Can India be the
Art of MNC to win India “Utterly Butterly Delicious..”
1 The Economy July 25 2012
2 The Economy July 25 2012
Never ignore your cash flow
ash is the lifeblood of a business -- poor flow of it can spell doom to an otherwise healthy firm. And interestingly, it can hit both small and big firms. From multimillion dollar companies to momand-pop stores, every firm needs to watch its cash flow and keep it healthy. Money keeps flowing in and out of any business, and it’s not unusual that at times it might suffer from a cash flow reduction, but if it’s constantly a problem, this could create long-term problems. A smallscale enterprise might not recover from the ill-effects. Like in many other cases, small and medium enterprises (SMEs) are more prone to poor cash flow management, mainly due to their limited financial training coupled with their lack of awareness. A small entrepreneur has to deal with a seemingly unending array of issues, and when it comes to cash flow management it usually doesn’t rank as a top priority. But that’s a mistake. As SMEs never get enough and some to spare like large businesses, they must be extra cautious about their cash flow. But what if your business is doing well? Why should you bother about your cash flow? Here again many small firms miss the point. Poor cash flow not necessarily happens to a firm that is under-performing or seeing declining sales. In fact, fast-growth companies are more vulnerable to poor cash flow as they usually have to pile up inventory, keep a strong workforce, and wait for many a customer to pay. So, your sales may be bursting through the roof, and your business may look in the best of its health, but if poor cash flow is there you may be hit all of a sudden -late but hard. So, you need to look over your expenses and see what fat can be trimmed without the business suffering. Is there too much overhead? Is your pricing affecting your profit margin? Are you overstocking inventory? You need to monitor all these things carefully. This might sound like a no-brainer, but keeping tabs on your expenses is the key to avoiding a cash flow crisis. However, cash flow control is not only about expenses. It’s about carefully planning and tracking both income and expenses through time, and while doing that you must not overestimate your income and underestimate the impact of your expenses. Don’t just think about the amount you have left in your checking account after paying your bills. What about the bills that you are supposed to pay tomorrow or next month? Will you have enough money? When will you get more money? What if your customers suddenly start buying less? What if some of your largest customers default? In addition, you need to put every effort to accelerate receivables, improve collection methods, stretch out payments, forecast sales and expenses carefully, and achieve inventory efficiency in the supply chain. These are only some basic tips and digging a bit deeper will certainly help SMEs avoid problems in their cash flow. But the road can start with small steps. First and foremost, accept the responsibility for minding your cash flow and take care of the small things. The big things will take care of themselves.
Monish Mohanan Editor & Publisher
the dia be Can In ix’?
NC Art of M dia to win In “Utterly
Editor & Publisher
: Monish Mohanan
: Janeesh Jalal
: Manu K. G.
Brand Manager : Dominic Savio M. Deputy Editor
: Tarun Narayan
Sr. Correspondent : Sumi P. Reporter
: Shyama Nair
Corporate Communication : Liji Lucas Art Editor
: Jolly K. J.
: Sanil Chirayil
: Aneesh V. M.
: Siju Varghese
Corporate Office Media Outlook India Publication 41/2796E4, 3rd floor, North Square Bldg., Paramara Road, Opp. Town Hall, Cochin - 18 Tel: +91 484 4019087 Mob: 9747551573, 9645830812 E-mail:firstname.lastname@example.org www.theeconomy.in Bureau office Media outlook India Publication Tower House, Convent Road Thiruvananthapuram -695 001 Tel: +91-9995037470 3 The Economy July 25 2012
4 The Economy July 25 2012
5 The Economy July 25 2012
In this issue
Narendra Modi “THE Iron Man of Gujarat”
28 Art of MNC to win India Companies should avoid simply imposing global business models and practices on the local market.v Biz Slot
“Utterly Butterly Delicious..”
16 Gujarat’s mantra is deploying wealth for welfare. Whether its Industrial growth or building up robust infrastructure, each of their initiatives are undertaken keeping in mind the ultimate objective of “welfare of common man” and balance comes naturally.
8 6 The Economy July 25 2012
Can India be the
Rating agencies are taking notice: Standard & Poor’s warns that India could become the first “fallen angel” among the BRICS countries (Brazil, Russia, India, China and South Africa) and Fitch has cut India’s rating outlook to negative
Amul was born out of competition. Right from the start we have been fighting competition from large MNCs such as Unilever and Nestle which is good because when you fight you become more efficient and you learn a lot.
Why politicians won’t retire? If the politicians of our country were to learn the misery and hardship of Aam aadmi they would not have increased the price of fuel and would have done something remarkably to chock the inflation.
Why Wall Street analysts do not ‘like’ Facebook?
39 Most analysts expect Facebook’s large user base to help it corner a substantial share of the Internet advertising market in the long term. Life Style
JOURNEY OF 56 AN ARTIST
A philanthropist and a popular rising artist in Great Britain, Rich Simmons, is a self taught artist who specializes in graffiti and stencil art, he is also the founder of Art is the Cure
Agriculture as a sector has habitually been an underperformer but its performance in terms of growth has ripple effects on controlling inflation
Save Agriculture, Control Inflation 7 The Economy July 25 2012
ver the past few months, one crisis after the other has gripped India. The
problems of coalition politics have paralyzed the reforms process. A campaign against rampant corruption in the government and bureaucracy has brought decision-making in New Delhi to a standstill. Ministers are worried that anything they do -- even a minor policy change produces winners and losers -- will be given the color of corruption later The fiscal numbers signal trouble. The GDP growth rate in the JanuaryMarch quarter has slipped to 5.3%; the earlier expectation was around 8%. The growth in the index of industrial production (IIP) in April was just 0.1%. Interest rates remain too high, choking investment and growth. Rating agencies are taking notice: Standard & Poor’s warns that India could become the first “fallen angel” among the BRICS countries (Brazil, Russia, India, China and South Africa) and Fitch has cut India’s rating outlook to negative. All indicators of business confidence reflect the growing gloom The unkindest cut came from the ratings agency Standard & Poor’s (S&P) which warned that India could be the first BRIC country to be downgraded to “junk.” The S&P report was direct in placing the blame: “The division of roles between a politically-powerful Congress party president [Sonia Gandhi], who can take credit for the party’s two recent national election victories, and an appointed prime Minister [Manmohan Singh] has weakened the framework for making economic policy,.”The reality is that the story of today’s fall of the Indian economy was written in 2009 and it so happened. The May 2009 Election The 2009 election was a huge victory for Sonia Gandhi, president of India’s Congress Party. For the first time since 8 The Economy July 25 2012
Can India be the
MOI News wire
‘Phoenix’? 1972, the incumbent party and prime minister were re-elected. This election delivered absolute power to Sonia Gandhi. She reappointed Prime Minister Manmohan Singh but restructured the rest of the cabinet. Most analysts missed the message that the policies of India would now be Sonia Gandhi’s policies and not those of Manmohan Singh. And Sonia Gandhi’s policies were a modern version of Indira Gandhi’s economic policy after her huge election victory in 1971. Yet, analysts and observers kept waiting for Prime Minister Singh to introduce economic reforms that would free up the private sector. They are still waiting. They should have remembered the 1971 campaign slogan of Indira Gandhi -- “Garibi Hatao” (Remove Poverty). That is exactly what Sonia Gandhi set out to do. Noble Aims and the Credit Boom of 2009-2010. Recently, Alan Greenspan, the former chairman of the U.S. Federal Reserve, described the euro as a “noble but failed experiment.” These words could just as easily be used for Sonia Gandhi’s policies. Supported by her shadow cabinet of social activists, she launched programs that guaranteed monthly cash payments to hundreds of millions of India’s poor. These programs did not create jobs or much-needed infrastructure. They simply delivered cash.
was easy to do in 2009 and 2010. The global rally in risk assets and the lure of secular high growth drove a flood of foreign capital into India. The distribution of free money worked well in the short term. Indians love to spend and rural spending drove up India’s growth rate. The uniqueness of the rural growth story drove more capital into India. The intermediate-term consequences were becoming visible by 2011. Thanks to the distribution of free money, workers from poor states like Bihar refused to travel to prosperous Punjab to help in agriculture or to industrial states like Maharashtra for construction or manufacturing jobs. This undermined labor migration, an
underlying strength of India’s economy. Handing out monthly cash payments to millions of people is the time honored recipe for inflation, structurally high inflation. Not content with giving out cash, Sonia Gandhi’s advisers planned a food security program to guarantee a minimum level of food (or its price in cash) to about 61% of Indians. The mere announcement of this program launched food inflation into a higher orbit. The years 2009-2010
represented good times with foreign capital flowing in and everyone in the Congress looked forward to an even greater election victory in the 2012 state elections and then in the 2014 national elections. Rise of Inflation and the Credit Bust of 2011-2012 The combination of the credit bubble, unprecedented distribution of cash to millions of people, and the lack of critical infrastructure for food distribution led to skyrocketing food inflation in India. So the Reserve Bank of India (RBI) went into action in late 2010 with an aggressive campaign to raise interest rates. Not surprisingly, November 2010 marked the peak of the Indian stock market. Unfortunately, that was like performing heart surgery to cure a kidney malfunction.
The interest rate hikes slowed down India’s industrial production and led to urban unemployment. But the RBI and the Indian Cabinet were powerless to reduce Sonia Gandhi’s delivery of cash into the hands of millions. As a result, food inflation kept rising and industrial production began slowing as the RBI kept raising interest rates. The result is today’s stagflationary bust in India. As the luster of India’s growth story dimmed and the stock market stopped delivering gains, foreign capital began leaving India. This created a very serious problem for the Indian government which relies on capital inflows to make up the balance of payment deficits. When Europe’s debt problems shocked the world in late 2011, the outflow of foreign capital from India became a flood and the rupee collapsed by 20% in one single month -- November 2011. Unfortunately, India’s brains trust considered this rupee collapse as merely an accident. So did non-residents Indians and most foreign investors. To them, the fundamentals of India’s growth story were sound and secular. They sent in more than US$5 billion in capital into India in January 2012. Global investors went back into risky assets in the first quarter of 2012, the Indian stock market rose by 18% in the first seven weeks of the year, and the Indian rupee rose by 10% to recover half of its November 2011 loss. So India, ever complacent and self-rejoicing, decided the worst was over. Growing New Wings What could go right for India? Could the country, the first emerging market
to fall, become the first to rise again? I believe this could happen – for several reasons. Frankly, the steep fall in the rupee has been a blessing for India. The country is as much of a fiscal mess as any among Europe’s PIIGS (Portugal, Italy, Ireland, Greece and Spain). But it has the flexibility of a free currency. There is no question that India is much more attractive at Rs. 55 to the U.S. Dollar than at Rs. 44. A global slowdown might actually make India more attractive than other emerging markets that rely on exports, chiefly commodity exports. In contrast, India benefits from falling commodity prices. A fall in oil and agricultural commodities could cool down Indian inflation and allow the RBI to cut interest rates. These cyclical factors could add to the real structural strength of the Indian economy and boost consumer demand. Contrast this with China where, according to a Financial Times article, “demand is fading fast.” The article states, “With demand weak… to many parts of the economy…[this] feels like deflation, as corporates appear to be losing pricing power….At this moment… the economy needs a new structural breakthrough.” Other emerging markets, dependent on commodity exports, could suffer from China’s waning demand. This makes India’s real, secular, structural consumer demand story both unique and attractive. So India, the first BRIC and major emerging market to fall, could end up being the first to recover with a cyclically positive story of low inflation, falling interest rates and the structurally positive story of secular demand. America, the first country to suffer a credit bust in 2008, is widely recognized today as the first economy to emerge from the bust. India could end up being the first to do so among emerging markets. 9 The Economy July 25 2012
PETROLEUM PRICING POLICY IN INDIA: NEED FOR CHANGE
MOI News wire
ndia is one of the fastest growing economies of the world. At the same time, the country is also home to almost one fifth of the total world population. With such a huge chunk of the world population and growth rate of the economy hovering around 8 to 9 per cent per annum for last five years, the demand for the petroleum products is expectedly high. Keeping the social and economic ramifications in mind the government has always remained involved with the pricing and supply of these products. The reasons for the direct involvement of the government are not difficult to seek. While the demand for the petroleum products is rising by almost 15 per cent per annum, the domestic production of the crude oil has virtually remained stagnant over the last two decades, making the country heavily dependent on the import of crude. Further, the rapidly developing economy requires petroleum products like diesel and petrol in huge quantities for carrying goods across this vast country. Diesel is also used by many industries as a critical input for production. The booming automobile sector of the country also needs a lot of petrol and diesel at reasonable prices. Thus, any steep increase in the prices of oil ad10 The Economy July 25 2012
versely affects the Indian economy. More than 250 million people in the country live below poverty line and there is a vast majority of population classified as the middle class. It is the responsibility of the government to provide the cooking fuel to the poorer sections at affordable rate and the government has been continuing with its policy of subsidising kerosene heavily. At the same time, the middle class, constituting majority of the population of the country, cannot afford the LPG at the market rate and hence the government has to subsidise the LPG as well. Immediately after independence the cost realization to the oil companies in the country was linked to the ‘import parity’ type of pricing, known as the ‘Value Stock Pricing’ (VSA). This mechanism was basically a cost-plus formula to the import price, which included added elements of all the costs such as shipping charges upto the Indian ports, insurance, transit losses, import duties and other levies and charges. The VSA was followed by the Administered Price Mechanism (APM) which actually involved artificial price fixing by the government from time to time
and hike or reduction in the prices become a political decision, rather than being a rational economic decision. The decision to dismantle the APM was aimed at gradually shifting from artificial pricing of petroleum products towards a situation where the price is determined by the market forces of demand and supply. Hence, as a conscious policy decision, the government brought into the force a new pricing mechanism with effect from April 1, 2002. The new mechanism was designed to partially insulate the prices of petroleum products in the country from volatile international crude oil prices. At the same time it was to ensure that the prices of certain products like kerosene and LPG remained subsidised as per the government policy. It was expected that the new pricing mechanism would be the first step to move forward towards a pricing
requirement is met by domestic production. When price per barrel of crude oil is discussed, the fact that one fourth of the total supply of the crude is met domestically is over-looked. Domestically produced crude oil costs the nation something around $55 per barrel and if the global price is taken to be around $150 per barrel, the average weighted domestic price comes to be around $122 per barrel. When converted to per litre, it costs the country about Rs 31 per litre. The refining and distribution costs included, the average cost of petroleum products like diesel and petrol should not be more than Rs 35 per litre, while the average rate of these commodities has been fixed higher. At the same time it should not be forgotten that the petroleum products are the most taxed commodities in the country. If the government is so much concerned about the prices of the petroleum products, it must reduce the excise duty and the VAT rates across the country. But such a decision would result in loss of revenue. It looks like the loss to the oil companies is a myth created by the government to protect its own revenues.
mechanism based on the interaction of the market forces. While the weaknesses of the new system had come to the fore during the past six years of its enforcement, the recent spurt in the global crude prices has completely exposed the flip side of it. While devising the new mechanism six years ago, no one had thought that the global crude prices would be close to $150 per barrel.
prices of the petroleum products was that the oil companies were suffering heavy losses and had to be bailed out. This logic, however, exposes the illogic of system of pricing these products. If the aim was to effect the import price recovery, the same badly lost focus in the previous years and the price determination for this sector has again turned out to be a purely political decision.
One of the most prominent arguments advanced by the Central government in favour of the recent steep hike in the
While the country is undoubtedly dependent heavily on imports, almost one fourth of the total crude
The performance of the public sector oil companies does not suggest that these companies are under any threat of loosing out their profits after the global crude price increase. Their profits have actually increased. A suggestion has been made that different types of diesels should be used for trucks and luxury cars. It makes no sense to supply diesel at subsidised rate for the owner of a luxury diesel car. It is high time that the railways also switched over to the use of 100% electricity for running the trains. For transport vehicles CNG should be used, which is less polluting, on the one hand, and would result in liberating the goods transport sector from the use of diesel, on the other. 11 The Economy July 25 2012
here are very few brands that bring to mind a sense of affection and satisfaction in its customers the way that Amul does. Whether it’s Amul’s humorous sociopolitical ads or its business culture that has lead to the upliftment of 3.5 million Indian farmers. It’s no wonder then that RS Sodhi, MD, Amul has been with the co-op for 30 years. Born in a village, raised in the country’s glistening farms, Sodhi has grown with the organization the way we have grown
“Utterly Butterly on Amul’s ghee, butter and milk. And today at the company’s helm, he’s taking Amul to new heights, never once forgetting the humble values Amul was built on. There is a new strength in Amul’s growth plan, what has changed after you took charge as the Managing Director? Amul has been successful for past 60 years. In the last three years, we have grown at over 20 percent which is much more than the previous years. Last year, our turnover was Rs 9,800 crore, this year it will be above Rs 11,000 crore. This is the result of a few steps that we have taken. We are the only FMCG Company in India to have four distribution channels – unlike others who have only two or three. But we were not able to cater to smaller towns as our distributors were
located only in the major towns of the country. So we introduced the concept of the super distributor. We identified 200 districts and added a super distributor to each of the districts. This super distributor would then cover 15-20 small towns. Last year, we added 3,000 more towns and cities to our distribution network. Today all our products reach the whole length and breadth of the country. The second change relates to sourcing of milk only from farmers in Gujarat. Therefore, we were able to sell fresh milk only within Gujarat and were not able to meet the increasing demand for milk in other states. Hence since the last year, we have started buying milk from the co-ops in West Bengal, Maharashtra, Rajasthan and UP. We also changed our product mix. We have expanded our product portfolio to include non-conventional products such as sweet lassie and freeze yoghurt. Are you trying to re-invent new products of Amul brand? Our plan is to increase our capacity by 2020. At the rate we are growing, we will probably reach our target by 2018. I have been with Amul for three decades now. When I joined Amul it was an organization of Rs 120 crore, this year we expect it to be Rs 11,000 crore. I want to take it to 30,000 crore. A lot of people are ready to work for the rich and powerful, but a very few are ready to work for the have nots. Besides the salary, the satisfaction you get from working with the 3.5 million marginal farmers of India is something else. What about the dealing when it comes to the point of competition with profit-focused Multi-National Companies?
12 The Economy July 25 2012
Delicious..” Amul was born out of competition. Right from the start we have been fighting competition from large MNCs such as Unilever and Nestle which is good because when you fight you become more efficient and you learn a lot. We face competition from two sides, one from the milk procurement side and the other from marketing and distribution. Because of our business strategy which is to give the highest price to the farmer and also value for money to the customer we are able to counter competition to a great extent. We give 15-20 percent more to the farmer and than others so we get better quality milk. We are able to sell our products at a very competitive price in the market. We don’t compromise when it comes to content, ingredients or even technology. We have the largest market share wherever we operate. I believe fighting a national player or an MNC is not difficult. Fighting local competition is a greater challenge for a national player like us. What is your biggest challenge? My biggest challenge is to keep the interest of milk producers and dairy farmers alive. Today’s educated rural youth is no longer interested in waking up at 4 am to bathe, clean and feed cattle. If we don’t encourage milk production, we will become import-
What’s your secret of success?
by Shyama Nair
dependent for milk too. Therefore our biggest challenge is to ensure that the next generation finds the business of milk farming and production lucrative. They should be able to make money such that at the end of the day they get at least 2 paise more than urban factory workers. So, in the last three years we have increased the price at which we buy milk from farmers by 50 percent. Today, if a farmer gets a few a little more money he’s ready to invest more, but his return on investment must increase. Besides, people no longer have 2-3 cows, but many more. They need milking machines to make their jobs easier.
Information Technology is the core of our business. Without IT, one cannot work in rural areas considering the numbers involved. We collect milk from 3.5 million farmers twice a day, that’s more than six million transactions a day scattered over 16,000 village societies. We have been able to achieve such a geographical dispersion and diversity only because of IT. Sitting here, I know in which village which farmer has given me how much milk. Product integration with IT also helps me to predict demand and adjust my produce to meet that demand. What does the future of Amul look like? Our plan is to double our capacity by 2020. At the rate we are growing, we will probably reach our target by 2018. I have been with Amul for three decades now. When I joined Amul it was an organization of Rs 120 crore, this year we expect it to be 11,000 crore. I want to take it to Rs 30,000 crore. A lot of people are ready to work for rich and powerful, but a very few are ready to work for the have-nots. Besides the salary, the satisfaction you get from working with the 3.5 million marginal farmers of India is something else. Preparing to defend its turf from foreign competitors, Gujarat Cooperative Milk Marketing Federation that sells dairy products under the popular Amul Brand, aims to open 1000 more outlets across the country in the current scenario. Amul, which is also known for its advertisements based on topical events helps in keeping the brand refreshed and young. Formed in 1946, Amul spurred the White Revolution in India which in turn made India the largest producer of milk and milk products in the world.
13 The Economy July 25 2012
Small Scale Industries: An Important Catalyst for the
Growth of India’s Economy T
he small scale industries have rendered a major contribution to the gross domestic product of the country. they play a vital role in changing the industrial scenario and strengthening the industrial sector tremendously. They assist the utilization of assets for productive purposes with minimal initial resources. SSIs have contributed greatly in nurturing private enterprise and in hastening the economic development by generating employment, exports, and reducing local unevenness. This sector estimated to possess a huge potential in the growth of trade with the array of products it offers. With 40 percent share in total industrial output and 35 percent share in exports, small scale industries significantly contribute to the fiscal intensification of the country. The adored possession of India, the khadi handloom is a favorite product of these industries. Household products to raw materials for large scale industries mark the range of produce by these industries. They are instrumental in transfiguring the areas of horticulture, sericulture, fishery, and garments with the products they supply. The fine handicrafts for example the stunning artworks of sandalwood or metal idols are all the works of craftsmen from these industries. The traditional small scale industries that have been at hand for a long time form the crafty portion and tap the above fields. The progression of traditional small scale industries have made the modern industries which 14 The Economy July 25 2012
MOI News wire
produce the day to day goods like hosiery products, leather products etc to more refined items like television and radio sets, electronics managing system. Pickles, papads, Bread, oils, wooden furniture, Exercise books, Wax candles etc also form the products on demand… In a nation like India small scale industries come as boons. They persuade entrepreneurship and help in employment of local
populace. The domestic talents are put to good use to produce commodities that have found market worldwide. Small scale industries to a degree avert needless urbanization. The number of people migrating to cities in search of jobs shrinks by the employment options domestic industries create thereby reducing pollution and over population in cities and also helps in decentralized industrial expansion. The main reason of a small scale industry is to achieve self reliance by utilizing the resources available and harnessing the skills of local people to lay a
platform that yields a steady income. The industries are characterized by the wise utilization of labor for the commodity production and the advantage lies in the fact that is consumption of ample laborers who are not qualified to work for the large scale industries and thus reducing unemployment and poverty in the country as well. Small Scale Industries help the financial system in promoting evenhanded development of industries across all the regions of the economy and also in the efficient distribution of money. Thanks to the measures of the government which have always supported the small scale industries. Government has reserved certain products for manufacture in the small scale sector in areas where there is an economic justification for such an approach to encourage these industries. Victory stories of countless women who held on to small scale industries are widespread in recent times. Physically handicapped, abandoned and even illiterate inhabitants have found new lives by means of the small scale business. Commodities form foreign countries like china and Singapore have hit the small domestic industries with cheaper price and superior quality goods. With the rise in the costs of raw materials it is intricate to maintain the unwavering manufacture and sustain domestic industries complain many small industry holders; nonetheless they are doing an enormous trade in promoting export and international relations with their “Desi” caliber and talents.
15 The Economy July 25 2012
Narendra Modi “THE Iron S P O T L I G HT
‘My Peoples are my strength’
Narendra Modi, Chief Minister of Gujarat recently completed 10 years at the helm. Ruling with a firm hand, Modi showed his capacities as an administrator and while politicians all around the country were getting tainted with large scale corruption, Modi’s Gujarat had definitely edged ahead, taking rapid strides in many sectors. Gujarat is known for its new initiatives, innovative approach and inclusive growth. As far as development is concerned, take any initiative of Gujarat and the result is before you. Take the power sector for instance – in first 40 years the state could add only 11000 mw of new electricity generation capacity and the Modi government added another 11000 mw of capacity in just another 10 years. Nowadays everyone is talking of global warming and renewable energy in Gujarat the Modi government have taken this far more seriously and taken several initiatives to promote renewable energy production. In fact, Gujarat is becoming the Global capital in terms of solar energy. If people talk of the social sector, the Modi government has achieved many feats here too. The Modi government have achieved 100% enrollment for primary education, they have an annual campaign for Quality education and in higher education, they became the first state in the world to start a Forensic Science University, they became the first to launch the Raksha Shakti University in India and they added that they will also occupy the first place in the world to start a Children’s University. So whichever index you take in any sector, the Modi government has achieved a lot. And even in agriculture, the Modi 16 The Economy July 25 2012
government has done quite a bit. Gujarat never used to figure in the list agricultural states of India as the states used to experience severe drought every year. Today, due to a number of water conservation measures, including water harvesting, check dams and micro irrigation and modern scientific farming techniques, we have managed a very major turnaround. Our motto is per drop more crops. Even in the milk production, they account for about 60% of the national production. In every walk of life, there are so many achievements, but as far as satisfaction is concerned, Modi always say that the satisfaction of his people is the greatest satisfaction. Modi took Gujarat’s natural advantages, its long coastline, nonunionized labor force and a developable land bank of thousands of acres and added the streamlined bureaucracy and reliable electricity supply is the biggest thing that Modi government has achieved. Today Gujarat is the only state in India where both big businesses and small farmers can expect an uninterrupted power supply for nearly 24 hours a day, with the premium rates paid by big business which is used to subsidize rural electrification. In 10 years, Gujarat’s auto industry has grown from one modest plant to an expected capacity of 700,000 cars in 2014, including billion dollar investments announced last year by Ford and Peugeot. Over the last 10 years, on several fronts Gujarat has become a model state in the country. Gujarat is the only state in India in which all the 18,000 villages receive quality power supply round the clock. While the national average is roughly 3% a year, Gujarat has shown
by Shyama Nair
a double-digit growth in agriculture. On the industrial front, over the last 10 years, Gujarat has become the number one industrial state of our country with very large and diversified industrial base. For the common man, from drinking water to infrastructure development, from education to employment and from transport to tourism, Gujarat has once again excelled on all these fronts. Of the areas where the Modi government are really putting a lot of efforts, are the girl child education and improvement in the overall human development index. They are working hard on both the fronts to ensure the state performs much better here as well. If we take agriculture side the Modi government has taken several steps to improve agricultural practices and also water conservation, in order to improve the lives of the farmers. Every year, before the onset of the monsoon, they organize a month long “Krishi Mahotsav” wherein a term of officers, led by agricultural scientist guide the farmers at their doorstep about modern scientific agriculture. This takes place in all the 18,000 villages and has become a bench mark in the agriculture revolution. They adopted a lab to land approach. Due to soil health card, the farmers of Gujarat now know about the right crop and right inputs for his soil. They also guide them about other aspects of agro-economy such as animal husbandry, farm forestry and farm gate value addition. Their efforts of water conservation have paid off and the water tables have come up. With Narmada waters reaching to hitherto dry areas of the state, thousands of hectares of land have been added to
Man of Gujaratâ€?
17 The Economy July 25 2012
S P O T L I G HT net cultivated area. The agricultural income in the state, which was only Rs 140 billion in 2001 stands at nearly Rs 800 billion today. Not only this, since all the villages have round the electricity, broadband connectivity, all weather roads and other modern amenities, the quality of life of farmers has enhanced substantially. Modi firmly believes that agriculture, industry and services are three pillars of the growth model of the economy. They must balance between them. So far as industrial growth is concerned, industrial investments are now in auto pilot mode in Gujarat. They have developed robust infrastructure, they have established a policy driven, business friendly framework, and they have institutionalized mechanisms in form of biennial Vibrant Gujarat Global Summits for business people from the world over to come and establish their businesses here and thus we have a perfect set up for handholding and facilitation. Many of you might be aware that in the fifth Vibrant Gujarat Global Summit held in January 2011, Memorandum of Understanding (MoUs) worth Rs 20,830 bn were signed. One of the important results of this is creation of more than 100,000 new jobs for the youth of Gujarat. Gujaratâ€™s mantra is deploying wealth for welfare. Whether its Industrial growth or building up robust infrastructure, each of their initiatives are undertaken keeping in mind the ultimate objective of â€œwelfare of common manâ€? and balance comes naturally. For example, even in events like Vibrant Gujarat, which are wrongfully perceived as big ticket business events, they keep the welfare of the masses in mind. Hence they look at how much employment the MoUs would generate, they consider projects for building houses for urban poor, they focus on tie-ups for education, and they have tie-ups for health and sanitation sector and so on. To give an example, during the last Vibrant Gujarat Summit, they launched Mission Mangalam, wherein 18 The Economy July 25 2012
State Government, Corporates and NGOs tied up empowering poor women and youth and project has taken off very well. All know that in Gujarat land is a limited resource and you need to smartly optimize it. They converted a lot of wastelands into cultivable lands with micro irrigation and modern agro tech. Due to water conservation efforts, the ground water levels increased. Narmada waters reaching to arid and semi arid areas also increased the cultivable area. Yield per acre increased substantially thereby enhancing the per unit efficiency of land. This is how in Gujarat both agriculture and industry flourish together. When it came to the NRIs and PIOs he added that they may not necessarily be very rich people who can invest financially but they can certainly invest their experience. They can invest their talent and their knowledge and that is the greatest strength. It can really add value. They know about disciplined behavior in other parts of the world, they know the work culture, they know global practices and if they can invest their knowledge and experience, they can do a lot of good to us. They may not necessarily be billionaires who can invest millions in an industry in Gujarat but with their experience and exposure, they can add value to hundreds of industries here. Thus they have a set of capabilities and India should utilize that. So if they share and give their experience and knowledge with the people of our country that will be a credit for our country. Thriving SME sector, which is the biggest strength of Gujarat. Gujarat has been and will always capitalize on this strength. They are working very hard for modernization and quality up gradation of our MSMEs. In fact, they have a special convention for SMEs in our Vibrant Gujarat Summits and they have been a huge success. The people in our country will be quite surprised to know that in the last Vibrant Gujarat Summit; more than 50% MoUs
(4417 out of total 8380) were signed by MSMEs. As far as tie ups between Gujarat and Mauritius are concerned, there are quite a few areas. Gujarat has the oldest Ayurveda University in the world and the people in Mauritius are very familiar with Ayurveda. If students from Mauritius can come over here and study in the Ayurveda University or if they can have a branch of Gujarat Ayurveda University over there, the Modi government is sure that their University can become a global university and people of Mauritius will get access to holistic health care. Tie ups can be explored for many other projects of cultural exchange too. Delivery of benefits is a big challenge. For this they came up with an innovative idea of Garib Kalyan Mela where the beneficiaries are given their eligible assistance directly on a single day under one umbrella. The administration is geared up to identify the beneficiaries under various schemes of all the different government departments, process the claims and keep the assistance ready for delivery. Beneficiaries of the entire taluk (Tehsil/sub district) are called at the designated place on the designated date and given their cheques, tools, equipments, etc. there is no scope for agents or non delivery. This has been very successful. They have also decentralized and strengthened administration up to
the sub-district level for better delivery mechanism. Moreover, they have adopted e-governance very effectively leading transparency and better accessibility thereby improving delivery. Gujarat was lagging quite behind in higher education. In last ten years the government has done a remarkable job in this area. Today, the state has not only set up a number of new universities, it has set up specialized universities, many of which are the only ones in the country and even the world. For the first time in the country, a Childrenâ€™s University and Commission for education innovation have been
established. They are the first in the country to set up a world class Forensic Science University as well as Petroleum University. They have also set up a Raksha Shakti University. The intake capacity of Medical and Engineering colleges have increased multifold in last ten years. Their colleges and universities are now trying up with World class institutions for better education and research. With Narendra Modi at the helm of affairs, Gujarat is balanced to lead national renovation. The new economy promises to turn the national into major economic power. He took some
spectacular steps to enrich energy supply and design several schemes leading to the improvement of infrastructure, setting up of special economic zones, etc. not merely for promoting growth and development but also excellence in all walks of life like Overall Economic Development, Business Development (Business Paradise), Energizing Gujarat, Disciplined Growth and Partnership in Progress â€“ SEZ Capital of India. Along with all this Modi is in the running to be Indiaâ€™s next Prime Minister.
19 The Economy July 25 2012
S P O T L I G HT
Corporate Social Responsibility in India: A long way to go
MOI News wire
The concept of Corporate Social Responsibility (CSR) is not new in India. It emerged from the ‘Vedic period” when history was not recorded in India. In that period, Kings had an obligation towards society and merchants displayed their own business responsibility by building places of worship, education, inns and wells. Although the core function of business was to create wealth for society and was based on an economic structure, the business community with their rulers believed in the philosophy of “Sarva loka hitam” which means ‘‘the wellbeing of all stakeholders. Indian society is witnessing a market in rapid transition, characterized by a growing degree of liberalization, privatization and globalization. The acceptance of social responsibility is redirecting Indians to their cherished values and teachings of
20 The Economy July 25 2012
their ancestors and their religious scriptures in the field of business. There are different ways through which a firm can exert positive social change in society and collaborate with partners who have the explicit power to trigger such change. Changes that led to power and authority are being transferred from government to the private sector. With the growing power and authority vested with the corporations, corporations are now answerable for a wider range of issues and are held responsible for their actions to a multiple level of stakeholders. Firms should have in-depth understanding of the circumstances that lead them to pursue various CSR activities and implement those activities that demonstrate a convergence between the firm’s economic objectives and the social objectives of society. Beckmann and colleagues point out that CSR is becoming more explicit and argues that this shift entails that firms can no longer practice a “silent strategy” and is gradually being replaced by a more vis-
ible approach to CSR activities. The requirements for how corporations communicate their CSR activities are however large. CSR communication is gaining its importance, and there is an increasing awareness and interest in the challenges and practices of communicating CSR. The National Voluntary Guidelines 2011 released by the Ministry of Corporate Affairs, India was set up as part of the multi-stakeholder platform on CSR making it mandatory for companies to disclose their CSR projects. “In a bid to turn companies’ management decisions more transparent, the corporate affairs ministry may mandate more disclosures in their annual financial statements and the reports of boards of directors. The manner in which companies carried out their Corporate Social Responsibility (CSR) activities during the year will become part of the annual mandatory disclosure.” (International Bar Association, CSR e-bulletin, October, 2011). To find out how well this mandate of disclosing CSR activities is accepted by Indian companies the author chose to study 23 companies belonging to private sector companies in Kolkata, India. These companies operate mainly in the manufacturing or heavy engineering sector. The nature of their
business may often results in polluting the atmosphere or displacement of inhabitants. The websites of the companies was studied in detail and other relevant documents found online. A Gap Analysis tool in the form of a score card was developed by the author along with her colleague having 46 criteria which highlighted areas such as stakeholder engagement, performance and compliance, management systems and procedure, scope and boundaries of CSR reporting, targets and achievements and assurance of the report writing. Scores were given in the denomination of ‘1’ or ‘0’ depending upon the information available. Most of the companies revealed a very low CSR score, the average being 6-7
out of 46. The declaration made in the websites on CSR was inadequate and did not reveal much about the CSR health of the company. Most of the activities were altruistic in nature without generating any value creation towards the bottom line growth of the companies. None of these companies have embedded CSR in their core business strategy. They are yet to realize the role of stakeholders for their business and often choose to ignore them in communicating their CSR activities. The websites are outdated and the information available is often a couple of years old. The booklet depicting CSR activities in a few companies were not written under any global guidelines and resemble picture albums glorify-
ing un-coordinated philanthropic activities. In order to make their CSR activities more strategic in nature companies are required to embed CSR in their core business strategy and to use the framework laid down by Ministry of Corporate Affairs, Govt. Of India, National Voluntary Guidelines 2011 or the framework suggested by Global Reporting Initiatives (GRI) to disclose their CSR activities through a well written Sustainability Report. The research provides further scope of assessing the cultural dimensions of corporations engaging in CSR, their definition of CSR, their motives for engaging in CSR and how they plan to communicate CSR to their stakeholders in the future.
“Doing nothing is better than being busy doing nothing”
21 The Economy July 25 2012
S P O T L I G HT
Arvind - “Pioneer manufacture of Denim in India” by Shyama Nair
he Lalbhai family has controlled Arvind group in Ahemdabad from the Swadeshi movement to globalization. Arvind Mills Ltd, one of India’s largest composite manufacturers of textiles, denims, shirting’s, knits and khakis. The three Lalbhai brothers – Kasturbhai, Narottambhai and Chimanbhai decided to set up a mill to produce superfine fabric and Arvind Ltd was born in 1931 with state of the art machinery acquired from England with a share capital of Rs 25.25 lakh. Sanjay Lalbhai, Chairman and Managing Director of Arvind, the flagship company of the Rs 4000 crore group recollects the more recent past in the 1980s when the group was weighing the option of diversifying to refineries but chose to stick with denim. Arvind, the largest denim-producer in the world, is now betting on the real estate sector through joint ventures. It has also chalked out an ambitious project of setting up a special economic zone with an investment of Rs 3000 crore. 22 The Economy July 25 2012
A 70 years of long tradition in textiles, how Arvind engineered itself from a company during Swadeshi movement to today’s era of globalization? Major change came when we embarked on Denim fabrics. We were the first company to bring denim in our country. Before that we concentrated on women’s wear. We were the leading composite textile mills in India. It was a huge success but, because the power looms had started creating very fierce competition, we worked on a new strategy, and worked out that we need to go for global kind of product category like Denim, to change our focus from domestic market to global market, and to bring about a different lifestyle into India. So that was the major change. Before Swadeshi movement, we were a domestic player; subsequent to that we have become a global player with product categories which are globally accepted. You have been very successful in the textile market beside that you were
planning to branch out into various sectors. Can you briefly explain? We have been very successful. This is reflected by the fact that we never missed on paying dividends to our shareholders except for a couple of times in 1984 and 1986. We started out with local products like dhotis and sarees. The textile business today has four verticals – denim, khakis, knits and technical textiles. By 2014-15, we aim to achieve a turnover of Rs 9000 crore from the current Rs 4000 crore. Our brands, i.e. the company have the license to sell brands such as Gant, USA 1949, Izod, Arrow and Cherokee. Arvind Ltd also has joint ventures with many global brands including Tommy Hilfiger, Lee, Wrangler and Riders will grow from Rs 800 crore next year to Rs 2500 crore in 2014-15; real estate revenues will be almost Rs 1000 crore; and revenue from technical textiles is growing to around Rs 500 crore from Rs 100-500 crore now. Our knitting division will contribute Rs 500 crore among other sectors. All these will add
up to Rs 9000 crore. The 80s saw the onslaught of the power looms and this was a time when we were looking to diversify. We were given the option of refinery but we chose denim. We have no plans to enter into any other sector recently. You have also tried your luck in telecom and engineering? Yes and they are generating revenues for us too. The telecom company generates about Rs 100 crore. As far as Denim goes, we emerged as the largest producer of denim in the world last year, overtaking Santista Textile SA of Brazil and Turkey’s ISKO Textile Industry and Trading Inc. Santista was holding number one position followed by ISKO. Our Denim capacity stands at 105 million metres per annum. What made you to continue your focus over textiles? Was it the success of Denim? Well, we have always been dominant in textiles. The other sectors were some experimenting kind of joint ventures that we tried our hands upon and disinvested them gradually on evaluating their less profitability proportion. Still now we have interest in diversification. Recently, we have made strategic change and renamed our corporate title from Arvind Mills to Arvind Ltd; this was to denote our very major interest in diversified sectors viz brands and retail, real estate and engineering, and telecom. So we are definitely a diversified company but still textile remains to be more than 60% of our business. However, in gradual period, we see our activities in it to be confined to 30% and more in other business. Moreover, we thought of switching over to international product category which was definitely – Denim. Can you briefly explain about your textile divisions? Our technical textiles division has a number of products and we are constantly carrying out research and development activities to add innovative
products. Currently, we are producing protective textiles, including bulletproof fabrics and high visibility fabrics used by the army and police force. We also make woven filtration fabrics for industrial usage. We will shortly start producing carbon glass-reinforced fabrics. This is a composite fabric used in manufacturing of wind-mill blades, body of buses, cars, yachts, and railway wagons. There is a big demand in India for carbon glass-reinforced fabrics. The total size of this market stands at over 50,000 tonnes per annum in terms of volume. In terms of value, it is over Rs 400 crore. We are expecting Rs 100 crore revenue from this product. Are you planning a Special Economic Zone (SEZ) on the outskirts of Ahemdabad? We are planning to set up a spinning industrial park. Yes, it could be SEZ. Spinning is big industry in South India and we intend to have a zone with a total capacity to produce 10 million spindles. Of this, we would need one-fourth of our own consumption. Electricity in Gujarat is very costly and the state government has encouraged us with enough lignite linkage to fuel a captive power plant. The project is at a very initial stage and not much progress has been made so far. The total investment that the park could draw would be about Rs 2500-3000 crore. What is the status of organic cotton contract farming initiative? We have been cultivating organic cotton in Maharashtra on 10,000 acres of land in Vidarbha and Akola, for the past many years under contract farming with over 5000 marginal farmers. Now we are going to start organic cotton contract farming in Gujarat on over 30,000 acres of land in Sabarkantha district. This will be under “Better Cotton Initiative” (BCI). We will produce 50,000 bales of better cotton per annum from Gujarat apart from 15000 bales from Maharashtra. Our organic farming initiative will benefit 10,000 marginal farmers directly and
over 60,000 people indirectly. What exactly will be Arvind’s role in the BCI? Arvind has been asked by BCI to head its initiative of designing and creating a BCI index to grade cotton using firms in their labor practices, carbon footprints, the usage of chemicals and gender equality in cotton farming process, among other things. The basic design of the index is almost ready and it will be launched soon. Through higher grading in this index a firm will be able to project itself as a brand implementing eco-friendly practices and gain more faith from its consumers and establish itself as a sustainable supplier f cotton and cotton products. Arvind has also become the first exporter of better cotton after this initiative was launched. Arvind Mills exported the world’s first cotton bale tagged as “Better Cotton” last year. What will be the impact of 10% excise duty on apparels on consumers? The imposition of 10% excise duty on garments is ill-timed. The new tax, along with steep price rise in cotton factors is likely to cause inflationary pressure in the apparel sector for the first time in the last one decade. Yarn producers have been trying to cope with rising prices of cotton for over a year. Denim yarn prices have risen to Rs 180 per meter from Rs 105 per meter in the last one year. The industry was expecting to grow by 50%, but now with this tax, the growth expectations will have to be toned down. What role does your son Puneet, who represents the fifth generation of Lalbhai family, play in the organization? He has done his MBA from Yale University and has recently joined the organization. He is currently looking after the new initiatives of the group, including technical textiles and engineering firms. With a background in environmental science he also takes care of the BCI project. 23 The Economy July 25 2012
FA M I LY B I Z
ALL ABOUT FAMILY BUSINESS F by Sumi P.
amily Business is common in India; it is a privilege to own such business. Here is a business group were three entirely different business ventures come from one Family and etched their success saga in South India. T.John was a man of rare clairvoyance who is perfected to fit into the adjectives allying philanthropist, educationist, and politician. And he was once the Bacchus of Bangalore and minister for Civil Aviation in S.M Krishna government. T John and his better half Chachamma John who had their roots in Kerala migrated to Karnataka years ago. T John who shines as a star in the business firmament was a man who bequeathed balanced attention to societal affairs. The Johns were blessed with three sons, Thomas John, Paul John and Biju John. Proved to be the worthy sons of a worthy father, the trio who were independently established their own empire, reign the kingdom upholding tightly the values and principle that they inherited from their parents. With utmost commitment and faithfulness ventures of Thomas John, Paul John and Biju John were in the forefront. “We are from a business family, so the spirit of doing business is in the blood” 24 The Economy July 25 2012
Mr. Thomas John, the eldest of the three disclosed. Inspired by his father’s Margagoun Education Foundation, Thomas John founded his inaugural venture in education in 1993. We have only 30 students when we started our first course in Hotel Management, its slow and steady growth substantiates with 3500 students as its strength in different courses. A doctor by profession Mr. John reiterates that I am not far away from the basic principles of being a doctor; both are divine profes-
sion dealing with human beings. “I am satisfied with this job because thousands of students are given a good life”. Mr. John harks back to the erstwhile days that he was profusely supported by his father T.John by giving him adequate land. He also recalls the generosity that his family members extended to fulfill his dream come true. The painstaking work of Mr. Thomas John along with his efficient staffs engender to craft ‘T.John Group of Institutions’ a brand name that appropriates in the South Indian education. We are given equal importance to all courses but there is a great demand for MBA courses and technical courses claim Mr. John. Thomas John was satisfied with the functioning of the institution; he was exhilarated to convey the quality of education they are providing. The group which was accredited by Rajiv Gandhi University, Visweswariya University and Bangalore University, revise the curriculum once in every two years which helps to impart an upgraded knowledge. This also helps to woo students from different Nationals. He had a clear vision about the posterity of the institution. “We will definitely want to become a University” said Mr. John with confident anticipation. Thomas John also owns Gold and Mine Jewellary confirms that he is a born businessman. There are no other partners outside the family. As an entrepreneur Mr. John also faces many challenges, but he took it as the part of the game. His attitude, talent and astuteness made him the architect of
successes. John Distilleries Pvt.Ltd, established in 1992 was the prime venture by Paul John who was equipped with a graduation in LLB. “I simply followed the path of my dad, who was trading in this business” said Paul John. John Distilleries launched his first brand the Original Choice in 1995, is the fifth largest distilleries in India. Though the distilleries had a pan India distribution status, they were more focused in South India and also exports to the Gulf countries and some African Countries. Paul John with his dexterity, derive new formulas in a highly regulated market prevailed in this field. “We are also promoting responsible drinking which we think that our duty” claimed Paul John. His second experiment which yields the result of success is the “The Paul” hotel in Bangalore. “I am equipped with a highly skilled management team “said Mr. John. With his Midas touch he turns all difficulties to success. “It is my innate passion and not any return
Dr. Thomas P. John
on investment that I stepped into the hospitality sector” claimed Paul. The Kumrakom Lake Resort is the third venture from the Paul John Group of business. His desire and deft in the hospitality, made Kumarakom Lake Resort a naive experience to tourist all over the world. Paul John who was not intended to disclose the high profile celebrities and VIP’s who were chosen to linger in this resort. The awards and acclamations hold by the resort
claimed that it is a rare piece of gem in hospitality sector. Whatever achievements are made in my business is just because of my family, especially my parents disclosed Paul John. We are three brothers doing business in three different fields; there is no conflict of interest or any crossholding. It is unequivocal that the chemistry of the family and the harmony of the family members forge the trios to become successful in their own businesses. There is an invisible bond that holds the family members together that make them to rein their business which was spread all over South India. Biju John, the youngest of the three, was a successful in property development. August Ventures Pvt. Ltd. located in Bangalore, owned by Biju John, is versatile in quality environment friendly constructions.
Paul P. John
25 The Economy July 25 2012
W O M E N E NTREPRENEUR
by Liji Lucas
harming and vivacious Karishma Grover is in the business of wine, a graduate in Viticulture and Enology from the University of California, Davis (UCD). After an internship in Napa valley known to be one of the finest wine regions in the United States, she returned home to India and has carved a place for herself in the wine making dynasty, a passion that runs in the family, she is the third generation vintner, a decision she took when in the 12th while studying in Mumbai, she says I was in science for my 11th and 12th. I think my interest in science without wanting to go into medicine or engineering made me seriously think about wine making. That summer I did a brief internship at the winery- during the visit of Mr. Rolland, and I just fell in love with it. Karishma grew around wine, her grandfather Kanwal Grover is a spearhead of the Indian wine industry, the Grover’s are among the exceptional few who treat wine as art. It is an amazing experience says karishma. It is also very humbling to be a part of something that is exciting and so much bigger than the individual. I also feel very blessed and lucky to be in the place Grover is today! She sallied into an industry that Indian women wouldn’t normally prefer to be in or think a hundred times before entering. The obvious question of whether being a woman have been a drawback, To me, this industry is a little more forgiving for women, than others that have been traditionally
26 The Economy July 25 2012
male dominated in India (like spirits).The wine industry is in the very nascent stages, so right now a person with the knowledge is welcomed-man or woman! So therefore, to be honest- this would be the advice I would give anyone! It is important to have a passion for wine, as that will be the driving force for you to be able to produce a wine true to you. Study and be knowledgeable about the aspect that interests you- winemaking, or marketing or even tasting, she says positively. Karishma is truly a path maker; she notes I do feel that winemaking for me is not so much a job, as much as it is a passion. While there are days when monotony creeps in, there’s usually something exciting around the corner. Winemaking is a constant learning process. Coupled with the challenges of an emerging wine market, I am kept on my toes. As each year is different from the other, there is always something new to look forward to. Michel Rolland who is our consultant visits us once a year and I find myself learning so much from those visits. So what is Grover’s marketing philosophy? In any consumer driven market, the consumer demand is critical for the production. It may differ from my personal taste, but when producing the wine, we never deviate from the quality standards that we are known for at Grover. Once you have a taste profile, then it becomes about being true to what the consumer likes, and thinking along those lines. For maintaining quality, we have good winemaking
practices and rigorous laboratory testing that ensures that every batch produced at Grover is up to the mark. Grover Vineyards is very much a brand that is dedicated to quality wine production. We are one of India’s oldest wine companies, and are proud of our tradition, but are not afraid to innovate at every stage of the production. Grover’s five wine labels—La Reserve, Cabernet Shiraz, Shiraz Rose, Blanc de Blanc and Sauvignon Blanc—are brands to add up with India’s most favorite. Well it was too only curious to ask her personal favorites from her own wines and she answers… It really for me depends on the day and occasion. For a formal evening out, I would say our La Reserve. For a relaxed afternoon brunch by the pool, it would have to be the Art Collection Shiraz Rose. Drinking wine has become more of a fashion statement and is a lot popular with youth especially girls, this is a blooming stage for wine drinkers in India. For me, I want to make a wine that is enjoyable to drinkers. It is easy to approach, and enjoyable to drink. I am very casual when it comes to wine drinking myself. I don’t think one should be fearful or nervous when approaching wine as it really can make for a relaxed and enjoyable time. Quality is important for me, and we strive daily to ensure that we are moving toward a greater experience for the consumers.The idea for us is to constantly improve our product and take Indian wine to greater heights, both internationally and in India says the charming winemaker.
27 The Economy July 25 2012
C A OV LL E AR BO SU T ORY T ADS
Art of MNC to win India O
ver the past 20 years, multinational companies have made considerable inroads into the Indian market. But many have failed to realize their potential: some have succeeded only in niches and not achieved large-scale market leadership, while others haven’t maximized economies of scale or tapped into the country’s breadth of talent. The experience of a leading multinational consumer goods company illustrates the challenge: its revenue in India has grown by 7 percent compounded annually in the past seven years—almost twice the rate of the parent company in the same period. Nevertheless, the company’s growth rate in India is only about half that of the sector. For multinationals, the key to reaching the next level will be learning to 28 The Economy July 25 2012
do business the Indian way, rather than simply imposing global business models and practices on the local market. It’s a lesson many companies have already learned in China, which more multinationals are treating as a second home market.1 In India, this trend has been slower to pick up steam, although best-practice examples are emerging. A leading beverage company entered India with a typical global business model—sole ownership of distribution, an approach that raised costs and dampened market penetration. The company’s managers quickly identified two other big challenges: India’s fragmented market demanded multiplechannel handoffs, and labor laws made organized distribution operations very expensive. In response, the company
contracted out distribution to entrepreneurs, cutting costs and raising market penetration. A big global automobile company has become the one of the largest manufacturers in India, growing at a rate of more than 40 percent a year over the last decade, by building a local plant, setting up an R&D facility to help itself better understand what appeals to Indian customers, and hiring a well-known Indian figure as its brand ambassador. To realize India’s potential, multinationals must show a strong and visible commitment to the country, empower their local operations, and invest in local talent. They must pay closer attention to the needs of Indian consumers by offering the customization the local market requires. And multinational
executives must think hard about the best way to enter the market. More and more, that will mean moving beyond the joint-venture approach that so many have adopted and learning to go it alone. (For a localization-assessment tool, see sidebar, “Winning in India: An illustrative scorecard.”) It’s essential that multinationals raise their game in India: the country’s economy is expected to grow by upward of 6 percent annually in the next few years, among the highest rates of any big emerging economy. In several product and market categories— mobile handsets, for example—India could account for more than 20 percent of global revenue growth in the next decade. In other words, the future of many multinationals depends on their ability to succeed in India. Empowering the Indian organization Many multinationals in India are stuck in a profitability trap characterized by a lack of commitment to build countryspecific operations and management systems. When expatriate company heads are brought in, their efforts often fall victim to short rotation cycles that inhibit the execution of long-term strategy. One important differentiator is the ability to demonstrate a commitment to India through the economy’s inevitable cycles and volatility. Policy makers and local entrepreneurs have long memories, and “state visits” by global CEOs and chairmen are not sufficient if a company doesn’t follow through on its commitments One global electronics manufacturer offers a successful example of the benefits of a leadership commitment in India. After the company’s efforts to set up a joint venture ran aground, it decided to do business on a standalone basis. The company launched an aggressive marketing campaign, but rather than raise product prices in India to pay for the effort, global headquarters financed it. Headquarters also helped the Indian subsidiary to source
inexpensive components until it could take command of its own operations. The support and commitment of the global office in those early years made this company one of India’s leading electronics manufacturers. But a multinational power and automation technology company learned the hard way what happens when senior executives lack commitment to India. In the late 1990s, the parent company paid marginal attention to local operations there and was unwilling to adapt to changing market conditions. The performance of the Indian unit declined—it lacked autonomy and faced hierarchical and bureaucratic roadblocks in its dealings with global headquarters. Finally, in early 2000, headquarters gave the Indian operations a high level of autonomy, and in response revenues rose by 30 percent (compounded annually) between 2001 and 2005.
Likewise, a global conglomerate faced with declining sales in India recently consolidated all its business units there under one country head, who has direct profit-and-loss responsibilities. This top executive makes all major decisions, including headcounts, pricing, and product customization. All local business unit heads in India now report to him rather than to their global business unit leaders, as they had in the past. This change has helped concentrate resources and enabled faster decision making, allowing the company to better serve local customers and, ultimately, to grow more quickly. Local empowerment should extend beyond the country head to lower levels of management, which can help drive innovation and entrepreneurialism on the ground and decrease times to market for new products. But structure is not enough. Multinationals need the right people—especially in middle management, a group critical
Companies should avoid simply imposing global business models and practices on the local market.v Empowering local management is also critical for attracting and retaining talented staff. Many multinationals are moving toward the creation of a strong Indian business unit and, in the process, moving away from functions or global products as the primary axis of governance. These companies are investing in top talent: the head of the Indian unit is experienced and knowledgeable about the market and has a direct line of communication with the global company’s CEO. This direct connection to global management—combined with the ability to make decisions on capital spending, products, and pricing— holds a local leader more accountable and facilitates the sharper development and execution of strategy.
to the successful execution of a growth strategy. Given the vast array of opportunities available in India and its relative shortage of management talent, multinationals have had to revise their models significantly. With the continuing professionalization of Indian companies, the country’s 5 stronger managers have less incentive to work for a branch of the multinationals, which must look beyond short-term tactical measures to attract high-quality people. The most progressive global companies are moving in three directions. First, they create more globally visible local roles, which may include representation on executive committees. Such positions emphasize entrepreneurialism and greater authority and offer higher 29 The Economy July 25 2012
C OV E R S T ORY compensation. Second, these companies promote a meritocratic culture: accelerated career tracks, fair and transparent advancement processes, the absence of a “glass ceiling” for locals, a performance-based system that motivates self-starters, and differentiated incentives for high performers. Third, progressive global companies offer mobility and tailored leadership programs. Structured global rotations for strong performers and leadershipdevelopment courses (especially with some form of certification) are proving to be effective recruiting and retention tools Innovating for India Multinationals are learning that many different Indias exist within the subcontinent. The big differences— the haves and have-nots, languages, literacy, and geography (including the urban–rural divide)—make it difficult for a global brand to satisfy all of the country’s consumers. Multinationals also face the challenge of low-cost local competitors. Indian consumers demand sophisticated products and services found in the West, but at lower prices. A one-minute call from a mobile phone, for instance, costs one to two cents in India, much less than it does in the United States. This aspect of competition in India means that innovation is occurring not only through localized products and services but also in business models and processes. To strike a balance between global brands and local positioning, multinationals can introduce sub-brands or models with features suited to Indian needs. They could also work with local suppliers to reduce costs, which would allow them to offer cheaper prices to the end consumer. Although many of these ideas are not new, multinationals have been low to implement them in India. The key is that customization has to be a game-changing strategy rather than an incremental one: multi30 The Economy July 25 2012
nationals must aim to cut costs by 60 to 80 percent, with just a 30 percent reduction in features. One of the classic examples of customization is the success of a Western farm equipment maker that builds and sells relatively low-cost, no-frills tractors in India. These are far less elaborate than most of the machines the company sells in the United States. As a side benefit, it started marketing a version of a lightweight tractor in the US market to farmers and others who wanted a less expensive yet sophisticated product. Televisions offer another example. Marketing a consumer durable as straightforward as a TV poses a lot of challenges in India’s rural market. Some consumers who don’t speak or read English can afford to buy a TV but use it primarily to listen to music, so they want high-quality sound. A leading global electronics manufacturer has met this demand by offering television sets with menus in Hindi and five other important regional languages. It has also adapted some models by enhancing their sound systems to provide a better
listening experience. Similarly, a leading car manufacturer has set up a team of people to understand customer requirements and redesign the features of its products. Its design-to-value approach is becoming increasingly common: in India, multinationals devote more than 10 percent of their product-development resources to such efforts. We also find that best-
practice international companies take talented employees from India and rotate them through the product-development organization globally. In this way, “frugal engineering” becomes an embedded capability—and frugal can mean both inexpensive and innovative. Choosing the right entry strategy One of the first and most important issues for a multinational considering
doing business in India is ownership structure. Multinationals that enter the country on a stand-alone basis, our experience shows, generally fare better than those that use Indian partners to create joint ventures. Most global companies that opted for them have exited the Indian market, while some have purchased the stakes of their partners or established majority shareholdings. One global consumer goods company, for example, bought out its Indian partner because of differences over product marketing and brand positioning. The multinational is now doing well in all the segments where it competes. Multinationals those choose joint ventures as their entry vehicle into India think that a local partner can better navigate the market’s complexities and manage regulatory issues. There is some truth to that idea, but in practice, joint ventures often tend to emphasize short-term performance over longterm goals, long-term commitment, and an alignment between the interests of the global and local partner. Without management control and a clear path to ownership, global companies may have no alternative but to exit the market. Joint ventures can be beneficial in some cases, but they are not essential if a multinational regards India as a priority market and regulations allow the company
to have majority or complete. When joint ventures are necessary, multinationals should ensure that they have real management control and a clear path to ownership should that become necessary. Partnerships with Indian companies need not be limited to joint ventures— multinationals should also consider strategic alliances with local players. An international technology manufacturer and an Indian company, for example, set up a local manufacturing plant that went on to double its production volumes every 18 months. This achievement set it on the path to becoming the largest of the multinationals’ plants in India, with the world’s lowest costs and high profit margins. From the multinational’s point of view, the success of this strategic alliance moved India from the “nice to have” category into an essential part of its international operations. A global pharmaceutical company established itself as a stand-alone entity but developed strategic alliances with a local manufacturer in licensing and supplies for the generic and off-patent segments. These agreements helped the multinational to enter India’s fastgrowing market for low-cost, easily accessible branded generics and offpatent medicines Winning in India requires an intense and concerted effort. The multinationals need top leaders willing to make a commitment to the Indian operation and to localize and empower it. They must adapt to the Indian consumer’s demand for innovative, low-cost delivery systems and high value for money products, as well as identify and implement an appropriate ownership model. Finally, senior executives of these companies should not neglect the management of local stakeholders, such as regulators and activists. The best efforts to localize an Indian business model will come to naught if these influential groups are overlooked. 31 The Economy July 25 2012
W O R L D WATCH
Meet the Chinese consumer of 2020 M
ost large consumer-facing companies realize that they will need China to power their growth in the next decade. But to keep pace, these companies will also need to understand the economic, societal, and demographic changes shaping the profiles of consumers and the way they spend. This is no easy task not only because of the fast pace of growth and subsequent changes in the Chinese way of life but also because of the vast economic and demographic differences across the country. These differences are set to become more marked, with significant implications for companies that fail to grasp them. Since 2005. Changing demographics Many of the changes taking place in China are common features of rapid industrialization: rising incomes, urban living, better education, postponed life stages, and greater mobility. Japan saw similar changes in the 1950s and 1960s, as did South Korea and Taiwan in the 1980s. But some unique factors are also at work, such as the government’s onechild policy and the marked economic imbalances among regions. Our analysis reveals important insights into the likely demographic and socio-demographic profiles of Chinese consumers at the end of this decade. Changes in economic profiles have been and will continue to be the most important trend shaping the consumer landscape. The Chinese are certainly getting richer fast: the per-household disposable income 3of urban consumers will double between 32 The Economy July 25 2012
2010 and 2020, from about $4,000 to about $8,000. 4That will be close to South Korea’s current standard of living but still a long way from its level in some developed countries, such as the United States (about $35,000) and Japan (about $26,000). The current vast differences in income levels will persist, however, although the numbers at each level will shift dramatically (Exhibit 1). At present, the great majority of the population consists of “value” consumers—those living in households with annual disposable incomes between $6,000 and $16,000 (equivalent to 37,000 to 106,000 renminbi), just enough to cover basic needs. “Mainstream” consumers, relatively well-to-do households with annual disposable income of between $16,000 and $34,000 (equivalent to 106,000 to 229,000 renminbi), form a very small group by comparison. China has fewer than 14 million such households, representing only 6 percent of the urban population. A tiny group of “affluent” consumers, whose household income exceeds $34,000, accounts for only 2 percent of the urban population, or 4.26 million households.
Evolving economic profiles will continue to be the most important trend shaping the market. Until now, these divergences have presented multinational companies operating in China with a choice: to target only mainstream and affluent consumers or to stretch the brand to serve the value segment. Those that took the first course could more or less maintain the same business model they applied in other parts of the world, without needing to de-engineer their products. But in taking that approach, they limited themselves to a target market of 18 million households. Companies that chose to serve the value category benefitted from a much bigger market to play in—184 million households—but their products had to be cheaper, they were forced to adapt their business models, and profitability was lower. This situation is changing. Because the wealth of so many consumers is rising so rapidly, many people in the value category will have joined the mainstream one by 2020. Indeed, mainstream consumers will then account for 51 percent of the urban population. Their absolute level of wealth will remain quite low compared with that of consumers in developed countries. Yet this group, comprising 167 million households (close to 400 million people), will become the standard setters for consumption, capable of affording family cars and small luxury items. Companies will be able to respond by introducing better products to a vast group of new consumers, thus differentiating themselves from competitors and earning higher profits. Nevertheless, value consumers,
whose ranks will fall to 36 percent of urban households in 2020, from 82 percent in 2010, will still represent an enormous market for cheaper products: 116 million households, or 307 million consumers. Affluent consumers will remain an elite minority, making up only 6 percent of the population in 2020. (In the United States in 2010, more than half of the population earned at least $34,000.) But that 6 percent will translate into about 21 million affluent households, with 60 million consumers. While income is expected to rise across China, some cities and regions are already significantly wealthier than others. Understanding these variations in the rate of development is important because they will affect which categories of goods and services grow most rapidly, and where. Today, about 85 percent of mainstream consumers live in the 100 wealthiest cities; in the next 300 wealthiest, only 10 percent of consumers are mainstream, but that percentage will rise to nearly 30 percent by 2020. At that point, many families in these cities will be able to afford a range of goods and services (such as flat-screen televisions and overseas travel) that are now largely confined to the wealthiest urban areas. Exhibit 2 explains the distribution of income in four different groups of cities. Some of them (Foshan in Guangdong, for example) are small in terms of absolute GDP or population size. But it’s worth noting that the affluence of their populations could make them as attractive to companies as leading tier-one cities, such as Shanghai and Shenzhen.
New spending patterns An understanding of China’s changing economics and its impact on the profiles of consumers helps to identify some key trends in spending patterns in the next decade. We discuss three: high growth in discretionary categories, the tendency to trade up as consumers spend some of their discretionary income on better goods and services, and the emergence of a senior market. Higher discretionary spending Bigger incomes and government efforts to increase consumption will benefit all consumer-facing companies, though to varying degrees, depending on their product portfolios. Discretionary categories will show the strongest overall growth—13.4 percent—between 2010 and 2020, as these goods become affordable to growing numbers of consumers. Next come semi-necessities (10.9 percent growth) followed by necessities (7.2 percent). These average figures will of course vary significantly by region and city. Exhibit 3 shows forecast annual consumption by category for 2020 and the rising importance of discretionary spending. Each broad category includes subcategories, some of which are more discretionary than others and expected to grow faster. For example, a discretionary category within food— dining out—is expected to grow by 10.2 percent a year in the coming decade, against 7.2 percent growth for basic food ingredients. Of course, the wealthiest people—those in our affluent segment—will be the main consumers of discretionary items. Less obvious is the extent to which they will be able to afford more such items in 2020, compared with people in other income
groups, as their numbers and wealth grow. Our consumption model suggests that in 2010, average household spending for value, mainstream, and affluent consumers was about $2,000, $4,000, and $12,000, respectively. These figures will jump to $3,000, $6,000, and $21,000, respectively, by 2020. So although all consumers will increase their spending, the gaps between different income groups will widen significantly. Stark disparities in standards of living are emerging in China. Emerging senior market The aging of China means that as a share of the total population, it will have five percentage points more people above the age of 65 in 2020 than it has today. That is an extra 126.5 million citizens, clearly an important consumer segment. What is equally important is the way the spending
patterns of older people in 2020 will differ from those of older people now. In our 2011 survey, the elderly were more inclined to save and less willing to spend on discretionary items such as travel, leisure, and nice clothes. These tendencies will probably be much less apparent in 2020. Most people in China over the age of 55 experienced the harsh conditions of the Cultural Revolution, in the late 1960s and early 1970s. Not surprisingly, they think it important not to spend frivolously. Among residents of tier-one cities, 55- to 65-year-olds allocate half 33 The Economy July 25 2012
W O R L D WATCH
of their spending to food and little to discretionary categories: only 7 percent goes toward apparel, for example. People who are ten years younger devote only 38 percent of their spending to food but 13 percent to apparel. Indeed, our consumer surveys have revealed that although today’s older consumers behave very differently from younger ones, today’s 45- to 54-year-olds—the older generation come 2020—have spending patterns similar to those of 34- to 45-year-olds (who allocate 34 percent of their spending to food and 14 percent to apparel). This finding implies that companies will have to rethink their ideas about what older Chinese consumers want. Implications for companies The biggest challenge is building and sustaining a leading position in China and, for multinationals, using it to drive global growth. In fact, as the country with the world’s largest group of mainstream consumers, it could be an excellent test bed for companies that serve this consumer segment. Our analysis indicates that huge variations in the growth rates of companies operating in China come 2020 are likely, depending on the product category, consumer segment, and geography. A second challenge is that China is so 34 The Economy July 25 2012
vast and its regions so diverse it should be treated almost as a collection of separate countries. Companies should redefine the roles of their regional divisions and headquarters, delegating more decision-making power to the former. Many companies already operate with three, five, or even more regional bases, but these tend to function only as sales offices, executing instructions from the top. Consumer needs could become so varied across China’s regions that local insight and strategic decision-making power will be vital. Regional offices should therefore receive full responsibility for their own profit-and-loss accounts, strategic planning, consumer research, innovations, portfolios, route-to-market models, and marketing. The corporate center should have a redefined role—serving the individual units and safeguarding the company’s brands—with less power and at a lower overhead cost. A third challenge stems from the fact that undifferentiated mass consumption and the rising cost of ads made the scale of a brand or product crucial to its success in the past decade. Companies provided the same value proposition—usually framed around a product’s functional benefits—to all types of consumers, while stretching
brands across product categories and price tiers to leverage scale and garner market share. Over the next decade, the game will change to take account of the emergence of different categories of consumers and their own sense of their differences and individuality. Companies will need the crispest value propositions to connect with each group and to stand out from competitors. By 2020, they will have to position brands (or sub-brands) to target narrower consumer segments and offer more tailored value propositions. Brands extended across too many consumer segments and price points may struggle to defend their market position. Hard though the transition could be, at some point companies that have focused on maximizing their brands’ scale will have to adopt a model based on a portfolio of more targeted brands or sub-brands to connect with different consumer segments. No doubt China and its consumers’ behavior will take some unexpected turns over the next decade. Nonetheless, our research reveals the clear direction of travel. To be sure of taking part in that journey, companies in the market should start making the acquaintance of China’s 2020 consumers today.
W O R L D WATCH
Golf breaks A
ndrew Stanley turned his passion for golf into big business when in 1998 he set up Golfbreaks from his bedroom. Today, Windsor-based Golfbreaks is Europe’s largest golf travel company and in 2011 achieved a turnover of £31 million. In fact in the past two years, in the midst of tough economic times, the company has had two of its biggest growth years. Stanley talked to Eleanor Harris about the ‘Tiger Woods effect’, his ambition to get every one of the UK’s 4m golfers on an annual golf break, diversifying into the spa industry, and why being an entrepreneur is in his bones. Andrew Stanley is founder and chief executive of the Golfbreaks Group. He was born in 1969 in Johannesburg and grew up in Somerset after his British parents moved back to the UK in 1972. He holds a degree in hotel and catering management from Portsmouth University. After graduating in 1992 he worked for Airpic selling aerial photographs door to door, and by 1995 had risen to sales director. In 1996 he joined Consumer Exhibitions and launched the first consumer golf show in the UK. In May 1998 he founded Golfbreaks and in August 1999 launched Golfbreaks.com. In 2007 he launched Teeofftimes.co.uk and in 2010 launched BookaSpa.com. Stanley was a finalist in the Ernst & Young Entrepreneur of the Year Awards in 2006 and the company won the RBS Company
of the Year Award in 2007. When he was in early 20s, at university: there was a wonderful scheme in Portsmouth where for £1 a round students could play on the local municipal courses on certain days of the week. He spent his third year of university on a placement at a hotel in Thurlestone, Devon, which had a beautiful nine hole golf course right on the coast, and there he could combine my two passions of windsurfing and golf. The crunch time came when he saw a gap in the market for organising Ryder Cup-style matches for groups of
golfers. He already organised a number of those with groups of friends and always seemed to be the one who got lumbered with the organising but he enjoyed doing it and realised that there was a lot of demand for no frills golf breaks in the UK – groups of four or six golfers wanted him to provide a one-stop booking service. He realised that there were a lot of golf travel companies who took people out to Spain, Portugal and France, but there wasn’t anyone doing it in the UK. So he talked to a number of golf resorts in the UK, and many of those were looking for a sales and marketing arm 35 The Economy July 25 2012
W O R L D WATCH to help drive some golf break business to them, so it was perfect timing. Part of the growth was that fundamentally he managed to recruit some very good people. From the early days there were three other shareholder directors who are still very much here now, and between us we’ve built a team of just under 120 people who are very friendly, polite, positive and knowledgeable with an evident ‘. Golf is one of the fastest growing sports in the world; it’s the highest participant sport here in the UK, up there with angling. And the ‘Tiger Woods effect’ in the last decade – his profile for the sport definitely made golf that little bit more sexy. He think nowadays there’s more and more value put on leisure time. He believes that there is an element of truth that is in the bones or in the genes – his father set up three businesses throughout his career, so he saw how those grew as he grew up, and then his first taste of it was working in the ski resort of Val d’Isere during the gap year between school and university. With a
36 The Economy July 25 2012
friend he set up a small enterprise selling packed lunches to skiers. He went round knocking on apartment doors in the evening, taking an order and delivering it the following morning. It was fun and it helped provide a bit of beer money. After graduated he had a summer job selling aerial photographs door to door. It was on 100% commission which absolutely took to, because it very quickly demonstrated that the more you put into something, the more you get out, and that wonderfully simple equation is something. Another wonderful expression taught from an early age is “Don’t die wondering” – that’s something which has constantly been in the back of his mind. There are other new ideas that are always up the sleeve. One thing always tried to do is make sure we grow within our means. If there were a million pounds sitting there now it would be about rolling out x, y, and z, but because there’s not and decided to try and run the company debt free, committed to driving the brands that already got and making those leaders
in their respective markets, rather than spread ourselves too thinly. To continue with the strong growth that experienced. There are 4m golfers in the UK, still got a long way to go until they getting every one of them going on a golf break every year. Looking at new destinations – the Caribbean is very much coming onto the radar, will be expanding into those countries to increase our worldwide product offering, and want to increase the choice of spa venues. In all of the business the constant challenge for them is to get more and more products online. The Teeofftimes.co.uk booking platform will book up over 250,000 golfers just on standalone tee times this year, and that’s absolutely the way it’s going, for golfers it’s the fast and easy way to book a round of golf. There’s not a day he wake up and think “oh my god I’ve got to go into work”, absolutely adore it, and get a huge kick out of growing the business. The challenge is to keep growing and to keep remaining profitable, and he always reminded that turnover’s vanity, profit’s sanity, so it’s keeping that yardstick.
t is true that the short-term thinkers are rewarded unfairly but the experience of creating cities where primefarming land has been sacrificed for the construction of malls and office spaces has shown that this bargain does not give good returns in the future. Agriculture as a sector has habitually been an underperformer but its performance in terms of growth has ripple effects on controlling inflation. Promotion of agriculture can also have a positive impact on related demand for other industrial products such as fertilizers, tractors etc. Hence there is
an economic upside to promote agriculture. The point that needs to be highlighted here is that city planners have continuously overlooked the problems created in other areas of India that have suffered from the destruction of prime agricultural land. The damage is natural, climatic, and long term issues like rising temperatures and creation of heat pockets means that the possibility of agricultural production in the future is greatly reduced. In my humble opinion malls & High-
tech infrastructures will not feed our stomachs and there is a need to for agriculture to thrive and grow in order to support our growing population. If that doesn’t happen then the day is not far where an apple costs Rs 100 and a Kilogram of rice a few thousands. Hope that day never arrives.
to Petta with 23 stations. The proposal that had been put forward by the Urban Development Ministry for the cabinet’s consideration had suggested starting the Kochi metro network as a 50:50 partnership between the Centre and the state government. “The cost of the project would be Rs. 5181. 079 crore and, like in the case
of Delhi Metro, Japan International Cooperation Agency would be approached for funding,” Kerala government would also form a high-powered committee which would assist the Kochi Metro project in acquisition of land, rehabilitation and ensuring alternative arrangements for public utilities during construction.
nion Cabinet cleared the over Rs. 5000-crore metro rail project for Kochi which will be the first city in Kerala to have such a transport facility. Sanctioning of the Kochi Metro project is a major step in the development of Kerala. The meeting gave its go-ahead to the fully-elevated link, covering 25.6 km from Alwaye
37 The Economy July 25 2012
I INN F CN UATIONAL Z TO ER ROUND -UP
French retailer readying for India expansion F
rench retail chain Groupe Auchan SA is finalising its partnership agreement with Landmark Group and putting together plans to expand into India: Auchan wants to reach up to 85 stores over the next six years. Dubai-based Landmark Group already runs operations in India in the form of lifestyle department stores, hypermarkets, restaurants, coffee shops and entertainment. Landmark and Auchan will each hold 50 per cent in the joint venture. Landmark Group said that it will cut ties with Dutch retailer Spar, which is at present engaged with potential partners in India, by the end of 2012 In India, Auchan would compete 38 The Economy July 25 2012
against global retailers Walmart, Metro, Tesco and Carrefour. As of March 2012, Auchan operates 616 hypermarkets in 12 countries and 759 supermarkets in five countries. International markets account for 55 per cent of the companyâ€™s total revenue, which reached EUR 44.4 billion in 2011. Meanwhile, Carrefour has put on hiatus its Indian expansion plans due to the effects of the global economic recession. The corporation is postponing the plans it announced earlier this year to expand into the Indian cities of Pune, Bangalore, Meerut and Agra. Carrefour, the worldâ€™s second-largest
retailer after Walmart, said in its most recent annual report that it intended to maintain strict financial discipline to shield itself within a challenging business environment. Instead, Carrefour stated, it will focus its growth in its other emerging markets including Brazil and China. Since it first entered India in 2010, Carrefour has opened only two cash and carry stores. Its rival American retail chain Walmart, which partnered up with Bharti Enterprises, operates 17 stores while German retailer Metro runs 10, and says it is exploring the option of expanding its presence into 40 cities.
Why politicians won’t retire? by Sanil Augustine
erhaps for all other profession and service sector have a retirement period but absurdly not for politicians. Even Priests who are in service sector do retire at the age of 75 but not politicians. Politicians who have tasted what real power is, the comforts and popularity that politics can offer never want to retire. They wish to die as a great leader, like prime minister or chief minister or ministers only then their death will get great publicity and receive all state honors for their funeral. Politicians are people obsessed with the hunger for power. Once they are intoxicated with the power, never they get away with it. It is a power addiction. As long as they are in power, they will be venerated by the supports, the moment the politicians are out of power and authority they will not be given the same respect as they were in power. To amass wealth and to easily become rich there is no other shortcut other than being a politician. Politics is no more a service and it is a big time money making service. Look at our politicians and the amount of the wealth each one possesses and that itself speaks the truth and that is why these creatures don’t want to retire at all. We shall remind you something, you dear Politicians of our country “You are living at the expense of the citizens of the country.” We, the citizens of the country, are meeting all your expense and what do you all give us in return? The politicians should learn that the status and the comfort they are enjoying are with the hard earned money of the destitute of this land. They are answerable for our wellbeing and convenience. The Politicians are elected to serve us not to be served. In their speech they aptly fit so many
jargons like Aam aadmi and aam janatha to woo the general public in the election campaign. The politicians are big time pseudo ones. The politicians can’t understand the value of the hard earned money. When the common man is working hard in the scorching sunlight our politicians are resting comfortably in the air-conditioned rooms for which the money is paid from state exchequer. If the politicians of our country were to learn the misery and hardship of Aam aadmi they would not have increased the price of fuel and would have done something remarkably to chock the inflation. If the situation continues in this alarming rate, the life of the common man is going to be even more miserable. The irony is that the job that demands greater managerial skills and educational qualification always has totally unfit people for the post. How many of our politicians are really qualified to mange different portfolios in terms of their educational qualifications and experience. In our country anyone can be a minister provided he wins an election with money and muscle power, and educational qualification is not counted at all. If politics is a service why MPs and
MLAs are having a salary system? A MP is getting a salary of 48000 and other PA and DA, on what educational qualification they are paid such a big amount as a monthly salary. Last year the salary of MPs was hiked triple time that is from 16000 to 48000 and they were not happy and they were arguing that in America the politicians are getting paid really high. The politicians of our country should understand that what is their educational qualification and caliber when compared with their counterparts in US. Do you think that adequate thinking and research have gone into all the projects that are undertaken by a politician? Many a time the projects turn up to be a big flop and the politicians remain beyond criticism. I think we should have legal provisions wherein they should be put behind the bars if they waste the money due to their mismanagement. It is high time for the politicians to learn that being a politician is not just a profession but it should be a great dedication and sacrifice to serve the citizens and the country at large. The happiness and joy of the politicians shall be in serving their country not in living at the expense of the citizens. 39 The Economy July 25 2012
S N A P S H OT
40 The Economy July 25 2012
by Sumi P.
ow can you define NIMHANS? How it differ from the other institutions of Mental Health? Started as a Lunatic Asylum, it went through different metamorphic changes it became the Mental Hospital. This hospital and All India Institute of Mental Health amalgamated to form the venerable National Institute of Mental Health and Neuroscience (NIMHANS) which is a multidisciplinary Institute for patient care and academic pursuit. In 1974, it functions under the Ministry of Health and Family Welfare of the Central Government and the State Government. Later after two decades it was declared as a Deemed University, by UGC with academic autonomy. Ours is the only institution which gives precedence to both Mental Health and Neuroscience which is supposed to handle the delicate environs of human beings. Now we are aiming to elevate the NIMHANS to a status of Institute of National Importance, which we hope to achieve soon. NIMHANS supports mental health, do you think the parochial perspective of people have changed a lot? The parochial perspective of people has changed a lot. In our hospital we are treating the patients like any other illness; in most cases we prefer domiciliary treatment, avoiding prison, cage etc. excluding excited cases. Nowadays family members extended a wholehearted support to the patients that they inclined to stay with them, which benefits to have a speedy recovery. Still there are a few exceptions, where patients who were abandoned by their family members owing stigma. Do you think there is an increase in illness regarding mental health? Minor mental illness exceeds more compared to the major mental health. Depression, anxiety, alcoholism etc. were a habitual puzzle in the psychiatry which is prevalent among the common people is considered as the minor cases. Dementia is a mental illness found
common among the elderly people as they lose their cognitive function. One major reason is the longevity of the people. Classical schizophrenia, classical affective disorder, bipolar, manias etc were come under the severe mental illness. Statistics shows that minor mental illness is ascents from 20 to 40 percent whereas the major mental illness sustains the same as three percent. In the wake of modern lifestyle, can you please define the psychological disorders that affect to children, youngsters and old?
which was common among youngsters. The highly alarming affair regarding elderly people was the isolation. The old people were running their life just because the society demands it. The isolation and the societal ignorance, prop to generate more psychological disorders among the geronts. What are the methods adopted by the NIMHANS to harness the lifestyle mental disease?
Though civilization upgraded the
We have NIMHANS Centre for Well Being, which is not meant for the illness but for the well being of the people. Here we train non-doctor psy-
lifestyle of people, unfortunately it leads them to have a stressful life. If we took the case of children, most of them are adhered to the technology were the parents makes them comfortable. The social interaction of a child was tending to diminish and they felt emotionally abstain in the midst of all prosperity. Busy life of parents and marital disharmony troubles the psyche of the children.
chologists, nurse, councilors, professionals, school teachers and even angavenvadi teachers. We have the Centre for Addiction Medicine which deals with drug addicts especially alcoholic. Another area we are focusing is the Community Psychiatry, here the trained non-doctor psychologist and nursesâ€™ travel across and imparts awareness among people, main area of thrust was the prenatal psychiatry.
NIMHANS: Healing Invisible Wounds
Most of the parents cherish their dreams through their offspring without knowing their interest and intelligence. Competition and pressure increases in every walk of life to sustain. Targets and deadline are the two buzz word that every young professional must come across in their job. Social circumstances instigate people to work and they are not able to control the emotions which mislead them to move away from the normal pattern of life. Alcoholism is a major mental illness
How effectively is NIMHANS using technology? It is my privilege to affirm that NIMHANS possess almost all the advanced technologies prevailed in world top psychiatric centers. We ordered for Magneto encephalography (MEG) expense a cost 25 crores which is expected to arrive in India by December but we still devoid of PETMRI. Can you please tell us about the Research and Development projects in 41 The Economy July 25 2012
NIMHANS? NIMHANS forefronts basic, applied and clinical research which thrusts genetic basis for disease causation, unraveling the molecular and sub-cellular mechanisms for disease processes, linking clinical status with structural, biochemical, immunological and serological abnormalities and developing prognostic and clinical predictors. Simultaneously NIMHANS doing research on the efficiency of traditional system of medicine and how it can include in the psychosocial care. Another area of focus has been inter-institutional and multidisciplinary research. We wish to promote translational research.
NIMHANS is looking forward to have a MoU with Taipei University. How supportive is government to NIMHANS? We are lucky that the government extended its full support, as the central government supports maximum of all our activities especially for the research and for the manpower development. Service, capacity development and research are the three objectives of NIMHANS and we are contentiously encouraged by the GOI, pouring us with adequate funds and support that shows the growth statistics of the institute.
Tell us more about Brain Bank, its functioning and its future development? Brain Bank is a unique venture that NIMHANS can boast off, which was earlier supported by ICMR and later it was taken over by our institute. We are promoting the donation of the brain, kept under a particular temperature is being used for research purposes. We also share the brain to anyone in the country who is doing research. We recommend young students to visit our Neurobiology Centre that insists on training the younger students. What are the international relations of NIMHANS? We have lots of collaborations with the foreign universities across the world. McGill University, Montreal University, Fogarty International Centre of USA, Royal Collage of Psychiatry, University of Glasgow are only the few among them. A team from Brunei visited NIMHANS which is an affirmative outcome our international partnership. We have already signed a MoU with Maastricht University of Netherlands, to develop joint research programme and co-operate in the area of R&D with special emphasis on translational research in the field of neuroscience and mental health. 42 The Economy July 25 2012
about 45000 patients per year, every day we come across 1500 patients accompanied by one or two doctors and then there will be 5000 outpatients too. So my major challenge is to increase the manpower in our institution which is comfortable to both the staffs and the patients. I am aiming to have a participatory and transparent administration in our institution. For this we have already introduced an online Postgraduate examination for students. What is your vision on mental health care domain? Mental Health should be a part of non communicable disease that mental illness as well as neurological illness should be treated as Non Communicable Disease. For example epilepsy is still a taboo in our society, it should be stigma free and it should become a part of NCD. This is one main objective that I am giving preference and it should be disseminated throughout the country. What are the future plans and projects of NIMHANS?
The public is also voluminously contributing to our institution. Infosys Foundation has built â€œRelatives Rest Homeâ€? at an estimated cost of five crores. The State Bank of India and State Bank of Mysore donate two high tech ambulances. Very recently the SBM has given two buggies which are very helpful for the patients to move around the wider campus. What are the challenges you face as the director of NIMHANS? In our country there, we have less than 1000 neurologists, less than 1500 neurosurgeons, and only3500 to 4000 psychiatrists for one billion people. So the shortage of manpower is highly alarming, to redeem this is a big challenge. In our institution also we have
Our prime objective is to elevate NIMHANS to the status of Institute of National Importance. We introduced courses like Child Psychiatry and also wishing to add more courses in the posterity. From this August we are giving a Post doctoral psychiatry to various courses. We have already developed indigenous machines like ventilators and H1N1 kits. We will concentrate on this too. NIMHANS is looking forward to have a Free Legal Cell to mitigate the problem of mental patients pertaining laws and impart free legal aid. We have made proposals for 12th Five Year Plan with nearly amount of 1000 crore which we hope to use for the further development of NIMHANS like the expansion of campus etc. We are propping to have NIMHANS like institutions other parts of India.
Excellence v/s Autonomy
undreds of thousands of spend their parents money in lakhs of rupees to get coached to ‘crack’ the IIT entrance examination-even though roughly only one in hundred succeeds. Comparatively, top universities in the USA, like Harvard get barely 10 applications for every seat on offer. Evidently the IITS continue to be the daring of aspiring youth and their parents. Unfortunately, there are some cracks in the beautiful image. as some people are enquiring whether the standard of these IIT’S has really deteriorated What is the truth? One half of IIT students are now admitted on the basis of reservation for the sc/st and the obcs. The student-staff ration has deteriorated from 6.1 to over 12.1. Class sizes, which used to be no more than 50, now often exceed 200. There is a rule that faulty should be selected on the basis of reservation though that has not strictly enforced. It is also a fact that the JEE has become trainable. If proof is required one has to go to kota in Rajasthan to see thousands who are
being trained there, and quite successfully too. It is also a fact that many more students are coming from smaller towns with little knowledge of English. Not all of them are able to overcome that handicap. Have these factors affected the quality of the IIT’S? However higher learning institutes need three essential freedoms: Freedom to decide whom to teach who to teach and what to teach. Unlike in the case of high schools, the government does not interface with what is being taught in IITS but has issued rules on the section of faculty: further, it offers no freedom to the IITS to decide who they teach. It is the policy of government to use IITS rectify 12 years of utter neglect of higher education Successful universities like Harvard have the three freedoms quality institutions need. They attract the very best student but also admit less able but rich students who make valuable contributions to their endowments. Harvard has an estimated endowment of Rs 85,000 crore , no IIT has even
a thousandth of that amount Harvard utilize that amount to support high quality research and offer virtually free education to poor but able students. Narayan Murthy’s children studied in Harvard but could not join IITS even if they were prepared to fund 100 poor students. Neither the government nor the courts in India offers that flexibility of Indian institutions. The result is there to see: Harvard is at the top and IITS have dropped out of the race altogether. Whatever the directors may say, it is doubtful they will be able to perform better so long as Government breathes down their necks in the fatuous what it has been doing in any case, no reputable university treats the entrance test the way IITS do. For instance sat scores are not he arbiter for the student selection or even a necessary factor in such selection Anatomy is what top institution require the most IITS can also become great if the government leaves them alone and instead works to improve the quality of school education. 43 The Economy July 25 2012
B A N K I N G & FINANCE
New heights of Kerala Fin Corp K
erala Financial Corporation (KFC) has scaled new heights by registering the highest ever profit of Rs.45.65 Crores for the F.Y. 2011-12. The Corporation also increased the size of its assets to Rs.1240 Crores as on 31.03.12 from Rs.1124 crores as on 31.03.2011. The sanctions registered a figure of Rs.539 Crores and disbursements registered a figure of Rs.464.57 crores. Buoyed by the all-time best performance of KFC, a dividend of 7.5% on paid up capital was declared by the Corporation in its Annual General Meeting held on 11.07.2012. This translates into an amount of Rs.15.90 crores with a major part going to Government of Kerala which owns more than 97% of the equity share capital. Another Rs.2.58 Crores of dividend tax is payable to the Govt. of India. This is the highest dividend declared by any PSU in the State. The improvement in its appraisal methods, introduction of objective credit rating system, etc. by KFC has tremendously increased the quality of its assets and advances and the Corporation has been able to reduce its gross NPA percentage from 8.20% to 3.60% and net NPA from 1.88% to 1.30%. The Corporation also formulated scientific, rational and modern policies for sanction of loans, their monitoring and recovery. Forward looking compromise settlement and recovery policies ensured that the recoveries for the year 2011-12 reached an all-time high figure of Rs.467.17 Crores. The total income also surpassed the figure of Rs.200 Crores at Rs.214.25 Crores up from the figure of Rs.165.98 Crores achieved in the year 2010-11 (an increase of 30%). It may be stated that this performance has been achieved mostly in the second half of the F.Y 44 The Economy July 25 2012
the figure of Rs.165.98 Crores achieved in the year 2010-11 (an increase of 30%). It may be stated that this performance has been achieved mostly in the
2011-12. This is also to be noted that and reduction of interest rate for good half of the F.Y 2011-12. This is rating also to be noted that the Corporation is only 12.5% as against the second Corporation had huge accumulated credit had huge accumulated losses just about 3 years around 16% back. charged by other banks. losses just about 3 years back. As at the end of the year The Corporation has been able to The Corporation has been able to achieve this performance despite 2011-12 the net worth of the Corpoachieve this performance despite rereduced financial assistance from SIDBI. the improved of rationHowever, was Rs.325.85 crores up performance from duced financial assistance from SIDBI. croresensured in the previous year.agreed to the Corporation andperformance confidence of in itsRS.297.36 management that banks However, the improved The Corporation has Capital Adequathe lend Corporation anda confidence in itsrates. Further, the reduction in its establishment to KFC at very economic management ensured that banks agreed cy Ratio (CAR) of 20.51% which is costs has enabled KFC to earn profits despite keeping low lending rates. The far above the minimum norm of 9% to lend to KFC at a very economic effective rate after rebate and reduction of interest rate for good credit rating is prescribed by the RBI. rates. Further, the reduction in its esonly 12.5% as against around 16% charged by other banks. tablishment costs has enabled KFC to A comparative chart for performance earn profits despite keeping low lendduring the last 3 years is given below: at the end of the year 2011-12 the net worth of the Corporation was ing rates. TheAs effective rate after rebate Rs.325.85 crores up from RS.297.36 crores in the previous year. The Corporation
Financial year Portfolio Size
Gross NPA% Net worth Â
urope’s retail banks are now entering a period of regulatory reform that looks certain to put pressure on revenues, profits, and margins, and may alter these banks’ core business models. Estimate that without any mitigating action by banks or material changes in the economic and competitive environment, recent global rules, especially Basel III,1 and new regional and national regulations will help reduce retail banking’s average return on equity (ROE) in Europe’s four largest markets to 6 percent, from about 10—a 41 percent decline. The analysis, based on 2010 financial-year data, assumes that the cumulative regulatory impact expected over the next several years will be realized immediately. The effects vary across the four markets, but in all cases the outlook is grim (exhibit). In France, ROE will fall to 9.5 percent, from 13.5—a 29 percent decline driven by changes affecting mortgages, debit cards, and investments. In Germany, ROE will
fall to 3.5 percent, from 6.6 (a drop of 47 percent); almost all retail products will be affected and many will become unprofitable. ROE in Italy’s retail banks starts from a lower base, 5.1 percent, but will fall further, to 3.1 percent. In the United Kingdom, returns will fall to 7 percent, from 13.6 percent. The impact here, 48 percent, is high because of extensive countryspecific regulation. All these figures assume no action on the part of banks, but of course they are already adjusting to the new world. While we think it unlikely that the industry will return to pre regulation ROE levels in the short to medium term, individual banks can do so if they pull all four levers available to them: • Technical mitigation. By raising the efficiency of capital and funding (through improved data quality, better risk processes, and refined risk models), banks can increase ROE by 30 to 160 basis points.
• Capital- and funding-light operating models. Banks can further improve their funding efficiency and reduce risk-weighted assets by, for example, changing their product mix and characteristics and pursuing collateral more vigorously. All told, these techniques might improve ROE by 10 to 80 basis points. • Repricing. Banks will have only a severely limited ability to raise prices but may still be able to do so in some product markets. • Business model alignment. Over the longer term, retail banks that embed an ROE consciousness in their management approach, address industry-wide cost challenges, and pursue some focused M&A (including divestitures) will probably make the biggest strides toward reclaiming their former profit levels. In the coming months, ongoing research will explore the development of possible future retail-banking business models. 45 The Economy July 25 2012
I N F O R M ATION TECHNOLOGY
Yahoo, Facebook reach patent deal
Facebook and Yahoo agreed to forge a broad Internet advertising and licensing partnership laying to rest their dueling patent lawsuits. The pact settles accusations of technology patent infringement that began under the stewardship of ex-Yahoo CEO Scott Thompson, ousted after a scandal erupted over inaccuracies in his resume. Sources tell Reuters interim CEO Ross Levinsohn is now the front runner for the top job. Facebook’s and Yahoo’s strategic deal -- which expands an existing multi-year tie-up that involved mainly allowing Facebook users to share Yahoo content -- encompasses cross-licensing of patents and collaboration on advertising offerings during major media events such as the Olympics or annual Super Bowl. Yahoo, the once iconic Internet company, has struggled to find its footing
in a digital world dominated by the likes of Apple, Google, Facebook, and Twitter. The company’s leadership has been in a state of upheaval since turning down Microsoft’s $44 billion takeover offer in 2008, plowing through four chief executives in as many years. The company would not say when a final decision on a permanent CEO will be made. Yahoo’s lawsuit had invited some criticism that it was trying to wring cash out of a company about to go public in Silicon Valley’s largest coming-out
party. It sued Facebook in March, claiming the No. 1 social networking company infringed 10 patents including several that cover online advertising technology. In its lawsuit, the company said Facebook was considered “one of the worst performing sites for advertising” prior to adopting Yahoo’s ideas. Facebook, which went public in May, filed a countersuit of its own a month later and called Yahoo short-sighted for its decision to prioritize “litigation over innovation.”
Why Wall Street analysts do not ‘like’ Facebook? Facebook may be having trouble connecting with Wall Street. Banks behind Facebook’s initial public offering kicked off formal coverage of the social network by warning about its uncertain business model, margin pressures and a difficult transition to mobile technology. Of 17 brokerages that issued research reports, only eight recommended that investors buy Facebook shares, including Morgan Stanley, Goldman Sachs and JP Morgan - the Internet Company’s three lead underwriters. Eight brokerages gave neutral ratings and one 46 The Economy July 25 2012
had a “sell” rating. The panoply of neutral or equivalent ratings is notable because Wall Street research analysts have a reputation for favouring “buy” ratings, particularly in the high-profile Internet industry where “buy” or equivalent recommendations outnumber “hold” ratings nearly 2 to 1. Here are key observations: * The average target stock price for Facebook was $37.64, but the range was wide, from $25 to $45. Morgan Stanley, which has come under scrutiny for its role in driving an IPO
price that now appears lofty, set a price target of $38 and “overweight” recommendation. It said it remained unclear how Facebook plans to make money from a growing number of users logging on to the No. 1 social network via smartphones and tablets. “Sell” ratings are rare in stock research, where access to corporate executives is considered crucial. * Facebook’s IPO was to have been the culmination of eight years of breakneck growth for a company that became a social and cultural phenomenon. Instead, it was marred by a series of trading glitches on its debut, and the
company and its underwriters subsequently faced accusations of pumping up the price and inadequate disclosure. * In the IPO, banks sold their clients shares in the company started by Mark Zuckerberg in his Harvard dorm room, at a price equivalent to a whopping 100 times 2011 net income per share. Facebook more recently traded around 65 times expected earnings, according to Solaris’ Ghriskey. That compares with Google recent price-toearnings ratio of about 13. *
Most analysts expect Facebook’s large user base to help it corner a substantial share of the Internet advertising market in the long term. BMO Capital Markets’ Daniel Salmon began his coverage with an “underperform” recommendation and a $25 target, translating into a nearly 25 percent discount from current levels. “Slowing user growth is one of our primary concerns for Facebook’s current valuation,” said Salmon, the
only analyst giving Facebook a negative rating on Wednesday. He estimated Facebook’s annual user growth would be 22 percent next year and 16 percent the year after, much slower than expansion in the past. * Facebook’s decision to increase the size of the offering by 25 percent just days ahead of the IPO, as well as concerns about decelerating
revenue, also weighed on the stock, which traded as low as $25.52 before regaining some ground to trade in a $31-$33 range in recent days. The rush of research comes ahead of Facebook’s secondquarter results, expected sometime in
mid-to-late July. * With about 900 million users, Facebook has become one of the Web’s top destinations, challenging established players such as Google and Yahoo. Even so, revenue growth from ads and other services is slowing. The company, which last year was more than doubling the amount of money collected every quarter compared with a year earlier, reported growth of 45 percent in the first three months of 2012, and revenue declined from the preceding
quarter. * Several analysts working for the underwriters, including Morgan Stanley and Goldman Sachs, cut financial forecasts for Facebook days before the IPO, after the company cautioned about revenue growth due to a rapid shift of users to mobile devices, where Facebook is less effective at generating revenue.
47 The Economy July 25 2012
AU T O F O CUZ
Jaguar-Land Rover eyes booming China market
ith booming sales, China will soon overtake North America to become the second largest market for luxury carmaker Tata-owned JaguarLand Rover (JLR) after Britain. The company will increase investment in China to expand its sales network in the country and develop cars that best meet Chinese consumers’ demands. JLR chief executive officer Ralf Speth said an assembly line introduced in a tie-up between JLR and China’s Chery Auto has passed the government’s environmental assessment and is on track toward completion, the models produced by the joint venture would remain ‘luxurious and high-end’. Chery is best known for its inexpensive sedans in China. Involving an investment of 17.5 billion yuan, the CheryJLR joint According to JLR, more than 37,000 JLR cars were sold in China in the first half of 2012, doubling that of the same period last year. In 2008, Ford sold JLR for $2.3 billion to India’s Tata Motors, which has been
focusing on emerging markets such as Russia and China. Boosted by strong demand from the Chinese market, JLR
recorded pre-tax profits of 1.51 billion pounds ($2.36 billion) in the 2011 fiscal year, up 34 percent from a year earlier. Sales hit 314,433 units including 54,039 Jaguar models and 260,394 Land Rovers.
Tata Safari Converted to Moon Rover Evoque
ecently been reporting a lot of Western cars being re-tuned by world renowned Modding stations. Adding to this list today is a modifier from our very own domestic homeground, BigDaddyCustoms, who are based in the country capital, New DelhI. They modified the Tata Safari and converted it into a Range Rover Evoque. This replica is named as Moon Rover Evoque. Transformation is in terms of a complete make-over to the exteriors. The front fascia has been upgraded to look just like the Evoque and has been added with LED daytime running lamps. The rear has also adopted the Evoque looks with new quad tailpipes and custom paint jobs. The interiors have been 48 The Economy July 25 2012
tuned as well and are dressed in red leather. From Safari to Rover Evoque, now that’s what we call a transformation. Land Rover is a subsidiary of the Tata Motors who took over the British Subsidiary in 2008, along with Jaguar. Tata Motors is now to bring quite a
few sports cars under Jaguar and also our very own Tata Safari is getting a facelift and would be re-launched as the Tata Safari Storm
erala Tourism, ahead of the new season starting in two months, will launch a fresh set of mobile-based services and IT-based projects to make Kerala Tourism, ahead of the new seathe passage to Godâ€™s Own Country a son starting in two months, will launch hassle-free and more pleasant experia freshThe set new of mobile-based services aand ence. products including IT-basedwebsite, projectsWAP to make theapplicapassage mobile guide, to Godâ€™s Own Country a hassle-free tions and Bluetooth kiosks will be and moreby pleasant experience. The Anil unveiled Tourism Minister A.P. new products including a mobile Kumar. website, WAP guide, applications and For touristskiosks travelling to unveiled Kerala, these Bluetooth will be by products will prove to be their e-guardTourism Minister A.P. Anil Kumar. ians by giving with a comprehensive For touristsand travelling to Kerala, these supportive protective cover rather products will prove to be their e-guardthan being just e-guides. The Kerala ians by giving with a comprehensive Tourism website started with just 50 supportive and protective visitors a day in 1998 and cover todayrather it gets
7000-8000 visits per day and more than 2.5 million visits a year. In addition, Kerala tourism is active in social media like You Tube with 3 million than being e-guides. Thefans Kerala video viewsjust a year, 1.76 lakh on Tourism website started with just 50 Facebook and 9,500 followers in Twitvisitors a day in 1998 and today it gets ter. Kerala Tourism started exploring 7000-8000 visits per more mobile technology as day earlyand as 2006. than 2.5 million visits a year. In addiThe visitors who are connected with tion, Kerala tourism is active in social their smart phones and mobile apps media Tube with million will be like ableYou to explore the 3destinations video a year, 1.76 lakh support, fans on in the views state without external Facebook and 9,500 followers in Twitbut by using these unique products ter. Kerala Tourism started exploring which will provide a wide range of feamobile technology as early as 2006. tures like tour planning, updates, guidThe visitors who are connected with ance, destination details. There were theirbillion smart mobile phonessubscribers and mobileacross apps 5.9 will globe be able the destinations the into theexplore year 2011. Latest data in the state without external support, shows that smart phones constituted
31.8 percent of the total shipment of mobile phones during the previous year. Besides these tools, the Tourism Department is setting up bluetooth but by matching using these unique products kiosks with international which will provide a wide range of feastandards at key places like internatures like tour planning, updates, guidtional airports within the state to help ance, destination details. the tourists coming to theThere state.were 5.9 billion mobile subscribers across the globe in the year 2011. Latest data shows that smart phones constituted 31.8 percent of the total shipment of mobile phones during the previous year. Besides these tools, the Tourism Department is setting up bluetooth kiosks matching with international standards at key places like international airports within the state to help the tourists coming to the state. 49 The Economy July 25 2012
50 The Economy July 25 2012
51 The Economy July 25 2012
splendid accommodation by the picturesque sandy beach, scrub-covered dunes, breath taking views of sunset, solitude and indolence - the perfect place to rejuvenate one’s senses are what Candolim beach of Goa is all about and right in the very end of the land at Candolim in splendid seclusion is located, at very fresh luxury beach retreat The 360°, Beach Retreat. 360° Beach Retreat has been designed with a passionate eye, in order to maintain the ethos of Goa’s strong spiritual roots and physical beauty, encouraging guests to unwind in peace, in a soothing setting, with rooms that have appointed the 21st century with acute subtlety Every room at 360° has its own character and charm providing the breathtaking view of sea from the rooms and bathrooms. Configured with the latest technology, plasma television, international satellite radio one could stay connected to the world with wifi enabled rooms At the rooftop restaurant enjoy delectable cuisine and 52 The Economy July 25 2012
specially crafted cocktails with awesome views of the sea. Sunny Side Up is the thatched roof shack which is 360°’s hangout zone, with the live band and roof umbrellas and this is the perfect shelter to enjoy the sun and sea breeze in day or feel the magical wonders of sunset in evenings. And if that sounds like a perfect beach vacation then wait 360° also offers the option of a luxurious personalized Yacht Vacation for the discerning few. 360° holds its own French Yacht Lady M with three bedrooms and a party lounge on the deck where tourists can party all night, have barbeque right on the sea or just revitalize senses with serenity of surroundings Goa as such has masquerading sea beaches and the 360° beach resort is a strong combintion of aesthetics, ambience and resilience. The sylvan surroundings are accentuated by interiors that make this hospitality landmark an ultimate destination for the busy corporate and the traveller.
ompetition who will build the most powerful underwater hotel in the world does not stop. There are quite a few amazing underwater hotels in the world and amazing luxurious hotels. Some are already built and in business while others are still in the process of being constructed. Water Discus Hotel in Dubai, is one of these. Building company Drydocks World and Swiss firm BIG InvestConsult are working together to develop underwater hotels across the region including the Water Discus Hotel Water Discus Hotel will look like a
luxury spaceship on stilts. Designed by the Poland based Deep Water Technologies, giant underwater spaceship will consists of two spherical buildings one above the water level and the other 10 meters under it, connected by three legs providing stabilization and a long, vertical shaft that contains a elevator and stairway. The elevator takes guests 32 feet below the surface of the ocean, where the 21 hotel rooms, dive center and a bar are located. The rooms will feature a special lighting system and miniature underwater vehicles which can be operated from inside allow-
ing guests to take a closer look at the underwater creatures using macro photography. The Water Discus Hotel safety has been addressed to withstand both water currents as well as extreme conditions as tsunamis. In case of danger the underwater disc floats up. An international classification organization has been allocated to administer design, construction, technical and safety requirements of the hotel.
53 The Economy July 25 2012
B AC TO UK R ITSO MPAST
ezula Private Castle, is one of the most exclusive destinations in the world and is situated on exquisite Noetzie Beach, voted one of the three Top Beaches in South Africa. This ultra-luxury beach accommodation, Pezula Castle is built into the rugged coastal cliff-face and offers breathtaking panoramic views of the beach and the ocean. The Castle complex offers five spacious luxury suites in three separate castles with sumptuous bathrooms, vast living areas and private terraces overlooking 54 The Economy July 25 2012
the beach. Three separate castles are Pezula Main Castle, Pezula Honeymoon Castle and the most exciting, Pezula Cliff Castle. In any of these three that you are accommodated, you’ll live in the lap of luxury. Your meals will be freshly prepared according to your own personal tastes. You’ll find the bar stocked with your favourite drinks and South African wines. You can laze at the heated outdoor pool, work out in the private gym or drink cocktails in the gazebo perched above the most beautiful beach in South Africa.
The extraordinary facilities include helicopter excursions, nature trails and horse riding, tranquil canoeing on the pristine Noetzie River, tennis at the Field of Dreams and golf at the Pezula Championship Course. Or, you can visit Pezula Resort Hotel & Spa where you can enjoy further pampering in the Pezula Spa & Gym, dine in style at Zachary’s restaurant, shop for souvenirs at the Private Collection boutique, or sip on something exotic at the Champagne & Whisky Bar.
Enjoy the palatial grandeur FORT RAJWADA
n the midst of the great Indian Thar facing the fortress of Jaisalmer lies the magnificent Fort Rajwada, created in tune with the ancient vedic science of “Vaastu,” set amidst gardens in a six acre area. Original balconies with intricate carvings and jalis as old as 450 years adorn the walls of the grand lobby of Fort Rajwada, a true example of heritage preserved, complemented by some of the finest conveniences of 21st century. The 98 well appointed rooms reflect the luxury of a bygone era complimented by the most modern amenities whose interiors are designed by the well-known opera set designer Ms Stephnie Engeln and is home to celebrities from the world over. Its unmatched serenity coupled with traditional Rajasthani hospitality of “Padharo Mahre Desh” transports one to the era of the Rajwada Thakurs- Majestic, Royal and Elegant. The exquisite Jharokhas, reminiscent of a real palace transmeates to a glorious past. The intricately crafted lobby, created by an opera set designer, holds balconies from 250-year-old havelis along with a grand chhatri (canopy). While “SONAL” the Dining hall offers one of the best dining experience, the restaurant has a capacity of 135 covers and offers multi-cuisine food, with Rajasthani delicacies in its mesmerizing ambience. The interior decor is reminiscent of the romance of the desert
and brings alive the litany of the bards. “ROOPAL” the multi-cuisine restaurant of 85 covers offers Rajasthani, Indian & European delicacies round the clock & also serves as a coffee shop and PAATU’- Bar offers 16th century ambience complimenting 21st Century comforts. This well appointed bar provide a peaceful setting for sipping your favourite cocktail while chatting & viewing ‘Sonar Fort’. Further it has multiple cuisines that make it extra special. Cuisines such as Indian, Chinese and Continental dishes make it an extraordinary place. The business heads could come together at the 300-seater conference hall and for smaller groups there is a mini conference hall seating sixty supported by a business center. For relaxation there is the crystal clear pool and a wellset billiards lounge. A large accommodation and an attached freshroom creates a synergy between architecture and construction. While the busy corporate has easy accessibility and connectivity a satellite television and a telephone brings in unmatched luxury. The four suites bring alive the vibrant mood of the proud warriors of the Thar Desert. Hospitality industry in Jaipur is at its scintillating best with Fort Rajwada. Looking over the fortress of Jaisalmer lies a six acre legacy of royal interiors
and gardens called Fort Rajwada Hotel. Original balconies with intricate carvings and jalis as old as 450 years adorn the walls of the grand lobby of Fort Rajwada, a true example of heritage preserved, complemented by some of the finest conveniences of 21st century. Within a distance of 4 kilometres from Jaisalmer airport and two kilometers from Jaisalmer railway station the luxury hotel has a unique blend of exquisite architecture and reflects a unique fusion of picturesque imagery as well as a rich heritage of the Golden City - JAISALMER. Fort Rajwada is the brainchild of Shri Dileep Singh Rathore & Shri Jitendra Singh Rathore. Its countryside presence adds to making it an oasis of serenity and comfort thereby making it a perfect venue for conferences and business meetings. while the business facilities of the Fort Rajwada include 2 conference rooms and other services there is also room to relax with an excellent facility of a swimming pool. Enjoy the opportunity of a lifetime!
55 The Economy July 25 2012
L I F E S T Y LE
vA philanthropist and a popular rising artist in Great Britain, Rich Simmons, is a self taught artist who specializes in graffiti and stencil art, he is also the founder of Art is the Cure, an organisation which uses street art as a medium to inspire lives, the organisation started in 2008 with the sole purpose of inspiriting people through art regardless of age and social background. Through workshops with schools and youth organisations, the community has expanded the effect of art therapy to help inspire the younger generation to use creativity in a new way. Rich Simmons stole the public attention in 2011 with his globally recognized street art of Prince William and Kate Middleton, titled Future ***King. Winner of the 2009 Inspired most inspirational volunteer and the finalist in the 2010 prince’s trust young ambassador of the year; he is truly a gifted artist. Some of his pieces are currently being featured in London’s contemporary art gallery. Please tell us about your first step you made in art? At what point in your life, did you realize that you have creative talent? I have always been the creative kid. From a very young age, it was art that separated me from the crowd and made me different but it wasn’t until I got older that I realized its what I wanted to do as a career. I am self taught and didn’t go to university to study, instead I went self employed at the age of 19 and learnt business and art in my own way and in my own time. It’s slowly come together over the last 7 years and I’ve learnt everything I needed to make a successful career out of my talents. How did you come up with the idea 56 The Economy July 25 2012
about ‘ART IS CURE’ what is the main idea you are trying to convey to people? I set Art Is The Cure up to try and inspire people to see and use art in a new way. Art saved my life and was my release when I went through depression and struggled with autism and it was a natural release for me, it became my cure. I wanted to create something that would inspire other people to find their own cures through creativity and I go into schools and run workshops and share my story to hopefully help other people find a cure through art too. Tell us a little about your background and how you got to where you are today? I have always loved art and over time that became an obvious career path for me. I come from a city in the UK called Peterborough but there isn’t a huge art scene there and it took me making the leap to London to really take off and push my art a lot more. I have been here a couple of years now and Art Is The Cure is blossoming here, I have galleries to work with and the streets to inspire me and paint on. Do you believe your path to Art is Cure was serendipitous? Confluence of fortunate events? I believe things happen for a reason and everything that I’ve been through or experienced has led me to this point. Without the negatives, I wouldn’t have the motivation or the determination to create the positives and the passion to want to inspire others. I am lucky to have experienced pain, heartache, problems and defeats because it motivates me to make the positives, the friendships and the opportunities even more meaningful to me and that juxtaposition is hugely important to
Liji Lucas me. Art Is The Cure is all about inspiring people to go from a dark place and find a positive cure through creativity like I did with my art and become inspirational to others in the process. Tell us about your workshops? How many have you conducted so far? What have been some of your favorite special projects or workshops you have been involved with?
do you usually have specific goals? Do you aim your creative efforts at certain groups of people? Do you have any concerns that people may see your work differently from the way you regard it?
Everyone will have different views of my art as everyone has a different background or thought pattern to me. I make the art that is personal to me and has a story in it, some people will I have lost count how many schools see that and connect with the art and I’ve been to and workshops I’ve done. I some people wont. As long as I stay feel incredibly lucky to get the opportrue to myself and make the art that I tunities to use my art to help others love, then I am happy for it to be taken and that is the best part of my job. and interpreted in different ways. The I get to work with amazing charities different reactions are often the most like Teens Unite Fighting Cancer, fun part of being an artist. The Princes Trust and many more Where do you draw your inspiration who I can help raise money for, run workshops for and try and inspire the from? young people they work with. Seeing I draw inspiration from everywhere the responses I get from people in the I can. People on the tube, walking schools and at the workshops is masround London, seeing the art already sively rewarding and I hope I get more on the streets, trying to tell stories opportunities to keep doing this long without words, trying to understand into the future. situations and putting my twists on it and anywhere else I can. I don’t want Do you think creativity is something to close my mind off and only think I innate or do you think is developed? can inspired in a few ways, I am always I think everyone has the ability to be open to finding beauty and inspiration creative in one form or another. All in new and ever more random settings. it takes is using an imagination and Are you dreaming of any new ways of having a creative release of energy in whatever form is most comfortable to using your art? Any particular products or spaces? someone, whether it’s using a spray can, picking up a paint brush, writing I wouldn’t be an artist if I wasn’t always a poem, playing the guitar or using pushing myself to try new things, test a camera. I think it’s more a case of my skills and experiment with new people not understanding how to use ideas. I have got a lot on the go with their creativity or realizing how creative new canvas pieces, new street art work, you can be. Sometimes people just new ideas and new goals. I want to need to be inspired or see things in a continue to evolve as an artist and connew way to realize what their creative tinue to learn and I hope that process release is and how they can best use it never stops. to their advantage. How do you stay connected to the When engaged in a creative activity, 57 The Economy July 25 2012
L I F E S T Y LE
wider creative community in United Kingdom and overseas? Im incredibly lucky to live in an age where the internet has made the world a very small place. I am able to use social networking sites to showcase my work, share my photos, promote my shows and contact anyone in the world. I have a lot of friends all over the world that I can share ideas and stories with and get their feedback and thoughts instantly which is hugely helpful. Which designers, artists or creative people do you admire? I am a huge fan of artists like Shepard Fairey and Banksy for the contribution they have given to creating a platform where new young artists can get more opportunities. They have made street art a globally recognized art form and opened huge doors for opportunities for young artists so I have a huge admiration for them. I love David Choe and have followed his storied career for a
58 The Economy July 25 2012
from him as an artist. Do you have an artistic dream or some distant plans that you would like to share? My big dream moving forwards is to grow Art Is The Cure into a globally recognized movement that inspires people all over the world to use creative therapy to overcome problems in life. The legacy I want to leave is that I tried my best to change the way people see and use art and if people liked my artwork along the way then that would be a huge bonus and compliment. Iâ€™m just enjoying the journey right now and have a lot to be excited about moving forwards. And on a final light hearted note, do you have any parting comments to the readers? long time now. I am also lucky enough to paint with Parlee from The Essex Rockerz who were one of the first big crews to do graffiti in the UK in the 80â€™s and have learnt a huge amount
Follow your passion, believe in your abilities and chase your dreams. I am testament to dreams coming true if you stick to it and have faith.
Now, try and ape the difference Monkey Bar is an all-day gastropub with a vibe that is cool NYC meets laid back.
ne thing’s for certain, one cannot eat and drink everything on a menu. The side effects are precarious. You tend to imagine things and your mind sees monkeys everywhere. While it isn’t exactly what happened when I paid an official visit to Monkey Bar, the freshly minted gastropub in the city, I did have difficulty in telling faces apart and nearly ended up saying hello to a few absolute strangers. Funnily, you don’t have to be drunk to do that; if your stomach is an ambitious soul, you’ll get there before you know it. Monkey Bar, Bangalore’s first official gastropub, looks like a fantasy bar — framed posters of all kinds, from films to funny old commercials deck up the walls, adding layer after layer as you walk in. Concert tables with seating divided into booths and chairs, this is an intimate space that lets you shout out your friend’s name and sing along with the music. And if you don’t mind
the steps, there’s a basement tucked away, complete with a few more tables, a pool and foosball table! And then there’s the wondrous menu. You see, when something as basic as Horlicks, can be blended with banana, Nutella and made into a cocktail with rum, you’re only left licking your lips; a few of those and you will need help getting up from your chair. Or the Mangaa for instance; aam panna, a summer favourite, sweet lime, mint, jeera and salt — one would think it’s a chutney or something in the making but add vodka and you get this really refreshing cocktail. The mellowed balance of all the ingredients hits the right spot; you taste the cumin for a few initial seconds as the mint takes over and the omnipresent mango gently wraps itself around your tongue. Or the Watermelon Caiprojka — where the little roundels of watermelon
make all the difference in the world it’s not a horribly complex cocktail, but you got to add the twist to make it unique. It’s pretty much the same story with the Monkey Mule; beer cocktails are not a new thing, every brewery in town is trying out something or the other. Even the shandy has been around for the longest time but you can’t help but credit the man (or woman!) who thought of adding bits of coriander seed and a hint of allspice seed, apart from the vodka and ginger to the beer. The result — interesting, in a good way. Now that you’re well on the way to getting drunk, don’t forget to eat — something you’ll find in plenty at Monkey Bar; after all, it IS a gastropub! Their signature creation — the burger — is a dish one could find difficult to get over. Perfectly baked buns, soft and easy to handle (albeit the massive 59 The Economy July 25 2012
60 The Economy July 25 2012
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size) and meat that’s been pounded to perfection — the recipe is a secret, but the pleasure from gobbling that one can be totally made public. And then there’s the oozing, sinful cheese that melts in the mouth and shoots a million calories up your bloodstream — heaven is right there! Personally, the Bork — where slices of pork are double cooked and then fried and served over some veggies that are flavoured with black beans and served on a bed of thin noodles — is something I can eat at least thrice a week. For pork lovers, this Russian-sounding Oriental dish reminds one of something Jamie Oliver makes except that he uses soy, fish and lots of oyster sauce; the Monkey Bar version of course focuses on the
pork a little more seriously! Now while the spicy wings and the Devilled Fish didn’t work with my tastebuds at all, perhaps bordering a bit on the boring, the galouti kebabs were special. No artificial tenderiser, the chef will tell you. The beef is pounded patiently and uses pineapple to make it soft. Now how much pineapple, that is the real secret. The one snack you have to try is the Spiked Nachos — tequila and lime tortilla chips, baked tomato jalapeno salsa, beans, guacamole, sour cream, onions and cheese. It’s sinful but oddly not greasy or over the top — the ingredients are used accurately and every element in the dish gets the chance to play its part. It’s pretty much the same with the Tiger Beef, where slices of
beef are tossed around with chilli paste, black beans, galangal, lemon grass, coriander, bean sports, bok choy and peppers. One of the signature dishes at Monkey Bar, it’s pretty amazing to see how a simple creation as this could bring out so many textures. But what would perhaps be better is if you hopped over to Monkey Bar and made your own list of favourites. They have room for all sorts of palates and curious drinkers. Passé and typical cocktails don’t quite cut it here but you could be chilling with a bottle of beer and feel as snazzy as you would if you were sipping on a At Your Own Risk, a fiery cocktail of Sambuca, Baileys, vodka and fresh orange, which by the way, is served on fire!
Conundrum of Liberalism in Indian History Christopher Bayly’s new book, Recover ring Liberties: Indian Thought in in the Age of Liberalism and Empire, traces the history of political thought in India with a specific focus on liberalism. Bayly attempts to trace the lineages of liberal political language in the Indian subcontinent from the beginning of the nineteenth century with Rammohan Roy to the middle of the twentieth. In the history of political thought, the terms liberalism and liberal have always been difficult to define. Both these terms have had an active existence in the field of actual politics. Moreover, the meanings of the two terms have also undergone crucial semantic changes in history. The project undertaken in this book is an ambitious one as it seeks to address all these issues. This kind of project in intellectual history or history of ideas involves enormous difficulties of methodology as theoretical constructs such as ideas and concepts don’t operate in the same tidy manner as they do as part of a coherent theory. Neither can they be rigidly applied to describe historical situations in a neat manner. In the recent revival of intellectual his-
RECOVERING LIBERTIES: INDIAN THOUGHT IN THE AGE OF LIBERALISM AND EMPIRE By Christopher Bayly Cambridge University Press, New Delhi, 2012 pp. 379, Rs. 695.00
tory generally, and history of political thought particularly, the methodological frameworks of Reinhart Koselleck, Quintin Skinner, and J.G.A. Po-cock
are being widely used to get around some of these problems and to trace the history of ideas in a way where ideas and ideologies can neither be completely reduced to such things as material forces or the logic of the structures nor can they be understood as ‘unit ideas’ (Skinner) continuing over long periods of history without losing their essential identity or changing their meaning. Furthermore, a renewed focus on the active nature of the political ideas, theories, concepts, and ideologies is also noticeable in these new histories even if it is conceded that they need to be understood in the context of their origins or usages. Bayly does not elaborate his method at the outset but engages with the methodological issues through out the book. Bayly seeks to create a balance between the contextual usages and applications of theories and ideas and their active role in politics. To further complicate the question of method, the perspective of transnationalism is also brought in. This is one of the important arguments of the book that the context of the emerging political language in colonial India from the beginning 61 The Economy July 25 2012
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