited Awareness
    • Demand and Supply Gaps
    • Non-Friendly Retail Market
    • Choice of Lower-Priced Product
    • Traditional Farming Habits