Far from the expectation of wide-ranging reforms in the education sector, including freeing up education fees and allowing foreign investments in the industry, the Planning Commission's proposal for the 12th Five Year Plan being presented to the government by January, has different ideas it seems. A widespread financial aid programme leading to larger education subsidies and focus on social inclusion are the orders of the day instead.About 18 per cent of all government education spending or about 1.12 per cent of the GDP is spent on higher education today. This has been proposed to be raised to 25 per cent and 1.5 per cent respectively. An increase of 0.38 per cent in the GDP's expenditure for education amounts to an additional allocation of about Rs 25, 000 crore towards higher education for the centre and the states taken together.The Planning Commission is also likely to propose setting up student aid agencies for a structured approach towards offering aid to students. A funding mechanism will not just reduce multiple layers in the delivery of aids but also cut down the excessive burden on the government, a senior official of the Planning Commission said. This funding mechanism could either be conducted by lending banks that would provide student loans at reasonable and affordable rates or an agency which might be set up with a certain corpus to provide financial aid. This funding mechanism could either be by lending banks to provide student loans at reasonable and affordable rates or an agency might be set up with a certain corpus to provide financial aid.There will also be focus on having unified delivery mechanisms such as a web based system to provide these aids through a single portal where in a student can fetch all the information from one source."In the 12th plan the student loan arrangement will receive a major flip as there is consensus among all departments over this issue," said a planning commission official.The approach to 12th Five Year Plan, which was approved in October by the National Development Council chaired by the Prime Minister, has also proposed to enhance the scale and reach of scholarship schemes and student loans. It also states that government guarantees for student loans could be considered.The financial aid programmes, fellowships and scholarships will be majorly focused on the poor and underprivileged members of society. Currently the Planning Commission is not considering any scholarships on merit basis."I would not like to see a lot of money being put there (scholarships for meritorious students). I don't think a significant amount needs to be put for those students since they usually have the means to afford higher education," a senior official said. The plan would also consider setting up a system of funding poor people for skill development through direct financial aid or loans.The Planning Commission has also proposed that there should be more focus on the quality of higher education rather than just larger enrolment, in its approach paper."Increasing gross enrolment ratio (GER) without a proper strategy in place is huge devaluation of higher education," says a senior official, who strongly believes that the entire concept around GER is misplaced and that a very high rate of GER creates aspirations which are very difficult to be fulfilled.Hence, the Planning Commission, this time will look at focusing on quality of higher education rather than just talking about higher GER numbers. Countries such as Singapore which are considered knowledge economies currently have only 23 per cent GER.During the Twelfth-Plan period, an additional enrolment of 10 million students could be targeted in higher education equivalent to 3 million additional seats for each age cohort entering the higher education system. This would significantly increase the GER bringing it broadly in line with the global average.
Read More
Uncertainty prevailing in the Euro-zone has seen Nick Cringle, global co-CIO, RBS Wealth Management, cutting his client exposure in equities by 40-50 per cent for investors — both conservatives and risk takers. Instead, he has been parking their money in safe havens like Swiss Franc, gold, US dollar and US bonds. Talking to BusinessWorld's Mahesh Nayak, he said the European crisis would see risk assets (equities) moving further south and market momentum and sentiment would return only if sustainable policy measures like aggressive quantitative easing and short-term fiscal stimulus are introduced in the US and Europe along with credible medium-term fiscal consolidation plans. As for the Indian market, he expects it to move in line with the global markets.Excerpts from the conversation:What is your view on Indian and global financial markets?Recent events have reinforced our cautious view on risk assets as game-changing policy is still not evident and valuations are yet to reach compellingly attractive levels. We continue to be cautious due to the high level of political risk, especially in Europe, and increasing evidence of a globally synchronised slowdown. In such circumstances, it is often the case that markets only bottom when valuations become compellingly attractive, or there is some sort of positive policy hammer blow that convincingly changes the direction of markets. So far we have not seen either. We expect the Indian markets to move in line with the global markets, even though valuations appear attractive. The prevailing volatility in global markets combined with domestic high inflation, rates and earning downgrades could contribute to domestic pessimism.When do you see the clouds of uncertainty getting clear?Market momentum and sentiment will only turn if some sustainable policy measures are introduced. These would include aggressive quantitative easing in the US and Europe; a shift to explicit inflation targeting in the US; short-term fiscal stimulus in the US and Europe combined with credible medium term fiscal consolidation plans and/or a combination of monetary and fiscal stimulus in China and material currency appreciation.In the absence of such concerted policy action, risk assets can be expected to weaken further in the coming months. At some point, valuation will kick in as a driver, but before it does, risk assets will fall further in price.What are the major challenges and concerns for the markets — Indian and global?In the recent weeks, the European crisis has entered an even more serious phase, with Italian and Spanish bond yields reaching around 7 per cent level, prevented from going higher still only by ECB bond buying in the secondary market. Also, it is difficult to see how the EFSF bailout fund can remain credible. Perhaps even more worrying, the crisis has moved right into the core of the Euro Zone with the spread between German and French 10-year bond yields hitting 200 bps. Political risk at a European level is still very high, with Germany and France in open disagreement about the extent to which the ECB should intervene in government bond markets. In addition, the newly appointed technocratic governments in Italy and Greece could face immense difficulties and opposition in reforming their economies. In addition, the Euro Zone is tipping into recession, making fiscal consolidation that much harder for periphery and core Euro Zone countries alike. Leading indicators suggest the Euro Zone is already slipping into a substantial recession driven by banks' deleveraging, fiscal consolidation and the shock to business and consumer confidence that the European financial crisis has created. It is not inconceivable that one of the smaller Euro Zone countries such as Greece should attempt to leave the Euro Zone in the next twelve months as domestic populations rise up against years of fiscal austerity. Such an event would quickly lead to contagion to other European periphery markets and increase financial stresses further.Even if the ECB does eventually relent, and engage in full-blown quantitative easing (QE), this will no longer be the silver bullet that it could have been 6 or 12 months ago. Put simply, despite some improvement in the US outlook, the risks to the global economy lie firmly to the downside because of the escalating crisis in Europe. This policy coordination may have to include not only ECB QE, but also outright reversal and pursuit of fiscal stimulus in major economies like the US and China in particular.In case of India, growth is tempered by high cyclical inflation and rates combined with delay in policy decisions. Further, with heightened risks of slowing global economic growth, Euro Zone's debt crisis and concerns of contagion effects have kept the markets volatile in sync with the global equity markets and also kept external investors guarded. However, India's resilience, reflected by over 8 per cent GDP growth during the global slowdown is the re-iteration of its strong fundamentals driven by domestic consumption and investments and its minimum dependence on external trade. While this inward nature of the market would insulate partly the economic growth, we expect moderation in growth at 7.5 per cent in FY12.What would you advice investors to do in the current environment?Due to the risk factors highlighted above we believe that there will be increased volatility in equity markets going forward, with a downside bias. We have already taken action to de-risk our global portfolios in light of the above mentioned risks. From an overweight Indian equities in March'11, we have turned to underweight in three phases from Aug'11 on the back of global developments. We like defensives namely Health care and Consumer Staples, while we are underweight cyclicals namely Materials and Industrials.This would be a great opportunity for Indian investors to increase fixed income allocations, to benefit from the prevailing cyclical high yields & our belief that Interest rates are close to peaking out. Clients should look at investing in a mix of accrual & duration strategy to take advantage of this interest rate cycle.
Read More
Indian equity continued its losing streak with the Bombay Stock Exchange (BSE) 30-share Sensitive Index (Sensex) sliding for the fourth consecutive week to end at a 2-year low. The Sensex lost over 4 per cent during the week to end below the psychological 16,000-mark at 15695.43. In the last 18 sessions, the Sensex has lost 12 per cent from 17804.80 on 28 October 2011. For the year so far, the Sensex is down 24 per cent.The market is on a slippery ground following the uncertainty over the Euro-zone crisis and lack of trigger in the domestic market. As nothing concrete seems to be coming from the government in the near-term, the movement in the Indian market will be dictated by the event unveiling in the west. In the coming week, the Q2 GDP report would clearly tell us as to where things stand as far the Indian economy is concerned and could indicate the future course for the market. Otherwise, it will be in tandem to developments in the US and the Euro-zone. Amar Ambani, head of research at India Infoline, said: "The undercurrent will remain weak, until European leaders find a lasting solution to the debt crisis." He says, today they are struggling in containing the financial malaise amid fears of it spreading to the core of the Euro-zone. At the same time there are worries surrounding US, Japan and the UK which is impacting sentiment across financial market. Despite valuations being attractive, concerns surrounding domestic and global economies has seen players sitting on the sidelines. This was also evident from the low rollover in the index (Nifty) future. Last week, was the future and option (F&O) expiry for the month of November 2011 and investors sold off their position to sit on cash. The rollover in Nifty was at 64.30 per cent, compared to a three month average of 71 per cent. A dealer from the local brokerage in Mumbai, said: "The fear of losing more has seen most of them even cut losses."Though foreign institutional investors (FIIs) have been selling, domestic institutions (FIs), especially insurance companies have been buyers in the market. According to the National Stock Exchange (NSE), for the month till 24 November, FIIs were net sellers in equities to the extent of Rs 5,114 crore, compared to a net purchase of Rs 3,330 crore by domestic institutional investors.Says Shuja Siddiqui, vice president & head at Motilal Oswal Wealth Management, "We are at the bottom and it's unlikely that the market may witness a sharp fall from these levels. Though the market may tank, which is possible, the fall will not be sustainable and at lower levels it will be quick to bounce back." However, he is quick to add that the macro issues surrounding both politics and economics in local and global markets will ensure the market does not scale higher and the Sensex trades in the 16,000-18,000 range.The confidence about the Indian market being able to bounce back is fuelled by expectations of strong corporate performance. Despite the dismal September ended quarterly performance, the expected earnings (EPS) for the Sensex for FY2012 has just been revised by one per cent to Rs 1,131 from Rs 1,142. This means the Sensex is today at a forward price-to-earnings (P/E) ratio and trading at 14 times. While for FY2013, on an estimated EPS growth of Rs 1,331, the Sensex P/E is trading close to 12 times. "We are not concerned about growth for India Inc, but the rate of growth. Companies related to IT, FMCG, banking, pharma and telecom will post growth. Though there are concerns over foreign exchange losses in telecom companies, other sectors will record good performance," says Siddiqui. He says, "Concerns continue in sector like engineering and real estate. Till there is no reform from the government in sectors like engineering it will languish."In the last two months, the Sensex has been yoyoing, hovering between 15,800 and 17,900 levels. Initially it fell from a high of 17,211.80 on 9 September 2011, to touch a low of 15,745.43 on 4 October 2011; thereafter buying spree at lower levels witnessed a vertical surge in the Sensex to touch a high of 17,908.13 on 28 October 2011. And once again, selling pulled the Sensex down to a low of 15,478.69 on 23 November 2011, only to recover somewhat to close at 15,695.43 on 25 November 2011. It all boils down to developmental reforms from the government. Says a chief investment officer from a domestic mutual fund on condition of anonymity, "Valuation are attractive, behavioral factors are positive, the only missing link is a trigger. The government has to find ways to lower interest rates, until there is a secular fall in rates we aren't expected to see any huge upmove in the market." He says: "It's not the Reserve Bank of India, but the government and its reform process will help bring down interest rates. If you open up investment windows, it will bring down interest rates." Though the Cabinet approval on foreign direct investment in multi-brand retail and the Companies Bill is a good trend and may even keep the market positive for a short while, it will only be developmental reforms that will help the markets. Until then, the markets will continue to remain fragile.
Read More
Earlier this year Nissan came forth with its ad campaign for 'Leaf' - its electric car- that had a polar bear travelling all the way from melting arctic ice shelves to hug a Nissan Leaf owner as if thanking him for making a smart choice. (On a lighter note if polar bears ever wanted to buy cars, Leaf would be their Ferraris!) The ad quickly went viral and also landed up an Emmy awards nomination for the best outstanding ad. The youtube version of the ad has over 1.5 million views till day. To get some perspective of what that figure means consider the fact that Nike's 'write the future' ad released for the world cup 2010 considered as among the some of the most watched ads in 2010 has clocked 1.2 million views.The trend of building sustainability into your ad campaigns is a trend that is growing by the day. Last month Coca Cola upped the ante by releasing its own polar bear campaign. Under the campaign Coca Cola will release 1.4 billion bottles in white with polar bears on them. The campaign aims to raise $3 million fund for conservation of the arctic refuge of polar bears. In over a hundred years of its history, the company has religiously stuck to its colour theme of red. In that context, besides of course the numbers involved, the white color scheme of the cans for this campaign does make it special. But it also gives clues of times to come. I may for an instance disregard that the utterances of Coke's CEO Muhtar Kent that sustainability is the most crucial challenge of this century but what does not goes amiss is that a company like Coca Cola wouldn't have put so much into this campaign if it did not make business sense for them.Sustainability is slowly building itself into the brand architecture of consumers. Perhaps to explain it, the example of coke is best. The manufacturing cost of carbonated water is perhaps less than one fifth the price you pay for it and yet the world over, millions of people day after day pay that price, happily. And that's the power of brand. It goes beyond the obvious utilities of things we buy. It appeals to an individual somewhere deeper in his mind. And that's exactly the place sustainability as thought will ultimately seep in. But unlike expectations from many quarters that will not happen overnight. The trend of brands creatively engaging their consumers over sustainability message is not a new. It is something that has been happening for quite some time now. Wayback in early 2007, (yes that's really way back in the history of sustainability) I can recall the creative advertisements from Italian brand Diesel that displayed models against popular landmarks under a flooded or desertified situation with a tagline, 'Global Warming ready'.Campaigns like that have been common in last many years, although increasing in intensity and frequency. Yet what has not been seen till now is a very dramatic outcome by any of these adverts. Consumers aren't yet rushing in hoards to stock eco-friendly products. Right now it is just the process of the sustainability thought seeping in. In one of my earlier conversations with an official of a renowned global consumer research company operating in India, I was told that 'green' as a component of consumer choice is now beginning to appear in their consumer data from India. People are aware like never before of the importance of sustainability. But there are various levels of awareness. To know that chemicals are bad for your body is one thing but to know how exactly those chemicals may be finding their way into you is another thing. This kind of an awareness of the complete picture will take time to seep in and even more time to seep in deeper. But when it does, as it will eventually, it will change the way we see brands, forever.Although this stretched out process is not deterring the companies around the world to give up on sustainability in their marketing campaign. Instead what is being seen is that some of the best companies are continuing their efforts to slowly integrate sustainability in their brand architecture, not as a temporary element but as a long term attribute, just at the pace at which the consumers are changing. For instance the Brian Dunn, CEO of Best Buy, A global giant in electronic goods, would like to tell you that while consumers may not be asking for responsible disposal of e- waste right now but in three years from now they will start to do that. Therefore Best Buy is taking steps to get ready for the process right now and he cautions that other retailers can "ignore this at their own peril".Respected brands are building sustainability ever deeply into the fabric (literally at times!)of their communication to consumers taking it beyond just the adverts. Like Levi's latest effort to add guidelines for sustainable washing of their jeans along with other washing guidelines or Ford which has tied up with a media platform to engage consumers towards choosing more fuel efficient cars reiterates the point.As Leroy Stick, creator of BP Global PR will tell you "the best way of getting people to respect your brand is to have a respectable brand". Sustainability- if global pundits are to be believed- will become the focal point of this century, It will be difficult for brands to appear respectable or responsible without convincing the people about their sustainability ethos. And Brands and what they stand for are not built overnight. Brands have to work hard in building themselves over time with a continuous focus on future. Which is why don't be surprised if you see major brands around the world going gaga over sustainability in times to come because that's the shape (May be even colour as in the case of Coke!) of things to come. Yash Saxena is a sustainability consultant with Emergent Ventures, a climate change mitigating consultancy. He also works on innovation evangelism with Techpedia
Read More
Be prepared to pay more if Union Communications Minister Kapil Sibal manages to get the Draft National Telecom Policy 2011 passed by the Cabinet. Further, many new services in the draft aimed to benefit customers are dependent on the operator and the market — one nation free roaming, full mobile number portability and rural connectivity.The national licence proposal aims to bring in consolidation. However, the draft policy is silent on the cost of the bail-out package or migration scheme it proposes. Broadband and rural connectivity do not have a fresh approach, but only offers fresh targets and plans.The draft NTP 2011 does not spell out an exit policy and merger and acquisition norms. A separate Spectrum Act, setting up of a Telecom Financing Corporation, IPV 6 compliance, code of practice for sales and marketing, standard operating procedures for operators in case of emergencies, recognition of telecom as infrastructure sector and strengthening the Telecom Regulatory Authority of India (Trai), are a repeat of existing and earlier telecom policies and lacks a new vision.Officials in Telecom Commission expect large scale changes in the ‘final draft' that will be placed before the cabinet. "We only have the ingredients that have been decided, not what and how the cuisine will be prepared," says a senior member of Telecom Commission. The Telecom Commission is the core team that prepares the NTP guidelines and takes other decision regarding the telecom sector. The guidelines are prepared on the lines of policy framework that the government of the day wants to give and is piloted by the Telecom Minister. The draft aims to bring in consolidation in the sector, rather than taking care of the customer's issue, as it was in earlier policies. Revenue Generation Is Motive No. 1Union Minister for Communications Kapil Sibal unveiling the draft NTP 2011 said, "In achieving the goal of NTP 2011, revenue generation will play a secondary role." But the fine print of the draft NTP 2011 only indicates revenue generation as the prime motif."Operators will get a free run on tariff," says top Telecom Commission member. Private telecom operators are already preparing the ground to hike the tariff. Already, operators are wailing, following the higher spectrum fee that they had to shell out in 3G and BWA. While the government will get higher revenue, the spectrum operators will try to justify higher tariff for customers. Add to that the higher spectrum, the taxes that account for more than 33 per cent of the total tariff that a consumer pays.Delinking Spectrum From LicenceThe draft NTP 2011 proposes to delink spectrum form licence. It is a welcome departure from the earlier system, where spectrum was allocated free. Operators deliberately used the spectrum inefficiently to show that it was starved of spectrum (popularly termed as hoarding in telecom sector) to service the growing subscriber base, resulting in a bad quality of service."We will have to bring in legal backing to make operators pay up, for failing to maintain QoS parameters," says a Telecom commission member. Sources in Department of Telecommunications, said that the Minister was not inclined to adding such a direction in the draft stage.Amongst the other draft proposals Minister spoke about NTP providing impetus to domestic manufacturing. But the draft is silent on qualification of a domestic manufacturer. It is a long standing demand of the local manufacturers, since even multinational companies have been able to take advantage of the loopholes and taken benefits of the government benefits. As a result, the policy will have to bring clarity in the final policy, if specific measures to encourage of development of "Indian Products", where the IPR is in India, and which create the maximum value addition are to become a reality.
Read More
Every car in Delhi and Noida, it seems, is headed towards the final F1 race. In a normal day, you can do 140 kilometers per hour effortlessly on the Noida-Greater Noida expressway which leads to the venue. Indeed, it has earned itself the reputation for being a road where everyone tries to test the limits of their cars. The official speed limit on the expressway is 100 kmph.Today, I am doing about 10 kmph on good stretches. All the lanes are choked. And vehicles of every description are trying to squeeze through impossible spaces.I have been invited by Shell, technical partners of Scuderia Ferrari, to join them at the Paddock Club, which overlooks the pitstops. If I reach on time, there is a guided Pitwalk. Unfortunately, it looks as if I might be late even for the race, even though I have started at 11.30 AM and the race is supposed to begin at 3 PM.I doggedly crawl through the expressway until the roads forks. Cars with parking passes (luckily I have one) take the right fork which leads straight to the venue. People without parking passes will have to park at a different spot, and take a bus to the venue).I finally find the parking lot at around 2 PM. I have missed the pitwalk but there is time to go up and watch the race.Celebrities, Fast Cars and Beautiful GirlsThe F1 is as much a venue for rubbing shoulders with celebrities as it is about the race itself. As I walk up the stairs to the Ferrari lounge of the Paddock Club, I spot Naresh Goel and Subroto Roy (not together). By the time I reach the lounge, I have passed or nodded to half the industrialists I have talked to in the past 10 years.And then there are the filmstars and cricketers. I spot Sachin Tendulkar. And Saurav at another place. There is also Shahrukh Khan looking exceedingly fit.And then there are pretty girls everywhere one looks. They are dressed to the hilt. The notable thing is that almost every girl has ignored the advice which come with the tickets – wear a comfortable pair of shoes. The impression I get is that everyone has picked out their best stilettos for the occasion, not matter how uncomfortable they might be going up and down the stairs and the stands.The Ferrari LoungeAt the Ferrari Lounge, people in Shell and Ferrari T-shirts are hastily fortifying themselves with food and drink before the race starts. The lounges (Ferrari, Force India, Mercedes etc) overlook the start (and the finish) of the race. From the narrow terrace outside the lounge, one can see the cars being prepared. The race is about to begin and everyone is waiting with bated breath.The national anthem begins playing. As soon as it ends, the race will start. There is a reasonable silence, given the crowds. Then, suddenly the cars start revving up. Everyone has been issued ear plugs, which promptly start being used, but that is not enough to drown out the roars. And finally, as the clock strikes 3, the cars vroom off one at a time. They accelerate so fast that they become a blur in less than 5 seconds.The F1 race is not the most interesting of spectacles to watch live once the race starts. What you see is a blur of cars as each lap is completed. That and the deafening sounds make it a fairly taxing sport for spectators.One the other hand, it is extremely entertaining if you watch it on television. You see the close ups. More importantly, you see the entire track and the jostling for lead.From the lounge for example, there was no way to see the Hamilton-Massa incident which saw Massa retiring from the race. On the other hand, the television inside the lounge shows replays of it when I go in to replenish my orange juice.The race if for 60 laps. It gets over in just over an hour and a half. Predictably, Vettel takes pole position. Button comes second.After that, it is a struggle to reach the parking lot. Now that the race is over, everyone is in a hurry to get out quickly.The Indian F1 story is important because it shows that it is not necessary that we will bungle everything a la the Commonwealth Games. The Gaurs of the JP Group built a world class track, fabulous facilities and conducted the whole affair smoothly. It gives rise to one thought: Could the Commonwealth Games experience have been equally smooth if it were given over to the private sector lock, stock and barrel? (The author attended the F1 race at the invitation of Shell)
Read More
Looking back, Rashesh Shah's aspirations of making Edelweiss India's Goldman Sachs seem like a slightly distant dream (Goldman Sachs itself is here anyway). "Things change," he says; and how they have changed. The financial services industry wields the most influence on our stockmarkets. In an interview with Businessworld's Srikanth Srinivas, Shah acknowledges that banks are a big part of that. Excerpts: After a spectacular opening, Edelweiss stock hasn't done particularly well. Why do you think the market has taken that view? What do your investors think?Stock price is always a tricky one. Ideally you should offer an IPO in the middle of a growth phase, so that you have demonstrated growth behind and created headroom for more growth. After our IPO, the world got hit by a huge credit crisis. Until then, the entire financial services sector was enjoying 50-60 per cent growth and most of us conservatively expected a 20-30 per cent growth to follow. But things changed after 2008. I think the Indian capital market business — scale and profitability — has not come back post the crisis. The current activity levels and profit pools are half to one third of 2007-8.Secondly, we have embarked on a process of restructuring of Edelweiss' business model — from a capital market company to a broad based financial services company. This has required investments, which will produce results in the future.Going retail is a big shift, even a risky one under the circumstances. What's the rationale for this strategy?The simple answer is that's where the next big opportunity, and it's a really big one. Imagine the total financial savings — roughly $400 billion a year - as being poured into the mouth of the funnel; think of large savings going in and large investments resulting from these. What comes out of the stem at the bottom as the pool of financial products? The $400 billion that is poured into the funnel goes through a series of pipes: products and services such as bank deposits, insurance, mutual funds etc.Going retail would involve focusing on the amounts that go into the mouth of the funnel, and the pipes through which they flow through to the bottom of the stem. That's a different scale, and a hugely different set of opportunities. That's what we are aiming for when we go retail; the next big growth opportunity or set of opportunities is there. That's why we are going into retail broking, insurance, housing finance, etc. Financial services companies like yours may have started off at different points, but almost all of them are building businesses along the lines you are. What makes yours different?You are right; financial services can be, and are being, commoditised. A firm creates a product, and very soon, others imitate and copy it. The same is true of services; what one bank offers, for instance, is almost identical to what others offer. Businesses - asset management, insurance, housing finance - have the same economics, even if they have different business models. So the replicability of such businesses is a given. Or in other words, product differentiation is not the only answer.But take a look at GE, or IBM: what makes them different is the organisation; that is what makes them the brand they are, that's why there is only one GE in the world, and one IBM. Organisational differentiation is the hardest thing to do: it's a combination of values, mission, business ethics and the way you conduct your business. That's what I —and my senior-most management team — spend lots of time on: how do we build Edelweiss one of the trusted brands among financial services organisations? Sooner or later, banks will probably end up having the lion's share of all the other the financial services business as well. How do you think the non-banking financial companies (NBFCs) and others respond? Currently if you look at revenue pools, banks are approximately 75 per cent of financial services; the other 25 percent a combination of NBFCs, insurance companies and capital market players. I don't think the 75:25 ratio will change significantly in the next 5-10 years. One reason is that banks still have a long runway to expand the reach of banking products for the next 10 years. A 25 per cent pool of a growing financial services market is not small.A GDP growth of 8-9 per cent and a savings rate of 33-35 per cent means that by 2020, our financial savings would be four times what we as Indians have saved in the last 40 years. So the size is enormous and will have enough room for all forms of financial services - from banks, NBFCs, Insurance companies to MFs to grow.Given your approach - creating the holding company structure, for example — is seeking a bank license the next step?A holding company in financial services is inevitable for a broad based player. As I said before, we are in the process of restructuring our business model. Currently, we are investing in our housing and life insurance businesses. This will keep us busy for the next 2-3 years, and it may not be prudent to change the business model again so suddenly. But banking is a good and large business opportunity, and every financial services firm which wants to grow, have breadth and scale will look at banking at some point; the key is doing it at the right time.
Read More
Japan's ambassador to India, Akitaka Saiki spoke to Businessworld's Shrutika Verma about the opportunities for Japanese companies in the Indian market, concerns over China's growing strength and the shift in Japan's diplomatic relationship with India focusing on cooperation in areas of defence and infrastructural development.How important is India to Japanese private sector companies. Where does it show on your priority graph?India is a growing economy and I often tell my Indian friends that this country is no longer just a 'potential' but it is a 'reality'. So we have to come into this country for business and otherwise. The number of Japanese businesses in India has almost doubled in the last three years from 365 to 725 and this number is going to increase in the coming months and years. There is a huge opportunity for Japanese to do interaction or business with this country. I am very pleased at the cooperation between the two countries at all levels in many sectors. Our two governments are operating very closely even in areas of security. We are intensifying cooperation including joint operations at the coast of Africa; our two navies are operating with each other very intensively to protect the vessels to freely travel between Africa and Asia through the Morocco state into Japan. China has always been placed higher on Japan's priority graph than India. Do you see that changing in the near future?For the time being, no, but the fact that the huge delegation from Japan business community is here indicates that they are looking at India as a very promising business partner.China is still running very fast. India too is pacing up and I am sure soon India will catch up with China because of the population growth. China may face some setback in about 15 years because of its policies. The workforce of China is going to decrease while in India, people who are in the 20s will be about 40 per cent of the population even 20 years from now and this is very important for any country or economy to sustain moving forward. I think population - young population is very important.What do you think of China's military assertiveness?We are concerned about China's military and its muscle flexing attitude in the recent months. Their naval powers are now expanding towards the south including the South China Sea and also in the neighborhood waters of India. Their active operations are a matter of concern to the countries in Asia. China insists what they are doing is clearly for their defense purpose and that they have no intentions to intimidate any of the countries in the neighbourhood but their words must be accompanied by their actions. If they want to be friends with countries in Asia, I hope they will be a little more sensitive towards the sentiments or the concerns expressed by many countries in this region including our friends here in South Asia. Does China or India as a rising power worry Japan?No, we have comparative advantage in some of the products over Chinese and Indians. Our offerings are different from theirs, so we can manage that.Japanese FDI in India is largely from auto and consumer electronics... is tough competition from Koreans in this segment a cause of concern?If you take Sony for example, they have now come back to number 1 position in the electronics market. Of course the Indian consumer firstly looks at price but they are more and more realising the importance of quality of the product. As long as we are talking about the quality of the product we are number one and we will remain number one. We have some competitive edge over Korean products and I think it is up to the consumer of India to decide what will they choose.Is Japanese economic diplomacy shifting away from consumer electronics and auto sector to other areas such as infrastructure and nuclear technology?Not necessarily. Areas such as consumer electronics we still have a lot of market share so we will continue to maintain that.Infrastructure opportunity for construction, roads, bridges and urban facilities is huge in India. There is a lot of demand for it and Japan wants to partner in constructing that infrastructure. One example is the Delhi - Mumbai industrial corridor DMIC project which with the assistance from the government in terms of ODA, Japanese private sector wants to keep participating in the project.Nuclear technology we still have the highest standard in the world. Unfortunately the Fukushima incident gave the impression that even Japan has difficulty about the safety of the nuclear power stations and we have to admit that. But we have to improve and upgrade the safety of the power stations in Japan and that I think we can still offer.Why has there been a renewed interest in India among Japanese companies?Japanese market itself is now very small and as businesses need to be expanded, they are going to the markets which are growing and India offers the best opportunity in terms of income level of people. Every year about 12 million to 15 million middle income class people are created in this country and they aspire to buy high quality electronic consumer goods and better automobiles. So we see huge opportunity. What kind of operational challenges do Japanese companies face in India? This is not just limited to Japanese investors but many foreign investors in the country face these issues. Every year a wide range of requests are sent to the government of India around the infrastructural improvements. Warehouse, port facilities, electricity and water supply are few elements need to be supplied by the host country on a stable basis. If you are engaged in manufacturing of sensitive electronic products you need to have a very stable supply of electricity. One can not work with time to time power breakdowns during factory production. An improved infrastructure will help the operations in greater roles. How big a challenge does a strong yen pose?We are concerned that yen is appreciated too highly and this is now getting reflected in fundamentals of the Japanese economy. It needs to be rectified. Yen is currently 76 - 77 to a dollar and Japanese companies are already operating around 85-90 yen per dollar. This appreciation of 10 yen is really hurting the Japanese manufacturers and that is why they have to think about shifting their manufacturing base overseas, which is going to be very negative for the Japanese employment situation. If the industries shift abroad the local employment is going to suffer. So how are we going to set the balance between the two is the challenge that the new Japanese government is facing.
Read More
