Wednesday, May 1, 2013

“We had predicted it in 2005, but no one took it seriously”

Arun Maira, Member-Planning Commission, reveals to IIPM Think Tank’s Sray Agarwal and Ganesh Roy about why the need of the hour is to have a faster decision making procedure

B&E: The Indian economy is going through a slowdown. What’s the way forward for the economy now?
Arun Maira (AM): What is happening in the Indian economy is just a phase of an economic cycle and it is not going to be the situation forever. In the present scenario, the investors are shying away from coming to India but there is a dire need to understand that this slowdown is temporary. One of the main reasons for this picture is lack of power in decision making. Hence, the need of the hour is the ability to have a faster decision making module. The trust of our people in the government is shaky right now. It’s not only the case with India but in US too that people currently are low on confidence in the government and there too it is very difficult to bring reforms, whether health care or industrial. Both these nations are on the same page and the transformation seems difficult; but since the US has much larger economy they do not get much affected by investors. We at the Planning Commission perform tasks which do not change with these economic cycles – rather, we do a combined and collective research taking views from common people, environmentalists, people from civil society and many more and try to find out what could be the best possible outcome for any situation; and then we proceed from there. We had predicted long back in 2005 that the Indian economy will grow at around 8% to 9% growth rate; but none of the institutions took our prediction seriously; yet eventually we were right!

What policy reforms should we take to tackle the current issues?
AM: This is a fundamental thing and this has happened over the last 2 years and this has not happened overnight. We have predicted that if policy making and decision making are faster, we can achieve a growth rate of over 9% and we have done that. But again, we also have said that things if not done properly will equally affect the economy, as is the case that you see now. I agree with the fact that the economy is not in a good position; but if things like policy making can be done immediately, we can recover from this economic slowdown very fast.

The growth in the economy has made many persons rich but what about the lower strata of the society? They are deprived of the benefits of liberalization so the ultimate challenge for us is to bring these people into the main strata of the society. The political lock-jam which has happened is also one of the reasons for this condition currently.

The institutional and economic reforms if not implemented will make the scenario even worse than what it is prevailing right now. I am not talking about reforms like FDI in retail or the banking reforms but the way in which jobs are created in the country. It is a major issue of concern for us. For example, the main problem with the Naxal affected areas is that the things which were promised to them were never fulfilled; so to get those promised things, they take the help of arms! This is one example of a main policy failure which we have in our system as of right now.
 

Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Monday, April 29, 2013

National

RBI: interest rate cuts
Apex bank leaves India Inc. disappointed
Seems that the stalled growth engine of India Inc. will have to wait for some time more before it gets some further rev ups. In its latest review of monetary policy, the RBI decided to keep benchmark interest rates and cash reserve ratios unchanged, leaving many market participants and analysts crestfallen as they were hoping for further cut in policy rates. On the contrary, the central bank warned that reducing key policy rates at this juncture could accelerate inflation rather than spur growth. This stand of RBI is in divergence with its earlier stated policy of bringing down the interest rate if core inflation is below 5% (core inflation was hovering around 4.9% at the time of the announcement.) Currently, repo rate (the rate at which RBI lends funds to other banks) and cash reserve ratio are at 8% and 4.75% respectively. However, RBI has increased the limit of export credit refinance from 15% of outstanding export credit of banks to 50%, which will potentially release an additional liquidity of over Rs.300 billion, equivalent to about 50 basis points reduction in the CRR. But RBI’s stance is going to baffle foreign investors no end. After a span of two years, even China has now started to reduce its interest rates in an attempt to boost the economy. Brazil, another member of the BRICS club, has also been cutting its key policy rates for quite some time. Even a recent report of rating agency Moody’s has said that India could turn out to be the weakest amongst all BRICS countries.

Oil: high diesel demand
Private refiners make hay
Due to the huge difference in the prices of diesel and petrol, the demand for diesel in the country has shot up. So much so that demand outstrips supply by a wide margin. Demand for diesel has skyrocketed and exceeds supply because of petrol prices, which is 70% costlier than diesel. As a result, PSU oil refiners have been forced to buy diesel from Reliance Industries Ltd and Essar Oil. State run oil firms like Hindustan Petroleum, Indian Oil and Bharat Petroleum are buying nearly 15 million tonnes of diesel per year from the two private refiners. Essar Oil operates 1,391 operational outlets, including 249 under construction. Reliance has about 700 operating outlets. The private refiners are able to charge diesel at international prices from the PSU refiners leading to huge windfall gains for the former. On the contrary, state firms are suffering a revenue loss of Rs.10.20 per litre of diesel they sell in the retail market. IOC, India’s biggest oil refiner with a capacity to process 66 MT crude oil, annually bought about 42% diesel from other domestic refiners in the first two months of the current financial year. The company produced 4,485.4 thousand metric tonne diesel in first two months of the current financial year against a sale of 6,371.2 TMT in the same period. According to oil ministry’s data keeper, Petroleum Planning and Analysis Cell, while petroleum consumption recorded monthly growth at 0.2% in April (lowest in the last one-and-half years), about 47% of total consumption in that month was of diesel. “This is one strong indicator of dieselisation of the economy due to price distortion among competing fuels,” PPAC said in its latest report. Diesel rates in the country are frozen since June 2011. It is sold at Rs.41.29 a litre in Delhi while petrol costs Rs.70.24 a litre in the metro.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Saturday, April 27, 2013

Meet the enemy of the internet – Facebook!

We all know Facebook as the dorm room idea that popped out of no where and changed the world. And recently bombed at the bourses. But then, there’s also the counter argument...

Before I explain how, let me first give you a quick background about why Facebook is in a position to threaten the internet.
 The story behind the network
Till about the rise of online media as a means to access news, print, radio and television were the only options. But soon, Google came along and mainstream media was no longer the only gatekeeper of news, It was a great way to express oneself and anyone was free to post anything anywhere on the internet, My blog is an example of the same. Most of the online content was relevantly available through search giant Google. With the rise of social networks, the concept of sharing came into prominence. Twitter and Facebook bring news straight into our News Feeds and we do not have to go anywhere else searching for news.

If it is not shared on Facebook it does not exist! While Twitter still remains a niche network with a small percentage of active users who make all the noise, the dominance of Facebook has been so overwhelming that almost everyone we directly know is a member there, and quite active too. Apart from this, we have celebrities and brands who keep long for us to ‘LIKE’ their pages on Facebook at the expense of their own official websites. Facebook pages are far more attractive to them because that is where all the people are. In due course of time Facebook has become not just another website but the Internet for many

This places Facebook in a position of great power. As such, we expect Facebook to act with maturity as people depend on it to bring them the news. Instead, it is slowly turning out to be a very smart villain and with the IPO money, things can get really bad. Therefore, the focus of this piece is on Facebook, on how it treats ‘The Internet’ as its arch enemy, and why we should be concerned about it. When I say ‘The Internet’ I mean the internet that exists outside the walls of Facebook.

But isn’t it nice to use Facebook to access content from all across the web, shared by our friends and pages that we like, all in one News Feed? Why should we be bothered about the rest of the internet? Here’s why. Facebook hides more stuff than it shows! At any given time, the News Feed shows only a small percentage of all content that is shared by our friends and Pages that we like. If we try and change the settings to show Most Recent posts, we might find few more updates, but still, a huge percentage of updates are hidden from us. That also means, whenever we post status updates, they reach only a small percentage of our friends. Facebook itself has said that the reach is around 12% to 16% of total friends. Beat that, more than 84% of our friends don’t even see what we are sharing or talking about even when we are online at the same time! Isn’t this a violation of our fundamental right to speech? Shouldn’t we be deciding whose updates we need to see in our news feeds and shouldn’t our voice be heard by our friends?

Facebook says that it does it to control noise in the News Feed. Too many updates can inundate the users feed, so Facebook devised an ultra sophisticated mechanism that reads our minds (It always asks “What’s on your mind”, so that it knows) and shows us what it thinks is appropriate and relevant to us.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Thursday, April 25, 2013

Intel inside, arm outside!

When Intel Chief Paul Otellini announced that his company had secured the commitment of Lenovo and Motorola Mobility to put ‘Intel Inside’, it was considered as a significant development in the computing world. But the launch of Intel’s first processor in Lava’s XOLO X900 instead was a bit of a dampener. B&E looks into Intel’s strategy and attempts to dig out the chip maker’s odds of succeeding in the smartphone segment

The funny thing about most great corporations is the fact that they are great only for a limited period of time. The greatness stays around for one generation and might even extend to two generations. But the moment they begin taking market forces and technological change for granted – they lose their cutting edge and eventually their greatness. This is the very reason why Microsoft – a company once referred to as the 1000 pound gorilla of the computing industry – doesn’t quite ring that loud a bell today.

The time when powerful – and cash rich – companies could afford to ignore external forces is long over. So when the Santa Clara based semiconductor giant Intel announced that Lenovo and Motorola will have ‘Intel Inside’ their smartphones at the Consumer Electronics Show in January this year, the news made headlines but was hardly surprising. It was about time that Intel made a move into the smartphone market, dominated by chips using designs from ARM of Cambridge.

Consider a few statistics. According to data complied by research firm IDC, 491 million (almost half a billion) smartphones were activated in 2011 – a 61.3% increase over 2010. Samsung, Apple, Nokia, RIM and HTC shipped 94 million, 93.2 million, 77.3 million, 51.1 million and 43.5 million units respectively. The remaining 132.3 million smartphones were sold by players like Sony, LG, et al. How many of these carried an Intel processor? Not even one! Although Intel remains the undisputed supplier to PC manufacturers globally, this market grew by a mere 1.8% last year.

Under these circumstances, the chip major’s interest in smartphones was palpable. And then came the big dampener in the form of Lava’s XOLO X900 powered by an Intel Atom Z2460. At a time when investors and analysts were expecting an Intel equipped Motorola or Lenovo handset, Intel chose to debut in the smartphone category with a lesser known Indian brand. The Intel powered Lava smartphone is impressive no doubt. Even if the processor is not a dual core or a quad core, Intel’s 1.6 GHz CPU with Hyper Threading allows for an exceptional multitasking experience while promising a battery life comparable to competing smartphones. But here’s the catch. It’s priced at Rs.22,000. No matter how well packaged the smartphone is, Indian consumers will hesitate to invest that kind of money when they have an option to go for a Samsung, HTC or Nokia smartphone. The association with Lava therefore appears to be nothing more than a pilot test for the Atom Z2460. That the stock market did not react to the development (Intel’s share price in fact fell by a few percentage points) indicates that investors did not see this launch as a major breakthrough for the chip major.

So, despite extensive expertise in developing processors, why is Intel having such a hard time replicating it’s PC success with smartphones? The answer lies in the architecture. While you have an entire motherboard on a PC which can accommodate everything from Graphic Processing Units (GPUs) to peripherals, all these have to be put on to a single chip (SoC – System-on-a-Chip) in a smartphone. The technology to make this integration possible has been developed by ARM Holdings – a British multinational with revenues of roughly $772 million – which licences it to ecosystem partners like Qualcomm, NVIDIA, Samsung and Texas Instruments.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Wednesday, April 24, 2013

“True entrepreneurs don’t start rich”

Stephan Gary Wozniak, Co-founder of Apple Inc., in an exclusive interview with B&E talks about the notable traits of successful entrepreneurs, and how he rates the late Steve Jobs as an entrepreneur-leader

B&E: How do you define “entrepreneurship”, since you were key to creating Apple as a company, and what prime qualities should an entrepreneur possess?
Steve Wozniak (SW): I don’t have a good definition of entrepreneur. I’d go with the popular opinion. It’s usually a young person but could be an older person who is young at heart. It’s a person who wants to start a company and get going on his or her life toward making a lot of money.

B&E: How critical is passion as a success factor for an entrepreneur to succeed?
SW: Some entrepreneurs are motivated by passion to do a particular thing. Others just want any opportunity to have a business of their own. They all want to, at least partly, escape from working for others on this project. Usually entrepreneurship involves creation and engineering. Bright engineers get ideas and become entrepreneurs to bring them to fruit. Often an engineer or scientist creates some sort of working model in their home or garage first.

B&E: And what do you have to say about young graduates who make a mark in the world of entrepreneurship?
SW: These days many graduate from college with entrepreneurship training and they look for ideas or come up with ideas with little or no understanding of what it will take or if it’s possible. They assume that once they get funding for an idea on paper they can find engineering as a resource anywhere in the world. This is the business graduate. The best is when both disciplines, engineering (science) and business, are in the same person.

B&E: How would you rate the late Steve Jobs as an entrepreneur and what were his top qualities (and weakness, if at all) as an entrepreneur and a leader?
SW: Steve was one of the greatest. He didn’t do the engineering but he understood it better than pure business types. He always recognised the importance of it and hired the greatest engineers. I was his key in the early days but he did not make a mistake. In later times it was clear that he understood the importance of all the departments of a large company and insisted on hiring some of the best people in the world in every one of these departments.

B&E: So you say that for Steve Jobs, being around engineers helped him emerge as a successful CEO-leader?
SW: When Steve was young he had a huge spirit to form a company as a way to bring his great ideas to the world. He thought fast and had ideas about everything and he was very outgoing about it. He was around a lot of engineers and knew when gold had struck, with the Apple II.

Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Monday, April 22, 2013

B&E Annual CEO Report 2012-13 results*

Why CEOs do what they do

Methodology

In 2011, NYSE Euronext commissioned the NYSE Euronext CEO Report, the seventh annual CEO survey. The survey ascertained expectations of respondents on various business and economic conditions. 317 NYSE CEOs, 119 emerging CEOs of US non-public companies, 205 MBA students were covered in the research report.

Based on the NYSE Euronext CEO Report, the Indian Council for Market Research (ICMR) with research support from the IIPM Think Tank conducted a nation-wide survey amongst CEOs and top managers for both listed and unlisted/emerging companies from India Inc., apart from MBA students. Responses were taken via face to face/telephonic/e-mail interactions, and the survey generated 100 responses from CEOs/top management executives of Indian-listed companies, 100 CEOs/top management executives of unlisted companies and 300 Indian MBA students.

With exclusive permission from NYSE-Euronext and IIPM Think Tank-ICMR, Business & Economy presents the B&E Annual CEO Survey 2012-13, comparing business and economic sentiments of CEOs/top management and MBA students in the US and India.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Friday, April 19, 2013

When push comes to shove

Sales figures for november saw HMSI stage a quiet coup in the domestic two-wheeler market as TVS Motor was edged out of its number three perch. Can it claw its way back?
 
Appearances can be deceptive. They may conceal more than what they reveal. At first blush, the Chennai-based $2.2-billion TVS Motor Company’s 7.79% growth for the month of November 2011, in which it sold 1,50,406 two-wheelers, appears to be a fairly good showing, all the more so considering the macroeconomic challenges and the overall poor market sentiment in the Indian market. However, one only needs to look a bit deeper to arrive at a fuller picture. During the festive month of November, the two-wheeler industry grew by 25.27% and its (TVS) arch rivals like Hero MotoCorp and Honda Motorcycle & Scooters India (HMSI) managed to beat the industry trend by registering top-line growth of 27.28% and 59.04% respectively. For TVS, worse was yet to come. The month also saw it ceding its No. 3 slot in the two-wheeler market to HMSI, whose November sales logged 189,970 units.

Sure, the figures are for just the month of November. For the two contenders, the scales of fortune could tip either’s way and there could well be many a slip betwixt the cup and lip in the months ahead. For the past few years and till as late as November 2011, TVS was the third-largest two-wheeler manufacturer with a market share of 14.5%. The company sold 1,282,117 units as compared to the 1,228,987 units sold by HMSI during the April-November period. But the latest coup by HMSI has set tongues wagging. Will TVS be able to claw back the lost ground in the Indian two-wheeler market going ahead?

An e-mail sent to TVS Motor Company for its comments on this story did not elicit any response. But it is worth mentioning here that in October 2009, Business & Economy did a story discussing the fight for the #3 slot in the Indian two-wheeler industry between TVS and HMSI. As far back as two years ago, the magazine made a prediction that has come to be almost prophetic in hindsight. The story in question strongly made a case for TVS to pull up its socks or suffer the fate of watching HMSI vroom ahead. That fate has now come to haunt TVS. Considering the pace that HMSI has picked up of late, TVS will need to pull off a visceral performance and push sales aggressively to come back into the game with its honour intact.

Venu Srinivasan, the Chairman and Managing Director of TVS Motor Company, is not new to facing challenges. In fact, he has a reputation for thriving when the going gets tough. As a student of business management at Purdue University in the US, he spent a summer hawking the Good Book Bible in North Carolina. Despite being the grandson of the founder of the group (T.V. Sundaram Iyengar), Srinivasan started his career with the group as a grunt mechanic and put in a lot of elbow grease before moving up the ladder and becoming the CEO of Sundaram-Clayton (a TVS Group company) in 1979. And it was not before the mid-1980s that he rose to the top and was calling the shots at the two-wheeler manufacturer.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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