Tuesday, July 31, 2012

INTERNATIONAL : BANK OF AMERICA: THE BURDEN OF COUNTRYWIDE FINANCIAL

The new Right to Public Services Act empowers people in Bihar to get government officials to act in a time-bound manner. Will public servants finally wake up to the tasks-at-hand?

As the entire nation sat glued to their television screens watching the Anna Hazare movement gain momentum, the state of Bihar was witnessing a movement of its own. Aimed at providing various services to the people in a stipulated time-frame, the Independence Day brought with it a crucial reform process in the state. It was called the Right to Public Services Act (RTPSA), 2011, which came into force starting August 15, 2011.

As per the Act, hereon, 50 services spread across 10 departments is to be made available to the people of the state. The Act, considered to be the brainchild of Chief Minister Nitish Kumar, was envisioned and drafted as a major anti-corruption tool. It was passed without a debate in the state Assembly in March 2011. The rules were framed two months later. Prescribed forms for making applications were issued soon after its implementation and all applicants were issued receipts against applications submitted. Termed as “yet another revolutionary step” in Bihar’s journey towards becoming a corruption-free state, the law provides for penal action against officials who fail to deliver within the stipulated timeframe. There is also a provision for dismissal of officials from service for such failures.

Bihar is the second state after Madhya Pradesh to enact such law. The real test here will be for the bureaucracy of Bihar, which is known for its lethargic ways. In just two working days after the much-hyped law guaranteeing time-bound delivery of several public utility services was enforced, at least 40,000 applications were reportedly received at the district and block headquarters across Bihar. They were submitted by large crowds, mostly seeking certificates for caste, residence, income, ration cards and social security pension. Until August 22, 2011 – thanks to the legislation that ensures that officials down to the lowest level are held accountable for the services they are meant to provide within a fixed time frame – 2.80 lakh applications had been received.

In response to public enthusiasm, special counters were opened across several districts of Bihar. The Act is aimed at playing a crucial role in curbing corruption in the lower bureaucracy. If implemented in good order, the Act has all the requisites that could turn Bihar into a model state in terms of rendition of public services.

Realising the importance of the Act at a time when corruption has caught the imagination of the entire nation, Nitish Kumar says, “The RTPSA is just another way to curb corruption and to provide services to all sections within a limited time. In a matter of a year, people can apply for services online and get certificates online too.” The government’s move to check corruption through the Act has painted a peculiar picture, especially in the small towns of the state, where people are unaware about the law. But the loopholes in the Act are being exploited too.

Reports from the state capital suggest that certain government officers have already started using the shortcomings of the Act to their benefit. Here is an example. The Department of Education had issued a directive with regard to the awarding of scholarships to students under class seven. Submission of the Income Certificate of their parents within seven days was made mandatory to avail the scholarship. However, the local officers, quoting the provisions laid down in the Act, are now found to be causing a delay in the process. Regardless of the urgency of the matter, local officials are now asking the parents to return after 21 days, only causing a further delay in finalisation of the scholarship list. Lamenting over the attitude of local officers, Manoj Kumar, a teacher at the Saguna Middle School tells B&E that over 100 applications were affected as block officials told the students and their parents to return after 20 days. The officials have cited the timeframe of the Act as the reason of delay. “Students were asked to come after 20 days when it was necessary for them to submit the required certificates within a week. Many of them could not for various reasons, and they missed out on the chance to obtain a scholarship,” he said. Similar incidents have now prompted Nitish Kumar to take note and he has indicated that the timeframe for certain services under the Act could be considerably reduced.

“The effort in eradicating corruption through the Act is commendable. However, corrupt officials have found certain lacunae and are delivering their work only in the time-frame envisaged by the government,” Arun Kumar Singh, Public Prosecutor and a senior JD(U) leader tells B&E. But there are some encouraging tales too. In Muzaffarpur, 145 applications for different services were disposed of within a day, claims Bharat Dubeya, Director of the District Rural Development Agency (DRDA). “Despite loopholes, the district headquarter is bound to deliver its duties looking at the problems of the petitioner. Work here is going smooth. There might be some lacunae, but they will be eradicated soon,” he said. In another incident in Sitamarhi district of Bihar, some school students landed at the office of the Superintendent of Police (SP) to complain that their character certificates were not being released by the concerned authorities. The matter was urgent as the students needed the certificates within 4 days. When SP Rakesh Rathi learnt of the situation, he ensured that the documents were delivered on the same day by 5pm. This was quite an example of an official stepping-in to ensure that certain provisions of the Act do not breed insincerity amongst state officials.


Monday, July 30, 2012

Opportunity in Misery

The Political Upheaval in key Arabian countries was most welcome as it removed decades of monarchy, but The Subsequent Economic winter is certainly not. It is time for the Arab world to unite and face the crisis

Henry Kissinger, the famous American political scientist was once quoted, “You cannot make war in the Middle East without Egypt and you cannot make peace without Syria.” This was true 50 years before and this perhaps is as equally true today. Irrespective of that, it is equally valid to argue that the Arab economy as a whole cannot survive if the economies of Egypt and Syria collapse.

Arab nations, which have been ruled by monarchs for centuries, have seen long awaited democratic revolutions of late. Thus, nations like Tunisia, Egypt and Yemen have succeeded in overthrowing dictators like Zainal Abedine, Hosni Mubarak and Ali Abdallah Saleh. However, the challenges are not over. The severe political unrest that most of these Arab nations have gone through including Tunisia, Libya, Egypt, Jordan, Yemen and Syria are the very reasons they are projected to suffer a sever economic downfall.

A report published in May, 2011, by the Institute of International Finance (IIF) global banks group (consisting of 430 banks and financial institutions) forecasted that the economies of Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia will shrink by 0.5% together in 2011 in contrast to the 4.4% growth they achieved in 2010. The African Central Bank, too, has recently predicted that the collective growth of the entire North African region would decline from 4.5% in 2010 to less than 1% in 2011. IIF has further projected that GDP growth of Yemen will fall by 4%, and that of Syria, Egypt and Tunisia would shrink by 3%, 2.5% and 1.5% in 2011.

Saturday, July 28, 2012

I know where’s your Money!

Usage of Radio Frequency Identification (RFID) tags in Indian notes of higher Denomination will allow better tracking of funds during Hawala Transactions and make laundering much harder

Much rejoicing has happened over the treasure unearthed at the Sree Padmanabhaswamy temple in Thiruvananthapuram, which was an event that came as a bolt from the blue. Ironically, the event that India is impatiently awaiting – the unearthing of India’s wealth at Swiss temples (read banks) – remains a non-event, despite countless government assurances. As per estimates, India tops the list of countries with almost $1.5 trillion in black money in Swiss banks, followed by Russia at $470 billion, UK at $390 billion, Ukraine with $100 billion and China with $96 billion.

Besides ridding us of the past burden, the government also has to proactively stem the flow of black money happening here and now. And we have a fantastic idea that Race Course road could use to track money laundering.

And that is, implant Radio Frequency Identification (RFID) tags in high value Indian notes. An RFID tagged banknote is not an unknown commodity. The European Central Bank (ECB) took the initiative to deal with money counterfeiting and laundering through RFID technology in 2001. The ECB began research and development to implant RFID tags into the fibres of euro currency notes. The process started in 2005, and by 2007, the ECB had successfully embedded RFID tags in all euro notes above €20.

The major concern of embedding RFID tags in Indian notes is the cost of implanting, as a tag would cost between 20 cents to $1.00 (Rs.18-45). To counter that, either the government could start manufacturing these tags themselves, or these tags could be used in high denomination currencies only.


Friday, July 27, 2012

Going full Throttle Ahead

After Posting Impressive Numbers in The Last Fiscal, BAJAJ auto HAS a slew of New Projects to keep it on top of The Game.

For Bajaj Auto, India’s second-largest two wheeler, the past two years have been extremely eventful. In 2009, when Rajiv Bajaj, MD, Bajaj Auto, decided to pull the plug on the high-volume generating 100cc segment bike, the decision was seen as being knee-jerk by many industry observers even though it was made under the assumption that volumes from the 100cc segment would fall from 61% to 25%. The company clocked sales of 1,60,000 units in October 2009 as compared to 2,50,000 units in the same month a year ago, registering a 35% fall in sales. The months that followed saw quite a few strategic business shifts at Bajaj Auto.

To start with, Bajaj once again surprised itself and the industry by making a comeback into the entry-level segment with the launch of a new product Discover. The company followed this up by announcing its exit from the scooters segment and its decision to drop the parent brand from its product portfolio. The last two decisions once again set tongues wagging in the industry and caught many offguard, including Rajiv’s father, Rahul Bajaj, Chairman, Bajaj Auto. But by the end of FY2010-11, Rajiv Bajaj was standing tall and even the critics were offering him grudging admiration.

Numbers don’t lie. And for Bajaj Auto, the numbers really wax eloquent. The company declared revenue for last fiscal stood at Rs170 billion and its net profit soared to Rs36 billion at a whopping growth rate of 41%. In fact, there were plenty of other reasons to cheer about. The company’s bike sales crossed 3.3 million units in the last fiscal, showing a stellar growth of 35%. Similarly, in the CV segment, the growth recorded was 28% with sales of over 4.36 lakh units. All this at a time when input costs were hardening and inflation picking up. Not only did Bajaj Auto come out with flying colours, its rich product mix, higher volumes, and effective cost management enabled the company to declare an industry high operating EBITDA margin of 20.4% for FY11.


Thursday, July 26, 2012

The Solar Option for a Sustainable, Safe and Secure Energy future

Proponents of Nuclear Energy are Blatantly and Deliberately disregarding The Solar Energy Option, many with Their own Ulterior Agendas B&E Analyses why India needs to Urgently look Beyond Nuclear Energy towards The Solar Option for a Sustainable, Safe and Secure Energy future

At the same time, the turn of events at the proposed 9900 MW Jaitapur nuclear plant calls for a reality check in the backdrop of the risks that now are becoming evident – from earthquake (as the region is on a seismic zone), to Tsunami fears to the fact that there is no government-led research (perhaps deliberately) that confirms the radiation exposure to humans living in and around nuclear plants, all points reinforce the dictum that there is no fail safe reactor and there is no honest government. Reportedly, only 30 or so villagers out of the 2,000 plus living around Jaitapur have accepted compensation to be relocated.

In all this commentary, the solar energy option has been not followed rigorously by India so far as it has been traditionally regarded as a very expensive mode of power generation. As per market approximations, India produces less than 1% of its total energy through the solar route, while the same figure for some developed nations is as high as 15-20%. And that huge differential exists because in the developed word, solar projects are continuously getting cheaper whereas the cost of constructing a nuclear power plant is almost the same as it was in mid 1980s ($2-6 billion).

As more and more players slowly hop on to the solar bandwagon and invest in R&D, there has been a regular year on year decline of 3-4% on the cost of solar installations across the world as against a continuous increase of 4-5% for conventional sources. According to a recent report by KPMG, India will be able to reach solar grid parity by the year 2017- 2018. This means that by that stipulated time, the cost of power generation through non-renewable resources will be at par with the cost of the same amount of power generation through solar. The cost of solar power is expected to drop to Rs.10 per kWh by 2015-16.

Yes, this seems still not comparable to the lower cost of our non-renewable resources like coal and petroleum. Indian thermal power plants have been producing energy at the rate of Rs.5 to Rs.5.5 per kWh in comparison to solar installations at Rs.12-13 per kWh (2011 data). But as mentioned earlier, this cost is coming down with every passing year, while the cost of other energy sources has been in general rising up. Also, in the recent past, there has been acute shortage of raw materials to a variety of industries including iron ore and coking coal; engulfing the power generation, steel manufacturing and cement manufacturing industries. Our coal import requirement is expected to exceed 30% of our demand by 2017. The voluntary target of reducing 20- 25% carbon emission intensity of GDP by the year 2020 also needs to be achieved following the green initiative.

As per available estimates, solar power has the potential to almost meet 7% of our power needs by 2022. This shall also mitigate 2.6% of our carbon emissions and at the same time, will save 71 MTPA of imported coal in that year that accrues to $5.5 billion worth of imports. However, to realise the benefit out of solar energy and light up 40% of our rural households with a reliable and clean source, India needs to invest around $110 billion into this sector over the next decade.

In 2009, the Government had launched the Jawahar Lal Nehru National Solar Mission (JNNSM) as one of the eight missions under the Prime Minister’s National Plan on Climate Change (NAPCC) to pursue our needs to rely on solar projects in India. But very recently, India’s Ministry of Renewable Energy in its new strategic plan has scaled down the share forecast of renewable energy in India’s energy mix from an initial 15% to a deplorable 6%! Currently, the share of renewable in India is around 3.5-4%. Besides increasing the overall pie of renewable energy, it is imperative for the government to invest in the proliferation of sustainable and safe power generation rather than invest into a high maintenance and highly susceptible and volatile technology, which is what the nuclear option really is. The new plan sets a target of a total of 21,700 MW for the next 6 years that will take the cumulative share of renewables to 41,400 MW. Earlier, under JNNSM, solar energy was supposed to see an addition of 22,000 MW of power by 2022. The erratic behaviour from the ministry has resulted in the scaling down of investments into solar power projects – and hence the 20-25% cut in emissions that India volunteered at Copenhagen will only see a reduction of around 2.5%.

The US has around 5% of the world’s population, but it uses almost a quarter of energy produced in the world. Despite the fact that in 2009, solar energy projects in the country gave employment to some 46,000 Americans directly and indirectly, even America seems reluctant at present to pursue the solar route as it demands huge investments. Compared to parts of Europe where the most solar projects have been installed, it is but thought provoking to see that the intensity of solar radiation in India is much higher as compared to what they have. The intensity of solar radiation falling on earth at the sea level at peak is 1,020 W/m2 but it differs considerably across the landscape. For example in North America, the average power of solar radiation is around 125-375 W/m2 that yields a power of 3-9 Kwh/m2. The average solar energy that falls on Australia is equivalent to 15,000 times its present energy requirements. India has the capacity to deploy 70 million square metres of solar collecting area to capture solar energy that can yield power close to 1600-2200 kWh/m2; with a potential of 6000 million GWh every year.

Then again, Indian nuclear power plants are able to produce cost effective energy at an average rate of Rs.2.19-2.30 per kWh. The Tarapur reactor has been producing energy at the rate of 94 paise per kWh. But then, as Dr. Santwana Raychaudhuri of the Saha Institute of Nuclear Physics opines, “Nothing is sure enough from the point of view of safety in the case of nuclear power. It is better to invest more in research for producing systems to store solar power for our daily needs.”


Stratagem-TELECOM: MANUFACTURING

Depite a Humongous Growth in The Telecom Sector, The Country has failed to build an Ecosystem that Promotes Telecom Manufacturing, Forcing Operators to Import most of The Equipment for their networks.

Telecom equipment manufacturing in India took off just after Independence. In 1948, the first Public Sector Unit (PSU) – ITI– was formed. In the initial stages it met 50% of the domestic demand for telecom equipment. However, in 1993-94, the government withdrew the defrayment of its R&D expenditure. ITI, which had six manufacturing facilities then, was hit hard by the government decision. That was the time when telecom sector had started opening up and demand for telecom equipment had begun to grow considerably. ITI was not able to match the rising demand.

Today, handset is the only telelcom device, which is manufactured in India. Top MNCs, including Nokia, Samsung and LG have manufacturing facilities in the country. Some domestic players, including Mircomax, Karbonn and Lava have plans to start manufacturing in India. But for them manufacturing only make sense when they can sell 1 million units per month or have at least 10% of the total market share, which seems a difficult target for them to meet in the next few years.

On the other hand, telecom service providers in India are not happy with the recommendations of the regulator. Service providers are against putting a cap on the telecom equipment purchase from foreign vendors. They fear that it will kill competition in the market and inflate equipment prices. Telecom service providers’ industry body Cellular Operator Association of India (COAI) has expressed concern over TRAI’s recommendations. “It is good that the government is promoting equipment manufacturing in India. But there should be no binding obligation on telecom operators to buy from them. If the standard of equipment manufactured by local players matches the global standards and prices there is no question of not buying from them” says R.S. Mathews, Director COAI.

Apart from the dearth of local telecom equipment manufacturers, there are other reasons that have held down manufacturing. The law of the land itself supports imports over home manufacturing. Manufacturing needs the support of various electronic components but ironically duty is levied on the import of components as against there being no duty on import of finished products. Testing of wireless equipment is another problem. Spectrum is needed to test a wireless equipment of which there is again scarce availability. “Testing of equipment is one of the biggest challenge that we are facing. We need to test equipment for months before commercial launch. However, Indian authorities allocate testing spectrum for a maximum for 30-day-period, which is not enough. Besides, the entire process of getting spectrum is painful and lengthy,” says a senior official of a telecom equipment manufacturing firm, pleading anonymity. His company test its equipment in a foreign location.

Numerous challenges lie ahead before telecom equipment manufacturing can be pushed from its present abysmal level. The biggest is getting the Department of Telecom’s approval on TRAI’s recommendations in its present form. Also, other than rolling out incentives and tax waivers, the government has to make the entire process of setting up manufacturing units hassle-free. At present one has to take several NOCs to set up an unit, unlike in the East-Asian countries where it is a single window operation and takes a maximum of one week to fifteen days. If the existing roadblocks are not removed then making India a manufacturing hub will forever remain a distant dream.


Wednesday, July 25, 2012

Retail goes on a charm offensive

Some Nifty Retail Strategies, Putting in Place a Superior Customer Relationship Programme and Introducing World Class Retail Technology and Practices, all have helped The Department Store Chain to be on top of The Retail Game.

The financial year 2010-11 was a good year for the K Raheja Group promoted Shoppers Stop. Two years after the financial downturn, the company recorded a positive double-digit growth for the first time. And there’s more! Even as the industry has been growing 15% annually (according to Retailers Association of India), Shoppers Stop clocked a promising growth of 20% last fiscal.

So what are the factors driving the financial growth of the company? Recalibrating its business supported by a good strategic plan helped Shoppers Stop steal the show from its rivals (read Pantaloon, which grew at 17%). “Our fine tuning of the business model was accomplished by undertaking rent correction, cost control and inventory rationalisation. We repositioned the brand as a bridge to the luxury space and the consistency of our standards in terms of the quality of merchandise & service along with the appeal of our customer loyalty programme helped a lot in the financial growth of the company,” says Govind Shrikhande, Customer Care Associate & Managing Director, Shoppers Stop Limited.

In fact, the chain’s customer loyalty programme, christened The First Citizen, has proved to be a huge success, so much so that there were 2.8-lakh First Citizen offers last year. It helped Shoppers Stop garner 60% of revenue generation from loyalty programmes alone. Loyalty programmes – that offer special discounts and easy rewards to regular customers – are structured marketing efforts to encourage customers to frequent a company’s outlets and spend more by offering them attractive rewards and discounts. In the fast-growing and competitive retail market of India, brand positioning depends a lot on customer loyalty. The trend for customer loyalty programmes has caught on fast and retailers such as Future Group, Landmark Group, Reliance Retail, Indus League and others are now making their loyalty programmes even more attractive by taking them to the mobile phone platform and even adopting a gender-based approach. Reliance Retail, ever since its launch five years ago, started its loyalty programme for the first time last year. Pantaloon has its ‘Green Card’ programme which enables customers to fill in their basic details. Currently, there are about 1.8 million customers under its loyalty programme.

Customer loyalty being the result of a well-managed customer retention programme, and as 50% of Shoppers’ Stop’s sales are drawn from Customer Relationship Management (CRM) initiatives, the chain has taken CRM to an even higher level. Going beyond its loyalty programmes, the company has now introduced customer experience management. This way, Shoppers Stop has converted the concept of retail into an experience, an indulgence. To gain insight into the international practice of customer service and new retail concepts, Shoppers Stop became the member of Inter Continental Group of Departmental Stores (IGDS), becoming the only Indian member among the 29 other celebrated retailers of the world. Says Shrikhande: “Our focus on best practices & systems have also added to our revenue and financial growth.”


Tuesday, July 24, 2012

Why Big Mac Should not Worry about Subway

Despite Losing out to Rival Subway on The Number Global Outlets, McDonald’s still Scores on Key Business Metrics and is Easily Winning The Palate game in key Emerging markets. B&E gets through to Subway and Global Analysts for an Insider into The Famed Rivalry.

In February the Milford, Connecticut-based sandwich maker Subway sprinted past its famed burger-flipping rival McDonald’s to become the head honcho in the world of quick eats. With 34,410 restaurants in 97 countries, the Fred DeLuca-led Subway is now the largest restaurant chain globally in terms of number of units. The Oak Brook, Illinois-based McDonald’s has some 33,737 restaurants in 117 countries. In the race for fast-food world domination, the ‘health oriented’ Subway is having a great run, spicing up the competition with its aggressive expansion worldwide, thanks to its successful franchised business model emphasising small, low-cost outlets.

While the face-off between the two fast food giants has aroused great interest – and media and analysts alike have gone over each other in announcing that this latest Subway benchmark marks the beginning of the end of McDonald’s CEO James Skinner’s global dominance – the truth of the matter is that Subway isn’t bigger or better than Ronald (the McDonald) in terms of profits or even sales. McDonald’s continues to be the industry champ, reporting $24 billion in revenue and close to $5 billion in net profits in CY 2010. Subway generated roughly $15.2 billion in sales during the same period. Despite facing stiff competition from Subway, Yum! Brands, Starbucks, Wendy’s and Burger Kings – all wanting to nibble away market share – McDonald’s still commands a mind numbing 19% market share of the global QSR (quick service restaurants) industry.

In other words, neither does the Subway record signify anything more than, well, a record (well, Subway had already beaten McDonald’s in the total number of US outlets way back in 2002), nor does it signify that McDonald’s is going to fall over itself trying to analyse what went wrong. Even the Subway representative, while talking to B&E from the US for this article, at least on the face of it was clear that the McDonald’s business model was and would remain critically different from Subway’s. And the reasons are quite explicit. Although McDonald’s is still growing at home and in a big way overseas, it has made a concerted effort over the past few years on getting “better, rather than bigger,” as their spokespersons have been careful to overemphasize recently – and hidden in that one statement lies the one strategy that has ensured McDonald’s superlative profitability. One has to understand that McDonald’s for years had been the “bigger – and don’t care about better” visioning giant, attempting to position the behemoth as reaching the largest chunk of humanity – in lbs too. Thus, the move to a “better, not bigger” strategy was a mammoth shift – perhaps their biggest ever – from the traditional decades’-old strategic think. The genesis of this can perhaps be found in the year 2002, when the company was facing problems from all quarters: lawsuits and criticism for its fried, fatty food. As a result of these headwinds, the firm posted its first ever quarterly loss ($344 million) in 2002. But the company moved with decisiveness. Jim Cantalupo took over as the new CEO, and started the biggest restructuring in the company’s history. He closed more than 100 under-performing restaurants, changed the traditional growth strategy of opening more outlets to focusing on increasing the turnover from existing units. The menu was refurbished and expanded with the introduction of more fresh and healthy eating options like entree salads, McGriddles breakfast sandwiches, et al. Creative drinks came to be seen as the product du jour at the chain, with everything from fruit smoothies and specialty coffee drinks becoming the order of the day.

Today, much of McDonald’s success in beverages has come from specialty coffees such as lattes, which are sold at relatively higher prices. And to top it all, the company introduced the “I’m lovin’ it” campaign – its largest global campaign ever, launched in over 100 countries. But leave aside the outside positioning, McDonald’s has been careful to not let go of the old guard. One example; according to Ad Age, Subway spent about $400 million from January to November 2010 in advertising, of which about $58 million went to support its new breakfast line. McDonald’s US advertising has been estimated at about $1.2 billion annually. Wonder of wonders, its biggest campaigns continue to focus on the old ‘unhealthy’ guard – for example, the new “Made Just for You” TV commercials promote its Big Mac and Quarter Pounder with Cheese core-menu items. But who’s complaining? The results speak for themselves. Since 2003, McDonald’s has remained Wall Street’s darling, posting rising same-store sales for 30 consecutive quarters. Even during the depths of the recession in 2008, its same-store sales rose by more than 6%. McDonald’s stock has risen nearly 40% over the past three years.

Despite the Subway franchise model being widely successful, returns are greater for McDonald’s. A Subway franchise cost about $150,000, while it’s $1-2 million for a McDonald’s franchise. But if a Subway franchise makes roughly $450,000 per restaurant, McDonald’s franchise revenue is over $2 million per store. The choice of location of Subway restaurants has also raised a few eyebrows. Often, Subway restaurants are found in locations that even the most gumption driven competitor might not touch. Outlets have sprung up in the unlikeliest of places: on a riverboat, inside a church, at car dealers, bowling alleys and casinos. “We are proud of the fact that we have more convenient locations available to offer variety and choice to consumers,” says Les Winograd, Subway to B&E. On the process front, owing to its small restaurants, Subway emphasises on the take-away format. On the contrary, McDonald’s is all about (well, almost) providing the best dine-in QSR experience to its customers – and in profitable locations. Its stores are found in upscale locations, are big in size, draw larger crowds and create better brand recall. For Subway franchisees, it’s not uncommon to directly compete with one another by having multiple outlets in an area that effectively cannibalises business. Winograd counters: “Our growth is a result of our ability to offer franchisees the opportunity to own and operate their own businesses that follow a proven and simple operational model, coupled with all the hard work, dedication and support provided by our team members around the world.”



Barack Obama – The New George Bush

A few issues back, I wrote an editorial on how the revolution was happening in Egypt and how civilisation was changing elsewhere in the Arab world... Ergo, when a few days later, we got this incisive article from my icon Fidel Castro (see the following page), it was a tough decision to run it concurrently with my editorial. One feared people would think that Castro’s perspective was the opposite of what I wrote. Still, we didn't discard Fidel’s column, as we thought we would carry it in the succeeding issue of our sister publication The Sunday Indian (TSI), with a clarifying note... And then the Japanese disaster took place and this article went into the back burner. Personally, I would have wanted the column to be the cover story of TSI’s issue dated 28 March-3 April 2011, but for the fact that Dr. Binayak Sen’s Supreme Court hearing was coming close and, after all, we are more committed to India than to any other part of the world. [The cover story in that issue of TSI was titled, ‘Supreme Court must initiate a change in sedition laws and release Binayak Sen’.] However, what is happening in Libya makes my blood boil. Col. Muammar Gaddafi is that man who, 40 years back, made the OPEC and in one go made the Western world pay the right price for oil and made Arab nations rich. He is that way an icon by himself for the developing world. That one stroke which hit the West so hard is something they haven’t been able to digest yet. And therefore, the moment they got a chance, they have started bombing Libya; and, for a change, India has rightly shown true courage in strongly condemning the attack. Sarkozy, on the other hand, has totally lost it at home and found this a lovely way to divert attention and act smart. But the most disgusting part is the final revelation that Obama, the ludicrous Nobel Peace Prize winner, is no different from Bush. Shame on what the greedy West is doing. The real rogue nations like Pakistan and conspiring nations like Saudi Arabia remain friends of the West, while they ruthlessly bomb the oil-producing nations for their personal benefit. The saddest part, however, is that oil was $40 a barrel before the Iraq war. Following the war, it touched the $100 plus mark. Now, with the pounding of Libya, it will end up touching $150 plus! And the West seems to not have learnt its lessons from Afghanistan. You can't win a war in such lands through air strikes... And in Libya again, they will lose it. I will only end by saying that it’s time for a grand alliance of India, China and Russia to neutralise these imperialistic forces from creating more destruction in this world for greed.


Friday, July 20, 2012

Off Limit for Over 600 Million?

India, as a Unique case in The World, ranks 2nd in Farm output and also ranks on top in terms of Child Deaths due to Malnutrition. There are huge Flaws in The Delivery Mechanism. Who will solve them?

Wherever he goes, whatever he does, Sharad Pawar & controversy are inseparable. Their bonhomie has only grown since he became the Minister of Agriculture & Food Processing. This is not only because the Indian media is biased against him. His policies & statements are equally at fault. More recently, for added effect, he repeated this on February 22, 2011 as he commented, “The government can not purchase and manage vegetables and fruits.” He further added that any possibilities of purchasing and managing perishable produce directly from farmers in line with other commodities like wheat and rice was simply not possible. To any person, these remarks would sound quite unbelievable, especially when the person giving these remarks is heading the responsible ministry. Especially when Sharad Pawar himself had accepted last year in May that “the country wastes Rs.580 billion worth of food items every year due to lack of poor storage facilities.” Shouldn’t it have been his ministry’s responsibility to proactively find out how to resolve the issue?

While the perishable products market accounts for around $3 billion of the $28 billion organised retail industry, wastage is 3-3.5% of sales – significantly higher as compared to the global rate of less than 1%. Wastage takes place due to inadequate post-harvest infrastructure such as storage facilities, transportation and proper cold chain facilities. While 15% wastage takes place at the farm level, 25% happens during transportation. This is a huge loss for India, which takes pride at being the world’s 2nd largest farm output country with above 228 million tonnes of output.

Read more.....

Source : IIPM Editorial, 2012.

An Initiative of IIPMMalay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

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Thursday, July 19, 2012

Investing in India in The Short-Term

Goldman Sachs Economists have cautioned The World against investing in India in The Short-Term. With high Inflation and Record current account Deficit, has Indian Economy Deteriorated so much? 

After raising the repo and reverse repo rates by 25 basis points (bps) for 6 times in 2010, in its first policy meeting for this year, the apex bank has splendiferously again added another 25 bps to the existing rates. However, so far, these measures have delivered negligible results demanding stricter action. Although from outside the country, RBI’s moves seem right (George Worthington, Chief Economist-Asia-Pacific, Thomson Reuters, tells B&E, “Given these structural factors, the RBI will need to bump rates up considerably, or institute other curbs on liquidity, to rein in inflation this year.”), in reality, even school level economists within the country would be able to tell that the RBI has gotten it horribly wrong – the basic inflation increase is more because of supply side constraints rather than because of excess demand; even the visiting World Bank chief Robert Zoellick was quite taken aback at RBI’s monetary policy and refusal to address the supply side issues. In other words, the RBI should have actually decreased corporate loan rates (and kept retail loan rates unchanged).

But on the other hand, the government looks more focused on maintaining a high GDP growth rate. For that matter, in Q3 itself, our GDP grew at 8.9% y-o-y, the fastest for the country since the second half of 2007. As a result, while IMF now expects India to end up achieving 8.75% GDP growth in 2010-11, Moody’s Analytics has given a growth forecast of 8.5% to 9.5% over the next few years. But at what cost? The government’s die-hard attempts to keep its GDP growth afloat have now started taking its toll on the country’s current account. From 1.5% of GDP in Q1 FY2010, India’s current account deficit (CAD) climbed up to 4.1% of the GDP at the end of Q2 FY2011. Historically, India’s CAD has been financed by capital inflows, FDI and FII, with the former being the stable source of the two. But the clear and present danger for India at present is that while deficit is inching towards a record high, 95% of the same is financed by short-term portfolio inflows (which can reverse anytime if investor sentiment goes negative; and Goldman has already beaten the dead horse into life) in the second quarter. In a precursor, FDI inflow dropped a shocking 36% to $12.6 billion in H2 of the current fiscal as compared to H1 FY2010. In fact, India only received $2.5 billion as FDI in the second quarter. And this is at a time when the government is targeting to attract $100 billion as FDI by 2017.

While the CAD is deteriorating in an imbalanced and distressed manner, rising global fuel prices and higher imports by India to support rising demand (to cover up domestic supplyside failures) has started accumulating in the form of India’s external debt stock, which jumped around 12.5% in the first half of this fiscal to $295.8 billion as on September 30, 2010 (whereas the country’s total forex reserves stood at only $294.2 billion on the same date). Moreover, as the deficit rises, a sudden rise or fall in capital flow (which keeps happening on a regular basis depending on the market conditions) will tend to have a magnified impact on Indian economy making the situation unexpectedly bad.

With the Union Budget round the corner, this is certainly the time when Finance Minister Pranab Mukherjee needs to resort to some tough calls to administer the situation (read our ‘alternative budget’ in the next issue for details). With the US struggling with weak labour and housing markets, with fiscal deficit projected at 10.75% in 2011 (more than double that in the euro area), and gross government debt projected to exceed 110% of GDP in 2016 is taking a breather, this should have been the best chance for BRIC economies to corner all global investment. But strangely, and suddenly, comes the anti-BRIC Goldman advice right out of the blue... Now who was telling us the other day that Goldman does everything these days according to how the US government demands?


Wednesday, July 18, 2012

The Finance Ministry took Micro and Macro Economics Revision Lessons from us

A Blanket Interest rate Hike will have The Worst Economic Impact in order to Curb Supply-side Inflation. It’s time The Finance Ministry took Micro and Macro Economics Revision Lessons from us
 
The second problem is RBI’s fetish for contractionary policies. As is well accepted globally, contractionary policies can work only when the inflation is a demand pull inflation (as raising interest rates and reducing money supply results in consumers having less disposable income, and taking lesser loans to purchase, say, houses). Unfortunately, food items in India are not of the luxuriant variety, which can undergo price jumps so suddenly and so uncontrollably simply because people have as suddenly and as uncontrollably started eating more – unless of course, as even World Bank head Robert Zoellick accepted this week, the inflation in India was much more due to supply side constraints. In such a case, tightening of monetary policy would end up destroying supply even further as businesses would stop investing.

So what should RBI do? Immediately initiate the practice of differential interest rates while providing money to borrowing banks, which would broadly mean three different interest rate slabs when the borrowing bank takes money – one, when the bank borrows money from RBI for providing loans to the agriculture sector, one for corporate sector and one for retail/end consumers. RBI should provide money to banks at lower rates (expansionary monetary policy) in case the banks are taking finances for subsequently providing loans to the agriculture or industrial sector. This will motivate supply growth. RBI should provide money to banks at higher or unchanged rates in case the banks are taking finances for providing loans to end consumers. This will proactively motivate savings and demotivate an increase in retail demand. At the same time, banks should be prohibited from charging increased interest rates from end consumers who have taken past loans. Protectionist surely; but when it is a question of the economy collapsing due to inflation rate jumps, a protectionist policy is any day more welcome than a contractionary one. Dada, try us out – one call and we’ll be at your service! And no, we’ll charge no interest for that.