Modi’s Cash Ban May Have Been in Vain as India Outlook Dims Bloomberg 12-27

Prime Minister Narendra Modi needs a new narrative for his banknote ban.
            

He’d touted the surprise move to scrap high-value bills as India’s biggest step against unaccounted cash, which the government estimated at 5 trillion rupees ($74 billion). The bulk of this money has already been deposited with two more weeks to go before the deadline lapses, meaning the shock to the system may have been in vain.

The decision sucked out 86 percent of currency in circulation, akin to withdrawing all U.S. dollar bills except about half of the $1 notes. Only 50 percent of this is projected to be replaced by the year-end, leaving authorities scrambling to push digital payments as public anger rises.

"India’s ‘own goal’ currency swap initiative has put a crimp on the cash-dependent economy," said Singapore-based Paul Gruenwald, chief economist for Asia-Pacific at S&P Global. The government’s "well-intentioned but poorly thought through demonetization program" is driving down the pace of economic activity, he said.

Finance Minister Arun Jaitley on Friday said there’s no official estimation of black money, the local term for unaccounted wealth. He submitted a written reply to a lawmaker’s question about a month after the government’s lawyer told the Supreme Court that Indians won’t deposit about 4 trillion rupees to 5 trillion rupees of bank notes of the 15.4 trillion rupees invalidated by Modi’s move, implying that this was ‘black.’ The top court was hearing petitions questioning the rationale behind Modi’s decision after Modi in his Nov. 8 speech to the nation said "the specter of corruption and black money has grown," without providing figures.

So far, about 13 trillion rupees of bills have been deposited in banks. The central bank on Monday tightened deposit rules, adding to a list of regulatory flip flops since Nov. 8.

GROWTH

As investors try to assess the impact of Modi’s move, all eyes will be on the government’s forecast for the year through March -- due Jan. 7. The central bank and private economists have lowered their projections for the economy where 98 percent of consumer payments are made in cash.

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FACTORY OUTPUT

The Nikkei purchasing managers’ index signals a contraction in the key services sector, which accounts for about 60 percent of gross domestic product. Car purchases, a main indicator of manufacturing demand, grew at the slowest pace in nine months in November while sales of motorcycles and scooters -- where about 65 percent of payments are in cash -- fell for the first time in almost a year.

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LOAN GROWTH

Commercial credit sank to a 19-year low as backlogs piled up at factories and banks stayed busy with the task of exchanging currency notes. Meanwhile deposits surged, pushing the credit-deposit ratio to a six-year low.

"For a cash dependent economy, a cash crunch is not good," said Madhavi Arora, Mumbai-based economist at Kotak Mahindra Bank Ltd.

TRADE

The trade deficit widened to a 16-month high as export growth slowed in November and imports surged. Most worryingly, gold shipments jumped 26 percent in November, triggering speculation that consumers were converting their cash into non-productive holdings of the precious metal.

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JOBS

Export numbers also hinted at the employment outlook. A decline in gems and jewelry, a sector that depends on unorganized manual labor, suggested the cash crunch was affecting employment, said Kapil Gupta, an analyst at Edelweiss Securities Ltd. Rafeeque Ahmed, chairman of the council for leather exports, said Modi’s move has slashed about 75,000-100,000 jobs from his industry. 

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INFLATION

As demand dips for goods, price pressures are easing. The benchmark consumer inflation gauge plunged more than estimated to below the mid-point of the central bank’s target. However, this wouldn’t be the first time that economists have been surprised and it may not open much room to ease policy. So-called core inflation -- excluding food and fuel -- is sticky, the central bank said this month. 

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RATINGS

India’s currency clampdown won’t impact the nation’s credit ratings, according to S&P Global Ratings. However, the company said Indian corporates and banks will face short-term "execution and adjustment risks."

Fitch Ratings called the demonetization a "one-off event" and said that while the short term hit will be significant, people will find "inventive ways" around the cash crunch. Moody’s Investors Service placed on negative watch three micro-finance lenders, indicating that their ratings may be downgraded.

DIGITAL PAYMENTS

Data on card transactions indicate plastic is taking the place of currency usage at a faster pace. With the data incomplete, conclusions are tentative, but the analysis strengthens Bloomberg Intelligence Economics’ view that demonetization will not deal a major blow to growth.

CONSUMER SENTIMENT

A central bank survey of 4,686 respondents also pointed to robust consumer sentiment despite the cash ban. Perceptions of general economic conditions and financial situations have improved, the central bank said Dec. 7, adding that the surveys were conducted between Oct. 27 and Nov. 13 and more data must be analyzed to draw conclusions.

"A puzzle has arisen of late -- why are some activity indicators still in the positive range, albeit slowing, when cash has contracted so sharply?" said Pranjul Bhandari, chief India economist at HSBC Holdings Plc. "One answer might be that growth will be affected with only a lag. Another is that informal arrangements, like vendor credit, have helped to fill the void." 


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Big Brands Are Missing the 'Social' in Social Media 05-27

Big Brands Are Missing the 'Social' in Social Media

A recent report from Forrester Research (FORR) found that a third of U.S. marketers surveyed were dissatisfied with their social marketing results. Meanwhile, only 38 percent of those surveyed targeted their fans on social networks, and just 38 percent targeted friends of fans.

You would think those results would give marketers pause. Forrester also reports, however, that U.S. marketers are pouring more than $2 billion annually into social media—including ads and promoted content—to try to reach the 1 billion-plus social media users.

What many big social media advertisers have failed to grasp is the “social” component of social media. To date, many brands have focused on individuals rather than relationships among individuals and the economic power of those relationships. Who is most likely to influence their friends? Who is most likely to share with friends? Who is most likely to buy or take some other action?Those are vital questions to address to truly unlock the social value of an audience.

That effort starts with a brand redesigning its digital advertising so individuals are encouraged to engage their social networks on the brand’s behalf. If the campaign is paired with the proper analytics, a brand gains visibility into how its offer is playing out among friends and their followers and among brand “likers” vs. “non-likers.” It can understand who is influencing whom to take action.

Many major brands today, however, are not taking full advantage of their social advertising opportunities. For instance, Target’s (TGT) current “Give with Friends” campaign on Facebook (FB) lets consumers choose an e-gift card design, invite friends to contribute, then give a gift together with them. By simply leveraging paid media in tandem with the social activation, Target would be able to have more of its audience do the selling for them and reach a new audience in the process.

In March, Virgin America unveiled a promotion to mark the launch of its nonstop flight service from Los Angeles and San Francisco to Newark, N.J. The “Fly Like a Boss” campaign offered an engaging social media contest on Twitter and Facebook with attractive goodies, including the chance to score a ticket to the launch and attend aGoogle+ (GOOG) hangout onboard with Virgin Group Chief Executive Officer Richard Branson and Mashable CEO Pete Cashmore. While the campaign was a winner, it missed an opportunity to encourage people to refer the offer to friends. Were social analytics tied to automated advertising efforts, Virgin could have identified key buyers, sharers, and influencers—and consumers like them—based on their social actions to further improve future promotions.

If you’re someone like Buzzfeed, with content that is so darn cute, timely, or jarring that it becomes infectiously viral right away, it’s not as critical to deliver a social experience that combines gaming with a shareable reward. Content consumption and sharing will do the heavy lifting of delivering that new audience, and the offer can be a tasteful companion.

But for most brands, unconnected tactics in social media aren’t going to gain traction with people who are there to hang out and share cool stuff with their friends and family. Instead, brands need to create the architecture that ignites the “social” in social media if they are truly going to thrive.

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