IIPM Media: March 2013

Thursday, March 28, 2013

Better Late than Sorry!

Indian Policymakers certainly need to take Significant Measures aimed at Further Liberalisation of FDI framework if they want to make India an Emerging Investment hub in the Near Future

Despite improving global economic prospects and robust recovery of the Indian economy, the FDI inflows into the country have largely remained muted during the course of the current fiscal. In fact, FDI inflows recorded a significant decline of 23.3% to just over $12 billion during the first nine months of FY2011 (April-December 2010) as compared to the corresponding period last fiscal. What is more intriguing is the fact that FDI inflows to the South, East and South-East Asia regions (according to UNCTAD) rose by about 18% in 2010 and reached $275 billion (after a 17% decline in 2009), primarily due to booming inflows in Singapore, China, Indonesia, Malaysia and Vietnam. Does that mean – “India Shining” story is over for now!?

Timothy Moe, Chief Strategist – Asia-Pacific at Goldman Sachs puts forth the radical outlook that the bank is not going to be “tactically positive” on BRIC economies.” What is more worrying from the Indian perspective, one that this magazine has pointed out in earlier issues, is that Tim has pointed out that India is a bigger issue for investors than China; and the nation would see a lower preference from investors than even nations like Singapore, Taiwan or South Korea in the near future. The problem issue that arises out here is that forecasts similar to those that Goldman has taken out will force prospective and current investors to rethink on their investment strategies, with Indian being more or less the less preferred destination.

So, what is it that has slowed down the FDI inflows into India? Owing to a resurgence in the wholesale price index (WPI) for food articles (which rose 10.05% for the week ended on March 12, 2011), inflation has again hit the headlines in the country. Yet, beating worst of the expectations, growth (y-o-y) in over all WPI in India accelerated from 7.5% in November 2010 to 8.4% in March 2011. Though a mind-boggling 70% rise in food prices and surging fuel prices were blamed to be the key reasons for the ongoing high inflation, there is no denying that India has already been facing one of the strongest inflation in the Asia-Pacific region as surging output and soaring demand bump up against capacity and other constraints, increasing price pressures.

Even RBI is on its mis-foot toes to curb the pressure by clearly wrongly resorting to tightening of monetary policy. After raising the repo and reverse repo rates by 25 basis points (bps) for 6 times in 2010, the central bank has again added 50 bps (25 bps each in January 2011 and March 2011 respectively) to the existing rates. However, so far, these measures have delivered negligible results demanding stricter action. Although from outside the country, RBI’s moves seem right (George Worthington, Chief Economist-Asia-Pacific, Thomson Reuters, tells B&E, “Given these structural factors, the RBI will need to bump rates up considerably, or institute other curbs on liquidity, to rein in inflation this year”), in reality, the RBI has gotten it wrong. Reason: The basic inflation increase is clearly because of supply side issues than due to demand. World Bank chief Robert Zoellick, who recently visited India, also pointed out the fact that RBI should view these supply side issues too (“My own sense in the case of the Indian economy is that some of the inflationary pressures are more likely a function of some of the bottleneck on the supply side than they are from the demand side,” Zoellick had mentioned, and that too in a conference with Pranab Mukherjee).

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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Monday, March 25, 2013

It Makes Sense, Even if you have The Cash

Technology Financing could be The Next Game changer as it will Shield Small and Medium Businesses from The Axe of huge IT Expenditures

Enterprises across the world are leveraging financing and asset management solutions to enable next generation innovation, including better infrastructure, green data centres, grids, health information technology and transportation projects.

At the height of the credit crisis, cash was king. With access to credit, be it scarce, non-existent, or expensive, cash remained the only logical way some companies could purchase critical information technology they needed to remain competitive. When an IT acquisition became critical, many companies turned to cash, for what they thought was a more cost-effective option than leasing or financing. Ignoring the economic reasons for financing, some companies see purchasing technology with cash as just a simpler way of doing business. However, as many CFOs who have successfully weathered the financial storm can attest, there are significant benefits to leasing that can make financing technology equipment a more viable option than paying with cash.

Many of us are familiar with the cartoon character Wimpy, Popeye’s portly friend from the television program Popeye, the Sailor Man. Wimpy is famously quoted as saying, “I’ll gladly pay you on Tuesday for a hamburger today.” Essentially what he meant was, that he would like to acquire the merchandise today and put off payment for another day. Because of what economists call the “time value” of money, which is based loosely on projected inflation, the discount rate and what analysts and economists think the cash could earn in other uses in the future, which means it has an opportunity cost.

Wimpy may have had it right. Financial experts tell us that today’s money is generally worth more than tomorrow’s. Therefore, a company leveraging leasing to acquire a new data centre or a retail point-of-sale device is actually conserving cash today for its core business, while paying for the technology flexibly over time. This allows the company to align its investment better with the expected/projected benefit and thus ensuring a quicker break even for the investment. From a purely tax perspective, technology leasing also trumps cash. Every cash purchase made is paid with post-tax dollars. With an average corporate tax rate today approaching 34%, paying for technology equipment with cash is like adding 34 cents to every dollar that makes up the final price.

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Tuesday, March 12, 2013

Short Sweet Theatre

T20 of Theatre is Here!

In times when almost everything needs to be short and fast in order to be popular, be it communicating through the 140-character-limit format of Twitter or the 20-over game of T20, there’s a new industry raring to catch-up with the times. Theatre underwent a makeover recently, thanks to Short+Sweet Theatre, which took place in the capital from 11th November to 19th November. Every night audiences were presented with a buffet of some ten plays of ten minutes each, on themes that tackled issues like that of the displacement of Kashmiri Pandits to quirky tales about a Rottweiler’s misadventures, by a mix of theatre artists: from the renowned Arvind Gaur to relatively newer talent.

While the first edition of Short+ Sweet Delhi was probably most Delhites’ first brush with ten-minute theatre, it’s not a new genre. In 1923 Pierre Loving published 10 Minute Plays, which featured works by notable authors like Arthur Schnitzler and Ferenc Molnar. It was only in 1977 though, after Actors Theatre of Louisville’s Humana Festival of New American Plays, that 10-minute-plays came to be taken as a veritable format of theatre. But does the time limit force the playwright to compromise on the script in anyway? “I don’t think time is a determinant in how powerful a piece can be. There can be a play of three minutes and it can be immensely powerful,” says Lushin Dubey, who has directed, acted and scripted theatre productions for over 20 years. “Some 10 minute plays are as moving and profound as longer works. For example in Short + Sweet Delhi, we have a play called Perfect Stillness, by an Australian playwright Jane Miller, and it’s about a woman who has passed away and her husband is trying to write a eulogy for her. And she comes back from the grave to correct it. It’s a sad, beautiful and romantic, which only takes 10 minutes, but is as profound and moving as a longer play,” says Alex Broun, Festival Director, Short+Sweet Theatre.

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Wednesday, March 6, 2013

The evolving role of management Education for the Country

Dr. Devi Singh, Director, IIM Lucknow talks to Ashutosh Harbola of B&E about his stint at IIMs and his views on the evolving role of management Education for the Country

B&E: How do you view the impact of the increasing number of B-schools around the country?
DS: Management education has undoubtedly been a knowledge and wealth creator globally. Having said that, it has also, in many ways, been reckless in churning out numerous managers for the economy, which has led to deterioration in quality and thereby downgrading the image of management education. Quality is the most important aspect in education, which cannot be compromised upon. Every expansion done has led to compromising on quality at the cost of revenues and quantity. The environment of pressure and faculty unable to give complete attention to students are all indications of deterioration in the education process.

B&E: What has been your most memorable achievement at IIM that you believe will stay in your memories for a long time?
DS: Every moment spent at IIM Lucknow has been memorable and it has been very close to my heart. There has been a continuous transformation here for the past ten years. With this, we have expanded in every sphere; becoming much more robust with 80 faculties, 2 campuses, decent financial position, largest number of students, good corporate interface with our Management Development Program (MDP)... the list goes on.

B&E: How much have the IIMs contributed to your individual development?
DS: They have contributed to my development to a certain extent. But I believe that hard work pays off wherever you are. Before joining IIM, I was a part of MDI, where I worked really hard and then IIMs, which was a great stint. I take life as it comes and try to give my 100% in whatever i do.

B&E: How do you rate entrepreneurship as a growth indice for the development of India?
DS: Infrastructure, technical development and the whole economic environment have created a very enthusiastic and robust platform for entrepreneurial aspirations. It is one of the most significant aspects of growth. Even on the social entrepreneurship front, everybody’s participation is necessary. People should get access to basic healthcare and education so that basic rights are enjoyed by everyone. We need to create wealth, get more people on board, create more quality institutions and see that the entire population benefits.

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Tuesday, March 5, 2013

MINING HURDLES: VEDANTA

Amidst speculation of a possible alternative to Niyamgiri, Gandhamardhan hill may once again become the soft target for Vedanta. Ajit Nayak reports on the possibility of history repeating itself

The government too is keen to close the chapter by immediately making alternative arrangement for Vedanta. At the same time it does not want to give Congress a reason to accuse BJD of going out of their way to help Vedanta resources. Meanwhile, the Congress is desperate for an issue to stain the ‘clean-image’ of Naveen Patnaik and is prepared to make an issue in case of an alternative arrangement for Vedanta. “We know government is planning to hand over Gandhamardhan to Vedanta. But we will not allow the government to do so”, senior Congress leader and former Law Minister Narasingh Mishra said.

Talking of Gandhamardhan, one is reminded of the local tribal movement that took place 28 years ago to protect their environment. Bharat Aluminum Company (BALCO), then a public sector company (now a part of Vedanta), got the government’s approval to start mining at Gandhamardhan. But the movement popularly known as ‘BALCO Hatao’ forced the company to roll back. Even after 28 years, reminiscence of the movement is alive in the shape of ruined buildings and half constructed colony of the BALCO. The Gandhamardhan hill range, equally rich in biodiversity and bauxite , was the platform for one of India’s famous mass-struggles to conserve forests and livelihood. A five year long battle resulted in BALCO winding up its operation to mine 213 million tonnes of bauxite. It was the then Congress government of the state which allowed BALCO to mine Bauxite in Gandhamardhan in 1982. The chief minister JB Patnaik faced the opposition of the people when he came to lay the foundation stone of the company at Padmapur in 1983. The people’s opposition forced the government to cancel the lease given to BALCO. “It was possible because of the selfless struggle of the people. Even today applications of at least 25 companies for mining lease are pending with the government. The government should declare the area as ‘no-mining zone’ to end the chapter for ever”, says Yuba Parisad’s convener Pradeep Purohit. “The mountain range is a source of livelihood for more than 10 thousand people of the tribal community. Instead of going for mining, the area can be developed with eco-tourism and eco-based industries”, says former parliamentarian and leader of BALCO movement Bhawani Sankar Hota. He adds that people are ready to fight once again if government tries to allow mining of bauxite in the forest range. While the state government of Orissa is contemplating on allowing mining at Gandhamardhan, Chhattisgarh government is willing to spend `2 crores in facilitatating the hospitality of the devotees and tourists coming to the place (‘Papanasini dhara’ at Nrusinghnath hill). In such a situation people are willing to shed their blood to save the environment of Gandhamardhan like 28 years ago.

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Sunday, March 3, 2013

The railway minister isn't doing as badly as her immediate predecessors

Mamata Banerjee is drawing flak for neglecting the ministry, but as a response to an RTI query from TSI (a Planman Media publication) shows, the railway minister isn't doing as badly as her immediate predecessors. A report by Vikas Kumar

Nitish Kumar does not seem to be lagging far behind. He issued 414 passes during his first one-year tenure in New Delhi's Rail Bhavan. On the other hand, Mamata Banerjee, during her first term as Railway Minister, issued no more than four passes.

Nitish probably took a leaf out of Mamata's book and improved his record during his second term. He issued no free pass from 2001 to 2004. This discussion will remain incomplete without mentioning Lalu Prasad Yadav, who issued 352 passes, out of which 134 passes were issued in a single year span of 2008-09.

A senior level officer, on condition of anonymity, told TSI, “During Nitish Kumar's second term, some steps were taken to improve safety standards of the railways. However, during the Lalu Prasad regime, safety concerns were put on the back-burner in a mad race to generate revenue. Modernisation of the railways was put on hold. The negative impact of that trend is being felt now.”

Subhash Chandra Agrawal, who filed a separate RTI regarding the Ministry of Railways, says, “No recommendation has been made by the Railway Minister for her personal staff.” On the other hand, another RTI response revealed that Lalu Prasad had made free lifetime passes for himself and an assistant. When Mamata assumed office she cancelled all these passes. She also drastically reduced VVIP quotas on all Bihar-bound trains. The RTI response also revealed that she does not use the official vehicle that she is entitled to as railway minister.

A hue and cry after a major mishap is nothing new for the railways. Lalu Prasad said, “One should see why such accidents are taking place. This is a big lapse.” However, the Rs 17,000-crore fund for the railways has remained unutilised. Ramavatar Singh, general secretary of the Railway Workers' Union, says, “Two years ago, there were 7,000 gangmen in Delhi. Today it is only 800. This is the situation in every department of the railways. How can we assure safety?”

Mamata can be criticised for not devoting enough attention to her Ministry, and it is true that the railways is suffering as a result, but her track record is much better than many of those who have handled the ministry in the recent past.

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