Monsoon blues

All the bluff and bluster of services driven, $1 trillion economy comes apart, almost minute by minute, as the monsoon gets delayed.

Unlike the G 7 countries, where a miniscule per cent of people survive on the farm, in India and China more than one thirds of people survive on the mercy of the land. And unlike China, India is a democracy. Already there are protests in Uttrakhand and Madhya Pradesh on water shortages, these could just be starters should the Monsoon fail. The Monsoon is the umbilical cord of the Indian economy - even 60 years after independence - that cord has not been cut.

While estimates differ, there is a broad agreement among economists that the monsoon determines at least two per cent of GDP growth for India. In the context of the slowdown, a bad monsoon can be a disastrous. Even more so because so far buoyant rural demand has allowed India to grow at more than 6 per cent per year.

The share of the Monsoon fed agriculture in total output in India according to official statistics is at 18 per cent. The trick is the number of people dependent on it - and that is overwhelming. A government that swears by the national employment guarantee scheme cannot afford bad rains.

A failed monsoon will put pressure on FMCG’s, the sensex as well as tertiary sectors such as transport and storage. It will also curtail any food grain export hopes India may have harbored and put pressure on the trade deficit by encouraging imports.

“Monsoon is critical. It is a trigger not just for the FMCG sector but also for the economy. I believe that if the Monsoon fails, it shaves off the demand. At the end of the day a good one percent of the economy as a whole gets written off.”, comments Chennai based C K Ranganatan of Kavin Care, India’s second largest shampoo firm.

And it is not just the shampoo or the soaps we may suffer. We could be all in the dark. After all that fancy engineering with massive dams like Tehri, there is a 34 per cent deficit in India’s dammed reservoirs already. Bad rains will mean North India in a partial eclipse.

India’s hope of keeping the recession away was counting on the fact that we have robust domestic demand - but that too may be hit with a bad monsoon. The cumulative effect of an economic slowdown and a bad monsoon can be deadly.

To sum up, if as you read this and if it is not raining, be prepared for a longer economic downturn. A lack of money supply can be made up with the monetary policy, lack of bank loans interest rates can take care of – but short of hiring the American Indians - rains will be tough to come by.

A slow down is not a recession

Don't P A N I C

Ninad Dhirubhai Sheth

Confidence is the key. In cricket, when you are low on that critical element, the same shot that got you those spectacular no one moves boundaries result in inglorious caught behinds. The Indian economy is somewhat a similar mood spell. Fundamentals are intact. On almost all parameters including saving rates, investment rates and domestic spending the country is better placed then the US Japan and Germany the three economies which have fallen into a recession. Yet the mood is one of fear. Look around and you see a country low on confidence. The economic crisis globally has induced a scare in India. It is amazing that so many are worried so much by the global crisis even as the economy itself grows apace. It is as if we are determined to talk ourselves into a recession. Go to the ministry of finance and you see nervous bureaucrats scurrying around trying to understand the impact of the global crisis. In Mumbai big firms - the Tata's included - are communicating with staff asking for belt tightening, giants like L&T are cutting back on grand ship building and realty projects. And the airlines, well that's too well documented to be detailed. Thus the fear of recession is writ large in today's corporate India. But is there really a recession? For one thing the classic definition of recession a - shrinking economy for two consequent quarters – simply does not imply to India. The economy grew the last two quarters - albeit at a marginally slower pace. Comments Surjit Bhalla, Chairman, Oxus investments, a noted economist, "We do not have a recession in India. Sure, the global recession will lead to a growth downturn however it cannot be called a classic recession. Look at the realities, inflation is back in single digits and oil prices have halved. Thus we have more elbow room now. " A Standards and Poor's report recently commented that countries like India are less likely to be impacted by the global downturn since their exposure to global trade is marginal when compared to their domestic consumption.Says Pavan Jain CMD, of safexpress, a logistics firm, "There certainly is an economic slowdown, but to call it a recession would be a statement made too soon. As compared to what the other countries are facing we are still in a better position as our banking structure is not as influenced as the western countries. We can call it a spill over effects of the global financial meltdown. More liquidity is coming in to the system and this will help we need to reduce fuel taxes and bring the price of petrol down and lastly the domestic consumption is still a growth story so overall I think we should just concentrate on the basis and results will come." The first bright spot for the Indian economy is the foreign exchange cushion. With nearly $255 billion put the country in a far better position when it comes to measures such as recapitalization of banks and providing support to the rupee. The Software sector that is depended on the external markets is still very much in vogue due to economic arbitrage being in India's favor. With the recent fall in the rupee the InfoTech sector has remained competitive. Firms with size, such as Wipro and Infosys can bet on bigger contracts since the pattern in the rich world is to outsource more - not less - in a down turn. The three large Indian IT firms together hold in access of $500 million in cash reserves. This will allow not only for adjustment s during the downturn - but also overseas acquisitions at the right price since firms in the west are looking good at current valuations. Agrees Raman Roy BPO veteran and chairman of Quattro an IT consultancy based in Gurgaon, "India is a part of the solution of the global crisis not a part of the problem. The US cost structure in a recession predicates further outsourcing. They have to cut costs there not add them. As for India, our dependence on the US market while significant is not absolute. In India there is a growth slowdown that can not be termed as a recession. " A report brought out in October 2008 by Everest, an IT consultancy points out that in fact this quarter and the next will see robust outsourcing orders for larger Indian IT firms from the US should Indian firms manage their cost structures in a correct manner. The state of Indian banks is the third redeeming factor in India's favor Vis a vis the global slowdown. The health of Indian banks is also much better in comparison to their global counterparts. What the US is now doing by taking stakes in big banks, is a matter of course in India. This has helped develop buoyancy. It was reported by the Reserve Bank of India that as much a half a billion dollars came into the NRI bank receipts in September 2008 alone. While some sectors such as banking and export firms have fired a record number of people it is not a sea of pink slips out there. Says Ashutosh Khanna, Partner Korn Ferry, a leading global recruiter "Look, jobs are out there for many sectors. Look at Unilever they grew by 16% last quarter. Sectors such as telecom and consumer durables have picked up and there is robust demand for quality professionals in these. Entertainment too is growing bear in mind that when times are bad sectors such as the liquor industry and entertainment have historically done well. We see a continuing trend of growth in these sectors of the economy." So while there may be a roll back on those fat pay checks the spa as a fringe benefit may not be on offer if you are good enough jobs are still around in many sectors. It's all about Money Globally the crisis is about sourcing money to fund the running of business and supporting business expansion. Here India is on a sounder footing. The RBI is expected to cut lending rates by at least 2 percentage points in the current quarter. This will see an infusion of nearly 80,000 crore of liquidity into the Indian market. What that does is restore confidence among lenders, among entrepreneurs and among corporations - the holy trinity that drives the Indian growth story. With the infusion of cash will also come the peripheral advantages such as new projects and strengthen infrastructure spending on new roads, electricity plants, ports and so forth. This can have the crucial multiplayer effect for the economy. The lending rate is the catalyst to pull a country out of the bad times. Says Ajay Relan of CX partners, an Investment Bank," A dramatic rate cut will certainly help in kick starting the economy, bringing it back on track. However India cannot afford to be complacent. India needs to channels its record level of savings into productive assets. We can no longer afford the ghastly cost overruns in infrastructure projects and so forth." Clearly to ride out the storm India needs to ensure that its tardy abilities at project execution are replaced by a vigorous new approach. We may create new money but it is much harder to create opportunities where that money is spending productively. Taken together, domestic consumption, easier lending rates, entrepreneur culture and robust foreign exchanges can come together to lift us out of what are bad - but not horrid times. As in Cricket so for the Indian economy – stick around this could yet be fun.

Ranbaxy sale - innovate or perish

Just when Indians were rejoicing the takeover of iconic British brands Ford and Range Rover by the Tatas, Daiichi Sankyo spoiled the euphoric mood.

In what has been the biggest takeover of a listed firm in India's history the Japanese major paid $4.6 billion in cash for Ranbaxy.

This is not just another takeover. It holds valuable lessons for corporate India as well as the government regarding India's emergence as a global player.

For many years Ranbaxy was held as an example of an Indian multinational that bravely went where few Indian companies had gone before.

In the world of drugs, Ranbaxy was betting big. It was trying to move beyond the generic space where Indian firms can reverse engineer off patent drugs.

It had also benefited in its early days from lax patent protection. This allowed the firm to grow in size by profiting from volumes of scale.

The change came when Ranbaxy set itself a target of developing original drug compounds through proprietary research route.

Alas, the strategy proved to be its undoing as an independent firm. India's economy still lacks firms with the wherewithal to make path-breaking discoveries.

Over the last three years this painful weakness of corporate India was becoming all the more obvious. Ranbaxy was unable to come up with even a single original blockbuster drug discovery. The rights India signed away in the WTO deal were coming home to roost.

With a patent regime loaded in favour of the West, developing new drugs was proving prohibitively expensive. Drug after drug developed by Ranbaxy ran into American and European patent regimes.

On the generic front too there was competition from smaller, more nimble firms. Few know that Ranbaxy was not even in the top five generic drug developers worldwide.

Unable to make patent breakthroughs Ranbaxy was at a stage where it may have discovered that it could reach just so far on its own and no further.

The sale by itself is not bad news for the promoters. After all, the firm was established in 1962 with an investment of Rs 2.5 lakh and gave a return of Rs 10,000 crore to the investors.

It is in the genius of the capitalist system that it provides for several exit routes to entrepreneurs. So everyone, the promoters of Ranbaxy, its shareholders and the Japanese firm gained by getting the correct combination at the right price.

However, for corporate India the deal comes as both a shock and a loss. This deal exposes the fact that across industries Indians are still incapable of being thought leaders.

Soul-searching has already begun in the Indian corporate world. Several firms across industries could be potential take-over targets since their growth formula depends on incremental volumes and cost arbitrage unlike global leaders that are innovative thinkers and have proprietary research in their portfolios.

Particularly vulnerable are firms in the IT, textile and pharma sectors. Even top firms like Wipro make less than 4 per cent of their turnover from products and patents.

A very large percentage of second-rung IT firms are nothing but glorified code developers. India Inc needs to take a long hard look at its current globalising strategy. Instead of the easy way out where you fill in the gaps in the international trading system based solely on cost advantage, corporate India must invest in research and development.

This is a longer, costlier route to becoming world-class companies but it is also a surer way of ensuring sustainable success.

On the government's part, it would do well to use the proposed $2 billion sovereign fund to buy the right technology which can later be auctioned to Indian firms so as to provide them a firm footing in the exclusive club of original ideas.

Ranbaxy's takeover has a stark message for corporate India. Innovate and prosper or the big fish will gobble you up.

princess yacht now in india

Top-end luxury yachts are sailing into tap the super rich in India. Forget Bentley’s and business jets—Princess Yacht is here. These exclusive hand- made boats are 50-ft beauties. For the uninitiated, the price list is of great interest: they start from $500,000 for a 35-foot boat and go up to $7 million for a P95, a boat which is almost 100 feet tip to tip.
Says the 32-year-old Delhi-based entrepreneur, Vishal Choudhry of Aquamarine, the company that will sell Princess Yachts in India, “There is no experience like being on the high seas in a yacht. The endless ocean, the well-appointed private space in the yacht is the ultimate in luxury. We see a definite market in India and plan to sell three to five boats each year. We have already four enquiries for the P42, the first boat that comes this November. The rest will follow over the next one year.”
The bigger market is not in just stand-alone purchases of these yachts but in fractional ownership. Analysts see these boats as a great entertainment and event opportunities, and the market for fractional ownership is believed to be worth over Rs15 crore annually.
Says Olympian sailor Ashim Mongia, who now runs a yacht consultancy in West Cast Marine in Mumbai, “Fractional ownership has a huge market potential in India. We need better handling and many more marinas to tap into this potential. Currently most boats anchor off Bombay or Goa. However places like Cochin and Pondicherry need to be developed.”
Princess is offering the entry-level P42 in the fractional ownership mode. For Rs 30 lakh, this will give you access to the boat for four weeks. You can sail from Mumbai to Phuket or drop anchor and have fun just off-shore. Options include full crew, food and beverages and maintenance for an extra charge.”
That India may be seriously lacking in infrastructure has not prevented other top yacht makers from entering here. Waiting to drop anchor are two other top brands — Sunseeker of Britain and Fereddi. Sunseeker sold a massive 105-foot boat reportedly for $15 million to an undisclosed buyer in Goa recently and Fereddi has done a deal for 55-footer with another underscored Indian buyer.

the ball is in play

Americans have cruel saying, “ If you are so smart how come you ain't rich?” The nay Sayers about the astronomical sums offered at the Indian players league auction need to keep that one in mind. Obviously the barons who bid know something that others do not.

By any estimation the bid was a grand success. Half a dozen players went for more than a million dollars a contract. Each ball that Harbhajan Singh bowls for the Mumbai team for example is worth 100,000 rupees. A no ball by him will put an opportunity cost of 50,000 on his personal account. An impressive 50 million dollars was splashed on the first among equals on the cricket pitch during the course of this momentous auction.
This may seem outlandish, but so did Kerry packer’s pajama cricket back in the 70’s. That created history. In a television driven, trillion-dollar economy that is today’s India with cricket as a prime pastime for at least 300 million citizens, the sums offered do not look odd. The IPL deal needs to be placed in the context of the larger picture where entertainment and sports sponsorship are estimated to be a $16 billion business. A large chunk of this in the sports domain comes from the game of cricket.
Like in cricket, so in life there will be winners and there will be losers. Some teams who have the firepower and the stadia that can manage to charge the 500 rupee a ticket that the league is banking on to make money will do well. So on paper Mohali and Calcutta are likely to do well. Others may have given way to irrational exuberance.
In the end the cake of the sport business is beings baked afresh. The IPL is a refreshing and even revolutionary idea from a board known to ignore basic necessities like training and equipping its sportsmen. In the end the hype will matter for little. It will be the paying fans loyalty to the twenty format and his city that may determine the glory of this incredible and audacious endeavor. It is important that the IPL works since it will add depth and dimensions to a beloved sport that sociologist Ashis Nandy famously described as an Indian game that the British discovered accidentally.

eliminate caps on corporate pay

The recommendation to eliminate the 11%-of-profit salary cap for company directors that is currently enforced is sensible and long overdue. The JJ Irani Committee is right in pointing out that corporate compensation is best left to market forces. In the age of global deals and mega takeovers, directors' salaries cannot be held hostage to arbitrarily dictated caps by the government. In competitive times, the corporate sector needs flexibility in determining exactly how the finances are to be used in engaging resources to optimise operations and achieve the desired results, and this includes human resources. What value who brings to the business, and what it is worth in rupees, dollars or beach holidays, is a matter of internal knowledge. It may be a matter of disclosure and discussion between a company and its shareholders, but the government certainly has no locus standi here at all. The only external regulator should be the market, and the government's job is to ensure that there is sufficient competition. So, if a company mis-allots its funds, it will find itself edged out of business by firms that do a better job of it.

As for the charge that directors are 'overpaid', there is little evidence to show that any systemic imbalance has arisen out of high salaries in corporate India. In fact, there is reason to believe that companies are paying people only as much as needed to access their skills. And these vary vastly, as evident in dozens of other fields of human endeavour that get more media exposure. It is just that this variation is something that external observers are not necessarily equipped to appreciate in the corporate arena. Higher competition tends to activate the variation, resulting in divergences in pay. In such a scenario, any arbitrary cap can create an artificial imbalance that will eventually curtail corporate India's competitive advantage. This is not to argue that there is no such thing as an 'outrageous salary'; as some instances from the US have recently shown, scandals do occur, but it is the self-corrective mechanism of the market—shareholders protesting, for example—that adequately takes care of them. Corporate governance exists for a reason, and that reason is to make sure that the company serves the interests of its shareholders. Salary caps do nothing of the sort.

deconstructing delhi metro

There is a new vigour to Delhi’s urban culture and it’s literally subaltern. It is fuelled by the speed, efficiency and a quite wondrous pride in the metro train line that is transforming the commuting culture of this ancient city.
The pride part is imperative. For too long the capital and its inhabitants have had much too blasé an attitude about the city they call home. This was captured memorably by Naipaul in India: An Area Of Darkness — the shocking apathy of spiting without looking, peeing at every available lamppost, and driving down the wrong side of the road without a care. Now, this has been replaced by a collective restraint and admirable dignity and a strange sense of ownership.
It is this sense of ownership, which the Metro has uniquely succeeded in inculcating in Delhi’s citizens. They see in it a symbol of an emerging India and they want to preserve its purity.
On the Metro it appears that there is citizen schizophrenia. On the road the old rage still dominates, with every kind of vehicle jostling for space in the most chaotic manner possible. In the Metro, the same citizen turns respectful of public convenience and decency.
What explains this dichotomy? I think it is because Delhi has never before seen the like of the Metro —efficient, cool and modern — and likes what it now sees.
The subway offers a forty-kilometer ride in 25 minutes flat, with none of the jerks associated with surface travel. What is more, thanks to the air-conditioning, the whole ride is easy — literally no sweat. And with the punctuality on which you can set your clock, the Metro is now the ultimate arbiter of time and space in a city that expands in all directions, way beyond the 80-kilometre ring road. Page 2 of 2 (Jump to page 1)A facility so perfect can be almost frightening for a citizenry used to terrible rickety buses and quarrelling drivers. It seems Delhi’s denizens believe they don’t deserve such superb service; that if they spoil it, the metro train will somehow disappear just as magically as it made its miraculous appearance.
It took me just one commute from the poor district of Seelampur in the east of Delhi to Pragati Maidan, to become a fully paid-up fan. That day 265,000 people reportedly travelled on the commuter line between 9 am and 9 pm. And yet the platforms were clean, there was no half-finished burger lying about, nor were there any paan stains. Also, unlike Mumbai’s suburban local train, the pushing and shoving were absent.
Here’s another unexplained miracle: the Delhiwallah, ever callous towards the fairer sex, has seemingly reformed on the Metro. Ever since it started there has not been one single reported incident of offensive behaviour against women on the Metro. While the close circuit cameras may have played their part, the body language is decidedly different, too.
My high point of the discovery of the Metro Republic came when I came across a rich dude with a gold chain on his broad chest and the keys to his Ford Ikon dangling casually on his belt, board the train at Chandni Chowk and calmly hanging around with co-passengers who had never owned a car but had now a billion-rupee publicly owned train to cart them around.
Mumbai locals are said to be great levellers because they crush them all in the morning Churchgate fast. But thats not funny. When Mumbai gets its own Metro — it will be another republic.

indian forests in terminal crisis

Ever since the mid 1990’s when the Narsimha rao government amended the conservation act and threw India’s forests open for commercial purposes including mining, the forest cover has be rapidly dwindling. On the face of it a one time loss due to the tsunami and gains in some states seem to point to an environment balance. There is still a sizable loss of 728 sq kilometers of forests and degradation of another 630 square kilometers throughout India. Thus when one looks at the latest state of the forest report the devil is found in the details.

A lot of the blame lies with corporate India whether it is setting up a bauxite mine over a tiger forest in orrissa or a power plant in Madhya Pradesh. So much so that a supreme court appointed committee had recently ordered canceling of 49 projects on forest land that had seemingly got relevant clearance.
The most serious loss of forest cover is in states such as Andeman and Nicobar and Assam along with Manipur and Madhya Pradesh. These very states were previously thought to be green cover bastions and are the ones which have shown most forest loss. One can safely add Arunachal Pradesh to that list. That sate is India as it used to be, with 83 per cent forest cover. However the recently announced package by the Prime Minister that calls for 10,000 crore invested in roads and railways across the state is bound to degrade forest cover here.

The reason why forests matter even in this age of globalization is three folds. For on thing Indian forest is a source for more than 250 million tribal and non tribal persons across the country. Forest products by value constitute more then $45 billion annually to India’s economy including timber and non timber products and proactive large scale employment. Lastly India is home to one of the world most diverse fauna and flora which if not nurtured could be lost for ever.

The real story of the forest loss of India is in its imbalance. Over the last twenty years the continuing erosion of forests in Central and north India has meant that the north east of India that has only 7 per cent of India landmass has in more than 25 % of her forest cover. This imbalance has created vast swaths of India without significant forest cover. The related f\degradation of river and outer resources is most immediate here.

A new law to empower tribal to have right to forest produce and land has divided the conservation community. Some believe that this may be death knell of the forests as viable cover as well as the tiger. Past record however suggests that such a doomsday scenario is misplaced. If anything the Gandhian idea of self reliance is more relevant today then ever before in the context of tribal rights over the forests. The tribal, once having ownership, is likely to use the forest as resource not as something to plunder on the sly. The empowered tribal and sensible regulations can together save the last of India’s forest cover. India and the world will be worse off if the forest s is not saved through political will directed at arresting the current slide.

interview with Steven roach Morgan Stanley

Steven Roach is chief economist and managing director of Morgan Stanley worldwide. He has more than three decades of experience in economic forecasting, economic policy and the global financial markets. His responsibilities include overseeing the entities gamut of financial and economic research by Morgan Stanley, including country indexes and other financial forecasting products. He spoke to Ninad D Sheth on the global economy, its growth and weak spots:

The global economy is on a roll. There is growth everywhere.

Yes. The US, the primary engine of the world economy, had a very robust year, China grew officially at 9 per cent but in my view it was more like a whopping 12 per cent, India notched double digit and even Japan of all places had 4 per cent. Only Europe seems to have forgotten how to grow but still managed 1.4 per cent. There is an upswing. The issue is whether this is sustainable. There are too many fundamental gaps leading me to question the ability for the world’s leading economies to sustain growth.

How serious is the US deficit as a source of global financial instability on a 1 to 10 scale?

The US deficit is a serious, but secondary, issue. I would rate it 6 on 10, however, the dismal US savings rate is the largest single cause of worry for the global economy. This is 9 on the 10-point scale. The shopping addiction of the US household, which fuels a large part of global growth, is unsustainable and needs to be urgently tackled. US savings rate is at a historic low.

Is the Bush administration concerned?

Unfortunately, the administration is moving in the opposite direction. The tax cuts and the fact that there has been no movement on the interest rates combine to make a dangerous blend. Indeed, there is no appetite currently in Washington for a correction. The overriding theme seems to be to continue with the tax cuts and not allow for a rise in the interest rates. The only way the US can grow is to get capital from abroad. Thus, with so much money coming from foreign lands, there comes a point when this financing becomes unsustainable.

BPO has emerged as a major US issue. What is the worst case scenario likely to be?

I sincerely think the worse is behind us in the BPO backlash. The jobless recovery happening in the US is the real cause of this backlash fanned by populism in an election year. I do not think we can blame the layoffs to outsourcing. However, there is no doubt that outsourcing will hurt net new job creation. To stem the flow of outsourcing through government-sponsored incentives would be a very expensive choice.

So is the Bush administration committed to free trade on this issue?

George Bush is committed only to one thing, re-election. If he sees his numbers slipping, there is no preventing an about-turn on the outsourcing issue. The administration is currently in combat mode for re-election. This is not an issue of ideological commitment to them at all. He changed his mind on steel and went protectionist. He can do it on the outsourcing issue as well.

So should India worry about a protectionist phase in the US?

Yes, it should. However, China has much more to worry on this. Already, there are two very significant Bills in Congress with bipartisan support that attack China. China is an obvious target because of the incredibly huge trade surplus that it has with the US. However, should push come to shove, India with the attendant issues of outsourcing could become a victim of politics scoring over economics? The real problems are domestic — in the low savings, the poor education. But it is human nature to blame someone else for one’s own problems and this is exactly what is happening in the US.

How is India placed to leverage the labour arbitrage?

India is well placed, perhaps, in the best position as far as the outsourcing opportunity is concerned. It has a brand equity as well as ground strength in knowledge workers. These are well- educated people with a high motivational level and well-connected globally in cutting edge IT sectors. With a conducive environment, India can use this to immense benefit.

You are an old time China watcher. As the Indian economy takes off, what are the lessons India need to learn from the Chinese miracle?

The Chinese have a very powerful growth model. It is based on a currency pegged to the dollar, complete emphasis on infrastructure for manufacturing and a very business-friendly environment for foreigners. India, even today, lags on the last two counts and need to sort it out for a sustained bull run.

Do you see China devaluing her currency?

No, I don’t. What they will do — and some of this has already begun — is to tighten the credit in the economy and cool it down a few percentage points. A lower growth rate of 9 per cent will help China and I think there are other creative solutions — not devaluation — that the Chinese will opt for.

And the dollar?

I think that it will slide more. The fundamentals point to a much lower value for the dollar.

Is Morgan Stanley bullish on India?
Yes, we are. We believe that India is a real opportunity.

banks and IPO's

The Reserve bank of India has fined seven banks for their role in the allotment of shares in the initial public offerings by firms. While the move is belated, it needs to be welcomed for taking note of investor concerns and norms already in the books of these banks. It is a good move for ensuring long term stability of the stock markets.
In a recent case, just a handful of individuals managed to open 14000 demeterialsed accounts and route them to corner a large share of the offering of a public issue from the Infrastructure development finance corporation. There was a lot of concern expressed at the fact that the regulator did not act in time to avoid such manipulation.
While the fine in itself is not a very big amount, ranging from Rs five to twenty lakhs, it does harm a banks reputation and sends a strong message. Banking norms will ensure that the banks that have been fined will have to mention the penalty in their annual report thus denting their credibility.
The action also brings into focus the myth of the small investor. It appears that a large part of the small investors are in fact punters shopping to get shares at a discount price just too offload it at the earliest opportunity for a profit. While there is nothing intrinsically wrong with such a move, it is important to underline that these are not hapless small individuals that they are often made out to be but speculators.
Speculators do not deserve special treatment.
The Indian markets need a vigilant regulator and restoring the confidence in the purchasing of shares in initial public offerings is a critical step if the dream run of the Sensex is to be sustained and taken forward. Unlike many foreign markets, the Indian bourses have been so far powered by domestic and foreign institutional investors. If the faith of the domestic investor is restored in the stock markets the Sensex can easily go to greater heights. The penalty will go a long way in curbing the speculative instincts of a section of the players in the bull market who try to coroner a large share of the initial public offerings. The fine on the banks is an important though symbolic step in ensuring that banking norms are followed and market speculation curbed.

human rights under threat world wide

Human rights under global pressure
Indira Gandhi once famously said that Corruption is a global phenomenon. Going by the latest report of human rights watch the internationally respected NGO, the same seems to hold true for Human rights abuses.
The 2006 edition of human rights watch is a scathing indictment of the United States of America. The damage done to freedom of speech, expression and international guarantees by the Bush administration’s policies come in for special mention.
The US is by no means the only - or indeed the biggest - violator of such freedoms in the world. However, as one of the world largest democracies and a beacon of freedom it is especially troubling for the country to be in the spotlight for some of the worse abuses of human rights that include torture of prisoners and denial of freedoms guaranteed under international law.
The approach to give a state a license to maim, torture and to kill - an increasingly rampant tendency in today’s world has come under special criticism by the report. The executive director of the report Kenneth Roth has said that”… fighting terrorism is central to the human rights cause. But using illegal tactics against alleged terrorists is both wrong and counterproductive.”
India too has come for criticism. In particular, on account of India’s gender discrimination. The report says that in India, women continue to face discrimination and violence. The report also point to the fact the India has a bad record in respecting human right in those areas where it is fighting insurgencies. The report further points out that “militant groups and Indian security forces continued attacks on civilians. Caste-based violence continued, especially in rural areas, and tribal groups that had converted to Christianity were targeted for attack by extremist Hindu organizations.”
To be fair, India has a robust and open society where numerous human rights groups routinely point out the problems. However when an internationally respected group comes up with such findings it should act as a wake up call for our civil society.
Democracies have more influence in global order and a far greater responsibility to maintain human rights standards. From the latest report it would appear that democracies as prone as dictatorships when it comes to the option of shooting first and asking questions later.
This is worrying for the future of democracy as a system and the values that dictate the civil societies of these free countries.

pesticides are a clear & present danger

Consumers have won a major victory in the Supreme Court decision that makes it mandatory for cola firms to reveals the details of their contents. In particular the court’s ruling will go a long way in making public the exact amounts of pesticides in an aerated beverage. Given the fact that a large majority of consumers are children, the publication of information on labels will ensure that at least they become more aware of what they are consuming.
The court up held an earlier order of the Rajasthan high court which the cola majors wanted quashed. However the court has a given breather to the cola majors in not forcing any contempt of court proceedings. The cola majors had not carried such details on their labels following the earlier high court order.
The triumph for consumers however is to be seen in a context. The fact is that in India today everything from vegetables by the any the road side vendor, to milk available at the friendly neighborhood dairy is laced with pesticides. Ground water pollution too is a big worry.
That it took a court decision for this to be implemented rather than a state law is in it worrying. In India ever since the green revolution, Growth in food productivity has been accompanied by an enormous dose of pesticides. In India implementation of food and drugs administrations rules is notoriously lax. It is this that needs to be tightened. For water alone India has two laws one from 1974 that addresses water pollution and another from 1990 that address environment protection. However their implementation has been tardy
Urgent attention is needed to address larger issues of pollution. The yamuna in Delhi is the starkest example. While there is water treatment plants on the river the water has become so polluted now that even these are not enough to treat the water body of affluent. According to a TERI, and environment consultancy, a whopping 6000 million have been spent on the Yamnua alone - with no results to show in terms of controlling pollution. If this is the case with a major river one can only estimate the state of smaller water bodies and ground water in other parts of India.India must learn from China, where rampant industrialization has caused poisoning of as much as 40 % of its water bodies. It is all very well to single out high profile companies and make them accountable for pesticides in their wares - but without ensuring higher environment standards and compliance to laws already in place, the Indian consumer is doomed to leave in poisoned envir

soros looks @ indian entertainment sector

When billionaires come together industries shake. The decision by billionaire investor George Soros top put $100 million for a three percent staked in Anil Ambani’s Reliance Entertainment has indeed shaken up the sector .

Go to any film studio in Mumbai or a gaming café in Bangalore and you can see that consumer interest and easy availability through retail is allowing for a boom in India’s entertainment sector. The Indian leisure classes love their movies and their TV shows and there are more then 150 million of these willing to pay for content.
According to Price Waterhouse coopers, a consultancy, Indian entertainment industry has a turnover of $10 billion. It is estimated that the industry will be worth $13 billion by 2010.

The crucial difference this time is that this industry is moving away from fragmentation. Mr. Ambani’s enterprise for instance has under its roof more then 100 theaters across India and an equal number planned in the US. It also has film production firms that have signed upon big names in bollywood. Add to the menu gaming portals, postproduction faculties, an animation firm, TV programming companies, DVD distribution, FM channels with a pan Asian presence and music. What emerges is a media conglomerate in the making that can do the famed end-to-end operations Ambani style.
The larger industry too is growing exceptionally. New television channels are multiplying like rabbits similar growth is there in sectors such as movies and magazines. The Indian consumer is growing richer and more literate and there is also the back up of the foreign residing Indians hungry for content from back home. The annual growth of 18 % in this industry is looking to get bigger.
In all this growth however there are real issues distribution still remains a bottleneck though direct to home access will in time change that. The entertainment industry is heavily taxed making film tickets expensive even in small towns. Revenue models from entertainment avenues including FM radio and the Internet are in its infancy. However investors like Soros have taken a bet that a foot n the door now will ensure rich rewards as the market matures. This appears to be a good bet.

mills update bombay

Mills to develop into a new city center @ parel

The Supreme Court verdict, allowing unfettered development of mill lands brings to a close a bitterly fought struggle between the green lobby and the builders combine. The agenda is now set for commercial and residential development of 600 acres of land spread over sixty textile mills in Parel and laubaug in central Mumbai. .The decision will make 4 million square feet of developed land available in Mumbai within two years.
Fears have been expressed that the new development may at best stabilize the price of commercial space in Mumbai - but may not bring it down by much. The DLF group has proposed the development of a one million square feet mega mall on the NCT land it bought while India bulls –the group that successfully bid for two mills - is to redevelop for commercial space.
This leaves very little new property for residential purposes. The average bidding price for mill lands at the auctions was Rs. 15,000 per square feet. The price will naturally be much higher once development and marketing costs are factored by the builders. The residential property on offer given is unlikely to be within the reach of the middle class. What it may do however, is to take the price pressure off the better properties in the suburbs - and bring a general ceiling to land prices rising in the near future.
This may be just what Mumbai needed given that it will slow a sudden downturn in price. The deal may deflate the price bubble and reduce the chances of a burst..
For the greens the court order is a blow. They had hoped for 400 acres of green space from the mill land redevelopment scheme. However, with the Supreme Court upholding the the amendment in 2001, that changed the availability of free land these hopes have been dashed. The city will end up getting only about 60 across of green land in the new deal. This is bad news or Mumbai, by contrast Lodi Gardens, just one of the open spaces in Delhi is over 100 acres in spread. The order means that Mumbai landscape in terms of gardens walks and such like - that are a given in all the other great cities of the world is unlikely to change much. The ration of open space per thousand person is .003 acres in Mumbai and that is likely to remain unchanged.While the greens may have lost this immediate battle, they will do well to fight on. The docklands – the size of 60 Nariman points are likely to come up for redevelopment at some stage in the future an active campaign could yet help develop a green lung for the city.

domestic Infotech market should not be ignored

Leverage the domestic IT opportunity
A new report by Information technology industry consultant garner points out that Indian firms will up IT spending by as much as 13 percent this year. The Indian domestic market is already estimated to worth $9.7 billion. This is an important pointer for IT firms to look at India as a serious revenue generating opportunity. In times when they are troubled by the rising dollar, a squeeze on the price arbitrage model that is the backbone of Indian It exports and a talent crunch that is seriously undermining their ability to execute large projects, the domestic market could come to the rescue. The only problem is that IT firms are not looking seriously at opportunities out of Kochi or Surat instead they continue to look at markets as diverse as Romania and Japan.
This could be a costly error of judgment because multinational firms like IBM and accenture are doing the reverse. They have already cornered an impressive 55 % of the Indian market for IT products and services including big-ticket deals like Bharti’s $1.3 billion outsourcing contract to IBM.
The domestic market is also likely to get an impetuous from e government initiatives launched by center and state governments. According to an estimate by Skoh consultancy a research and consulting firm, in the e governance initiatives by the central and state governments in India are estimated to be worth over 5000 crore by 2008. These are often straight forwards contracts that require, less complexity and product ownership then the international contracts and are therefore far more profitable for the IT firms that undertake these.
Indian forms will do well not to ignore the domestic opportunity. It will need a new strategic orientation to ensure that this market is exploited properly. Indian firms will need to groom a different set of talent that would look at selling within the country. If they do not reorient their marketing strategy that combines global reach with local markets they may see the rug pulled from under their feet by MNC firms in their home turf. That would certainly be an ironic outcome along with a costly mistake.

indian airports are a shame

. The state of major airports in India is nothing short of a scandal. Near miss collisions, congestion lasting over three quarters of an hour, fatal accidents on the tarmac and traffic jams at the approach is all in a day’s flight at India’s airports. The airports are disasters waiting to happen.

A while back the aircraft carrying Sonia Gandhi came too close for comfort with another commercial flight. If this can happen on VVIP flights the layman is surly a sitting - or rather flying duck.
At the heart of the problem is the gap between the growth in the air traffic in India the infrastructure that ought to go with it. Currently 19 million people fly the Indian skies every year and this is going up at a staggering five million people per year. Of this growth 46 per cent has come from non-metro airports, which while not getting much publicity, are similarly constrained by infrastructure concerns.

The air traffic control links in India is poor both in numbers on the ground and the technology that they work with. Experts believe that the best way to ensure the position of an aircraft approach and departure position is the secondary surveillance radar. Shockingly many airports, including bangalore, are not equipped with this technology, likewise many airlines are not spending money to train their pilots in category III landing systems that allow for fog landing thereby throwing schedules off gear.

The second major concern is the unsustainable model of budget airline. Contrary to impression food and beverage costs are a tiny fraction of operating expenses. For both the full fare and budget airlines it is the fuel, maintenance, parking and crew costs that make up the large percentage of expenses. Thus temptations to cut costs are high a routine maintenance missed could lead to a catastrophic crash.

The bad news is that the scene at the Indian airports is likely top get worse before it gets better. Sure privatization at Delhi and Mumbai will help. It will create better utilization of resources and more comfortable transit. However till the airport authorities of India and the ministry of civil aviation comes in line with the urgent need for upgrading airport infrastructure today’s air traveler will have to contend with the fear of flying.

free the business of inteernet commerce inindia

Scrap B2C curbs
The proposed curbs on business to consumer firms that sell goods through the Internet are a retrograde idea. Anything that the Internet firms sell from abroad has to go through the tariff and duty regimes of the Indian government. That ensures the government revenue. Currently it is a 2500 crore market and growing at robust clip.

Unwarranted curbs on this growing business could lead to constriction of revenues and loss of jobs. At the heart of the issue is the fact that selling though Internet is not a vending matter but that of commerce. Put differently, it is in the realm of tariff and not retail policy.


What is more, the move could lead to retaliation from foreign countries and impact sourcing of goods from India thought the internet - which is a far larger business.
In fact the government would do well to encourage this business by simplifying norms for warehousing, logistics and the cold chain since. It should be borne in mind that the “at the door step” industry globally generates a substantial number of jobs and in time could compare with the growth of pure play retail. The potential for business to customer industry is enormous given the increase in broadband connections and greater online security in commercial transactions.

There is need for the government to allow greater equity in e commerce ventures that are pegged at 51 per cent and to libralise the current regime that does not allow any equity in foreign firms wanting to business to customer e commerce in India.

This is not to say that the Internet based businesses do not need regulation. There are cases of fraudulent and late delivery and also of banned goods making there way into India through the Internet based e commerce model. These should be regulated and not the system of supply and selling.

Internet based business to customer model is good for another reason. It is at the cutting edge of information driven business and add to the competitive capabilities of an economy. An Internet based model cuts waste and inventories and invests in technology for speedy delivery. This is turn ensures that even off line firms become leaner and more competitive. It is an industry that needs to be encouraged and not – as the proposed measures could – nipped in the bud.

small time india now in big league

The cheer is strange for this frontline town. Frontline that is on of the Naxal war that rages like a red blister across much of central India. Says a wireless telecom sales manager, plucked out of a management school in Delhi and placed here, " The truth is that while business is surprisingly good with people sick of land lines, I cant venture out worried sick as I am of land mines. Ranchi has no suburbs. Twenty miles out and you are in naxal cross hairs. I can't believe how much time I spend at the bar these days - there is just nothing else to do around here." He may have a point. While cell phones have boomed and Sunil Mittal said at a recent conference that the opportunity in Ranchi was spotted late, even most cell phones don't connect.

The real estate market though has boomed, regardless. Partly because Jharkhand became a state and expectations of a growth of the sort witnessed by Deharadoon propelled investor sentiments. The real action however is in the natural resources sector. You have a queue here for investing in mining in power and coal. Says Tanmay Priadarshini of Jindal Steel "Things take time here, but make no mistake, once you realize the sort of resources the state has you will appreciate that there are few better alternatives than Jharkhand. Sure law and order can be tough but the mining sector overall has the capacity to be a transforming agent in this state. We are very bullish about Ranchi."

This being Ranchi the main road is called simply that – main road. And here stands a five star hotel in white marble, its called Capitol Hill. It houses another giant potential investor - Arcelor Mittal. Currently playing the waiting game the steel giant has eyes firmly on the state. So do about 40 other steel and coal companies of various sizes who have signed MOU's. However says a senior Indian Steel firm CEO on the condition of anonymity “ The only problem is that the after the MOUs nothing has moved. And some of the MOU’s have even lapsed since the time of reference is long over. There is also a lot of uncertainty since PSU firms corner mines so you are left groping in the dark in the middle of seemingly endless opportunity.” Transparency is alien in these parts. What you see is never what you get. This is India inc. as it used to be.
\u003c/p\>\n\u003cp style\u003d\"margin:0in 0in 0pt\"\>\u003cfont face\u003d\"Times New Roman\"\>The malls bandwagon so conspicuous ion other growth towns is absent in Ranch – so far. However both the pantloon group and the future group have plans lines up with the later likely to start operation here early next year. So the mall going Indian will soon have its fist cousin in Ranchi. Says local businessman Aditya prasad " Reality as a trigger for growth has been slow in coming but its now firmly here. We also ready have an top-notch Apollo hospital and a seven star hotel is planned. It may not look like much but this lace is catching up – and fast.'\n\u003c/font\>\u003c/p\>\n\u003cp style\u003d\"margin:0in 0in 0pt\"\>\u003cfont face\u003d\"Times New Roman\"\>The youth are hopeful too. Some kids on motorbikes restless like the rest of India are eating at a popular Kebab joint on main road. I join the feast to see what the youth are humming. The ambitions seem modest a couple are preparing to go to Delhi to take the IAS exam two others work for telecom franchises and all of them are unanimous in one thing – Mahendra Singh Dhoni. If ever there was a motivational guru who could motivate enter peoples and give them hope this is it. Says Sarawak \n\u003c/font\>\u003c/p\>\n",0]
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The malls bandwagon, so conspicuous in other growth towns , is absent in Ranchi – so far. Pantaloon though has a big mall lined up. So the mall going Indian will soon have a first cousin in Ranchi. So while reality as a trigger for growth has been slow in coming its now a reality. Apollo has set up the first real multi facility hospital and a seven star hotel is also in the works.
The youth are hopeful too. Some kids on motorbikes- restless like the rest of India are eating at a popular Kebab joint on the main road. I join the feast to see what the youth are humming. It’s a modest hum - almost a whisper. A couple of them are preparing to go to Delhi to take the IAS exam, two others work for telecom franchises and all of them are unanimous in one thing – Mahendra Singh Dhoni. If ever there was a motivational guru who could motivate an entire people he is it. Says Sarawak gonda, 22 “ look we have to aim at the top and if we have it in us it is possible. If he can be a one of just eleven in a billion we are only looking to join the workforce.” Way to go mate! The odds are indeed in his favor.

infrastrucre delays cause pain to india

Arrest crippling delay
The delay in completing public infrastructure projects in India is nothing new. What is new is the staggering scale of the delay as well as the fact that with the recent increase in commodity prices the cost of these delays are piling up too unsustainable levels. The delayed projects also come with a huge opportunity cost. A delayed port or a highway programme can put breaks on economic growth and cause the economy to overheat.
According to a recent report ministry of statistics and program implementation Out of these 605 projects, around 248 projects are way behind schedule. Another 149 projects, though approved, have not even been commissioned, and 46 other projects are waiting for the updating of their completion schedule. Merely 22 projects are ahead of schedule, while 14 are on schedule. A staggering 105,000 crore has already been spent on these projects and the delays cost an average of The overall cost overrun with respect to original cost is calculated on an average to be 21.5 per cent.
The worst performers are sectors such as nuclear energy, Hydropower generation, Indian railways and ministry of health and family welfare. The delays are a symptom of comprehensive governance failure. The political structure of a parliamentary democracy in India also leads to many pork barrel projects where costs are exaggerated from the inception stage. Powerful MP’s often insists on mega projects n the vicinity of their power base irrespective of the feasibility of the project. There is urgent need to tighten the feasibility study criteria for government-funded projects.
Lessons also need to be learned by the babu’s from the private sector in project execution. Whether it is the Reliance refinery at Jamnagar or the Delhi metro port large time bound project are now being executed with much greater efficiency by the private sector.
A public private partnership model for project execution ought to be a top governmental priority. A vast engineering pool needs to be created for flexible project management. Some of these ideas have been mooted by the planning commission in the past but never taken forward in a concrete executable format. India can ill afford ignoring such an initiative
division has 605 projects worth Rs 267,815 crore (Rs 2,678.15 billion) on the monitoring system on which Rs 105,146 crore (Rs 1,051.46 billion) have already been spent.
Out of these 605 projects, around 248 projects are way behind schedule. Another 149 projects, though approved, have not even been commissioned, and 46 other projects are waiting for the updating of their completion schedule.
Merely 22 projects are ahead of schedule, while 14 are on schedule.
The overall cost overrun with respect to original cost is 21.5 per cent, mainly because of delays, which range from one month to 13 years!

the nano!

Small wheels they keep on turning
The successful launch of Nano, the much-awaited 1-lakh cars by Tata Motors, at the Delhi auto expo changes the rule of the games for the automobile industry.

The success of the car will depend on three aspects. First in its ability to seat four people in comfort, second in is fuel efficiency, and third its maintenance costs. The most interesting part of this design is that while it is a smaller car then the maruti 800, it has 21 per cent more interior space. With a four shift manual gear and comfortable but non-recline seats is offers value for money. The key to the car is its all-aluminum, two-cylinder, 624 cc, 33 bhp, multi-point fuel injection petrol engine. It is claimed to offer 23 kilometers to a liter. The Tata vendor network has so far a record of reasonable service costs when compared to the competition.

The Nano will have different implications for the customer, the company and the competition.

For the costumer for the first time there is a genuine choice between buying two wheeled vehicles and a motorcar. A whole lot of new costumers will now enter the car market.

For Tata Motors the small car comes with big management challenges. These include ensuring quality manufacturing of the car. Managing the scale of operations on a level that the industry has not seen before is the second imperative. A third imperative is to set up a reliable vendor network.

For the competition the car is a huge challenge. None of them seen to be in the same league, when it comes to producing a car at this price. While a two wheeler firm has shown prototypes these are very far away from production stage. The real challenge will be for motorcycle firms like Hero Honda and carmakers like Suzuki and Hyundai motors. They can either cut the price of their existing products or introduce new lower cost vehicles. Neither are easy options. Lastly the second hand car market is likely to be hit the hardest. Buying a second hand car at twice the price of a first hand one is not likely to be an option any more. In the end that exciting smile you see on the first time car owners face may stay for a long while to come.