I I L M I N S T I T U T E F O R H I G H E R E D U C AT I O N
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Vol-IV, No. 2, April 2007
FROM THE DIRECTOR’S DESK
Basudhaiva Kutumbakam The world is one large family. This has been India's motto for centuries. India's pluralistic society and culture allow seamless integration of individuals from any ethnic background with the broad Indian ethos - to find a resonance of his own in an otherwise seemingly different civilizational milieu. However, this hoary cultural tradition did not have its physical counter-part in the form of visitors from abroad. Despite its glorious past, grand historical monuments, geographical diversities from the peaks of Himalayas to the sandy beaches of Kerala, India's share of global tourism has so far been negligible. It has been reported that only the city of Bangkok gets more tourists than the whole of India. One reason behind this rather uninspiring record is the lack of adequate infrastructure, especially hotel rooms, catering to the all market segments. Again to cite the Bangkok example, that city has more hotel rooms than the whole of India.
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GLOBAL THINKER AWARD FOR 2007: GOES GREEN
Conferred on Prof. M.S. Swaminathan
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GLOBAL THINKER AWARD 2006:
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MARKET IN THE NICK
Conferred on Lord Bhikhu Parekh
However, the situation is getting better with more investments going to the hospitality sector. This is being fuelled not only by overseas tourists but also by domestic travellers. Indians like to travel, though more than 60% of domestic tourism is still going to religious destinations. But all said, India does have bright prospects in the hospitality sector. Hopefully, the dichotomy between the precept and reality mentioned at the beginning will wither away in near future.
B. Bhattacharyya
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CONTENTS INHOUSE MAGAZINE FOR LIMITED CIRCULATION Vol-IV No. 2 April 2007
19 20 23 26
OBITUARY Late Mr. P. K. Kaul
44
EXTRAORDINARY DEVELOPMENT OF FINANCIAL DERIVATIVES
MAKE TOURISM AFFORDABLE
48 52
DESTINATION INDIA: THE NEW BUZZWORD GOD'S OWN COUNTRY
EDITORIAL BOARD Mrs Malvika Rai Prof. B. Bhattacharyya Shree Dina Nath Mishra Pradip Chakrabarty Disha Dubey Design: SUNIL KUMAR
28 32
ENVIRONMENTAL IMPACTS OF TOURISM
36 38
REDEFINING EDUCATION
BOOK REVIEW CAMPUS NEWS
BANKING: MARKET THROWS SOCIAL CONSENT OUT
WHY RETAIL OUTLETS SUCCEED?
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CHALLENGES AHEAD
GLOBAL THINKER AWARD FOR 2007
GOES GREEN IILM Institute for Higher Education was honored to confer the global thinker award on Professor M.S. Swaminathan, Chairman, M S Swaminathan Research Foundation and President, National Academy of Agricultural Sciences. — to whom India owes much for its green revolution
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n a solemn function the agri-scientist-administrator was presented with a citation and a shawl as per tradition. Mr Swaminathan also delivered a highly thought provoking speech on “Achieving a Hunger-Free India: The Challenge Before Us.” His lecture to the audience comprising academic, bureaucrats, management experts, and students was research based. He started off with the data on food intake of average Indians, the link between deprivation and crime leading to even terrorism to justify a definite
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strategy for food and water security. He called for a thorough reform on the delivery system through grain and water banks where the community would be involved through local bodies. He advocated a harvesting benchmark on ‘income per drop’ of water used. He urged to focus on micronutrient deficiencies to ward off hidden hunger. Salt is another important element contributing to cognitive abilities of humans, he points out. 1.14 million farmer households do not get enough to eat each day. Small farms’ development assumes a very high priority since two-thirds of India’s population live on that, and smaller the farm the greater is the need for marketable surplus. The issues before us are things like water shortage in Punjab, Haryana belt that produces enough agro products, and poor yield productivity in eastern India where water is in abundance. His recipe for success includes soil health care, water harvesting, credit insurance, marketing for farmers. He mentioned the importance of synergy between public policy and technology in agriculture which the late Indira Gandhi was very alive to.
Prof. M.S. Swaminathan lighting the auspicious lamp
Rural core competency is something we must not side-step. Mr Swaminathan urgently calls for a food guarantee act to ensure physical, economic, social access to a balanced diet. All these will automatically positively impact consumer nutrition. A high level Food Security and Sovereignty Board is his ultimate recommendation for an effective implementation means for second green revolution that is overdue.
Prof. Sukhdeo Thorat, chairman, UGC
Ambassador Abid Hussain addressing the audience
Subsequent to the Global Thinker Award function, it was announced that Dr M S Swaminathan has been nominated to the Rajya Sabha. We congratulate him, on his recieving this national acknowledgement. We wish him all the success. The country hopes that his valuable presence as a Member of Parliament will strengthen our march towards a better future. The
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GLOBAL THINKER AWARD 2007 Conferred on Prof MS Swaminathan
“Achieving a Hunger-Free India: The Challenge Before Us” (The lecture was delivered by way of power-point presentation. Edge attempts to reproduce it in a text form) To a people famishing and idle, the only acceptable form in which God can dare appear is work and promise of food as wages — Mohandas Karamchand Gandhi The Situation in India today ◆ The Mid-term appraisal of the Tenth Plan reveals that we are lagging behind in achieving the Millennium Development Goal of halving hunger by 2015. India is the home of the largest population of malnourished people in the world. ◆ In 1999-2000, almost 77 per cent of the rural population consumed less than the poverty line calorie requirement of 2,400 Kcal ◆ The average calorie intake in 2004-05 across the eight States of
Kerala, Karnataka, Tamil Nadu, Andhra Pradesh, Madhya Pradesh, Orissa, Maharashtra and West Bengal was only 1907 Kcal as per provisional data released by the National Nutrition Monitoring Bureau (NNMB), indicating a declining trend
Nutrition Intervention Schemes: An Illustrative List of Current Status of Interventions Stage of Lifecycle Pregnant Women
Programme Food for Nutrition to avoid maternal and foetal mal- and under- nutrition resulting in LBW children Nursing Mothers National Maternity Benefit Scheme; support needed for breast feeding, for at least six months Infants (0-2 yrs) Not being effectively reached by ICDS Pre-school children (2-6 yrs) Integrated Child Development Services (ICDS) Youth going to School (6-14 years) Noon meal Programme Youth out of school Not being attended to Adults (18-60 yrs) Rural National Employment Guarantee Programme Old and infirm Annapoorna & Food for Nutrition programmes
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Need for a Strategy for Food Security: We need to move from the concept of food security at the aggregate level (ie, million tonnes of foodgrains needed to feed the population) to nutrition security at the level of every individual The concept of food and nutrition security implies that: i) Every individual has the physical, economic, social and environmental access to a balanced diet. This includes the necessary macro- and micronutrients, safe drinking water, sanitation, environmental hygiene. Transient hunger caused by seasonal fluctuations in food availability and disruptions in communication and transport arising from natural or manmade disasters A sustainable national food and nutrition security system should cover all these aspects and address the three issues of availability, access and absorption and primary health care ii) Food originates from efficient and environmentally benign production technologies that conserve and enhance the natural resource base of crops, farm animals, forestry, inland and marine fisheries. The Dimensions of Hunger Chronic or endemic hunger resulting from poverty-induced undernutrition and hidden hunger arising from micro-nutrient malnutrition, caused by the deficiencies
of iron, iodine, zinc and vitamins in the diet. Six Point Action Plan: Proposed by the National Commission on Farmers is as follows I. REFORM OF THE DELIVERY SYSTEM: ◆ The overall approach should be life cycle based and involve appropriate supplementation programmes. The delivery systems relating to all nutrition support programmes should be restructured on a lifecycle basis, starting with pregnant women and 0-2 infants and ending with old and infirm persons ◆ With regard to the PDS, it is high time we went back from the TPDS to a universal PDS with uniform prices. The allocation per household in the PDS should be based on the number of consumption units in the household. The cost implications of universalizing the PDS have been worked out and indicate a grain requirement of 56 million tonnes of grain and support of Rs.35,000 crore to feed 80 per cent of our population. The financial support component is just a little over 1 per cent of our GDP and can
Attention should be paid to the improvement of drinking water and the augmentation of water supplies. Bio-remediation techniques will have to be used for removing arsenic and heavy metals from tube well water be financed by raising our tax to GDP ratio by one percentage point. (See Diagram 1). II. COMMUNITY FOOD AND WATER SECURITY SYSTEMS AND ENLARGING THE FOOD BASKET: ◆ Community food security systems are especially relevant in socially cohesive communities characterised by limited income inequality and in locations, which find it difficult to access other delivery mechanisms such as PDS. To ensure sustainability, such initiatives may work closely with elected local bodies. ◆ Decentralised Community Food
Banks can help widen the food security base may be by including ragi and other millets, legumes and tubers in the bank. ◆ Policy must promote the establishment of community grain and water banks, involving Panchayats and other local bodies. This programme should be based on the principle “store grain and water everywhere” Community Food Security System: Conservation, cultivation, consumption, commerce of gene bank, seed bank, grain bank, water bank. Building a Water Security System: ◆ Augment supplies through mandatory water harvesting and conservation ◆ Give attention to demand management by eliminating all sources of unsustainable use of water and promoting “more crop and income per drop” methodologies of crop cultivation ◆ Harness new technologies relating to improving domestic water use efficiency, de-salination of sea water, breeding of drought and salinity tolerant crop varieties, bioremediation etc.
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◆ Each district in the country could develop a sustainable water security system. Community action should however start at the village level ◆ Promote seawater farming through integrated agro-forestry and aquaculture production systems in coastal areas. ◆ Pay attention to water quality. Equal attention should be paid to the improvement of drinking water quality and the augmentation of water supplies. Bioremediation techniques will have to be used for removing arsenic and heavy metals from tube well water. Safe Drinking Water : Need for Legislation:
◆ 5000 Farmer-Participatory Action Research programmes in the fields of small farmers, at the rate of one village in every block of the country ◆ 50 Agricultural Universities, WALMIS and other institutions to take up 100 projects each and also undertake the following tasks ❙❙❘ Empower Gram Sabhas with the necessary knowledge to enable them to discharge the functions of a Pani Panchayat ❙❙❘ Establish a Gyan Chaupal in collaboration with the CSC (Common Service Centre) programme of the Dept. of Information Technology and launch a Water Literacy Movement
◆ 1996: Parliamentary Committee on Subordinate Legislation says, water should be brought under “food”; the agency responsible for supplying drinking water to the public has to ensure purity and a statute should bind it to do so. Otherwise population will be exposed to serious health hazards, with no one owning responsibility An Action Plan for the Water Year 2007-08: (June 1, 2007 to May 31, 2008): Aim: Mind set change from quantity to the efficiency of use Water Year (2007-08)
❙❙❘ Train one woman and one male member of each Panchayat as Water Masters: Focal Theme : More Yield and income per drop of water Hybrid Arhar Villages: Pathway to a Pulses Revolution ◆ Rain water harvesting ◆ Hybrid Seed Production by SHGs ◆ Commercial Cultivation III. ERADICATION OF HIDDEN HUNGER: ◆ Hidden hunger caused by micronutrient deficiencies must be addressed based on natural food cum food fortification approaches
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◆ Local SHGs can be trained to make nutritious biscuits as an income earning activity. ◆ Nutritional literacy should be promoted at the school level. ◆ High priority should go to the elimination of iron deficiency anaemia among pregnant women. ◆ Food and nutrition security needs to be addressed through integrated complementary strategies, namely dietary diversification, supplementation, food fortification and community and public health measures ◆ Pandemics like HIV/AIDS need special attention: There are indications that the incidence of HIV/AIDS and tuberculosis is increasing in rural India. A food cum drug based approach is needed: Some examples Malady Vitamins: Vitamin A, vitamin B-Complex vitamin C, Minerals: iron, iodine, zinc, copper Remedy Rape leaves, cauliflower, amaranth, drumstick leaves, spinach, parsley, turnip, greens, carrot, tapioca chips, sweet potato, yam, radish Fortified Salt: Results of Cognitive Tests There is a significant improvement in the scores of four memory tests namely Benton’s, Cattells, Picture recall and the delayed response memory tests in the experimental group when compared to the control There is no significant improvement in the digit span and personal information tests There is a significant improvement in the letter cancellation test in the experimental group when compared to the control Overall, there is improvement in cognitive scores and memory in the experimental group when compared to the control IV. NEW DEAL FOR THE SELF-EMPLOYED:
greater is the need for marketable surplus in order to get cash income. Hence, improving small farm productivity, as a single development strategy, can make the greatest
Safeguarding the Heartland of the Green Revolution and Arousing the Sleeping Giant: ◆ The 'fertile crescent' (Punjab, Haryana, Western UP) is in a state of ecological and economic crisis. This area constitutes the main anchor of our PDS and food security system - Launch a Conservation Farming-cum-Green Agriculture Movement ◆ Eastern India, particularly Bihar, West Bengal and Assam, are well endowed with water resources. They have a large untapped yield reservoir. This region can become another fertile crescent, if a synergetic package of technology, services and market opportunities can
contribution to the elimination of hunger and poverty. Land Ownership Pattern in India: Percentage distribution of households and area owned across size classes: (see table-1) Number of Hungry Families Out of the 89.35 million hungry farmer households, about 1.14 million farmer households do not get enough to eat each day. Of the 1.14 million, 90,000 do not get food in some months of the year and about 50,000 are severely hungry not getting enough to eat in any month of the year
be introduced. Integrated Action Plan ; Enhancing Small Farm Production: ◆ Soil Health Care and enhancement ◆ Water harvesting, aquifer recharge and sustainable and equitable use ◆ Credit and insurance ◆ Technology and Inputs ◆ Farmer-Centric Marketing Green Revolution Symphony (1968) ◆ Technology ◆ Services ◆ Public Policies
Table-1
Land Ownership Pattern in India Percentage distribution of households and area owned across size classes
Classes
1971-72
2003
% of Household
% of area owned
% of Household
% of area owned
Marginal < 1 ha
62.62
9.76
79.6
23.05
Small (1-2 ha)
15.49
14.68
10.80
20.38
Semi medium (2-4 ha)
11.94
21.92
6.00
21.98
Medium (4-10 ha)
7.83
30.73
3.00
23.08
Large > 10 ha
2.12
22.91
0.60
11.55
◆ Detailed analyses of the causes of food insecurity in rural and urban India have revealed that inadequate purchasing power due to lack of job/livelihood opportunities is a primary cause of endemic hunger in the country ◆ Policies must provide adequate rural infrastructure and promote employment, besides ensuring credit facilities and remunerative prices for produce for our farmers ◆ The unfinished agenda of land reforms must be completed including, distribution of ceiling surplus land. There is need for aquarian reform to ensure the effective and equitable use of ponds, tanks and near shore fisheries ◆ Micro-credit Banks should be developed into Sustainable Livelihood Banks (SLB), through backward linkages to technology and credit and forward linkages with management and market ◆ We need an integrated Rural Non-Farm Livelihood Initiative patterned on the lines of China’s Township and Village Enterprise Model V. ENHANCING THE PRODUCTIVI TY AND PROFITABILITY OF SMALL HOLDINGS ◆ Agriculture is the backbone of the livelihood security system for 2/3 of India’s population. Therefore, farmers constitute the largest proportion of consumers ◆ Nearly 80 per cent of the land holdings in India are below 2 ha in size The smaller the farm, the
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◆ Farmers' enthusiasm Indian farmers achieved as much progress in wheat production in four years (1964-68), as during the preceding 4000 years. Urgent Need: Pan-Govt. of India and State Government efforts Producing 100 Million Tonnes of wheat by 2015 Pathways ◆ Average yield of 4 t / ha from 25 million ha ◆ Large untapped yield reservoir in eastern, central and western India Three pronged strategy ◆ Defend the gains ◆ Extend the gains ◆ Make new gains Krishi Vigyan Kendras in the 21st Century (See Diagram 2) VI. DESIGNING AND INTRODUCING A FOOD GUARANTEE ACT A National Food Guarantee Act, combining the features of the Food for Work and Employment Guarantee Programmes, will represent a win-win situation both for producers and consumers. Following up on the NREGA and recognising that the right to food and the right to livelihood are intimately related, we need to move towards a comprehensive "Food Guarantee Act". The main aim of the proposed legislation should be to integrate the features of Employment Guarantee Acts (National and Maharashtra) and Food for Work Programmes, in order to ensure that every child, woman and man has physical, economic, social and environmental access to balanced diet, clean drinking water and primary health care. This is fundamental to providing every individual in the country an opportunity for a healthy and productive life. Building Food Security with Home Grown Food Objectives: ◆ Food Security Reserve ◆ Public Distribution System ◆ Food for Social Development The
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WORDS OF WISDOM : A CENTURY AGO
"We must now turn to the one field which we have most neglected, the field of agricultureThe return to the land is as essential to our salvation, as the development of Swadesh or the fight against famine.If we train our young men to go back to the fields, they will be able to become mentors, leaders and role models to the village population.The problem is urgent in its call for a solution". -- Sri Aurobindo 6 March 1908
Programmes Methodology: ◆ Announce Minimum Support Price (cost of production + 50%) before sowing ◆ Fix a Procurement Price at the time of harvest based on market price ◆ Provide a Smart Card for those selling their produce for public
good, which will enable them to purchase key farm inputs at concessional price ◆ Extend the purchase operations throughout the country and widen the scope of PDS to include ragi, millets and other nutrition rich grams New Imperatives of Food Safety Regulation of the modern-business of food process to ensure ◆ Consumer safety (quality); ◆ Consumer health (toxins, contaminants) ◆ Consumer nutrition (ingredients, additives). Regulate the traditional business of food for safety and adulteration National Food Security and Sovereignty Board In a country with a high prevalence of poverty and malnutrition, the Government of India should always retain a commanding position in the management of the food security system. Keeping inflation under check by making essential commodities available in adequate quantities and at affordable prices must be a national resolve A National Food Security and Sovereignty Board may be set up for providing political commitment and oversight to the "Make Hunger History Movement", with the following composition: ◆ Prime Minister - Chairperson ◆ Union Minister for Food and Agriculture ◆ Union Ministers of Finance, Rural Development, Water Resources, ◆ Panchayati Raj, Commerce and Environment (other Ministers could be invited in accordance with the agenda) ◆ Leaders of all national political parties ◆ CMs of a few States representing both food deficit and food surplus States ◆ A few professionals and media representatives in the area of
Food Security Is universal PDS economically feasible? A universal Public Distribution system should reach around 80 per cent of our population. So, first, the grain requirement for the PDS will be 160 mn times 35 kg (ceiling) or 56 mn tonnes. In 2005-06, the PDS offtake was 49.7 mn tonnes (including Antyodaya), so this is quite feasible. (In 200405, the offtake was 30 mn tonnes). This will involve raising the tax to GDP ratio by one per cent. Roadmap for Ending Hunger:
India is likely to have the world's largest population by 2040 or even earlier. We also have the world's largest farm animal population, which need feed, fodder and water. The human and animal population supporting capacity has already been exceeded in many fragile ecosystems. Building a sustainable food security system will require attention to both the availability of sufficient stocks and who controls them. If we are to achieve a second green revolution covering rainfed areas, the first important requisite Diagram1
NUTRITION THROUGHOUT THE LIFE CYCLE Higher mortality rate
Impaired mental development
Elderly Malnourished
Inadequate food, health & care
Reduced capacity to care for baby
Untimely/inadequate weaning Frequent infections Inadequate catch up growth
Inadequate foetal nutrition
Inadequate food, health & care
Child Stunted
d n ma she Wo nouri l a M ncy ain gna ht g Pre weig w Lo
Higher maternal mortality
Increased risk of aduit chronic disease
Baby Low birth weight
Adolescent Stunted
Inadequate food, health & care
Reduced mental capacity
Inadequate food, health & care
Reduced mental capacity
Diagram 2
Krishi Vigyan Kendras in the 21st Century Goal: Develop KVKs into Krishi aur Udyog Vigyan Kendras (KUVK) to help enhance on-farm and non-farm income and employment Farm Universities / ICAR and CSIR institutes / Private Sector R & D / NGOs Krishi aur Udyog Vigyan Kendra Production Technology
Natural Resources Conservation and Enhancement; Soil, Water, Biodiversity
Post-harvest Technology
Linkages
Panchayat Raj Institutions: Farm Science Managers (1 woman and 1 man in each Panchayat)
Farm Schools (in the fields of farmer-achievers)
Farmer-Participatory Action Research Programmes (eg. More income per drop of water)
Gyan Chaupals (Village Resource Centre and Village Knowledge Centre)
Financial Institutions Self-help graups
is opportunity for assured and remunerative marketing for dry land farm products like pulses, oilseeds, millets, vegetables, fruits, milk and meat. Special Agricultural Zones (SAZ) Goals: ◆ To conserve prime farm land for agriculture ◆ To realise the untapped potential of rainfed areas ◆ To ensure National Nutrition Security and Food Sovereignty ◆ To bring about a systems approach with concurrent attention to all the links in the cultivation consumption - commerce chain United States Department of Agriculture, 2007 Farm Bill As President Bush said in his message during Farm Bill Forums, “The Farm Bill is an important Legislation that meets real needs. It is a tremendous honour to serve as the Secretary of Agriculture. I could not be more optimistic about the future of American agriculture. The balance sheet has never been stronger, the technological advances never more impressive, and the potential for a rural renaissance never greater. For these reasons, I take very seriously the responsibility that lies before us.” — Mike Johanns, Secretary. Nature of Support ◆ Conservation Farming ◆ Market Support ◆ Fairness of international trade ◆ Restructuring the food stamp programme ◆ Financial credit policies for new as well as socially disadvantaged producers ◆ Rural health care and education ◆ Wood to energy programme and renewable energy production ◆ Risk Management through Effective Insurance ◆ Support to farmers for speciality crop cultivation (eg, bio-energy) Total Financial Support for 2008-2017 — 618 Billion Dollars. The
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DEMOCRATICALLY YOURS GLOBAL THINKER AWARD 2006: CONFERRED ON LORD BHIKHU PAREKH "We take great pride in the view that if there was a secular miracle, that miracle occurred in India. There is no society after 1945 of our history which has been able to sustain democracy. And there is no society in human history, certainly not in the West, where democracy was introduced at one go" "while making sure that no government uses public resources as a kind of largesse to give away which we tended to do very often when we subsidise almost everything in our own country, while recognising that the government must be subject to the discipline of the market, we must also recognise that the market should be constantly subjected to the discipline of democracy"
"Is democracy exportable?" D uring the Cold War, the West pursued what is sometimes called a realistic foreign policy and that involved supporting whichever government was in power. And quite often it involved giving a strong preference for authoritarian regimes including military rulers on the ground that these authoritarian characters were easy to handle, one could do secret deals with them because you don't have the trouble of media questioning too strongly, they were prepared to take a strong stand against Left-wing forces and therefore forestalled revolution which the Americans and others were very keen to prevent. In the 1970's a new dimension was added to it, which is promoting human rights as one of the important objectives of foreign policy especially under Jimmy Carter but that was pursued half-heartedly and later abandoned by Kissinger, Reagan and others. After the fall of the Berlin Wall on 9th November 1989 which is 9/11 according to the European calendar, that was a turning point. When the Berlin Wall fell and soon the collapse of the Soviet Union, the West returned to the project of human rights and began to argue that it had a duty to promote democratic governments in the rest of the world. After the horrendous events of 11th The
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Prof. Lord Bhikhu Parekh
September, 9/11 according to the American calendar this time rather than the European calendar, the democratic project was once again revived and it was given an added impetus and a new justification. And the justification in this case was very complex and I think it is partly the source of some of the trouble that we are watching that terrorism was said to be causally linked with tyranny and therefore democracy was supposed to be an answer to terrorism. Not that democracy was good in itself and therefore other people should have it which was the language in which it was articulated earlier, increasingly the rhetoric, maybe it was a way of selling it to the sceptical public, that democracy all over the world was necessary if we wanted to counter terrorism and therefore in the interest of everybody. So war for democracy became an extension and a legitimising ideology for the war on terrorism. This is where we stand now. How should we respond and this is a question I want to explore. The leftists feel the West doesn't really mean that project of democratisation. They cite its support for authoritarian regimes all over the world including people in our neighbourhood. And when they have
claimed to export democracy or to promote democracy as in Afghanistan, especially in Iraq, it was largely an afterthought. It was not the reason why they went in, it was an afterthought and intended to legitimise extremely dubious and self-interested interventions in the internal affairs of other societies. There is also a legitimate fear in many circles that the project of global democratisation could easily become another version of the civilising mission that inspired the colonial empires of three centuries ago and it could also easily pave the way for US led imperialism. And many academics have already been saying that decolonisation was one of the greatest mistakes that the Europeans made and what is now needed is a subtle, stealthy form of recolonisation and I hear it all the time not only amongst people on the left but certainly obviously people on the right that if the world is to be set right and if the western countries are to lead a decent life, some form of subtle and stealthy recolonisation is a must. The only question is how do you sell it and how do you get people to accept it. So a lot of people say that this democratisation project is dangerous, even sinister and therefore we should have no sympathy with it at all. This is one reaction. I share these fears but at the same
time this negative reaction is mis- come until about forty years ago. these principles upon other societies guided, due to a variety of reasons. And even now I am told 8 per cent of ought implies can. So the question is In a globalising world, our destinies the Black Americans can't vote if it likely that principles can be exportare interlocked. There is a communi- they are guilty of criminal records, ed in this way ? Can moral and politty of fate and what happens in one the felons can't vote. So the ical principles and institutions be part of the world inevitably affects American democracy has a very implanted in a society that has never others very deeply. We also have a powerful liberal thrust and therefore known them and may not provide a moral obligation to promote the well right to information, all kinds of hospitable soil? So these are the being of less fortunate societies. And things which are sadly missing in three questions that I want to take in the Left in particular has always Europe. Which brand of democracy turn. insisted on global justice and a are we trying to export? And the Although democracy in one form democratic way of life is an impor- question is since we can't export or or another we have known in our tant part of global justice. In other expect other parts of the world to fit own country. By and large democrawords, promoting global democrati- in with one particular model of cy as we know it began in classical sation can have an imperialist thrust democracy, the only way we can Athens between 450 BC and 322 BC. but it can also be an emancipatory tackle it is to ask whether there are In other words it lasted for 130 years and progressive force depending on certain universally valid principles in off and on. And it is this Athenian how it is done, why it is done and democracy which may legitimately experience that has proved the most what are the conditions in which it is be applied to other parts of the influential throughout history. Now carried out. So what I want to sug- world. So the first question is what for the Athenians, democracy was a gest is while remaining intensely within democracy is universally very specific form of government. It alert to its likely misuse and its dan- valid, and what is culturally and his- was an answer to a very important gers, we should not dismiss question that every society it out of hand. That would be faces namely, what is the best a grave mistake and my conway to organise and conduct If one looks at how democracy can be cern is to explore what it the collective affairs of a socinurtured, the important thing is to involves and how we should ety? And the democratic respond to this democratisaanswer was people must conmake sure that educational and other tion project. duct their affairs themselves. institutions are able to flourish, where So the question for me Why? They gave two kinds of societies need help, it should be given then is whether democracy answers, moral and prudencan and should be promote tial. Moral answers were in in non-democratic especially terms of the idea of freedom repressive societies? But that is a torically specific and therefore can- and equality. A society can be said to loaded question, a very complex not, and should not, be attempted to be free only if it is its own master. question. It in fact contains three be exported. The second question is, And since every individual is capable separate questions rolled up in one assuming that there are certain uni- of participating in the affairs of his and I want to separate them out and versal components of democracy, do country, all freeborn citizens in then tackle them one by one. First, we have a right to press them on Athens should enjoy equality of what is it that we are trying to pro- other societies. Should we not trust power. So democracy was morally mote in the name of Democracy? our fellow human being, accept them the best form of government because Democracy can be defined in sev- as equal and leave it to them to it alone guaranteed freedom and eral different ways. And it can take decide how they want to run their equality. And the prudential, practimany different forms. Which of these affairs, whether they want to accept cal arguments for democracy were forms are we seeking to promote? these democratic principles or not. as follows. When people conducted And even in the West, there is no Why should we take it upon our- their affairs themselves, they were agreement on democracy. British selves, is it a form of moral arro- more likely to pursue common goals democracy is quite different in many gance to assume that we have dis- than otherwise. Also when people important ways from the French or covered the truth and others are liv- gave the laws to themselves, it was the American democracy. France ing in darkness, should we not leave likely that the laws would be fair, and Germany had a strong state tra- them to decide whether they want non-discriminatory and in common dition. Britain never had a strong these principles or not. And thirdly interest. And as Aristotle said in that tradition but a strong civil society even if we can answer the second wonderful phrase, since only the tradition. In United States, liberalism question in the affirmative saying wearer knows where the shoe pinchcame first, democracy came after- 'yes', we don't have a right to impose es, people were likely to be the best wards. In fact democracy did not anything but we have a duty to press judges of their own interest. For
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Athenians, democracy was a form of governance, and established two important principles â&#x20AC;&#x201D; Isonomia, equality before the law, and Isogoria, equal freedom of speech. But this form of democracy immediately began to raise some extremely important questions. Who are the People? Common people. The Greek word "Demos" and I want you to bear this in mind that the Greek word "Demos" from which we get the word democracy had two meanings in Greek. It meant the whole community. It also meant the common people as opposed to the aristocrats. And this ambiguity was never systematically resolved. The next question was that if you are going to say people should rule, does it mean that they might do whatever they like? What if they refuse to tolerate dissent? The Athenian treatment of Socrates was one example of this. Kill the man who refused to take conformist line. There was also the argument that since democracy implied majority rule, it was a danger to property, it could easily lead to the dispossession of propertied classes as it did repeatedly in the history of Athens, which made it extremely unstable. And there was also the feeling that in democracy, people could be swayed by demiGods. So democracy could become demigodocracy. So there were all these dangers in democracy. After the Athenian experience ended, a lot of people began to argue that although democracy was important, it could not be an absolute value because it was also a source of dangers. Crude majority rule, ignoring basic rights, insisting that everything should be done by people and therefore bringing elections into areas where elections don't belong, like the election of civil service, executive election of judges and all that. So this debate began and there have been all forms of democracy in the light of The
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these criticisms that have been thrown up. Most important answer from our point of view begins to emerge in the 19th century in the form of liberal democracy, which increasingly became representative democracy. So in the light of these criticisms of democracy in the 19th century, people began to argue that what we need is not the Athenian kind of democracy that people rule themselves. Their job is to elect representatives but once they elect representatives, they are the leaders and they will rule the country. In other words, it was going to be not representative government which means people governing themselves through representatives, it was going to be representative democracy, representatives replacing
democracy. And this is the form that we have been practising off and on with minor changes here and there for the last 150 or the last 130 years. Now the liberal democracy is at one level an improvement on Athenian democracy. At another level, it is a step backward. It is an improvement because it respects individual rights in a way that the Athenian democracy did not. It protects minorities and dissidents, it checks volatile public opinion and it allows the creation of stable institutions. This is progress. But it is also a step backward because it limits people's power. People are active only once every four or five years. Public opinion does not rule it may occasionally influence the government. It takes away from people the most
important power which people have, and they had, in classical Athens which is the right to declare war. It is extraordinary. I find it incomprehensible. It is extraordinary that whether in the United States where it is greater amount in check or in Great Britain, the Prime Minister can commit the country to a war which can lead to the deaths of lots of soldiers but also threaten the civilian integrity without the subject of this magnitude being put to the people in a referendum or without people being actually consulted. Right to the heart of the Athenian democracy was this idea that ultimately people must have control about whether they will live or die and war is one place where you die. And if people are going to be excluded from decisions of this magnitude then it is not democracy. And in a liberal or representative democracy, that right does not belong to the people because there is no country in which the right to war is left to the people rather than delegated to the Prime Minister, the Government. In Britain, House of commons does not have to even vote, the Prime Minister can decide. Now here is a mature democracy and it is only this time that Tony Blair was good enough to ask the House of Commons to debate, but not the House of Lords. How can you have a situation of this kind? We already have two very different models of democracy. The Athenian model where people said the Government is ours, we want to be actively involved in it, therefore fundamental questions about how the country will be organised, whether or where the war will be declared, and how long the war will be continued, whether there should be a Treaty or not will be our decisions because it is our life, our property. On the other hand we have liberal democracy which is democracy within the limits of liberalism.
Democracy emasculated by and also strengthened by its commitment to liberalism. So liberal democracy is one where liberalism is the dominant premise, and democracy is defined in terms of it. We already have two different models of democracy and there can be many others. And I want to highlight the situation of a multi-ethnic or a multi-national society. What kind of a democracy is possible in a multi-ethnic society? The Athenian democracy would not work because the Athenian democracy pre-supposes a single demos, homogenous people which ofcourse you don't have in a multi-ethnic society. Liberal democracy wouldn't work either because it presupposes individuals and it dissolves the demos into a group of individuals. In a multi-ethnic society, you have multiple demos, multiple people and the question is what kind of democracy is possible or how should democracy be indigenised, adjusted to the circumstances of a multi-ethnic society. Take Canada, that is the big battle. One people or two people, it's a binational country, or the way in which we had to handle the problem of Kashmir or the Nagas or the Muslims in India. And inevitably I think the great wisdom of our founding fathers, way back in 1946-48, long before multi-cultural societies or the ideas of multi-culturalism became popular, our founding fathers knew that we needed to accommodate the sensitivities and needs and demands of different parts of the country, different groups of the country who had different needs and therefore different demands. So a multi-ethnic society cannot have democracy of the same kind, and need to make adjustments. I think four important conclusions followed. First, we should not make the mistake of homogenising democracy as if there is only one universal, standard model of democracy.
Secondly, democracy is an important value but there are also others such as individual liberty, national security, social harmony and inter-ethnic equality and justice. And these values need to be balanced. Thirdly, liberal democracy is a historically specific form of democracy. Some of its values can be shown to be universal, others not. And fourthly, there are some aspects of democracy, some principles of democracy which can be universalised, others cannot be. Following five are absolutely central to any form of democracy. People should be able to govern themselves, governments should be chosen by and accountable to the people, all citizens should have equal right to participate in public life, rule of law so that law is impartially enacted and
impartially enforced and finally freedom of expression and association so that people are able to articulate their own opinion. And I would suggest that when a form of government meets these principles, it is democratic and to the extent it falls short of them, it is not democratic. Now here I think there is an important issue which is often lost sight of. Take a society which satisfies these five principles, people who rule, government is accountable to the people, elected, can be removed and so on. Suppose that society were to strike a different balance. They are about what we take to be fundamental rights. In some societies we would say right to property is fundamental, should be protected. Supposing this society which is democratic decided
that right to property in the sense of personal property is fine but right to property in the sense of unlimited capitalist accumulation, we do not want to allow. Supposing we believe that you should be completely free to criticise a religion, to mock religious sensibilities. Supposing in a society which is democratic by these principles, it was decided that free speech should not be absolutised as it is in the United States for example, But that it should be balanced again, the right to religion. Are we going to say that this democratic society, because its values are not exactly the values that we want, are not liberal, is not democratic. And I think there is a constant tendency, I want to warn against this, pack the idea of democracy with a lot of baggage with the result that societies whom we are urging to practice democracy are asked not just to practice democracy but to absorb a lot of moral and cultural and ideological baggage. And that is something which many societies resist and they feel that although ordinarily people in those societies might be very sympathetic to democracy, they would feel that in the name of democracy, a good deal is being exported which they dislike, and, therefore, they throw away the whole package of democracy because the content that is put into it is unacceptable. And in this context, I just want to explore this idea about which I have a very mixed attitude, of Islamic democracy. Just like we have, we talk about democracy and we think that there is only one kind of democracy. I have argued that there can be liberal democracy which is quite different from the Athenian democracy, could there be Islamic democracy? And if there was, are we to dismiss it on the ground that look, this is all spatial pleading, there is only democracy. But there is not only democracy because liberal democracy is democThe
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racy within the limits of liberalism. these people, which makes them ene- source of legitimacy. Can you have democracy within the mies of democracy and just as they That is how the idea of Christian limits of Islam, Islamic democracy? become enemies of democracy and democracy developed in Europe. And if some societies feel very strong- practice terrorism, we get frightened Until the 17th century, the Catholic ly and profoundly that they are reli- and what we have is two rival funda- church was condemning democracy gious, committed to Islam and they mentalisms facing each other leading on the ground that this was secular, think that it is the source of their the world increasingly towards a against God and so on, and through moral values, are we going to say you semi-hot, semi-cold war which will the intellectual struggle that went on, can either be Islamic or you can be a last much longer than the last one. Europeans began to realise and even democracy but you cannot be both. The last Cold War lasted from now in Europe we have the idea of In the light of what I have argued, 1946 to 1989. This one I fear began Christian democracy, Christian just as in the 19th century, we in 2001 may not end till 2099 democratic Party, why should we rule evolved liberal democracy, because because the enemies are not clear, out the possibility of Islamic democwe had thrown up a new form of they are not organised. 1.3 billion racy provided it is genuine, it is serieconomy in the form of the bourgeois people on the other side of the world, ous and it respects those five princisociety or capitalistic economy or the 44 countries where Muslims consti- ples that I mentioned earlier. As long ideas of individual freedom and liber- tute majority, you can't function like as those five principles are menty where the Greek idea of Athenian this. This is why I want to emphasise tioned, then if the government democracy had to be suitably trans- this point that the ideas of Islamic decides to privilege religion over free formed and something new began to democracy, we should not rule out of speech or if it decides that laws will emerge in the shape of liberal democ- hand. But at the same time, we be made in the light of what the racy, is it possible that the 21st cen- should not fall in for the view that just Quran says, Fine, it is a democracy. tury might see the rise in We may not like what it does, some quarters of a new form we may think it is not liberal Democracy can be defined in several of democracy called Islamic enough or individualist different ways. It can take different democracy. enough but we may criticise Now I don't want to press it on that ground not on the forms as well. British democracy is quite the argument too far. ground that it is not democdifferent in many important ways from Whether it is possible, what racy. This is a very important the French and the American democracy are the dangers but all I want point that I wanted to make. to do is we should not panic. Coming to my second And some of us do panic and point, let me now turn to the certainly in western society, in the as you can have liberal democracy, next question. Assuming that we government circles in particular, you can have Islamic democracy, have these principles of democratic there is a tendency to panic that the why not? It is not as simple as that. governance which are universally moment you hear the language of Because between liberalism and valid, the five principles I mentioned, religion, or the moment we hear peo- democracy, there is an inherent com- what do we do about those societies ple talking about Islamic democracy, patibility because democracy, and which do not measure up to those we say Oh my God! How are we this is another big issue, if you start principles. And there are three going to handle these fundamental- by democracy as people ruling them- answers, if we can impose them, ists, these Mullahs? The same kind of selves, as we say in our constitution leave them alone or try to encourage language you hear again and again or as the great American constitution them. The first two responses are with the result that we create a block- says, "We, the people", does it mean muddled and the third one is the only age between us and them and it that we are the source of all authori- correct one. There are people who becomes very difficult for them to ty, not God. Is it the case that democ- believe that we have a right, indeed a sort out the issues in their own soci- racy is inherently secular so that to moral duty to impose these universal ety, to go to their ordinary people and begin by accepting democracy is to principles. I could produce quite a say, look, we know you are commit- begin by marginalising the Almighty, large body of literature and it tends to ted to Islam, you believe that Allah whether or not he exists, or is it pos- come very easily to religious people revealed himself exhaustively, defini- sible to talk about "We, the people" within the European, western, tively in Quran, alright, but within while recognising, as many Muslims American tradition where the arguthat framework, we can create space would want us to recognise, that ment is, remember when the Christ for democracy. I don't want us to Allah is the source of all sovereignty, said, "compel them to come in" or block that space and it is that attempt he is the source of all authority but when St. Augustin said, "Error has to block that space which frightens subject to that people can be the no rights". If you know that these The
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principles are absolutely true, then question always is government in happened to have started them, that the same evangelical spirit which power, over centralised, over person- doesn't make them western because requires you to spread the truths of alised, therefore kind of paranoia they can be found in other societies. Christianity, you are now required to about power, corrupt, thrown out in And they are universally valid. spread the truths of democracy. And the next election and it refuses to go. And equally importantly if there is there are people who talk in that lan- What do you do? And it refuses to go nothing wrong about western techguage. But there are lots of other peo- because it knows that the vengeance nology, if that is kosher, why are ple who do that, that error or evil has will be taken. It refuses to go because western principles not kosher. So I no rights and if we have discovered there is so much to lose. When you think the argument that every society the truth as we have in the form of lose an election, you don't just lose an should be left alone would not work democracy, we have not only a right office, you lose your life, you lose your at all. but also a moral duty to impose them property because you will be hunted. Third argument which is that upon other societies. I think this is a What do you do in those kinds of democratic principles should neither non-starter for a variety of reasons. places? That is the problem. And be imposed nor be indifferent to We have seen what happens in imposing democracy at the point of a other societies. We have a duty and a Iraq where more people have been bayonet or bombing, bribing or right to encourage them. It is a desirdying than they died under Saddam blackmailing a society into accepting able goal but is it likely to work in Hussein, and it is not just a question democracy in this way is disastrous. practice, has it worked anywhere. of people dying. Those who are badly Because it may be alright, it gives us We take great pride in the view that if injured but not reported, property a happy feeling that we have done a there was a secular miracle, that mirdestroyed, families breaking up, the good job, the question is two years acle occurred in India. There is no kind of silent, subdued, Hobbesian later when the harvest is collected, society after 1945 of our history war of each against each that which has been able to sushad been unleashed in that tain democracy. And there is The liberal democracy is at one society, I think should be a no society in human history, level an improvement on Athenian salutary lesson to all of us. So certainly not in the West, when you try to impose where democracy was introdemocracy. At another level, it is a step democracy, you provoke hosduced at one go. We introbackward. It is an improvement because tility to democracy because it duced democracy when literit respects individuals right comes to be identified with acy was 26%, poverty was aggression and outside forces. 58%, at one go, men, women, You also don't take local cireverybody over the age of 21, cumstances into account and there- what would happen? So the imposi- never before in human history and it fore that model does not work. And tion of any kind is a non-starter. has worked. And this was at one level in any case unless people feel comThe other question is why can't we and externally induced experiment. mitted to a form of government espe- leave societies alone? I don't buy that So it can be done. cially one as important as democracy, argument because the question is Take the case of Japan. After the it is not going to last. autonomy of a ruler is not the same war where the whole thing was a And I think there is another rea- as autonomy of the people. And it is new constitution was passed in 1946 son why any attempt to use force to in the name of the people that we and adapted in 1947, that constitudo this kind of thing is not only might try to undermine the autono- tion was widely discussed, quite the morally unacceptable but invariably my of the ruler who might be mis- opposite of what has happened in disastrous politically for one simple chievous. A new state has to be Iraq. They had suffered the absence reason. recognised, which means accepted as of democracy and they were already When the ruling party is defeated, an equal in the community of disposed to this. And the Allied powis it prepared to vacate. This is where nations. So other states will decide ers were able to mobilise the goodwill the trouble comes. Introducing whether that state is able to measure for democracy. The Emperor breakdemocracy is at one level the easiest up to the basic standards. So respect ing with thousands of years of thing in the world. Not that easy but for autonomy argument would not Japanese history was persuaded to certainly easy. The question is how work, or to say democratic values are become a constitutional monarch. do you get those guys out when they western and, therefore, we can't And things began to happen. are defeated in election. I have made have it. That is a silly argument for all This has been happening in the some study about 248 coups that kinds of reasons. case of the European Union. Ten new have taken place since 1945 and in First, there is nothing western accession states and if you take the all almost 90% of those cases, the about them. Just because the west case of Poland or Hungary, or the The
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Baltic Republics, democracy has both the civic and the political dimen- democracy is when poverty is seen to grafted two or three elections in sion of civil society, so that the forces be unjust or avoidable or permanent. many cases, the country has sur- of civil society are used to regenerate And that happens when government vived. And this is largely because decadent representative institutions. follows policies which are disastrous, what happens in each case is when We also should not think that which have no hope of success and a country wants to join the democracy can only flourish in a cap- we simply end up creating greater European Union, there is a detailed italist economy or a whole package of inequality. negotiation as to what are the mini- privatisation and all that. Of course It is worth bearing in mind that mum demands that the European democracy needs the discipline of the since economic development is quite Union makes. After about 10 or 12 market but equally market needs the important, the West, the rich counyears the country becomes ready to discipline of democracy because tries of the West, if they are really enter the European Union. Its market has its own casualties, serious about promoting democracy, rewards are plenty. Massive aid, sin- deep inequalities, inequities. And they must commit themselves to gle market, monetary stability, therefore what we need to do is global justice. Fair terms of trade so immense international respectabili- while making sure that no govern- that repressive societies making tranty, the opportunity to influence the ment uses public resources as a sition to democracy are able to export European Union's policy. kind of largesse to give away and import, and engage in trade on There is no opposition within that which we tended to do very often equal terms. And it is also important country about whether to become when we subsidise almost every- that not only the regime of trade but democratic or not. If we are really thing in our own country, while also well directed attempts to reduce serious about promoting democracy, recognising that the government inequalities between the north and spreading democracy, we should be must be subject to the discipline of the south. I think the issue comes in thinking in terms of moral, political, the market, we must also recog- that the danger of democratisation economic, cultural and other becoming a neo-imperialist incentives. Helping societies or whatever kind of project is to create conditions in which real but the answer to this is When the ruling party is defeated, is it democracy can flourish. to see the creation of democprepared to vacate? This is where the You can't have a flourishracy all over the world is a trouble comes. Introducing democracy ing democracy without a common, human project, not flourishing civil society. But something that one enlightis at one level the easiest thing in the one needs to be slightly careened country passing it on to world. Not that easy but certainly easy ful. Increasingly in Eastern the rest of the world. Why Europe and in parts of Asia can financially large compaand Africa, civil societies sometimes nise that the market should be nies sway elections or why you can't becomes substitute for democracy constantly subjected to the disci- even be a candidate unless you have and ends up undermining democra- pline of democracy. got 100 million dollars in your pockcy. It becomes a safety net for disconIf one looks at how democracy can et? I don't know any country where tent. So when people are unhappy, be nurtured, the important thing is to people have a right to decide whether there are voluntary groups, NGO's, make sure that educational and other they should go to war or not. In other they take care of that. So the discon- institutions are able to flourish, words, all societies need to democratent is not politically mobilised into where societies need help, that help tise themselves some more than othchanging the decadent representa- should be provided. If you look at the ers. Rather than approach the questive institutions. It is also often the ways societies tend to collapse having tion in a spirit of arrogance, moral case where civil society groups will started well in democracy, steady arrogance and spiritual righteousprovide certain services on behalf of rate of economic growth or economic ness. ,what we should say is creating the government. So they become development is a very important fac- democracy is a global, human proindebted to the government or they tor. Poverty by itself does not under- ject. We are all collectively involved will provide those services because mine democracy. I don't know any in it. We all have to change in differthe government wouldn't. And there- country in which just because there ent directions and if we commit ourfore they absolve the government was poverty, people said we don't selves to a program of global justice from its own responsibilities. So want democracy. On the contrary the then I think this western project when we talk about the importance poor are keen on democracy. In our would be taken far more seriously of civil society, we must remember own country, the voting rate amongst and would have far greater chances that there is a danger if we are not the poor and the underprivileged is of success that I fear is likely to be careful. We should be emphasising higher. What alienates them from the case. Thank you. The
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MR. P. K. KAUL, a constant source of inspiration and guidance to us and a member of our Board of Governors, left for his heavenly abode on 28th February, leaving behind him a host of devastated friends, colleagues and relatives. He was 78. A Post-Graduate in Economics from Allahabad University, Mr.Kaul was affectionately called "Don" by his friends who were in perpetual awe of his vast learning and intellectual acumen. In keeping with his deep interest in academics, Mr Kaul later took a Masters degree in Public Administration from Harvard. A 1951-batch IAS officer, Mr Kaul served in the Uttar Pradesh cadre and held several important assignments in the State. Subsequently, he rose to great heights in the Government of India served as Commerce Secretary, Finance Secretary and Defence Secretary of the country. A brilliant administrative career culminated in his appointment to the post of Cabinet Secretary. In each of his assignments, Mr Kaul will always be remembered for his breadth of vision, incisive decision - making, and his adherence to the highest principles. Mr Kaul served as India's Ambassador to the United States from 1986-1989.While he was the Finance Secretary, Mr Kaul played a key role in formulation of policies for import and export promotion, development of free trade zones and infrastructure for movement and financing of exports. He
OBITUARY Late Mr. P. K. Kaul
also served as alternate Governor to International Monetary Fund (IMF), World Bank (WB) and Asian Development Bank (ADB). After retirement Mr Kaul was Director on several reputed companies. During the autumn of his life Mr Kaul immersed himself in service to the community in a wide variety of ways. He was nominated on several committees relating to the development of Delhi and its environs. He was a very active member of the civil society, and motivated the decision makers and voluntary groups to carry out various measures for the improvement of social and civic amenities in Noida and its neighbourhood. A large number of projects and organizations in Noida owe their existence to his vision, and the citizens of Noida will always be grateful for his selfless contribution to the betterment of the quality of their lives. IILM was fortunate to have Mr. P K Kaul in its
Governing Council since the Institute's inception in 1993. As one of the senior most members, he chaired many Governing Council meetings. He conducted them in his inimitable style, which made it possible to obtain the best results from the deliberations. He was always willing and ready with his valuable advice to help us in the Institute. Mr. Kaul's association with IILM helped the Institute fine tune its vision and constantly strive towards devising policies and programs in achieving them. IILM is proud and extremely grateful for the association of a man of the stature of Mr. Kaul, a great visionary, a great institution builder, with it. All of us would always have fond memories of his affection and fatherly hand on our shoulders at all times. There was not a life he touched that was not changed for the better. Mr Kaul was the quintessential gentleman. There was not a trace of arrogance about him. Rudyard Kipling would have approved of a man who "walked with princes but did not lose the common touch." Mr Kaul truly believed that every man who did an honest job deserved due respect and it was this quality that endeared him to high and low alike. It would perhaps be appropriate to let Shakespeare have the last word on Don. "His life was gentle, and the elements so mixed in him, that Nature might stand up and say to all the world, 'This was a man!'
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GOING PLACES
MAKE TOURISM AFFORDABLE TRAVEL, TOURISM AND BOP
Dr. Tarun Das Professor (Economics)
In the balance of payments (BOP) accounting, 'travel and tourism' are defined as the activities of people travelling to and staying in other countries for no more than one year for leisure, business and other purposes not related to an activity remunerated from the place visited. Expenditures by inbound tourists on goods and services consumed (such as domestic transport, hotels, entertainment, food and beverages etc.) in the host country are regarded as travel and tourism exports,
Table-1
MAJOR ECONOMIC INDICATORS OF LARGEST FOUR ECONOMIES IN 2004 Economic Indicators PPP-Adjusted GNI (US$ billion) Population (million) Per capita GNI (US$) Inbound tourists (million) Outbound tourists (million) Travel and tourism exports (US$ billion) Travel and tourism imports (US$ billion) Tourism exports as % of total services exports Tourism imports as % of total services imports
Source: World Bank: World Development Indicators 2006 The
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USA 11693 294 41440 46.1 61.2 112.8 93.2 9.8 5.3
China 7634 1296 1500 41.8 20.2 27.8 21.4 4.2 3.5
Japan 3809 128 37050 6.1 16.8 14.3 48.2 2.3 8.9
India 3369 1080 620 2.7 5.4 4.1 4.8 5.0 5.1
while those by the outbound tourists in foreign countries are regarded as travel and tourism imports. Major indicators related to travel and tourism in the four largest economies of the world in terms of the purchasing power parity adjusted Gross National Income (viz. USA, China, Japan and India) are presented in Table-1. It may be observed from the table that both inbound and outbound tourists of India are much lower than those in other countries. This reflects low per capita income of Indians and poor infrastructure facilities for travel and transport in India as compared to those in China, Japan and USA. Top 10 countries attracting international tourist arrivals include France (9.4%), Spain (6.9%), USA (6.1%), China (5.8%), Italy (4.5%), UK (3.7%), Mexico (2.7%), Germany (2.7%), Turkey (2.5%) and Austria (2.5%). India attracted only 0.5 percent of world tourist arrivals and accounted for 0.84 percent of global tourism receipts in 2005. However, the average foreign
Table-2
Average foreign exchange earnings per tourist in 2005 (US dollar) Country
Average foreign exchange earnings India 1462 France 556 Spain 862 USA 1653 China 626 Italy 970 Sri Lanka 984 Malaysia 520 Thailand 763 Singapore 892 Indonesia 863 World 844 Source: World Tourism Organisation.
exchange earnings per tourist in India are higher than those in many developing and developed countries (Table-2). The high expenditure of tourists in India is attributable to longer stay and the visit of high end tourists to India. Top 10 home countries for tourist arrivals to India include UK (accounting for 16.5% of inbound tourists to India), USA (15.8%), Canada (3.9%), France (3.8%), Sri Lanka (3.5%),
Germany (3.3%), Japan (2.6%), Malaysia (2.5%), Australia (2.4%) and Singapore (1.8%).
INDIAN SERVICES EXPORTS AND TOURISM India’s services exports have shown significant buoyancy in recent years supported by rapid growth of software exports, business and professional services and a strong revival of international tourist interest in India. Reflecting these positive developments, India’s share in global services exports increased from 0.6 per cent in 1995 to 1.8 percent in 2004. Over the years, the shares of travel and tourism, transportation, insurance and Government services have declining trends in both services, exports and imports of India (Tables 3 and 4), while the share of business and professional services including information technology (IT) and IT enabled services increased over the years. The share of travel and tourism in India’s services exports declined continuously from the peak level at 44 per cent recorded in 1980-81 to 13 per cent in 2005-06 (Table-3). However,
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and leisure travel consistent with growing merchandise and services trade and rising disposable incomes of the Indian middle and upper class.
Table-3
Composition of India's Services Exports (Per cent) Year
Travel and Tourism
Transportation
1970-71 17 1980-81 44 1990-91 32 2000-01 21 20005-06 13 Source: RBI Annual Report 2005-06.
50 16 21 13 10
Insurance and govt. services 19 6 3 6 2
Software & professional services 14 34 44 60 75
Total
100 100 100 100 100
FISCAL AND OTHER INCENTIVES
Table-4
Composition of India's Services Imports (Per cent) Year
Travel and Tourism
Transportation
1950s 18 1960s 12 1970s 7 1980s 12 1990s 15 2000-01 13 2004-05 13 Source: RBI Annual Report 2005-06.
23 30 31 32 31 16 14
Travel and tourism have positive impact on the overall economic growth and poverty reduction in India due to their direct and mulitiflier effect on employment
Insurance and govt. services 29 19 21 5 3 3 3
Software & professional services 30 39 41 51 51 68 70
Total
100 100 100 100 100 100 100
tourist arrivals (Table-5) and tourism earnings maintained their buoyancy witnessed since 2003-04 reflecting both business and leisure travel. Foreign tourist arrivals follow a usual seasonal pattern every year peeking in October-December with the tourist season extending up to March. An increasing number of Indian tourists are also going abroad reflecting rising business
Travel and tourism have positive impact on the overall economic growth and poverty reduction in India due to their direct and multiplier effects on employment. In order to make tourism a major engine of growth, Government of India formulated the National Tourism Policy 2002. Both the Central and the State Governments provide various incentives for promoting domestic and international tourism. These include schemes and programs for public-private partnership for infrastructure and destination development, integrated tourist networks, rural tourism, capacity building for service providers, large revenue generating projects, rural tourism, time share resorts, market development assistance, capital subsidy, and financial subsidy for tourism related events. However, there is a need to bring professionalism and better management techniques in the whole system. There are high potentials for the management institutes to develop management courses on travel and tourism.
Table-5
Inbound Tourists To and Outbound Tourists from India Year
Inbound tourists Million
1992 2000 2001 2002 2003 2004 2005
1.9 2.7 2.5 2.4 2.7 3.5 3.9
Growth rate (%) 11.3 6.9 -7.4 -4.0 12.5 29.6 13.2
Foreign exchange earnings from tourism Rupees crore 5951 14238 14344 14195 16429 21603 25172
Growth 37.8 9.9 0.7 -1.0 15.7 31.5 16.5
Outbound tourists Million rate (%) 2.2 4.4 4.6 4.9 5.4 6.2 7.2
Source: Ministry of Tourism and Culture, Govt. of India, and Reserve Bank of India. The
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Growth rate (%) 15.8 7.3 4.5 6.5 10.2 14.8 `16.1
APPROVAL STAMP
DESTINATION INDIA
THE NEW BUZZWORD DESTINATION INDIA A BACKGROUND
hotel industry, striving to fit varied consumer needs based on different services, amenities, price, and quality expectations, ensuring that customer remains the king!
The efforts to communicate the Brand India message in the subtly worded Incredible India campaign are finally paying off! The high profile advertising BUILDING A PERSPECTIVE blitzkrieg has got the mind The Indian economy has perspace and the eyeballs of the formed consistently at a target audience. The meloPriyanka Dhingra growth rate of over 8% for dious tunes of “Padharo Fellow (Marketing) the past three years i.e. hamare des” from Rajasthan and God's own country Kerala FY2004 — FY2006. According to recent from Central Statistics are beckoning tourists from the globe, estimates competing aggressively with popular but Organisation (CSO) the current year expensive European holiday destinations. growth rate is pegged at 9%. The contriWell, those in the quest for the right bution of the services sector (the trade, places to stay when travelling either for financial services, hotels, insurance, leisure or business are in luck. A variety transport and communications compoof ‘Brands’ have been developed in the nent) to the GDP has been over 50% over
The ‘incredible’ India image is finally paying off. It has already caught the attention of big names in the hospitality sector who bring in their unique style at affordable price
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the last decade, it is now nearing 60%. The positive business sentiment created by a booming economy and 'India' focus of global businesses has led to a tremendous increase in the tourist arrivals on Indian shores. The year 2003 was an outstanding year in terms of inbound tourism, with tourist arrivals reaching 2.73 million. Domestic travel, both business and leisure, also benefited from the thriving economy and credit-fuelled consumer spending culture. The concept of travelling for leisure in India has, in recent years, has gained favour with growing disposable incomes and rising ‘urban, nuclear, double income’ households. According to World Travel & Tourism Council Indian tourism is projected to grow at 8.8 % over the next 10 years.
REALITY CHECK Amidst the entire high decibel ‘Destination India’ campaigning, India actually has fewer hotel rooms than Manhattan! Taking into account all approved and unapproved hotels, an HVS study estimates this figure to be close to only 90,000 rooms ! The hotel room shortage is most acute in the budget hotel segment. There are very few
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options if you are looking at Rs 3,000 per night and there are no brands or hotel chains in this segment yet. Sustained growth of this industry depends on how successfully several issues like poor roads, airport infrastructure, corruption and security are addressed.
BRAND SEGMENTATION As a solution to the diverse needs of consumers, the lodging industry is turning to the concept of 'Brand Segmentation'. The term refers to refers to developing separate products (properties) based on certain price - quality parameters while still maintaining to represent of the parent organization. Each brand offers different value benefits and service levels to meet the needs of that brand's typical guests. Even luxury brands (hotels) are making inroads into segments differentiated through services and prices. Segmentation allows brands to tailor the consumers needs ranging from economy brands up to the luxury heritage hotels. The budget segment or mid scale brand has been developed for the market segment which focuses on quality accommodation at a reasonable price. This market offers certain complimentary services such as breakfast, Internet access, mini refrigerators, and access to business and fitness centers. The extended stay segment or the service apartment brand is a new market segment that has experienced rapid growth over the past few years. Extended stay brands are further being developed to provide a home-like atmosphere for travelers looking to stay for an
extended period of time. The luxury segments or the upscale brands includes hotels that are luxurious and feature the best accommodations in the lodging industry, besides providing amenities and services that are quite lavish. This segment is intended for travelers willing to pay premium prices for first-class accommodations and service.
THE INDUSTRY HAS TUNED IN ◆ Raymond Bickson, Managing Director and CEO of Tata owned Indian Hotels Company Ltd. announced their plan to invest Rs100 crore to set up budget hotels across the country and bid for Indian Railways Catering & Tourism corporation's (IRCTC) tender for operating hotels and branding them as 'Ginger' ◆ Indian Hotels Company also plans to launch service apartment projects in cities like Delhi, Kolkata, Hyderabad and Chennai ◆ Bessemer Group has invested along with New Vernon Private Equity, Rs 38 crore in Sarovar Hotels, to build a chain of budge hotels in India, under the ‘Homtel’ brand. Sarovar is India’s largest Hotel chain in the mid market segment, managing properties in the 3-5 star categories. ◆ Hilton Hotels Corporation & DLF have announced a joint venture to build 50 — 75 hotels and service apartments over the next seven years. ◆ The Taj Group of Hotels has got the contract for renovating and running Rail Yatri Niwas, on a 15 year lease. ◆ Hyatt International is now introducing its new brand, Hyatt Place,
which is an all-suite property that is to serve the upscale market segment but offers lower prices than its flagship, Hyatt Hotel.
OPPORTUNITIES IN HOSPITALITY Substantial investments in tourism infrastructure like upgrading the 28 regional airports in smaller towns, national highways and liberal Government policies are essential for the sustenance of this industry. With tourism projected to grow at 8.8 % over the next 10 years, new opportunities in the hotel sector lie in two key areas — one being the extended stay segment (service apartments), specially for destinations near large concentrations of IT organisations, Hospitals (medical tourism) and suburban metro regions. The real opportunity is in good budget hotels of international standards. The big names in hospitality have already caught on the game and are segmenting their brands to give you budget hotels that carry a famous brand name and services unique to the brand but at price the target audience can afford. As of now, India’s going in the right direction.
Substantial investment in tourism infrastructure like upgrading the 28 regional airports, national highways and liberal Government policies are essential for the sustenance of the tourism industry
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GREEN TOP
GOD’s OWN COUNTRY
KERALA - A preferred destination for tourism INVESTMENT
T P Sunil Kumar Chairperson’s Office
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ourism industry in Kerala is booming due to the recent increase in foreign tourists from Europe, Africa, Southeast Asia and Australia as well as tourists from within the country. Some tourists come from Middle East countries to witness the heavy monsoon, a phenomenon never seen in the desert. The State is famous for its scenic beauty and beaches, wild forests, forts, palaces traditional ayurvedic treatment and pilgrimage centres like Sabarimala where lakhs of people visit during October-January every year to witness the natural jyoti (sparkling light) which appears for a few seconds atop the blue mountains. The backwater rides and cruises also play an important role in attracting international tourists.
There are several reasons for this exuberance in the tourism industry. Amongst them first comes the upward trend observed in the growth rate of Indian economy which has raised middle class incomes, prompting more people to spend money on vacations. Also, aggressive advertising campaign in electronics media — ‘Kerala the God’s own country’ by the Government has also contributed in changing Kerala’s image from that of a land of people with 100% literacy and most of them unemployed, to the ‘Paradise of Tourists’. Recently, Kerala Government adopted a multi-pronged approach for promotion of tourism, which includes new mechanism for speedy implementation of tourism projects (details and application forms are placed in the Govt website)
and development of rural destinations, and new marketing strategies. Kerala Government’s pavilions in the India International Trade Fairs in New Delhi have been another sourcing centre for tourists and investment to the State. However, in order to attract more visitors, Kerala still needs to upgrade its roads and other infrastructure facilities to global standards. This problem exists in the whole country as a result of which, tourist arrivals are just a small percentage comparing with other Asian destinations like Bangkok. IL&FS Ecomart has already been assigned by the Govt to study and make the master plan for Sabarimala infrastructure development. More such plans are in pipeline for similar projects. Also there is not enough star hotels to accommodate the increasing no of tourists which fingers to the path of fresh investment in Hospitality sector. Growing at a rate of 13.31%, the tourism industry significantly contributes to the state's economy. With the whole support of the State, Kerala Tourism Development Corporation has been effectively marketing the kerala tourism globally. KTDC's brains with great ideas, freedom and authority markets Kerala Tourism as one of the attractive destinations in the globe.
VEEGA LAND’S SUCCESS STORY V-Guard group’s Veega Land Amusement Park is an ideal example for private investment in tourism sector. In a short span of time, Veega Land has become one of the most loved entertainment spots in India. Before its inception, it’s founder had personally visited many successful amusement parks around the globe and designed Veega Land. The park was made keeping in mind the lat-
est amusement technologies in the State where it was totally a new experience. It is located in an idyllic and tranquil hill situated almost 300 ft. above sea level and within the radius of 15 km from Cochin which has also made Veega Land an easily accessible spot. Even after gaining success beyond imagination, still it strives for the better facilities and maintains unmatched quality standards, impeccable service, excellent rides and a host of modern facilities. Due to all these specialities, it has become another spot for the tourists arriving in Kerala. Witnessing the success of Veega Land, more theme parks completely owned by private parties have been mushroomed up recently, surprisingly, all of them are running in profit. The Govt has recently received proposals for Adventure Tourism and Helicopter Transportation which may be the beginning of the next mile stone in Kerala’s history.
Agressive advertising campaign by the Government that Kerala is God’s own country has changed the State’s image from that of 100 per cent literacy and most of them without jobs to ‘paradise of tourists’
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GO GREEN
ENVIRONMENTAL IMPACTS OF TOURISM Dr. P. Malarvizhi Associate Professor (Finance)
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â&#x2014;&#x2020; INTRODUCTION Tourism industry is one of the world's largest and fastest growing industry, in terms of its contribution to global GDP and the number of jobs it generates. Tourism sector generates major source of foreign exchange earning and employment for many developing countries. In India, tourism industry is the third largest foreign exchange earner for the country. It is also one of the sectors, which employs the largest number of manpower by providing direct employment to - 10.7 million and Indirect employment to 24.4 million. India's share of the world tourism market is still a meager 0.8 per cent. In south - Asia, India has 65.8% of the Regional Tourism Receipts. India has significant potential for becoming a
major global tourist destination. Conde Nast Traveler, one of the world's most celebrated travel magazines ranked India amongst the top 10 tourist destinations of the world. Indian tourism industry has generated an Export earnings of US $ 9.6 bn in year 2006 and its contribution to GDP is Direct 2% and Overall 5.3%.It is estimated that tourism in India could contribute Rs 8,50,000 crores to the GDP by 2020 ( approx. 1800 million USD). The foreign exchange earnings and foreign tourists arrival in India during 2007 is given below.(Table-1) â&#x2014;&#x2020; ECO-TOURISM Tourism based on the natural environment -"Ecotourism" is a vital growing segment of the tourism industry. The
Table-1
FOREIGN EXCHANGE EARNINGS IN INDIA DURING 2007 AND CORRESPONDING FIGURES FOR 2005 & 2006
FOREIGN EXCHNANGE EARNINGS (In US $ million) MONTHS 2005 2006* January 532.19 632.43
2007* 744.58
PERCENTAGE CHANGE 2006/05 2007/06 18.8 17.7
FOREIGN EXCHNANGE EARNINGS (In Rs. crores) January 2326.2 2722.07
3299.51
PERCENTAGE CHANGE 17.0 21.2
FOREIGN TOURIST ARRIVALS & FOREIGN EXCHANGE EARNINGS IN INDIADURING 2007 AND CORRESPONDING FIGURES FOR 2005 & 2006 FOREIGN TOURIST ARRIVAL (Nos.) January 385977
444260
514453
PERCENTAGE CHANGE 15.1 15.8 Source: Ministry of Tourism, Government of India
International Eco-tourism Society defines eco-tourism as "responsible travel to natural areas that conserves the environment and improves the wellbeing of local people." Eco-tourism is considered the fastest growing market in the tourism industry. According to the World Tourism Organization with an annual growth rate of 5% worldwide and representing 6% of the world gross domestic product, 11.4% of all consumer spending. The rate at which tourism continues to grow presents both opportunities and threats for biodiversity conservation. The quality of the environment, both natural and man-made, is essential to tourism. However, tourism's relationship with the environment is complex - many activities can have adverse environmental effects. The negative impacts of tourism development can gradually destroy the environ-
mental resources on which it depends. On the other hand, tourism has the potential to create beneficial effects on the environment by contributing to environmental protection and conservation. However, tourism is a double-edged activity that can positively contribute to socio-economic achievements. Yet at the same time, its fast and uncontrolled growth can be a major cause of environmental degradation leading to loss of local identity and traditional cultures. Biological and physical resources are in fact the assets that attract tourists. However, the stress imposed by tourism activities on fragile ecosystems accelerates and aggravates their depletion. Paradoxically, the very success of tourism may lead to degradation of natural environment. Such depletion severely affects the attractiveness of tourist spots, the very commodity that
The quality of the environment, both natural and man-made, is essential to tourism. However, tourismâ&#x20AC;&#x2122;s relationship with the environment is complex. Many activities can have adverse enviornmental effects
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Tourism industry’s most valuable assets and land resources are fertile soil, forests, wetlands and wildlife. To provide improved tourism facility, it has put a huge pressure on these resources
tourism has to offer. Thus creating awareness of environmental values would serve as a tool to finance protection of natural areas and increase their economic importance. ◆ WATER RESOURCES Tourism industry tends to consume enormous quantity of water for hotels, swimming pools, golf courses and personal use of water by tourists. In recent years golf tourism has increased in popularity and there is steady increase in number of golf courses. Golf course maintenance plays a major role in depletion of fresh water resources as it generally requires huge quantity of water every day, for its maintenance. This would lead to acute water shortage, slow & gradual degradation of ground water level, permanent damage to the
water table and generation of abundant waste water. ◆ LAND DEGRADATION Tourism industry's most valuable assets and land resources are fertile soil, forests, wetlands and wildlife. The zeal to provide improved tourism facilities has put a massive pressure on these resources through increased use of land for accommodation and other infrastructural improvement. Thus tourism oriented construction, fuel wood collection and land clearing, directly leads to deforestation. For example, 4 to5 kilograms of wood per day is used by one trekking tourist in Nepal. ◆ POLLUTION Transportation sector - which is the heart of tourism, has improved substantially to take the load of rising number of tourists. There is greater mobility by air, road, and rail to varied tourist destinations. Tourism now accounts for more than 60% of air travel. A study estimated that a single transatlantic return flight emits almost half the CO2 emissions produced by all other sources (lighting, heating, car use, etc.) consumed by an average person yearly. Air pollution from tourist transportation has impacts on the global level, especially from CO2 emissions related to transportation energy use. In addition to local air pollution there is noise pollution from airplanes, cars, buses etc. High decibel of noise pollution can cause annoyance, stress, & even hearing loss for humans and distress to wildlife that might alter their natural activity patterns. ◆ SOLID WASTE AND LITTERING Tourist areas with appealing natural attractions, invite high concentration of tourist activities. Waste disposal in such areas pose a serious problem and improper disposal is a major hazard to the natural environment - rivers, scenic areas, and roadsides. For example, cruise ships in the Caribbean are estimated to produce more than 70,000 tons of waste each year. Solid waste and littering severely degrades the physical
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appearance of shoreline & water. Most importantly it causes death of marine living beings. In mountain areas, trekking tourists generate a great deal of waste. Tourists on expedition leave behind their garbage, oxygen cylinders and even camping equipment. Such practices degrade the environment, as tourist spots in remote areas, have few garbage collection or disposal facilities. â&#x2014;&#x2020; SEWAGE Tourism industry has accelerated the construction of hotels, recreation and other facilities. This in turn leads to uncontrollable sewage pollution which threatens the health of humans and animals. Wastewater has polluted seas and lakes in high dense tourist spots, which damages the flora and fauna of serene natural environment. For example, Manali in Himachal Pradesh is a favorite tourist destination for both domestic and international tourists. Hotels in that region have been discharging sewage into river Beas, causing water pollution. The green area of this township has diminished rapidly, thereby, destroying the natural landscape. Udaipur is known as the city of lakes and it thrives on lake tourism. Udaipur's tourism has been threatened due to effluents, sewage and solid waste discharged in to lakes, by hotels and industries located mostly at the periphery of the lakes. Similar is the case with the Dal lake in
Srinagar, which is receiving effluents from the house boats and hotels in its vicinity. River Ganges -supports 400 million people along its 2,510 km course. It flows through more than 29 cities, 70 towns and thousands of villages extending along its banks, receives nearly all their sewage. An estimated 1.3 billion litres of sewage goes directly into the river, along with thousands of animal carcasses. Another 260 million litres of industrial waste is added to this by hundreds of factories on the banks each day. â&#x2014;&#x2020; CONCLUSION Today, many countries around the globe formulate and rigorously implement "Green Laws" of conservation. Such laws help in understanding the need for mankind to live in harmony with nature. Eco-tourism is the only way to maximize the economic, environmental and social benefits of tourism. In India green-tourism movement is gathering momentum with increase in number of travelers. More travel related organizations are addressing the needs of eco-tourists and promoting eco-tourism in the country. Eco-environ policies laid by the Government will help facilitate domestic and foreign tourism. Thus tourism will emerge as a key factor in eco-development in future years and can spear head towards full blown development only with people's participation.
Eco-environ policies laid down by the Government will help facilitate domestic and foreign tourism. Thus it will emerge as a key factor in ecodevelopment in the future
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POWER OF TECH
BANKING: MARKET THROWS SOCIAL CONSENT OUT I
ndian Banking, influenced by bankers face is to introduce new the financial sector reforms and products, innovative in nature yet globalization is witnessing a be customer friendly for which shift away from meeting social pri- newer technologies are needed to orities to confronting market be brought in multiple areas to reduce the overall transforces. The power of action cost for the ultitechnology has fuelled mate benefit of the custhis change and made tomer. profound impact on the The Indian Banks are Banking business. From not working in a closed being enabler, IT is gradenvironment any more. ually emerging as a driResistance to advancing ver and key differentiator technology is no longer a of business performance solution. While the and competitive Prof. Deepak Tandon absorption rates are superiority. The high, still the adopcompetition in the Profesor (Finance) tion rates are not banking industry keeping pace with it. between the public sector banks, old private sector But the mission of serving the cusbanks, new generation private sec- tomer has not changed and CRM tor banks and foreign banks is still remains competitive in this mainly through technology innova- millennium. tion, upgradation and modernization. The major challenges which Technology in Banks enables The
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Efficient Management Quicker ‘Go-To-Market’ Richer Customer Experience Enhanced Competitiveness Enterprise wide Customer View Preventive, Risk-based Architecture Empowerment to Manage Pace with Developments The race for market supremacies is compelling Banks in India to adopt the latest technology. The whole of the Banking system has undergone a transformational change as summarised. Pre-nationalisation era (1948-68) — No banking laws, bank failures, lack of socioeconomic objectives. Only big corporate benefited. Post-nationalisation era (19691991) — Nationalisation (14 banks in 1969 and six in 1980), public control, branch network increased Post liberalisation 1991 era (liberalisation, privatization and globali-
sation) — high tech banking, core banking, E-banking, Internet banking, MICR technology, RTGS, EFT, ECS product innovation and marketing approach. Banks are service organisations and their profitability and survival primarily depend upon their ability to widen and retain their customer base by rendering a multitude of services in a manners that meets the expectations of customers. The expectations/satisfaction of the customers may be a function of time, cost, and provided efficiency which all are related information and financial technologies. The IT revolution in the Banking sector caters to: Strengthening the prudential norms, capital adequacy AND BASLE II, NPA management, corporate governance, recapitalisation, focus on customer relationship in efficient manner-continuous and error free service to customers, reduction in transaction cost (single window system). Focus on MIS and risk management Diversity of products and services Recent products: CBS (Core Banking Solutions) — Online Banking and extended product service offerings by reducing the time and dependence on human intervention, state of art branch and ATM Network, MIS development (Analysis,80:20 rule prevails for the key performance branches, network plan, back office MIS, flexibility, Government banking, e-Channels, documentation and Data warehousing, easy to use, extendibility, scalability, security) Networking — interconnection of one or more computers through the use of satellites, microwave, terrestrial linear media, use of terminals. Types are WAN (Wide Area Network)-long distance telephone service, satellite transmission, under-sea cables, LAN (Local Area network) — limited geographical area and channels are error free, MAN (Metropolitan Area Network).
Electronic payments infrastructure (at RBI centres) MICR (Magnetic Ink Code recognition) clearing system at the Metros for paper debit instruments deferred net settlements, value in T+2. High Value Clearing — paper based debit notes, deferred net settlements, same day value with restriction of Rs 1 lakh and above ECS (Electronic Clearing
Banks are primarily service organisations and their profitability and survival depend upon their ability to widen and retain their customer base by rendering a multitude of services Service) — electronic, bulk transfers value T+3, dates to be fixed in advance, minimum Rs 5 lakh and below Electronic Fund Transfer Scheme — electronic, bulk transfers value, Value in T+0 or T+1, one cycle a day, settlement if not returned is final ATMs and fund banks which allow to withdraw cash, pay bills, balance inquiries, cash deposits which is a card, code (Personal
identification Number, PIN or debit cards,POS (Point of Sale) terminal, EDI (Electronic Data Interchange). Electronic payments through smart cards INFINET (Indian Financial Network) is a closed user group for the banks having linkages to VSATs, terrestrial leased lines and is a TCP/IP based network. Following are offshoots: RTGS (Real Time Gross Settlement System) — electronic credits, interbank or customer transactions near real time value (maximum 2-4 hours) NDS (Negotiated dealing system) for Government securities CFMS (Centralised Funds Management system) SFMS (Structured Financial Messaging System) Committees in IT Transformation: Rangarajan Committee I — Mid 1980s stated to draw a phased plan of computerisation and mechanisation (front Office — ALPM computerised while back office work done manually and vice versa aiming at error free accounting Rangarajan Committee II — 1988 spoke of Electronic Fund Transfer (EFT), SWIFT, ATMs BANKNET. Broadly Information technology affects banking in two ways: By reducing costs associated with the management of information (collection, storage, processing and transmission) because of replacement of paper based manual methods with automated processes. By facilitating customers by providing banking products and services through automated processes such as remote banking. Objectives: Relationship between information technology and profitability of Indian Banking sector To study the challenges and scope of few current trends in IT applications in Banking. Technology can help banks in The
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providing efficient and highly cost effective s in a timely manner. Methodology: The new generation private sector banks have embraced technology right from their operations and, therefore, have adapted themselves to changes in the technology easily. Two approaches to study the productivity changes are parametric (econometric) and non-parametric techniques. We may employ nonparametric frontier method of DEA (Data Envelopment Analysis) for measuring technical efficiency of the banks. We may measure technical efficiency, allocative efficiency, and economic efficiency. It assumes an input orientation and is dependent upon ratio of weighted outputs to weighted inputs. The optimal values obtained by corresponding output oriented DEA models are equal to the reciprocal of the output distance functions and we may calculate the multiplier linear programming models. Sample data has been collected by various branches of ICICI Bank and 50 respondents were interviewed and the results showed that there is an increase in efficiency in the deregulated era. Technological products indicate efficiency scores generally increasing over the study period. Negative relationships exist with respect to NPA management. CASE STUDY — technology differentiator in a new generation private sector bank — ICICI bank: ICICI bank considers information technology as an enabler and a Force multiplier for business, acting as a spring board for new product mixes. Unlike other banks ICICI bank had no existing mainframe structures to use the bench marks and so the bank made conscious decision to embark on new technologies taking into account the various risk factors The bank believes that technology be an integral part of business decision making, and in conformance to this, it believes to have technology teams The
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The new generation private sector banks have embraced technology right from their operations and, therefore, have adapted themselves to the changes in the technology easily and budgets in three areas —wholesale segment, retail and international banking groups. The bank’s Managing Director has categorically mentioned that it is the bank’s technology agnostic point of view and its use of disruptive technologies that has brought ICICI ahead in the race. The bank also has fully integrated system that offers both flexibility and low cost. It has a dedicated technology management group that plays a key role in acquisition and leverage technology by the bank which adapt tactical as well strategic decision making. The bank is using the product — Finnacle 6.x from the vendor Infosys Technologies Ltd. A host of technology enabled measures have been introduced to enhance customer service like extended business hours, seven days convenient banking, intracity cheques, ATMs, globally accepted cards, Internet and
mobile banking on retail side and cash management on retail front and cash management on the corporate side. The bank is also using its technology in rural sector, microfinance and also in international banking operations and treasury management. ICICI BANK Fact sheet LAs on 31.03.2006) Total Assets Rs 2,513.89bn (US $ 56.3 bn) Profit After tax Rs 25.40 bn (US $ 569 mn) Branches 614 (630 as on 10.08.2006) Extension Counters 51 No of Employees: (ICICI Bank 29,255 ICICI subsidiaries 50,000 No of customers: 14.98 million net customers (retail) Online customers Total customers 16.5 Lakh Web trade customers 10 Lakh International customers Retail 522,987 net customers Retail (Without subsidiaries ) 399,588 net customers Locations 14 countries Subsidiaries are there Internationally — UK,Russia, Canada Branches in Singapore, Bahrain, Hongkong, Sri Lanka, Dubai, & various representative offices in China, South Africa,
Bangladesh,UAE. IT Products: setting of Data warehouse: Mobile Banking (tie-up with Reliance India mobile so that the customers can avail the banking services free of cost with the help of Reliance Industries Online Trading ATM Network (2250) Call Centres (2450) Internet Banking TECHNOLOGY — START FROM BUSINESS NEEDS Customer Needs Strategic Imperatives ◆ Ease of Understanding · Ease of Transacting · Low Cost · Flexibility ·Convenient Access ◆ Easy Entry and Exit · Stability & predictability · Risk Adjusted Return · Risk Containment · Minimise Cost of delivery ·Customer retention ICICI BANK -Technology as Enabler & Differentiator ◆ Expanding service delivery (a) Easy call on acceptance of technology by Indian customers (b) Reacting to new segments (a) E-enabled products and services (b) Improving internal process (c) Building global delivery plat-
forms The following guidelines of RBI have been adhered to by ICICI: -Technology -security (DDOS) distributed denial of services ) & DOS(Denial Of service),making system available all time as per business requirements -Legal issues(The Information Technology Act ,2000) -Regulatory issues as suggested by RBI are: Ø At the minimum the Bank should use the proxy server type of fireball(High level of monitoring using logging and auditing tools) Ø Real time of security alert Ø PKI (Public Key Infrastructure ) for Internet Banking used Ø Security personnel and end users be there Ø Information Security Manager and IT Auditors do periodical inspections of Systems (passwords, no backdoor traps, check lags in E-mails, outsourcing monitoring ) Ø Physical access controls monitored Ø Proper infrastructure and schedules for backup Ø Internal and external security being regulated and monitored. CONCLUSIONS AND RECOMMENDATIONS
Banks are reaping following benefits with the use technology: ◆ With low investments, banks would be able to satisfy a large customer base ◆ With modern facilities more customers are attracted to the bank and they are viewed as technology savvy a modern state of art ◆ Now Banking services are customer centric than the service centric as dreamt earlier ◆ Network sharing by different banks enables to reduce investments and service better to clients ◆ Cost per customer becomes low and thus more profitability and a better corporate brand image of the bank is there ◆ Technology helps to track key customers and provide tailormade /customized services ◆ Technology helps to widen portfolio mix ◆ Provides more intra interface and helps Banks to adapt to strategies of minimisation of risk and maximise returns ◆ The customer service costs decrease and the productivity of the staff increases and this also adds to profitability of the banks. There is a need to redefine the business model of the Indian banking sector so as to optimize the resources and deliver world class service in the light of modern day technology. In India we need a 24x7 payment systems that will ensure credit to end beneficiary's account within two hours with significantly lower costs. The RBI should adopt steps to reduce the paper based instrument. In the run of providing more and more technology intensive services to the customer and to face the competition banks have not been able to look the other side of the coin. The abuse of technology is there viz — credit card frauds, accounting frauds, hacking. The next phase of growth will be in the emergence of “secured online banking through shared networks.” The
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MODERN TIMES
REDEFINING
EDUCATION The education system in India has undergone a dramatic change. From the traditional gurushishya mode of teaching, the emphasis has now shifted keeping in mind the practical aspect of teaching keeping in mind what the industry needs
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T
In the early Middle Ages, the purpose of he history of education is long and extensive, since the term “education” education was to advance spiritual wellencompasses a broad range of imple- being and promote socially “proper” forms mentations that have led to different forms of knowledge. It was not until the colonial of schooling throughout the centuries. The era that Western education sought to advance practical industrial ancient Indians followed the needs. When the Europeans gurusishya parampara A embarked on colonial expansion Gurukul (Guru refers to teacher in the 17th century, they realized or master, Kul refers to his that their system of education domain) is a type of ancient needed to be changed to be Hindu school in India that is res“associated with citizenship, idential in nature with the nation-building, practical and shishyas or students and the secular knowledge, and the teacher living in proximity, many advancement of a technological a times sharing the house. civilization and private Gurukul was also a place Meenakshi Roy enterprise.” where the students resided “In the 20th century, all together as equals, irrespecDP Co-ordinator educational disciplines (both tive of their social standing. The guru-shishya parampara is a hallowed technical and non-technical) have been tradition. At the end of a student’s study, increasingly scrutinized on their ‘use’ the guru asks for a guru dakshina. A guru value.” All contemporary fields of study can dakshina is the final offering from a student be judged beneficial or not beneficial based on how useful they will be to a person tryto the guru before leaving the ashram. When great philosophers, such as ing to get a job in a world that is becoming Aristotle and Plato, arrived on the scene increasingly dependent on workers trained they changed the way that people were in technological disciplines. In keeping with modern needs various educated. To both philosophers, “training the mind was more important than training systems of education have evolved, The the hand,” and labourers did not deserve to Cambridge University conducts the CIE be educated because knowledge was only examinations, the IBO offers three programmes — the primary, middle and for the gifted thinkers (Gomez, 2001).
senior levels. These are gaining popularity along with the national system in India. The IB programme was founded in 1968 by the International Baccalaureate Organization (IBO), a non-profit educational organization based in Geneva, Switzerland. Despite having its headquarters in Switzerland, the IBO is an international organization, not associated with any particular country and free of national political educational agendas. The IBO aims to develop inquiring, knowledgeable and caring young people who help to create a better and more peaceful world through intercultural understanding and respect. To this end the IBO works with schools, governments and international organizations to develop challenging programmes of international education and rigorous assessment. These programmes encourage students across the world to become active, compassionate and lifelong learners. The Diploma programme is a rigorous pre-university course of studies, leading to examinations that meet the needs of highly motivated secondary school students between the ages of 16 and 19 years. Designed as a comprehensive two-year curriculum that allows its graduates to fulfill requirements of various national education systems, the Diploma programme model is based on the pattern of no single country but incorporates the best elements of many. The University Of Cambridge International Examinations (CIE) conducts the IGCSE, A and O level exams among others. The CIE is a not for profit organisation and caters to a large community of students all round the world.
The Banyan Tree Word School empowers each student to have the confidence to understand that every goal can be attained. Small classes provide individual attention, resulting in individual growth. Through integration of science and art, skill and sportsmanship a nurturing balance is instituted so that each student can find his/her own success. Collaborative learning coupled with innovative teaching techniques, helps each student to interact in a group setting providing a community of learning. The teaching staff utilizes their experience, wisdom and warmth to create a dynamic academic environment. Teaching combines the best of tradition and innovation, providing students with a solid foundation in humanities, social and natural sciences, foreign languages, the arts and technology. The The Banyan Tree Word School, a new school for a new century is strategically located in Gurgaon. The school brings the latest in academic pursuits to the national capital region of India. The The Banyan Tree Word School is committed to the IB and CIE programmes. It is a centre for CIE and trains students for the IGCSE and A level exams .It is remarkable that within a short span of time the school has been accorded â&#x20AC;&#x2DC;candidate statusâ&#x20AC;&#x2122; by the IBO at all the three levels. The school recognizes the need to equip students with an education, an international curriculum of the highest quality aimed at the intellectual, emotional and social development of the students. Ref: www.cie.org.uk www.ibo.org www.google.com
When the great philosophers like Aristotle and Plato, arrived on the scene in 350 BC, they changed the way people were educated. For both philosophers training the mind was more important than training the hand
The
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CHANGING PHASE
Why Retail Outlets Succeed?
(This is a sequel to the first one and their value propositions. ‘Modern Retailing in India: Growth Indian retailing has remained Trail and Key Challenges’ by the largely unorganized contributing same author published in our pre- about 97% of the total retail sales. vious issue, Edge - Jan,07) Estimate of size of the retail sector Top three critical factors for suc- largely vary between US $ 250 to cess of a retail outlet are US $ 350 billion and the location, location and sector is expected to location. That was pergrow by 12% to 15% a haps true for years gone year. Estimate of the by, but not any more. number of retail outlets Organized modern retailin India vary greatly from ing has thrown up varione million to five milous formats that are lion. By the EIU working on a variety of (Economist Intelligence value propositions not Unit) estimates, tradijust based on locational retailers tion. Sachchidanand Karna dominate the marInnovations in ket and 96% of the Assistant Professor (Economics) format besides in five million retail technology, supply outlets are smaller chain logistics, cost management than 500 sq. ft. in retail space. and store operation is changing the Organized retailing in India is way the retail businesses used to about US $ 8 billion, just about 3% run and wrestle to grow in increas- of the total retail sector and is ingly competitive and globally inte- expected to grow by 18% to 20% a grating markets. Table I describes year to become US $ 22 billion the various common retail formats business by 2010 and cross US $ 50 The
38 Edge
million mark by 2015. The growth would be much faster if infrastructure (warehousing, roads and transportation, real estate and power) develops faster, reforms remove legislative hurdles (relating to labor laws and real estate development) and the government allows FDI more freely into the sector. Indian retailing remains fragmented resulting in poor economies of scale, long supply chain leading to very high mark-up of prices, poor handling, warehousing and transportation leading to high cost of distribution and losses; and traditional and outdated in terms of implementation of technology and support systems. In spite of the challenges, favourable changes in income dynamics brought about by economic growth of 7-9% a year, favorable shift in demographics, changes in spending pattern make Indian retailing the most promising for investment in the world. The ‘Global Retail Development Index (GRDI)’ prepared every year
Table 1
Value Propositions of Modern Retail Formats Format
Description
The Value Proposition
BRANDED STORES
Exclusive showrooms either owned or . franchised out by a manufacturer Offers most brands focusing on a specific consumer need Large stores having a wide variety of products, organized into different departments Extremely large self-service retail outlets Stores selling at discounts based on high volumes and economies of scale Larger than a supermarket, often with a warehouse s look, generally located at outskirt Small self-service formats located in crowded city areas. An enclosure having different formats of in-store retailers - all under one roof.
Whole range of the brand avail-able, assured quality Greater choice easy to compare brands
SPECIALTY STORES DEPARTMENT STORES SUPER-MARKETS DISCOUNT STORES HYPER- MARKETS CONVENIENCE STORES SHOPPING MALLS
by management-consulting firm AT Kearney to measure the investment attractiveness in retail sector of 30 odd emerging economies based on 25 macro-economic and retail-specific variables puts India at the top in 2006. India ranked number one for the first time in 2005 changing its number two position of 2004 with Russia. Experts and various sector analysis (by AT Kearny, KPMG, Morgan and Stanley, KSA Technopak) conducted in the past 2-3 years suggest that there is no better time than now for investors and entrepreneurs to make move to tap the immense opportunity that
With the entry of biggies like Wal Mart, Tescos and Metro, the retail sector in India is all set for a giant leap. So much so that even Indian biggies are busy rolling out their expansion plans and are foraying into more cities and different market segments with multiple formats
One stop shop for varied consumer needs Low Prices Low prices, vast choice & services . such as cafeterias Convenient location & long op. hours. Variety of shops available to each other.
exists in organized retailing. No wonder that Reliance has sensed it and is hurrying its mega plan of investing Rs 300 billion in the coming five years and is targeting a turnover of Rs 900 billion by 2010. The current biggies of the organized retailing like RPG, Pantaloon, Tata, K Raheja Corp, Lifestyle and Piramyd are busy rolling out their expansion plans and are foraying into more cities and different market segments with multiple and varied formats (refer Table 2). South India’s retailers — Nilgiri’s, Subhiksha and Trinethra — are set to fan into other regions. For modern retailers, retail format is a key strategic choice and can provide an edge to the retailer. Organized retailers in India are working on a variety of formats, ranging from discount stores to supermarkets to hyper-markets to specialty chains (refer Table 2). AT Kearny’s analysis of formats and timing (of entry) patterns based on GRDI ranking of 2004-2006 give an indication of what formats will work best. Figure 1 compares the successful formats in two types of markets — markets that are in opening and peaking stages (markets that have consistently risen on GRDI eg India, Russia, Slovenia, Ukraine) and the markets that are in declining or closing stages (markets that have consistently fallen on GRDI eg Hungry, Slovakia, Czech The
Edge 39
Republic, Turkey). In emerging and peaking markets, supermarkets and ‘Cash and Carry’ formats are most successful. In declining markets, where international competition is well entrenched, discount stores and hypermarkets are better options. In KPMG’s Survey of CEOs of Indian retail companies conducted in 2005, specialty stores and supermarkets were considered high growth formats each by 45% of the CEOs interviewed followed by hypermarkets (36%), discount stores (27%), convenience retailing and e-retailing each by 9% of them.
Table 2 presents the current landscape of organized retailing - the leading retailers, their evolving mix of retail formats and future plan for expansion. Notes to the table: Out of 93 Foodworld stores, 44 Food world stores along with Health and Glow stores went to DFI, the JV partner of RPG group in retail, after JV's split. Pantaloon also is into Health and Beauty Chain (Star & Sitara and Health village), Kidswear stores (Gini & Jony), Books, music, gifts and stationery stores (Depot),
Pharmacy (Tulsi), e-retailing (ezones) and Fashion stores Tata’s retail of automobiles is through dealer distribution channel. Watches retail -through over 188 World of Titan showrooms spread across 109 cities — had sales over Rs 6.55 billion, jewelry through 83 Tanishq showrooms had sales of over Rs 7.9 billion in FY 05-06. Trent acquired 76% stake in Landmark — book and music retail stores chain. Landmark stores — three in Chennai, one each in Bangalore, Mumbai and Kolkata (JV in Kolkata with
Table 2
Evolving Mix of Retail Formats and Expansion Plans of Leading Retailers Retailer
Evolving Format Mix
Outlets Now
Expansion Plan
Pantaloon Retail (Est. '87 as Menzwear Pvt Ltd, into retail from '97. T.O.: Rs. 11 billion)
S: Small format outlets (Shoppe) Department Store (Pantaloon) A: Supermarket (Food Bazaar) Hypermarket (Big Bazaar) Mall (Central).
100 stores in 25 cities (3.5 mill. sq. ft.): 3 Malls, 20 department, 27 Hyper& 43 super- markets.
Plans to add retail space of 30 million sq. ft. by 2010 taking turnover to Rs. 300 billion in FY 2009-10 boosted also by its foray in real estate, insurance and consumer finance.
K Raheja Group (Started in 1991; T.O.: Rs. 6.75 billion)
S: Department Store (Shopper's Stop) & Specialty Store (Crossword5) A: Malls (Inorbit - Mall development & management), super- and hyper- markets
19 department stores (9 cities) & 34 Crossword (Book & Music) stores (10 cities)
55 Hypermarkets each with retail space of 80100 thousand sq. ft. in Tier I & II cities. Revenue of US$ 100 million by 2015. 40 Mothercare stores in next 5 yrs.
RPG Retail1 (Est. 1996, T.O.: Rs. 4.5 billion for in this FY)
S: Supermarket (Food World) A: Hyper4 Hyper stores, 49 Food market (Spencer's) Specialty Store (Health and 265 Music World & Glow, Music World) stores (6 lakh sq. ft.)
50 more Hyper stores (3.5 mill sq ft) by Mar '08; 200 more Music World stores. "Books and Beyond" format for book-store, Music World and café together.
Tata3/ Trent4 (Est. 1998; T.O. Rs. 3.58 billion)
S: Department Store (Westside) A: Hypermarket (Star India Bazaar)
23 Westside stores (14 cities)
27 stores in next 12 DLF malls scheduled for construction. Total 100 stores by 2010.
Life Style Intl. (Landmark Grp) (T.O.: Rs. 3.5 billion '04-05)
S: Department Store (Lifestyle) A: Hypermarkets (Max), Max value retail stores, Home & Lifestyle Centers
9 Life style stores (avg. size 46,000 sq. ft.) in 9 cities
Investment of Rs. 4 billion in next 5 years - 50 Max stores. 20 Lifestyle centers in next 3 years mostly planned in Tier II cities.
Piramyd Retail (Est. '99; T.O.: Rs. 1 billion)
S: Mall (Crossroads5) & Depart-ment Store (Piramyd Mega store) A: Discount Stores (TruMart)
8 department stores and 12 supermarkets
Plans to add 1.75 mill. sq. ft. of retails space through 150 stores in next 5 yrs.
Adani Group (T.O.: Rs. 1.15 billion)
S: Acquired 'Raviji Supermarket'. A: Hyper-marts & smaller neighborhood stores
50 stores in nine cities of Gujarat
15 additional outlets in Gujarat by '06. Plan to expand to Rajasthan, Maharashtra, M.P. and Chattisgarh next.
Nilgiri's (Est. 1905; T.O. of Rs. 3 bill. for '06-07)
S: Vegetable, fruits and grocery stores A: Franchisee chain of coffee shop-cumsnack bars
36 outlets - all in south Indian cities
Increase outlets to 50 and turnover of Rs. 4 billion by 2007.
Subhiksha (T.O.: Rs. 3.4 billion)
S: Supermarket and pharmacy chain - low cost, low cap model. A: Opening small functional outlets (1500-2000 sq. ft.)
145 stores in 31 cities of Tamilnadu
600 more outlets across India by '07 with investment of Rs. 3 bill. & sales of Rs. 6 bill. 145 outlets in NCR to roll out first
Trinethra (T.O.: Rs. 1.7 bill)
AP based grocery chain mostly having bakery attached. 83 stores in A.P., 26 in Banglore and 25 in Chennai
Targets 220 stores spreading further in South and revenue of Rs. 3 billion by Mar '07.
Vishal Mega-mart (T.O.: Rs. 2.88 billion)
Delhi based retailer primarily in clothing and accessories - 32 large stores in Delhi and North Indian cities.
220 outlets (5 mill. sq. ft.) all India, investment of Rs. 12.5 bill. & Sales of Rs. 15 bill by '10.
2
(T.O. = Sale turnover for FY 05-06 if not mentioned otherwise; S: Retail format started with; A: retail formats added later.)
The
40 Edge
Enami) range from 12,000 to 45,000 sq ft. It added Rs 620 million in Trent’s kitty during Aug 05Mar 06. Cross road malls have been sold to Pantaloon for Rs 4 billion. Among others, Ebony (DS Group) started in 1994 and has seven stores in Delhi and North India. The public sector oil company, BPCL, runs 580 ‘In & Out’ convenience stores in 120 cities. Interestingly it has entered alliances for retailing with leading FMCG companies (ITC, Pepsi, Cadbury’s, and Gillette), ATMs, Western Union Money Transfer, music stores, Coffee and snacks (Cafe Coffee Day Express) leveraging on the network of 6,600 fuel retailing outlets across the country and over 1.6 million petro-card members. Reliance Retail which has started with 100 co-owned fast food joints
(motels format) located with petrol filling stations on highways — at present it has 1000 stations. It plans to roll out hyper-markets, supermarkets, discount stores, department stores, convenience stores and specialty stores. With planned investment of Rs 250 billion in next five years, it targeting revenue of US $ 20 billion by 2010. First phase of 1,575 stores will come up by March, 2007 for which RIL has already sanctioned an initial investment of Rs 33.5 billion. Starting with cities in Maharashtra, Gujarat, Punjab, West Bengal and Andhra Pradesh, it plans to spread to 800 cities across India by 2010. Bhart-Walmart and Aditya Birla group will start their retail outlets in the latter half of 2007. Evolution in retail formats as organized retailing expands and matures: The winning format for a firm depends on real estate prices,
choice and availability of location, nature (demographics, spending power and pattern) and size of the local market, besides the firm’s strategic goals. For example, Tier II, cities like Kanpur, Ahmedabad, Indore, Agra, Baroda, Lucknow, Ludhiana, Jaipur and Surat are seen as more promising in terms of return on investment and growth potential compared to many Tier I cities where real estate prices are high and at times unworkable. According to industry reports, organized retailing in Tier II cities is growing at a staggering 50-60% a year compared to 35%-40% in the large cities. This is because of lower real estate prices, cheaper labour and lower employee attrition in smaller cities. Of the 700 new malls coming up all over India, 40 % are in the small cities. The retail formats chosen by the companies are evolving as they are expanding and getting into newer geographies, smaller towns and look for growth through Tier II and Tier III cities. Companies like Reliance who are planning to fan into 800 cities, townships and even rural centers are adopting a multiple format so as to suit the setting. Music World of RPG Retail operates in three formats — Music World Destinations of 4000 sq ft size, Music World Express in 300-400 sq ft space and Music World Unplugged — single gondola placed in high traffic outlet. Tesco is introducing a smaller store under the Magnet banner in the larger Indian cities where space is limited. Subhiksha, south based retail chain, works on low-cost lowcapital investment model. It leverages on high volume of purchases and offers discount to consumers. It is setting up 145 outlets in Delhi NCR with an investment of about Rs 1.2 billion. With FDI restrictions likely to be eased off and entry of Wal-Mart, Germany’s Metro and Britain's Tesco will take the organized retailing to another level, the kind that Reliance with matching financial muscle has already embarked on. The
Edge 41
CHALLENGES AHEAD
MARKET IN THE NICK
T
he simple question â&#x20AC;&#x201D; there is a niche in the market, but is there a market in the niche? has, perhaps, been the single-largest stumbling block in some of the most elaborately-laid marketing plans in the last decade. This is specially true of the consumer electronics market, where technological differentiators between products and brands have quickly disappeared. Marketers have, as a result, spent more time finding a positioning for a product than, perhaps, for any other activity. Not all of it, unfortunately, has been spent wisely. This problem is quite simple. Many marketers have tried to segment the market using traditional tools. So, you have the age-old classifications based on consumer locations (urban vs rural, A-1 towns vs B-1 towns), age-profiles (young vs old), gender (male vs female), and economic strata. A matrix of this information is also used to arrive at The
42 Edge
Dr. Deepanker Mukherjee Professor (Marketing)
an estimate of a market in a particular segment, and the products for that market. But the reality is beyond this two-dimensional matrix. Every marketer must take into account several other factors that differentiate the market. They include: Exposure Levels: In economics, it is called the demonstration effect. Which implies that a consumer
tends to want what he or she sees around himself or herself. But this effect presumes that the consumer is exposed to information. Logically, the higher the degree of exposure to information, the higher will be the aspiration level. For example, the aspiration levels of a family exposed to satellite television will be different from that of a family unexposed to it. The other factor is mobility. Purchasing Power vs intention to buy: This is differentiator that is missed by most. Having identified a target group according to its socioeconomic characteristics, it is safely assumed that all you now have to do is reach out to these consumers and they will lap up the product. This, unfortunately, is not necessarily true. Of course, a consumer needs to have purchasing power to buy your product. But, more importantly, he or she also needs to have the intention to buy it. In an increasingly con-
sumerist world, this is not necessarily true. For example, someone may have the means, as well as the need, to buy a rocking chair. But if the space in his house does not allow it, the buying decision is unlikely to be made. If this differentiator is factored in, several marketers would find the size of their markets shrinking quite dramatically. In the above example, the market would not just be families with a disposable income of, say, Rs 20,000 with at least one retired person, but families with a disposable income of Rs 20,000 with at least one retired person and an open floor area-as opposed to that occupied by other furniture-with certain dimensions. Utility: Economics teaches us the law of diminishing marginal utility. Marketers may do well to remember it. Unless a consumer finds utility from a product, she is unlikely to buy it. This utility could well be in terms of the physical benefits that the product delivers-an air-conditioner, for example-or in terms of enhanced self-perception: A boost in self-image with the use of a designer wear. But this kind of utility diminishes more rapidly than marketers can introduce products in the markets. If someone has half-a-dozen designer watches, she is unlikely to buy another. Similarly, people may lust for imported labels of designer wear till they are available in the country. But once these are marketed here, and almost anyone with enough purchasing power can buy them, its utility in terms of the enhancement of self-esteem is lost. In such a scenario, a buying decision is unlikely to result. A marketer, thus, needs to be keenly aware of the kind of utility his product will offer before making an estimation of the target audience. Cultural Factors: Societal and cultural factors play a significant role in defining markets for particular products. Unfortunately, although marketers often talk about this, they rarely address it properly. This is
particularly true when the product is of a personal nature. Another example of cultural inhibitors is our psyche to avoid wastage. This holds in the consumer durables replacement market. Try and convince a consumer to junk his exciting, but outdated, television set for a state-ofthe-art set-and even if he fits into the profile of your ideal consumer, the chances are that he will refuse to do so. The solution, then, is to offer him some kind of an exchange scheme. As long as he feels that he is getting some value for his old set-in terms of a reduced price-he can be initiated into making a purchase decision. Of course, cultural factors are also dynamic and changing constantly. What may be a negative influence today, as far as a buying decision for a product is concerned, could well become a positive influence tomor-
row. The point is, if you are marketing a product which will be affected by cultural inhibitors, at least in the short-to medium-term, be prepared for a long haul. What this really means is that marketers have to view consumers as more than just a demographic or a socio-economic composition. They have to look at the basic human motivations, which differ from one consumer to another. Only when they do that can they really begin to find out what motivates a specific consumer to buy a product, and what motivates him or her to buy a specific brand. This country has many diversities with regard to consumption patterns. Thus, in reality, it is a conglomeration of several markets in which people tend to differ. People can be regrouped demographically, economically, and socially, but even within these groups, each set of consumers can be differentiated further. For instance, individuals sharing a common demographic profile may show variations in terms of a cultural and demographic mosaic. The marketer has to recognize all these differences since each individual represents a unique opportunity. Segmentation is dynamic and extends beyond the traditional twodimensional classification. We need to treat it as three-four or fivedimensional segmentation to the third dimension. However, it is only the gut feeling of the marketer that will help him venture into the fourth and fifth. Thus, segmentation itself becomes a multi-dimensional issue, and a marketer has to face a complex matrix in terms of positioning products. Most textbooks do not talk about this kind of segmentation because we have learnt most of this on the ground level. As with societies, so with markets. They change with the passage of time. Only those companies that can adapt to these changes, and innovate to serve the evolving needs of customers can hope to survive. The
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SUCCESS STORY
EXTRAORDINARY DEVELOPMENT OF FINANCIAL DERIVATIVES Financial derivates have been the most significant development that the world has seen in the past decade. It has certainly revolutionarised the way business in being done today The most significant event in tives contract can also be seen in finance during the past decade the ages before Jesus Christ. has been the extraordinary develIn Genesis Chapter 29, believed opment and expansion of financial to be about the year 1700 BC, derivatives. These instruments Jacob purchased an option costing enhance the ability to differentiate him seven years of labour that risk and allocate it those investors granted him the right to marry most able and willing to Laban’s daughter Rachel. take it — a process that His prospective father-inhas undoubtedly law, however, reneged, improved national properhaps making this not ductivity growth and only the first derivative standard of living. — but the first default on a Alan Greenspan, derivative. Laban Chairman, Board of required Jacob to marry Governors of the US his older daughter Leah. Federal Reserve System. Jacob married Leah, Although derivabut because he preMeena Bhatia tives are new ferred Rachel, he instruments, they purchased another Assistant Professor (Finance) are not a just made option, requiring creation. Therefore, it is important seven more years of labour, and to understand their various appli- finally married Rachel, bigamy cations and its background. The being allowed in those days. Jacob history of these products is much ended up with two wives, twelve longer than one can think. The sons, who became the patriarch of characteristics of derivative con- the twelve tribes of Israel, and a lot tracts can be found in of domestic friction, which is not Mahabharata. Indication of deriva- surprising. The
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Some argue that Jacob really had forward contracts, which obligated him to the marriages but that does not matter. Jacob did derivatives, one way or the other. Around 580 BC, Thales the Milesian purchased options on olive presses and made a fortune off of a bumper crop.Marcantile trades from Genoa & Narples. The first “futures” contracts are generally traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardized contracts, which made them much like today’s futures, although it is not known if the contracts were marked to market daily and/or had credit guarantees. Forward contracts in US earlier
Table1: Chronology of Events leading to Derivatives Trading 1956
Enactment of the Securities Contracts (Regulation) Act which prohibited all options in securities
1969
Issue of Notification which prohibited forward trading in securities
1995
Promulgation of the securities Laws (Amendment) Ordinance which withdrew prohibited on options
1996
Setting up of L.C. Gupta Committee to develop regulatory framework for derivatives trading in India
1998
Constitution of J. R. Varma Group to develop measures for risk containment for derivaties
1999
Enactment of the securities Laws (Amendment) Act which defined derivatives as securities
2000
Withdrawal of 1969 Notification
May 2000 SEBI granted approval to NSE and BSE to commence trading of derivatives June 2000 Trading in index futures commenced June 2001 Trading in index options commenced Ban on all deferral products imposed July 2001
Trading in stock options commenced Rolling settlement introduced for active securities
Nov. 2001 Trading in stock futures commenced
Source: www.nseindia.com
addressed merchants’ concerns about ensuring that there were buyers and sellers for commodities. But then there was a serious concern towards ‘credit risk’. To deal with this problem, a group of Chicago businessmen formed the Chicago Board of trade (CBOT) in 1848. In 1865, the CBOT went one step further and listed the first ‘exchange traded’ derivatives contract in the US; these contracts were called ‘future contracts’. Chicago Mercantile Exchange (CME) which was earlier Chicago Butter and Egg Board, a spin off of CBOT, was reorganized to allow futures trading in year 1919. The today are the largest financial exchanges in world today. During the mid eighties, financial futures became the most active derivative instruments generating volumes many times more than the commodity futures. It was at the Kansas City Board of Trade that stock index futures were born, hailed as the most innovative financial instrument of the 1980s. India has very large agriculture production in number of agri-commodities, which needs use of futures and derivatives as pricerisk management system. In India also derivatives have had a long presence. Commodity derivative markets started in India in cotton in 1875 and in oilseeds in 1900 at Bombay. Over a period of time the derivatives market developed in several other commodities in India. Following cotton, derivatives trading started in raw jute and jute goods in Calcutta (1912), wheat in Hapur (1913) and in Bullion in Bombay (1920). After Independence, the Constitution of India adopted by Parliament on January 26, 1950 placed the subject of “Stock Exchanges and Futures Market” in the Union list and therefore the responsibility for regulation of forward contracts devolved on Government of India. The Parliament passed Forward Contracts (Regulation) Act, 1952 which presently regulated forward The
Edge 45
contracts in commodities all over India. Financial Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2001. SEBI permitted the derivative segments of two stock exchanges, NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivatives contracts. To begin with, SEBI approved trading in index futures contracts based on S&P CNX Nifty and BSE-30 (Sensex) index. This was followed by approval for trading in options based on these two indexes and options on individual securities. Trading and settlement in derivative contracts is done in accordance with the rules, by-laws, and regulations of the respective exchanges and their clearing house/corporation duly approved by SEBI and notified in the official gazette. Foreign Institutional Investors (FIIs) are permitted to trade in all Exchange traded derivative products. The term “derivative” indicates that it has no independent value, ie its value is entirely “derived” from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities With Securities Laws (Second Amendment) Act, 1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:— derivative includes: Security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security Contract which derives its value from the prices, or index of prices, of underlying securities. The
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Table:-1
Turnover in the cash and F&O segments in NSE (Rs. Cr.) Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Source: NSE
Cash Segment 13,39,510 5,13,167 6,17,989 10,99,534 11,40,072 15,69,558
Derivative Market 2,365 1,01,925 4,39,865 21,30,649 25,47,053 48,24,251
Table-2
Derivative (F&O) Market: Total No. of Contracts (NSE) 2005-06 15,76,19,271
2004-05
2003-04
2002-03
2001-02
2000-01
770,16,465
5,68,86,776
1,67,68,909
41,96,873
90,580
101,925
2,365
Turnover in derivatives contracts traded on (NSE) 4,824,175
2,546,986
2,130,612
439,863
Source: www.nseindia.com Table-3
(Rs. Cr.)
Business growth of futures & options market: NSE & BSE Turnover BSE Month/Yr 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Index Futures 1,673 1,276 1,811 6,572 13,600 5
NSE 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
2,365 21,482 43,951 5,54,462 7,72,174 15,13,791
Stock Futures
Interest Rate Futures
Index Options
Stock Options
Total
452 644 5171 213 0.48
-
83.8 1.4 0 2297.2 3.2
114 21 332 3 0.09
1,673 1,922 2,478 12,074 16,112 8.77
51,516 2,86,532 13,05,949 14,84,067 27,91,721
20 -
3,765 9,248 52,823 1,21,954 3,38,469
25,163 1,00,134 2,17,212 1,68,858 1,80,270
2,365 1,01,925 4,39,865 21,30,649 25,47,053 48,24,251
Source: SEBI Table-4
(Rs. Cr.)
Comparison of growth in futures & options market: BSE & NSE Turnover BSE Month/Yr 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Source: SEBI
Futures 1,673 1,728 2,455 11,743 13,813 5
Options __ 197.8 22.4 332 2300.2 3.29
NSE Futures 2,365 72,998 3,30,485 18,71,368 22,56,203 43,05,452
Options __ 28,929 1,09,377 2,70,023 2,90,779 5,18,722
The various types of derivatives contract that BSE and NSE are offering are Index Futures, Index Options, Stock Futures, Stock Options and Weekly Options (only on BSE). Other way of classifying the derivatives contract is by markets ie over the counter and exchange-traded. Over-the-counter contracts (OTC), such as forwards and swaps, are bilaterally negotiated agreements between two parties. The terms of an OTC contract are flexible, and are often customized to fit the specific requirements of the user. OTC contracts have significant credit risk, ie risk of counter party that owes money defaults on the payment. In India, OTC derivatives are in general prohibited with some exceptions. Some contracts are specifically allowed by the Reserve Bank of India (RBI) and commodity derivatives which are regulated by the Forward Markets Commission are traded informally in forwards markets. An exchange-traded contract, such as a futures contract, has a standardized format that specifies the underlying asset to be delivered, the size of the contract, and the logistics of delivery. They trade on organized exchanges with prices determined by the interaction of many buyers and sellers. Margin requirements and daily marking-to-market of futures positions substantially reduce the credit risk of exchange-traded contracts, relative to OTC contracts. Contract performance is guaranteed by a clearinghouse, which is a wholly owned subsidiary of the NSE. In India, two exchanges offer derivatives trading: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). NSE accounts for almost 99% volume of exchange-traded derivatives. Derivatives result in higher volumes in underlying market. The participants who were not trading earlier because of lack of arrangement to transfer risk also start trading. Derivatives have a number of
In India, OTC derivatives are in general prohibited with some exceptions. Some contracts are specifically allowed by the RBI and commodity derivatives which are regulated by the Forward Markets Commission are traded informally in forwards markets
advantages such as hassle free settlement, lower transaction cost, flexibility in terms of various permutations and combinations of trading strategies. Hence, they provide greater liquidity and ease in transacting for investors. The developments in Indian sce nario : A variety of developments have been taking place in India on the subject of derivatives markets. From 2003 onwards, derivatives turnover has exceeded spot market turnover, as is the case with all successful derivatives markets in the world. This underlines the importance of the derivatives market ie price discovery. (see Table-1) In terms of volume and turnover, NSE is the largest derivative exchange in India. Currently the derivative contracts have a
maximum of three month expiration cycle. All these derivative contracts are settled by cash payment and do not involve physical delivery of the underlying product. Derivatives on stock indexes and individual stocks have grown rapidly since inception. In fact, NSE has the highest volume (i.e. number of contracts traded) in the single stock futures globally, enabling it to rank 16 among world exchanges in the first half of 2005. The rank was 17 in year 2004 and ranked 21 in year 2003. The number of stocks on which individual stock derivatives are traded has gone up steadily, from 31 in 2001 to 118 today, which has helped in the percolation of liquidity and market efficiency into the second tier of firms. (see Table-2) Interest rate futures were introduced in June 2003 but, in contrast to equity derivatives, there has been little trading in them. One problem with these instruments was faulty contract specifications, resulting in the underlying interest rate deviating erratically from the reference rate used by market participants. (see Table-3 and Table-4) Futures exchanges exist in all major economies, and in fact have become the most important financial markets in the world. The key reason for this success has been that futures and options filled a very real lacuna in the financial system. Before this, there was no mechanism to protect traders or businessmen or banks from price risk â&#x20AC;&#x201D; either in dollars, or oil, or sugar or any asset/ security/commodity that they may have positions in. Essentially derivatives provide a means for hedging or a kind of risk insurance. Numerous studies show that derivatives are a low-cost, effective method for users to hedge and manage their exposures to interest rates, commodity prices, exchange rates or stock prices. This is supported by the progress which it has made in Indian market. The
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BOOKMARK
A deeper insight into the subject would have explored it all
H
ow do we identify Amartya Sen? The Nobel Prize winner, bespectacled economist of Indian origin settled in America having his roots in eastern India! That’s more or less how we ‘identify’ Amartya Sen. This perception of a human being leading to formation of an identity is the basis of the book, the identity which has its origin from religion cultures, class, civilizations and nationality. Smashing such stereotypes as “the monolithic Middle East” or “the Western Mind,” Amartya Sen examines the much-misunderstood concept of identity. At the core of the book is what Sen calls the communitarian view of the identity — which is omnipresent and often quite threatening. According to him the world is divided into stereotypes of religions, cultures, civilizations suppressing the other aspects of ‘human’ identity in terms of political beliefs, sense of nationality, humanitarian commitments and professional attachments. Conflict and violence are sustained by the illusion of a unique identity, overlooking the need for reason and choice in deciding on bonds of class, gender, profession, scientific interests, moral beliefs, and even our shared identity as human beings. The conditions become apt for violence and conflict when people seek and acquire a strong and exclusive sense of belonging to a single group, when devoid of its layered complexity, identity can kill. Sen observes that in our day to day lives we see ourselves as The
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BOOK REVIEW Sangeeta Yadav Lecturer (Economics)
IDENTITY AND VIOLENCE The Illusion of Destiny By Amartya Sen
One thing Sen subtly but surely drives is identity adopted for himself while narrating the book — not that of a Nobel laureate but that of a very ordinary concerned human being making a fervent appeal for moderation and tolerance
members of a variety of groups. However, at critical junctures, we disown that knowledge. He asks, is it because human cognition tends to trade in binaries? Is it because violence creates identity as much as identity creates violence? Sen touchingly tells the story of how as a child he was witness to the mindless killings that accompanied the Hindu-Muslim riots in the run up to the Partition of India. Many of the people killed belonged to same class i.e. 'labour class' but their identification as belonging to a religion was prioritized than their class. Sen also dons the hat of an economist while discussing the issues of globalization and antiglobalization which he argues can actually result in benefits for the underprivileged and need not be imperialist while the anti-globalisation movement is in fact fighting for a better 'global' order and can thus be seen as a part of globalization itself. One thing Sen subtly but surely drives is identity adopted for himself while narrating the book — not that of a Nobel laureate but a that of a very ordinary concerned human being making a fervent appeal for moderation, tolerance, taking a singular identity view of the world and peaceful co-existence. To summarise, Sen’s book succeeds in analyzing the politics of identity and violence — a subject of immense relevance to the world we live in today. Although a deeper insight into the subject would have explored it in all its dimensions.
Making Globalization Work
G
lobalization has passed its initial high-pitched `for' and `against' stage. Some two decades after it appeared, the arguments still continue, but it is now possible to subject them to a reality check. The U.S., once the loudest champion of globalization, has begun to have doubts about it because employment of its workforce is being taken away by countries situated far away from its shores, its once `almighty' dollar is losing its strength and shine, and its global economic supremacy is being challenged. It would appear that China, once a tightly closed economy has emerged as the greatest beneficiary of opening up to the rest of the world. In India it is claimed that globalization has resulted in high rates of growth, unprecedented prosperity, and, above all, a sense of optimism about the future. Within and across nations inequalities have been growing leading to social and political tensions. This is the background to Joseph Stiglitz's second book on globalization. The Nobel Prize winner and former World Bank Chief Economist's new book, "Making Globalization Work", is billed as a sequel to his "Globalization and Its Discontents" (2002). This book surveys the iniquities of the global economy, and the mechanisms by which developed countries exert an excessive influence over developing nations. Dr Stiglitz argues that through recourse to various measures - be it overt trade tariffs, subtler subsidies, a patent system that developed countries are far better prepared to navigate, or the damage done to poor countries by global pollution the world is being both economically and politically destabilised, from which we will all suffer. Making Globalization Work
BOOK REVIEW Disha Dubey Lecturer (Economics)
MAKING GLOBALIZATION WORK By Joseph Stiglitz
exposes the problems of how globalisation is currently being managed, the vested interests behind many decisions and the prospects for negotiating fairer terms for those worst affected. Dr Stiglitz tackles the problems immediately facing the world, arguing that strong, transparent institutions are needed to turn globalisation to favour the world's poorest. Mr. Stiglitz' book is excellent in framing the inequities of economies in the developed and developing world. I'd highly recommend this book to anyone even casually interested in the world economy, or interested in global forces that are affecting their community. Stiglitz' review of trade negotiations is especially interesting, since he puts them in political
and historical contexts His objection is not to globalization itself; but to how it is managed. Stiglitz argues the United States' exerts excessive influence on the system. When poor countries seek aid, this influence attaches counterproductive economic policies and lending conditions that often undermine the borrower's sovereignty. The gist of the book seems to be that globalization can be made to work better if we just make better policies. Stiglitz stresses the importance of democracy and transparency. The poor countries have too much debt, he says, and it is largely the fault of the lenders. The debts should be forgiven, and followed by large increases in foreign aid. The poor countries have gotten back too little from trade deals, he says. They should be given free access to richcountry markets, and the fat countries should quit protecting their farmers. In trade talks, Stiglitz writes, the U.S. trade negotiator pushes for intellectual-property rights so that Americans can get paid for what they invent. At the same time, it blocks poor-country products with one-sided anti-dumping laws, an outrageous sugar quota and a ridiculous subsidy to cotton growers. He proposes a set of green tariffs to offset damage to the Earth. He also proposes a global antimonopoly authority. Some of these may seem like impossibly radical ideas now, but you never know. I strongly recommend the book to all who are eager to become familiar with the way globalization has been impacting national economies and different sections of society in many parts of the world. The book is, indeed, a global account of globalization. An urgent, compelling read! The
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No fine line separating the news and the views
S
ometimes, we come across a book that we want to finish within a very limited time. The book takes the reader to such absorbing depths that one is not satisfied by reading it once. New Public Relations and Power is one such book. The book has been edited by Simon Cottle, a professor and director of media and communication programmes at university of Melbourne. He has authored many titles dealing every aspect of the media. The planning of this book has also to be appreciated because each chapter of it has been so conceived that a subject is allotted to a well-known authority of the particular field, selected from universal spectrum. Specific areas covered in this volume include: comparative analysis of NGOs, quasiautonomous non-governmental organisations (quangos), trades unions, voluntary groups and charities — and their efforts to secure media access. The communication strategies of environmental pressure groups and ecological and cyber-activists; tabloid television and forms of cultural representation; and the ‘deliberative’ architecture of television’s news and current affairs programmes and how this variously enables and disables the public engagement of contending views and voices. Sage Publications have to be given credit for bringing out such a volume, which gives deep insight into soul and face of media. As everybody knows, what we are witnessing today in media is the most complex
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BOOK REVIEW By Dina Nath Mishra
NEW, PUBLIC RELATION AND POWER Edited by Simon Cottle
What we are witnessing today in media is the most complex phenomenon that is going to dazzle the people in the coming generations. It bombards the senses, informs, entertains and opens new horizons
phenomenon and it is going to dazzle people in coming future as well. It bombards the senses, informs, entertains and opens new horizons. It works as the advance army to the market forces. We can weed out horrendous competition for getting space and time by state’s political forces, ideologies, market forces, celebrities, organizations, NGOs and many other groups getting into mad race in search of finding space in the media, I must add ‘at my cost’ I have seen Governments trembling in front of media’s anger. We have all seen instant birth of a celebrity and its sudden demise also. It looks that media relishes the demolitions more than the creations. In today’s promotional times PR occupies a central position. “Defined as ‘the deliberate management of public image and information in pursuit of organisational interests’, the practice and institutions of public relations have grown across the twentieth century into a major industry. Indeed, in recent years this growth has assumed exponential proportions. The rise of the public relations industry, and its associated army of public relations consultants and so-called ‘spin doctors’ employed by Governments and corporations, pressure groups and celebrities, mirrors the rise of an increasingly media aware, and ‘mediatised’ society — a society where
both commercial interests and Globalization has also unquestioning adherence on the cultural identities seemingly increased the flow of finance, basis of tradition alone compete for media space and peoples and the culture around (Giddens 1994). strategically mobilise forms of the globe. Globalisation also Traditional solidarities of communicative power.” consolidates modernising class and political allegiance Corporate sector or any other impulses, including the disenrooted in the social relations of organization can purchase time chantment of the world where mass production have also been and space in media at a negotifaith and tradition become subweakened in respect of new ated price. But an advertiseject to Max Weber’s ‘iron-cage’ flexible arrangements of social ment is less credible. It becomes of instrumental reason. production and cultural patten times more credible if Pronounced individualism, conterns of consumption; this has shown as part of a news story. sumerism and technical ratiogiven rise to new forms of idenNewspapers and TV channels nality undermine traditions and tity politics, new social movehave devised methods of selling ments and other extra-parliatime and space in the form of mentary ‘subpolitics’. Together news and comments at the these constitute an expanded Globalisation price of advertisement. field of ‘the political’ within This trend is increasing civil society (Hall and has also increased the everyday. Jacques 1989; Mouffe flow of finance, peoples and If an artist or 1996; Beck 1997; actor wants time Castells 1997). the culture around the globe. It and space in Such social transalso consolidates modernising media, it has to formations have pay for it in one also produced a impulses, including the form or the other cacophony of disdisenchantment of the world where and the same courses as differapplies to almost ent state, corporate faith and tradition become subject to everyone who and group interests Max Weber’s ‘iron-cage’ of needs time and and cultural identispace in the ties compete, coninstrumental reason. Pronounced media. tend and promote a individualism, consumerism and This perhaps diversity of values does not relate to the and aims via commutechnical rationality ambit of the book but nicative action in the undermine traditions there is scope for it as media ‘public sphere’ the Indian media market (Habermas 1996). and belief has developed exponentially. I Earlier there use to be two have a feeling that the Indian clear segments in the media — media fills unadvertised space news and views. News was by the stories originated from always considered sacred; not one or the other promotional belief systems once taken for to be tempered with. Views was agency. granted. the segment in which individuAs a practice any project In ‘post-traditional times’, als could have their opinions must have a component of pubhowever, traditions do not necrun riots. lic relations expenditure. There essarily disappear but, paraNow we do not find that finer are professional newsmen in doxically, can assume a more line separating the two. It is the various media organizations but assertive and combative saddest thing that has haponly a section of that adheres to stance in response to modpened. News has been replaced objectivity. ernising/globalising forces. The by opinionated news and the We are living in the post-trapoint is that they are now so-called news analyses, specuditional and uncertain times. expected to defend themselves lating as to what happened This has increased the centraliin reasoned and self-reflective behind the scenes, giving twist ty of the media. terms and cannot assume to this or that side.
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Management development programme on Risk Management in International Business Management Development programme on Risk Management in International Business was held at the institute campus.
The first ever MDP on International marketing at the institute campus during 29 â&#x20AC;&#x201D; 31 Jan, 07. It was on Risk Management in
Senior executives of public and pvt. sector organisations attending the management development program
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International Business, organised b D Bandopadhyay, Dean, Management Training and Development. programme director was Prof Pradip Chakrabarty, Chairman, International Business Area. Participants were senior executives from a variety of public undertakings and private sector. Resource persons were in-house as well as outsourced in equal proportion. Feed back at the end was enthusiastic as most participants expressed that it was a rewarding experience which raised their awareness level on the topic prompting them to be proactive.
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Prof Conor Horan, Faculty, Dublin Institute of Technology delivering lectures on Research Methodology to the MSc. International Business Students
Faculty Development programme on Teaching Technology Faculty development program was organized on Teaching Technology on February 22, 2007. The resource person invited for the program was Dr Poonam Batra. She is a Professor of Elementary Education at the University of Maulana Azad Centre for Elementary & Social Education (MACESE), Central Institute of Education (CIE), University of Delhi. Dr Batra also has over 20 years of teaching, research, training, management and consultancy experience. The emphasis was laid on the learning process which is contingent to the type of learner & knowledge. The program was well received with enthusiastic participation from all the invitees.
One-day MDP on 'Intellectual Property Rights' for senior management of APEDA: A day-long training program on Intellectual Property Rights for Agricultural and Processed Food Products Export Development Authority (APEDA) at their head quarters. in New Delhi on February 3,2007. The program was attended by their chairman, director, advisor and senior management staff. Coverage of the relevant topics discussed thread bare during sessions evoked encouraging response and comments from the participants.
â&#x20AC;&#x2DC;The dying voicesâ&#x20AC;&#x2122; The documentary The dying voices made by FMS students under the guidance of SR Sridhar, faculty, Film and Media, has been selected for screening in National Student Video Film Festival 2007 at Lucknow. The competition was tough as there were entries from different countries.
The motive behind making this documentary is to upraise those unheard voices of Kashmiri Pandits in refugee camps. The documentary was made with the intention to highlight how the Government and the media is ignoring the plight of Kashmiri Pandits.
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Industrial visit to centre of e-governance
Students at the centre for e-governance (CEG)
Backdrop of visit: As part of the increased thrust on e-governance, Ministry of Communications and Information Technology, Department of Information
Technology, Government of India has set up a Centre for e-governance (CEG) at its premises â&#x20AC;&#x201D; Electronics Niketan in New Delhi. The centre, first of its kind in the country, showcases several
Students being given an overview of the use of the latest trends & technologies in e-governance The
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e-governance applications and solutions that have been successfully deployed in various states, and offers such other services like technical consultation, proof of concept and thematic presentations. On our visit we were joined by Deepak Jain, Project Manager, centre for e-governance. Focus of visit: In order to help the students to understand the use of latest trends and technologies used in e-governance, this Industry visit has been organized. The aim of this tour was to give students the opportunity to see the technological innovations, benchmarks and the Indian scenario of eGovernance vis-Ă -vis the International Government. The visit is intended to familiarize students with e-governance environment, and highlight the
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development of e-governance projects at the department. Activities conducted: Introduction to CEG by Project Manager, CEG: During introduction session deepak Jain, Project Manager, CEG shares his views, experience and knowledge about e-governance as well as on the different aspects of it. E-governance introductory clip: This was followed by 20 minutes of e-governance introductory movie clip. This further made the students aware of the various programs conducted in the area of e-governance. Applications showcased at the centre for e-governance. Demonstrations on the following e-Governance applications were given: Bhoomi e-Seva Lokmitra (Integrated Citizens' Service Centre) Stamps Registration and Archiving (SARITA) Question and Answer Session The visit was followed by a question and answer session. It was a 15 minute session, giving students the chance to put their questions on e-governance to the staff of CEG. Outcome from visit: The visit was very illustrative and academically stimulating experience for both students and faculty member. It was a very enlightening experience for all of us as we got exposure to latest trends and technologies used in e-governance. Students came out quite informed about the technological innovations, benchmarks and the Indian scenario of egovernance. Inputs from:Damini Grover
GUEST LECTURE
Mr. Rakesh Maheshwari, Director, IT Services, Ministry of Communication & Technology addressing the students
Organisational Information System Rakesh Maheshwari, director, IT Services, STQC Directorate, DIT, Ministry of Communication & Technology had students spellbound in his hour long lecture on â&#x20AC;&#x153;Towards Citizen-Friendly Government: The role of Information Technologyâ&#x20AC;? at IILM, Lodhi Road campus on Wednesday February 21, 2007. The lecture aimed at developing student knowledge and awareness on the role of Information Systems in Government organizations. Maheshwari provided valuable insight into the vision and mission of Government of India under the NeGP Project. He sensitized the attendees to the Ministry of Company Affairs, project and its benefits. He provided examples of the role of Information Technology in Indian Railways and talked about the key concerns while
making Government services online. His of the prospects of a growing India could only be matched by the interest with which the participants heard his views. He acknowledged the growing strength of India and was of the view that India could in the future experience reverse brain drain with more Americans wanting to join companies like Infosys. His pedigree was evident in the ease with which he handled some difficult questions from the audience. His sharp and witty talk kept the audience on its toes and engrossed in the speech. The visit was a motivating one and definitely added value to the learning of the students of IILM. Inputs from Damini Grover, Lecturer, Information and Technology
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Convocation ceremony
The second convocation ceremony for MSc students of Dublin Institute of Technology
The Second Convocation Ceremony for the award of Master of Science Degrees by Dublin Institute of Technology The Second Convocation Ceremony for the award of Master of Science Degrees by
Dublin Institute of Technology took place on Friday, March 16, 2007 at IILM Institute for Higher Education, Gurgaon. The Academic Registrar of Dublin Institute of Technology, Dr Tom Duff conferred the
Mr. Sandeep, HR leader, GE Money delivering the convocation
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degrees to the graduates of M.Sc in International Business and Marketing of the 2005-06 cohort. The Chief Guest for the occasion was Mr Sandeep Girotra, HR Leader GE Money and Mr Gabriel McCarrick, Commercial Counselor, Embassy of Ireland was also a special guest. Twenty seven students graduated in M.Sc in Marketing and International Business. The ceremony commenced with the academic procession. As the academic procession reached the dais, the ceremony began with invocation to Goddess Saraswati and the lighting of the lamp by the Guests of Honour and Prof Badal Mukherji, director, IILM Gurgaon. Dr Tom Duff gave his opening remarks and conferred the degrees and congratulated the students on their success. The chief guest Mr Sandeep Girotra delivered the
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Convocation address. Mr Girotra, in his address emphasized the importance soft skills and interpersonal competencies for succeeding in Organisations. He stressed on the need to be well informed on the contemporary developments to remain competent and to take wise decisions. Mr Gabriel McCarrick recalled with great admiration the contribution of Irish missionaries to the Indian education. He also emphasized the importance of human capital in India’s success today and how the graduating students could contribute to it. With the address of the commercial counselor, the conferring ceremony came to a close.
Graduating students
Book launch This book is first of its kind at IILM. It contains 13 essays written by OB/HR faculty members at IILM. Each essay focuses it attention on conceptual clarity of topic, Indian experiences and areas to be explored further. The topics of the essays are : Human Resource Management in the 21st Century Stressors and Strains of an Emerging Workforce: Dual Career Couples E-work in India : The New Labour Market Challenges Building Competitive Advantage: Value Creation in Human Resources Cultural Diversity at Workplace : An HR Concern Mentoring in Business Organizations : A way Forward Performance Management — Emerging
Practices Ethics in Information Technology: Implication for HR Tribology: The Emerging HR Concern Attrition: A Behavioural Perspective HR: Governance Glass Ceiling – A Case for Concern Role Stress: Now and Future.
The distinct advantages of this book are three-fold: It will help the practitioners, teachers and researchers in understanding the topic and appreciate the concerns therein. It will also provide an insight of what has already been examined and explored and the body of knowledge that is available to us. Prospective researches will find the coverage in these papers extremely useful. They will also find areas that are significant but not yet studied and fully explored, as exciting topics of research to pursue. Each paper is followed by a large number of references which in itself can become a treasure box to generate future researches.
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Sanatan Sangeet Sanskriti's Samman Samaroh 2007 The evening's programme commenced with the performance of Kumari Mythili Prakash, a young exponent in the Bharat Natyam dance form who has attracted worldwide acclaim for her talent. It was a very inspiring and enthralling experience. The Chief Guest, The Hon'ble Justice Markandey Katju, Judge, Supreme Court of India presented the Sanatan Sangeet Sanskriti Awards for 2007. Sanatan Nritya Puraskar for 2007 was presented to Kumari Mythili Prakash in recognition of her talent and potential for greater excellence in the sphere of Indian classical dance.
Ustad Amjad Ali Khan
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Sanatan Kalakriti Puraskar for 2007 was presented to Shri Subrata Kundu for his outstanding contribution to Indian art. Sanatan Sangeet Samman for 2007 was presented to Sarod Maestro, Ustad Amjad Ali Khan for his outstanding contribution to the enrichment of Indian classical music. Ustad Amjad Ali Khan is acknowledged throughout India as one of the foremost classical musicians and the maestro of his chosen instrument, the Sarod. Music, like poetry, is a spontaneous overflow of powerful emotions, that elevates human intellect and soul to a higher realm of existence. This is particularly true of the music of Ustad Amjad Ali Khan. A true jugalbandi of a very different kind was witnessed, where Shri Subrata Kundu painted to the mellifluous music of the Sarod Maestro, Ustad Amjad Ali Khan. Ustadji's performance can be characterized as a compelling combination of deep spirituality & effervescence. It was a soul stirring & captivating performance.
Hon'ble Justice Katju, Judge, Supreme Court of India, Dr. Najma Heptullah, Member of Rajya Sabha, Mr. M N Krishnamani, Senior Advocate President, Supreme Court Bar Association, Mr. Hira Lal Somani and Ms Malvika Rai lighting the auspicious lamp
Above: Shri Subrata Kundu painting to the mellifluous music of Ustad Amjad Ali Khan
Kumari Mythli Prakash
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A Modern Approach to Education The IB programme was founded in 1968 by the International Baccalaureate Organization (IBO), a non-profit educational organization based in Geneva, Switzerland. Despite having its headquarters in Switzerland, the IBO is an international organization, not associated with any particular country and free of national political educational agendas The International Baccalaureate Diploma Programme(IBDP) is a rigorous pre-university course of studies, leading to examinations that meet the needs of highly motivated secondary school students between the ages of 16 and 19 years. Designed as a comprehensive two-year curriculum that allows its graduates to fulfill requirements of various national education systems, the Diploma Programme model is based on the pattern of no single country but incorporates the best elements of many. The curriculum is displayed in the shape of a hexagon with six academic areas surrounding the core. Subjects are studied concurrently and students are exposed to the two great traditions of learning: the humanities and the sciences The International Baccalaureate Organization aims to develop inquiring, knowledgeable and caring young people who help to create a better and more peaceful world through intercultural understanding and respect. To this end the IBO works with schools, governments and international organizations to develop challenging programmes of international education and rigorous assessment. These programmes encourage The
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students across the world to become active, compassionate and lifelong learners who understand that other people, with their differences, can also be right. The core components of the International Baccalaureate Diploma Programme include the
Ms.Dohadwalla & Mr.McCandless lighting the ceremonial lamp,
(a) Creativity, Action and Service (CAS) programme, (b) Extended Essay and the (c) Theory of Knowledge course. Together these offer IBDP students experiences and skills they will not find on any other programme. The IBDP encourages international-mindedness. That is, an understanding of global issues and a concern for others in our community and the broader world. The IBO believes that students must also develop an understanding of their own cultural and national identity. Thus all IBDP
students study two languages. Through the IBDP students develop the skills to live and work in an international context which is essential for life in the 21st century. It provides a balanced education for the â&#x20AC;&#x2DC;wholeâ&#x20AC;&#x2122; student and provides excellent preparation for both university and adult life. Universities prefer IBDP students because the IBDP curriculum develops a balanced variety of skills. IBDP graduates, with the range of subjects they have studied, have a greater choice of undergraduate programmes. Employers too, are increasingly looking for well informed and adaptable, well rounded personalities, attributes that all IB students have. Assessment of student performance takes a variety of forms. In nearly all subjects, some of the assessment is carried out within the school by teachers. Such assessments by teachers are checked through sampling of work from every school. However, external examinations still form the greatest component of overall assessment for each subject, because of the greater degree of objectivity and reliability provided by the standard examination environment and external marking. The IBO is an independent organization and acts as a powerful guarantor of unbiased assessment procedures. The holistic philosophy of the IB emphasizes high academic standards in the mandatory areas of first and second languages, mathematics, humanities and science. Academic excellence is coupled with emphasis on personal development in areas such as philosophy, social awareness and
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Students of Banyan Tree World School
the arts. The promotion of international understanding with inter cultural awareness helps the DP students to recognize that to be different, to look different, to think differently is not wrong, that diversity is to be celebrated, not feared. They learn to respect the fact that the variety of cultures and attitudes make for the richness of life. Banyan Tree School achieves this mission by empowering each student to have the confidence to understand that every goal can be attained. Small classes provide individual attention, resulting in individual growth. Through integration of science and art, skill and sportsmanship a nurturing balance is instituted so that each student can find his/her own success. Collaborative learning coupled with innovative teaching techniques, helps each student to interact in a group setting providing a community of learning. The teaching staff utilizes their experience, wisdom and warmth to create a dynamic academic environment. Teaching combines the best of tradition and innovation, providing students with a solid foundation in
humanities, social and natural sciences, foreign languages, the arts and technology. The Banyan Tree School, a new school for a new century is strategically located in Sector 53,Plot 70 Gurgaon.The school brings the latest in academic pursuits to the national capital region of India .Banyan Tree School is committed to the IBDP.It is remarkable that within a short span of time the School, Gurgaon has been authorized to offer the IB Diploma Programme by The International Baccalaureate Organization (Geneva). Banyan Tree School recognizes the need to equip students with an all round education, an international curriculum of the highest quality aimed at the intellectual, emotional and social development of the students. as it seeks to engender intellectual curiosity, a sense of family compassion and kindness and a strong sense of self confidence. The main benefits of schooling at the Banyan Tree International School are the experience of an international curriculum, the advantage of the Diploma as a
passport to university education virtually worldwide, internationally trained and highly experienced faculty ,low student-teacher ratio, technology enabled classrooms and the latest infrastructure. Universities in over 110 countries recognize the IB Diploma and it will allow entrance to the most competitive universities around the world. The university admission authorities recognise the academic rigor of the IBDP, and value the "extra" parts of the Diploma, such as TOK, CAS and the Extended Essay. ◆ Most universities in Europe require the full Diploma as a qualification for entry. ◆ It is considered to be worth 'four and a half' A Level. ◆ Higher Level Courses are broadly equal to British A Level courses. ◆ Higher Level courses are considered equivalent to American Advanced Placement (AP) courses Successful IB Diploma students may be offered credit (particularly for Higher Level courses and TOK) for first year at university. With inputs from:www.ibo.org The
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ACADEMIC ACHIEVEMENTS DAMINI GROVER Lecturer (IT)
❙❙❘ Presented research paper entitled “Empowering Persons with Disabilities through Information & Communication Technology” at National Conference on “Computing for Nation Development’ organised by Bharati Vidhyapeeth's Institute of Computer Applications and Management, New Delhi (February 23-24, 07). ❙❙❘ Participated in two weeks AICTE sponsored National Level Staff Development Programme on the theme “Best Practices in Software Quality Engineering” organized by Bharati Vidyapeeth’s Institute of Computer Applications and Management (December 18-30, 06). DR. TARUN DAS Professor and Area Head (Economics)
❙❙❘ Invited by the Malaysian Institute for Economic Research (MIER), presented a paper on “Indian Overseas InvestmentPolicies, Issues and Outlook” in “Conference on National & Global Economic Outlook” at Hilton Hotel, Kuala Lumpur, 4-6 December '06 ❙❙❘ Invited by UN-ESCAP, participated in discussion on “Interrelationships between the UN Millennium Development
Prescription for budget and national happiness
DR SHRUTI SINGH
❙❙❘ Presented Research Paper on Doms of Gorakhpur: A Study in Dalit Ethnography at XXXIIIrd All India Sociological Conference held at Chennai from 27th to 29th December, 2006. DEEPAK TANDON Associate Professor & Head Finance,
Goals (UN-MDG) and National Development Plans (NDP)”, 8-9 December '06 at Bangkok. ❙❙❘ Acted as External Consultant to UN-ESCAP for preparation of reports entitled “Manual on Effective Debt Management” and “ESCAP Survey 2006: Energizing the Global Economy”, published by United Nations, 2006. ❙❙❘ Published paper “Bridging research and policy — a case study of India” in the Global Development Network (GDN) Research Monitor, September '06. ❙❙❘ Appointed as an independent Director in the Board of Shristi Urban Infrastructure Development Ltd. (SUIDL), New Delhi, a joint-venture company with HUDCO.
The
MS SWETA GUPTA Lecturer (Finance)
❙❙❘ Presented a case study on "Dabur India: Working Capital and Cost Management" in the 6th Global Conference on Business and Economics sponsored by International Journal of Business and Economics (IJBE) and Association for Business & Economics Research (ABER), held between 15th-17th October, 06 at Harvard University, Boston, MA, USA. The case study dealt with the various measures adopted by the management of the company in reducing working capital and managing cost.
is able to positively impact every citizen on these three attributes, some of us are going to be unhappy. My recommendations would be to reduce our dependence on agriculture for employment generation, increasing the incentives of rural medicos, judges, teachers and policemen, and stop pleasing dogs and cats (no offence to animal lovers)! If the foundations of our system are strong we will all be on the road to happiness.
LETTER TO THE
EDITOR
The most important question around this time of the year in everybody’s mind is what will be the impact of the Budget on one’s finances. If we equate one’s finances to one’s happiness, the Budget I must say has a profound impact on the country’s happiness. The Budget broadly defines how much we earn, consume and save. Until and unless the Government
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❙❙❘ Published a book Forex Management & Business Strategy. The book essentially is the first book of its kind covering the PGDM / MBA degree / Msc International Business course and the students shall find it useful.
Joydeep Ghosh Lecturer (Economics)
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FUNNY ENGLISH NOTICES AROUND THE WORLD IN THE HOSPITALITY SECTOR Here are some signs and notices written in English that were discovered throughout the world. You have to give the writers an 'E' for Effort. We hope you enjoy them.
IN A BUCHAREST HOTEL LOBBY: The lift is being fixed for the next day. During that time we regret that you will be unbearable. IN A LEIPZIG ELEVATOR: Do not enter the lift backwards, and only when lit up. IN A PARIS HOTEL ELEVATOR: Please leave your values at the front desk. IN A HOTEL IN ATHENS: Visitors are expected to complain at the office between the hours of 9 and 11 AM daily.
IN THE LOBBY OF A MOSCOW HOTEL across from a Russian Orthodox monastery: You are welcome to visit the cemetery where famous Russian and Soviet composers, artists, and writers are buried daily except Thursday. ON THE MENU OF A SWISS RESTAURANT: Our wines leave you nothing to hope for. OUTSIDE A HONG KONG TAILOR SHOP: Ladies may have a fit upstairs. IN A RHODES TAILOR SHOP: Order your summer's suit. Because is big rush we will execute customers in strict rotation. IN A CZECHOSLOVAKIAN TOURIST AGENCY: Take one of our horse-driven city tours â&#x20AC;&#x201D; we guarantee no miscarriages. IN A COPENHAGEN AIRLINE TICKET OFFICE: We take your bags and send them in all directions. IN A NORWEGIAN COCKTAIL LOUNGE: Ladies are requested not to have children in the bar. IN A BUDAPEST ZOO: Please do not feed the animals. If you have any suitable food, give it to the guard on duty. Compiled By Rohini Rode The
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Institute for Higher Education