Indian Manufacturing Primer

Indian manufacturing sector contributes 25% to the Indian GDP and is growing at 6-8% annually. Some challenges which the sector faces is; cheap products of China. China is considered to be the manufacturing hub of the world but India stands a better chance in product quality and product & process Innovation. Chinese are good learners. The competition in the coming decades is more likely to be neck to neck. India needs to concentrate in playing the value proposition game in the domestic market. But a growing percentage of Indian population has high disposable income and looks for premium products. Indian companies should also consider this market segment as the products developed for this market could also be marketed to the developed markets. Constant improvement in quality is another concern area. International benchmarking and following international best practices would also help. Also new product development and patenting would prove to be fruitful in the era of patent protection. Once the corporations are world class more and more Indian corporations now exporting to developed countries can convert into MNC's.

Distorted Labour Deployment : Economy Focus

60% of Indians are involved in agriculture contributing only 23% to the GDP. This is surely a distortion. Efforts should be made to modernize agriculture practices in India as in developed countries to drastically improve productivity. This can be achieved through training of farmers and providing the marginal farmers with credit to use technology for improved harvests.

The surplus labor which is currently involved in agriculture could move to manufacturing and services sector and create a multiplier effect on the economy growth. Efforts would be required on the part of HRD ministry to plan for more productive labor deployment at the national level. Also work done by housewives currently do not get discounted in the GDP of the country. With more and more women becoming productive and gainfully employed GDP is bound to increase in the coming decades.

Meanwhile,"Take the right direction".

Skill Shortage

The leaders of corporate sector and industry associations of India and other countries find relief in constant crooning that skill shortage will reach so and so figure in so and so year. The moot point is what initiative have they taken to tackle the problem and who are accountable for the situation.The root of the problem is that of lack of alignment between quality of supply and quality of demand. National planning for development of Human Capital at a national or International level would help. There is a need to constantly upgrade the syllabi of Educational Institutions and Universities ( if possible every year) in consultation with Industry Pundits and keeping to the expected skill requirement. A national database should be created and every citizens career should be planned in consultation with him/her.Also the corporation in India have become Pound Foolish Penny Wise. They save a cent of employee training cost and are ready to lose million dollar business opportunity.

Murphy's equation , " Skill shortage x unemployed 10x".

Jessica Vs. Zaheera : Judicial Update

One thing is common in both the cases the poor women lose.Other issue is that of witnesses turning hostile. Thanks god the supreme court has taken cognizance of the fact that witnesses turning hostile is a big problem in the way of delivering justice. But no thought has been given by the learned people towards the reasons behind this widespread phenomenon. One reason is that politicians and other big shots having muscle and money power are involved; the life of a genuine witness is constantly under threat by the accomplices of the perpetrator of crime. It is a well known fact that a large proportion of police works under the influence and on the payroll of the underworld, so police protection to the eye witnesses make little sense.Further in a country where even higher class people dont like to forgo even one day of salary, why a person employed in a lower job would take the chance of losing a job by getting involved in long drawn cases( high profile cases having media support take three to four years to get a final judgment). Further there are professional witnesses who work for commercial considerations, would obviously act to have gone hostile after receiving a better package from the rival party.The Judicial state of affairs is pathetic.

"God , help this country".

Falling Standards of Telecom Service in India

Trai served notice to Bharti Televentures, Reliance, Tata Teleservices, BPL, Spice Telecom operators for failing to meet the network congestion benchmark. BSNL, MTNL, Idea, Hutch and Aircel have been found to be satisfactory. At end February 2006, the number of mobile subscribers stood at 84.88 million which was 51.44 million same time in the year 2005.The blame game is on. Operators site the increasing number of cellular subscribers and failure on the part of the government to allocate sufficient spectrum as the reason for fall in quality. This is a specious reasoning. When the well performing mutual funds could stop allocating fresh units to stop quality of returns to get affected, why cellular operators can not stop offering new connections till the spectrum issue is sorted out. The benchmark standard is 0.5% Point of Interconnection ( POI ) congestion.

" Hello , can you hear me".

A look at Globalisation Issues

Challenges posed by Globalisation

1. There is a problem of overregulation. For example some clauses of Sarbanes-Oxley act and clause 49 of the Sebi act is being felt by the Companies to be over restrictive. There is a cost of compliance to be borne by organisations.

2. Trade barriers , protectionism : Some countries try to protect their domestic organisations and industries by way of subsidies, high custom and excise duties and other covert or overt ways.

3. Political instability or coalition government may make globalisation and liberalisation a policy specific to a particular political party and some other party when come to power may not support it or may reverse the decisions of a previos government like in India.

4. There may be social issues which may affect privatisation. Labour unions may not support opening up of various industries to foreign competition.

5. Only cost cutting is not going to make domestic organisations competitive. Various other proactive measures and strategies are required to achive growth and profits.

6. Level of complexity of business has increased. For example a foreign company wanting to invest in India finds that the regulations, law and culture of the market is so diverse that it is very difficult to continuously keep performing profitably as well as growing consistently.

7. Companies must constantly innovate and introduce new products according to the market expectations.

8. Poor or unfair legal system is also supposed to be a hinderance in setting up shops in host countries.

9. IPR issues also figure frequently. For example 90% of software use in India is pirated which hurts the American business returns. Countries should abide by each others IPR laws.

10. One way to deal with compleaxity is to keep the business operations simple which can be achieved through continuous business process reengineering. (BPR)

Take my advice ," First grow in your home country , venture out with a full kitty".

Budget 2006-07: India

Overall the budget looks sensible. Agri-credit expanded to Rs. 1,75,000 crores, covering 50 lakh more farmers. Farmers can get short-term credit at 7%. My only apprehension about this scheme or any other government scheme is that of execution. Strategising is one thing and proper implementation and delivery is another. According to estimates roughly 10% of aid reaches the intended target. Also there seems to be no step to insure the farmers against crop loss at national level. The scheme of depositing Rs. 3000 to girl child after she enrolls for class VIII is welcome. Allocation for educators and health care increased by 31% and 22% respectively. Emphasis should have been laid on increasing the quality of medical services and the ethics exercised by doctors while treating the patients. Also education should be made more bread based and affordable for poor. Some sort of financial aid should also be helped ( in return for some errands) to poor kids. FII limits for the stock market raised to $2 billion , markets will see increased investment. 82 power projects to generate 69,500 MW of power in private and public sector. Welcome step if next summer there is no load shedding.Personal income tax and corporate tax rates not touched. Securities transaction tax increased marginally from .02 to .025. This is to result in loss to short term equity investors but I think its good for the health of equity market. 1,000 girls school for SC's , ST's, OBC's and minorities. Effort should be to make them efficient, productive, competitive and employable at par with other candidates so that they don't require the the crutches of reservation. The list of items that got dearer and cheaper looks fair.

Tax holiday for power projects and industrial parks would give a much awaited fillip to the infrastructure requirements of India. Peak customs duty reduced to 12.5% from 15% will result in cheaper imported components and goods and boost consumption and improve the fundamentals of the economy and enabling India to achieve higher growth. Minimum alternate tax increased to 10% from 7.5% negative , but credit can be taken for 7 years instead of 5 years ,positive step. Countervailing duty of 4% in imports to make domestic producers more competitive.

Economy Column : The Economic Survey 2005:2006

A quick summary

1.Economy to grow at 8.1 % (Central Statictical Organisation)
2.Inflation expected to be a problem area because of increasing global oil prices but manageable
3.Interest rates may rise
4.The current account deficit is rising which can be a cause of worry
5. Other problem areas include inadequate infrastructure and High taxes and distortive exemptions
6.The subsidy on oil related products to be removed
7.Sixth pay commission may be imprudent and profligate to implement
8.A need for single energy regulator was sited

Railway Budget : Safety Ignored

No increase in passenger fares. AC-I and AC-II fare reduced by 18% and 10%, new trains introduced, internet cafes and ATM's to be opened in the station premises, e-ticketing facility introduced. So far so good, but what about safety Mr. Railway Minister. I suggest you to introduce a group insurance scheme for the travelers of Railways whereby all pay Rs. 10 extra which should be kept in an account which should be invested into a scheme, to be used for relief to accident victims of up to 20 lakhs in case of death and some amount for disability. If no one dies then this amount should be used for Safety Infrastructure and Processes.As I mentioned in my previous articles government is no less a monopolist. Take telecom prior to privatisation people were being taken for a ride for their STD and ISD calls, now even after taking into account the inflation same BSNL and MTNL are trying their best to be competitive with the private players in their offerings. Height of pathetic double standards for survival. The reduction in railway fareis also only to counter low fare airlines like Deccan,Spicejet and GoAir.

Government Agencies,"Always Reactive Never Proactive".

Evolution of Indo-US Relations

Bush seems bullish on India. In an Interview in Washington he said India has upheld democratic and secular values. He also called India a responsible nuclear power and said that US would support the Indian pitch for a permanent seat on the UN Security Council at the right time. US president is also for helping India with its Civilian nuclear program if India separates its military and civilian Installations and sign the IAEA safeguards. Bush said India showed benevolence in helping Afghanistan in its post war reconstruction.Bush said India and US being secular and democratic forces can work together against terrorist organizations. He praised the role that Indians have played in the growth of the US economy.

What politics is doing on my Blog?Well if there is no good politics between nations there is no economic relations between them.Hence Murphy proposes,"Good Politics is Good Economics".

Unrelated Diversification

Pantaloons Retail India is entering into healthcare, beauty and wellness. Other day there was a news item saying that Indian Post Office in Gujarat would sell Herbal Products of Aloe Vera Company. I also saw a notice hanging in a particular post office in mumbai saying , "RK Laxman's Cartoon CD available here Price : Rs.210". It seems that globalisation and privatisation has taught the Ostrich's of the Indian green pasture to remove their heads out of the proverbial sand and start thinking out of the box.Well hopefully these and other innovative products like Tele Money Order will see post offices through rest of the 21st century. One drawback of Indian Post Offices is that they look like cowsheds or horse stables in dilapidated condition. Some post offices also sport cats on their selling counters. Some professionalisation of the management through training or bringing in fresh outside blood and good hygiene and ambience would help.

"Indian Corporates and Multinationals dont underestimate the sophistication of Indian Consumers".

Cascading effect of Bird Flu on the Economy

Sales of poultry firms have fallen by 50 % . IA, AI, Indian Railways, the armed forces have stopped rationing and using broiler and eggs. Few human infestations have been reported. Large scale culling of chicken is on. Initial loss estimated at 1800 crores. Seven countries have banned import of poultry products from India. Tourists are changing their plans of visiting India. This shows the interdependence of various components of the economy. The total poultry industry in India is pegged at 28,000 crores. The GDP growth target of India will be affecred according to some experts.

Murphy Infers , " India is a chicken economy".

India Shining- Market Leaders Please Note

Dear Audience,

With Reference to Indian Companies,India is really shining but there is always scope for improvement. Indian products are good value for money proposition but after sales service in india is pathetic. India needs to understand that there are costs of poor customer service. The best Indian companies that I came into contact give a very pathetic Customer Service for the leadership position that they hold in the Indian market. If these companies want to succeed in the Gloabal Marketplace they would better look into this aspect of the business. These companies seem to believe that the customer has no choice but to come to them because of the value proposition they offer but this is sheer short-sightedness because in the long run new competetion may enter the field dethroning these Market Leaders by offering better service. Today good customer service is not a Differentiator in Market but assumed to be present. Recently after being meted out some shoddy service by Airtel I wanted to show my Indignation by posting a Blog on the same. After posting my Blog I submitted the URL to Google to make sure some damage is done to such unethical companies, I was surprised to see loads of such complaints. That shows the success of Consumer Movement in India. That's India shining for you.

How to earn from stock market : MF Primer

If you are new to investing in the stock market then you better take the Mutual Fund ( MF ) route. Its safe and less volatile than managing the stocks of the market. There are innovations in the MF market with facility of online investment and instant redemption from ATM's. There are new categories of MF's. There is one to suit one's need. Another advantage being that the fund manager is probably more educated about the market and experienced in handling the nuances of investment and earning a profit.If you are starting afresh then most probably you are going to start with a small investment. Brokers and Sub- brokers of the market do not entertain paltry amounts and if you approach them they will surely rebuff you. You can start with a MF with as low as Rs. 5000 in most of the schemes. In some liquid funds this limit may even be upto one lakh. In some tax saving equity schemes even Rs. 500 can be deposited.Basically there are three categories of MF. The debt fund, the equity fund and the balanced fund. Debt fund invests primarily bonds, gilts etc and has a low risk low return. Equity funds invest in shares of listed companies and has a high risk high return composition. A balanced fund invests in some proportion ( generally about 50:50) in both debt and equity . This has a moderate risk moderate return. If you want to invest in theses vehicles you need to have a clear understanding of your risk apetite and you can earn returns based on a MF choosen to match your risk apetite. If you are retired with no source of income you could go for 80% debt : 20 % equity,if you are 24 years old with a stable and growing income you could go for 80% equity : 20 % debt.There are also some Monthly Income Plans (MIPS). These have mostly debt and a part ( 15 to 20 %) equity component to leverage returns on the primarily debt portfolio. But these and any category of MF do not gurantee any returns. All the MF's are subject to Market Risks i.e. in a bear phase there can be no returns and even your principle amount may erode.

Blind Charity: Good Politics not Good Economics

Charity to poor nations by developed nations by developed nations is incentivising the poor to reproduce more and spread more, as they know that there will be people to help them is not going to root out poverty from this world. In economics or even good spirituality would tell you that human beings should do some work to sustain their lives and earn livelyhood. People should be helped and trained to be able to self sustain themselves which can be a permanent cure to poverty. Today educated metropolitan post-graduates married to each other don't have the confidence and wherewithall to have children and rear them. How can a state take responsibility of the children of beggars or other street dwellers ( beggars themselves should be rehabilitated).No country or intellectual can demand charity from America or any other developed country for a third world or poor country. As poverty and unemployment raises even in the developed countries, they need their own funds for betterment of the people of their nation. Trying to remove poverty through charity will never get rid of this evil.Go on ," Make them self - dependent".

The Judicial Mess

India is in the Midst of a judicial mess. If due care is not taken to smoothen the state of affairs, incidents of taking law into own hands by ordinary citizens is bound to surge. Lakhs of cases have been pending in the high courts for upto as high as ten years. Undertrials have been languishing in jails for as long as 35 to 40 years ( I wonder what a life time is) without any trial. There are cases of corruption, exorbitantly high legal fees, shootings in court premises and blatant cases of partial behaviour. There seems to be no reprieve for the poor.Furher adding to the woes of Indian Citizens laws are open to interpretition according to the convenience of the lower courts. What is the utility of a system which doesn't fulfill its objectives. There is urgent need to increase the number of courts, judges and setting up of fast track courts to clear the backlog of long pending cases.

As aptly put by somebody , " JUSTICE DELAYED IS JUSTICE DENIED".

3G Moble Sevices Soon to hit India

Characteristics would include faster web browsing speeds comparable to that of broadband. Sharper pictures enabling better gaming and mobile tv experience to the mobile users. Also streaming video and audio would be a real possibility.But cost of handsets which is expected to be on the upperside would prove to be a major hurdle. Also 3G policy regarding spectrum allocation would have to be framed. Further telecom companies would have to spruce up their network infrastructure to be able to roll out these new services.In India where a mobile model from Motorola in the range of Rs. 700 is expected soon and the inequality of income distribution as a result of improperly executed libralisation steps ,with people having disparate incomes and purchasing power is going to make growth for the telecom companies in 3G segment not an easy thing. Also competition from VOIP is going to intensify with computer penetration and home broadband connections going up.

Bravo Google

Google has recently taken a number of innovative steps like advertising solutions, e-mail, , online library, google earth etc and has earned in reputation and profits. Microsoft is being touted as a laggard in Innovating its business. Google has been proactive in leading innovation led growth. Microsoft has been reactive in its response to changed market reality and needs of customers.

Energy Security

How can India become more self reliant in its energy needs in the future. One way can be to become more dependant on non-conventional renewable sources of enery; like solar energy, wind energy, nuclear energy, hydro - power etc. Less and less dependance on oil would be good for the economy in the long run as it would reduce the import bill and consequently the balance of payment situation.

India move up the Value Chain

Approximately 70 percnt of the Indian population still resides in rural areas and is involved in agriculture for sustainance. India has become the backoffice of the developed countries. Its time that BPO and ITES companies move into partnership with the companies they offshore or outsource. A beginning has been made by various R&D centres being set up in India by MNC's and some KPO work is also being done in India. But true value could only be derived by developing products indigeneously, obtaining international patents, commercialising and marketing the products globally. Economy would easily then Zoom past China and Indian Markets would become more Attractive for FII as Indian Economy Fundamantals would really improve drastically.

"Move On India".