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Showing posts from October, 2008

Down, down but not out

BACKGROUND I have, over the last few weeks, been frequently asked to comment on the nature of the crisis in the financial sector and its consequent impact on the economy at large. With a view to gathering a broader perspective, I interviewed approximately 25 individuals, responsible for managing businesses across a spectrum from shipping to consumer products, engineering, BPO, automotives, travel and building products, amongst many others. This paper will seek to provide a view on the origins and nature of the problems facing India’s economy and how things may play out in the coming months. The deterioration, from an era of boom and buoyancy, has seldom before occurred so quickly and by so much. Some businessmen are predictably shocked as the world around them appears to have changed and in some instances quite beyond recognition. Most would argue it all began with the collapse of Lehman Brothers. As it happens, the problems actually started much earlier, but few were able or willing

Turf Shifts

A little more than two decades ago when businesses first began seriously investing in Information Technology, the IT function was typically a part of the CFOs domain. This seemed logical as Finance frequently took the lead in business automation. Book-keeping migrated from manual accounts to digital computer records; cheques were churned out by a software programme that integrated with the purchase ledger; invoices linked in with the sales-book and bank reconciliations; the trial balance and the P&L statement were all produced with the press of a button. The use of technology changed completely the CFO’s job description as computers made tremendously time consuming and detailed work such as the settlement of branch accounts so much easier. Increasingly more time was available to lend to the business’s strategic imperatives and CFOs moved up the pecking order, into a role that facilitated decision making. Technology provided the basic support systems that enabled this to happen. Ho

Challenges following the crisis

This edition of our quarterly update presents a gloomy picture of India’s economic environment. As the UPA administration turns towards its last lap in office, it is burdened with an economy plagued by conflicting imperatives of persistent inflation and tight liquidity. Asset prices continue to fall and consumer demand has slackened, specifically in areas of discretionary spending. Money is not only expensive; it’s terribly scarce. Investment plans are on hold for all but the most essential. The tools available to manage this odd situation are limited. Substantial easing of liquidity by the Reserve Bank, to pump prime the economy, would put added pressures on price stability and further weaken a falling currency – none of which could construe as good news. Doing nothing will only make things worse, prolonging recovery. This situation raises two fundamental questions. First, how did this happen and second, how long will the agony last? Most commentators easily explain these events as t

Now, the land of the demons

The Baspa river a tributary of the Sutlej hurtles down the Sangla valley in Himachal’s Kinnaur district, enveloped between the Great Himalayan and Dhauladhar mountain ranges. For centuries this has been a pristine place of outstanding natural beauty where mountain passes remain closed for six months of the year. It is a land of apricot, peach and apple orchards and lies on the ancient trade routes between India and Tibet. Legend has it that in this lush terrain lived the descendants of the ‘Kinners’, the demi-gods of the Hindu pantheon whose deeds have been immortalised in epics and in the writings of ancient Sanskrit poets. Sadly, over the last ten years this has all changed. Jaiprakash Hydro-Power Limited owns and operates a 300 MW power project which has destroyed completely an entire region. Jaiprakash’s website claims that its hydro power is environmentally friendly and non-polluting. Nothing could be further from the truth. The project has in fact ruined the local ecology. Thous

Spiti Valley - Some Pictures

China's Not Cheap

China’s not Cheap September 2008 Nancy Faraday runs a lamps business based in San Francisco. This has, over the years, established itself on a firm footing and has become a preferred supplier to numerous retail outlets on the west coast. These include large chains together with smaller, more specialised stores. Years of strong economic growth in the United States helped a small start-up grow into a sizable enterprise over a fifteen year period. Ms Faraday’s model was simple. She identified a string of suppliers based in China who could manufacture CFL and halogen lamps to the specifications sought by important retailers. The business was strong on cash flows as suppliers were content to offer generous credit terms and retail demand generally exceeded what she was able source from her vendors. Her challenge until a year ago was to find enough supply capacity that was capable of meeting her considerably stringent quality standards. But now things are abruptly different. The demand

Business & Political Risk

Political risk – the bane of business September 2008 In the early seventies, when the trade union movement in Bengal was at its peak, the proclamation of a ‘chukka jam’ by communist parties was taken most seriously. Nothing on wheels would move. Cars and buses that adventurously ventured out, defying the blockade, were burnt in minutes. Labour strikes were so effectively picketed by Left unions that not a single worker would show up. The militancy of the trade union movement led to the demise of Bengal’s once powerful industrial base. Old British hongs such as Balmer Lawrie; Bird & Company; Martin Burn and Jessops either shut shop or were nationalised. Scarce investment flowed in and within a decade, Calcutta lost not only its place of glory as India’s business capital but its exceptional charm as well. Today, it looks appallingly deprived when compared with new metropolitan cities like Hyderabad and Bangalore. The blame rests squarely on Bengal’s militant politicians. History ha

India and Nato

The road to NATO September 2008 India’s foreign policy has historically been based on what is described as the principles of ‘non alignment’. Whilst in theory India remained neutral to conflicting positions between the United States and the Soviet Union, in practice it was perceived largely as a Russian ally. Foreign policy in the early days was determined on strategic considerations. Effectively, Russia became India’s leading arm supplier and this relationship stood the test of three decades. However, things have gradually started to change. The first move towards a transition began on the 9th November, 1989 with the collapse of the Berlin Wall. Russia’s satellite countries that constituted the erstwhile Eastern Block, quickly disengaged and the Soviet Union collapsed as a military power. India, too, commenced a programme of economic reforms, in 1991, under the PV Narasimha Rao administration leading to an integration with other countries, many of whom had traditionally been on the