daily economics


In the late 90’s when the Khan trio was making waves at the Box Office, there was one veteran who was dishing out a movie every second month and sometimes more than one in a month, a  trend which continued for over a decade. Mithun Chakraborty did intrigue me then, days when there was no google to check the economics behind this. The material relied on were mostly found in saloons.

“MITHUNOMICS” as I refer to, was possible in that era and practically impossible in the current Multiplex generation.

This went on to prove that one does not need a big star or a big banner to reap in profits while not making any noise at the Box Office.

First things first, Mithun slowly drifted away from Mumbai to Ooty down south, where in he had invested in a few businesses that included hotels and educational institutions.

A three-time national award winner would not want to let go of his acting intentions just because he moved out of Mumbai. This is where Mithun, the businessman played his cards well.

Ooty is a seasonal tourist place. However, during the lean season, tourism starts dwindling and the cascading effect is directly on the Hospitality industry.

Mithun decided to use this lean period to his advantage. He gave probably a 60 day call sheet to the producers, the leading lady would invariably be  Gautami, Shantipriya, Rambha, Ramya Krishnan, thus glorifying the resume of these actresses of having acted in a Bollywood movie. When the budget was slightly higher, an Ayesha Jhulka or a Pooja Batra would step in.

The Directors were mostly from South (TLV Prasad, Rama Rao, K. Bapaiah).

Charanon ki Saugandh
K Bapaiah directed this 1988 flick

A large part of the production cost is the fee of the lead artistes. Mithun had the equipments to shoot a movie and also capitalized on his hotel properties in Ooty, where the elite in the film crew stayed on. These were provided at discounted rates. So, in effect he was cashing in on both “Income from Profession” as well as “Income from Business”.

This tight schedule would minimize the interest rates and limited logistical issues in Ooty, helped in wrapping up the movie in quick time.

The movies were all formulaic, a dozen fights, 5 songs (including a mandatory item song), revenge, triumph of good over evil and finally all’s well that ends well. He sported the same look in all the movies. He went on to reject directors like Maniratnam, as he wanted to retain his look for the dish he was serving at such alarming frequency.

TLV Prasad movie

A low budget movie with Mithun could be easily wrapped up under a budget of 70-80 lakhs (50% being his fee and the balance comprising of fee for the others and other production costs). So who were his audiences? Like every dish has its own connoisseur, a Mithun movie had its own set of audience at B & C Centres, a term mostly referred to audiences in Rural India and small towns. The movies were released in these centres and in single screens in the Urban centres.

Distribution centres in India are divided into six territories: Bombay circuit, Eastern circuit, Delhi-U.P. circuit, C.P.-C.I.-Rajasthan circuit, Punjab circuit and the South circuit.

Mithun movies sold for anywhere between 20 to 25 lakhs in each of these territories with a size-able amount of prints being circulated. The movies could see an average occupancy of 75-80% over a 2 to 3 week run. So even a flop movie could bring back the investment and the money would be pumped back in to an other Mithun movie only. The Return on Investment here was far higher than any other bankable star back then. No wonder this made him the highest tax payer at that time.

Every innovation has a shelf life, alas this too had. The digital era and the dwindling single screens spelt doom for this kind of an experiment. The Satellite and digital rights of these movies have further raked in the money much after their shelf life. Even to this day you see these movies while channel surfing.

Key Management lessons from Mithunomics :

  1. Don’t be afraid to create your own niche
  2. Look for diversification of your Income Stream
  3. Create captive customers


Trivia: Ooty was once house to Hindustan Photo films that manufactured photographic films among other related material that once employed over 5,000 people. This too was victim of the Digital Era.


“Education is the manifestation of perfection already in man”. This has been aptly stated by Swami Vivekananda. Every year thousands of Indian students flock to universities abroad in the hope of experiencing the much-coveted foreign education and leading what is popularly thought to be a luxurious lifestyle. But the reality is quite contrasting to these widespread beliefs.

The point I wish to highlight in this article is about the tremendous difficulties faced by international students while undertaking part time jobs in Australia. Legally, under the terms and conditions of the visa, an international student is permitted to work up to 20 hours per week and 40 hours a fortnight. There is no limit on the number of working hours during vacations (which constitute around 4-5 months in the total study period, assuming two years masters’ degree). On the face of it, this appears to be a very reasonable and generous provision. Students (who often have a massive loan burden), assume they can cover up most of their living expenses coupled with additional spending on travel and leisure.

Australian Dollar

However, a closer look at the Australian legal system and the job sector provides astonishing results. Approximately, only a quarter of formal established companies prefer to take international students for part-time jobs. A callous attitude of employers coupled with distrust towards international students, leads to many of them not being able to find jobs in their preferred interest areas, to gain industry experience.

As a result of this, many are forced to take up casual jobs in fast-food chains, restaurants, and retail stores. The labour laws of Australia (popularly called the Fair Work Ombudsman) prescribe a minimum wage of 22 Australian dollars (AUD) per hour. However, even a cursory look at these wages hints at widespread exploitation of international students, with many being paid as low as AUD 5-10 per hour.

Employers play around this rule by not accounting the overtime work. Let us say an international student works for 40 hours in a restaurant which is more than allowed limit – the employer shows only 20 hours in books and the rest of the 20 hours are not reflected on the records. And the direct consequence of this is that 20 hours never get paid. Thus, making it an effective rate of AUD 11 per hour.

Part-time jobs in Australia

Monthly expenditure for a student in Australia can be broken down into the following segments namely: Groceries (AUD 500), Travel (AUD 200), Rent (AUD 1200) and other miscellaneous charges (AUD 100), which comes to a total of AUD 2000 approximately. The deficit is generally big – which needs constant funding from parents.

The said amount is not sufficient even to meet basic needs such as groceries, let alone being able to pay rent and other allied expenses. Furthermore, in certain circumstances, students are coerced to work beyond the legally permitted hours, which might result in facing the risk of visa cancellation and deportation at the hands of law enforcement officers. 

Moreover, majority of the students in their respective home countries, are not accustomed to taking up casual jobs while undertaking their education. While struggling with an inherently competitive educational system which places incredible emphasis on academic achievements, supporting oneself through casual jobs is a far cry in most instances. Thus, a sudden change in the system of instruction coupled with separation from families puts enormous pressure on many young minds and often proves to be detrimental.

It is worth noting Australia sees around a million new student enrollments every year. It is a hot destination for both undergrad and post-graduation education and comes a close third after US and UK in terms of overall attractiveness – counting reputation of Universities, cost of the program and post education work opportunities. Chinese and Indians form major chunk of these enrollments. With visa restrictions tightening in US – Indians have increasingly looked at Australia to get their higher education credentials.

So, what is the solution? In my opinion, students must be prepared in the “real” sense before planning to move abroad. It is mandatory to do extensive research on local employers and support the same with adequate networking. This can minimize the chances of being exploited in Australia as a student. Finally, it is quintessential to stay strong and not lose hope even in despair situations.

A contagion that has submerged the entire world into a whirlpool of violent suffering and death, Covid-19 has mercilessly revealed the fragility of human life, where keeping oneself alive is all that is left of life today.

Tracking, tracing, isolating, and socially responsible behavior are the only ways to combat the pandemic. Yet the highly contagious nature of the virus, a bane to the afflicted, is proving to be a boon to researchers. Clinical trials of vaccines are on the world over, India being a prominent player in this. The vaccine could well be available shortly, saving lives, livelihoods, and reiterating humanity’s faith in a return to a normal world.     

None would have imagined that human civilization could be brought down to its knees by a tiny, invisible creature. Schools have been closed, travel plans have been shattered, and entire countries have been locked down for months on end.  Children are glued to computers for online classes and office employees work from home. We are now acclimatized to an imprisoned lifestyle!

In the midst of this chaos, migrant labour and those living on meagre incomes, couldn’t   cope with the changing times. Thus began a massive urban-rural exodus, making millions of people vulnerable to the virus. The life of every person on this planet has changed decisively.  Disease and calamity are not new to humanity. But the corona virus is like none other in its highly infectious, rapid spread, and its resistance to yield to any combination of drugs.

Easy global connectivity helped the tiny bug to reach every corner of the world in a short while and create havoc in the lives of the most intelligent species on this planet.

The viral pneumonia outbreak which began in Wuhan, Hubei province, China, in December 2019, soon became a global pandemic with 11 million positive cases, and 0.5 million deaths as of July 5, 2020. It was identified as the severe acute respiratory syndrome coronavirus-2 (SARS-CoV-2) which causes the corona virus disease-2019 (COVID-19).

Currently, there are no vaccines in the market. Detection and isolation is the main approach adopted by many countries to control the outbreak, till such time as a vaccine or better therapeutic treatment is developed.  

 This is a highly challenging scenario in densely populated cities in India and other developing countries. For instance, Dharavi, in the heart of Mumbai, spans around 500 acres and has a population density of more than ten times the rest of the City. Dharavi is one of the biggest informal urban settlements in the world with an estimated one million people living in this small, confined zone. The prevailing pandemic in such densely populated zones could create havoc as the disease spreads further with the increasing infection rates.

An effective vaccine is the only solution to control the devastating pandemic.

Developing a vaccine is a tedious and multi-year procedure, with the product having to go through several safety tests to comply with regulations. Presently, the average time needed for creating traditional vaccines is over ten years. Scientists need to race against time to break this time barrier to provide some relief during these desperate times.

Vaccine for Covid-19: Vaccine are the Final Solution
Vaccines are the final solution

Today, an average person in a developing country receives around eight vaccines, while his/her counterpart in an industrialized country receives twelve. It is a common practice in developed countries to vaccinate for seasonal flu, which is not common in developing countries. Even during the swine flu outbreak in 2010, many poor nations did not have access to H1N1 vaccines.

 Accessibility of vaccine for people across borders is critical to fight Covid-19.   

Scientists are working on multiple platforms to develop a vaccine at the earliest. These include vaccines made up of DNA, RNA, recombinant vector, subunit, live attenuated and inactivated virus forms.  As of June 29, 2020, there were seventeen candidate vaccines under clinical evaluation and 132 vaccines in preclinical evaluation stage (WHO, 2020).

In addition, there are several candidate vaccines in developmental stage. University of Oxford/Astrazeneca, CanSino Biological Inc., Beijing Institute of Biotechnology, Moderna/NIAID, Sinovac and Novavax are leading the race with phase 2 and phase 3 trials.  Production of plant-based vaccine is currently on at Medicago Inc.

The race for a vaccine is intensifying and rich countries are investing heavily on developing it. This poses serious questions about the timely availability of the vaccine for protecting the lives of people in poor economies.

The costs involved in developing and testing vaccines is huge. It is impossible to cover such costs without having intellectual property rights. Several patents have already been filed which provides twenty years of exclusive rights of production and sale of the products for the inventors.

However, Johnson & Johnson, and AstraZeneca have pledged to make the vaccine available at no profit during the pandemic. WHO has advocated surrender of intellectual property rights so that pharmaceuticals can make data and technical knowledge available free.  

Bharath Biotech, a leading vaccine maker in India, has developed Covaxin, India’s first vaccine candidate for Covid-19. The work is a result of collaboration with the Indian Council of Medical Research (ICMR) and the National Institute of Virology (NIV). The Drug Controller General of India and the union ministry of health & family welfare have approved Phase I & II human clinical trials.

India is a global leader in the supply of various pharmaceutical products including vaccines. It is the largest producer of vaccines in the world, with a capacity of three billion doses per annum for domestic use and for export.

Affordability of any health intervention is crucial considering the economic status of developing countries.  In the race for a solution to the pandemic, India will play a major role in handling this enormous public health challenge.

Rohan, a six-year-old boy was brought by his distraught parents for leg pains which used to be worse at nights. This story has been going on for the past 6 months or so. It was distressing to the family to have the child wake up night after night complaining of pains. He was taken to his pediatrician for a check-up. He was evaluated by his pediatrician and was diagnosed to have ‘Growing pains’.

Growing pains in children typically seen between 2 to 12 years of age. It might be the reason why it has been labeled or mislabelled as growing pains. Firstly, it has nothing to do with the growth of the child. The usual story is that of a physically active child who either complains of lower limb pain typically in calves, shin, or behind the knees, typically just before going to bed or wakes up at night due to pains. The pains tend to be seen in both lower limbs in 80-90% of the patients. There might be periods of time when the pain seems to disappear completely for a few days or weeks. The pain typically gets better with some massage or paracetamol use.  There are multiple theories of why growing pains in children happens. It is thought to be related to happen due to muscle/bone fatigue due to lower limb overuse. This might be supported by the fact that the pain tends to be worse on days of increased physical activity.

It might also be related to psychological stressors like marital discord at home, stressors at school, or bullying at school. Some of these children might have a lower pain threshold which would mean that they experience pain even with minimal painful stimulus.  

The condition tends to resolve in most of the children in the teenage years. It is estimated the pain is experienced anywhere between 10% to 20% of children. The treatment is usually symptomatic with massage and hot fomentation like the immersion of the lower limbs in a bucket of warm water. Medications like paracetamol can be useful in a few patients. 

Since I received the email cancelling exams in the second  week of March from the Principal, – I had been hopeful the management would do a U turn on the planned annual increase in school fees, which was around 15%. My expectation got a little more ambitious as the lock down continued for long and incomes across the middle class and lower middle class (read school fee paying parents) took a never before seen beating. School managements, I thought, ought to give big Covid-19 discounts. Most schools, as on the date of this report, have cancelled fee hikes – however very few have offered discounts. Will come back to the schools a little later.

Cashflow 1

Two weeks ago, a friend, Pushpa, called to enquire if we knew where to buy or lease a laptop, as her kid, aged 6 years, was about to start her online classes. Pushpa was working as a teacher in a pre-nursery but owing to the birth of her second child she had to quit her job. Her husband who happens to be a small private civil works contractor is the sole bread winner. During the pre-corona days he could make around Rs. 20,000 per month but since March that has dwindled to almost zero. That is a huge impact on low income households. However, aspirations of Pushpa remain unblemished. She wants the best possible education for her kids. During January she got her daughter admitted to a “Good” private school where the fee runs into few months of her husband’s gross earnings.  I loved the positivity this lady projected despite falling incomes. “I want a bigger screen for the online classes – my daughter cannot see the power point presentations clearly on a five-inch screen mobile” – she said.

A used laptop would cost her anywhere between Rs. 15,000 – 20,000 and a new one around Rs. 35,000, I told her after enquiring with a couple of known dealers. She chose to go for a new one, but she was in no position to make full payment at once. The cost of the laptop is one and half months to two months her current household income. That is not a small hole to fill. Thousands of parents are under similar financial stress in pursuit of a bigger screen for their kids’ classes. But they are borrowing from relatives, friends, and breaking FDs to fund the purchase of bigger screens. Fortunately, a classmate of mine runs a Computer leasing business in Koramangala. Kiran, a good Samaritan that he is, offered to lend a Dell laptop for two months, free of cost and offered to extend six months credit for the purchase a new laptop. Not everyone is as fortunate as Pushpa, thousands of parents are staring at the gaping hole Covid-19 created.

Pushpa’s Monthly Cashflow Statement ( ‘000s) Pre-Covid Covid
Income 20 10
Expenses 18 18
Rent 10 10
Food 5 5
Others 3 3
Excess/(short) 2 -8
Capex – Laptop   35
Borrow from relatives   -43
Pushpa’s Monthly Cashflow Statement ( ‘000s)
Pushpa's Monthly Cashflow Statement


Cashflow 2

Conventional wisdom has been that Education sector is one of the most profitable businesses out there – especially for the classes till twelfth, the tuition fee costing more than the traditional bachelor’s degree. So – schools must have enough reserves for the winter which should be used give discounts.  

I shared my conventional wisdom with a friend who works as CFO of IB/ICSE curriculum school based out of Bengaluru. The situation is not very cushy out there, I was told. He argues that its hard to maintain top class facilities and continue to pay the staff without fee income rolling in. Schools in the city run on high operating leverage – in simple English at remarkably high fixed costs. Fixed costs could range anywhere between 80% to 90% of the total costs. I said, when you are running online classes there must be huge savings in electricity, maintenance, repairs, staff meals etc. Why don’t you pass on that savings to the students?  – the operating surplus can be shared, I insisted. He took a pause and pulled out another excel sheet and quipped “ we have done the analysis” – the savings is not much as we have to maintain our pools, sports grounds, buildings and most importantly we are paying salaries to all our staff. Schools like ours have to keep reinvesting in facilities every four to five years. And there are some segments like pre-nursery where in the question of online classes does not make any sense. Consequently, admissions in this segment have fallen drastically. All in all, there could be savings of around 10%. I could not audit his numbers – but had to take his argument at the face value. His voice showed worries of nightmares of cashflow management.

               Government of Karnataka has made it clear that the management cannot insist the payment of school fees. Many schools have sent the fee request to parents – however are not insisting on immediate payment thus complying with the Government norms. Some school managements have asked the parents to provide proof of their financial distress to provide additional time for payments.

His answer was they are not operating at their full capacity hence full fee is a must to sustain. It also means well established schools have enough cash balances to ride out the Covid-19 wave.

Unlike Pushpa none of the schools I contacted were ready to share the numbers. But I did get hold of a few school numbers through grapevine. Table below give out only costs and profits as a percentage of revenue (google Common Size Statements). Schools without the burden of debt and depreciation (read charge for investments in building, computers i.e, Fixed Assets) make around 30% to 50% cash profits. We accountants call it EBITDA. And that ratio is a favourite one among financial analysts, investors in evaluating a business.

Well Established School’s Cashflow %
Revenue 100%
Monthly expenses  
Rent 18%
Staff Cost 46%
Teaching 35%
Non-Teaching 12%
Maintenance 10%
Cash Profit/(Loss) – EBITDA 26%
Well Established School’s Cashflow

By the time I completed this article, Karnataka High Court had ruled against Government of Karnataka’s ban on online classes. High court said it is against the spirit of Right to Education. Many parents think the initial ban order was not a well thought out one. Parents feel online school classes are a great way to keep their little ones “gainfully” occupied. A petition on change.org petition was used to push the government to roll back the ban. Online school classes would any day be better than noisy cartoons blasting out of the TV screens – many parents opine.

But many other parents believe online classes are being used as a pretext to collect fees. They blame school managements of being insensitive in the current crisis times.

Cashflow 1 and Cashflow 2 are two different dimensions of the current crisis. Then there are stories of teachers losing jobs. Anitha and Nagaveni (names changed), two Montessori graduates received their job offers in the month of March from an upcoming Montessori school in the suburbs of south Bengaluru. The salary was a decent figure of Rs. 16,000 per month, which solved many of their financial problems. These housewives in their late thirties were super excited to get into a new role after diligently performing their duties as home makers for close to two decades. The year 2020, they thought would give them financial freedom for the first time in their lives. But Covid-19 had different plans. Anitha’s offer has been pulled back as of first week of June. And Nagaveni’s calls to the Montessori school are met with silence. She believes her job offer is no more valid. Much aspired economic independence of these two women must wait for some more time. No one knows how long.