Showing posts with label GDP. Show all posts
Showing posts with label GDP. Show all posts

Friday, May 03, 2013

“It’s like killing two birds with one stone”

Dr. Partho Mishra, VP & GM, Service Provider Access Business Unit, Cisco India, discusses how Cisco leverages the benefits of dual-use technologies

B&E: How relevant is reverse innovation for India at large and for Cisco’s R&D operations here in particular?
Dr. Partho Mishra (PM):
The potential for engineering and technology in India is immense in the last 10 years, and the analogy I can give is this. In the 1960s, Japanese manufacturers had these el cheapo cars. In the 1970s, they started developing small but best in breed cars. By the end of the 1980s, the Japanese were dominating the US market with models like Lexus and Infiniti. Reverse innovation is a part; there is a huge opportunity for India out there in terms of IT, telecom, computing. If you look at our capabilities, there is capital available to fund the development, and all the information required to develop a product is readily available, as compared to 20 years ago. We should capitalise on all that. At Cisco, reverse innovation is only a part of our agenda, which is to solve problems specific to emerging markets, because we believe that as the GDPs of these countries grow, we will benefit. For instance, look at the Smart Connected Communities idea. If we can build on that, and make people cross a certain threshold, it opens up new possibilities, like being able to provide services on that infrastructure like telemedicine, remote education, et al. If you can replace poor physical infrastructure with great virtual infrastructure on top of that, you can enable things.

B&E: How do you qualify a reverse innovation opportunity?
PM:
Even if there is no opex/funding constraint, the reality of the situation is that we have more work to be done than there are people. When we have situations where we are able to have du-al-use technologies (which we are designing for emerging markets, but can sell to other markets), we can kill two birds with one stone. There lies the engineering challenge – how can you design a product that can scale up and down? It’s something like what car manufacturers have started doing in the last 10 years. They build a common chassis and skins change. We approach it in a very similar way. Like for the ASR 901, we have different SKUs, but we took the various scale, features and power consumption requirements into account when we were developing this product.

B&E: You are optimistic on India’s R&D potential. Are there critical need gaps that need to be filled?
PM:
Intellectual capital and seed capital is available, and so are global commercialisation opportunities. But we need technology leaders who will say, “Five years down the road,that’s what’s coming, and that’s what we should be building.” In India, we still have a services mentality. Let me go and develop x software and y hardware. It is so incremental and risk averse. If I were to dedicate 500 engineers to doing this, I am going to get a very predictable ROI. The other thing is that if you go to the core of any start up in Silicon Valley, you may have 100-200 engineers. In addition, they also have 3-4 system architects. They are the brains, who know everything about how everything works together there. There are too many of them at Silicon Valley. In fact, if you walk into a Star-bucks, you’ll find such people there. That’s a critical piece missing in India, but it is fast coming up.
 

Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Friday, April 12, 2013

They call it The Kangaroo Trick

Despite The Recent Devastating Floods, Australia’s Expansion is forecasted to Strengthen over The Next two years. In fact, The Country hasn’t seen a Recession since 1990. So, what makes Australia a Recession-free zone?

Only a dozen economies are bigger than Australia (in 2010 its GDP stood at $1.235 trillion; IMF data), and only six nations are richer than it in the world (it has a per capita GDP of $55,590, higher than that of countries like UK, Germany, Japan, US, et al). The country was ranked 2nd in the United Nations 2010 Human Development Index and 4th in Legatum’s 2010 Prosperity Index. And above all, while most of its counterparts have faced the fury of a financial tornado in the recent past, it’s the one that has avoided a recession since 1991. Well, that’s Australia for you today!

But then, the situation wasn’t always the same “Down Under”. Just 25 years ago the Australian economy was grappling with issues like high interest rates (during the ‘80s the minimum lending rate had reached 17%), negative growth (-1.6% in 1983), big budget deficits, et al, coupled with highly regulated financial system (read: protectionism). In fact, in 1985, Paul John Keating, the then Australian Treasurer (he was also the 24th Prime Minister of Australia, serving from 1991 to 1996) had declared if the country failed to reform it would become a banana republic. No doubt, barely five years later, the economy faced a nasty recession, but then, it was the last for this OECD nation. Since then Australia has grown at an average annual rate of 3.6%, well above the OECD average of 2.5%. What’s more? Despite the recent devastating floods, which has forced the Australian economy to contract 1.2% in Q1 2011 (it’s the sharpest fall in real GDP since the recession in 1991) Australia’s expansion is forecast to strengthen over the next two years. In fact, Moody’s Analytics maintains its full-year 2011 GDP growth forecast at 3.4% for Australia.

Many attribute Australia’s success to its opulence in minerals, which thriving Asian nations are hungry for. But then, the economy was standing tall and smiling wide when a financial crisis struck Asia in July 1997. Further, commodity exports have not always been in vogue. It was only in 2003 when minerals begin to garner big bucks for Australia (see chart), but by then the economy had escaped both the Asian crisis as well as the financial cyclone that hit America in 2001. In 2007 came the global financial crisis, but that too failed to drag down the Australian economy. So, what is it that makes Australia a recession-free zone?

No doubt, to some extent, the country has been benefiting from a resources bonanza that brings it big money for doing nothing but extracting minerals and shipping them to Asia (and will continue to do so for a while as Asia’s appetite for minerals shows no signs of slowing), but then that’s surely not the thing that can be credited for the country’s economic success. Rather, it’s the series of well-thought reforms carried over a period of 20 years (between 1983 and 2003) that has made Australia one of the most prosperous and resilient economies in the world today.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 

Monday, April 01, 2013

Rubbing Salt in The Wounds

Post The Steepest-Ever hike in Petrol Prices since December 2008, The Government is all set to Increase The Prices of Diesel, Kerosene and LPG. There is no Respite to The Common man’s agony.

While Buddhadev Bhattacharjee, former Chief Minister of West Bengal, failed to read the pulse of the electorate and thereby played his own crucial role leading to the historic fall of the red bastion in West Bengal; but his biting observation during the electoral campaigns that a hike in oil prices would be the Centre’s gift to the electorate soon after the elections apparently seems to have come true. Soon, after the election results of the four states and a union territory were declared, the oil marketing companies (OMC’s) guided by informal advice from the Ministry of Petroleum (to be read as the central government) called for a steep hike of Rs.5 a litre in petrol prices. While, the opposition parties, for their own hidden political motives, lambasted the government for the decision, the aam admi (common man) has been left unto himself to bear the brunt of the whammy. An approximately 56% increase in the retail price of fuel over a period of two years (the retail price of a litre of petrol in New Delhi on 15 May 2009 was Rs. 40.62, which post nine successive hikes and the Rs.5 per litre hike on 15 May 2011 is pegged at Rs.63.41) is certainly too harsh for the mass. But interestingly, the government considers that the price rise in petrol will have “marginal impact” on consumer sentiment. And laughably OMC’s argue that the increase has been “moderate”. But then, certainly it’s moderate. At least when one considers the fact that the empowered group of ministers is likely to take decision on increasing the prices of diesel, kerosene and LPG very soon. The real tough time will start only after their announcement.

While the timing of the OMC’s decision was undoubtedly a political one, the economic aspect of the decision, given the crude oil prices in the international market (hovering over $110 a barrel), can not be totally criticised. The recent hike in retail prices will help the OMC’s, in particular, to reduce their under recoveries (analysts at Bank of America Merrill Lynch estimate that despite the price hike, the absolute figure of under recoveries would still be more than Rs.1 trillion). On the economic front, while the likes of Kaushik Basu, Chief Economic Advisor in the finance ministry, and Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, argue that the increase in administered retail price of petroleum products would have a relatively less harmful effect on inflation compared to a slippage in the fiscal deficit, the opposition claim that the hike will have an adverse effect. In fact, they (Left in particular) argue that if a rationalisation of the tax structure on import of crude can be done, wherein the cess revenue earned by the government due to increase in international crude oil prices is returned to the OMC’s, then there would be no need to hike the prices and unnecessarily burden the common man. Truly so, a back of the book calculation makes it amply clear that various taxes shave off around 40% of the price of petrol. At this juncture it needs to be remembered that the taxes are levied as a percentage of the basic price of the fuel and aren’t fixed per litre. However, the government on its part is unlikely to tinker with the prevailing taxes as any reduction in taxes would definitely upset its finances and blunt its effort to keep the fiscal deficit within the set target of 4.6% of GDP.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles

Friday, February 08, 2013

Houston, we have a problem... Portugal!

Though EU & IMF have agreed on an audacious $956 billion bailout plan for the Euro zone to control the sovereign debt crisis that started with Greece, it won’t be of much help. B&E talks to experts across continents, including the European Central Bank to analyse who all are next in the felicitation parade by Manish K Pandey
 

Almost a month ago when ash clouds from Iceland’s volcano Eyjafjallaj-kull were showing their prowess by bringing almost all European airports to halt, not many knew about the danger that was about to engulf Greece and had the capability of bringing some of the biggest euro zone economies to a standstill. Then it came and even Greek gods could not save their beleaguered nation from its fury. Result: The $333.53 billion economy (2009 estimate) has today almost but collapsed. While Standard & Poor’s has already rated Greek bonds as junk (first time a euro member has lost its investment grade since 1999), its fiscal deficit is hovering around 14% of GDP.

As Greece now moves closer to a sovereign default, several economists believe that the turmoil would not end here, and would continue to take some more in its wake. Taking into account the deteriorating financial strength of the banking systems in nations like Ireland, UK, Spain, Italy, et al, any or all of them could be the usual suspects. But leading the identification parade is Portugal, a country could well be the talk of the town very soon with respect to a domino collapse. Robert Thomas, Senior Vice President, Moody’s Investor Service, based out of UK, shares with B&E, “Despite many fundamental differences to Greece, Portugal is now at the forefront of investor concern if the risk of contagion continues.”

The signals sent by Portugal are almost similar to the ones propelled by Greece just before the financial volcano erupted there. Like its distressed Euro-partner, Portugal too has a fragile public finance. Its budget deficit is already around 9.4%, which is an astonishing 6% higher than the standards set by EU. Further, Portugal’s foreign liabilities are close to 108% of its GDP ($225.35 billion), much higher when compared with Greece whose foreign liabilities stand at 87% of GDP ($264.82 billion). Truly, Spain too has foreign liabilities that are equivalent to 91% of it GDP ($1.20 trillion), but unlike Spain, Portugal has been suffering from a bigger problem of very slow growth rates over the last decade. CMA DataVision, a UK-based research firm that tracks the riskiness of sovereign debt, rates Portugal’s performance during Q1 2010 to be the worst in the developed world. As per it, the spread between the starting price of swaps in January 2010 and the end price in March 2010 has widened to 52.3%. So, while last year Portugal’s GDP declined by 0.1%, this year it is forecast to slow down even further, by 3.3%. And the only solution that Portugal has if it wants to stick to the lifeline is to borrow from foreign investors. But, that’s exactly where the problem lies. If interest rates stay high, this dormant volcano can erupt any time to engulf the Portuguese economy. Not to forget, investors are already demanding an interest rate of 6% on Portuguese bonds.


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

For More IIPM Info, Visit below mentioned IIPM articles.

Friday, January 18, 2013

FINANCIAL CRISIS: POOREST NATIONS OF THE WORLD

Recession has thrown up crazy results in the poorest nations of the world; they’ve become richer!

Liberia, the second poorest nation, saw its GDP grow from $0.53 billion in 2005 to $0.87 billion in 2008 (9.4% growth in 2007, 7.1% in 2008), with per capita GNI increasing from $250 in 2005 to $300 in 2008. Much credit goes to Liberian President Ellen Johnson Sirleaf, who held innumerable meetings with UN, IMF and even US officials on how to mitigate the impact of the financial crisis. And this despite FDI and aid contracting heavily.

Burundi is the next poorest nation in the world. The landlocked economy is primarily dominated by agriculture, dependent purely on international aid, a factor which in fact dramatically fell in the years leading to the recession – aid aggregated $1.247 billion in 1997, $1.2 billion in 2003 and fell to a tiny $181 million in 2005. Yet, Burundi’s GDP grew from $0.71 billion in 2000, to $0.8 billion in 2005, to $1.16 billion in 2008 (63% since 2000; an average of 4% growth over the last two years). Per capita GNI grew from $310 to $380 from 2000 to 2008.

The paradox of cash flows in a so-called flat world continues to surprise us; and we hope the Friedmans too.


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

For More IIPM Info, Visit below mentioned IIPM articles.
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Wednesday, August 22, 2012

The virtuos cycle of growth and investment

Bold but politically unpalatable reforms such as freeing up the labour market are necessary to permit a higher rate of sustainable, non-inflationary growth

India weathered the global financial crisis comparatively well, with growth slowing to a still solid 5.8% at its weakest in the March 2009 quarter. Since then, the economy has recovered speedily, with GDP expanding 8.6% in the March 2010 quarter and accelerating to 7.4% for the entire fiscal year from 6.8% last year. Encouragingly, growth was driven by soaring private-sector investment even as rapid inflation dampened consumption. The near-term outlook is generally bright as surging investment and recovering exports drive should deliver growth near this fiscal year’s 8.5% target. But risks remain that could prevent the economy from maintaining this pace over the next decade.

Apart from possible negative international developments such as a renewed downturn in the US or a worsening of Europe’s debt woes, soaring prices and the government’s fiscal woes are the most pressing domestic economic concerns. The Reserve Bank of India has started to tighten policy, but needs to do more as wholesale inflation remains just under 10%. Much will depend on the strength of the monsoon given the impact of food prices, but capacity constraints mean the supply side is also underpinning rapid inflation as prices for manufactured goods have been gathering momentum in recent months. Further rate hikes, even as much of the world maintains very loose monetary settings, would be expected to put upward pressure on the rupee and weigh on exports.

With the trade deficit expanding rapidly, the authorities are concerned over the potential damage to exports from a stronger rupee, but cheaper imports and inflows of capital would be positive for domestic investment. The trade deficit rose to just under $100 billion for the year in April, well below the previous peak of $122 billion in 2008. The current account gap looks likely to widen to 2.2% of GDP in 2010 as domestic growth outpaces export, but it should be easily contained at under 3% of GDP this year. With nearly $300 billion in reserves, India should easily avoid the sort of funding crisis suffered by some countries with similar debt concerns.


Friday, July 13, 2012

In an exclusive conversation with B&E’s Mona Mehta, M. V. Nair, Chairman and Managing Director, Union Bank of India (UBI), talks about the expected growth of the bank in the coming year

In an exclusive conversation with B&E’s Mona Mehta, M. V. Nair, Chairman and Managing Director, Union Bank of India (UBI), talks about the expected growth of the bank in the coming year and the initiatives UBI is planning to take to make retail lending more consumers oriented. 

B&E: Your retail lending portfolio grew over 28% (y-o-y) last year. In fact, it’s around 11% of your total loan book at present. Are there any plans on the anvil to expand it further this fiscal?

MVN:
UBI is focused on increasing its retail loan portfolio. There is a huge opportunity in retail loan segment due to favourable demographic profile, increasing migration to urban centers and a general rise in consumer aspiration. The retail penetration in India, measured by retail loans to GDP ratio, is about 9.5%, quite lower when compared to mature markets where this ratio ranges from 15 to 20. Considering this potential, UBI is gradually building a robust retail lending model. In fact, today we have 46 specialised branches called, ‘Union Loan Points’ for retail loans. These branches have exclusive focus on retail loans and also leverage the lead management technology for converting the leads from other branches into real business. We are also offering specific loan products in order to meet the customised needs of various segments. Today, technology can be leveraged in many ways and one interesting thing can be tracking the number of products availed by an average customer and then cross-selling to those whose availment is below the average. We are gradually building this capability that would provide us advantage in deepening the retail lending customer base.

B&E: What about UBI’s rural presence? How do you plan to augment it further?
MVN:
Rural and agricultural banking are significant areas of priority for the bank. Almost 55% of our branches are located in centers which cater to the needs of people whose livelihood is dependent upon agriculture and allied activities. Going forward, bank will open significant number of branches in rural centres in order to facilitate meaningful financial inclusion. This will include at least 25% of new branches in unbanked rural centres (Tier 5 & Tier 6). Any one technology can not suffice the needs of rural areas due to the locational issues and different comfort of the people for a particular technology. Therefore, UBI is using a host of technology platforms to reach out to the masses. This includes biometric cards, ATMs and mobile banking. In fact, we have recently tied up with Nokia for our co-branded product ‘Union Money’. Under this a person can transfer the money, pay his utility bills just by visiting any Nokia outlet. Then there are business correspondents who reach out to the people using biometric card technology.

B&E: Your expansion plans for the current fiscal...
MVN:
UBI today has more than 3,000 branches and nearly 2,700 ATMs across the country. There is still vast scope for deepening our presence in pockets of emerging growth centres. In FY 2012, a total of 400 branches are likely to be opened. Of the new branches, significant share will be for branches in hitherto under-banked centres. Similarly, we are planning to increase our ATMs to 5,000 by end of the current fiscal. As far as international expansion plans are concerned, UBI would expand in select geographies. Presently, the bank has approvals from the Reserve Bank of India (RBI) for converting the representative office in London (United Kingdom) into a subsidiary and representative office at Sydney into a branch. The bank also has approvals for opening a branch each in Antwerp (Belgium) and Dubai International Financial Centre and representative offices at Johannesburg (South Africa) and Toronto (Canada). The process of obtaining approvals from the respective foreign country regulators are at various stages.


Tuesday, July 10, 2012

Power above law?

Bails given out in the 2G spectrum retell the sordid saga of how the rich & the elite control power in India

As estimated by the CAG report, the second Generation (2G) spectrum allocation scam, the biggest recorded swindle ever in India, has cost the exchequer a mind boggling Rs.1.76 trillion. It revealed the ugly face of corruption in India bang in front of media and public glare. Interestingly, the recent turn of events on the legal front has further highlighted the main reason why this scourge in our society can only get worse.

The CBI had accused fourteen people in the scam but twelve of them have already been granted bail under certain conditions within a short span of time. Only former telecom minister A. Raja and former telecom secretary Sidharth Behura are still in prison pending trial. DMK chief Karunanidhi has shamelessly announced that the party will be looking forward to welcome his daughter Kanimozhi with a new position. Even R. K. Chandolia, former private secretary of A. Raja, was released from jail one day prior to the High Court bail order. These court decisions have led many to make the hopeless conclusion that punitive action towards corrupt politicians and bureaucrats & unethical corporates is really hard to come by in India.

A study by the Asian Development Bank concluded that the wealth of 50 Indian billionaires equals 20% of the country’s GDP. The doyens of Indian industry often come under scrutiny for their connections in the bureaucracy and the government and how they use them to their advantage.