Thursday, March 28, 2013

What’s going Wrong with China?

Consumer Price Inflation in China has Skyrocketed from 1.5% in The Beginning of 2010 to about 5% at Present. And The Policymakers have been Helplessly reacting to it by Tightening The Monetary Policy, Aggressively. But is it The Right solution when it comes to Maintaining Growth?

While the Chinese economy continues to stun the world with its superlative growth figures at the forefront (in stark contrast to the troubled economies of the First World), there is an interesting happening in the background – the Chinese economy could well be overheating. No doubt, it’s difficult to tell when a rapid-growth economy like China’s starts overheating, but some of the risks associated with China’s $586 billion stimulus programme (announced on November 9, 2008) – inflationary pressures and asset bubbles specifically – are now certainly intensifying beyond the point of being ignored.

It’s not as if Chinese growth is slowing down. In fact, the dragon economy baffled expectations of mild cooling and reaccelerated in the last quarter of 2010 – Chin’a GDP growth accelerated to 9.8% y-o-y in Q4 2010, from 9.6% in Q3 2010, bringing the overall GDP growth for 2010 to 10.3%. While the industrial production rose by 15.7% in 2010, fixed asset investment also increased 24.5% during the year. Yes, that’s fast. Perhaps, too fast as all this clearly outpaced the government’s 8% GDP growth target for the year 2010 by a big margin.

Result: The overall rate of CPI inflation in China skyrocketed from 1.5% in the beginning of 2010 to about 5% at present. Chinese policymakers do argue that about half of this increase over the past year or so can be traced to sharp increases in food prices that reflect, at least in part, temporary supply shortages caused by adverse weather conditions; a closer look at the numbers shows that they might be right, at least partly.

Consumer prices excluding food were up 2.6% in January 2011, the fastest y-o-y inflation rate in at least 10 years. Although the rate of non-food price inflation moved back a bit to 2.3% in February 2011, it still remains high when compared to the average non-food price inflation over the last decade (see chart). In fact, a slight increase in food price inflation in the near future could prompt Chinese workers to demand even higher wages, thereby accelerating the non-food prices, and ultimately resulting in a higher overall CPI inflation. In short, there is a risk that an explosive wage-price spiral could hold the Chinese economy to easy ransom.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Posted by at 3:57 PM
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Monday, March 25, 2013

Trends & Prospects in R&D

R&D Invariably Plays an Important role in Addressing The Interwoven challenges of an Economy. Having Endured The Worst Recessionary periods, The Global R&D outlook for 2011 looks Increasingly Stable & Positive. The R&D spend is Anticipated to Increase to almost $1.2 trillion. B&e’s ReflEction of The Trends and Prospects.

European union a concern

The available statistics and forecasts thereof make it amply clear that growth in research and development (R&D) has resumed following the recession induced cuts in advanced economies. The global spending on R&D is anticipated to increase to $1.2 trillion in 2011. Amongst the global research community, the state of R&D in European Union is the most concerning. The EU has failed to reach the “3% by 2010” mark primarily because of the banking failures and the massive support required by Greece, Spain and Ireland. The active environment for collaborations with emerging economies such as China and India hold a lot of promise for the European R&D. Still struggling to recover from the economic downturn R&D investment in Japan and Germany is not keeping pace with Asia.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Posted by at 12:17 PM
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Monday, March 18, 2013

INDIAN AVIATION SECTOR: FARE HIKES

The Last Time Domestic Airlines were allowed to decide fare levels, They went into a Hand-Wringing war to death. This time, The Government has intervened. But the Players Aren’t Amused. Steven Philip Warner Answers Why.

Not to forget, the pleading lot this time too, is the same, which went about illogically doling tickets at throw-away prices some years back (which resulted in the state of the domestic sector that is today), forming cartels, requesting relief from the government on all possible fronts and begging for deadline extensions on the billions of rupees due on jet fuel payments. [As on December 3, 2010, Jet & Kingfisher still owed Rs.10.50 billion in fuel bills.] So why is their lot requesting the government to stay home this time? The answer lies in understanding that these preachers of “Free-market Economics” desire to make every inch count. For them, this is the chance to garner windfall profits, and in unbelievable quick time.

Count the maths. Given the improved conditions of demand in recent months, which have proved a setback for LCCs to an extent, even if we assume that a 200% increase in fares across the board, leads to a 50% fall in topline (considering 0% change in op. expenditures & ATF bills for the players), at the H1, FY2010-11 levels of topline, depreciation and interest on loans, Jet would have reported a net profit of a massive Rs.31.73 billion in the remaining two quarters of FY2010-11 – wiping out the nightmares of Rs.11.20 billion in losses garnered since FY2007-08 and lighten its existing debt burden by 91.33% over the next six quarters! Kingfisher, on the other hand, would have reported profits of Rs.52.13 billion during H2, FY2010-11 – enough herb to soothe the Rs.42.04 billion burn accumulated in five years, and wipe clean its total debt by Q2, FY2011-12. Given that the airline has never made profits since it began operations in FY2005-06, it clearly viewed the fare hike as an apt redemption from the societal pressure of not having broken-even yet. It wasn’t to be.

For now though, the government has put its foot down, to restrain the worst of corporate behaviours. It has already set up a tariff analysis unit to monitor route-wise fares of airlines, and the fares across various routes have already fallen by upto 70% since the DGCA made its intentions clear. As for the domestic aviators, they would do themselves good, even if they try and imitate the act of American LCC SouthWest Airlines (SWA) – the only airline that has never made losses in the past three decades! Even in 2009, while “all” airlines in US reported negative bottomlines, it made $99 million in profits. SWA has made money by no wizadry. It plays with volumes (not price-hikes), offers just what a stripped down LCC aircraft can, and operates its fleet of 550 aircrafts only on profitable routes. Today, Indian carriers which deploy about 70% of their fleet in the budget model (as of October 2010), are close to getting it right. And some like CAPA has even forecasted profits to the tunes of $300 million this year. Says Greater Manchester-based David Bentley, Joint MD, Big Pond Aviation, to B&E, “There is a demand for competitively priced tickets in US. The same is the case in India. India is not physically as big as the US but there is the opportunity to follow the same path...”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Posted by at 10:48 AM
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Tuesday, March 12, 2013

A Rebuilding Phase post the Worst of the Recession

She began her Journey Inheriting a Legacy of Hard-to-Change Processes, A Rebuilding Phase post the Worst of the Recession, And an ever Expanding Competition from Cutthroat Rivals. She has Weathered Every Storm and firmly Established herself as The Frontrunner among the Most Powerful Women in India Inc. In an Exclusive Conversation with B&E, Shikha Sharma defends Axis Bank’s future plans

B&E: What kind of overseas network does Axis bank has right now and what are your future plans with respect to the overseas market?
SS: We have four offices outside India right now. While Singapore, Dubai and Hong Kong are branches, Shanghai is just a representative office. However, we have RBI’s approval to convert the Shanghai office into a branch but we are still waiting for an approval from the Chinese regulatory bodies. Our intent of going international is primarily to help Indian customers and our clients who go overseas. Therefore we are looking at overseas locations where we can support our client base more efficiently. As far as UK operations are concerned, it’s a fairly lengthy process and all that we have right now is just an RBI approval.

B&E: What is the kind of growth that the bank is witnessing and what is your return from the infrastructure sector?
SS: As far as Axis Bank’s growth is concerned, we are one of the fastest growing private sector banks in the country. In fact, we have had a growth rate in excess of 40% in the last 5 years. We do not disclose our sector specific returns, but we are certainly focused on the segments which deliver us our target RoAs.

B&E: NIMs of banks have been under pressure for quite some time now and have been heading southwards. What about Axis Bank?
SS: Axis Bank had a lot of expansions in NIM last year due to factors like capital infusion, which lowered our cost of borrowing. Credit growth was also low last year so our CASA ratio went up dramatically. Lastly, refinancing of some of high cost deposits, which were raised during the crisis of October 2008, were done. All these factors led to NIM expansion and it went up to 4% in one of the quarters and we believe some of it will reverse out in the near future. In addition, policy interventions like an increase in CRR, interest on daily savings balance, are going to compress NIMs further. Though NIMs will get compressed, we still hope to maintain our long-term average of 3.5%.

B&E: But credit growth has not picked up as expected...
SS: In fact, credit growth has been quite good as growth in the sector has been around 18-19%; if we knock out the telecom part, it has been around 15-16%, but there is expectation that credit growth is likely to pick up in the next couple of quarters. In fact, as a bank, we have traditionally grown ahead of the sector and will likely be ahead in times to come. Like I said, the sector is growing at 18% and we are likely to grow at 24-25%, but it is tough to predict a specific number at this point of time. Further, interest rates will be affected by two factors, cost of borrowing and liquidity coupled with the credit demand. If there is a lot of liquidity and no credit demand then we can’t raise interest rates, at least on the lending side. We need to look at all these factors and as such can’t give specific answer. In fact, I had mentioned last year that this year is going to be a year of volatility, so you need to wait and watch.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles
Posted by at 10:18 AM
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Monday, March 11, 2013

Girish Rao

Chief Executive Officer, Essar Hypermart in talks with B&E’s

Busy on an expansion spree, one of India’s handful of organised steel retailers, Essar Hypermarket is aiming to double its top-line by increasing the number of its touch points in the country to 800. But prior to that, it plans to strengthen its inventory management practices that have proven to be one of the major reasons for the retailer to face structural process issues.

B&E: Recently, Essar Hypermart market increased the number of its outlets in India to more than 100. Where do you wish to take that number to?
Girish Rao (GR): Expansion beyond a certain point does not make any business sensible. Our aim is to create a sufficient number of touch points in India. At present, we have 109 Hypermarts and 460 Express Marts across the country, which is a franchisee owned outlet. We wish to take our touch points across India to around 800, including 125 Hypermarts. For us, North India is the biggest market after the western part of the country, contributing 32% to our total sales. So, we are also planning to increase our presence in the region by 25% before March 31, 2010.

B&E: Talking about North, you have recently opened your third Hypermart in Punjab (in Mohali). Do you have any special plan in mind for the state?
GR: The region has a strong presence of SMBs and north is the second largest retail market in India. We have come to know that people from Mohali and surrounding areas were buying steel from our outlet in Jalandhar. So we decided to open an outlet in Mohali itself. For that matter, we are planning to open a store in Amritsar as well.

B&E: What about your global plans? A few weeks back you opened up a store in Dubai. What kind of contribution, in terms of revenue, are you looking at from the global operations?
GR: Yes, recently we have opened Essar Hypermart in Dubai in a bid to expand our foothold in the Middle East. Further, we have a steel mill and as many as six Essar Hypermarts in Indonesia. Apart from these, we are also planning to expand in the sub continent by entering into countries like Sri Lanka, Nepal and Bangladesh because markets there are similar to that of India. We are hoping to replicate our Indian model in these countries and also looking forward to have around 5-6% contribution from global operations over the next 3 years.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles
Posted by at 9:41 AM
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Thursday, March 07, 2013

Sathiahhh!

Media’s favourite butt-of-jokes, Vivek Oberoi, is gearing up for his wedding with Priyanka Alva on 29th October, where the confirmed invitee list includes Karnataka CM B.S. Yeddyurappa. Vivek has been in the limelight recently, with the movie Rakta Charitra, which after much controversy has finally released. Reportedly, his fiancée got quite squeamish after watching the movie, which shows him slicing and dicing villains with much ease. We bet Vivek won’t return to gore for a while now!


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles
Posted by at 10:15 AM
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Wednesday, March 06, 2013

Why insurance means “need-based” selling?

Director and Chief Marketing Officer, Max New York Life Insurance, speaks to Steven Philip Warner and Manisk K. Pandey about the company’s segmentation, advertising and differentiation strategies and on why insurance means “need-based” selling.

B&E: There are a host of private life insurance players in India, which offer undifferentiated products under different brand names. How does MNYL strive to be unique in the clutter?
AM: If you have a product which emanates from a consumer’s need, you have your differentiation done. Our Shiksha Plus product is my favourite case in point. Typically, if you say that people are buying child insurance policies, people are not looking at merely insurance. The predominant consumer trend is that of parents wanting to groom their children as all-rounders and not just academic super-achievers. In other words, the consumers typically want a “talent development” kitty and not just a lump-sum for their child’s education. It is this very consumer insight that led to forming the contours of our leading child insurance product – Shiksha Plus. We added features in the product like ‘talent enhancement withdrawals’ – which can be used by parents/children to nurture any special talent that the child posses or wishes to develop. Also, there was need felt amongst parents to be able to add their second child into the same plan without the hassle a completely new policy altogether, hence we introduced the feature of ‘sibling upgrade’ within the plan. Now, these represent just two of the pluses we offer with the Shiksha Plus. We therefore use consumer insights as a differentiator to create relevant products.

B&E: MNYL is quite an aggressive advertiser too. Do you believe that advertising pays off in the life insurance industry?
AM: That is a typical dilemma question, because people say that insurance is sold and never bought. In insurance, up to the consideration stage, the brand funnel remains the same as for an FMCG brand. There needs to be awareness, familiarity with the contours of the product and you need to make it to the consideration set. So, advertising has to play the role to take your product into the consideration set. After that, sales take over. Therefore, advertising works for every industry, be it insurance or retail.

B&E: MNYL is planning to come out with a new marketing campaign in October? Will it be product centric or will it target a certain category?
AM: It’s a little too early to say much on it, but yes it will definitely not be product centric. Rather, it would be category centric. We have decided to keep child as the focus. Insurance fulfils multiple needs; protection, long-term savings, risk-cover, saving for your child’s future and even saving for your own retirement. We have however decided to focus on children and their needs, at least in our marketing efforts, as that ties in well with our segmentation strategy and long-term business goals.

B&E: What has been the response to your rural initiative, Max Vijay?
AM: Max Vijay was an innovation and innovations take own time to fructify, to be understood and to be learnt, before you are ready to scale them up. So, we are still in that phase where we are actually working on refining this innovation. But various aspects of it have been very successful like its top-up plan. In fact, 25% of Max Vijay policy holders topped-up at least once and that too, without an agent approaching them. It’s our continuous efforts that have helped us build an army of 97,000 Max Vijay customers.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles

Posted by at 9:22 AM
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Tuesday, March 05, 2013

“I see no reason why Middle-East conflict can’t be resolved”

In an exclusive conversation with Akram Hoque and Sayan Ghosh, H.E. Mohamed Ali Daher, the Ambassador of the Hashemite Kingdom of Jordan talks about Middle-East peace process and democracy in Jordan

B&E: Jordan has a very balanced relations with US, Israel and the Arab nations. How does it maintain the status quo?
H.E. Mohamed Ali Daher (MD): It’s true that Jordan enjoys a very good relationship with all its neighbours. We thought establishing peace with all the countries in the area and Israel would give an extension to channel our resources for development. The urgency of establishing peace has always been there and it’s a global phenomenon that peace has its own rewards. Now, the question is what have we achieved? We are aspiring for better understanding for peace as we say in English that it needs “two to tango”. So, we also need the other side to understand the value of peace and help in establishing permanent peace in the region.

B&E: Establishing peace in the Middle-East region is very much possible. Do you agree to this?
MD: I see no reasons why not. After all, we can’t live life of agony and state of restlessness for all of our life.

B&E: Who will be playing the most critical role in the Middle-East peace process?
MD: Indeed, it’s Israel and the Palestine. Because they have to sit together and talk about peace. Otherwise, the problem between these two countries will not only be a matter of concern for the Middle-East region, but also for the whole world. At present, the US is playing a good role as an inter-mediator to resolve the issue. They have a special envoy George Mitchell, who is shuttling around in the entire region. Jordan is also a key player in the peace process due to its closeness with these countries. However, Jordan don’t play any role away from the rest of the Arab world. As you probably know that in the last Arab summit conference that was held in Beirut, the Arab leaders universally adopted peace plan and it is still on the table. But I am afraid that we have not received any encouraging reaction from Israel. I don’t know how long that would be on the table. Hopefully, it will be implemented. This really reflects how much the world community is emphasising on establishing peace in the region.

B&E: Despite being ruled by the Royal family, Jordan ranks first in the Arab Democracy Index. How do you rate democracy?
MD: For this, we first have to understand the meaning of the word “democracy.” Democracy is so much under the influence of certain social structures. There is no general norm for democracy. Democracy, in my understanding, is that people are not oppressed, they enjoy their rights without any obstruction and they do their duties for the country. These are all integral and essential elements of any democracy. Considering this, I will say, we are enjoying democracy in Jordan and as you mentioned it correctly we are doing well in the index. His Majesty King Abdullah II has always emphasised that democracy is an essential part of the whole process of development and upliftment of the country’s economy. Moreover, like other democratic countries, we have a parliament and it is elected in a very democratic way. As a matter of fact, the country will see its next general election sometime in November this year. Now talking about how some of the western society preview democracy, I am afraid that we have difficulty in understanding western definitions. Democracy in our country is basic necessity and is based on our religion Islam. You cannot say that the Arab world lacks democracy.

I don’t see any Arab country that has a military rule or martial law. Thus, democracy can be tailored according to the need of the people and we are proud of what we are now. We are enjoying all kinds of freedom.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

Posted by at 3:49 PM
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Friday, March 01, 2013

Rahul Sharma in an interaction with Surbhi Chawla

Micromax founder and Executive Director Rahul Sharma in an interaction with Surbhi Chawla of B&E

B&E: Recently there were rumours that your dealers were not happy with you stating that there were no stocks. How have you sorted that out?
VJ: We have believed in growing prudently with our dealers and would do that. Most of the dealers that were there with us from the start continue to be with us but there is no wide spread dissatisfaction, although we have been out of stock from time to time. Yes, we have added new distributors and dealers from time to time, which was a natural progression for us. For example, we had only one dealer in MP when we started; but in this market, we are now number one and selling 1,12,000 units. There is also this dealer in Bihar who I remember wrote the first cheque to us for Rs.1,36,000 and now does a RTF of 4 crores as he realizes that cheque takes three days to clear. We have cautiously adopted this strategy to grow the entire ecosystem with us and that’s what we would continue to do.

B&E: How do you see competition in the segment?
VJ: I will think of competition only when I am not growing month on month. Another plus is that now we see a lot of Indian brands also fighting it out with the MNC’s so that’s also a good sign. I have utmost respect for Nokia; they are the leaders and have a wonderful portfolio and it isn’t that they are not competent. What we are seeing is the maturing of the market. A similar thing happened in the auto industry. Earlier we had just Maruti but with privatization, Hyundai and Tata Motors came in and slowly Maruti’s share has come down; but it continues to be the leader. Similarly Nokia will continue to be number one; only the difference between number one and two would become lesser & more legitimate.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
Posted by at 4:38 PM
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