Biz and Eco

India Inc

By Gautam S Kumar:

Accountability and Transparency, two ideals that are central to any democracy. Two ideals, without which, democracy is impossible. Naturally, any law that gives more emphasis on any of these ideals should be welcomed with both arms by a country’s citizens. Then why is India Inc throwing a fit over the revised Companies Act that aims at doing just that?

Can there be any justification to their stance or are they just blatantly against transparency as their reaction would initially suggest? Our quest for answers begins(quite inevitably) with the act itself.

India Inc

The revised Companies Act’s section 182(3) states : “Every company shall disclose in its profits and loss account any amount…contributed by it to any political party…giving particulars of the total amount contributed and the name of the party…”. The previous version of the law allowed companies to name persons while disclosing political funding and most companies thus refrained from naming any party.

This very section that aims at improving transparency has caused India Inc ( the formal sector of the nation), to throw a tantrum and demand its ‘right’ to secrecy. The issue has been taken so seriously by the formal sector that it has led to the CII (Confederation of Indian Industry) writing to the government, suggesting this particular section be altered. The report says the private industry is apprehensive that full disclosure may lead to a backlash from parties that are ‘less generously funded’ in what one executive called ‘a volatile democracy of ours’.

What I believe this act aimed to do was to empower people. This would enable the people to know where exactly their money was going once they spend it on some service offered by the formal sector. The people can thus make more informed decisions, and would not end up funding something that they were against or did not believe in. Another important point to be noted is that companies in ‘developed’ nations like the USA already disclose this information. Warren Buffet (CEO Berkshire Hathaway) openly supports the democrats and his largest contribution of $30,800 was to the Democratic National Committee in 2011. Exxon Mobil Chairman & CEO Rex Tillerson on the other hand gave the same amount to the National Republican Senatorial Committee.

Now, while one can argue that since Rex Tillerson and Warren Buffet have had no issues in disclosing who exactly they funded, the same can apply here as well. One must also concede to the fact that the political scenario in India is vastly different. Give generously to both sides, and one will surely win (one of the perks of having just two sides?). But for our very own desi corporates, it is cheaper to keep the recipient under wraps. It is way easier to stick to the philosophy that a politician (or the company) can’t be hurt by what he does not know.

A university of Pennsylvania study suggests that India Inc seeking to maintain its anonymity over its funding may not be without due reason after all. In their research, M. V. Rajeev Gowda and E. Sridharan argue that secrecy in political donations became an imperative for political parties because black money was so entrenched into the system and businesses had to deal with such a wide range of parties in power in the central and state governments post the re-legalization of corporate funding in 1985, that corporates found it difficult to come above board for the fear of facing the wrath of rivals that were not supported.

What this shows is that the largely negative public response to India Inc’s move is sadly another case of jumping the gun. Nothing is as simple as it seems and this holds true for this particular case as well. People forget to take all aspects into consideration before they point fingers or make judgements. One of the key features of our political scenario is that despite two decades of economic liberalization, Indian businessmen are still highly vulnerable to discretionary government actions. Starting, operating or expanding a business requires government permission at both state and central levels. The real problem thus becomes the fact that there has been too much discretion vested with the government and the government is thus in a position to arm twist at will. This has given birth to an electoral system which is largely run on black money derived from extortion.

Industrialist Rahul Bajaj had openly hinted at a CII conference in 2011 that most political funding happened through black money generated from corporate houses. “Where does the political party gets its funds from? Come on, I’ve been in Parliament for four years. It’s not cheques, it’s not by small members. All money comes in through black money. Black money doesn’t come from heaven”

Now, where does all this leave us? While it may be true that the revised act aims at providing the public with more information and thus improving transparency, we must also realize that it comes at a cost. What we the public must ask ourselves is, will knowing who the Birlas or the Tatas or Ambanis bankrolled, be worth the price we will have to pay? We must realize that it always comes down to the common man. Here, the common man’s quest for transparency might take him/her to a country where the services he/she receives is drastically reduced. Expansion of businesses will slow down acutely, the number of new services springing up will tumble.

Furthermore, any move aimed at making white money donations any less opaque would only result in an increase in black money transactions. And hence, we are left with a final question, is upholding the ideals of transparency and accountability(to an extent) worth its after effects?

Indian economy

By Shashank Saurav:

The modern day world economics presents a curious picture. Today, world’s major booming economies are languishing under low industrial productivity as well as under the depleting values of their currencies and high inflation rates. Be it South Africa, India or Brazil. All are now in the same boat battling the waves of economic despair and the inertia of slow growth in the recent financial year.

Indian economy

One wonders as to why such a danger looms so heavily upon all these Developing economies that were recently quite aggressively growing. Have we seen the worst or is it still impending? In India’s case, it is unanimously seen as the repercussion of the magnanimous Government spending that has raised its fiscal deficit to 7% of its GDP from the tolerable 2-3% range. This, coupled with the lack of Foreign Investments funds flowing into the country owing to the distrust caused by the corrupt Govt. policies and scams have thrown the Indian Economy into an abyss of despair and have worn out the shine brand India use to bask in previously. The double digit inflation rate along with the low industrial output has further aggravated its miseries.

So, what are the steps that the Indian economy should take up to enable itself to grow in a similar fashion as it was earlier. Firstly, in my view, Quantitative Easing is very important as this would help it leverage the new rates and the borrowing would become cheaper in India thus giving impetus to the investors. The one step in this direction worth mentioning was the recent MOU signed between India and Japan where they increased the upper limit of credit swapping from 15 Bilion $ to 50 Billion $ between two countries . This would help it to maintain its foreign reserves even in Japanese yen which already is at par with India. Shinzo Abe’s economic policies — also hailed as Abenomics, are worth mentioning in this regard. His second term in office since 2008 has brought in new sense of hope in the dwindling Japanese economy by infusion of fresh policies aimed at solving long term problems of the country. India , Japan and China, all face slow growth and economic challenges. India, however, lacks the prudence of a political class who can gaze future problems and frame policies to tackle long term issues. Populist measures and the subsidies of the Govt. have put increasing pressure on the economy.

For example, the 60,000 crore loan waiver given to the Indian farmers in 2008 wasn’t even accounted for in the budget properly as to where that money will come from. India’s fiscal dislocation is a result of such cathartic steps taken by the Govt. mainly to woo the voters. To add to this, the multi crore scams —the 2Gs , the Commonwealth etc. have further lead to immense loss of public faith and outcry against the rusted system. India was comfortably growing at 8-9% in the year 2008-2010. The fiscal deficit has risen from 2.5% back then to alarming 7% at the present. India’s ex finance minister, Yashwant Sinha had warned that P.Chidambram had overlooked the fiscal issues of the country in his zest to please the masses by introducing such measures. This not only weakened the economy but also set a wrong precedent of defaulting among the farmers. In a recent interview to Mint, SBI’s chief Pratip Chaudhuri candidly mentioned in an interview to a Business daily that since the next elections are deemed to take place in 2014, the farmers have began defaulting since they think that the Govt. will surely issue some waiver to woo them again .

Secondly, the recent Global risk aversion has also demotivated the foreign investors from investing in the developing countries. Global risk aversion has spiked in response to Fed Chairman Ben Bernanke’s announcement of plans to taper Quantitative easing (QE). As the 2008 and 2011 experiences demonstrate, heightened risk aversion among global investors reduces capital flows to emerging markets, even when they are not the source of risk. In such a case, the Indian economists can increase the interest rates such that the FIIs are lured in by higher returns. The recent land reform passed over the hundred year old Land Reform Bill will further even lead to more issues with respect to the acquisition of the land for setting up factories .

The recent effects of the economic tightening of the US reveals the ugly fact that the flow of money in the emerging markets is largely determined by the policies of the Fed Reserve. Among the most vulnerable are Turkey, South Africa, Brazil, India, and Indonesia — a group that Morgan Stanley researchers have dubbed the “Fragile Five.” As I write this article down, the Rupee is recovering and due to the withholding of the Ben Bernake’s tapering of the QE , Sensex has reached its highest peak since Jan 2011 .

It’s high time that Indian political class starts being pragmatic and stops leading us in the Utopian belief that all is well. With an expensive election looming over, chances are rife that the poor and the middle class of our population will have to bear the brunt of these faulty practices. At least, we should have the long term vision for a nation that is poised to become the next ‘Super power’.

Indian rupee

By Trippayar Sahasranaman Priyaa:

The last time we spotted the rupee, she looked really thin and aggravated. We decided to ask her a few things about her well being and what she thinks about her sudden downfall.

Indian rupee

Q: Do you think it is fair that you have tumbled down the currency ladder? What do you think is the reason behind this ordeal and chase to bottom?

Rupee: There is nothing fair about economics. There is only wisdom and ignorance that can make my value fluctuate. Well there are a couple of reasons behind the atrocities done to me, and they are done at different levels.

Let me start with the global foremost one: A lot of money has been converted into dollars and locked up in Swiss bank. If this money was circulated in the Indian market, it would have given rise to so much economy generation. People believe that charity begins at home, but they do not realize that their home is only a part of the bigger picture. When the world collapses, their home would, as well.

Q: Do you think that the massive work and economic giant, the IT industry, can save you a place a little higher than what you have now?

Rupee: Well, what I told you about the global foremost reason penetrates down to the citizen level in a different way. The professionals of the IT industry earn sufficient amount of money, more than what they need to make both ends meet. But what goes wrong is their ignorance in spending the excess money. Much of the money is wasted on enjoyment, booze, pizzas, burgers, buying cars and phones etc. which is not wrong, but my position would have been much better off, had this money gone into the market as investments, or even fixed deposits.

Q: What do you think about those who impersonate you and the body doubles?

Rupee: It is sad that there is so much of fake note in the market as of now. I heard that the underworld don Dawoo Ibrahim injected a lot of fake currency into the economy, so foreign investors are reluctant to invest here.

But, there is one more dimension to the fake note topic that you brought up. A couple of people my face by writing silly jokes or love letters on notes. You wouldn’t believe it, because of this, the government loses 2638 crores approximately each year as they cannot be used for STD transactions. Again, that affects my worth.

Q: Do you think that the food security bill is going to assuage the harm done to you?

Rupee: I only hope so and I’m keeping my fingers crossed at the moment. But honestly speaking, I don’t think so. There are two aspects to this. First of all it will raise government spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently, exacerbating the government’s weak finances. This will, in turn, affect the economy as a whole. Another thing is that there might be people faking their status to avail the scheme. This would have detrimental effects on the economy. I, however, think that the whole notion behind the food security bill is noble as it aims at providing food to the people, and I hope that it is not misused.

Q: What can you say about the present government?

Rupee (chuckles): Well, what can I say? The 2G scam and the coal scam are the first few things that come to my mind as they have acted as a tumor and eroded the last ounce of healthy blood in me. However, the present government has three of the best economists of India and I am happy that now it is trying hard to reinstate my former position.

Q: It was great meeting with you and really nice of you to share your opinions with us. But last but not the least are there any words you would like to share with the Indian citizens?

Rupee(nods): Of course, there are a lot of requests that I have for them. My position is in their hands.

Firstly, invest and spend wisely. Let your money circulate in the market and generate economy. And as far as possible, buy Swadeshi things, to curb the imports.

Secondly, use Facebook and twitter for your silly jokes. Please don’t write on notes.

Thirdly, please vote for the right government, these scams have taken the life out of me.

Fourthly, please pay your taxes and don’t save your money as black. Though you may save now, you will be affected in the long run.

Fifthly, avoid paying or taking bribes and do not fake your financial status to avail schemes like the ones in the Food Security Bill.

These little drops of water make a mighty ocean and would definitely help me and of course, you! I don’t want to rely any longer on the Loreal ad to hear that I’m worth it :)


By Pradyut V. Hande:

In what many industry watchers believe was a plausible development in the offing, Microsoft Corporation is in the final stages of purchasing the mobile handset business of the now beleaguered Finnish company, Nokia. The deal valued at over 5.4 billion Euros is expected to be formally completed by early 2014, subject to approval by Nokia’s shareholders and completion of other regulatory formalities. This promises to add yet another dimension to the ongoing global smartphone war which has borne witness to proactive competitors engaging in the development of a sustainable differential advantage on the cutting edge of technological and marketing innovation.


Nokia that once stood head and shoulders above its closest industrial rivals till the early 2000s has gradually seen its strong market position whittle away in the face of mounting competitive pressure across various platforms; most notably the smartphone segment. It’s failure to suitably respond to rapidly evolving consumer sensibilities and changing market realities coupled with the strong emergence and subsequent establishment of rivals such as Samsung, Apple, HTC, LG and off late even Google have collectively eroded its market share and brand credibility. However, despite all criticism; Nokia did valiantly attempt to stem the rot by bringing on board Microsoft’s Stephen Elop on board as CEO in 2010 who embarked on turning around the ailing company by first discarding its Symbian operating system in favour of a potentially beneficial partnership with Microsoft and then channelling its energies and resources behind the Lumia range of smartphones in 2011. The move although prudent at the time has produced mixed results globally as the Microsoft Windows Mobile platform still trails Google’s Android and Apple’s iOS powered smartphones significantly.

Microsoft’s purchase of Nokia is being viewed as an attempt to keep up with its industry rivals such as Google which purchased Motorola last year. Seamless software integration amplified by a wide variety of apps on a robust hardware mainframe is critical for any company’s success in this sector. The acquisition would provide Microsoft the opportunity to singularly manufacture, manage and control an independent product range; thereby, furthering the aforementioned agenda in an increasingly competitive environment.

At the other end of the spectrum, the sale of its mobile handset division will offer Nokia the chance to focus its attention on its network systems division where its primary competitors include the rapidly emerging Chinese company in Huawei and the increasingly sluggish Swedish giant in Ericsson. If Nokia can suitably leverage its advantage after buying out Siemens’ 50% stake in the successful Nokia Siemens Networks (NSN) joint venture, then it can undermine the strengthening market position of Huawei. A measure of NSN’s consistent performance since its inception in 2007 can be gauged by the fact that it made a profit of 8 million Euros during the second quarter of the current financial year while Nokia’s mobile handset business accrued losses worth 227 million Euros in the same period. From a purely financial point of view, given the fact that capital is scarce to begin with; offloading a loss making venture to protect the overall bottom line makes sense.

Nokia’s mobile division acquisition by Microsoft throws up myriad technological and leadership oriented implications. Many believe that Stephen Elop who will be absorbed by the Silicon Valley giant along with 4,500 odd Nokia employees; is being groomed to succeed Microsoft’s current CEO, Steve Ballmer. Having worked extensively first at Microsoft and then in a major leadership role at Nokia, Elop could play a pivotal role in the strategic alignment of both companies down the line. Integrating Nokia into its organisational framework whilst restructuring the company will prove to be an immediate challenge.

It may have been on the cards, but the alacrity with which Microsoft has wrapped up the deal has taken many by surprise. For Nokia, the fall from grace has been quite spectacular. From being the leading mobile handset manufacturer for 14 years to drastically falling behind agile competitors to surrendering its Numero Uno global position to Samsung in 2012 and eventually tasting capitulation and selling out to its close ally in Microsoft. In an industry driven by constant innovation and hyper-competition, Nokia committed the cardinal sin of taking its dominant market position for granted instead of improving its value proposition to increasingly fickle target consumer segments. One false step can snowball into a series of costly blunders which can make recovery next to impossible. Whether Microsoft benefits from Nokia’s acquisition remains to be seen. However, what can be said with certitude is that the global smartphone war has just gotten that much hotter.


By Shanthi Sara Cheriyan:

Over the past two weeks, India has been witnessing a major downfall of Indian rupee against the US dollar. Oil and petrol prices have been rising, food inflation continues to rise. But this is not something that happened in a fortnight. What are the reasons that resulted in the fall of rupee? Why didn’t the government and the economists foresee this sudden depreciation in the rupee value? Why are the government and the RBI not able to bring about the efficient measures to tackle the downfall? All these have been lingering in the common man’s mind for quite some time now, but unfortunately, our Prime Minister and Finance Minister have failed to give satisfying answers that can reassure the people that being patient would actually better the situation.


Much of the weakening of rupee is attributed to the negativity in the market. The various steps taken by the government and RBI to promote development,  increasing the FDI limits and purchasing governments bonds seem to have little or no effect on the market confidence. Foreign investors seem reluctant to invest in India due to its well known red-tape delays and corruption. Add to that the declining growth rate for past couple of years and the increase in imports, it is a surprise that many people are shocked at the inevitable decline of rupee.

India’s fiscal deficit has been lingering around 5% of GDP for quite some time. And it doesn’t look like it will come down anytime soon. A major chunk of government’s income goes towards subsidies. India subsidizes diesel, LPG, fertilizers for farmers and essential food grains through the PDS. But with the corrupt systems in place, a lot of these subsidies don’t reach the intended recipients. Furthermore, the new Food Security bill is sure to increase the subsidy bill a lot more. Meanwhile, it is calculated that less than 3% of Indian citizens pay tax, something which should be the major income source for the government.

India imports a lot of essential and non-essential goods like petroleum products, jewelry, chemicals, vehicles and machinery. Recently, the imports have increased tremendously, especially in petroleum and gold, while the exports seem to grow at a slower rate. This has adversely affected the current account deficit and has resulted in a vicious cycle wherein imports affect the value of rupee adversely which in turn increases the import bill. Government has tried short term solutions by increasing the duty on gold imports, letting oil companies buy dollar directly from RBI, but they should be looking towards long term stable reduction of CAD. This can be achieved to a great extent by focusing on improving the exports. The government should focus on better trade agreements and creation of trade routes with other nations.

The current level of Indian Rupee at 67-68 to a dollar is said to be below its equilibrium value and that rupee is undervalued. That can be partly attributed to the extra demand for dollar as month approaches its end and oil companies settle their bills. With general elections due early next year, the uncertainty over next government also affects the market.

So, what can the government and RBI do to definitively put a hold to this rupee decline and bring back the growth? Well, I am no more a financial expert than you are. But let’s just hope those in power, including the newly appointed RBI Governor, Raghuram Rajan, who is widely respected in the financial field, find ways to tackle this issue and help raise India back to a blooming economy. Else, I fear, we will forever remain a developing nation.

Delhi Taj Mahal

By Sango Bidani:

The hospitality sector in India has come to play a big part in the economy with a huge chunk of our revenue coming from this particular sector, and then it has been flourishing quite handsomely. However, there is a belief that while it is true that it is a highly profitable sector, there are some serious areas of concern which need to be addressed in the times to come so that the sector can continue to flourish. Through my article, I would like to do a strength, weakness and opportunities analysis of the hospitality sector to give a clearer picture. Also, I would look at how sometimes the customers get it totally wrong and behave unreasonably, and that the customer is not always right.

Delhi Taj Mahal

One of the main reasons why the Indian hospitality sector continues to flourish is because of the cheap prices of everything within the same, be it medical tourism, hotels, restaurants or the cost of travel as compared to other countries in the world. The biggest gain has gone to the medical tourism industry which has been growing at an astonishing pace, with every other day or at least once a month, a news report being published as to how Indian doctors have been able to treat a patient who had been given no hope by their foreign counterparts. The other big plus point of the hospitality sector is the fact that there is so much architectural variety and so much heritage in the country that people from other countries of the world flock to India. We have heard so many Hollywood actresses saying that they love India and its monuments and the way they look after the visitors, and that their favourite place to stay is the Taj Mahal. I think the other reason why the hospitality sector is flourishing is because of the various hotel management courses that have been introduced. These courses have opened up newer avenues for the youth of the country to get involved in and plus there is big money and perhaps most of all, job security. These courses have helped the students understand how they are supposed to interact with foreigners, trained them on how to be diplomatic when they get into trouble among other things.

However, there are some serious flaws in the way the hospitality sector is progressing. One of them is that in a bid to expand at a rapid pace, especially hotels, the infrastructure has become poor and the foresight required in deciding where hotels need to emerge has gone. As a result, for example in Mayur Vihar Phase 1 Extension, at least three hotels (Fraser Suites, Hilton and The Double Tree) have been opened which have remained unoccupied ever since their construction was finished. The hotels were apparently built for the purposes of the Commonwealth Games in Delhi but throughout the period, not a single person occupied them. The problem is with the location of the hotels, as in an area which is flourishing with housing societies, nobody wants to go to a hotel. They might as well take a room in a Society if they are planning to stay for a longer period of time or they can go to and stay at a sports Club, where you have decent accommodation at a reasonable price. So, in the bid to expand the popularity of these hotel companies, what they are losing out is on pragmatism and foresight. The second problem that the hospitality sector needs to address is poor quality service across many state run hotels and restaurants. Either there is lack of basic hygiene in some restaurants or the quality of service provided by some is really poor, where you are made to wait for quite a long time, and when you do get the food and you point out some anomaly, they become rude.

Coming to incidents where the customers have got it wrong, the Lemp Brewery case in Gurgaon seems to be a good case in point. However, one needs to be cautious in fully exonerating the Lemp Brewery management. The whole problem was with regard to the quality of service provided, which from the point of view of the visitors was not at all up to the mark and on the other hand you have the bad behaviour of the management. Now, on the face of it, you could argue that the visitors had every right in being annoyed at the service provided, but then somewhere I believe they were a bit too impatient and also indecent in their expectations. If the cook is unwell, you have to accept that some of the dishes on the menu that you wished to be served with, will not be served to you. You cannot get mad at the management for a thing like that. Having said this, it is also true that the management also behaved in an irresponsible way, by not being humble enough in accepting their mistake and then to get the police involved in it and try and extract outrageous money was also not fair.

If the Indian Hospitality Sector has to continue to flourish and be the fastest growing sector of the economy, it needs to improve on its service providing, has to develop a much stronger infrastructure base and most importantly, learn to be humble when it has committed a mistake. The other thing that the sector needs to improve on is its ability to keep a tab on problems in the way it is functioning at the present moment and trying to foresee problems that might arise in the future.

Photo Credit: © Jorge Royan


By Amit Ranjan:

The only time, when Indian Rupee goes up these days, is during the toss. A cruel joke which has turned true and the entire economy has gone for a toss. Rupee’s new found love for newton’s laws of gravitation has led to its free fall. It is sliding incessantly and has touched all time low of 59.98 for a dollar. Economists primarily blame it to our lust for yellow metal.


We Indians were perhaps the first to find this metal, and ever-since have preserved and cherished it as our status symbol. Whether it be marriage or birth or anniversary; gold ornaments are numero uno in our check list. When Vijay Mallya turned 57, he donated 3 kg gold to Tirupati. Just this Friday, a New Delhi-based professional donated a garland, containing 51 gold coins of Mughal-era worth Rs. 16.28 lakh, to Saibaba temple at Shirdi. We have a singer, whose gold ornaments might weigh more than the gold stocked in a bank’s locker. Our obsession with gold dates back to centuries ago, when we built an entire temple out of gold. Shrines and idols made of gold find elite place in our mythology.

‘It’s my money and I can buy whatever I want to, be it yellow metal or green, why do you care?‘ Sure, it’s your money, but your obsession with gold is instrumental in pulling our country down. While our consumption of gold is swelling year after year, our indigenous reserves for the same is negligible. So we have to import gold to meet our demand. Gold and silver imports rose nearly 90 per cent to $8.4 billion in May. Cumulatively, in April-May the import of precious metals stood at $15.88 billion. As a result, our gross imports overshadow our exports. We need not be an economist to understand that if a farmer consumes more than what he produces, he will run in debt. The same is true for Indian Economy. This is termed as Current Account Deficit (CAD), which is the difference between the outflow and inflow of foreign currency. CAD is estimated to be around 5 per cent of the GDP in 2012-13 fiscal.

To view this current downfall of Indian currency as a tragic aberration is to forget the grim history of Indian Economy. This problem is not new. Our failure to address this problem has led to this virtual collapse. Our Finance Minister says “I would once again appeal to everyone, please resist the temptation to buy gold… If I have one wish which the people of India can fulfill, it’s – don’t buy gold.

It’s good to know that he has finally identified the problem, but his helplessness and inaction won’t cut much ice. He in particular and governments in general have either failed or have never tried to know the root cause. The appreciation in gold is much more than interests provided by various saving schemes or dividend paid by mutual funds. Hence, purchasing gold is still a lucrative investment. The biggest problem with gold is that it is a ‘dead‘ capital. Gold ornaments kept in lockers are the potential investments which are never made. Adding insult to injury, many gold loan schemes have made it easier for people to get liquid money in lieu of gold. I would expect Finance Minister of my country to share greater responsibility for this economic catastrophe and take remedial actions so as to incentivise investment and saving schemes.

‘Indian economy is sinking, rupee is sliding. But I don’t give a damn.’ Exactly. Why should you care, unless it affects you? It will not affect you unless you are a student, a daily commuter, an office goer, a retail consumer, a bulk supplier,a vegetarian or a non-vegetarian. In short, as long as you live, you care. It affects us all in one way or the other. These are following flip sides of sliding rupee.

1)Education: If you are planning to go abroad for your studies, you might as well re-think, because foreign education will be costlier with strengthening dollar. While you earn in rupee or the education loan that you take is in rupee, your institute would charge you in dollars. Hence be prepared to spend more. Similarly cost of living would also go up.

2)Petrol prices: We extensively depend on imports to meet our requirement for petroleum products. This means that government pays for petrol and diesel in dollars. With dollar getting stronger everyday, we will have to pay more. Hence, petrol will soon be costlier. Every mode of transportation depends on petrol or diesel; hence daily commuter may have to shell out more.

3)Inflation: With transportation cost up, net cost of all consumer products would soar high. Hence consumers will have to spend more for every product and service.

4)Imports: This one is a no-brainer. As we pay our import bills in foreign currency, imported goods like luxury cars or healthcare equipment would cost more. Also, importers would face a stiff decline in their profit margin.

5)Exports: By the same logic, as our export bills are paid in dollars, we would earn more. Exporters are already making fortunes and would continue to do so in short run. But in long run, as every exporter has to import raw material, inflated cost would nullify the increased profit margin. Indigenous products like handicrafts will enjoy super-normal profit for a long term.

6)Investments: Investors would find it profitable to invest in European markets. As a result foreign funds sold shares worth Rs 5,029.80 crore during this week. This implies that foreign investors have withdrawn money from Indian market. Hence acute shortage of capital in Indian economy is inevitable. Sensex dropped for a third week in a row, losing 404 points to end at 18,774.24 on Friday.

But our FM is still hopeful, he believes that money withdrawn has to be invested somewhere and he is optimistic that it would be reinvested in Indian Market, only if he knew that investors won’t wait for rupee to get taller and stronger (boost is what it needs :P)

7)IT Industry: IT industry would make merry, as it mostly deals with clients offshore. IT and consultancy firms would thrive on our misery. Do you still wonder how Infosys affords pay hike when it was running into losses off-late.

So, sliding Rupee affects us all. While we should expect strong fiscal and monetary measures from the government and regulatory authorities, we should contribute our bit to resolve this crisis. We should prefer indigenous products over imported ones. We can’t afford to buy exported goods just to add to our status symbol. If you want a SUV(say), prefer TATA Aria over Volkswagen Tiguan, or go for TATA tea or TATA salt over their foreign counterparts(trust me, TATA has not given me a penny for this endorsement). As far as our obsession with gold is concerned, we need to explore other fruitful alternative investment options, so that we can fill in the void created by withdrawal of foreign funds.

business incubators

By Sagar Vishnoi:

What are you planning to do after your graduation degree? MCA, Civil Services or MBA? Well, if MBA is your choice, the whole panoramic view of an MBA college is a vague idea. I have a simple question, what value are MBA colleges adding up in nation building? How many entrepreneurs have they manufactured (leaving the IIMs)?

business incubators

Their sole purpose of providing employment looks almost useless with the absence of employment and enterprise factor. If we look at the statistics, India has only 7% people who have received vocational training against the 96% in South Korea, 97% in Japan according to the NKC (National Knowledge Commission) Government of India. This has widened the gap between the industrial demand of skilful employees and the supply of employable trainees. If you ask any first age entrepreneur, Porter and Maslow models don’t seem worth administering and scaling. Let’s keep it straight, only for people who don’t want the corporate ladder of Deloitte, PWC or Crisil, it’s better to spend 5-20 lakh by starting up your own company and get the best lectures from the professor called ‘Market’, which says-“one can learn more by running his own company, than by talking to people who are running their own”.

While working under an incubator you get accustomed to various skills, legalities and consultants. Incubators have a lesser time span of 3-6 months unlike B-schools, are cost effective by saving the opportunity costs of 15-18 months and provide better networking of course. Meeting and listening to stories of people from incubators of GIAN (Gujarat), IIT-D, SINE, YUVA (Delhi University), makes things clearer. The best case study is your business in those two years. What do you think would be cooler; spending 7 lakhs for getting into the rat-race for a job, or earning 2 lakhs with more Market Gyaan in two years?

Having only 2000 patents coming out of the country against 20,000 from USA (according to the NKC), our so called indovation (jugaad) has much to do in the field of research. But the suffering for people in incubators is living on peanuts and bananas when their mates are busy throwing parties and catching flights after their final placements.

Well, India hasn’t achieved much because no industrial revolution occurred after independence but yes, the times are not too far when we’ll have our own silicon valley providing employment to lakhs making ‘The Great Indian Dream‘ comes true.

The post can also be found on the author’s blog


By Ashutosh Singh:

When TOI came up with it’s augmented reality app “Alive”, built in partnership with AdStuck, it created a lot of noise among media and technology circles. Everyone thought it was going to change the print industry like never before. One of TOI’s competitors even took a frantic call and came up with it’s own AR app (Hindustan Times’s H), only to subside later. Sandesh, a regional newspaper published from Ahmadabad, joined the bandwagon by coming up with their AR app called Sandesh Smart, built in partnership with Telibrahma. But by and large, things remained calm. Media experts didn’t see much value in the technology and considered it another bubble which was to bust sooner than later.


Six months later, things have gone quite contrary to what experts had thought and AR market seems to have come out of it’s shell and is all set to fly. Or, at least that’s what the players say. Ashutosh Singh, Business Head, AdStuck, the company behind “Alive” seems bullish on Indian AR market. “Our business has grown some 25-30 times over the last few months.And this is just beginning” he says with a grin on his face. Numbers seem to suggest the same. Last week ,”The Sunday Guardian” did a story suggesting the same.

What exactly is augmented reality and what how much truth is there in it’s India story?

Augmented reality is changing the way we view the world by effectively blurring the line between reality and computer-generated graphics. It enhances what we see, hear, feel and smell and our perception of outside world. From being a scientists’ or researchers’ pet topic, it is fast becoming a subject in boardrooms of marketing departments. With applications ranging from healthcare to aviation to education to construction, there is no question of AR’s place in marketing over the near future.

The future of Augmented Reality is in the mobile space, because that’s where it will be most useful in helping deliver relevant content. But what does it hold for an Indian marketer? Time and again, the Indian consumer has proved a tough nut to crack for the marketer. Will this be any different? Let’s find out with a SWOT analysis on Augmented Reality marketing in India. Though the concept of AR marketing may be more than a decade old, it is still taking baby steps in India. Brands like Hippo and Shoppers Stop have been the pioneers in India in trying out AR marketing.

Some of the strengths we could find are that 97% of urban India owns a mobile, and 23% of them are smartphones. That is a huge number, and it’s growing. Even with the GDP growth touching the lower end of 6%, the long term interest on India as a potential investment destination has never been so high. And, with the policy paralysis getting out of the way with a flurry of reforms, it is only a matter of time before global firms engage directly with the Indian consumer and AR comes to the fore; primarily mainly because AR is a non-traditional marketing channel and helps in generating favourable word of mouth. It is important in this context that word of mouth is generally the best way to reach the Indian consumer who is wary of advertising.

The strength is the story of urban India. Unfortunately, the overall numbers are not so flattering. 65-70 per cent of Indians use feature phones, not smartphones. In that sense, AR may be considered as a self-restricting technology in that it demands smartphones for it to work. Moreover, users require GPRS and 3G in case of videos. Research shows less than 5% of phones in India have both. Again, most recent AR applications require GPS and digital compass and not many phones are built with GPS and digital compass. Lastly, India still has a lot of catching up to do as far as technology innovation is concerned — especially in the advertising and marketing space.

But opportunities do beckon. After all, according to reports, AR is taking off at a much better rate here than in other parts of the world. It is estimated it already has 5 per cent of the traditional media market place. With over 771 million users, mobile phones have formed a great and popular alternative to conventional modes of marketing. In a field like marketing which is looking out for innovation in every possible corner, AR will be an important component of the marketing campaigns of brands that are looking to be pioneers in the digital media space and break the clutter in traditional media. It is an additional benefit that it is cheaper than traditional media. Simply put, it is a cheap cluster buster.

Possible threats are that while Indian AR still is in its nascent stage, there is always a fear of overkill. Current AR marketing requires installation of a special app in a smart phone for every campaign and may not find fans every time whereas the required add-ons are automatically installed in a web browser. The same app may not work on all platforms (iOS, Android, Symbian) uniformly and put off many users.

While at a first look, it may be cheaper than traditional media, the real cost would depend on the features installed and it may well cross offline marketing budgets for a feature heavy application. Successful AR marketing is possible in India only when both hardware and software are seamlessly customized to suit Indian consumers’ tastes and usage patterns. As the Kolaveri phenomenon proved, the ingredients required for a product to go viral in anybody’s guess.


By Vikas Nath:

In mid-April 2013, over a thousand participants from India and abroad gathered in Mumbai. The venue was the high-energy Sankalp Forum organised by Intellecap – a pioneer in providing business solutions to help profitable social enterprises scale up, in partnership with Villgro. The Sankalp Forum is an annual affair which attracts social entrepreneurs, investors, mentors, leaders, youths and wannabe entrepreneurs.


It brings together people who are not found to be working in average day jobs. Most would not want to work in one. They belong to the perpetually unsatisfied class of people, and they are looking for problems, but with a difference. They have come up with some smart ideas to solve these problems be it in the area of health, education, environment or energy, and are trying to puts those ideas to practice. A few have succeeded, others are working their way through, and many have failed but are starting again with renewed enthusiasm. There cannot be a more unconventional set of people and we need more of them to bring newer imagination, resources and approaches to solve the development challenges facing the global South.

It comes as no surprise that the Forum this year was branded as the Sankalp Unconvention Summit, and the theme was “Looking beyond Impact: Seeking transformational change”. Several panel discussions and parallel forums were organised which focused on where social entrepreneurship and impact investing is headed, and what difference it is making in the lives of people. Given that social enterprise sector in India took off less than ten years ago this openness to reflect and rethink strategies is refreshing. Several points emerged, including the need for different actors (entrepreneurs, investors and governments) to come together and create an ecosystem which incubates innovative ideas, builds capacities, and funds risks. This calls for new and innovative financing mechanisms to fund the high-risk social enterprises, and do so at a large scale. The approach to investing has to shift to impact investing, namely investing in a portfolio of companies, organisations and funds, which generate measurable social and environmental impacts alongside a financial return.

Social enterprises need capital right from seeding to scaling up. As was expected, some of the most energetic discussions were on how to mobilise capital for impact investing and the ability of social enterprises to come up with solutions which serve the needs of poor people as well as generate returns for investors. While a high proportion of capital is raised through foreign investment funds and grants, the share of domestic capital is gradually increasing but more needs to be done to unlock the capital available locally and make it available to local social enterprises.

Amidst all the discussions, a single word which was absent was “free”. None of the entrepreneurs talked about providing their products and services for free, and for the right reasons. They wanted to engage with the unreached and the poor in a relationship which is equal and business-like instead of a donor and recipient one where services are generally provided free. This new generation of entrepreneurs represented at the Forum did not find it incongruous to talk about creating business solutions which work for the poor and generating profits in the same sentence. They are focused as much on creating income inflows from year one of their enterprises as they are on wanting their enterprises to reach the unreached and benefit people with low incomes.

This new mindset of social entrepreneurs is changing the long established terminologies and approaches associated with development. Words such as aid, subsidies, donors and recipients, free are “out” and investment, solutions, customers, terms of services and pricing are “in”. And this change will benefit everyone.

When a user pays for a service, he or she can negotiate the price and terms of service and can hold the seller accountable if the service is sub-par. A donor-recipient relationship is an asymmetric one. It does not allow recipients to negotiate and strips the ability of recipients to raise questions on the effectiveness of free services. By setting an affordable price, social entrepreneurs are bringing dignity to poor people – treating them as customers instead of profiting from merchandising their sufferings. Social entrepreneurs have to work hard to gain trust of users and be accountable to them, as without it, they will not be able to mainstream their solutions.

This is all the more remarkable when we consider that these entrepreneurs are trying to create profitable enterprises in sectors where most of the services are often provided free or heavily subsidised by governments and non-government organisations alike. Conventional wisdom goes against asking for payments in a sector dominated by free services. This being the Unconvention, it was represented by entrepreneurs who are daring to think and act differently. The failure of governments in reaching all places and providing quality services to the poor means that these entrepreneurs perceived vast opportunities and set up successful and profitable enterprises. And many of them saw aid and grants as perverse subsidies which distort the commercial model and do not provide a level playing field to other enterprises.

One such entrepreneur was Dr. Ashwin Naik who co-founded the Vaatsalya chain of hospitals. While more than 70% of the Indian population lives in villages and small towns, 80% of the hospitals are located in metros and large towns. This leaves a huge unmet demand for primary and secondary health care services in semi-urban and rural India and this forms the client base of Vaatsalya. Vaatsalya offers low-cost specialised services in the area of gynaecology, paediatrics, general surgery and general medicine, and allows them to fulfill about 70% of the needs of the local community and stay profitable while doing so. On an average, Vaatsalya earns about 15% to 18% in earnings before tax. One of the early impact investors for Vaatsalya was Aavishkaar India, whose chief executive officer (CEO) Mr. Vineet Rai is also the co-founder of the Sankalp Forum. This shows how daring entrepreneurs and visionary investors within a country can come together and create social enterprises which provide quality health care services for its citizens at a lower cost.

And the process has only begun. The Sankalp Emerging Businesses Awards brought together 21 finalists. They pitched before the audience to get support for their social enterprises in the area of agriculture, technology, education, health and technology. Many of these enterprises with proper mentorship and investments have the potential to become Vaatsalyas of tomorrow or go beyond national boundaries and set up operations in other countries.

India is emerging as the cradle of home-grown social entrepreneurship. A large number of youths in India are attracted to it and investment and support by government and domestic angel investors are going up. The social enterprises which are emerging are innovative, low-cost and aimed at needs and challenges facing India. A more conducive ecosystem which fosters entrepreneurship is also emerging which explains the dramatic take off of this sector. India is now in a position where it can share some of its indigenous experiences and experimentations on social enterprises with other countries in the global South.

As if on a cue, there was a panel in the Forum on South-South collaboration on impact investing and how other countries could learn from India’s experience. The panel shared interesting examples of how India, in spite of its enormous development challenges, all of which are competing for capital but is able to encourage and expand social entrepreneurship. Many of the home-grown enterprises have made a big impact globally in the area of health and technology.

To sum up, Sankalp Forum is emerging as the locus of new ideas and discourses, and a crossing point for people who are shaping and driving the social enterprises sector, not just in India but globally. The contribution of the Forum in mainstreaming the growth of the social enterprise sector is an important one but what is even more significant is that it dares to ask, are we making a difference.

Vikas Nath is an international development expert and an entrepreneur:
He can be contacted at [email protected] or

sahara q shop

By Vaishali Jain:

Fancy gulping down a glass of pure white milk or munching on some chopped salad of fresh, ripe fruits on a Saturday evening? I do. But it seems like a walk down the memory lane. I am yet to find a person who can vouch for the purity of the food he consumes. There is always the uncanny word ‘might’ sprouting up. My aunt brought a huge basket of big, red Kashmiri apples with a smug grin on her face. Her answer to the possibility of adulteration was, “It’s not a kirana shop. Big brands don’t indulge in such follies. Look at the size of these apples.
“Yeah, but can you give a word for them being 100% pure?”
“Of course not. There is always a possibility, you never know. But, nevertheless, they look so good.”

sahara q shop

Mostly all food-items, today, come to us adulterated in various forms. You can line up fruits to vegetables to cereals to spices to dairy products that have adulterants mixed in shocking proportions. It’s common to come across dirt, pebbles and sand in the raw items purchased, as they are visible to the naked eye. But the story, as we all know, does not end there. Sadly, there are adulterants that are deliberately blended with the consumable products resulting in nothing but loss of health of the consumer and a profit for the adulterer. A profit. But at what cost?

The adulterers not only play with the color or texture of the products but with the life of those who consume them. These substances are harmful, they are undetectable by a common man and they are getting mixed in our diets in large quantities. News channels cover the facts of the chemicals that are a part of our daily lives. Dangerous chemicals, that is. You cannot rely on the festival sweets you lovingly offer the little kids at home because the milk has been diluted. You cannot be sure of the ghee on your chapatti because it must be a doctored version of a vanaspati. You cannot utter out “Oh, divinity” after devouring a large piece of mango because it most probably is injected.

Where does this take us? Should we really consider a life on Mars? Or is there a way we could get back the trust and health we’ve lost? Now I really didn’t have an answer to these till I came across the tagline of an advertisement saying, “Milaawat ke Khilaaf Jung”. The advertisement was no less interesting. One just had to dig into the matter — to know about what Subrata Roy led Sahara group had forayed into. It’s called Sahara Q-Shop.

Launched on Independence Day last year, this venture had caught many an eye and rose many an eyebrow, too. Who wouldn’t wonder if out of nowhere a big name like Sahara comes and promises to fight adulteration? Who wouldn’t be shocked to see the big guns, the star Indian cricketers, in an ad that shows them preparing for the next person’s funeral. That next person could be you, me or our beloveds. How endearing would it be to get our funeral rites from the likes of Sachin Tendulkar, Virat Kohli and MS Dhoni?! A funeral much ahead of when it should’ve been. A funeral because there were toxic adulterants in the food on your table.

The message of the advertisement strikes hard because it’s true. But it’s in a negative light, cynical almost, plus the effect it might have on the mentality of the people could not be underestimated. Perhaps the reason why BCCI asked it to be banned. But, by the end of the same advertisement, Sahara Q-Shop comes with a promise that cannot be ignored. A simple look at their website would tell us of the achievable targets they talk about. Achievable AND effective.

Some of its advantages, as mentioned on the site, are:
● 100% commitment to quality
● Right weight/quantity
● 100% disclosure policy across all products
● Convenience of phone shopping
● 305 warehouses in 285 cities

With the availability of the Q-Shops in various localities and their public claim of reasonable prices with best quality, this venture is here to stay. It will get its customers sooner than later. And who knows if it might just change the whole retail picture. The positives it provides are most welcome in a time of deflating trust and inflating prices.

If Sahara can make its mark this time, it will have won a huge battle — not only for the society in general but for its own staggering reputation. This venture is a drowning man’s straw, in more ways than one. It’s a real challenge in a real world and no one is going to cut them some slack. One can only hope it works out the way it was intended to. Or else, there is always Mars to look forward to.


By Akshay Rajagopal:

The recent decision by the government to raise the diesel prices every month by 45 paise did not come without widespread condemnation from people around the country. The decision comes at a time when the common man is still struggling to digest the increased petrol prices, inflation in daily needs and consumable commodities, the dreaded price hike and cap on LPG supply. With opposition bashing the government and questioning their motive of helping the economy, many parties have taken a strong antagonistic stand. The production and manufacturing industries are also hostile to this call and the decision might see the railways and other government transport systems bear the brunt. Bank of America- Merrill Lynch claims the partial diesel price hike will inflict a 1.20 per cent burden on the already sticky inflation  that might remain high till the next fiscal year. While all this is giving the government nightmares, the Oil Minister M Veerappa Moily conveyed the government’s stand on going ahead with the “controlled” price hike.
However, there is a section that thinks the hike in diesel prices could not have come at a better time and is a step forward in strengthening the economy. Diesel prices have remained unchanged for the most part in India making it cheaper than in China and even Pakistan. It is important to mention here that in the past 10 years, where the fuel price has doubled in the country the cost of crude oil has grown four folds. The government has tried to keep the prices intact for so long that it has resulted in a shocking Rs 400,000 crore of oil subsidy in the past five years. The real shocker is that the government is staring at a bill of 800,000 crore if the oil prices keep rising at current rate. The economic imbalance, fall of the rupee and widening fiscal gap has only added to the woes. The small hike in price will reportedly not help in bridging the gap between the local and international oil prices but will provide the government with some breathing space and the RBI some legroom in formulating their policies for the next fiscal year. The RBI has long called the government to reduce its fiscal deficit which was putting pressure on the interest rate and locking liquidity. If FICCI is to be believed, the governments decision to deregulate the diesel price will have a marginal effect in increasing the inflation for the next few months but is being justified by the reduction in fiscal deficit that the government is trying to find a solution for. “The spike in inflation (by 6-7 basis points), which is most likely to be observed, would be a short-run phenomenon that would eventually translate into lower fiscal deficit (achieving a target of 5.3 per cent of GDP), thus, opening up the option of reduction in subsidy on LPG and kerosene,” FICCI President Naina Lal Kidwai said. Rating agency Moody’s has also stated the decision to be a welcome relief for the economy and is a step forward in the right direction. While the increase in FDI is seen as a boon for the struggling economy the price hike was an interim relief to the economy and the policy makers as it reduces subsidy of 15,000 crore a year.

Selling shares of state owned companies is the central plank of the policies being constructed to bring the deficit down to a healthy 5.3% of GDP for the financial year end and avoid any credit downgrade from the rating agencies. The news of diesel hike has already started showing improvement in the stock market with shares of oil firms going up by 20 per cent adding 1.1 billion to Oil Indias market value. The decision would help attract more foreign investment when the government decides to sell its shares. New Delhi plans to raise $5.5 billion in current fiscal year by selling its stake. This reduced gap in the fiscal deficit will allow the government in diverting its money in more important sectors like raising the LPG cylinder limit from 6 to 9 seen recently.

Apart from saving the fiscal deficit gap the price rise is also seen as  a savior for the car makers who have seen a drastic plunge in their petrol car sales. Manufacturers of diesel car makers have welcomed the move and state the hike will not have any adverse effect on the car sales. Pawan Goenka, president , Mahindra and Mahindra said the gap between diesel and petrol being narrowed is a positive call and will have no impact in the demand for utility and commercial vehicles.

All in all the decision to de-subsidise the diesel prices is seen as the government waking up from its slumber and finally calling the shots. Its being said the price hike will have a positive long term impact on the economy and will help the people. Although how helpful it is for the middle class and the poor, especially the farmers whose livelihood depends on them is yet to be seen.

mobile service

By Harshal Mantri:

The mobile service sector is a relatively new area and can explain how the informal market provides services to the customer at cheaper prices than formal markets. Many local repairing shops in each city repair mobiles at cheaper rates. The question remains “How do they learn this occupation?” Do they take a formal training or practice “Learning by doing”? In addition, when a new technology comes out in the market how do they update themselves?

mobile service

India has seen a significant boom in the number of mobile phone subscribers in the last decade alone. Various multinationals have targeted the 1.2 billion population of India as a very important market and adapted to suit it better. India has offered a large market for all categories of mobile phones right from basic low cost phones to high-end smart phones. With over 900 million mobile subscribers already and one of the lowest user charges rate (lower even than China), India has succeeded in increasing its mobile reach and offers a great opportunity for all aspects of our economy, governance and other fields. One of the important corollaries to this phenomenal growth is its contribution to the growth of an industry supporting the servicing and maintenance of the ever-growing number of handsets. Apart from the formal market of the handset-producing firms, another important contribution to this sector is through the informal market.

In spite of the wide range of diversity in formal market products that have already established their service providers, the consumer chooses the informal market for servicing of their mobile, which is a much cheaper option than the established formal service provider is. The reason for the low costs in servicing at a local store who works informally lies in the fact that they do not pass through the formal education or standardized learning of technical knowledge.

According to my preliminary study in this area, I have concluded that there are many institutes providing education related to these services. I have observed it on small scale and one can probe this even further. Many institutes in the city of Pune provide diploma certificate in mobile services and repair. The course structure is more practical than theoretical in nature. Few institutes do provide placement opportunities in formal sector and give training to run their own business. The education eligibility for this course is 10th or 12th pass according to the institute’s criteria. In Pune, about ten such mobile training institutes conduct around three to six month courses with valid certification at institute level. Students also get placement in the formal servicing sector such as Nokia, Samsung, etc. This informal market also gives rise to an external market that provides cheap products reducing the cost of servicing. The manufacturer either purchases it from China or produces it at cheaper cost in the domestic market.

This training also allows them to start their own business, the presence of the informal market affects the formal market as they are cheaper service providers and customers tend to prefer this market. Also, customers with low end mobile phones are larger in number than those with high end phones, formal service providers are only available for the big companies such as Nokia, Samsung, Sony Ericsson, Spice, Blackberry, LG, Spice, Videocon and Motorola. But companies such as Maxx mobiles, Fly mobiles, Karbonn Mobiles, Micromax, Onida, G’Five, Red, HTC, Airphone, Maxphone and Philips which are launching new mobile phones every day, do not have their formal service provider in India. Thus, they have no other option than to go the route of Informal service providers. Informal market not only provide cheaper services to low end mobiles as well as high end mobiles but also play a vital role in providing services to such segment which do not have their own formal service centre.


By Pradyut Hande:

The global Smartphone market has gone from strength to strength in the last few years alone. Fuelled by rising demand, increased affordability and accessibility, enhanced network capabilities and manufacturing prescience; the Smartphone segment continues to register healthy rates of growth, year on year. With a predicted annual growth rate of 20-22% in the next couple of years, the Smartphone segment that presently accounts for 15% of the entire mobile phone market is touted to be worth USD 150 billion by 2014.


Set in this backdrop of hyper competition and cut throat margins, Smartphone manufacturers are pulling out all the stops to offer their consumers quality products whilst enhancing their market shares. The last few years has witnessed the astounding ascendancy of the Google developed Android and the Apple iOS platforms that have ushered a veritable revolution in the industry. With traditional powerhouses in Nokia and BlackBerry struggling to keep up with the “cooler kids on the block“, the once fractured market is pulling away on the back of ever improving hardware and software capabilities at the altar of cutting edge technology.

Canada based Research in Motion (RIM), the makers of BlackBerry, has gradually witnessed the erosion of its market share since the arrival of Android and the Apple iPhone. According to Gartner, BlackBerry’s global market share has fallen from 11% to just over 5%, whilst Android has further consolidated its market leader position by enhancing its share from 52% to 72% in 2012 alone. Uninspiring designs, sluggish systems, rigid interfaces and limited apps in comparison to its rivals; have collectively contributed towards ensuring BlackBerry’s poor performance. RIM’s stock prices have fallen by as much as 72% in the last two years alone, indicative of dwindling consumer confidence in its products. The appointment of Thorsten Heins as CEO in 2012 was deemed as a necessity as the company looked to shed its lackadaisical garb of indecisiveness and breathe new leadership and vision in an endeavour to tackle the ceaseless competition and drum up demand for its future range of products.

Consequently, RIM is all in readiness to launch its BlackBerry 10 Operating System and new handsets powered by the same. Given its current market position, RIM has bet big on the BlackBerry 10 and thus, can ill afford another debacle. With a host of new available features, sleeker designs and fluid user interfaces enabled through touch screen and keypad functionalities; RIM hopes to not just safeguard its present market share but also wrest some of it back from its more enterprising competitors. It has also revamped its Application Store, re-christening it the BlackBerry World (previously known as BlackBerry App World) and is in the process of expanding the same with many more apps, catering to an increasingly diverse consumer spectrum.

The situation demanded that RIM throw caution to the wind and embrace a more proactive approach by investing heavily in the development of an altogether new platform and that is precisely what it has done. It is undoubtedly a big gamble, but one that has to be taken in an unforgiving industry that doesn’t hand out plaudits for those who fail to finish at the top. The fact that RIM has always had a loyal segment of consumers in the Government and Corporate sectors ought to work in its favour. Its Smartphones have also won immense favour with younger users, what with the success of its multi-utility instant messaging service, BlackBerry Messenger (BBM). The challenge now for RIM is to suitably leverage its inherent strengths of network security, reliability and device durability to re-position itself as a Smartphone maker with a difference. It does possess the “brand appeal” that cuts across age, sex and occupation to a great extent. All it needs to do is drive greater “device appeal“, and that ought to happen with the launch of a product that truly intrigues its consumers. The initial response to the marketing initiatives for the BlackBerry 10 has been most positive. Whether RIM can translate that interest into product sales and enhanced revenues in the next few months remains to be seen.

Instead of punching above its weight and trying to run as fast as its other heavyweight industry opponents, RIM ought to rediscover and further consolidate its niche market positioning, foremost. Only then can it hope to challenge the likes of Android and the Apple iOS on a larger scale in the future. For now, its survival and success hinges on the BlackBerry 10.

About the author: The Writer is a Business student with a degree from NMIMS, Mumbai. He is presently working as a Senior Executive with a leading Public Relations firm in Mumbai. Through his writing; he attempts to address myriad issues of both domestic and global consequence, ranging from Business and Economics to Geopolitics…from Sports to Arts and Culture. He has over 200 publications to his credit in some of the leading national dailies and weekly magazines across the country. He is also a keen debater, munner, quizzer, painter and amateur freestyle rapper. His other interests include Sports, Music, Reading, Travelling and Social Entrepreneurship. For his latest postings, follow his blog . To read his other posts, click here.


By Shweta Madaan:

I know you cannot hear me but I hope it sounds somewhat like Homer Simpson: “Mmm….chocolate!” Chocolate is the masterpiece of sweet-makers which makes everyone go crazy and it dates back to the time of the Mayans. The Hershey Company was the first one to bring chocolate in solid forms. It is one of the few foods that people feel passionate about – a passion that goes beyond the love for the ‘sweetness’ of most candies or desserts. After-all, it is a feel-good food. It is a fact that chocolate contains more than 300 known chemicals, the combinations of which provide the ‘lift’ that is experienced by most of the chocolate eaters.


In India, the chocolate market is of Rs 2,000 crore and is growing continuously at a rate of 20%. It is not surprising that the global chocolate market has a turnover of about $83.2 billion; the variation is because of consumers’ consumption habits. Here, in India, the per capita consumption of chocolate is 300 grams when compared to 1.9 kilograms in developed markets such as the United Kingdom.

The Indian chocolate industry is dominated by two chocolate giants; Cadbury and Nestle, both multinationals. Cadbury dominates the market with a share of 70 percent whereas Nestle has around 25 per cent build up in the chocolate market in India.

According to an estimate, there are good signs for the Indian chocolate industry because sales have risen by 15% in 2007 to reach 36000 tons. Some emerging brands are ‘Sweet World’, ‘Candico’ and ‘Chocolatiers’ which are marking their presence in several malls. ASSOCHAM Secretary General DS Rawat said, “The consumption of chocolates is steadily increasing in urban and semi-urban areas, registering a compound annual growth rate of 25 per cent. It is expected to cross Rs 7,500 crore by 2015.” The key growth driver is the Indian tradition of gifting sweets, which is now shifting currently from mithais to chocolates because of rise in consumer income levels, prices suitable for everyone and attractive labeling and packaging. This is the reason for the sudden spurt in this industry. It may develop at a much larger scale by targeting its products towards the youth as they consume most of these products. The growth is not at much pace when compared to foreign brands. There is a Delhi-based brand called ‘Chocolatiers’ which started with a small shop in south Delhi’s Chittaranjan Park and is now venturing into malls and multiplexes in NCR, Mumbai and Bangalore and their focus is on designer chocolates. Another firm ‘Candico India’ is available at 400 locations across malls and multiplexes in the country; both of them not much known brands.

Let us look at British and Swiss giants such as Cadbury and Nestle. They are doing a very good business in India. Cadbury has the largest target segment which is focused on the youth. Some of its products are Five Star, Gems, Eclairs, Perk and Dairy Milk which are, without any doubt, the leaders in their segments. Although Cadbury is the market leader as it had 80% of the market in its hands till the 90s. It was after this that Nestle appeared on the scene and from then onward, there has been a tiff between the two for grabbing the No.1 position. Nestle introduced some international names like Kit Kat and Lions and is commanding a 15% share. The reasons behind the success of Cadbury are their maintenance and improvement in quality, meeting the specific needs of consumers, improving its taste and presenting new variants in the market. In India, Nestle trails Cadbury but some of its achievements are a better understanding of local cultures, traditions and needs besides providing best quality at a low cost; which is quite sufficient for grabbing a large market share.

Now, let us look at the Indian chocolate brand Amul. The Gujarat Co-operative Milk Marketing Federation Ltd. or Amul is getting ready to challenge Cadbury in the moulded chocolate market. Amul has been lying low for a while with its generic chocolate variants such as Fruit & Nut and Milk. Now, it is planning to segment its chocolates, so as to cater to different age-groups and categories that are likely to consume its brand. It is planning to cash on Cadbury’s damage control activities in its favour. It also has plans of segmenting the market with brands catering to the `impulse’ and `teen’ segments, as well as having brands catering to different occasions. Its impulse segment can taste success instantly because the range and variety of chocolates available in malls seems to be growing day by day, which leads to lot of impulse sales for chocolate companies. With ITC and Parle getting more active in this segment, Amul officials feel it already has its cold chain and distribution network in place to get more products to ride this chain. Presently, is has 5 lakh retail outlets and has 2,600 distributors under its fold.

In India, the per-capita consumption of chocolates has increased from 40gm in 2005 to 110-120 gm. There is a lot of scope for it to grow even further as Indians are developing a palate for dark chocolates as well. But the key challenges that the chocolate market is facing in India are inflationary pressures on raw material prices, lack of government initiatives, high entry barriers due to duopolistic market and price-sensitive consumers. So, for changing the game, the Indian chocolate industry needs to gear itself up for satisfying the consumers’ needs; it has to build its brand like those of international brands and then only can it lead this market. The government must liberalize some of its policies and start taking the initiative so that everyone can taste this wonderful commodity.

Photo Credit: cacaobug via Compfight cc


By Akhil Kumar:

2012 was a year of global economic disasters with economic giants like the European Union and the USA struggling to balance the boat; it had adverse effects on the Indian economy too. The side effects of the Eurozone crisis will hinder a full economic recovery. After the numerous crises, scams and hounding inflation left the national economy in turmoil; it seems like the worst is over for now.


Though a lot will depend on the 2013-2014 budget and the degree of government’s desperation to announce populist steps in light of the upcoming elections, we can comfortably say that it will be a more or less balanced year as far as the economy is concerned. With the inflation finally stabilizing, tax reforms and interest rate cuts planned; the various industrial, automotive and real estate sectors are expected to give a much needed push to the economy through larger investments.

It was a turbulent year for Indian aviation as Kingfisher and Air India went through a lot of trouble and hence the government introduced FDI in the sector as a rescue, all eyes would be on this sector along with Cyrus Mistry as he replaces Ratan Tata in the $100 billion-plus house of Tata. With subsidy rollback and pre budget reform measures, the government is all geared up to accelerate growth and rejuvenate the economy. A major concern would be cuts in social sector spending as the administration seems to focus on rapid instead of sustainable and inclusive growth.

The manufacturing sector is also set to receive a boost as the government plans to increase manufacturing’s share in the GDP from the steady 15 percent. This move can help in creating new jobs and sustain growth only if implemented properly unlike past records. As a recent Planning Commission paper made it clear that it was time for serious policy initiatives for India to become a better place to set up new ventures, and create a strong and vibrant ecosystem for entrepreneurship; there is hope that the government would encourage startups and new initiatives to lure more investment. India Inc. would also be instrumental in economic changes as it further concentrates on mergers and acquisitions learning from the mistakes of the year gone by.

All the other things revolve around the budget that is to be announced in February by the Finance Minister, let us just hope Chidambaram does better than the last budget that had the government sweating it out to undo the damage done by it initially. The focus should be sustainable and inclusive growth, not populist or politically motivated steps that further hamper our economic growth in the long run.

Photo Credit: Saad.Akhtar via Compfight cc

Cyrus Mistry

By Nidhi Sinha:

Legendary entrepreneur Ratan Tata waved goodbye to Tata Sons recently. At 75, he has decided to hang up his boots, handing over the reins of the $100 billion conglomerate to Cyrus Mistry, who is now the chairman of the company.
In his farewell letter to his employees, Mr. Tata expressed cheerful optimism for the future of the Group and immense pride at being a member of it. However, his retirement stirs up a buzz of apprehension as the number one Indian brand gears up to function without its anchor.

Cyrus Mistry

Under Ratan Tata’s leadership the company proliferated profoundly. High profile acquisitions such as that of UK’s Tetely Tea, Jaguar Land Rover and Tata Steel’s Anglo-Dutch rival company Corus, put India on the global map like never before. But at the same time, Tata gave its gift to the common man, the Rs.1 lakh car, Tata Nano. The company rose to $100 billion revenue mark in 2011-12 from a turnover of a mere $10,000 crores in 1971, the year when Ratan Tata succeeded JRD Tata as chairman of the Group.

For an Indian brand to diversify as much as Tata Groups has, to raise itself to the global platform and yet to remain deeply grounded in its national roots is a rare and commendable feat. Which is why Cyrus Mistry has big shoes to step into. His biggest challenge will be living up to Ratan Tata’s legacy, and with time, adding his own.

On the business side of things, there are a number of hurdles to leap over for Mr. Mistry. The $12 billion Corus acquisition by Tata Steel has encumbered a nearly $10 billion debt, half of which will come up for refinancing in the next three years. Moreover, the diversification of Tata Group in the global arena implies that this amalgamation of domestic and global operations needs to align with new economic realities. Also, brands Jaguar Land Rover are not posing a problem in the global front, with an expected 16 percent growth rate in volumes this year.

The Singur issue that cropped up during the initial production stage of Tata Nano remains unresolved and it is up to the new chairman to tie those loose ends.

While Mr. Tata will remain emeritus chairman of Tata Group after retirement, he is looking forward to occupying himself with his other passions, which range from piano to philanthropy. Meanwhile it will be interesting to see how the functioning chairman steers the iconic salt-to-software Tata Group of industries ahead.


By Muhammad Shah:

Facebook has literally turned this world into a global village. People are more than ever social–creating personalized moments, every second. It is being used by everyone to post pictures, update statuses and remember birthdays, plan reunions, support social causes and more through this social network. It has completely transformed the way we interact within communities.


Facebook has opened a completely different arena for advertisers too. Brands now communicate with consumers on a personal level; in fact, they are no more names only ― Facebook has given a life to them. A new gift shop or opening of a restaurant in town, people get all such information on Facebook. And advertising, as influential as it can be, definitely has a role to play here.

Marketing on Facebook is full of benefits, providing a tremendous boost to businesses, worldwide. With over 500 million users, you just can’t ignore it. Following are 4 reasons why advertising on Facebook is an option to consider:

1. More Than Your Target Market

Facebook has millions of people who use their account actively, on a daily basis, and as per some studies; it actually attracts more traffic than Google. With such a vast outreach, enterprises have a golden opportunity to interact with its target market. But here, you have an option of reaching beyond your focus group as well. The demographic-targeting structure allows advertisers to select their market based on factors like demography, likes, people’s inspirations and interests.

2. Budget Under Control

Marketing is an expensive thing for any kind of business or company, but with Facebook, marketers get well thought-out budget options. You can start and stop ads on your page, just by a single click. Few of the most convenient payment methods on Facebook include options like setting daily budgets, Cost-Per-Click (CPC) and Cost-Per-Impression.

3. Unparalleled Feedback

Not only the feedback is unmatched because of the product popularity, Facebook also takes initiatives―shows how well your ad is doing or if there’s anything wrong with the campaign. It identifies areas which can be improved to guarantee better results.

This helps advertisers assess their failures and plan their next endorsement―more effectively, keeping in mind all the flaws of the previous drive. Facebook Metrics is a great tool for improvement in advertising campaigns.

4. Facebook Pages Create Your Identity

Your product page is one of the ways to interact with the masses, on a personal level. You get to know customer reactions through various polls. An effective promotional strategy used today is “share and win”. This raises the product popularity, hence increasing the number of page likes. Moreover, people can post queries demanding your attention. You may even create events and capture more audience. All in all, your page can carry out a number of initiatives, and Facebook presence for every brand is pivotal.

Facebook has really challenged the traditional publicity methods, making it possible even for small businesses to set up a strong place among powerful monopolies. We have witnessed local brands making their way to the market, through advertising―on Facebook.


By Swarupa Rani:

“Be the change you want to see in the world”

The twin crisis of economy and global climate change has planted seeds of change in the organizations to craft alternative business models to benefit our society as well as the economy.

A better strategy to sustain in the ever-changing market, a stronger risk management system with minimum expenses and maximum profit is what every business’s sole objective is at present. To shift to a growth that is slightly different requires a huge leap. Building a new economic paradigm keeping in mind both the economy and society is really a novel deed.

Every organization tries to be active in CSR activities. Well, that’s a positive sign of course. But where is the growth shown in CSR? Is the money invested actually reaping? Or is it just to show in figures how society-oriented the organization is? Serve for a different purpose — is the need of the hour!

To make a difference, locally based needs can be catered to serve the society as a whole. Not all global brands reach the end customers in the small towns. By doing so, not only the human resource of the local region will be fully utilised but also maximum local knowledge gained from them would certainly help in keeping the consumers satisfied. Also the cost that would have been incurred in making this possible without the local knowledge would have been much higher.

Crowdsourcing is when organizations outsource the work to a group of distributed unknown people instead of a specific body. It’s a cheaper way to get the task done/to obtain a solution. It also serves the interested people who would genuinely like to do that particular type of work instead of forcefully getting the work done by a specific set of people/body. If incorporated, the organizations would save a lot on the way of motivating the people.

Collaborative planning can help the organizations to save the resources. Using another organization’s readily available resources to produce goods/services is an excellent idea. In return you can share the profit or pay royalty. Because investing to generate that vast amount of resources would take huge money and effort.

As engaged citizens we have the power to develop ecologically sound and economically stable ways of living in the world. But we will first have to do the hard work of transforming our institutions, our mindset, and our expectations about what our economies are supposed to do. With the earth’s resources declining and dragging us to the pit of utter energy shortage, it’s high time to wake up from the fantasy that Earth would be feeding us with unlimited resources. It’s time to go environment friendly goods/services in some way or the other. Use recycled items for further production, use degradable products, try to keep environment green by planting trees, save energy, etc. Encouraging customers/clients, employees for the same would be a great initiative that we can do for our society as a whole. If we cannot make real changes for wellbeing in our own local communities, a global strategy is unlikely to materialize. Be the role model to revolutionize the ‘eco-friendly’ concept in the business world.

walmart retail india

By Kartik Bansal:

Finally, the long battle between the United Progressive Alliance-2 and opposition parties has come to an end. The UPA has succeeded in implementing Foreign Direct Investment (FDI) in the retail segment, against all odds. They had to face severe criticism and resistance from their supporters, allies and other members of the party. Even the Dravida Munnetra Kazhagam (DMK), the second largest partner in the UPA was opposed to the FDI. The main outside supporter of the government, the Samajwadi party also called it ‘anti-national’. The Trinamool Congress (TMC), headed by Mamata Banerjee also pulled out of the Congress-led ruling coalition, owing to the same.

The reason behind the implementation of FDI is seen as a very important reform to revive the economy and it will ease the pressures of supply and further reduce inflationary pressures. FDI is direct investment into production in country by a company in another country either by buying a company in the target country or by expanding operations of an existing business in the country and taking advantage of cheaper wages, special investment privileges like tax exemptions, subsidies etc. It is very clear that in a country like India, where the population is very large and where 70% of Indians live in rural areas; investment by the countries will give them cheap labour benefits, tax exemptions to boost this sector and allow them to earn profits. To maintain this profit, the accepted threshold for an FDI relationship is 10%. The foreign investors must own at least 10% or more of the voting stock or ordinary shares of the investing company. A recent survey by UNCTAD stated India as the second most important FDI destination sectors that attracted higher inflows into telecommunication, construction activities, computer software and hardware and other services. Now that the government has allowed FDI in multi-brand retail up to 51% and in single brand retail up to 10%, the choice of allowing FDI in multi-brand retails up to 51% has been left to each state.

According to the consulting firm Technopak Advisors, India’s decision to relax foreign investment barriers in its retail sector will create an $80 billion market opportunity for international super market chains by 2021 and nearly quintuple tax revenues from the industry. The major investors are Walmart, Tesco, Brooks Brothers etc. In the next decade while corporatized retails will add another 2.7 million jobs, independent retails will create a million more jobs. Technopak predicts that India’s retails sector will grow from $490 billion in revenues in 2012 to $810 billion by 2021 and modern retailing will increase from 7% to 20%. Walmart has already said that it is expected to open its first store in India in two years. India has said that foreign companies can only set up in cities with more than one million people. The whole exercise will also benefit India in tax collections that are expected to go up from $3.4 billion to $16.2 billion by 2021.

Now, opening the retail industry to FDI will bring benefits in terms of increased economy, advance in employment, increase in imports and exports, availability of quality products at better and cheaper prices and will also enable the country’s products and services to enter into the global market. But FDI is opposed by small retailers and trading people on the grounds that it will put mom-and-pop stores out of business and also be a threat to farmers and people involved in agricultural practices. FDI also has some disadvantages, for instance, 50 million merchants in India will be affected, economically backward people will suffer the price increase, retailers might face losses, inflation may be on the rise and yet again, India may become slaves because of the same.

In my view, the UPA government has taken this decision just to safeguard their position in coming elections in the name of boosting the economy. The other side of this story is that India is such a hugely populated country that we are not able to create our own mega brands, revenues and infrastructures, while other countries, having a population in mere lakhs are investing in our country, earning their countries handsome revenues. This is actually our weakness. Our politicians are interested in earning money by selling the natural resources of our country and indulging in scams on a large scale. It is true that the FDI will provide employment, technology, better infrastructure, organized retails stores, but my question is — can’t we achieve the above on our own with the large human resource our country has? We do not need to depend on other countries and let our natural resources go waste unnecessarily. We should seriously think about it.


About the column: In our column “Bull’s Eye“, we take up articles from business dailies like Economic times and Business Standard, and explain them. In each article, we cover an economic/financial concept and a market occurring that the article is focused around; and explain it in the context of that news update.To read more from the column, click here.

By Naman Sanghvi & Sangeet Agarwal

Link to original article

Original article
Treasury Sells More AIG Shares: $20.7B Total Cuts Stake To 15.9%

Good news for AIG: Uncle Sam is now a minority shareholder.

The U.S. Treasury Department sold 553.8 million shares of the insurer’s common stock at $32.50 Monday, raising a shade under $18 billion and cutting its stake in the company to 21.5%, from 53.4%. The underwriting group – led by Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan Chase – exercised an option to purchase another 83.1 million shares in full, buying an additional $2.7 billion in shares.

All told, the Treasury raised $20.7 billion with the Monday and Tuesday stock sale, cutting its stake in the insurer to 15.9%.

Treasury Secretary Timothy Geithner said that keeping AIG afloat “was something the government should never have had to do, but we had no better option at the time to protect the American economy from the damage that would have been caused by the company’s collapse.”

AIG, which bought $5 billion worth of stock in the offering, which priced above the $30.50 level of August and May offerings, stressed that the government rescues of the insurer have now been repaid at a profit and left the company in position for a successful future. “We are close to achieving what most outside AIG thought unimaginable,” said Chief Executive Robert Benmosche.

While there is plenty left to criticize regarding the bailouts of 2008 – in AIG’s case alone banks were made whole on contracts with the insurer while shareholders paid the price, and many executives still took home lucrative retention payments – those criticisms have certainly been blunted over the last four years.

With just four days until the anniversary of Lehman Brothers’ failure, the biggest financial institutions to take government money have in large part repaid those bailout loans and are on sounder, if not crisis-proof, footing today. The government is still well in the hole on its automotive rescue of General Motors and Chrysler, and it may never fully recoup the billion upon billions spent to keep Fannie Mae and Freddie Mac in business.

The success of the bailouts from an execution and profitability standpoint will be debated endlessly, but from the standpoint of keeping the financial system intact it is difficult to argue with Geithner: the bailouts should never have been necessary, but when they became essential they had the desired effect.

The Treasury Department has a blog post here explaining its view that the $182 billion AIG rescue has been repaid in full, and at a profit, including an infographic touting the return.

Shares of AIG were still in the red Tuesday afternoon, but hanging in above the Treasury’s sale price, down just 0.8% at $33.04.


AIG was the 29th-largest public company in the world and one of the biggest insurers in the world. In 2008, during the economic crisis; The U.S. government seized control of American International Group (AIG) Inc; out of fears of the ramifications of the failure of one of the world’s biggest insurers would have on the market which had still not seen the bottom on its way down. While the government let Lehman Brother go bankrupt, AIG was just too big to ‘let it fail’. The government will lend up to $85 billion to AIG get a 79.9% equity stake. Before deciding to step in the government tried raising money through private parties, but when that failed decided to step in; as allowing AIG to file for bankruptcy protection like Lehman Brothers would have been catastrophic. The company was bailed out by the Federal Reserve Bank of New York, but even after a loan of $85 billion, put in additional money on account of continued losses. The total amount spent in bailing AIG out was $182 billion, making it the biggest federal bailout in United States history.

As of April 2011, the US treasury held as much as 92 % in AIG. Earlier this week the US government sold USD 20.7 Billion worth shares reducing its stake to 15.9%. The government ( Treasury and FED) recovered about $197.4 billion from their rescue of A.I.G, thus making a substantial profit with the taxpayer’s money. The Treasury still has 234.2 million common stock shares which will provide an additional return for taxpayers (shares were sold above USD 30/ share)

As per Yahoo finance, volumes of shares of AIG available for trading currently stands 1730 million. (calculated using market cap — 61. 19 b divided by share price – $34.9). Before this week’s offering the AIG ownership stood at close to 53% which means the treasury had close to 916 million shares. Out of 916 million shares treasury on Monday sold 553. 8 million shares, the sale also included an option which allowed underwriters to buy additional 83.1 million shares, for which the buyers were Citigroup, Deutsche Bank, Goldman Sachs and JP Morgan Chase. The Treasury still has 234.2 million common stock shares which will provide an additional return for taxpayers (shares were sold above USD 30)

Underwriting group —

An intermediary between the issuance Company and investors are referred to as underwriters. When the company releases its IPO or sell shares, it first chooses an investment bank to buy its majority of shares in the primary market. With the help of these investment firms the shares are then floated in the secondary market (stock exchange like Sensex, NYSE) where the common investor like you and me do trading of shares.

The underwriters makes money by charging underwriting fees to the issuance company and selling shares to the investors. When the economy faces a downturn, these holdings can take a bite on underwriters, as they now have to sell the shares below the specified offering because of fewer buyers/investors in the market.

Here in this case treasury is the issuance company which on Tuesday sold 83.8 million shares to underwriters like JP Morgan, Citi Bank, Goldman Sachs.

When faced with the decision of rescuing AIG, critics claimed that Wall Street companies like AIG had created, marketed, and sold risky mortgages and sealed their own doom; and the common man’s money should not be used to bail out and give another chance to such companies. Having not only saved AIG, but also made a profit with the taxpayer’s money, this will prove to be a great victory for the Obama administration and his treasury officials.


By Pradyut Hande:

Finance Minister, P. Chidambaram, may have come up with an ambitious Fiscal Consolidation Plan to reduce the growing fiscal deficit and in turn embark on a calibrated path towards accelerating economic growth; but the RBI’s decision to not lower interest rates appears to have dimmed some of the enthusiasm surrounding the development. It was widely speculated that the D. Subbarao helmed RBI would back the Finance Ministry’s renewed attempt at rekindling a stagnant economy. However, whilst commending the Government’s efforts, the RBI presently stands steadfast in its refusal to reduce interest rates in the face of rising inflation. Set in this backdrop, there appears to be a consequent face off between tackling the critical issues of both economic growth and inflation; with the Government and the central bank differing in their points of view.

A visibly annoyed Finance Minister openly declared, “If the Government has to walk alone to face the challenge of growth, well we will walk alone…” There may be just reason for him to be piqued. But let me examine this perceptible dichotomy in thought process and action plans from another angle. For starters, irrespective of the criticism coming his way, Subbarao deserves to be lauded for not buckling under populist pressure and maintaining the prevalent interest rates instead of dropping them as was widely expected. Tackling inflationary pressures is paramount on the RBI’s monetary policy agenda. Thus, the interest rates will remain the same, at least for this quarter.

Many believe that this throws a major spanner in the wheels of potential economic growth. But, instead of focusing merely on that aspect, naysayers would be better served taking cognisance of other aspects too. Now, although the current Repo Rate (the rate of interest at which other banks borrow from the RBI) remains at 8%; the RBI has made certain concessions by further reducing the Cash Reserve Ratio (CRR) (a stipulated requirement where banks have to maintain a fixed portion of their deposits with the RBI) to 4.25%. This would result in the availability of over Rs. 17,500 crores across banking channels, in the hope of decreasing the credit deficit and mobilise funds for investment in important sectors. This is actually the fourth time that the CRR has been decreased in the last 12 months alone. Although its benefits have been subliminal, a further reduction is expected to make more of a positive fund flow difference. Additionally, the RBI has also brought down the Statutory Liquidity Ratio (SLR) (a mandatory directive that requires banks to invest a certain proportion of their deposits in Government promoted securities).

Also, instead of continuing to focus on potential Repo Rate reductions, the key issue of Liquidity ought to be addressed. Without adequate liquidity in the system, no amount of increase or decrease in Repo Rates would make much of an impact. Enhancing liquidity is a major stepping stone towards resuscitating a slackening economy. While lowering interest rates in the long run is advisable, concomitant to the prevalent rates of inflation and economic growth, it isn’t the only way to spur growth. Dwindling liquidity is a clear indicator of a struggling economy. Thus, once liquidity in the entire system is gradually increased, there is greater stability and available avenues for investment.

The Government may have green lit a slew of diverse reforms in the past month and a half, but the RBI does not intend to reduce interest rates unless those reforms actually come to fruition, inspire greater investor confidence and begin to translate into tangible sectoral benefits. Instead of trying to pull away in opposite directions, both the Government and the RBI ought to devise a collective blueprint that would systematically counter inflationary pressures while not compromising on revitalising the economy. It may be easier said than done, but is definitely not an impossible proposition.

About the author: The Writer is a Business student with a degree from NMIMS, Mumbai. He is presently working as a Senior Executive with a leading Public Relations firm in Mumbai. Through his writing; he attempts to address myriad issues of both domestic and global consequence, ranging from Business and Economics to Geopolitics…from Sports to Arts and Culture. He has over 200 publications to his credit in some of the leading national dailies and weekly magazines across the country. He is also a keen debater, munner, quizzer, painter and amateur freestyle rapper. His other interests include Sports, Music, Reading, Travelling and Social Entrepreneurship. For his latest postings, follow his blog . To read his other posts, click here. 

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