Risky Business: Are Teaser Rates for Home Loans Pushing Real Estate to the Edge?

At the Indian Banking Conclave (Bancon) in Mumbai on January 12, Reserve Bank of India (RBI) deputy governor Usha Thorat warned against what she considers risky mortgage lending practices. "In the area of housing loans, teaser rates are increasingly being offered, which is a cause for concern," she said. "I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal takes into account the repaying capacity of the borrowers when the rates become normal."

Teaser rates were introduced by banks last year to boost demand for housing finance in a slowing economy. The first off the block was the public sector State Bank of India (SBI) with its Easy Home Loan. Launched in January 2009, when home loans were on offer at interest rates between 8.5% and 11% depending on the amount and the tenor, SBI's rate was 8% for the first year and 8.5% for the next two years. After three years, the terms are highly confusing. According to SBI, the "interest rate after three years may be fixed or floating as per the borrower's choice at the time of sanction. If the floating rate option is chosen, then the rate will be 2.75% below SBAR. If fixed rate option is chosen, then the rate will be 1.25% below SBAR prevailing on the third anniversary date from the date of first disbursement, and shall have a reset frequency of five years from the third anniversary date of the loan. Fixed interest rate shall be subject to [a] force majeure clause."

"SBAR" refers to the State Bank Advance Rate or the Benchmark Prime Lending Rate. And what is the Prime Lending Rate? Beginning June 29, 2009, it was revised to 11.75% per annum; it depends on the RBI's rate and other factors. In other words, the borrowers' monthly payments or equated monthly installments (EMI) three years from now will depend on the SBAR at that time. Little wonder borrowers are befuddled, regardless of whether they opt for fixed or adjustable rate mortgages.

"It is partially correct to state that loan terms are not fully explained to the borrowers," says Sudip Bandyopadhyay, group president of Spice Finance. "It is important to be transparent while providing loans. This does not happen in case of teaser loans." But even the banks have no clue about how much the EMI could be. It depends on the interest rate, and banks are obviously not going to talk about worst-case scenarios.

"While documentation necessarily has to be detailed, there is a strong case to be made for banks being compulsorily required to provide simple illustrations on how floating rates are pegged and what the precise implications are," says Jayesh Desai, national director (infrastructure, real estate and government services), Ernst & Young (E&Y). But it would be unfair to say that banks are taking customers for a ride, he adds.

Thorat's statement about repaying capacity and clarity on obligations drew an immediate response from SBI chairman O.P. Bhatt. "I don't know what the RBI means by teaser loans," he told morning newspaper DNA at the same Bancon a few minutes after Thorat spoke. "It is not right to refer to the 8% home loan scheme as a teaser ... there are no hidden costs in these loans or any add-backs."

On February 5, RBI deputy governor K.C. Chakrabarty added another dimension to the debate. Talking to journalists at a seminar on infrastructure financing in Mumbai, he said: "We have no concern [about] teaser rates." In a lighter vein, he quipped: "What we are telling banks is that you should tease everyone. Don't just tease new customers; also tease old customers by charging a uniform rate for both."

Five days later, on February 10, the RBI stepped in with a circular "to make credit pricing more transparent." Beginning April 1, housing finance can no longer hide behind a wall of banker-speak. A new Base Rate system will be introduced. According to the circular, "Since transparency in the pricing of lending products has been a key objective, banks are required to exhibit the information on their Base Rate at all branches and also on their websites. Changes in the Base Rate should also be conveyed to the general public from time to time through appropriate channels. Banks are required to provide information on the actual minimum and maximum lending rates charged to major categories of borrowers to the Reserve Bank on a quarterly basis. Apart from transparency, banks should ensure that interest rates charged to customers in the above arrangement are non-discriminatory in nature."

High Interest Rate Regime
The problem for banks is that the country is moving to a high interest rate regime. The RBI credit policy announced on January 29 did not raise interest rates; it only increased the cash reserve ratio (CRR) by 75 basis points. This squeezes liquidity out of the system and helps temper inflation. But interest rates are bound to go up; the only question is when. Teaser loans could then become uneconomical for banks. To add its earlier customers to this category will make things worse. On the other hand, if interest rates rise too much, EMIs will climb, squeezing borrowers further.

Bankers say a bubble in India is unlikely for another reason. In the U.S., loans were given based on the value of the asset (the house). In India, the primary yardstick is the capacity of the borrower to repay. Besides, banks in India have been traditionally conservative about lending to individuals.

Despite the insistence of the banks that they check on borrowers' ability to repay, one key issue is how much they are paying for the home in the first place. At the height of the boom two years ago, a mid-market apartment in Mumbai had a price tag of $200,000. This tumbled to $100,000 (in some cases). Buyers who had $170,000 in bank loans suddenly found themselves with a lot of negative equity. For the banks, they would be making significant losses even if they were able to seize the property and sell it off.

Another issue most borrowers don't realize is that most loans have a Depreciation of Security clause. A buyer is expected to contribute 15% of the cost of the house or apartment -- $30,000 in the example given. If the price falls to $100,000, the bank will still finance only 85% of the current cost -- $85,000. The borrower will have to pay the shortfall ($85,000) to avoid being labelled a defaulter. (In loans where shares are pledged as collateral, this has happened very often. Banks ask borrowers to top up their securities when prices fall. If they fail to do so, they sell the shares.)

So why are banks offering teaser rates? The reason is they make money through lending, and today there are limited takers. Banks have too much money sloshing around in their coffers. According to RBI data, by November 20, 2009, personal loans were up a meager 0.7% for the year. Advances against fixed deposits were down 11.80%; on credit cards they were down 24.70%, and on consumer durables down 11.80%. The saving grace was education, where loans went up 31%, and housing, where loans increased by 7.30%. The increase in housing loans was essentially the effect of teaser rates, without which mortgage lending might have declined. Loans to the real estate sector were up 15.30%. This looks fine until compared with the 49% growth of the previous period.

In this environment, once SBI took the plunge, everybody followed suit. When SBI launched its Easy Home Loan, Deepak Parekh, chairman of Housing Development Finance Corporation (HDFC), the country's biggest mortgage lender, declared it a gimmick. A few months later, HDFC itself was offering a similar product. But Parekh continues to insist the teaser loan is "playing with fire." In an interview with business daily Mint, he said: "It's not a very healthy way of lending. It can create problems in the future, particularly if the rates shoot up. Today what we are saying is, if the rate is 8% or 8.25% for the first two years, the rate will be 9% afterwards and so the gap is very small. Suppose interest rates in India shoot up in the next three years, then what will happen? 

These are all floating rate loans and fixed only for the first two years. So, 8% interest could become 12% or even more. Then, the gap will be too much and it's a problem for the individual homeowners.... Financial innovation doesn't take time; if one does it, everyone copies. It can be done in 24 hours. Now most banks have this product." More than 20 banks and housing finance companies in India have launched some variant of the teaser loan.

Competing for Borrowers
"These loan programs have proved to be extremely popular, and any large bank would be interested in getting on such a winning bandwagon," says Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, a real estate services firm. "In the end, a successful business entity will not steer away from taking a leaf out of the competition's book." Adds Bandyopadhyay of Spice: "I guess competition forced HDFC to follow this route. They obviously did not want to lose customers."

"Banks as well as HDFC have always had variants of the teaser loan programs," says Desai of E&Y. "They always had floating loans, which were linked to prime lending rates, so you have had situations in the past, too, where interest rates start out low and then move up. Parekh's comment was probably linked to pricing loans initially below the cost of funds."

Business daily Business Standard agrees with Parekh's views about the risks of teaser rates. "Teaser rates are doubtful in themselves, but the experience of the recent global financial crisis makes them more so," the newspaper says in an editorial. "The U.S. sub-prime crisis, where defaults by a large number of home mortgage owners led to the collapse of the housing bubble, which in turn led to the overall financial crisis, was essentially a matter of those who could not afford to service a loan of a particular order for its entire life being lent funds. And this was facilitated by the offer of teaser rates which were to be reset at not-too-late a date, a provision that was part of the fine print which many borrowers initially ignored. With antecedents of this nature, teaser rates should not have been allowed (in India) in the first place. It is not clear why the regulators should have allowed this to happen even while sounding warnings that it is not a good thing. The banks' response, particularly that of SBI, is that it was awash with liquidity at the particular period when the practice was initiated and the stratagem has served its purpose. But this still leaves open the issue of quality of assets which will not be known unless the higher reset rates kick in."

Following the RBI's warnings, some banks have changed course. Two major banks, Canara Bank and Union Bank, have decided to end their teaser loan programs. Axis Bank has withdrawn the teaser loan program it had introduced as recently as January 6. Even Bhatt of SBI seems to have had second thoughts. "We will review the special home loan scheme sometime in March and see what kind of credit offtake has taken place, what kind of liquidity we have, what is the view on lending to various sectors and where we think the cost of funds is heading," he told the Business Standard Banking Round Table in early February.

Bhatt's concern is primarily the SBI's bottom line, not the borrowers' capacity to repay. Still, the two are linked because the quality of the bank's assets depends on the latter. "The points of contention are the short-term impact of low margins of teaser loans on bank balance sheets and the long-term impact on the quality of the loan books the banks build," says Bundeep Singh Rangar, chairman of IndusView, an advisory firm for multinational companies looking at business opportunities in India. "While the short-term pressure on margins is reflected in the debate between Bhatt and Parekh, the differences between SBI and the RBI stem from asset quality issues. The interest rates of such teaser loans automatically reset after the initial relief period. This resetting character of the interest rates is being compared to sub-prime mortgages in the U.S. The key difference, though, is that even these low rates are not being offered to unqualified buyers, only to people with predictable and documented incomes and repayment capacity." The consensus view is that there are dangers, but Indian banks have been much more careful. And the RBI should be able to head off the trend before banks get into serious problems.

Bubble Trouble?
Is a bubble building up in real estate prices? Opinions differ. "There is a recovery in certain pockets only," says Desai of E&Y. Agrees Rangar of IndusView: "The real estate industry is picking up, but slowly and unevenly." Bandyopadhyay of Spice, however, says that the prices of both commercial and residential properties have gone up significantly and they are close to their peaks. "The sharp increase in real estate prices during past six-eight months is definitely a cause of concern," he adds. "A calibrated approach needs to be taken by the regulator in consultation with the banks and the industry to slow down the pace, thereby ensuring more sustainable long-term growth."

The residential market is currently still largely end-user driven," says Puri of James Lang. "While there is a fresh complement of investors on the market as well, wholesale speculation such as we had seen in previous years is definitely not in evidence. It is speculators who create bubbles, not genuine investors." Adds Rangar of IndusView: "We don't believe there is any bubble in the Indian real estate sector."

Rating agency Fitch sees demand picking up but no dangers of overheating. "After a difficult period in early 2009, residential market demand picked up in the second half of 2009, as reflected by the absorption of new projects that were launched at a 25% to 30% discount versus prices during the previous peak in the second half of 2008," says a January 2010 report. "Developers reacted to the fall in demand by reducing prices and lowering unit sizes, and the focus shifted from high-value housing to the more mid-income affordable segment. Any significant increase in property prices by developers, and a tightening monetary policy, could have an adverse impact on future demand. With some recent launches already indicating an increase in residential prices, there is a risk that volumes may moderate if prices continue to appreciate." The commercial segment, says Fitch, continues to remain under pressure.

The sizzle is evident elsewhere. Nearly 20 real estate companies have lined up initial public offers (IPOs) totaling more than $6 billion. Some have already gone through and done remarkably well. During the boom of 2007, there were nine real estate IPOs. Today, only one of them has shares that trade above their offer price. Even if the homeowner has been a winner, investors in real estate stocks and speculators in property have been clear losers.

Socio-cultural Changes Cheer India's Wine Market

Bangalore, known as India's very own Silicon Valley and home to many information technology multinationals and start-ups, recently raised a toast of a different kind: The city hosted an International Wine Festival.

Spread over three days and across sprawling grounds, the wine festival offered Bangaloreans an opportunity to understand the basics of wine, varietals, wine tasting and food pairing. There was also grape stomping, musical concerts, a fashion show, a display of vintage automobiles, a flea market and food stalls.

Behind the apparent frivolity, though, was serious intent. Organized by the Karnataka Wine Board (KWB) and co-sponsored by other government agencies, including the ministry of food processing industries and the National Horticulture Board, the event was the first of its kind in the Indian wine sector to be hosted by a government organization. It provided a platform for international and domestic wine makers, grape farmers, machinery suppliers and other service providers to network and showcase their offerings. There were also various technical sessions for both existing and aspiring players on the different aspects of wine making, development of vineyards and viticulture practices.

But wine consumption in India currently is minuscule, with the annual per capita consumption estimated to be less than 10 milliliters. Compare this to the world over, where the global yearly per capita consumption of wine is around four liters. According to recent news reports, in 2011 the U.S. was the biggest wine market with annual consumption of 3.7 billion bottles of wine. The reports suggest that by 2015, the per capita consumption of wine in the U.S., which is currently around eight liters, will increase to 13 liters. China, which in 2011 replaced Britain as the fifth largest consumer of wine, is expected to have a per capita consumption of two liters by 2015. In France, it is over 40 liters.

Given India's small wine market, one could well wonder what propelled the government agency to host the event. Subhir Hari Singh, chairman of the KWB shares his logic: "True, the wine market in India is very small at present. But we see a huge growth potential in this sector and we want to facilitate the growth by creating an enabling environment for all stakeholders in the chain -- from the grape farmers to the end consumers." The Southern state of Karnataka is the second-largest producer of wines in the country, next to the Western state of Maharashtra, which accounts for the majority of India's total wine production.

Alok Chandra, founder and CEO of Gryphon Brands, a Bangalore-based wine consultancy firm, notes that while traditionally Indians have been more inclined toward spirits and beer, wine has been steadily gaining acceptance. He estimates that over the past decade, the market has been growing at over 20% each year. There has also been a substantial increase in the number of wineries in the country, from less than 10 in 2000 to around 75 at present. Most of them, however, are very small. And just a handful of players have a pan-India presence, Chandra points out. "Wine is a state government subject in India and every state has its own tax rules and regulations. This makes it very difficult to operate outside one's own state. It also adds to the end price for the consumer," says Chandra.

According to Anand Dikshit, executive director of corporate finance & investment banking at PricewaterhouseCoopers (PwC) India, the wine market in the country has grown "consistently at 15% to 18% over the past few years" and at present is close to 17 million liters with a value of Rs. 1,400 crore (approximately US$280 million). "Given the slowdown being faced in the market, we believe that the market might grow at a rate of 10% to 12% in the coming years," he notes.

Industry players and other observers are more optimistic, however. Chandra, for instance, predicts that total wine sales in India "can increase to 8.3 million cases [one case is equal to nine liters] by 2020." Rajeev Samant, founder and CEO of Sula Vineyards, the leading wine company in India, and Kapil Grover, director of Grover Vineyards, the country's second-largest wine producer, expect the market to grow at a minimum of 25% year-on-year for the next 25 years. "If the government policies change, it could be far higher," says Grover. Adds Samant: "There is no way but up."

Retail sales of wine also reflect its growing popularity. According to industry estimates, in the organized liquor retail segment, wine now accounts for 30% of all sales as compared to 22% to 25% just a year ago. Whiskey and rum together account for 33%, while beer accounts for 22% and white spirits 15%. Talking recently to the daily newspaper, The Times of India, Ponnu Subramanian, senior vice president of food and supply-chain at Max Hypermarkets (India), which runs the Spar Hypermarkets in the country, said: "In a short span of time, wine will emerge as the single largest segment in liquor retailing."

While the premium and super-premium wine segment (above Rs. 750 or US$15 a bottle) in the country is largely dominated by imported wines because of the perception that they are of finer quality, the total consumption is driven more by domestically-produced lower priced wines, observers note.

A Changing Lifestyle

Observers point out that there are multiple drivers shaping India as a growing wine market: The country's economic growth over the past years; growing disposal incomes; increasing foreign travel and exposure to global lifestyles; more women in the workforce resulting in greater social mobility and higher social acceptability of women consuming alcoholic beverages; younger-skewing demographics; greater awareness of the health benefits of wine and easier availability through newer retail formats.

Some government measures have also added to the expansion. For instance, a couple of years ago, some states like Karnataka delinked wine from hard liquor and beer and introduced the concept of “wine tavern” licenses. These cost only a fraction of a regular bar license or a beer pub license, making it easier and less expensive to serve wine. According to Singh of the KWB, other policy measures like the removal of the inter-state taxes and slashing of import duties are also being considered. This is expected to give a further impetus to the market. Recently, India became a member of the Paris-based International Organization of Vine and Wine (OIV). Chandra believes that this is a significant step for the industry. "It brings you in line with international standards and practices," he says.

M. V. Rajeev Gowda, professor of economics and social sciences at the Indian Institute of Management, Bangalore, notes that "the shift in social attitudes toward consumption of wine and its growing popularity [in India] is reflective of deeper social and cultural changes that are taking place in the society."

Harish Bijoor, brand strategist and CEO of Harish Bijoor Consults and a visiting professor at the Indian School of Business, Hyderabad, adds: "Economic prosperity has found ways of flowing out into social prosperity, and the eating and drinking out levels have grown exponentially. With this, wine finds center-stage." Bijoor points out that wine has become the entry-drink in the food chain of liquor consumption. "Wine is seen to be the least harmful and the least potent and therefore wins."

Grover compares the Indian wine market with that of China. He notes that like in India, wine consumption in China was traditionally at very low levels. But in the past few years it has galloped and the country has become one of the biggest markets across the world. "There is no reason why India should be so far behind. It is just a matter of time before we reach the inflection point. But the government also needs to do its bit to make it easier to produce and consume wine," he says.

Creating New Wine Experiences

India's leading spirits and beer major, the Vijay Mallya-led UB Group, is keen to get a significant part of this growing pie. Four Seasons Wines, the fledgling wine arm of the UB Group, was launched in 2008 and has been growing at "30% to 40% year-on-year on a cumulative basis," according to Abhay Kewadkar, chief wine-maker and director. He expects to continue this pace in the coming years.

In 2006, the UB Group acquired Bouvet-Ladubay, a French winery, and the following year it set up United Vintners, under which it imports wine from across the world. Kewadkar explains UB's interest in this segment: "UB is a leader in spirits and beer. You can't be a global leader in the alcoholic beverage space and not have wine in your portfolio. And with the potential that India has in the wine market, it is a natural move."

Kewadkar's strategy for growth at Four Seasons Wines is based on the three pillars of "education, awareness and accessibility." "Over the years, wine consumption has remained metro-centric in India and it has a very snobbish appeal in the consumer's mind," says Kewadkar. "We have taken it upon ourselves to educate the consumer to demystify wine as a category and [make them aware] that wine is like any other beverage meant for enjoyment." As part of this, his team has been conducting vineyard tours, wine tastings and wine appreciation sessions for corporations and various other consumer groups.

Kewadkar notes that the large distribution network of the UB Group gives him an advantage in reaching out to tier-2 and tier-3 cities. "This has helped us in expanding the pie and [also] in paving the way for a higher market share in a bigger pie," he says. In a bid to further expand his reach, Kewadkar has also partnered with outlets like casual dining restaurant chain Pizza Hut and coffee chains Cuppa Café and Café Oz to serve Four Seasons wines in their outlets.

During the announcement of Four Seasons' partnership with Pizza Hut, Sidhartha Mallya, heir to the UB Group and general manager of marketing at the UB Group's United Spirits Limited, presented numbers from the company's market research: "The current alcoholic beverage penetration in India is around 42.5%, while beer and whiskey penetration is at 26% and 23% respectively. Wine is only at 0.6%. However, four times as many people have expressed their willingness to taste wine, but haven't done so for lack of the necessary casual fine-dining experience and opportunity." Pointing out that drinking wine in cafes and restaurants is common in many countries, Mallya added: "Through this partnership with Pizza Hut, we are introducing a wine trend that is globally accepted."

According to Bijoor, easy access to wine, especially through the fast-growing coffee café market, could be a game changer. "Wine may be the new coffee. By that I mean that coffee itself took a while to gain [a foothold] in India. In the beginning, people knew coffee to be just plain old filter coffee. Today, there is a wide acceptance of cappuccino, lattes and frappes of every variety."

Sula's Samant is thinking of expanding along similar lines. "There is no doubt that wines being served across coffee chains and at affordable casual dining restaurants will attract a lot of people. This is common globally and I see it as a positive trend in India." For now though, Samant is focusing on setting up company-owned wine bars across the country. The first one is up and running in Mumbai. Apart from the metros and the big cities, Samant is looking to expand in smaller cities and towns also.

Meanwhile, Grover Vineyards is on the verge of bringing in fresh investments through a private equity player to avail of the growth opportunities. A few years ago, Grover Vineyards had outsourced its marketing to Brindco, a New Delhi-based wine importer. Brindco had also taken an equity stake in the company. The thinking then at Grover was that Brindco's strengths in marketing and distribution would help it to expand. Grover says that the move did not work out as anticipated, and the marketing is now back with the company. But unlike Samant and Kewadkar, Grover predicts that wine drinking in India will largely be confined to the metros, at least for some years to come.

Another debate in Indian wine circles is around the export potential of Indian wines. Some observers say that Indian wines have yet to achieve the maturity to appeal to the global palate. More importantly, they add, as a country India doesn't have the necessary brand persona to make it big as a wine exporter. Others, however, suggest that with Indian food gaining popularity across the world, Indian wines could well be part of the overall Indian food experience. "There are over 50,000 Indian restaurants worldwide. Indian wines need not necessarily pair well with Indian cuisine; just by being 'Indian,' they can complete the entire package,” Chandra of Gryphon Brands notes. “And as the India story becomes bigger, Indian wines could ride the wave.”

Bijoor suggests that if India can make the world’s third-best single malt -- a distinction the country earned in 2010 when whiskey expert Jim Murray awarded that title to Amrut Fusion single malt whiskey from Bangalore-based Amrut Distilleries -- “Why not a wine that is truly world-class? Our grape-growing belts hold a lot of promise. The next big wine of the world might just about come either from Nashik [in Maharashtra] or Bangalore, for all we know."

While that's something that India vintners would raise a toast to, Dikshit of PwC adds a dash of reality: "We [need to] develop the domestic market prior to making moves overseas."

Can Telemedicine Alleviate India's Health Care Problems?

Chakrajmal village, in the Bijnor district in the North Indian state of Uttar Pradesh, got its first doctor in 2008. He was not based in the village, though. The villagers had access to the doctor via a telemedicine project launched by World Health Partners (WHP) to provide health care services to 1,000 villages in Uttar Pradesh's Bijnor, Meerut and Muzaffarnagar districts.

Set up in 2008, WHP, a U.S.-headquartered international nonprofit, provides basic health care and reproductive health services by harnessing local market forces to work for the poor. According to Gopi Gopalakrishnan, founder-president of WHP, the organization's model is to draw on private sector capacity through social franchising, innovations in labor management, and low-cost technologies to develop a scalable and sustainable health care service delivery model.

WHP's Uttar Pradesh telemedicine network now comprises around 1,200 local individuals called Sky Care Providers and 120 entrepreneur-run centers branded as Sky Health Centers. The Sky Care Providers are given training and low-cost mobile solutions by WHP to perform diagnostics, symptom based treatments, tele-consultations and, wherever needed, referrals to the Sky Health Centers.

These centers use remote diagnostic devices for measurement of basic parameters such as blood pressure, heart rate, electrical activity of the heart and pulse rate. The patients are connected to doctors at WHP's central medical facility in New Delhi via computers and webcams. The entrepreneurs have the option of leasing the equipment from WHP. For the patients, consultation charges vary from 20 U.S. cents for below poverty line households to US$1 (at the exchange rate of Rs. 50 to a U.S. dollar).

Patients who require surgery, inpatient care or specialized procedures that cannot be delivered via telemedicine are referred to the nearest WHP franchised health care clinic. Currently WHP has 16 such clinics in Uttar Pradesh. Since 2008, WHP has provided villagers in Uttar Pradesh with around 35,000 tele-consultations for common ailments such as fever, indigestion and gynecological problems.

Gopalakrishnan is now replicating this model in Bihar. Currently there are 104 telemedicine centers up and running in 13 districts of the state. He hopes to expand to 400 centers across 25 districts (covering a population of 70 million) by end of 2012 and 1,250 centers over the next three years. Apart from treating basic ailments, Gopalakrishnan now also wants to focus on detection and treatment of tuberculosis, visceral leishmaniasis, childhood pneumonia and diarrhea.

"There's a huge, unmet health care need in our rural hinterlands. The challenge is to make health care affordable for the masses and attractive to the providers at the same time," says Gopalakrishnan. "Telemedicine is a good strategy to strengthen the existing human resources available in health care. The scale, however, will come only through effective government intervention."

According to Rana Mehta, executive director and leader of health care practiceat PricewaterhouseCoopers (PwC), access to health care in India "gets limited by the affordability factor and hence telemedicine -- or the remote diagnosis, monitoring and treatment of patients via videoconferencing or the Internet -- has a very important role to play. It is at a fairly nascent stage right now having started only about a decade back, but it is undoubtedly a fast-emerging trend, led by growth in the country's information and communications technology sector."

K. Ganapathy, president of the Apollo Telemedicine Networking Foundation, past president of the Telemedicine Society of India and adjunct professor at the Indian Institute of Technology, Chennai, is categorical that telemedicine is the way ahead. "We can't go far with conventional brick-and-mortal hospitals,' he says.

Vijay Govindarajan, professor of international business at the Tuck School of Business at Dartmouth College, not only sees India as one of the early adopters of telemedicine, he also notes that the country has the potential to develop innovations that can be adopted in other parts of the world, including developed nations like the U.S. "In the United States, we are thinking of IT [information technology] as just electronic medical records," Govindarajan says. "This shortchanges IT's full potential. Driven by extreme need, India is inventing new ways to use information technology to improve health care."

Govindarajan lists the reasons why telemedicine will take off first in India: A severe shortage of doctors, especially in rural areas; very high patient volumes; widespread availability of mobile networks; rapid growth in the availability of low-power, hand-held medical monitoring devices, and the shift away from the proprietary, local area network-based medical image archiving and communications systems to a networked tele-enabled system. "Innovations in telemedicine will accelerate in India, where access and cost are critical issues. These telemedicine innovations will be adopted in the U.S., where cost and access are becoming increasingly talked about. This is a classic reverse innovation story," he adds.

Potential for Growth

A January 2012 report titled, "Global Telemedicine Market Analysis," by RNCOS Industry Research Solutions, an India-based market research and information analysis company, projects that the global telemedicine market will grow at a compound annual growth rate (CAGR) of around 19% from 2010 to 2015. An earlier report in 2009, titled "Global Telemedicine Market: 2008-2012" published by Infiniti Research, a London-based market intelligence firm, pegged the size of the global telemedicine market in 2008 at US$9 billion. According to this report, Asia is the fastest growing region for the telemedicine market with India and China leading the growth.

There are no clear numbers, though, on the current size of the telemedicine market in India. Murali Rao, associate vice president for health care at the New Delhi–based research and consultancy firm Technopak Advisors, estimates the current size of the Indian telemedicine market to be around US$7.5 million. "This is expected to grow at a [compound annual growth rate] of 20% over the next five years," he says. That would take it to around US$18.7 million by 2017. Mehta of PwC on the other hand notes: "Studies indicate that the size of India's telemedicine market is expected to be US$500 million by 2015." (This is a nascent area and estimates vary widely.)

Ganapathy of Apollo points out that 80% of India's population has no direct, physical access to specialist health care and gives some back-of-the-envelope calculations: "Estimates suggest that the telemedicine market is at least for 800 million Indians. Even if half of these 800 million need to consult a specialist once a year, [that still amounts to] 400 million specialist consultations per year. Even if 10% of these are enabled through telemedicine we are talking about 40 million consultations per year from rural India alone…. The market potential for telemedicine is obviously enormous."

While the numbers may vary, what is undisputed is the potential that telemedicine holds. A major driver of telemedicine in India is the dismal state of health care in the country. India's government spending on health as a proportion of the GDP – currently at around 1% of the GDP - is among the lowest in the world. Even in other Asian countries, it is higher. The corresponding amount is 1.8% in Sri Lanka, 2.3% in China and 3.3% in Thailand. Despite the launch of the National Rural Health Mission in 2005, India continues to grapple with a 33% shortage of rural hospitals, which are called Community Health Centers (CHCs). Even in the ones present, there is an acute shortage of staff. According to the Ministry of Health and Family Welfare, there is a shortage of 50-70% of physicians, specialists, lab technicians and radiographers at the CHCs. And around 10-15% of them lack even basic amenities such as water supply and electricity.

Experts have time and again suggested that if the vision of "Health for All" is to be achieved by 2020, India will have to pump in 6% of its GDP in the health care sector. At the same time, technology-enabled health care networks can play a huge role by bridging the distance between doctors and patients through Internet and other telecommunication technologies.

Ground Realities

Some of the major players in telemedicine in India at present include Narayana Hrudayalaya, Apollo Telemedicine Enterprises, Asia Heart Foundation, Escorts Heart Institute and Aravind Eye Care. Devi Prasad Shetty, a leading cardiac surgeon based in Bangalore and founder of Narayana Hrudayalaya Hospitals, predicts that it is only a matter of time before we see a huge spurt in the use of telemedicine. "In the early days, satellite was the only means of managing the telemedicine program and keeping satellite connectivity was not very easy," he notes."However, now with Skype and other ways of videoconferencing there are many options available. With the stabilizing of technology platforms, technical problems are extremely rare."

Shetty is at the helm of one of India's earliest and largest telemedicine programs. Launched around 10 years ago, the initiative is managed through satellite connectivity provided free of cost by the Indian Space Research Organization (ISRO). Presently, the Narayana Hrudayalaya telemedicine network is connected with about 100 telemedicine centers across India. Outside India, as part of the PAN African satellite network, it is connected to 55 cities in Africa. The connectivity also extends to some other places like Iraq, Malaysia and Mauritius. Since its launch, it has conducted around 53,000 tele-consultations in the areas of cardiology, neurology, urology and cancer. Narayana Hrudayalaya also has an electrocardiogram (ECG) network wherein general practitioners in remote locations are given a trans-telephonic ECG machine that helps transmit ECGs. Narayana Hrudayalaya gets about 200-300 ECGs daily. These are interpreted by its doctors and then communicated to the local doctors at the remote locations.

Shetty points out that telemedicine is not just about connecting remote locations. Six years ago, when Narayana Hrudayalaya started performing liver transplants on babies, its cardiac anesthetists did not have adequate experience for this procedure. So Shetty turned to telemedicine. Narayana Hrudayalaya's operating room in Bangalore was connected to the Children's Hospital of Philadelphia and the anesthetists there. "After hand-holding for about five to seven liver transplants, our anesthetists acquired the knowledge," says Shetty. He goes on to add: "In the coming years, most of the medical treatment will be through telemedicine either in the same city or in other countries. There will be enough gadgets available at home to check blood pressure, blood sugar, ECG, oxygen saturation, even ultrasound. Patients will consult the doctors through mobile phones or videoconference through cellphones."

Some of this is already happening. Recently, leading telecom player Airtel tied-up with Healthfore (a division of Religare Technologies) and Fortis Healthcare (a Religare group company) as the knowledge partner to offer Mediphone services to its customers. This service allows subscribers to access basic medical guidance on non-emergency health problems over the phone. The service is available around-the-clock at less than US$1 for each consultation.

Other telecom players like Aircel and Idea have launched similar services in collaboration with HealthNet Global, a Hyderabad-based emergency and health care management services firm. The subscribers who call to seek health advice are visited by paramedics who come with a laptop and medical diagnostic equipment and conduct consultations via video conferencing. This is also gaining traction among insurance companies. "We have already conducted 1,000 sessions since our launch in September 2011. We are currently present in Chennai, Mumbai, Delhi and Hyderabad. We plan to expand our services to all the metros," notes Rahul Thapan, global head of marketing & sales for HealthNet Global.

In December of last year, microfinance firm Equitas also launched tele-health care delivery centers in association with HealthNet Global. The project is funded by Fem Sustainable Social Solutions (FemS3), a nonprofit company operating in the social business space. Equitas' Consult 4 Health and Call 4 Health products, developed exclusively for the firm by the Centre for Insurance and Risk Management at the Chennai-based Institute for Financial Management and Research, allow its members to consult physicians from Apollo Hospital over video for a charge of US$1 a consultation. The patient's data is also stored for any further diagnosis and treatment in the future. 

"It is our endeavor to improve the quality of lives of our members and their families," says P.N. Vasudevan, managing director of Equitas. "Health care is a source of significant financial stress for this segment. The initiative with HealthNet Global using physicians from Apollo Hospital will bring a revolution by providing health care to the doorstep of our members and the best medical care anytime, anywhere. We will roll out our services from Chennai and gradually go pan-India." Currently, Equitas has three tele-health care centers operational in Chennai.

Other new models are also emerging. Take Mumbai-based MeraDoctor (My Doctor) founded in 2010 by Gautam Ivatury, who was earlier working in the area of mobile phone-based services, and Ajay Nair, a medical doctor with a master's degree in public health management from Harvard. A phone-based medical advice service, MeraDoctor works on a membership model. The company offers family membership plans for three months and six months; during this period, members are entitled to unlimited phone consultations with MeraDoctor's team of doctors. Members can also avail of discounts at select diagnostic centers that MeraDoctor has tied up with.

There are new products, too. Dartmouth's Govindarajan points to General Electric's innovative low-cost ECG machines, which were developed in India and can take digital images that can be emailed to cardiologists in the U.S. "[This gives] poor patients in remote rural areas access to world-class care," he says.

Another example is 3nethra from Bangalore-based Forus Health. Developed with the aim of enabling mass pre-screening outside the hospital environment, 3nethra is a portable, non-invasive device that helps in early detection of eye diseases like cataract, diabetic retina, glaucoma and cornea related issues. The digital information taken by 3nethra can be easily transmitted electronically. The device won the Samsung Innovation Quotient award in 2011. "At 3nethra, we wanted to work with the system and its limitations," notes K. Chandrasekhar, founder and CEO of Forus Health. "Even a minimally trained technician can operate it. The idea was to develop a solution that was cost effective. The device that we have developed is available for one-sixth the cost of present diagnostic devices. Also, it uses only 10 watts of power. It can run for four hours on a UPS, making it ideal for rural areas [which face enormous shortage of power]."

Challenges Remain

But even as the telemedicine scenario in India is seeing significant developments, challenges still remain. According to Narayana Hrudayalaya's Shetty: "The greatest challenge is getting enough medical specialists to see patients in remote locations and also to get the patients to trust the opinion by the doctors, virtually."

Healthnet Global's Thapan points out that India will soon have a billion phone connections and the network will not be a problem. "It's now about finding the right linkages," he says. Thapan notes that ASHA (Accredited Social Health Activists) workers, for instance, can be trained to aid the doctors. "It will help spread the network," he adds.

Apollo's Ganapathy suggests that the potential of telemedicine in India is still under-realized because of lack of awareness among the masses and lack of a business model that caters to all the stakeholders. "Telemedicine will never reach the critical mass for take-off until doctors are excited about it and unless people clamor for it as a cost-effective method. We need public-private-partnerships to drive telemedicine [in India]."

Mehta of PwC says the entire ecosystem needs to be strengthened. "Ten years ago, there was the technological barrier," he notes. "That has gone away. However, the economic barrier stays. The ecosystem, in terms of incentives for the hospitals, the broadband service providers and the patients, needs to be defined. That is the tipping point of the telemedicine market in India."

HEALTH: VITAMINS - Too Much Of A Good Thing

What Overdosing On These Can Do
- Vitamin A Eczema, respiratory tract infection, blurred vision, ringing in the ears, insomnia, nausea, vomiting, diarrhoea, hair loss, joint pain, menstrual irregularities, liver damage.
- Vitamin D Calcium deposition, deafness, nausea, loss of appetite, kidney stones, weak bones, hypertension, high cholesterol
- Vitamin E Breathing trouble, swelling of tongue, hypertension, severe fatigue, breast tenderness, slow wound healing Niacin - Acute flushing, peptic ulcers, liver dysfunction, gout, faintness, tingling of fingertips, arrythmias, hyperglycemia
- Vitamin C Kidney stones, hot flashes, insomnia, tiredness, osteoarthritis
- Vitamin B6 Problems with sense of position and vibration, reduced tendon reflexes, numbness in hands and feet, problems walking, problems with memory, depression, headache and tiredness
- Calcium Depresses nerve function, drowsiness, tiredness, calcium deposits, and kidney stones Iron Damages liver, heart, pancreas
- Zinc Fixed facial expression, difficulty walking, slurred speech, hand tremor, involuntary laughter
- Cobalt Goitre, heart damage
- Selenium Nausea, fatigue, irritability, loss of fingernails.

It’s one of those truisms of modern medicine that have become part of folk wisdom: taking vitamin pills keeps you healthier. But doctors are now concerned about an alarming number of problems related to the unregulated consumption of vitamins—liver and kidney damage, bone growths, tremors, slurred speech, the list is endless. Internationally, doctors and health agencies are already ringing the alarm bells; but in India, we are still popping pills in the dark.

Vitamins can be classified into two groups, water-soluble and fat-soluble. Overdoses of water-soluble vitamins are not so much cause for concern as they are readily flushed out in excretion. But fat-soluble vitamins—vitamins A, E, D and K—can cause problems, for they persist in the body’s fat deposits. An overdose of vitamin A can cause joint pain, insomnia, hair loss; that of vitamins D and E can lead to kidney and liver damage, the early symptoms being as ordinary as nausea, vomiting and exhaustion, making diagnosis tricky. It must be noted, though, that prolonged overdoses of water-soluble vitamins do not help in any way, and could even harm you.
“Vitamin toxicity is a big concern, as lots of people are showing the symptoms of overdoses,” says Ritika Samaddar, a nutritionist. “It’s better to get vitamins and minerals from food rather than pills. Food will never leave an excess that causes harm, but pills will.”

Last year, Nancy University, in Lorraine, France, reported after a six-year study of more than 8,000 subjects that people taking vitamins didn’t in any way reduce their risk of heart disease and cancer in comparison with those taking placebos or dummy pills. The report from an ongoing study from the University of Minnesota, US, which has covered 38,000 cases since 1986, is more frightening: women taking supplements were found running an increased risk of dying.

With malnutrition a major issue in India, attention has always been on macronutrients—carbohydrates, proteins and fats. It’s only recently, and that too among the urban middle- and upper-classes, that there’s awareness about the intake of micronutrients, that is, vitamins and minerals. In the main, the worry is about deficiency: the educated rich overdose on all manner of supplement without realising it, and without knowing the ill-effects of doing so.
Among mineral supplements taken thus, the commonest over-the-counter pills sold are those of calcium. Prolonged overdosing can cause drowsiness, calcium deposits and kidney stones. It can also depress the nervous system. So, if you have been taking calcium pills in the hope of improving your hurting knee, in the long run, you could well be risking hospitalisation for kidney stone. An overdose of iron pills, commonly taken in fear of anaemia, especially by women and girls approaching puberty, can cause damage to the pancreas, heart and liver.

The vitamin most commonly taken singly, rather than in multi-vitamin formulations, is probably Vitamin C, either popped, or sucked on in the form of sour lozenges, the self-medication driven by its overstated reputation for curing and preventing colds and coughs. But experts say there’s no evidence to suggest such powers. A January 2008 article in the American Journal of Clinical Nutrition linked Vitamin C overdoses to devastation of musculature and consequent loss of endurance. Overdosing can also result in hot flushes, headaches, insomnia, tiredness and kidney stones.

But self-medication isn’t alone to blame. There’s enough poisoning by prescription: doctors often put patients on regimens of vitamins for vague symptoms like tiredness, mild depression, all-overishness. The trouble is, such symptoms are also linked to vitamin overdoses. Complicating matters is the placebo effect prescriptions of vitamins achieve.
A recent trend in India is the liberal dispensing of Vitamin D by orthopaedicians, who prescribe shots for a host of aches—frozen sholder, backache, hurting knees and so on. The vitamin shot does solve the problem if the cause of pain isn’t anatomical, but it can leave in its wake a host of other complications. “We had a patient who showed all signs of a Vitamin D overdose, which he had been given for a bad back. He had to be hospitalised for treatment,” says Dr Rommel Tickoo, a senior consultant in internal medicine at Max Healthcare. “There’s widespread misuse of vitamins.” He also warns that a number of potent combinations of vitamins being sold over the counter are not for most people in average health.

So people must stop popping pills in the belief that, even if it doesn’t help, it won’t harm anyway. A researcher at AIIMS, Delhi, says, “Since there has been no India-centric study as yet, one doesn’t want to sound alarmist by asking people to stop buying over-the-counter vitamin pills. But there’s more than enough data from across the world to suggest that vitamin and supplement use must be regulated.” Dr Tickoo points to another danger, of people taking supplements on the recommendation of friends and family members, not doctors. “For healthy people who may occasionally feel weak, supplements are not the answer,” he says. “People must know if they need it and what the side-effects are. Vitamin supplements are not something you take life-long.”

Not surprisingly, pharmaceutical companies have exploited people’s habit of taking pills they don’t really need. So have makers of breakfast cereals and bread, canned milk, etc, feeding on fear to promote sales. Vitamins A and D are added to milk products, Vitamin E to edible oils, iron to breakfast cereals and bread. The fact is, the human body is incapable of processing such overdoses of supplements over a long period of time. It absorbs what is required mostly from food; the rest is either washed away, or stays in the body’s fat deposits. “People have busy lives, they ignore their diet and think supplements will make up for nutritional deficiencies,” says Sammadar. Vitamins, it could be said, are the too-much-of-a-good-thing habit that many of us must kick.

Who Should Be India's Next President?

Summer 2012 will see one debate generate considerable heat: who should be the next President of India after President Pratibhatai Devisingh Patil retires this July. The head of state of the Republic of India, the commander-in-chief of the armed forces, and yes, ideally speaking, also the nation’s conscience-keeper. Political circles are abuzz with a few names who could wear these hats; who, if any of them, will eventually occupy Rashtrapati Bhavan depends on a number of political permutations and combinations.

Pundits and professionals, depending on their own persuasions, are divided in their opinion on whether the next president of the country should be a career politician or someone non-political but held in high regard; the scale tilts towards the former. “The president has a constitutional responsibility and defined constitutional role that must be discharged in a non-partisan manner,” says Dr Ajit Ranade, economist and one of the founders of the Association for Democratic Reform (ADR). “We should not be looking for a messiah here; instead the focus should be on strengthening democratic systems and processes.”

The frontrunners from the political firmament are predictable. Vice-president Hamid Ansari, PM Manmohan Singh, Union finance minister Pranab Mukherjee, Lok Sabha Speaker Meira Kumar top the political list. These names have done the rounds in the last few months and it’s not difficult to see why; the next incumbent of Rashtrapati Bhavan will be swearing in the prime minister after the general election in 2014, or even earlier, and may be called upon to take tough political decisions. “It’s too early to discuss any candidate; let’s wait and see the political alignments after the assembly results,” says a Congress general secretary.

A possible scenario is that vice-president Ansari is elevated by some cobbling up of political consensus and an NDA-affiliated leader is made vice-president. When BJP president Nitin Gadkari remarked recently that Shiv Sena leader and former Lok Sabha Speaker Manohar Joshi could play “a larger role” after his Rajya Sabha term ends in April, the speculation was if Joshi would succeed Ansari. That, of course, would depend on whether Ansari is voted into Rashtrapati Bhavan, and the changing BJP-Sena equations. As Joshi says, “it’s hazardous to expect anything in politics”. If Ansari does become a presidential candidate, his election would depend on what the feisty Bengal CM Mamata Banerjee decides: oppose him to spite the Left or vote with the UPA for a rain-check.

“It’s the middle-class fantasy to have a non-political or apolitical president, but make no mistake, no one can occupy Rashtrapati Bhavan unless he/she has something to do with politics,” points out Paranjoy Guha Thakurta, political commentator. “We can speculate on non-political names to amuse ourselves, but it’s a political exercise.” Mumbai-based analyst and editor Kumar Ketkar agrees. “There have been suggestions like Narayanamurthy or Amitabh Bachchan, so that we send out a certain signal to the world and so on.” he says. “But these people will be out of their depth in the office. It may be a ceremonial office but it’s also a constitutional office.”

Film icon Amitabh Bachchan, Infosys founder (and now mentor) Narayanamurthy, Tata Sons czar Ratan Tata are some suggestions from the professional class. In fact, these are popular candidatures in the virtual world. Murthy as the next president of India was trending on Twitter late last year. His candidature was endorsed by none other than former president Dr A.P.J. Abdul Kalam while on a visit to the Infosys Global Education Centre; Kalam, when asked by a company employee in the audience what he thought of Murthy as president, replied, “Fantastic.” His rival and Wipro founder Azim Premji as president gets an even more positive response.

The Tatas had a Facebook page devoted to the cause two years ago, in which he was described as “one of the most respected and ethical business icons alive” and which exhorted that “there is no other more capable person than you for the ultimate honour to be the President of India”. Corporate India is unwilling to take positions. A CII spokesperson told Outlook, “We have no official view as this is a speculative exercise at the moment.”

Some scoff at the suggestion of a corporate czar, particularly Murthy, in Rashtrapati Bhavan. “He has made some fairly anti-democratic statements in the past,” says P. Sainath, rural affairs editor of The Hindu and a leading voice on the country’s agrarian crisis. “He doesn’t believe in local self-governments, he wants cities to have czars like corporates.” Would he back economist and Nobel laureate Amartya Sen, as suggested by Tushar Gandhi, the great-grandson of Mahatma Gandhi? “A Nobel laureate need not make a good president,” says Sainath.
Across academia and politics, the candidature of Gopal Gandhi, former West Bengal governor, finds resonance. His background, pedigree and experience mark him out to be a frontrunner among non-politicians, aver pundits. “Gopal Gandhi would be a good choice but for his own abilities, not because he’s the Mahatma’s grandson,” says Tushar Gandhi. “I would suggest two others: Aruna Roy, given her background in the IAS and her incredible body of work in the last few years; and filmmaker Shyam Benegal for his depth of understanding about India, his secularism, his experience and his public persona.” He also suggests Bachchan because “he knows how to pose for the cameras”.

Roy has considerable support; on a similar scale are Bengali writer-activist Mahasweta Devi and Self-Employed Women’s Association of India (SEWA) founder Ela Bhatt. Says Anita Ratnam, Chennai-based dancer, “The next president could be someone from the NGO sector, which is seen as an unglamorous area. The mental bandwidth should not be restricted to someone from an urban centre but has to extend to rural India.” Gnani, a political analyst from Chennai, roots for Mahasweta Devi because of her “societal concerns, writer’s sensitivity and work with adivasis”. Her criticism of the Left during the Nandigram episode, many say, showed her ability to be impartial. Maharashtra social worker Dr Abhay Bang gets a look-in too; he will know the ground realities, says Gandhi.

Pundits agree that the chances of a woman succeeding Pratibhatai Devisingh Patil are dim, but it doesn’t hurt to hope. And if gender is a consideration, can caste be far behind? There are many suggestions from Dalit writers and activists, from Dr Narendra Jadhav, former deputy governor of Reserve Bank of India and former vice-chancellor of Pune University, to Dr Bhalchandra Mungekar, former vice-chancellor of Mumbai University and now Planning Commission member. Similarly, there’s some backing for J.M. Lyngdoh, former cec, and activist-politician Suhasini Ali.

However, Dr Surendra Jondhale, head of the political science department at the Mumbai University, begs to differ. “We shouldn’t be hung up on these religious, caste and Dalit criteria. We need a president with administrative experience, commitment to nation-building and ability for crisis management because political challenges are inevitable in the next couple of years,” he says. There could be a case for a technocrat-administrator like telecom whiz Sam Pitroda, ‘Metro man’ E. Sreedharan, legal expert Fali S. Nariman, says Jondhale, but not “at this critical juncture in our political history”.

Others who drew in support were anti-corruption crusader Anna Hazare, backed by a lot of aam janata, but not by pundits; and former president Dr A.P.J. Abdul Kalam who many remember as “a non-political hero with charisma”. But politicians, understandably, seem disinclined to experiment with a non-political person yet again.

Upgrading India’s Engineering Colleges

Given India’s large population of 1.2 billion, typically demand far outstrips supply in almost everything. When it comes to infrastructure in particular — be it transportation, housing, health care, education, etc. — the constant refrain is that the country needs more.

For instance, with over half of India’s population less than 25 years of age, there is usually a scramble for seats in educational institutions of all types. But in an anomaly of sorts, even as there are thousands of students aspiring to become engineers, thousands of seats in engineering colleges in the country have not found any takers this year.

Meanwhile, state governments have asked the AII India Council for Technical Education (AICTE), the country’s regulatory body for professional education, to reject any fresh proposals for starting new engineering colleges. Talking recently to daily newspaper The Times of India, S. S. Mantha, chairman of AICTE, said: “We have received letters from [the] Andhra Pradesh, Karnataka, Tamil Nadu, Haryana and Chhattisgarh governments telling us not to clear proposals for engineering institutes.”

AICTE records show that the capacity in engineering colleges has increased three fold in the past five years. India currently has close to 3,400 engineering colleges (both government and private) that offer around 1,500,000 seats. Of these, nearly 200,000 went empty this year. Mantha points out that while there are “no takers for specific engineering programs, the core engineering courses — civil, mechanical and electrical — still have takers.”

According to T.V. Mohandas Pai, chairman of education services provider Manipal Global Education, the vacant seats in the engineering colleges are not just a reflection of increased capacity or lack of student interest in certain streams. Instead, they are an indication that students are rejecting bad quality education. Pai, who until recently was a board member and head of human resources at information technology firm Infosys, points out that there is “a mushrooming of inefficient institutions. Seats are going vacant only in bad colleges because students now have a choice. This is a good thing for the country and will clean up the [education] sector.”

In India, education is restricted to nonprofits, but unscrupulous players enter the sector because of the high demand, manipulate the system to get through the entry criteria, and then bend the rules to rake in profits. Many legitimate players tend to stay away because offering high quality education requires deep pockets to attract good faculty and for setting up the infrastructure. In the nonprofit model, investments are typically limited, and it takes a long time to build a critical mass.

One possible solution to India’s woes in the education sector is to allow new players to enter the system based on transparent norms and let established institutions freely expand to whatever capacity they want. “Providing education is a noble activity, but it must be seen as a providing a service like in any other sector,” says Pai. “While regulations are needed to ensure the highest standards of quality, what the government needs to do is create a transparent system where private institutions are encouraged to invest in and deliver high quality education, and let the inclination of the players [to be for-profit or nonprofit] and the market dynamics decide their profitability.”

In addition, it is important to incentivize educational institutions to become more than just good disseminators of knowledge. They must also become good creators of knowledge, experts say. This, in turn, will lead to a natural upgrading of the education that they impart. In the meantime, the empty seats could be a warning to those wanting to make a fast buck.

Bulgaria 'jails' asylum seekers

Bulgaria routinely locks up asylum seekers, despite EU law banning the use of detention centres, forcing migrants west.

"What crime have I committed to be held a prisoner?" "When will they set me free? They are telling me six months, why six months?" "On what grounds are they detaining me? I am a refugee, not a criminal."

Visiting the Liubimets detention centre on the Turkish-Bulgarian border is not for the faint hearted. Within seconds the few outsiders who visit are mobbed by dozens of angry immigrants, all yelling the same question in different languages: "Why are we in prison?"

"We don't know why we are being detained. We haven't seen anybody. Nobody explains what is going on," shouts a Tunisian man in his twenties.

Another, an Algerian in his early thirties, chips in: "I know my rights. Are you [Bulgaria] in the European Union? I know the rules; you don't have the right to put me in a prison."

Bulgaria currently locks up the 1,000 asylum seekers it receives in an average year in two secure units, the Liubimets centre and another in Busmansti, just outside capital city Sofia.

Most are detained for months, something that is against both Bulgaria's national laws and EU regulations.

While Bulgaria is already failing to properly manage its asylum system, many fear the situation could spiral out of control once the country finally joins the border control-free Schengen zone.

On joining, the number of immigrants heading for Bulgaria is expected to rise dramatically, as the many thousands who currently cross illegally into the EU via the Turkish-Greek border may opt instead to slip into Bulgaria en route to the West.

Detention the 'only option'
Government officials acknowledge they are breaking EU rules and national law, but insist they can only properly cater for just 400 asylum seekers at any one time in dedicated, open reception centres.

Nikola Kazakov, director of the State Agency for Refugees, says: "The biggest problem in the Bulgarian system of reception is the low capacity of the open reception centres, so we are forced to keep people who applied for refugee status in closed camps.

"Yes, it's against the minimum standards for reception of asylum seekers but that is the capacity of Bulgaria."

Bulgaria's interior ministry has also admitted it is failing to meet even minimum EU standards. In March this year, it published a draft strategy detailing the system's failings, including too few residential places for asylum seekers.

Sofia's bid to join Schengen was postponed in September, after the Netherlands and Finland objected on the grounds both were unable to secure their borders.

Schengen members do not want to see a replica of the situation in Greece where, in 2010 alone, some 41,000 immigrants illegally crossed the Turkish-Greek border in the hope of making it to western Europe.

Officially, asylum cases in Bulgaria should be decided within six months. In practice, applications are subject to frequent delays, extensions and lengthy court appeals.

Trapped in detention centres while application processes drag on, many asylum seekers just want to be released so they can take their chances in Bulgaria or beyond its borders.

To be freed, asylum seekers must sign declarations stating they have secure lodgings and are able to financially support themselves. Many simply invent addresses.

"One of them had filled in the address of the Bulgarian Red Cross, which he saw in a leaflet, and was set free - but then had no place to live," says Linda Auanis, an Iraqi who is chair of the Women's Refugee Council. "Afghan people say they know a flat in Sofia where, according to the declarations, at least 20 people 'live'."

Many are unaware that, by signing these documents, they also permanently waive their rights to any material assistance - including accommodation - from the state, from that point onwards.
A 20-year-old Iranian who declined to give his name said: "I am on the streets for several months now. I eat once every two days, whatever I am thrown. I have lost more than ten kilos. No one has called me for an [asylum application] interview and the procedure is being extended again and again."

Missing 6,000 'in Europe'Forced to choose between begging on the streets, working illegally or even stealing, unsurprisingly it appears even those who want to stay in Bulgaria opt to chance their luck in other European countries.

From 2000 until today, around 6,000 of approximately 15,000 applications have been cancelled. Those 6,000 people have disappeared from the system and the Bulgarian authorities have no idea where they are.

"We can presume that those people whose procedures have been cancelled have left for other EU countries," says Iliana Savova, a lawyer working for the Bulgarian Helsinki Committee, a human rights organisation.

However, many of those who made it to other countries will have been sent back to Bulgaria, where they must restart their asylum claim or return to their country of origin.

Since 2003, the Dublin Regulation has been in force among all EU nations, enabling countries to return asylum seekers to the first member state in which they applied for refugee status.

The EU has established a European fingerprint database - EURODAC - and member states are obliged to ensure it contains prints and other data for every immigrant to facilitate these returns.

Payam, not his real name, says he was tortured by the police in his home country, Iran, during the state's crackdown on reformists following the disputed 2009 election.

He originally applied for refugee status in Sofia but managed to get to England where he has relatives. Three months later he was sent back to Bulgaria, and now fears his application will be prejudiced because he tried to go to the UK.

Five months since returning to Sofia, his second application for asylum is yet to be formally registered by the authorities. Throughout this time, he has been unable to rent an apartment, draw money from his bank account and he could be sent back to one of the two detention centres at any time.

"This is not a life really; it is hard to bear… I would prefer a prison at home where I was tortured in all kinds of ways," he says.

Bulgaria does not grant special residency terms for claimants who are not deported when their country of origin, and therefore vaildity of their asylum case, cannot be determined.

Unable to repatriate these people, most countries can opt to grant special leave to remain or "status of tolerance" that at least allows applicants to settle and work. Bulgaria has no such legal mechanism and is reluctant to introduce one.

"It may provide a legal status to potentially dangerous persons," explains Dragomir Petrov, director of the Migration Directorate within Bulgaria's interior ministry.

Immigrants 'criminalised'
This means many asylum seekers in Bulgaria are trapped in a vicious circle of application, rejection, appeal and reapplication - all the while unable to work, claim benefits, settle or integrate.

Mohammed, an Afghani in his mid-30s, has been in Bulgaria for 12 years. He is still waiting for a final decision on his asylum claim after submitting eight separate applications.

"I cannot, and will not, go back to Afghanistan where my life is in danger. I cannot afford to pay traffickers to get me from Bulgaria to other European countries. I can work illegally here but the authorities are cracking down on bosses employing illegals. What else can I do, steal or be a criminal?" he asks.

On average, around 600 people illegally cross into Bulgaria via the Turkish border each year. The crossings are organised by traffickers operating in Turkey, who are said to charge around €1,000 ($1,380) to show immigrants how and where to cross.

"It's like being at a market, you go and choose your trafficker depending on where in Europe you want to go and how much you can afford to pay," says Farhat, an Afghani in his twenties who crossed into Bulgaria via the Turkish border in 2001.

Most choose to go to Greece, an EU member state that is part of the Schengen zone.
Greek crisis

The situation is dire in Greece, where thousands of immigrants, many fleeing violent conflict and extreme poverty in places such as Afghanistan, Congo, Iraq and Libya have poured over the border from Turkey.

Amnesty International, the European Committee for the Prevention of Torture and the European Court of Human Rights in Strasbourg have all strongly criticised Athens' policy toward asylum seekers.

"Asylum-seekers and irregular migrants are not criminals. Yet the Greek authorities treat them as such, disregarding their rights under international law. Currently, migrants are detained as a matter of course, without regard to whether such measures are necessary," reads the Amnesty report published in July 2010.

Greece responded to this criticism, acknowledging shortcomings in their system but stressing they had no means to reasonably deal with the sheer numbers of people - 41,000 in 2010 alone - coming over the border.

They also underline that it is an EU-wide problem, as 90 per cent of those illegally entering member states do so via Greece and the Greek-Turkish border, according to FRONTEX, the EU border security mission.

FRONTEX manages operations across the union's borders and has now established a strong presence in Greece, but immigrants still manage to slip through by changing routes and crossing points.

"After we secured control over the land border, the influx moved to the river and in the first quarter of 2011 there were 11,200 illegal immigrants who crossed this way," says Georgios Slamagkas, chief of police in Orestiada, a Greek town that borders both Bulgaria and Turkey.

Few people here believe the patrols will stop the flow of immigrants desperate to get to the West.

Bulgaria the next Greece?

"I have great hopes that Bulgaria's membership of the Schengen zone will reduce the pressure on us," a Greek border guard says, on condition of anonymity.

"We will build a wall along our 12km land border with Turkey, we will strengthen the control along the river and this will redirect the immigrant flow towards Bulgaria."

He then smiles, explaining he often prefers to end his working day tracing the 210km land border between Turkey and Bulgaria on Google maps.

While this might sound callous, the large numbers of asylum seekers in Greece resulted in entire districts of the capital becoming effectively no-go zones.

Omonia Square is part of the historical centre of Athens and was once a popular hang-out for locals and tourists alike. Today, shops and hotels have been closed down as the area has been effectively taken over by immigrants, many of whom have been forced to squat empty buildings or even sleep out on the streets.

The locals are frightened to go there at night because, they say, the crime rate has dramatically risen. They are also furious because the presence of the immigrants deters tourists from spending time and money in bars, hotels and cafes.

"More and more local businesses and shops have gone bankrupt; at the beginning of the year two of the biggest hotels, each with 150 to 200 rooms, closed their doors because tourists cancel their reservations. The immigrants frighten them off because it is very common to be robbed, crime is getting worse and worse," complains a young Greek who owns a souvenir shop near Omonia Square.

Greeks protest regularly, calling on the authorities to take control of Omonia Square. Athens' mayor, Giorgos Kaminis, recently warned that unless the state intervenes, Omonia Square will turn into a "war zone similar to Beirut during the 1970s".

Traffickers outwit border patrolsMeanwhile, Sofia insists on joining Schengen, claiming anything else would mean Bulgaria was effectively a second class member of the EU club.

However, as long as Bulgaria focuses solely on stopping immigrants crossing its borders, rather than setting up a robust system to properly handle the flow of migrants, it seems inevitable it will fail to stem to tide of would-be refugees heading to the West.

"Previous experience shows that building walls and tighter border controls are not adequate measures for solving the problems of refugees and immigrants - traffickers will simply find other ways to get people to Europe," says Mauro Longo, a film-maker and activist associated with European Alternatives, an organisation based in London which organises conferences, arts festivals and symposia on global refugee issues.

Now is the time for Bulgaria to properly close the gaps in the system, says Lorenzo Marsili, director of European Alternatives, who recommends Sofia quickly implements effective procedures aimed at integrating refugees.

Failing to act will "lead Bulgaria into the same situation as Greece", he warns, something the Bulgarian public is most certainly not prepared for.