Wednesday, October 29, 2014
Tuesday, October 28, 2014
Eclipsing India Economy
As Brightest BRIC Star China
By Elvis Picardo, CFA |
October 23, 2014
It seems altogether fitting that on the occasion of Diwali – the Hindu “festival of lights” –
should emerge as the brightest star in theBRIC firmament, threatening to
eclipse perpetual economic luminary India . While the planet’s largest democracy has long
toiled in the shadow of the world’s second-largest economy, India is finally stepping into the
limelight thanks to
the election of a pro-business
mid-2014, even as growth slows perceptibly in China . Will Diwali of 2014 usher in a new age of
prosperity for the Indian economy? China
A brief economic history of
: 1947 – 1991 India
Despite these obstacles, the Indian economy managed to amble along at a 3%-4% growth pace until the 1980s. In fact, economic growth increased in every decade from the 1950s onward, except for the struggling ‘70s, when the economy was hampered by oil shocks and near double-digit inflation. The Indian economy continued to remain closed to foreign investment throughout this period, its insularity highlighted by the exit of multinationals like Coca-Cola and
IBM from the country in 1977. This exodus was precipitated by the stringent
provisions of the Foreign
Exchange Regulation Act, and tough demands made by the new Indian
government, such as its insistence that Coca-Cola partner with an Indian
company and share its secret formula. (Related: An
Introduction to the Indian Stock Market.)
The post-1991 period
had made some perfunctory attempts to open up its
insular economy in the late 1980s, these efforts attained the utmost urgency
from 1990 onwards, as a balance of payments crisis took the country to the
brink of bankruptcy. The collapse of the India Soviet Union eliminated a major supplier of cheap oil to , and as oil prices skyrocketed due to the Gulf War, India ’s foreign exchange reserves were depleted to less
than $1 billion by mid-1991, only enough to cover two weeks of imports. India
With the country in the grip of an economic crisis and still reeling from the assassination of former Prime Minister Rajiv Gandhi, an unexpected free-market champion emerged during this dark hour in the form of Manmohan Singh, a well-regarded economist who became
’s new finance minister in June 1991. Singh
immediately launched an ambitious slate of economic reforms based on three pillars –
devaluation of the rupee, slashing of import tariffs, and decontrol of gold
imports (to eliminate the “hawala” or currency black market). Singh also
liberalized the industrial licensing policy and relaxed the rules for foreign
direct and portfolio investments. India
The measures paid off very handsomely, as the Indian economy was transformed into an IT and knowledge-based powerhouse with one of the fastest growth rates of the major global economies. From 1991 to 2011,
’s GDP quadrupled, while its forex reserves
soared more than 50-fold to over $300 billion, and exports surged 14-fold to
$250 billion. The benchmark BSE Sensex index rose almost 15-fold in the 20-year
period from June 1991 to June 2011. India
Rapid economic growth also led to the emergence of a huge middle class population that had an insatiable demand for consumer goods. An example of this runaway demand can be seen in the explosive growth of the phone industry in
. India previously had an antiquated phone system that
resulted in a landline waiting list that was measured in years. The overhaul of
the telecom sector and the introduction of cellular phones in the 1990s
dramatically changed the phone industry. The number of phone subscribers soared
from 0.5 million in 1991 to 960 million by May 2012, the overwhelming majority
of which were cellphone users; this was not just an urban revolution but a
rural one as well, with rural users making up 35% of the subscriber base. As a
result, the number of phones per 100 people in India increased in leaps and bounds, from just 0.02 in
1950 to almost 3 in 1990, and over 79 in 2012. India
The second wave
Despite these tremendous achievements, the Indian economy was bogged down in recent years by various factors. These included inadequate infrastructure, a deteriorating financial position characterized by rising fiscal and current account deficits, and most importantly, fractious coalition governments that made it difficult to achieve consensus and push through the tough reforms needed to take the economy to the next level.
However, the landslide victory of the Bharatiya Janata Party (BJP) in
’s general elections in May 2014 handed the party and
its pro-business leader, Prime Minister Narendra Modi, an unequivocal mandate.
Investors were confident that Modi would be able to replicate the success he
enjoyed as chief minister of the western Indian state of India Gujarat, where annual growth from 2003 to 2012 averaged 10.3% with Modi at the
helm, a faster pace than ’s 7.9% India GDP growth rate over the same period.
There was also unprecedented optimism that Modi would be able to expedite decisions on critical projects worth almost a quarter-trillion dollars that had been stalled by infighting between the previous government and its coalition partners.
The second wave of landmark reforms may not be as dramatic as the first wave that commenced in 1991, but they will have far-reaching effects on the Indian economy just the same. Proposed measures include infrastructure development, implementation of a goods-and-services (GST) tax that could contribute to a percentage point increase in annual GDP growth, and opening up more areas of the economy to foreign investment. Another priority would be reducing the burgeoning subsidy bill that had grown fivefold over the past decade to 2.6 trillion rupees annually.
Long-term growth drivers for India
dividend”: Half of India’s
1.2-billion population is under the age of 25. By 2020,
will have the world’s youngest population, with a median age of 29 years, compared with a median age of 37 in India . This demographic dividend could potentially give China the biggest labor force and make it the largest consumer market in the world. India
’s middle class of 250 million already represents one of the biggest consumer markets in the world. This educated, tech-savvy and relatively affluent group is expected to continue its rapid growth in the years ahead. India
penetration of goods and services: Despite the economy’s progress over the past
quarter-century, the Indian market still has a relatively low penetration
of goods and services, which translates into massive untapped potential.
For example, in 2009, there were only 11
passenger cars per 1,000 people in India, compared with 34 in
, 179 in China , 233 in Brazil , and 440 in the Russia U.S.
functioning democracy: One of
’s greatest strengths is that it is a vibrant and functioning – albeit a trifle chaotic – democracy, where the electorate regularly exercises its constitutional right to kick out non-performing governments. India ’s army, one of the world’s largest, is also staunchly apolitical and has consistently remained aloof from political shenanigans. India
companies and institutions:
has a thriving business sector with dynamic SMEs and large companies that are increasingly expanding overseas, educational institutions that are among the world’s best, and competent financial organizations. India ’s central bank, the Reserve Bank of India (RBI), is currently headed by Raghuram Rajan, who was formerly chief economist at the IMF. India
The long-term outlook for the Indian economy is getting brighter just as that of its BRIC counterparts is getting murkier.
The IMF projected in its October 2014 World Economic Outlookreport that the Indian economy would accelerate from a 5.6% pace in 2014 to 6.4% in 2015 (see Table), propelled by rising exports and investment. In contrast,
’s growth is projected to moderate to a more
sustainable pace, from 7.4% in 2014 to 7.1% in 2015, as decelerating credit
growth slows investment and real estate activity continues to ease. While China continues to grow at a faster pace than China , the performance differential is shrinking, and for
the first time in years, the growth trajectories are moving in opposite
The outlook for
and Brazil is much less positive. The Brazilian economy contracted in the first
half of 2014, and is forecast to grow only 0.3% in 2014, hindered by political
uncertainty, low business confidence and tighter financial conditions. The IMF
forecasts growth to rebound modestly to 1.4% in 2015. Russia is forecast to post the slowest growth of the BRIC
nations in 2014 and 2015, as economic sanctions in the wake of the Russia conflict take their toll on the economy. Ukraine
The Bottom Line
The IMF forecasts that
will become a $2-trillion economy in 2014 – the
tenth biggest in the world – and will cross the $3-trillion threshold in
2019, which would make it the world’s seventh biggest
economy. But while the long-term outlook is very positive, the 26%
increase so far in 2014 in the BSE Sensex index – which reached a record level
of 27,354 in September 2014 – has made valuations among the most expensive in
the emerging market space. Nevertheless, for investors who are comfortable with
the risks inherent in emerging markets, India represents an alluring investment choice on a
pullback, which could well occur if Modi is unable to proceed with reforms as
rapidly as investors expect. India
Wednesday, October 22, 2014
Ensuring a Successful Leadership Transition
In this issue, Clarke Murphy and the CEO/Board Services Practice set forth the specific elements and timeline of a successful CEO succession plan, as well as the steps necessary to ensure a smooth transition.
The transition from one CEO to another is a critical moment in a company’s history. A smooth transition is essential to maintain the confidence of investors, business partners, customer and employees, and provides the incoming CEO with a solid platform from which to move the company forward. A properly designed and executed succession plan is at the center of any successful transition.
CEO vacancies can be planned or unplanned; in either scenario, by the time a succession plan is needed it is far too late to start building one. Because of this, it is the responsibility of the board to make succession planning a priority, even in the face of more immediate and tangible issues. In addition to being necessary for risk mitigation, succession planning brings with it several beneficial byproducts:
It gives the CEO, through an ongoing analysis of the job requirements, the opportunity to adjust his or her role in light of changing business conditions and strategic imperatives.
It strengthens the relationship and information flow between the board and the senior management team through the regular contact that is part of the board’s review of candidates.
Russell Reynolds Associates regularly advises boards and CEOs on Chief Executive Officer Succession Planning, and from this experience we have developed the following practical guide to the succession planning process.
Establishing The Foundation
Succession planning is usually directed by the governance or compensation committees, or occasionally a special ad hoc committee. The current CEO’s involvement varies (depending on whether the succession is planned or unexpected) with primary responsibility being the development of internal candidates. The Lead Director often acts as the single point of contact between the board and the sitting CEO on succession matters.
How to build a robust succession planning program that aligns current talent development with future leadership needs.
If your CEO has a sudden heart attack, do you know who will take the chief executive's place? What if your top executives are wooed away to another firm? Do you have the next generation of leaders ready to fill those roles? If not, you may end up with an empty C-suite—or worse, under-qualified people moving into leadership roles because there is no one better to take over.
The only way to reduce the effect of lost leadership is through a strong succession planning program that identifies and fosters the next generation of leaders through mentoring, training and stretch assignments, so they are ready to take the helm when the time comes. Research supports sound succession planning. A study some years ago from consulting firm Booz Allen Hamilton concluded that "over their entire tenures, CEOs appointed from the inside tend to outperform outsiders" when it comes to returns to shareholders. Yet many organizations struggle to take their succession planning programs beyond a static list of names slotted for a few top spots.
"Every company has a succession planning document," says David Larcker, a professor in the graduate school of business at
. "The question you have to ask is, 'Will it be operational?" Stanford University
This Roadmap offers human resources leaders a framework and advice on how to create a robust succession planning program that aligns talent management with the vision of the company, ensures employees have development opportunities to hone their leadership skills, and guarantees that the organization has a leadership plan in place for success in the future.
Jim Skinner, former CEO of McDonald's Corp., was known to tell managers:
"Give me the names of two people who could succeed you." It was just one way the CEO continued the culture of succession planning at McDonald's.
It was an understandable priority considering Skinner only landed in the role in 2005 after two other CEO's died suddenly over the course of just two years. And when he retired in 2012, Skinner was confident that his successor, Chief Operating Officer Don Thompson, was ready to take over, because he spent much of his seven years mentoring him.
"I basically felt the responsibility to the board of directors to be sure I provided them with someone who could run the company when I'm gone," Skinner told Fortune a year before his retirement. "Until I was capable of doing that, I would not have left."
This kind of leadership level commitment to training and mentoring the next generation is a vital component of succession planning. And while most executives understand the importance of succession planning efforts, few of them believe their organization excels in this category.
Monday, September 08, 2014
Tuesday, August 26, 2014
Monday, August 25, 2014
To make “Make in
delete control. India
Over a hundred uncles use the park for their morning/evening walks, society meetings and yoga classes. Each uncle also carries a stick, and uses it on the few kids who happen to venture into the park. If a kid jumps too much, squeals in delight, climbs up a tree or plays cricket, the uncles whack the kids. After all, the uncles feel, the park must be kept in order. There is even a microphone system installed that warns kids to behave.
As expected, the kids soon abandon the park. They go across town to
where they are made to feel welcome. There are rules in that park too — kids
are told to keep the place clean and not hurt anyone. But apart from that, they
are encouraged to have fun. The only few kids who still use China Park are those who have figured out how to manage the
uncles. Whenever they come to play, they bring treats for the uncles — a box of
sweets, cold drinks or newspapers. Uncles then leave them alone for a bit.
However, the number of kids doing this is small, as bribing uncles is not what
most good kids do. India Park , hence, is mostly empty and under-utilized. India Park
Then the uncles of
start wondering why so few kids come to play there
while twenty times the number go to India Park ? Uncles have meetings, sticks kept in their lap, to
discuss the solution. They put up huge signs outside the park saying ‘Kids
Welcome’. However, nothing seems to change. China Park
In the above story, replace uncles with the Indian Government, kids with Foreign Direct Investors, fun with legitimate profit and
with India Park . This sums up how we approach the global investor
community. We want them here, but we want to beat them with a stick and shout
at them the moment they start having some fun (or earn a reward, in terms of
legitimate profits). India
This is why we have a long way to go to achieve the PM’s ‘Make in
’ slogan. The hardest part in achieving this is not the manufacturing
infrastructure we need to set up; it is the ‘control freak’ mindset that exists
in our power corridors (or rather in any Indian entity with power). India
So we say we will never use the retrospective tax laws (which effectively allow the government to change tax laws for previous years and take more money), but we don’t remove the law either. The uncles say, ‘We will keep the stick, but we will never use it’.
Well, maybe not today but what if another uncle comes tomorrow? Are the rules going to depend on the uncle’s personality? We want companies across the world to invest here, but the government places so many controls and permissions that it effectively controls every business. We call it free-market capitalism, but in reality it is state-controlled capitalism. The only way the uncles will let you do business is if you keep giving them enough treats. This is how
has been run since India , and that is why it is difficult to change the
The unfortunate part is this uncle-and-stick model keeps the park empty. If investors don’t come, we don’t have jobs or growth. Kids can play in other parks. Asian economies,
Eastern Europe and Latin
America are all competing
for investor dollars and to be manufacturing hubs. The only way the investors
will come is if the rules are clear, simple and not
politician-personality-dependant — in spirit, writing and practice.
If we really want Make in
, the government has to let go. Keep business rules,
but according to international standards. Get the government out of business,
not just in terms of selling PSUs, but also having no arbitrary or
discretionary control over individual businesses. All this should be
personality-proof. The current FM may be investor friendly. The next one may not. If I have invested money in India , how can I be sure the new guy won’t come behind me
with a stick? India
All these issues have to be addressed if we want economic and jobs growth which, come to think of it, is what makes ‘acche din’ happen. Let go of the sticks uncles; let the kids come and play.
By Chetan Bhagat -
24 Aug 2014 – The Times of India
Chetan Bhagat is a bestselling author and a popular newspaper columnist.
Calmness of mind is one of the beautiful jewels of wisdom.
It is the result of long and patient effort in self-control. Its presence is an indication of ripened experience, and of a more than ordinary knowledge of the laws and operations of thought.
A man becomes calm in the measure that he understands himself as a thought-evolved being, for such knowledge necessitates the understanding of others as the result of thought. As he develops a right understanding, and sees more and more clearly the internal relations of things by the action of cause and effect, he ceases to fuss and fume and worry and grieve, and remains poised, steadfast, serene.
The calm man, having learned how to govern himself, knows how to adapt himself to others; and they, in turn, reverence his spiritual strength, and feel that they can learn of him and rely upon him. The more tranquil a man becomes, the greater is his success, his influence, his power for good. Even the ordinary trader will find his business prosperity increase as he develops a greater self-control and equanimity, for people will always prefer to deal with a man whose demeanor is strongly equable.
The strong calm man is always loved and revered. He is like a shade-giving tree in a thirsty land, or a sheltering rock in a storm. Who does not love a tranquil heart, a sweet-tempered, balanced life? It does not matter whether it rains or shines, or what changes come to those possessing these blessings, for they are always sweet, serene, and calm. That exquisite poise of character which we call serenity is the last lesson culture; it is the flowering of life, the fruitage of the soul. It is precious as wisdom, more to be desired than gold - yea, than even fine gold. How insignificant mere money-seeking looks in comparison with a serene life - a life that dwells in the
beneath the waves, beyond the reach of tempests, in the Eternal Calm! ocean of Truth
"How many people we know who sour their lives, who ruin all that is sweet and beautiful by explosive tempers, who destroy their poise of character, and make bad blood! It is a question whether the great majority of people do not ruin their lives and mar their happiness by lack of self-control. How few people we meet in life who are well-balanced, who have that exquisite poise which is characteristic of the finished character!"
Yes, humanity surges with uncontrolled passion, is tumultuous with ungoverned grief, is blown about by anxiety and doubt. Only the wise man, only he whose thoughts are controlled and purified, makes the winds and the storms of the soul obey him.
Tempest-tossed souls, wherever ye may be, under whatsoever conditions ye may live, know this - in the ocean of life the isles of Blessedness are smiling, and sunny shore of your ideal awaits your coming. Keep your hand firmly upon the helm of thought.
In the bark of your soul reclines the commanding Master; He does but sleep; wake Him.
Self-control is strength; Right Thought is mastery; Calmness is power.
Say unto your heart, "Peace, be still!"
Sunday, August 24, 2014
The Protective Mantra
(Known As Trailokya−Vijaya)
Hring, may the Adya protect my head;
Shring, may Kali protect my face;
Kring, may the Supreme Shakti protect my heart;
May She Who is the Supreme of the Supreme protect my throat;
May Jagaddhatri protect my two eyes;
May Shankari protect my two ears;
May Mahamaya protect my power of smell;
May Sarvva−mangala protect my taste;
May Kaumari protect my teeth;
May Kamalalaya protect my cheeks;
May Kshama protect my upper and lower lips;
May Charu−hasini protect my chin;
May Kuleshani protect my neck;
May Kripa−mayi protect the nape of my neck;
May Bahu−da protect my two arms;
May Kaivalya−dayini protect my two hands;
May Kapardini protect my shoulders;
May Trailokya−tarini protect my back;
May Aparna protect my two sides;
May Kamathasana protect my hips;
May Vishalakshi protect my navel;
May Prabha−vati protect my organ of generation;
May Kalyani protect my thighs;
May Parvati protect my feet;
May Jaya−durga protect my vital breaths,And Sarvva−siddhi−da protect all parts of my body.
Hymn Entitled Adya−Kali−Svarupa
Hring, O Destroyer of Time,
Shring, O Terrific One,
Kring, Thou Who art beneficent,
Possessor of all the Arts,
Thou art Kamala,
Destroyer of the pride of the Kali Age,
Who art kind to Him of the matted hair,
Devourer of Him Who devours,
Mother of Time,
Thou Who art brilliant as the Fires of the final Dissolution,
Wife of Him of the matted hair,
O Thou of formidable countenance,
Ocean of the nectar of compassion,
Vessel of Mercy,
Whose Mercy is without limit,
Who art attainable alone by Thy mercy,
Who art Fire,
Black of hue,
Thou Who increasest the joy of the Lord of Creation,
Night of Darkness,
Image of Desire,
Yet Liberator from the bonds of desire,
Thou Who art (dark) as a bank of Clouds,
And bearest the crescent−moon,
Destructress of sin in the Kali Age,
Thou Who art pleased by the worship of virgins,
Thou Who art the Refuge of the worshippers of virgins,
Who art pleased by the feasting of the virgins,
Who art the Image of the virgin,
Thou Who wanderest in the kadamba forest,
Who art pleased with the flowers of the kadamba forest,
Who hast Thy abode in the kadamba forest,
Who wearest a garland of kadamba flowers,
Thou Who art youthful,
Who hast a soft low voice,
Whose voice is sweet as the cry of a Chakravaka bird,
Who drinkest and art pleased with the kadambari wine,
And Whose cup is a skull,
Who wearest a garland of bones,
Who art pleased with,
And Who art seated on the Lotus,
Who abidest in the centre of the Lotus,
Whom the fragrance of the Lotus pleases,
Who movest with the swaying gait of a Hangsa,
Destroyer of fear,
Who assumest all forms at will,
Whose abode is at Kama−rupa,
Who ever plays at the Kama−pitha,
O beautiful One,
O Creeper Which givest every desire,
Who art the Possessor of beautiful ornaments,
Adorable as the Image of all tenderness,
Thou with a tender body,
And Who art slender of waist,
Who art pleased with the nectar of purified wine,
Giver of success to them whom purified wine rejoices,
The own Deity of those who worship Thee when joyed with wine,
Who art gladdened by the worship of Thyself with purified wine,
Who art immersed in the ocean of purified wine,
Who art the Protectress of those who accomplish vrata with wine,
Whom the fragrance of musk gladdens,
And Who art luminous with a tilaka−mark of musk,
Who art attached to those who worship Thee with musk,
Who lovest those who worship Thee with musk,
Who art a Mother to those who burn musk as incense,
Who art fond of the musk−deer and art pleased to eat its musk,
Whom the scent of camphor gladdens,
Who art adorned with garlands of camphor,
And Whose body is smeared with camphor and sandal paste,
Who art pleased with purified wine flavoured with Camphor,
Who drinkest purified wine flavoured with camphor,
Who art bathed in the ocean of camphor,
Whose abode is in the ocean of camphor,
Who art pleased when worshipped with the Vija Hung,
Thou Who threatenest with the Vija Hung,
Embodiment of Kulachara,
Adored by Kaulikas,
Benefactress of the Kaulikas,
Observant of Kulachara,
Joyous One, Revealer of the path of the Kaulikas,
Queen of Kashi,
Allayer of sufferings,
Giver of blessings to the Lord of Kashi,
Giver of pleasure to the Lord of Kashi,
Beloved of the Lord of Kashi,
Thou Whose toe−ring bells make sweet melody as Thou movest,
Whose girdle bells sweetly tinkle,
Who abidest in the mountain of gold,
Who art like a Moon−beam on the mountain of gold,
Who art gladdened by the recitation of the Mantra Kling,
Who art the Kama Vija,
Destructress of all evil inclinations,
And of the afflictions of the Kaulikas,
Lady of the Kaulas,
O Thou Who by the three Vijas, Kring, Hring, Shring, art the
Destructress of the fear of Death.
(To Thee I make obeisance.)