Japan to partner Vibrant Gujarat

 Gujarat’s biennial investment mela is truly going global. Breaking a seven-year jinx, Japan has become the first country to join hands with the state government for the Vibrant Gujarat Global Investors’ Summit to be held on January 12-13 next year. 

    Japan’s interest in Gujarat stems from the fact that nearly 40 per cent of the proposed Delhi-Mumbai Industrial Corridor (DMIC), which is being built with Japanese funding, falls in the state. 
    The Japanese External Trade Organisation (JETRO) will be leading a delegation of 40-odd industrialists and officials of the ministry of international trade and industry (MITI). “Among the top names that have agreed to be here are Mitsubishi, Nissan, Toyoto and Honda,” said a senior official. The proposal to make Japan a partner country was put forth before Japanese officials during managing director, GIDC, Maheshwar Sahu’s visit to Japan to canvass for Vibrant Gujarat. 
    Among the issues to be discussed will be ‘Mini Japan’, an exclusive city meant for the Japanese to be located between Dholera and Fedra, where an international merchant airport has been planned. Investment in the ports sector and creating a chain of godowns along the DMIC, especially in Dholera special investment region (SIR), will be on the agenda. 
    The United Kingdom was a partner country at the resurgent Gujarat partnership meet, which took place on February 8-9, 2002. But a few weeks later, the post-Godhra riots started and that kept foreign investors away from Gujarat.

Optimism, the power within..........

• There are a number of factors that would allow the economy to ride out the storm 

• The Indian economy is far more insulated from the global crisis than the mood around would lead us to believe

• But for that factors to gel together and produce growth, we need politics. Strong, imaginative leadership is what we need.

    WINTER can get gloomy in Delhi — fog and clouds block out the sun, people are sapped of energy and the mood turns less than cheerful. This kind of a winter has the Indian economy in its grip. Policymaking is clouded, inertia is more visible than action on the ground and the mood is far darker than it ought to be. But there is a way out. And that is politics. 
    Bad news is pouring out of the rest of the world. Models of regulatory rectitude and institutional integrity suddenly turn out to be plain hubris, if not actual Ponzi schemes. The three biggest economies of the world are in full-blown recession. Interest rates there are fast approaching the fashion industry’s dimensional ideal — size zero. Yet, economic activity remains stuck. People prefer to sit on cash rather than spend or invest their funds. 
    Thanks to this, and the fact that we, in our collective wisdom, have prevented the bulk of our long term savings from being deployed in equities, the Indian stock market remains hostage to global recessionary impulses. Instead of reflecting India’s economic fundamentals, our stock market indices reflect global pessimism. This adds to the sense of crisis and crisis-inducing paralysis. The reality is that there are several grounds for optimism. 
    Number one: the Indian economy depends far less on exports than other fast growing economies do. If the export market dries up, an export-dependent economy would face crisis. While India’s exports of goods and services together add up to a little under a quarter of the total output, the direct export contribution to gross profits and wages and salaries is less than 10% — substantial, but not huge. The indirect contribution would be significant, particularly in the case of high value exports like software and IT-enabled services. But these segments are likely to grow, rather than decelerate, as companies in the recession-hit large economies seek to cut costs through outsourcing. The bulk of the demand for India’s output comes from India itself. Consumption demand is about two-thirds of the output. 
    Ground No. two: In aggregate terms, the bulk of Indian investment is financed out of domestic savings. The current account deficit is the measure of dependence on external savings for local investment, and this is about 2% of GDP. 
    The third ground for optimism: All costs are coming down (save, strangely, of newsprint!). Oil prices are less than one-third their peak. Globally, food prices are down a fifth, metals are down by half and the Economist’s index for all commodities is down by a third. Freight costs are a fraction of what they used to be. 
    Of course, metal and commodity producers would not call this good news. But India, on the whole, is a net importer of commodities and not a net exporter of commodities. For every steel producer fretting over falling steel prices, for example, thousands of steel users would be cheering cheaper steel. This fall in global commodity prices also gives elbowroom to the central bank and the central government to pursue expansionary policies without fear of runaway inflation. 
    Infrastructure is both crisis and opportunity for the Indian economy. Its dearth constrains growth. But that crippling paucity also means that a concerted government drive to build infrastructure would not end up creating an excess of it. Rather, the process of building infrastructure would provide the boost the economy needs, and the created infrastructure would support further growth. 
    If all this were so simple, why isn’t growth happening on its own? Just because all the pieces of a jigsaw puzzle are around, the puzzle doesn’t automatically get solved. Someone has to put those pieces together the right way. In the case of a slowing economy, what can put the pieces of the puzzle together is politics. 
    The government has been spending its energies on sectoral sops — interest rates for cars or housing or exports. This is wasted energy. All focus must be on spending, preferably on building infrastructure. And this cannot be done without strong political will and imagination. 
    When people sit on cash, largescale public expenditure alone can get things moving — this is classical Keynesian economics. The government must borrow at the cheap rates available to it abroad and spend on infrastructure in India: roads, towns, dams, irrigation canals and watershed development. 
    Getting the bureaucracy to move and spend money is tough — there is too much of lethargy, procedural inertia and plain corruption in the system. Political will alone can energise the system and make it deliver. 
    All land-intensive projects languish because of political failure to create a framework for converting those who lose land to projects into its stakeholders. Nandigram, Singur and Posco are epitaphs to technocratic activism devoid of enabling, empowering politics. Firm resolve to clamp down on power theft alone can sustain investment in the power sector. 
    If winter comes, can spring be far behind? When it comes to economics, you need politics, besides poetry.

Kris Gopalakrishnan : IT industry to recover by Q2 2009

  

 THE Indian IT services industry could see a recovery during the last three months of 2009 or early 2010, according to S Gopalakrishnan, chief executive officer of Infosys, which is India’s second biggest software firm. 

    Speaking to reporters on the sidelines of the ongoing TiE summit, Mr Gopalakrishnan said that current slowdown in the global economy “has only seen a dip in the business volumes of the IT industry.” 
    The prospects of the industry look bright as there are numerous opportunities, with offshoring being a credible strategy, he added. 
    Earlier participating in a discussion, the Infosys chief executive said that despite the slowdown, the industry will benefit from such conditions, as demonstrated during past recessions. 
    Providing statistics, he said the global technology industry is estimated at around $800 billion and “India’s share is only 5% giving it enough room for growth.” 
   

Microsoft succour for Indian start-ups

THE world’s biggest software company, Microsoft, will help Indian start-up companies cope with the economic recession by offering them Microsoft software needed to run their business free of cost. 
    Termed as BizSpark and coming under the Microsoft Startup accelerator Program, this new initiative will provide the startups with software products free for a period of three years. 
    “IT industry is going through a inflection point and there are a host of startups who are looking at tapping into domestic market through the creation of Ips. Their initiative would be to provide the entire tech support,” said Ravi Venkatesan, chairman of Microsoft India. In order to become a member of this program, the start-up companies will have to be less than three years old, and their annual revenues should not exceed $1 million.

C.K.Prahlad urges Entrepreneurs to Explore domestic opportunities

MANAGEMENT guru CK Prahalad on Tuesday asked Indian entrepreneurs to seek domestic opportunities for serving around 400 million people living below the poverty line. There is a need to focus on creating wealth rather than sharing wealth,” he said during his keynote address at the TiE summit in Bangalore on Tuesday. “The poor represent an opportunity, a source for innovation,” he said. 
    Giving example of the upcoming Indian elections, Prahalad said that no country in the world has done 100% electronic polling, and India is attempting to do just that with around 1.5 million electronic polling booths. “It’s a great innovation to be able to leapfrog the west,” he said. 
    Referring to the Indian phone firms such as Bharti Airtel, who are able to serve millions of subscribers at rates much lower than the US, and still remain more profitable than their western counterparts, Prahalad said that these phone firms have demonstrated how a company can be so profitable despite serving customers who are basically poor. 
    Among other opportunities for the Indian entrepreneurs to pursue, Prahalad also mentioned how locally manufactured access devices can trigger a revolution.

Strategic Advice for Personal Finance

P E R S O N A L F I N A N C E Adventure is out, safety is in Lure of lucre takes a backseat as investors root for safety & traditional investment options IDEAL CONSERVATIVE INVESTOR PORTFOLIO : Growth Assets (equities, diversified large-cap mutual funds) 25-30 %  Income Assets (small savings schemes, fixed maturity plans, long-term bank fixed deposits) 70-75 % IT’S THE mailer you would rather not be interested in opening. When this year you receive your yearly financial statements, you may probably prefer ignoring them and pushing them into a drawer. Indeed, it was a year which investors would prefer to forget. Stock market valuations almost halved, prices of commercial property dipped, manufacturing and services sectors witnessed a slowdown and a wave of retrenchment loomed large over the country. But should this really press you to re-balance your portfolio? If the financial pundits in the country are to be believed, then you should. Because they believe that time for adventure is over and safety of funds should be your priority, going ahead.      Financial planners advise one to deploy a major chunk of their funds in safe investment avenues such as bank fixed deposits (FDs), bullion, gold exchange traded funds (ETFs), gilt funds, public provident fund (PPF), National Savings Certificates and fixed maturity plans (FMPs), and have minimum exposure in equity markets and exotic products, depending upon their risk-taking abilities. For those who wish to make alternative investments, they could look at vintage cars, rare stamps, gold bars, rare coins, antiques, wine, photography, sculptures, and private equity. You should, however, have a minimum investment horizon of three years to reap benefits of the above mentioned asset classes.      Devendra Nevgi, CEO of Quantum AMC, feels that 2009 probably would be the year of gold. “The yellow metal is a global currency, and a hedge against inflation. In tough times such as these, it acts as a portfolio insurance. In fact, for Indians, this asset class is not just an investment, but also a security,” he says. According to him, an investor must allocate at least 20-25% of their investible funds in gold-related products.      The sentiment is shared by Zankhana Shah, a certified financial planner and head of Money Care Financial Planner. She, however, feels that the current investment scenario is an ideal opportunity for investors to venture out. “It will eventually depend on your risk appetite. In the new year, possible downside is lesser than upside in the equity markets, compared to this year. Risky assets look more attractive now than they have earlier. It’s time for you to ask yourself the question — what’s your expectation from your portfolio — before deciding on allocating funds,” she says. According to her, debt funds and government securities will be the flavour of the new season. For an investor, the eventual challenge is to remain guided by reason today because if one starts reacting to the downturn by saving more, it will make matters worse. To earn a reasonablereturn, you must avoid the temptation of investing in the wrong place, especially if you have an investible surplus. In fact, if you are a daring investor, the opportunity has come for venturing out. On the contrary, if you are a conservative investor, you can wait until stocks rebound and stay cautious with your portfolio. The choice is yours. Your fate lies in your own hands!

Indian Auto Industry : Fortune @ the bottom of the pyramid

In the time of slowdown, what industry should focus is the a large untapped market : Rural Domestic market.... Future lies in Bottom of the Pyramid.....

Car makers in top gear on country roads

Maruti Suzuki, Hyundai & GM see rise in sales in rural areas

HERE is something exciting. After getting hijacked by the slowdown, domestic carmakers seem to have struck gold at the bottom of the pyramid. With sales drying up in big cities due to unavailability of credit, auto manufacturers such as Maruti Suzuki India (MSI), Hyundai Motor India and General Motors India are now looking at cash-rich rural customers to boost sales. 

    Last year, almost 3% of MSI’s sales came from rural areas. This year, rural customers have contributed around 10% to its sales. MSI’s executive officer in charge of marketing and sales, Mayank Parekh says, “During these troubled times, rural areas are coming to our rescue. Last year in the period April-October we sold 16,400 cars in villages. This year the number has shot up to 31,000. And this is just the tip of the iceberg.” 
    Similarly, rural areas are now contributing almost 40-50% to GM India’s sales. In the last 10 months the company has opened 100 new outlets of which 60-65 are in rural areas and sub Tier 3 towns. Ankush Arora, VP, sales & marketing at GM India says, “We have doubled our rural volumes in the last 10 months. We managed incremental volumes of around 600 units per month.” 
    And even Hyundai, India’s second-largest carmaker in terms of sales, is bullish on its rural marketing initiative, Ghar Ghar Ki Pehchan, which it launched earlier this year. And here is the reason why: Almost 50% of the 220 million households in rural India are potential car buyers due to the agricultural subsidies extended by the government and also due to increase in productivity of agri-based products, according to a recent survey.

 Financing options 
TO SIMPLIFY things, among the people who have an opportunity to buy an automobile in the rural areas there are approximately 22 lakh Gram Panchayat members, 1.5 lakh Panchayat Samiti members and 15,000 Zila Parishad members, who according to auto companies are sitting on piles of cash. Parekh of MSI explains, “This year, there has been a bumper harvest of kharif and rabi foodgrain. So, there is a positive sentiment doing the rounds. Also, people in villages have some collateral security or the other in the form of land to help them avail of loans.” 
    In fact, MSI has 2,500 RDSEs (resident dealer sales executives who are local contacts of big dealers) in rural areas and buoyant with their success it now plans to increase the number to 10,000 shortly. Even Hyundai Motor India Senior V-P for sales & marketing Arvind Saxena has been quick to cash in on the opportunity. Saxena said: “We are also in talks with a financing institution with a huge branch network to extend easy financing options for the people in rural India.” 
    And vehicles that are mostly in demand in rural areas are small cars and people carriers. For instance, MSI is pushing its Alto and Omni, Hyundai is promoting the Santro and GM is banking on the Tavera, Spark and the UVA. And with other players also planning to roll out small cars, the pyramid is all set to be turned on its head soon. 

C K Prahlad's Analysis

Impact of US recession to last just 2 yrs

    THE recession in the US could open up opportunities in emerging markets such as India which have a huge consumer base to be tapped at the bottom of the pyramid. More work could be outsourced here when the ailing financial sector in the US consolidates, said CK Prahalad, management guru & professor of corporate strategy at the University of Michigan. 

    The real economy in the US has slowed down in the aftermath of the financial crisis triggered by the subprime mortgage mess. Mr Prahalad reckons the impact of recession on business there may last only for about two years. 
    “People have lost trust in organisations due to the crisis. The new administration there is expected to take efforts to restore the trust in about 18-24 months,” he said on the sidelines of a seminar hosted by the Indian School of Business in partnership with IIMs and other business schools and corporations. According to him, the crisis went out of hand as regulators and managers ignored fundamentals. “Researchers may not be able to come out with instant solutions for this kind of a deeper financial problem. But they can point at the opportunities arising out of this crisis,” he said. 
    Entrepreneurship is a proven concept in the country and many corporate houses like ITC and Airtel have come out with business models to explore opportunities at the grassroot level.