Time to pay attention to the finer points of the BRIC report
Goldman Sachs’s most famous Global Economics Paper No. 99
named Dreaming with BRICs: Path to 2050 is no news now-a-days, at least in India, given the impunity with which this has often been referred to by nation’s polity and policy makers to showcase the bright future of our country. And also as if forewarn all those, who are yet to make up their minds about investing in India or take it seriously, as to what a grave mistake they would commit if they gloss over the writing on the wall.
This year, Goldman Sachs even revised their previous estimation thereby putting India even ahead of the US by 2050 in terms of Gross Domestic Product (GDP). Much to the glee of the Indian policy makers, soon thereafter, India entered the exclusive trillion dollar club. But in the midst of all these, one thing was completely ignored, i.e. the warning from Goldman Sachs which had laid down four conditions namely, macro stability, institutions, openness and education. While India’s combined fiscal deficit (that of the Centre and the states together) of about 9-10%, is a major dampener to the right kind of macro stability, lack of reforms in agriculture, power and education spheres and several other government departments like the Department of Post make sure that fiscal deficit would continue to remain high. Its reduction, if at all is not in absolute numbers but because of the increasing GDP, as a percentage looks lesser. Subsidies continue to serve the rich and middle class and incredible amount of loss in power and oil sectors is a proof enough of lack of right kind of institutional mechanism. All that oil bonds end up doing is to shift the subsidy burden to a future date. Sheer lack of pragmatic regulatory bodies ensure that cross subsidies remain very much a part of system of governance, thereby stifling growth in key sectors like aviation which continues to pay the price of the distorted price juggleries in oil sector. Incidentally, the price of aviation fuel in India is about 70% more than that in the international markets. In the same league, absence of institutional mechanism, translates into a challenge, when venture capital for starting a business is sought. Industries like insurance and banking are yet to receive full dosage of foreign investment even when they, and especially the insurance sector, are in dire need of fund infusion.
That the Indian economy is yet to be opened properly is vindicated by the fact that a stronger rupee is increasingly becoming a major cause of concern for the government and the exporters, at a time, when India ideally should be celebrating the strengthening rupee as a sign of a growing and potent economy. Instead, strict controls on capital outflow ensure that India isn’t being able to extract maximum mileage from it. The fourth and the most important point as stated by the Goldman Sachs report is on education. Unfortunately India’s dismal ranking (128th) in the UNDP Human Development Report portrays the dismal condition in terms of education and health. This can severely impede India’s economic dream run as it would invariably dry down the future supply of quality manpower. In addition to it, distorted subsidies for education like in other sectors, make sure that even today, urban college students spend more on one time recharge of their cellphones than on paying college fees, thereby depriving the millions who otherwise deserved the subsidy, more. It is for all these reasons that for India, BRIC dream is still nothing more than just daydreams. And to make it a reality, the bricks of the BRIC will have to be first of all put in the right place. Or else, the ‘I’ of BRIC would just collapse like a pack of cards.
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Source : IIPM Editorial, 2008
Goldman Sachs’s most famous Global Economics Paper No. 99
named Dreaming with BRICs: Path to 2050 is no news now-a-days, at least in India, given the impunity with which this has often been referred to by nation’s polity and policy makers to showcase the bright future of our country. And also as if forewarn all those, who are yet to make up their minds about investing in India or take it seriously, as to what a grave mistake they would commit if they gloss over the writing on the wall.This year, Goldman Sachs even revised their previous estimation thereby putting India even ahead of the US by 2050 in terms of Gross Domestic Product (GDP). Much to the glee of the Indian policy makers, soon thereafter, India entered the exclusive trillion dollar club. But in the midst of all these, one thing was completely ignored, i.e. the warning from Goldman Sachs which had laid down four conditions namely, macro stability, institutions, openness and education. While India’s combined fiscal deficit (that of the Centre and the states together) of about 9-10%, is a major dampener to the right kind of macro stability, lack of reforms in agriculture, power and education spheres and several other government departments like the Department of Post make sure that fiscal deficit would continue to remain high. Its reduction, if at all is not in absolute numbers but because of the increasing GDP, as a percentage looks lesser. Subsidies continue to serve the rich and middle class and incredible amount of loss in power and oil sectors is a proof enough of lack of right kind of institutional mechanism. All that oil bonds end up doing is to shift the subsidy burden to a future date. Sheer lack of pragmatic regulatory bodies ensure that cross subsidies remain very much a part of system of governance, thereby stifling growth in key sectors like aviation which continues to pay the price of the distorted price juggleries in oil sector. Incidentally, the price of aviation fuel in India is about 70% more than that in the international markets. In the same league, absence of institutional mechanism, translates into a challenge, when venture capital for starting a business is sought. Industries like insurance and banking are yet to receive full dosage of foreign investment even when they, and especially the insurance sector, are in dire need of fund infusion.
That the Indian economy is yet to be opened properly is vindicated by the fact that a stronger rupee is increasingly becoming a major cause of concern for the government and the exporters, at a time, when India ideally should be celebrating the strengthening rupee as a sign of a growing and potent economy. Instead, strict controls on capital outflow ensure that India isn’t being able to extract maximum mileage from it. The fourth and the most important point as stated by the Goldman Sachs report is on education. Unfortunately India’s dismal ranking (128th) in the UNDP Human Development Report portrays the dismal condition in terms of education and health. This can severely impede India’s economic dream run as it would invariably dry down the future supply of quality manpower. In addition to it, distorted subsidies for education like in other sectors, make sure that even today, urban college students spend more on one time recharge of their cellphones than on paying college fees, thereby depriving the millions who otherwise deserved the subsidy, more. It is for all these reasons that for India, BRIC dream is still nothing more than just daydreams. And to make it a reality, the bricks of the BRIC will have to be first of all put in the right place. Or else, the ‘I’ of BRIC would just collapse like a pack of cards.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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capacity of 300,000 cars and Suzuki intends to make India the global production base for a new bigger car code named ‘A Star’ mainly destined for foreign markets. Maruti will also be introducing a new family vehicle, Splash, next year. But Maruti will not be competing with Tata Motors or Bajaj Auto for the manufacture of an ultra low cost car. Khattar has stated that the sale of these cars will lay the foundations for more customers to upgrade a few years later to cars from the Maruti stable.
look no further than IBM; a truth vindicated by its announcement on November 12, 2007, to buy Canadian business software maker Cognos Inc. for $5 billion. So while this gets counted as the sixth buy for IBM in 2007 (and 23rd overall) to support its ‘Information on Demand’ business, the question remains – does it make strategic sense to buy off a firm that even failed to file its Q1 2007 results, thus failing to meet Nasdaq’s requirements?!
convince the Indian communist on the virtues of the Indo-US nuclear deal and the immense benefits which will accrue to the nation through its operationalisation. In addition, Pranab Mukherjee, the External Affairs Minister & the Congress stalwart, is also tasked by the party High Command to ensure that the UPA Government wades through the current crisis to survive its full five year term. Till now, Pranab has been successful in convincing the communist of the need to start the process of talks with the International Atomic Energy Agency (IAEA) for safeguards agreement. Furthermore, the political-economist plus strategist, has been able to buy time from the communists and ensure that the government does not go down at least till the next year begins. This is not the first time that the erudite minister has been coming to rescue of the party in crisis (In early 2005, he was instrumental in convincing the Left as well as his own Union colleagues on the virtues of accepting the Patent’s Amendment Bill.) His proven negotiating skills and his deep understanding of the global & domestic political undercurrents makes him an almost indispensable part of Cabinet.
mobile top-ups, and, among other services, insurance. Once completed and fully operational, the centres will offer a bouquet of 180 services. After a tie-up with educational institutions like XLRI, they will provide on-line professional education to rural youth. “For the rural youth, we will start courses in retail management and computers. This will encourage them to gain employment in sunrise sectors like retail (Reliance Fresh & Big Bazaar),” says Nayan Jee, District Manager, Comat Technologies.
basic range. There is a tremendous scope for volumes to grow in the business segment and we are surely moving in that direction. With a gradual shift towards data driven services & demand for web enabled & Wi-Fi phones picking up in India, smart-phone sales should pick up. Commenting on the scenario, the spokesperson from HTC said, “Currently, based on IDC figures, datacentric devices, which are more suited as business phones, have a market size of approx. 250k per year. For all high-end devices, which could be those upwards of the Rs.15,000 mark, total market size would be close to the 1 million/month.” HTC is already planning to get the HTC Touch Dual (with two keyboards i.e. QWERTY & normal) and HTC TyTN (compact & ultimate in connectivity) in 2008, apart from other world-class smart phones & PDAs they don’t wish to name at present.
These funds have stated criteria for investments and their portfolio comprises of only those options that meet their criteria. These funds are concentrated and thus riskier. However, even this debt category has managed to escape without delivering negative return under any scheme. Average return for the category remained at 8.61% for the year.
with the youth and to go for a more youthful image, the company decided to go in for a logo colour change, at the same time leaving the design intact for the ‘old’ customers.” But there was another emotional reason, as we found out later. The logo also denotes the signature of Ardeshir Godrej. And being one of the major sponsors of IPL has only helped. A source in the company confirms that the company is further planning to spend Rs.1 billion per year for branding exercises. But all this sudden transformation has not been a seat-of-the-pants effort, but rather, a plan worth the portals of battlefield.
of a retail revolution. Players like Tatas (Westside), Biyanis (Pantaloon), et al, were ramping up their act and others like Lifestyle had also jumped on to the retail bandwagon, giving some serious competition to Shopper’s Stop. So in 2006, Shopper’s Stop decided to chalk out some new re-structuring plans and changing its promotional activities. “We didn’t want to compromise with the brand image as we were for the premium fashionable ones. But we wanted to change our class of audience,” elaborates Shrikhande.
had always been its forte and it knew that the competition may never reach its level in the short run. Since Maruti was the only manufacturer in a variety starved nation, it was entrusted with the responsibility to fulfil all demands. The eventual mass production capabilities it acquired were just a by-product of massive demand and Maruti has been successfully reaping the benefits of the past, keeping production costs down. I remember last year (September 2007), S. Nakanishi (he was Chairman then) had written in his statement, “The success of Maruti in India has been based on a sharp understanding of Indian car customers, and our ability to meet their changing needs... This is especially true in recent years, when competition has intensified and we have strived to maintain our leadership...” There’s no question that Maruti’s range of small cars – 800, Zen Estilo, Wagon R, Swift, and Alto – are all market leaders and invariably find themselves in the top ten sellers list (and even the soon to be launched Splash)!
is luring the PE investors.” The advertising revenue (which is the largest source of income for most media companies) is expected to shoot up in coming years. Currently the Indian advertising industry is worth Rs.196.4 billion and is expected to grow at a CAGR of 18% for next five years to touch the magical figure of a staggering Rs.453 billion. This in itself indicates that there is a huge unexploited potential in the industry, which is what is pulling the PE industry towards them.
is undeniably an exceptional talent, his varied interests (read: writing lyrics, poetry, et al) could prompt him to soon find ad-biz too restricting. He considers Joshi a genuine creative creature whose real joy resides in freedom. Advertising after all, is creating communication to a given and pre determined brief. It can only offer that much creative satisfaction to a truly liberated soul. Sooner or later, he may feel (despite his best efforts & intentions) claustrophobic!”
benefited from the process patent law that was in place prior to 2005 and has developed a significant competence and talent pool in the area of reverse engineering. This led to significant growth of the generics drug industry, particularly in the small scale sector. Now with the product patent law in place and increasing focus on research, many companies will feel the need for consolidation. R&D is a high risk activity requiring large scale funding, a strong talent pool and organisational skills to bring a drug to the market. All these factors are likely to prompt a consolidation phase in the industry.
that Japanese auto players expect to contribute to further evolution of the compact segment, offering more features, better styling and space than existing players in the market. Adds Srinivas Krishnan of BS Motoring, “The much talked Yaris will not be the Toyota small car for India; Toyota is developing an all new small car for the Indian market, which they would prefer to be within the ambit of the small car norms.” It comes as no surprise therefore that even the larger Palio, Swift and Getz are following a similar line of duty, increasing value for consumers.