“The way I look at it, it’s an investment in our people, in our company and in society. It is a win-win”—Howard Schultz, chairman and CEO, Starbucks, while announcing free tuition to all employees who work 20 hours a week or more“Markets expect more decisiveness in government policy formation as well as greater efficiency in implementation”—Raghuram Rajan, governor, Reserve Bank of India, in preface to RBI’s bi-yearly Financial Stability Report“India has the potential to become the largest economy in the world”—Sheryl Sandberg, chief operating officer, Facebook, at a conference“I think the dinner is unfortunate how much attention it’s gotten. I was late. I apologised to IPG at the time and in no way meant for it to be a slight to them”—Marissa Mayer, CEO of Yahoo, in an interview after facing criticism for arriving late to a dinner set up by Interpublic Group at the Cannes Lions festival“Our Mars mission is cheaper than the Hollywood movie ‘Gravity’”—Narendra Modi, PM, India, comparing the cost of sending an Indian rocket to space with the 2013 sci-fi thriller during the launch of the Polar Satellite Launch Vehicle (PSLV) C-23 from Sriharikota“The lesson of the Juncker debacle is that David Cameron and the Conservative Party now pose a real and present danger to our economy”—Ed Miliband, leader of the Labour Party, on how Cameron’s failure to stop the appointment of Jean-Claude Juncker to the European Union’s top job has taken the UK closer to exit, putting three million jobs and tens of thousands of businesses at risk(This story was published in BW | Businessworld Issue Dated 28-07-2014)
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Some of India's biggest companies are pouring billions of dollars into manufacturing guns, ships and tanks for the country's military, buoyed by the new government's commitment to upgrade its armed forces using domestic factories.India, the world's largest arms importer, will spend $250 billion in the next decade on kit, analysts estimate, to upgrade its Soviet-era military and narrow the gap with China, which spends $120 billion a year on defence.Under the last government, procurement delays and a spate of operational accidents - especially dogging the navy - raised uncomfortable questions over whether India's armed forces are capable of defending its sea lanes and borders.Even before his landslide election victory in May, Prime Minister Narendra Modi promised to assert India's military prowess and meet the security challenge posed by a rising China and long-running tensions with Pakistan.Within weeks of becoming prime minister, he boosted defence spending by 12 per cent to around $37 billion for the current fiscal year and approved plans to allow more foreign investment into local industry to jump-start production.Launching a new, Indian-built naval destroyer last week, Modi said: "My government has taken important steps in improving indigenous defence technology ... We can guarantee peace if our military is modernised."This build-up comes as Southeast Asian nations expand their own defence industries, spurred by tensions with China. India, reliant on a state defence industry that often delivers late and over budget, risks being caught flat-footed."The opportunity is huge," said M.V. Kotwal, president (Heavy Engineering) at Larsen and Toubro Ltd, one of India's biggest industrial houses."We really expect quicker implementation. There are signs that this government is very keen to grow indigenisation," added Kotwal, referring to increasing domestic production.Tata Sons, a $100 billion conglomerate, said last month it will invest $35 billion in the next three years to expand into new areas with a focus on a handful of sectors including defence.Larsen is putting $400 million into a yard to build ships for the navy, while Mumbai-based Mahindra Group is expanding a facility that makes parts for planes, including for the air force, and investing in armoured vehicle and radar production.The companies are being lured by the prospect of lucrative returns on their investments as the Modi government has pledged to make "buy Indian" the default option for future orders.Larsen is targeting a fourfold increase in annual defence revenue to $1 billion within the next five years.Critics of indigenisation argue that producing gear - especially in the lumbering state sector - is more costly than buying from abroad. Such deals can add layers of bureaucracy, increasing risks of corrupt dealings.Indian industry is renowned for its ability to adapt, yet questions remain whether the private sector can come up with the solutions needed to bring armed forces into the 21st century without sufficient access to world-class foreign technology.DelaysSome companies are also sceptical of the government's commitment to grow the private market given New Delhi's history of delays and order cancellations, and the traditionally strong ties between the military and state-run manufacturers.They cite the case of a $10 billion Future Infantry Combat Vehicle (FICV) programme. Conceived in 2009, the defence ministry invited three private players and the Ordnance Factory Board, a state entity, to bid for the 2,600-vehicle contract but suddenly withdrew the letter of intent in 2012.Bidders included Mahindra and Tata, which is developing a vehicle along with Lockheed Martin Corp and General Dynamics Corp that could compete for a future contract, said Rahul Gajare, an analyst at Edelweiss Securities.A quick decision to relaunch the programme would demonstrate Modi's resolve, said S.P. Shukla, who heads Mahindra's defence business. Past tenders have stalled amid wrangling over whether or not to allow state manufacturers to bid and under what terms.Larsen's Kotwal said its Kattupalli shipyard in south India has yet to receive any orders for warships or submarines despite being designed to do just that and despite past government pledges to build at least two submarines in private yards.In the meantime, the yard has switched to constructing and repairing commercial vessels."The policy in India has been right since 2006. The problem has been implementation," said Rahul Chaudhry, CEO at Tata Power SED, which makes rocket launchers, sensors and radars.Local firms have captured a fraction of the Indian defence market since it first opened to private participation in 2001. Consecutive governments have handed orders to state factories or to foreign giants like Boeing, Lockheed and BAE Systems.Gajare at Edelweiss estimates total India private sector revenues from defence, including overseas orders, at below $2 billion last year, less than 6 per cent of the country's defence spending.(Reuters)
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A survey of business confidence done by the Federation of Indian Chambers of Commerce of India (Ficci) has thrown up a heartening result. The Overall Business Confidence Index of Ficci has climbed to a 14-quarter high. Confidence and business sentiment is brimming at three levels of the economy, the industry and also for individual firm’s growth prospects. This survey sets the tone for budget week when the new government will flesh out its tax and spending plans. After months of dismal mood where the industry was of on the brink of turning manic depressive, this survey captures the changes expected from the new government at the centre. Prime Minister Narendra Modi promised a lot and now his government will have to start delivering. The first few steps of increasing railway fares and petroleum prices indicate an appetite for unpopular but critical decisions. Much of the confidence is rooted in these initial steps. Of course, it will be impossible for the Modi Government to make everyone happy even within the industry. But it should be able to hold on to its strength of conviction and maintain the path of taking tough calls. The Iraq crisis threatens to throw the import bill out of gear while domestic consumption story will be marred by poor monsoons. Industry leaders will have to keep their expectations in check. They have been patient for long. But they for one must realize that any turnaround requires time and action. The budget policy announcement will be a good starting point for turning the economy around.
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If union health minister Harsh Vardhan is to be believed, the government is thinking of giving 50 essential drugs free of cost to 1.2 billion Indians from ‘birth to death’. To be initially rolled out at select hospitals across India, the programme will focus on efficient procurement, quality control and rational use. We know where this is coming from. As Delhi state’s health minister during 1993-98, Vardhan had pioneered the ‘public drug distribution’ model which helped people access subsidised quality drugs through an efficient procurement and distribution system. That model was later adopted by the WHO and implemented by a dozen other Indian states. But the latest proposal veers towards populist zeal and fiscal recklessness. Consider this: the Indian pharmaceuticals market is worth over Rs 75,000 crore at present and basic essential medicines account for 40-50 per cent of this market. Free drugs to all will mean a tab of Rs 30,000-37,500 crore every year. A more sustainable approach will be procurement and distribution of essential drugs at affordable prices through public hospitals. — P.B. JayakumarSense & Sensibilitythe recent rail fare hike was supposed to be the first of the tough measures to put the country’s finances back on track. But within days, the hike in suburban services was rolled back. After all, Maharashtra goes to the polls soon, and the Mumbai commuter was badly hit by the nearly 100 per cent hike in monthly fares. While that may be a politically sound decision, it’s time the suburban railway networks in the country are spun off — Mumbai, Chennai and Kolkata — into separate entities. This will allow each unit to focus on the city it is operating in and also allow planners to invest and improve networks. By removing the subsidy on them, the networks can be modernised to meet global speed and safety norms. — Anup JayaramIt’s Wish-ful Thinkingit’s budget season once again, and we are all collectively coveting a tax-break from the government. Who doesn’t want lesser taxes, after all? But one question that merits discussion is the possibility of deductions for expenses incurred by individuals, similar to those allowed to corporates. Currently, corporates pay a tax on the profits they make after deducting expenses. On the other hand, salaried people get a minimum exemption, but get taxed on their total revenues. Such deductions will compensate for the lack of social security in our country. At a time when inflation is eating into disposable incomes, allowing deduction of at least some living expenses, or a higher minimum exemption limit, will act as a balm to soothe the salaried class of India. — Abraham C. MathewsWin Some, Lose SomeIt’s not all doom and gloom for Reliance Industries (RIL), ONGC and Oil India following the government’s decision to defer the gas price hike. The move has its silver linings too. In fact, the inability of the government to arrive at decisions on policies related to the gas sector has discouraged foreign players from exploration and production activities in India. Already, British giant BP Plc, which bought a 30 per cent stake in RIL’s 21 oil and gas blocks for $7 billion in 2011, has been struggling to recover its investments. In such a scenario, global giants are likely to keep off the Indian market in future, giving a free play to the domestic giants. — Nevin JohnVoice Of ReasonHDFC chairman Deepak Parekh wants banks and housing finance companies (HFCs) to be allowed to fund land acquisitions. The logic: at present, finance is sourced from sundry sources at exorbitant interest rates which pushes up the cost of the final product — land cost can be 30-80 per cent of a realty project depending on the location. If formal and cheaper finance (via banks and HFCs) is available at a project’s inception— the land buying stage — it will drastically reduce what you pay to buy a nest. It will also have a huge multiplier effect on the economy: steel, cement, consumer goods, furnishings, malls, entertainment, the works really. But if Parekh’s suggestion is to see the light of the day, the mindset needs to change at Mint Road: it classifies realty, equities and commodities as ‘sensitive’ sectors. It notes that unlike in the past, in 2012-2013, bank loan exposure to ‘sensitive’ sectors doubled largely due to exposure to realty as a result of the steep rise in housing prices in Tier-1 and Tier-2 cities. You can’t miss the irony: realty exposure in a way went up only because we have not done what Parekh wants! — Raghu MohanSetting The AgendaA group of economic experts, under the banner of the World Hindu Economic Forum (WHEF), has framed an agenda for the new government. It calls for an end to what it thinks is wasteful expenditure and seeks additional taxation and reduction in the reach and role of the government in the economy (perhaps, a euphemism for disinvestment of public assets and reduction in subsidies). The 27-point agenda has one flaw though. Many a times, it stands against the electoral promises of the ruling BJP. The forthcoming Union Budget will perhaps prove whether WHEF’s prescriptions are holier than the so-called nationalist sentiments expressed by the Swadeshi Jagaran Manch or the Rashtriya Swayamsevak Sangh, with both explicitly favouring a less liberalised economic regime. — Joe C. MathewNothing Black And White About ItThe government on June 24 extended the ban on import of milk and milk products from China by another year. The ban was imposed after it was alleged that milk and milk products from China contained melamine, a toxic substance used for making fertilisers and plastic. But here is an irony: India does not import any milk or milk products from China. In fact, it does not import milk at all —it is a milk-surplus country and the world’s largest producer of milk. So what’s the ban all about? Some say it could be a pre-emptive step as the government is wary of taking any risk. Alternatively, there could be a diplomatic angle to it — the ban can come handy as a diplomatic tool if and when the NDA-led government decides to sweeten trading relations between India and China.— Sachin DaveMedieval MindsetUnion health minister Harsh Vardhan’s view on sex education deserves the reaction it has evoked. To call for a ban on ‘so-called sex education’ in schools is outright retrograde. His stress on value education and yoga in the school curriculum, although perfectly fine in its own right, seems to imply the corruptive influence of sex education in schools. He forgets that scrapping the topic from the curriculum will not stop children from accessing information about sex as it is everywhere on the Internet. A 2013 UNPF report says four million girls in India aged 15-19 years give birth every year, which is a matter of concern. The best and easiest way to communicate the ill-effects of the same to children at an early age is only possible through schools. After all, teenage pregnancy or rapes can be better handled by sharing the right information rather than those through multiple sources on the Internet. — Rozelle LahaThe New CoolThe splits versus windows debate is passé. The new kid on the block that’s fast becoming the coolest one is Variable Refrigerant Flow (VRF) systems using inverter technology. This is a multi-split AC system offering a cheaper and more energy efficient alternative to central airconditioning. According to AC makers, the adoption level is fast rising, not just in offices but in new residential apartments as well. According to LG’s Head of Business for AC Saurabh Baiskhia, VRF technology has a bigger application in homes thanks to the ability to cut off cooling where not required. Also, costs have dropped substantially this year — 30 per cent from last year (it now works out to anywhere between Rs 45,000-Rs 55,000 per tonne narrowing the gap between the VRF and a single split AC). The total residential AC market in India (split AC and Window AC together) is around Rs 10,000 crore. VRF is an additional Rs 2,000 crore market, and now expected to grow at a fast clip. Energy saving is clearly emerging as the biggest USP in the power guzzling AC segment. — Chitra NarayananEngineering A ChangeIndia’s membership of the Washington Accord augurs well for engineering education in the country as well as its engineers. Besides global recognition for Indian engineering degrees, the membership of this club is likely to eventually ensure global quality for all engineering institutions in the country. But all this will depend on astute gate-keeping by the National Board of Accreditation (NBA). The 220-odd Tier-I engineering institutes shortlisted by it will have to apply afresh for accreditation and get their programmes vetted before they are awarded equivalence with Washington Accord institutions. So expect extensive rejig of courses and changes in emphasis. Also, NBA has asked universities to allow affiliated Tier-II engineering colleges to design 50 per cent of their programmes. These developments, along with the Modi government’s efforts to spur the manufacturing sector, may revive the glory of engineering education, which, in the past few decades, has mostly been used as a stepping stone to an MBA degree. — Rozelle Laha(This story was published in BW | Businessworld Issue Dated 28-07-2014)
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The rupee is trading at 60.72/73 versus its close of 60.61/62 on Wednesday (21 August).Dollar gains broadly as investors detect a hawkish turn in policy discussions at the Federal Reserve.Dollar's index versus six majors up 0.13 per cent.Almost all Asian units lower against the dollar.Traders will monitor flows into the debt and share markets for direction.The Nifty is trading up 0.17 per cent in early trade.(Reuters)
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The Budget Session of Lok Sabha on Monday (7 July) started on a tempestuous note with members belonging to several opposition parties storming the Well protesting against inflation and hike in rail fares and prices of petrol, diesel and LPG. Trouble started as soon as the Question Hour began, with members of Congress, Trinamool Congress, RJD, SP, Aam Aadmi Party and the Left trooping into the Well raising the issue of prices and rail fare hike. Speaker Sumitra Mahajan's repeated pleas to allow the questions to be taken up went unheeded, leading to adjournment of the House for nearly 40 minutes. Monday (7 July) was the first day of the Budget session of the Narendra Modi government. Telangana Rashtra Samithi (TRS) members were also in the Well opposing the ordinance on the Polavaram project. Slogans like "achha din ayega, mahangai badhayega (good days will come, prices will rise)" and 'roll back rail fare hike' were heard. Members also opposed rise in prices of petrol, diesel and LPG. Congress leader Rahul Gandhi was seen standing in the aisle, while his party colleagues Jyotiraditya Scindia, Deepinder Singh Hooda, K C Venugopal and several others were in the Well. RJD's Pappu Yadav was vociferous in his protest as was TMC's Kalyan Banerjee and most of his party colleagues. Bhagwant Singh Mann of AAP was also in the Well and was heard raising the plight of Indians left behind in trouble-torn Iraq. Prime Minister Narendra Modi was in the House during the entire period of turmoil along with his senior party and ministerial colleagues L K Advani, Rajnath Singh and Sushma Swaraj. Congress President Sonia Gandhi was also seated in the front row of the opposition benches. Amidst the din, the replies to questions given by Petroleum Minister Dharmendra Pradhan and Labour Minister Narendra Singh Tomar could not be heard. NCP's Supriya Sule, who was asked to raise a question on unemployment, shouted the government's reply was "unsatisfactory and bureaucratic". (PTI)
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The rupee was trading at 59.67/68 versus its close of 59.73/74 as gained in the domestic sharemarket raise hopes for continuation of foreign fund inflows.Overseas investors bought Indian shares worth $159.20 million on Thursday (3 July), provisional exchange data shows.The BSE Sensex is trading up 0.2 per cent.The rupee is expected to hold in a range of 59.40 to 59.80 during the session. Most other Asian currencies also trading stronger compared to the dollar.The Reserve Bank of India on Thursday restored the overseas investment limit of Indian companies to 400 per cent of the firm's net worth after the rupee rebounded from last year's record low levels against the dollar.(Reuters)
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He knows what it takes to keep the show going. New Infosys CEO Vishal Sikka has promoted 5,000 employees to stop them from leaving the software major. The company has sanctioned promotions for employees falling between level three — software programmers— and level five, senior management. It has also given salary hikes of 6-7 per cent to employees in India and 1-2 per cent to those on site, effective 1 April. With this latest round of promotions, Infosys has promoted 15,000 employees in all since the start of the year.Off The HookSetting aside the Jharkhand High Court ruling, the Supreme Court quashed criminal proceedings against J.J. Irani, former Tata Steel joint managing director and Tata Sons director, in the 1989 Jamshedpur steel plant fire tragedy. Irani, who was charged with negligence in the fire that killed 60 people and maimed more than 100, could not be incriminated as the case was filed three months after the accident.Flying OutGabriele Del Torchio, CEO, Alitalia, is ready to leave the airline after striking a rescue deal with Etihad Airways. Recruited last year to help nurse the struggling carrier back to profits, Del Torchio successfully secured a deal with Etihad in less than a year’s time. The deal will see the Abu Dhabi-based carrier buy 49 per cent of Alitalia and invest 560 million euros in the loss-making Italian airline. The airline will also have a new chairman as the current chairman, Roberto Colaninno, too, has decided to step down.Pay CutBharti Airtel founder-chairman Sunil Bharti Mittal’s remuneration dropped about 45 lakh or 1.8 per cent to Rs 23.88 crore in the last financial year from Rs 24.33 crore in the previous fiscal. This, despite higher perquisitites. He received about Rs 79 lakh in 2013-14 , up from Rs 49.6 lakh a year ago. The drop in pay has been mainly due to a Rs 75-lakh decline in the performance-linked incentive.In The SlammerVice-chairman and managing director of Bhushan Steel Neeraj Singal has been arrested in connection with a Rs 50-lakh bribery scandal involving the chairman mangaing director of Syndicate Bank, S.K. Jain. Accused of offering a bribe to Jain to increase the credit limit of some companies in violation of banking rules, Singal’s application for anticipatory bail has been rejected in view of the serious nature of the crime, which involved public money.No DealRupert Murdoch’s 21st Century Fox scrapped its $80-billion offer to buy Time Warner to create one of the world’s largest media conglomerates after the latter declined to engage in negotiations. Murdoch, chairman and CEO of Fox, cited Time Warner’s refusal to come to the table to discuss takeover as one reason for the stunning turnabout. He now intends to buy back $6 billion of its own shares.Out Of The windowHead of Nokia India, now Microsoft Devices Group (MDG), P. Balaji, has resigned less than a month after Microsoft took over the Finnish company’s mobile phone division. The global streamlining of the devices business by the US technology giant is seen as a plausible reason behind Balaji’s move. He will, however, continue to be an advisor to MDG through the transition till October 2014.Riding HighPawan Munjal, managing director and CEO of Hero MotoCorp and the third son of Hero Group chairman Brijmohan Lall Munjal, 59, has been elevated as the vice-chairman of flagship Hero MotoCorp, lending clarity to the succession plans at the country’s top two-wheeler maker. Munjal’s elevation was cleared by the board. He was running the firm even before the JV with Honda was dissolved in 2011.(This story was published in BW | Businessworld Issue Dated 08-09-2014)
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