The world's problems are caused by excess liquidity and it cannot be cured by adding more. It's like treating the problem of alcoholism by alcohol. Whether we like it or not, the world has to go through 2–3 years of rehab before this problem can be cured.What politicians are doing right now is just delaying the problem and not solving it. They are just giving more alcohol to an alcoholic to reduce the immediate pain, which is increasing the damage (bubble) rather than reducing it. Sooner or later, in the near future, they will have to solve this problem and the best of economists can't predict the time because it would be a fallout of political equations also rather than just economic equations. A doctor (economist) can only recognise the problem and suggest immediate treatment; ultimately the patient's (world economy) family members (people / voters & politicians) have to force upon the hard decision of going for rehabilitation.The best way to solve a problem is to first recognise the problem. After that, generally, things are not that difficult. As individuals, once we have recognised the problem, while we are waiting for politicians to decide when they want to tackle the problem, we should do our own planning to ensure that impact of the financial crisis on ourselves is minimum.Here we should recognise that once the world economy goes into rehabilitation, there would be periods of pain and if there is a bubble burst in the world, no matter how much we prepare, we cannot escape totally unaffected. The idea should be to minimise the impact to tolerable limits.Again, we should recognise that impact may not directly impact us but can impact us indirectly. For example, your spouse or your brother might lose his job and you might have to support him. Or you might not be leveraged but your father might be and you might have to pay for his debts. Hence when you are getting your house in order it's important that you make sure that your near and dear ones for whom you feel responsible also gets their house in order.I would suggest the following key steps to prepare for the rehabilitation:Reduce Leverage: The first and the foremost thing that we need to do are is to reduce our leverage. We are lucky to have seen the trailer of this upcoming financial crisis in 2008 and should take clues from it. That time we saw what happens to the patient when he is put into rehabilitation, just that we could not see his pain and agreed to give him more alcohol. Just think of a situation when liquidity (alcohol) is sucked out of the financial markets (patient's veins). Remember, as individuals, we are not ‘too big to fail'. Our investment in bubble assets like real estate etc might be worth a fraction while our debts against them stand as it is. We should try to square-off our leverage positions as much as possible. In the greed to maximise returns, we might leverage now and also gain till music stops. But once it stops, we would lose even our principal.Avoid Real Estate For Investment: In last 8 years, real estate has given an average annual return of around 30 per cent and hence out of fear of missing the bus, we want to buy property. Secondly, due to excess liquidity, no other asset class has been able to give similar returns, not even best of businesses. Hence everybody wants to invest in property where not only one is getting higher return but also has good opportunity to leverage. However, it's not sustainable and if you see the history of financial crisis, including USA's real estate market after 2007 or South East Asian market after the 1997 crash, each downturn (rehabilitation phase) is marked by a steep fall in real estate prices.If you are buying a house for own use, with limited leverage you can go ahead, because it is difficult to keep postponing comforts for one's family members. However, if you are leveraging yourself to buy property only for investments, please avoid. Real estate is a depreciating asset and 20 years down the line you would not be able to live in the property you are buying today. Tell me how many properties you have recently considered buying is 20 years old?Invest In Yourself: Go for the higher education you had been postponing for a while. Ask your employer to send you for the training you always wanted to go for. Read up when you get time, develop new skills. No investment can fetch you higher return than your investment in yourself. It can also protect you better in recession time when companies are cutting jobs across the board and you might find yourself in the wrong place at the wrong time.Get Medical Insurance For Family: We should get medical insurance not only for ourselves but for all the family members for whom we are responsible, and in case of medical emergency we will end up footing the medical bill. We should not rely on the company provided medical insurance and should take a separate medical insurance because you if you lose your job you will also lose the medical cover provided by the company. During 2007 financial crisis in USA, many people were willing to work for zero salary just to take benefit of the company's medical cover. Medical emergencies are biggest risks to one's planning and in today's world can drain out all the savings you might have made for the rainy day.Understand The Bubble Points (Real Estate, Commodities, Financial Sector): Due to worldwide excess liquidity, major bubbles are formed in real estate, financial sector and commodities. If you are exposed to these sectors due to your job or any other reason, create a good plan B. Lot of financial intermediary jobs like private equity, equity researchers, brokers, analysts, wealth managers have been created in the last decade due to extra liquidity. Once the liquidity is sucked out, a certain percentage of these people would lose their job and a certain percentage will have to live with pay cuts.Similarly, due to excess liquidity, prices of commodity like crude, iron ore, coal etc. have run up. This excess demand is not only due to excess investment in unsustainable assets but also speculative investments by investors sitting on lot of liquidity and who believe in high leverage. The crash in prices would badly impact countries that are dependent on exports of commodities like Australia, Russia, Brazil, etc. On the other hand, countries like India, which is majorly an importer of these commodities, would gain from a crash in prices of commodities like crude. Hence, it's important to understand whether you are on the buy side or the sell side of these commodities to understand the risk.Understand Currency Risk: Unlike many of the previous downturns, the relative purchasing power of different currencies is in the heart of this crisis. Hence people who are exposed to currencies like US Dollar, Euro, Brazilian real etc need to be aware of this fact and accordingly hedge themselves. It's difficult to predict whether hegemony of US dollar would end or not in the next few years but surely it's not a safe haven and should not be looked at like that. When the liquidity is sucked out, first reaction of the financial world might be to move to safe haven of US Dollar but soon they would realize that it's a ‘financial cliff'. Again, gold is not a safe haven. Chances of the world moving back to gold as the under-lying asset is very remote and the new standard would most probably be based on a basket of commodities/currencies.Understand Cross Country Trade Risk: At the heart of current financial crisis is the currency risk and hence we should be very aware of cross country trade risk if we are into international trade or similar business. Proper hedging tools should be used for international transaction. Remember that one might be right about the movement of currency but one needs to get the timing also right which generally is much more difficult. Lot of people in the world are predicting that the US dollar would eventually crash and most probably they would be right but nobody is able to predict when and that's the crucial part. During the 2007 crisis, many people incurred heavy currency losses because they were betting against the US dollar while the currency appreciated as it was considered a safe haven.If I have scared you, I must make it clear that this is not the end of the world. The economy always goes through such economic cycles every 5–7 years. People who prepare themselves well for the downturn are able to make most of the upturn. This downturn would be in many ways a blessing in disguise for India. Crash in commodity prices would lower our import bill of crude which will solve the current account deficit problem and also reduce our subsidy burden. Relative strengthening of the Indian rupee against developed country currency like US dollar and the euro will help us retain our talented manpower in India and utilise their talent to build domestic consumption focused industries. For example, an industry like infrastructure would be able to attract the much needed engineers who today are keener to work for IT assignments for foreign clients. While you are making investments in shares today, go for companies which are focused on domestic consumption specially those who are importing large part of the input commodity.Remember in our life time we would see many such economic cycles. The art is to survive the bad times so that we can make most of the good times. By playing safe today you might not make as much money as your neighbor is making by leveraging, but at the same time, unlike your neighbor you would not lose everything that you have earned, when the bubble burst. Anybody can be ‘the king of good times', the real test is when the tide turn.(The author is VP, Finance and Gas Business of H-Energy, a Hiranandani Group company)
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The gates at India's leading carmaker Maruti Suzuki India's Manesar plant are shut. The campus is teeming with hundreds of policemen. That's a fall-out of the violence that gripped the plant after workers turned violent, attacked executives and burnt cars and parts of the office on Wednesday. In the fracas, Awanish Kumar Dev, general manager (HR) was burnt to death. At least 88 other executives have been injured. Close to a 100 workers have been arrested post the arson.Ei Mochizuki, a Tokyo-based spokesman for Suzuki Motor Corp, which controls Maruti Suzuki, told Reuters two Japanese employees had been hospitalised after the unrest.The provocation was the suspension of a worker, who had ostensibly beaten a supervisor. The workers' union demanded his reinstatement. According to a statement issue by Maruti Suzuki, "the first act of violence by the mob was to forcibly shut the main gate and prevent managers from leaving the premises after working hours. Thereafter, armed with iron rods and door beams of cars, the mob spread out in groups in the factory area and targeted supervisors, managers and executives." They also reportedly ransacked offices, damaged property and finally, set the offices on fire. The statement points out that the office facilities have been burnt beyond repair.However, the assembly line has not been hit. Therefore, it is possible to restart production at the plant that makes the Swift, A-Star and SX4 models once the situation is under control. The plant can produce close to 1,500 cars a day.The standoff between the workers and management at Maruti Suzuki is nothing new. After three strikes totaling 45 days in 2011, this is the first flush of worker activism this year. During the last fiscal, Maruti recorded a 28.6 per cent decline in net profits from Rs 2288.7 crore (in 2010-11) to Rs 1m635.1 crore (2011-12). Car production during the year also fell from 1.27 million to 1.13 million. Labour unrest cost the company more than Rs 2,500 crore in lost production during 2011.Shares in Maruti, which saw its sales fall 11 per cent in the fiscal year to March, partly due to the protracted labour strikes, fell 8.9 per cent on Thursday, their biggest daily per centage drop since July 26, 2010.Suzuki's shares closed down 3.8 per cent in Tokyo to their lowest price since February 2009.Maruti Suzuki is not the only automobile company to face labour problems in India. Others including Honda, Hyundai, Ford and General Motors have faced labour problems from time to time, but in the case of Maruti Suzuki it is quite a regular feature. Meanwhile, Maruti has announced plans to set up a Rs 4,000-crore plant in Gujarat. That could be a means to reduce its dependence on Haryana, where labour problems have been on the rise.The Maruti Suzuki statement goes on to add that "it is an orchestrated act of mob violence at a time when operations had been normal over the past many months." The violence at the plant has been condemned by industry. "Assocham expresses its anguish and strongly condemns the violence at Maruti Suzuki premises," says secretary general D S Rawat.He said that India could not afford any disruption in economic activity when industrial growth was declining.That could be critical in the coming months for both the carmaker and its workers.
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FDI is not relevant. At least not as relevant as domestic investment. In the whole debate about the quality, quantity and restrictions of foreign direct investment, economists and politicians are forgetting about the importance of domestic investment. In any dynamic and healthy economy, FDI is a small part of total investment. In a strong economy, domestic investment is the bread and butter while foreign investment is the jam. The debate sparked by the comments of US President Barack Obama has distorted the debate on investment. Fresh domestic investment must grow to create jobs. Even if India were to lift all caps on FDI, the economic activity in the country will not be recharged. But if domestic investment grows, foreign investment will naturally grow. The government's own figures show that domestic investment is sliding fast. Since the delicensing of manufacturing activity, companies that launch new projects don't have to take permission. But they need to file details of their projects. This filing is called and Industrial Entrepreneur Memorandum (IEM). It's an indicator of fresh investment activity in the country. Unfortunately, this figure is falling. For instance, in March 2011 investment worth over Rs 15,000 crore in 409 projects was promised under IEMs. A year later the figure was less than half at Rs 6,900 crore for 277 projects. The IEMs also mention the number of people employed. Not surprisingly, the figures are negative here as well. From 2006 to 2011, the annual number of proposals have halved and employment fallen. It should have been the opposite. Investment and employment should have doubled, not halved. The fall in industrial output numbers is known. So is the fall in growth of capital goods industry. Combine these two with lower figures of IEMs and you get the frightening sigh of an economy winding down. Indian industrialists are struggling to keep up with the costs of credit. At best they are managing to keep the existing operation going with their revenues. But even if demand rises, they are not ready to expand and invest for the growing market. So this raises the spectre of another crisis. A few months later, supply of manufactured goods will not be able to meet demand. Without capacity addition, even basic consumer goods will be short supply. This could trigger a fresh spiral of price rise and inflation. What then? Touting FDI figures will not help. It's imperative to feed domestic expansion needs. FDI will take care of itself. FDI can't exist in isolation to domestic investment. It works only in those countries that have little or no domestic industry. India has never been in such a country. Here manufacturing is centuries old. Therefore to have a debate only on foreign investment and not domestic is missing the point. Even if the political leaders don't want to worry about the investment figures, they should worry about the monster of scarcity of basic products. This fear is closer than expected. It will be tough to blame domestic scarcity on Greece. (Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com)
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In June 2003 Singapore's North East Community Development Council conducted an experiment where a group of Singaporean students competed to see whether they can survive for three days with nothing but a laptop and about $ 70. One participant said, "In all seriousness, until one has experienced both the pleasures and pains of surviving wholly online, we wouldn't appreciate the Internet for what it's worth - both good, and bad. Surprise surprise, e-commerce isn't as bustling as we all thought it to be." Ten years later the scope of the internet has extended to a point where consumers can remain in the comfort of their homes and use e-commerce to conduct every possible transaction like shop, pay bills, transfer funds and check their account balance. The things we can purchase online does not surprise us anymore.While the e-commerce boom began globally in 2008, India only saw its inflection point in the latter part of 2010, when internet adoption in India surged. The Internet and Mobile Association of India (IAMAI) states that the e-commerce industry in India has grown manifold in the last couple of years with the net market size expected to grow by 47 per cent to touch Rs 46,520 crore by end of 2011. While the growth numbers look good, the true potential of e-commerce has not been harnessed due to low internet penetration, which is critical for its growth. With India crossing the crucial 100 million internet users' mark in December 2011, it still remains under 10 per cent. When you compare this with the global average of 26.6 per cent, it becomes clearer that India has languished in this regard. The second factor that is a huge barrier to Internet access in India is the low penetration of personal computers (PCs) primarily due to the issue of affordability. The third aspect is credit and debit card penetration which was under 200 million in 2010. Add to this the fact the online payment market in India stood at only €4.2bn in the same year, which puts India at the smallest market in terms of potential value where the average online spend per person is lowest compared to global indicators (Source: Datamonitor Jan 2012 study). This is indicative of the fact that Indians are not yet comfortable transacting online owing to privacy and security concerns based on the need to reveal personal information at multiple sites while using debit or credit cards for online transactions. So while the e-commerce model is gaining traction in India-i.e. businesses are fast evolving from the traditional brick and mortar model to the e-commerce model- the challenges described above, are pushing these very businesses to now develop an m-commerce strategy. Let's take a deep dive into why. Reach: M-commerce will be a game changer in a country like India where internet penetration has been much lower than that of mobile penetration. According to TRAI, the total Wireless subscriber base in India was 911.17 million at the end of February 2012. Additionally, while e-commerce mandates an internet connection, many m-commerce applications are SMS-based and do not require GPRS settings. E-commerce penetration has not yet reached tier III and IV cities in India, while mobile service providers offer all kinds of services in these areas as well. Clearly this is an opportunity bus that no one will want to miss. Affordability, portability: e-commerce misses reaching out to a majority of the population due to the high acquisition cost of hardware and the operating cost of an internet connection. M-commerce on the other hand is more inclusive due to the wide-spread adoption of mobile phones. Most people have one and they are available in sub-Rs 1000 range with SMS rates being among the lowest in the world. Also, mobile phones trump PCs in mobility as one does not need to wait to get to a PC or boot a bulky laptop.Ease of use, security: The interface for m-commerce is simple and easy-to-use, designed in a way that everyone can use while e-commerce may not always be an option for users who are not computer literate. M-commerce offers higher security levels with unique passwords that are required for every transaction. E-commerce has always been in the spotlight for security concerns. Alignment With The National Agenda: In the Indian context, the single most s significant reason for m-commerce adoption is the government's focus on inclusive growth and its commitment to bring India's unbanked population within the banking net. Two critical services provided under the m-commerce umbrella are mobile payments and mobile banking. RBI estimates show that about 450 million of the population is unbanked which signifies huge scope for growth in the banking sector in India abetted by mobile banking. Additionally, the RBI has been supporting mobile banking to achieve 100 per cent financial inclusion thus recognising the potential m-commerce has to reach India's unbanked population. Initially it had allowed non banking entities like carriers to offer a semi closed wallet with a limit of Rs 5000, later, it increased the limit to Rs 50,000 and then removed it all together showing a clear intent to accelerate financial inclusion through mobile payments. In conclusion, I believe that the opportunity for m-commerce is enormous with benefits that will accrue across the board to consumers, banks and the country at large. All we need is a level of education, awareness and a push in the right direction so that we can see it happening sooner rather than later. In about a year's time, an experiment like Singapore's NECDC on the m-commerce space in India will tell the story of a bustling space replete with opportunities. Its inflection point is fast approaching and to use a much clichéd statement - the future is mobile. The author is the VP & CMO of Obopay, a mobile payment services company
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...I have come to understand that not all enclosed spaces are prisons, and that some are for safety: some are sanctuaries" What redeems a small place, turning a cell into a place of refuge? Peter Hobbs asks this question in In the Orchard, The Swallows. The book is about enclosed places — a small room where an unnamed man recovers from weakness, a garden in the house of the kind man who rescues him and of course, the orchard, where the memory of love resides. Hobbs sets the story in Northern Pakistan, a place of fluid borders with Afghanistan, where the swallows wheel over the branches of pomegranate trees. Swallows that appear as leit-motif, both in prison and in orchard, in sorrow and in love. The main character, a nameless man, sees a girl at a market... “Beside a tray of apricots — I remember because their colour was reflected onto the white silk of your dupatta.” They are two 14-year-olds. He gives her a pomegranate — the first fruit, in Islamic legend. This is another garden of Eden and they are young Adam and Eve. He is thrown out of this paradise when the girls's father, a politically important person, has him thrown in prison to rot for 15 years while undergoing hideous tortures. He survives and the love that led him into darkness ultimately delivers him out of it. We meet our narrator as he emerges from prison, a broken and disoriented 29-year-old who is nurtured back to health by a former government poet and his young daughter, living near the now-neglected orchards. In The Orchard is an exquisite love story. It is also a cruel story told with infinite gentleness, with the fragrance of a single crushed flower. The central theme of love runs through this short, fable-like novella. Here the love of the boy for the girl Saba, transcends the beloved (interestingly Saba means beloved ) to be one with infinity. It is difficult to find such love these days, a love beyond the broken body. One is reminded of the classic love story of Laila-Majnu. But in an interview to The Star.com, Hobbs said he had never heard about the tale of Laila Majnu before writing this novel. He had wanted this story, a fable of sorts, to be rooted in the natural world; the seasons and the landscape mattered a great deal to him and that's why he had set it in Northern Pakistan, a place that had impressed him a great deal when he had travelled there 15 years ago. According to Islam, pomegranates grow in paradise and can be tasted only fleetingly in this life. In the Orchard, leaves a bittersweet taste of paradise for the reader. Peter Hobbs, grew up in Cornwall and Yorkshire, and lived in Canada while writing this book. His debut novel, The Short Day Dying was shortlisted for the Whitebread First Novel award and the John Llewellyn Rhys prize and won a Betty Trask award. nandini (dot) bw (at) gmail (dot) com
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One of the offshoots of a faling rupee has been that global private equity funds, which poured tens of billions of dollars into India investments when the economy and currency were flying high, may be stuck with those holdings much longer than planned as the rupee's plunge plays havoc with their exit options.The sharp fall in rupee against the US dollar has prompted many foreign private equity funds to up their return expectations in rupee terms for new investments in India.The rupee is now down by nearly 20 per cent against the dollar from a year ago, adding to the several previously unforeseen challenges for the PE investors. For every investor realising a 15-per cent return on equity investment, the gains will be nullified if rupee slides 15 per cent. For investment made one year back, the return in such a case will be negative due to 20 per cent fall in rupee. Returns on funds raised in dollars have shrunk with the currency's tumble to record lows, compounding the effects of a weak stock market and slowing growth, and threatening to further dampen private equity interest in Asia's third-largest economy.Srinivas Chidambaram, managing director at Jacob Ballas Capital India, of the rupee's steep slide since August says "this has simply shaved off nearly a year's implied return.""The depreciation is clearly a matter of concern in the medium term as it impacts exit realisations and existing portfolios," he said. His company, an offshore fund backed by New York Life Insurance Co, manages $600 million in India.However, that does not mean the global PE funds have gone dry on India. While Asian private equity is set to see a boost in allocations from North America and Europe in the next few years, Australia is seen as the most attractive market for buyout deals, as indicated by about 39 per cent of LPs across all regions, followed by China with 30 per cent. Indonesia and India were deemed appealing by about 25 pwer cent of investors.The currency risk could dampen private equity investments in India which, including venture capital deals and stakes in listed companies, rebounded to $13.5 billion last year, up 64.3 per cent from 2010, according to KPMG. The peak year for private equity investment in India was 2007, at $14.1 billion.Last year, exits were down 38 per cent from a year earlier, at $2.8 billion, the KPMG data showed. "Most funds are not keen to exit their investments now," said Jacob Mathew, managing director of Mape Advisory Group, an Indian investment bank that handles private equity deals.Investor OptimismA latest survey by Bank of America Merrill Lynch (BofA-ML) show fund managers have pared their underweight positions on India in June, even as they have reduced their overall exposure to emerging markets to the lowest level since October 2011.India, the third least-preferred among the emerging markets, has seen its underweight position coming down to 35 per cent in June from 55 per cent last month, according to the latest survey of fund managers by Bank of America Merrill Lynch (BofA-ML).However, India hasn't seen any improvement in fund allocation by global investors, as they have gone underweight on emerging market equities in June for the first time in seven months.For Asia-Pacific LPs, India is in the bottom three for buyout investments over the next two years. For venture and growth capital investments, India is the second most favoured destination after China. For global LPs, China, India and Indonesia are the most attractive destinations for venture or growth investments in the region. There is an interesting discrepancy between views of LPs in different regions about India, It seems India's neighbours are less optimistic about the country's PE industry than those farther away, he said, adding that it is a reflection of what is happening in the local PE market, pointed out a report in Business Standard.The desire for greater Asian PE exposure is in line with investor optimism for the region, in contrast with dampened sentiment towards the West.Also, the tumble in the rupee comes on top of a slump in share prices, with the BSE Sensex sliding 25 per cent last year, although it has recaptured some of those losses with a gain of about 9 percent so far this year.And while the outlook for protracted weakness will give many investors pause, Mape Advisory Group's Mathew said it also makes Indian assets attractively cheap."If the rupee remains at these levels, we will see more fresh investments than exits," he said.How Did Things Change?As JM Trivedi, Partner and Head of South Asia, Actis, writes in Business Standard, the world was a different place in early 2008. The mood was bullish in India — over 2005-08, private equity (PE) investments in India had grown 10 times. Nearly $50 billion was raised during this period for investment in India, of which $20 billion was yet to be invested at the end of 2009, as the global recession took hold and investment activity froze. So, what went wrong? In the past, the PE industry relied on earnings growth led by strong revenue expansion and multiple arbitrage to deliver returns. After the financial crisis, the earnings growth declined and multiple arbitrage (between entry and exit multiple) vanished. In fact, in many deals done before the financial crisis, the arbitrage is likely to be negative.The Rupee ConundrumComing back to the curse of falling rupee, it is Asia's worst-performing currency over the past 12 months, shedding more than one-fifth of its value to hit a record low last Friday at 57.32 to the dollar. In November 2007, at the height of a boom in private equity investment, it marked a decade high of 39.03.India has proven a tough market for global private equity companies once captivated by its growth potential.Fierce competition for deals, few willing sellers, a regulatory ban on leverage and a fickle market for exits through IPOs meant many private equity firms have had to content themselves with minority stakes, often in listed companies.KPMG figures $31.5 billion was invested in India by private equity funds during the boom period of 2006 to 2008, with less than 10 per cent of that having exited as of the end of 2011. Typically, private equity investors look to sell off their investments in roughly five years."There is at least one year extra time required for portfolio companies to now deliver the returns," said Subbu Subramaniam, founding partner of M Cap Fund Advisors, which has invested in consumer products maker Jyothy Laboratories Ltd and City Union Bank.In one boom-time deal whose paper loss has been exacerbated by the drop in the currency, US private equity fund Warburg Pincus, one of the most active India investors, in August 2007 paid $98.5 million for a small stake in Indian engineering firm Punj Lloyd at Rs 275 a share.Since then, the rupee is down 27 per cent and Punj Lloyd stock is down nearly 83 per cent, and the stake is worth just $12 million.Caught Off-GuardThe rupee has been under pressure as India's economy weakens and investors worry about a widening current account deficit. Ratings agencies Fitch and Standard & Poor's, citing fiscal policy woes and risks to growth, have cut their outlook on India's credit rating, threatening its investment grade status.The Reserve Bank of India, which has stepped into the market to sell dollars, on Monday announced a rise in foreign investment limits in government bonds and other steps to bolster the rupee, but the currency drew little support as the market had hoped for more aggressive measures.The sharp drop in the rupee late last year, and again since March, caught companies, investors, and policymakers off-guard."The speed and magnitude have been significant. It adds to the risk profile of our investments," said Devinjit Singh, managing director of the India buyout fund at Washington-based private equity giant Carlyle Group, which has invested $800 million in India, according to its website.Traders and economists expect the rupee to remain weak as Europe's protracted debt crisis steers investors away from risky assets and India's economy sputters at its slowest in nine years, growing at 5.3 per cent in the March quarter. (With Agencies)
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When the internet came to India on 15 August 1995, nobody could have imagined the progress and reach it would garner in more than fifteen years of its existence. Seventeen years and 121 million users later, the internet has become the harbinger of information, communication and technological revolution in the country. The medium which has engaged people from varied walks of life has now become an intrinsic source of revenue generation within the economic setup and accounts for a considerable chunk of traffic across the financial spectrum of the country. Indians are now more confident in using the online domain for doing business, banking and shopping and are increasingly employing social connections to reach out to their near and dear ones. Herein lies the pull of the social media revolution that has hit the country and has taken over the virtual world with approximately 45+ million regular users of social media services available in the country. It is a well known fact while Indians have embraced social media wholeheartedly, they have also started using this platform as an extension of their personal lives. According to the annual Global Customer Service Barometer study released by American Express, Indians are far ahead of their global counterparts when it comes to using social media for customer service. Of those surveyed in India, 54 per cent said that they had used social media at least once in the past year to get a customer service response. This is more than twice the average 20 per cent of consumers in other markets revealed in the findings of the study, which was conducted in India and 10 other countries.It is in this regard that the significance of social media can be fully understood through a small example that elucidates the relevance of this medium. A decade ago, while Pyra labs was building the first blog engine, a lot of internet users did not have an idea of what the medium was or what it could possibly become in the near future. Ignored for most part of its existence, blogs have now become a veritable resource house of information which, in comparison to other resource material, carry more matter than traditional website content.Another example that illustrates the significance of the social media revolution in the country is the curious case of ‘Kolaveri Di'; a song that became an instant rage in the country within hours of it being uploaded on a famous video sharing site. With millions of views adding in every minute, it went onto become the most heard song of the 2011 while also becoming a slang term across the country, thereby turning its singer Dhanush into an instant celebrity. The success of the song demonstrates the power of social media and the clout it commands across its followers.Not just in India, but the world over, social media has become a tool for bringing about social(often systemic) changes, as has been well documented during the Egypt Uprising last year, where protestors and rebels kept up with latest developments across the country over a popular social networking and a social micro-blogging site, so much so, that fearing the medium's potential, other regimes cracked down on the social media before cracking down on the protestors themselves. These incidents while showcasing the influence of the nuovo media also attests to the reach and impact of this medium which is emboldened by the fact that eighty-six per cent of the young generation views social media as ‘a potent force for change', in the new millennium.An interesting fact that emanates from the aforementioned study is social media's relevance to the economy of today. Info-stats that claim ‘Social media in India reaches out to 60 per cent of the online Indian audience', ‘Facebook and Orkut, together cater to about 90 per cent of the users in the social media space' and ‘The highest number of active users are from the 15-24 age group', point to the vast potential for prospective businesses in the social media sphere. They also indicate that India is a fast growing market and its relevance in the global social market is humongous to say the least. According to a slew of recent studies, social media is becoming an essential element of the global media utilisation. Coupled with the interest of the young generation of today this can work wonders for the businesses. With positive attributes such as affirmative customer engagement, positive brand building and lost cost-high return model, social media can in work as an upbeat PR medium for the business. It is said that in times to come, digital or social media will become an integral part of the marketing initiatives of every business wherein a major chunk of the revenue creation will be channelised towards social media initiatives. All this can be achieved keeping in mind the fact that in today's time indirect propagation works more potently than direct advertising. Thus, the magnitude of digital media activation will become very specific to the businesses. It is here that one needs to bring in the marketing aspect in the social media ecosphere of today as well. We all know that social media marketing is absolutely necessary in today's times. While for larger business setups, social media marketing helps with bringing in eyeballs into the setup which is forever dogged by different verticals, it is also favourable for a small business setup as it helps in taking word out to the masses and thus adds to visibility. Bringing in other positives, the social media marketing module works in tandem with customer activation and thus creates a win-win situation for both the business and the consumer. Positives like greater audience penetration, wherein presence across social networking sites guarantee greater eyeball count, creation of an awareness module where simple internet activation ensures greater reach which coupled with low tech savvies acts as a pertinent add-ons to the medium. In my view, a great beneficiary in this context would be the start-up businesses of today who will greatly gain from the low-cost and low-barrier-to-entry advantage that social media offers to the start-ups. While they have flexible policies, the advent of social media will help them in easily accepting social media activations and will help them easily reach out to potential clientele and thus build on a hugely flourishing brand legacy. In India the total penetration of the Internet domain is only about 10.2 per cent, which leaves a seemingly empty ground for internet to grow and consecutively social media to spread its wings as well. While expecting the digital medium to grow in times to come it is now safe to say that with shifting power echelons in the digital ecosphere in today's times, it is now imperative that the future of social dynamics in India will be largely fuelled by digital tools, which will thus transform the Indian economic ecosphere in the times to come. The author is the COO of Percept Profile & Buzzinga (A Division of Percept Limited)
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The only business school from Africa to find place on Financial Times' MBA rankings, the Graduate School of Business(GSB) — part of the University Of Cape Town — has managed to make its presence felt across the globe. Segran Nair, finance specialist and the Director of Open Academic Programmes at GSB, was recently In India to talk about the school's value-for-money MBA and how the profiles of emerging market business schools are of unique, strategic importance. In an interview with Alokita Datta, Nair discusses GSB's efforts in highlighting the relevance of emerging markets within the MBA curriculum, how the school is differentiating itself from Western b-schools, how the transforming business environment in Africa is influencing education programmes and why there is scope for healthy reciprocity between Indian and South Africa. As a business school in Africa, what has been the primary focus when it comes to designing management courses? Could you talk about the nature and composition of your programmes and what kind of a profile do you look for in a candidate applying to the Graduate School of Business… Graduate School of Business (GSB) is part of the University of Cape Town and has been in existence for the last 50 years (the University was established in the late 1800s). We have a full time MBA programme that runs for about a year (11 months). We then we have a modular format (not a part time programme) which is spread over a 2-year period. It requires students to be physically present in Cape Town 6 times during the 2-year course period for about 2 weeks (except for the beginning where students need to be present for 3 weeks). Overall, it is a 13 week commitment. We have students from all over South Africa, the African continent and other parts of the world as well. The third format is the executive MBA and is targeted towards individuals who are much older with more than 10 years of senior management experience. The average age therefore, is around 45. The pedagogy we follow is different from the classical MBA. It would be rather arrogant of us to teach individuals who have so much experience. While universities are places of learning, we feel there is a lot that we can learn from senior managers as well. In this case students directly relate the theories (taught in class) to their workplace. They could write a paper on finance, the return on investment on a marketing campaign for instance, by understanding the mechanics of the formula. In comparison, the average age of students in the MBA programme is about 30-31, with 7 years of work experience. However, we will surely consider a 25 year old with a work experience of 2-3 years for admission. It really is dependent on the applicant's maturity and his/her ability to hold their own in the classroom and contribute with the others. But work/industry experience is essential; something that makes our MBA programmes different from Indian business schools. Considering the legacy of Apartheid in South Africa, we have other programmes that recognise an individual's work experience but ultimately culminating in granting them the opportunity to also pursue an MBA degree. Over and above that, we have a department that customises programmes for corporations as well as in the domain of adult-based learning. The Associate In Management programme is post graduate diploma in business administration. The Graduate Business School is part of the Department of Commerce and we have to pass our academic issues through that department. We are autonomous and since we are a public university we receive (limited) funding from the state. Most of it is raised from tuition and the endowments we have to support students, though in a limited manner.As a Business school with a long legacy in an emerging market, how do you distinguish yourself from other business schools in Europe and America? Structurally, we follow a one-year MBA programme as opposed to the 2-year programme that most business schools follow. The second differentiation is that since we are a business school in an emerging economy, while the theory that we teach is a hybrid of what comes from developed economies-north America, Europe etc, it also includes significant material from developing economies. The case studies we use also follow a combination of resources from both developed and emerging markets. Our MBA is made up of three different components: one is the compulsory part that the entire class will study, accounting, strategy, HR etc. Once that component is done, students can construct their own MBA through elective courses. When it comes to elective courses, we have industry practitioners who come and teach these courses to students and thereby bring in their direct, relevant experience as it relates to emerging markets in the classroom. The third distinct aspect, and this has been prescribed by the Council of Higher Education in South Africa, is that students are expected to write a thesis or academic paper which could either be related to marketing a particular product, and the challenges that exist within the emerging market. Our faculty members not only teach but consult to businesses as well ; both in developed and emerging markets and therefore bring in that expertise into the classroom. Thus, in multiple ways we bring in the relevance of emerging markets into the curriculum but the mere fact that we are a business school physically located in an emerging market brings about the realities of inequality, unemployment, the realities of entrepreneurship and innovation. We are a product of that environment and therefore encompass it in our business education programmes as well. We offer one particular elective which is called doing business in Africa, and the faculty member teaches not just the theory of emerging markets but the course also has an internship component built into it where, up until last year, he took students to neighbouring African countries and corporations to enable students witness the larger realities of such markets beyond the borders of South Africa. Do you also focus specifically on the African market, in terms of developing case studies, white papers that relate to the domestic business environment?The University of Cape Town has classically been a teaching driven educational institution where a great deal of focus was around the dean taking classes as opposed to guiding post graduate or a PhD students being or encouraging research assistants . The emphasis has slowly moved in terms of also engaging in a lot more research: we've got faculty members who are academically very dynamic but now it's also much more driven by relevant research that they have to have a portfolio on, relating to their courses and bring that into the classroom. With respect to case studies, it is still a relatively new area for us. It is in the last 10 years or so that case studies have begun to evolve. So we have a long way to go in saying that we have a whole lot of relevant case studies which are also being used as study material in North America or Europe. Part of the issue lies in acquiring the kind of resources to support faculty members in writing those case studies and also supporting PhD students. We have a plan in place, we've begun to do what is needed but there is still a lot more work that needs to be done. Co-creating African case studies can be a mutually beneficial process since business schools from developed economies are taking a lot of interest in creating knowledge bases on emerging economies for their own post graduation, post doctoral research as well…Absolutely, and this is a very important part of the entire learning process as well. One of the criticisms labelled against business schools is that they concentrate only on theoretical teaching which is not relevant to individuals on the ground. A case study is therefore meant to bridge the gap between theory and practice; students are assessing the efficacy of what they are studying depending upon the uniqueness of where they are operation from in a geographical setting. Students can look at a classical new product launch, say the launch of a new detergent in Brazil: these are the factors that went into launching the product and students are allowed into thinking that yes, there are tremendous similarities that could successfully be applied in South Africa. Case Studies also therefore allow students to critically think through the relevance of a product or service, in their own domestic markets. Would you be interested in collaborating with Indian business schools to establish exchange/research databases? Do you have any such partnerships with other universities in the world?At present we have 30 (student) exchange partnerships with schools throughout the world, which includes Indian School of Business (ISB), in India (which is about a decade old). We are very strategic about the exchanges we enter into because, one, we are a very small school: we limit the number of students that come into our MBA programme to about 80-82. We follow GMAT scores (minimum of 550) but application is a holistic process, so if an applicant with a lower score but impressive application (good work experience, undergrad scores) will be considered and may be granted admission as well. The reason we do that is because we are aware of the cultural biases that are built into the GMAT. We also have data that shows how GMAT is not the best indicator of a person's performance. We would be keen to develop more exchanges with schools across India by looking aspects from capacity to relevance, what we can learn from the school-weather it is research, case studies or other areas-- and if there is a comparative advantage in relation to us, we will absolutely tap into that. The Financial Times (Global MBA Top 100) rankings highlight the 'international experience' that GSB provides. Could you talk about the composition of the students and faculty members in GSB, currently, in this context?Apart from South Africa, we have students coming from Angola, Mozambique, Zimbabwe and the Congo; they tend to comprise the largest section of foreign students in our programmes. We've always had tremendous participation from German students as well as those from the UK . But over the last two years or so we have seen a lot of American students coming into our MBA programme. Given how the economic crisis has played out in the US and the attention in civil society paid to efficient decision making, by executives, a different kind of consciousness has begun to permeate. The US has always been active in pushing the boundary in terms of around thinking but people are becoming more critical of certain modes of thought and are now recognising Africa as the future market. That's the reason behind the interest by Americans, I believe. We have about 16-17 students from foreign nationalities on the programme. It varies up to 30-35 per cent when it comes to the overall component of students. With my trip to India and Russia and travelling a lot more within Africa, we certainly want to increase foreign student participation to 50 per cent or more. A number of our faculty are foreign nationals and they are part and parcel of the permanent faculty members. So we have American, German and fellow African faculty members. We've got a relatively small faculty component as well. For a long time it was 25 and over the last 2 years or so, under the new director we have grown to about 35. Again we're seeing a lot of interest from the US who are willing to come down and teach here. We also have an adjunct faculty base, associated with the school-American and European-who active engage in research in South Africa and collaborate with their peers in GSB.break-page-breakHow many Indian students are currently enrolled in your programmes, at present? In our modular programme we have about 4 or 5 students who are Indian nationals. What we're finding in South Africa is that a lot of Indian nationals who are working in Indian multinational companies who are looking for post graduate opportunities and therefore coming into the programme. When it comes to the full time MBA the number of students varies from 3-4 last year to about 1-2 this year. I think the reason for that is the lack of the Graduate School of Business' presence in India. We want to engage with students answer questions they might have about the school, the programmes and the country. A lot of people might think: Why should I come to South Africa to study? Again, I think because we come from a mindset where we have a common history of colonisation in this part of the word or in Africa, we tend to have a sense that schools in America and Europe have a higher quality of education and thus tend to gravitate towards them, which I can understand, given our history as people. For us the focus is on integrating what we learn about business within the challenges that we see in society. To what extent is the 'competitively priced' MBA course an incentive for international students? For Indian Students, in particular, cost f education is an important criterion while considering admission to overseas b-schools…If you look at the conversion rate from rupee to rand it is Rs 7 to 1 rand but in that 7:1 ratio, you have to consider the incredible quality of education a student will receive, well recognised the school is. The cost of the MBA Programme in 2012 is 290,000 rands . The socio-economic challenges that we face (infrastructure, logistics) are in some ways similar to those that people in India face. South Africa has a very efficient, advanced transport system and perhaps people can learn from us in that respect. On the other hand, the kind of entrepreneurship and innovation that happens in India is phenomenal and we can learn something in that respect. There is tremendous scope for reciprocity between the two countries in terms of learning and engaging with each other; which can be a fruitful symbiotic relationship. To what extent do you focus on entrepreneurship within and outside the classroom/curriculum at GSB?The biggest challenge in South Africa is to create jobs because we've got a high rate of unemployment; it is structural, historical and there are legacy reasons for that. What this leads to therefore is to make people more entrepreneurial and innovative. We have a core course in the MBA programme on entrepreneurship and innovation which includes practical aspects to contemporary entrepreneurs, the likes of Richard Branson of the Virgin Group to someone from South Africa that students can relate to. The stories of these individuals get told, the circumstances that made it happen, to what was the driving force etc. It is a course that goes down well with students. In the second part of the MBA where students can construct their own programmes through electives, we have a course called Planning Your Ventures which allows students to put themselves out there: from articulating the business plan they've thought of to putting it to work in terms of cash flows, putting the numbers together and then presenting it to a panel. That is a practical, hands on approach. In the third stage of writing their thesis, students can examine, for instance, what goes into making the US an incredibly dynamic place for innovation. How much of research and development dollars gets pumped into the economy through taxpayers money? As an emerging market, we have so many other priorities that we can't put in 200-300 billion dollars into the economy to support innovation. The student exchange programmes allow individuals to go to ISB, London Business School or Duke University (The Fuqua School of Business) and take entrepreneurship courses there as well. A lot of (particularly European) management institutes offer dual degree programmes. Is that any area where you would wish to collaborate with (foreign) schools?The regulatory environment in South Africa, prevents us from doing that. All students therefore have to get their credits from the South African school. When they go off on exchange programmes, they get credit for the courses they opt for there but that is not reflected in the final transcript. They get a separate transcript from the other school about which they can speak about when they go for job interviews. We have to wait for the relaxation of certain rules within the South African government (the Ministry of Education) and then things can be different. The business environment in Africa has been changing significantly, especially since a lot of multinational corporations, many from India (FMCG), are expanding into Africa. With new players coming in and the opening up of new markets, what/how are MBA students learning from these developments? One of the companies where students went for their internship this year was Olam (a supply chain management and agricultural products/food company, company headquartered in Singapore with a strong presence in India ). They have a presence in South Africa and the sub-Saharan region in countries such as Tanzania. After the students managed to secure internships they actually went to the plants and set ups in Tanzania to interact with senior managers on a particular issue concerning their company. The part and parcel of any multinational coming to India is to try and understand how we do business here, especially in places where there is no infrastructure at all often times; there are certain challenges unique to Africa. One of the other courses we offer is called Emerging Enterprise Consulting. The idea behind this course is to bring students into an informal sector, primarily in Cape Town, as a reflection point of the informal market to assess certain key elements. One is, you have an entrepreneur who is living working in this area and has a product/service to sell. There is a market here because there is demand, there is a community and there are individuals with money and look at the challenges he/she has: they could be product related or supply chain issues or the challenges of protecting that particular asset that he/she might have when as a retailer (s)he is selling that stock. An individual can therefore infer that these challenges are similar to the ones that an MNC might face when bringing their product to an emerging market. In a practical manner of engaging with the entrepreneur and his community, the students get a chance to formulate solutions or see the beauty of solutions that come out from individuals who are working in that space. This course brings about a paradigm shift in an individual's thinking about markets and getting a product from one particular place to the table of a consumer. You've spoken about some of the complex after-effects of Apartheid. Post Apartheid what have been some of the biggest business changes that have taken and how has that impacted business education (in South Africa) per se?Apartheid has been a very complex issue given South Africa's history. For a county like ours where we are the doyens of industry and only people of European descent , examples, for generations to come, had been the success stories of European industrialists and businessmen and it was a very sexist environment as well where it were the men who played the phenomenal roles. Also there were a lot of romantic, almost superhuman like, notions associated with these characters. What was missing in this whole picture before 1994 was the whole system that was set up to make sure that only a certain part of the population was extremely successful. Post 1994 it allowed many individuals who hadn't enjoyed any kind of support to be brought up to the surface and we were basically asking, how is it that you were able to create these rather successful business operations, without networks, state endorsements and procurement contracts that were given? Thus, it brought about a very different narrative: people of colour who were able to run successful businesses. Majority of the people in South Africa are people of colour; these are the individuals that have buying power. Post Apartheid a space for a new kind of dialogue was created. In South Africa, they use a label -which I dislike -for black Africans calling the 'black diamonds,' the middle class that has emerged through education, but also their purchasing power as a result of their improved economic position. It brought about a new kind of realism for product need and demand by a class of people that had been excluded for a very long time. For many of our core courses, faculty members bring individuals into the classroom; guest speakers who come on a continuous basis. They've brought individuals, who were previously excluded, into the classroom to tell their stories; there is nothing better than hearing the life story of someone from that person, who they can relate to.We also run a course on advanced leadership. MBA, in most cases-unless you're going to Chicago School of Business or Wharton which are highly specialised in quantitative aspects or individuals gearing up for management profiles in McKinsey -is a general management degree programme. Given the fact that the students who enter are programme have an average age of 30, our story is that we help train students to be managers and leaders to function at different roles in an organisation: public, private or entrepreneurial. And for that we believe it is important for students to know what it means to be a leader and know oneself. It is difficult to manage people and help them achieve a common goal. A lot of students don't expect to be taught leadership in an MBA programme (and these are offered at the very onset and integrated with the MBA curriculum) it is an unpacking process.
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