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october 2013

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Indian rupee - the great fall

Revving up the manufacturing sector

GM crops: standup, scientists

Beyond Kudankulam

DML: how Chennai missed the bus? (rail!)

Tribute: A Ramakrishna

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tion a l f n i h g Hi ficit e d l a c s i Large f eficit D t n u o c c A nt Huge Curre ebt d c i l b u se in p a e r c n i Big ee Falling rup

Economy

nts e m t s e v n i n i Slowdown

Much can be

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IE inside cover story:

Economy

Much can be

done by

The major issues affecting the economy include: 1. High inflation, almost close to 10 per cent per annum 2. Large fiscal deficit 3. Huge Current Account Deficit (CAD) estimated at over $ 80 billion 4. Big increase in public debt 5. Falling rupee 6. Slowdown in investments and as a consequence, low economic growth

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Editor’s Notes

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Banking

inklings:

Indian Rupee:

The Great

FALL

22 Standup, GM Crops:

scientists

24 26

Nuclear Power:

Beyond Kudankulam

Tribute:

India’s Master Builder…

A Ramakrishna

industrial economist october 2013

30 36 38 39 40 41 42

Monetary Policy The rock star bats for change

Bharathiya Mahila Bank: A bank for women, by women

Management Worst decisions of Indian companies

Interview Ian Selbie, Unisys Asia Pacific: Fighting financial frauds

Capital Notes Business Briefs City Corner At a glance C-Box Walking into the sunset

32 How Chennai missed down memory lane:

the bus? (rail!)

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inklings

Flying High?

The recent relaxation of restrictions on investment norms in the aviation sector has revived the interest of the Tatas in this business. Remember, Tatas pioneered civil aviation and operated Air-India before it was nationalised in the early 1950s? JRD Tata continued as chairman after the nationalisation. When the policy was liberalised in the early 1990s permitting competition, Tatas joined hands with Singapore Airlines and bade for re-entry. After a few years battling for permission, they gave up in despair. Remember, the 1990s had a procession of civil aviation ministers who had short tenures and most of them outright incompetent?

Even while large corporates were hesitant to enter the fray, small players with little experience or resources like NEPC Airlines rushed in. Of course, they crashed out in quick time.

The last decade witnessed the entry of budget airlines which helped a surge in first time air travellers. SpiceJet, GoAir and Deccan Airways expanded rapidly and offered tickets at affordable prices. This experiment coincided with the boom years of 2003-08 when economic growth zoomed. Praful Patel, as Minister of Civil Aviation in UPA I, also focused on the modernisation of airports.

The bold initiative to invite private players to enter the fray resulted in Bengaluru, Hyderabad, Delhi and Mumbai airports emerging as modern airports with state-of-the-art facilities in double quick time.

The 2008 crisis slowed down the economy and civil aviation suffered as a consequence. The crash of Paramount Airways and Kingfisher and the large losses suffered by others afflicted the sector. Airfares shot up and air travellers were reluctant to fly.

The decision to permit FDI of 49 per cent by foreign airlines has revived interest in this space. Jet Airways utilised this by entering into collaboration with Etihad Airways of United Arab Emirates (UAE). Air Asia, a Malaysia-based budget airline, entered into a joint venture agreement with the Tatas and Telestra Tradeplace Pvt Ltd to set up a budget airline that will initially focus on the southern region.

The present proposal of Tatas involves a 49 per cent stake for SIA with Tatas holding the majority share. A Tata group veteran Prasad Menon, who retired after serving Tata Chemicals and Tata Power, is the chairman-nominee for the proposed joint venture (TCS’ s Ramadorai is the chairman for the budget airline).

After China, India is emerging strong in the market for civil aviation. The number of air passengers, presently in the region of 150 million, is expected to triple over the next seven years. SIA, with its large fleet, has earned a reputation for efficiency and growth. The large Indian domestic market will help this joint venture to tap a good share of in-bound and out-bound travellers apart from the huge domestic market.

Several other large airlines from Europe like Lufthansa evinced interest in such joint ventures but could not proceed ahead due to lack of stable and attractive longterm policies. With the present lacklustre growth of the European economy, one can expect the huge potential offered for growth by the Indian market attracting its large airlines as well.

Will the industry fly high or crash low? The jury is still out on this.

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industrial economist OCTOBER 2013

editor’s notes

Revving up the manufacturing sector

Vol. XLVI No.8 OCTOBER 2013 Editor: S Viswanathan FINANCE: V Padma R Uma Maheswari Correspondent: Jayanthi Raghunathan PROCESSING: R Rajeswari C S Shankar MARKETING: B Dhanalakshmi SECRETARIAL: Vijaya Durga DESIGN & PRODUCTION: Prime Academy

SUBSCRIPTION INDIA: Annual Subscription Rs.200 (Rs.50 extra for outstation cheques) Overseas: AIRMAIL only - US $ 50 (Cheques to be drawn in favour of ECONOMIST COMMUNICATIONS LTD) Regd office: S-15, Industrial Estate, Guindy Chennai 600 032 Tel: 22501235-37 Email: indecom1968@gmail.com URL: www.industrialeconomist.com The views presented herein are those of the authors. They are not necessarily the views of the editor and publisher.

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system, without permission in writing from the publisher.

For a couple of years now, there has been interest on the part of the policymakers and industry associations to increase the share of manufacturing sector in the GDP. The idea has been gaining momentum over the last three years. Speakers at the national convention of CII referred to the need to increase this share to 25 per cent of GDP. Presently, it is in the region of 14 per cent.

The experience of China in building a very strong manufacturing sector was often cited as a shining example. In recent years, China emerged a large manufacturer of a variety of goods. This was aided by the country opening up investments in the manufacturing sector. China developed a number of special economic zones for exports. It opened up investments, especially from the US, through liberal incentives.

Large multinationals from the US and Europe, Japan and Korea were attracted by these incentives offered. The major attractions included the ease of setting up and operating businesses and, most importantly, cheap labour. China also took care building a strong infrastructure in terms of roads, transport, port facilities‌ and offered other liberal incentives.

In a very short time, multinationals rushed to China and helped the country build a massive manufacturing base. The booming Chinese economy followed. In quick time China emerged a strong economic power next only to that of the US. Chinese products gained in quality as a result of such investments and the cheap labour enabled the country to win custom for a vast range of products at low prices.

An immediate fall out of this is the huge surge in exports. In recent decades, it is common sight to find in the US department stores several goods offered, carrying the label Made in China. Particularly pervasive is the share of a vast range of consumer goods including appliances and other items of daily use. In quick time such an experience also helped China upgrading its skills and win custom for more sophisticated goods.

Unfortunately, a similar wave has not struck India largely because of the slow pace of reforms. Investment policies do not still attract major corporates across the globe to set up shop to produce a vast

industrial economist october 2013 industrial economist OCTOBER 2013

range of manufactured goods. This is sad in the light of the existence of several multinationals working in India for several decades. The several restrictions in doing business in India and the various clearances still required from the government and most importantly, corruption at the high places, have been major deterrents.

Unlike China, infrastructure is also extremely weak. Ports are still congested.

Road infrastructure to carry goods from and to the port is still poor and the cost of basic requirements like power is pretty high, besides being uncertain. Tamil Nadu, which used to be in the forefront of attracting such investments for several decades, offers an instance of this deficiency: over the last two years, power shortages have been rampant forcing industry to take recourse to power generation through diesel gensets which shoots up the cost. Simultaneously, there has also been a huge increase in the cost of grid power. Cost of power in China is estimated to be less than half of that charged for Indian industry.

Of course, there is also the uncertainty of supplies and unsteady voltage. While the government and CII have been stressing the need to take the share of the manufacturing sector to 25 per cent of GDP, the lack of skills, lack of a strong work culture and the absence of training facilities come in the way. Sadly, education even at engineering colleges and higher institutes of learning do not prepare the students for ready employment in industry.

The target for raising the share of the manufacturing sector to 25 per cent of GDP thus appears tall. Even for a highly developed country with a strong manufacturing base like Germany, the share is just around 23 per cent; for countries in south-western Europe like France, Spain, Portugal and Belgium, the share is less than 15 per cent of GDP. IE has been suggesting serious efforts to improve the share of agriculture in the GDP. India has good natural endowments in terms of arable land and agriculture season extended round the year. By proper policy back up it will be possible to enable the agriculture sector to emerge strong which in turn can also support a strong industrial sector.

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editor’s notes

Insurance companies bleeding, yet no decision on increasing FDI limit!

The delay in clearing the proposal to increase the limit for foreign equity in insurance companies to 49 per cent is costing the country dear. A similar move in regard to civil aviation has evoked a lot of interest on the part of foreign airlines to invest in India.

In the 12 years after opening up the insurance sector, a large number of players have entered the business. Today, there are 24 life insurance companies and 27 general insurance companies.

Though several general insurance companies have become viable, life insurance companies are bleeding; a few, which entered the Indian market with a lot of expectation, like New York Life and ING have quit. HSBC Life and Aviva are likely to follow suit.

Padma Bhushan R Thyagarajan (RT), an expert on insurance, estimates the total loss suffered by life insurance companies at around Rs 25,000 crore. At the present rate, RT expects these companies to suffer an additional loss of Rs 20,000 crore in the next few years. This may trigger more foreign companies to quit.

It is baffling that a government so keen to attract foreign direct investment should be unconcerned over inviting foreign insurance companies to take care of this burden.

There has been tremendous interest on the part of foreign insurance majors to enter India and tap its huge potential, especially in the context of the very low penetration and consciousness for insurance. The opposition from BJP’s Yashwant Sinha and S Gurumurthy is indeed sad. A decade ago, while BJP was in power, they wanted to leverage the power to limit investment in insurance to counter some of the unhelpful postures of WTO. A decade later, this posturing does not make sense.

R Sridhar steps down as CEO of Shriram Capital Does it come as surprise that R Sridhar, who shifted to Chennai earlier this year to take charge as Managing Director and CEO of Shriram Capital Ltd, the holding company of the Shriram Group, is quitting his full time executive role in the company?

A chela of Founder-Chairman R Thyagarajan (RT), Chartered Accountant Sridhar joined Shriram Transport Finance Company 28 years ago. Shifting to Mumbai he took charge as the Managing Director and CEO in 2000. Sridhar quickly grasped the intricacies of financial engineering for which Mumbai is so much renowned.

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STFC’s capital base and assets funded grew exponentially over the last decade. At every stage STFC rode on innovation. Banks, though flush with funds, were not comfortable to finance directly used vehicles. STFC suggested securitisation taking care of risk assessment and contact with the prospective customers. Large financial institutions including CitiCorp and several European and American private equity funds flocked to STFC, which grew by leaps and bounds. Sridhar helped fine tune the systems and built the infrastructure, constantly pushing the boundaries. Shriram Automall Ltd and Shriram Equipment Finance Ltd were founded as subsidiaries.

The activities expanded manifold. By the end of March 2013, assets under management crossed Rs 50,000 crore and net profit earned during the year was Rs 1463 crore. Securitisation for the year crossed Rs 8500 crore. Market cap grew over the past ten years from Rs 20 crore to Rs 15,770 crore.

Cash management was perfected to an art by timely actions to raise funds over the medium term and lending over the short term. Sridhar helped change the earlier practice of keeping liabilities at 50 per cent each at floating rates of interest and fixed rates to 80 per cent on fixed loans and 20 per cent of floating loans. This was a big help in insulating the company from the frequent increase in interest rate resorted to by RBI over the last two years.

STFC institutionalised a secondary market through the auto malls providing an exchange for buyers and sellers.

STFC kept NPAs to less than two per cent and the interest spread handsome around seven per cent. It lends for around six lakh vehicles in a year.

Sridhar shares several of the traits of RT, including interest in music. RT is all praise for the immense contribution of Sridhar in making STFC achieve a leadership position among NBFCs. Understandably, the hectic schedule at Mumbai, managing hands-on operational pressures, is in contrast to a staid state of little action for Sridhar at Chennai. The vibrant financial market, the opportunity to interact with dozens of leaders and experts in finance characteristic of the commercial capital of India, are lacking in Chennai.

Understandably, after his hectic stint at Mumbai, Sridhar should have found the going staid and dull.

His expertise in fund raising would continue to be tapped

by Shriram Group. Sridhar may feel more comfortable shifting to Mumbai taking up more challenging tasks.

IE wishes him well. n industrial economist october 2013

COVER STORY

Economy

Much can be

done by S Viswanathan

Policymakers in Delhi, including the Finance Minister, often point to global conditions as responsible for much of the ills faced by the country. But we believe that India can do a lot on her own to improve matters.

Solutions for India’s problems should not be dependent on the pronouncements of the US Federal Reserve Chairman Ben Bernanke or those by European or Japanese leaders.

These are well within the capabilities of the political leaders within the country.

All it requires is a leadership that would be sensitive to the urgency of taking such steps.

The major issues affecting the economy include: 1. High inflation, almost close to 10 per cent per annum 2. Large fiscal deficit 3. Huge Current Account Deficit (CAD) estimated at over $ 80 billion 4. Big increase in public debt 5. Falling rupee 6. Slowdown in investments and as a consequence, low economic growth

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industrial economist october 2013

COVER STORY We believe much can be done to attend to these factors through decisive, strong and intelligent action. We explain how: Take CAD. This is caused by runaway increase in imports without a corresponding increase in exports. In regard to imports, major items include crude oil and other petroleum products including gas, followed by gold. Surprisingly, there is also substantial outgo on import of several things which, with some focus, can be avoided eg. import of edible oils, pulses, power plant equipment and the like. A firm policy can certainly help reduce substantially the outgo on these imports.

We will explain some of these areas.

How US reduces crude imports...

Crude and other petroleum product imports have been ballooning. With nearly 80 per cent of demand met through imports at present, India has little option in this area and secondly, with crude prices shooting up, the outgo on petroleum product imports has also been increasing rapidly. The United States provides a shining example of tackling this with firm policy initiatives. Hardly a decade ago, the US was heavily dependant on the Gulf countries, notably Saudi Arabia, for the import of crude oil. A conscious decision was made to reduce this and also march towards self-sufficiency.

US, being the largest consumer of petroleum products, naturally had to tackle this on an urgent basis. How effectively the country has done this !

Firstly, the country decided to focus on the manufacture of ethanol from corn. Today, nearly half of US corn production is diverted for producing ethanol and this has a twin advantage: apart from ensuring a degree of import substitution, this also helped revive the agriculture sector languishing for long.

This has given a big boost to corn growers in mid-west US. Several states have also made it mandatory to use ethanol as part of fuel bought at the petrol pumps.

Simultaneously, US also looked at the prospects for tapping shale gas, ie. natural gas imprisoned in shales in huge quantities. Tapping this earlier was not found economical when crude prices were low. But with crude prices shooting up, investment on this technology was found attractive. Today, shale gas production has shot up to dizzy levels and this helps US accelerate its march towards industrial economist october 2013

self sufficiency. In fact, there are optimistic estimates that over the next 5-7 years, US’ dependence on imports of energy in the form of crude and other petroleum products would almost grind to zero. This makes tremendous sense for a country so heavily dependant on such imports for so long. Remember, hardly four decades ago, crude was available for as low as a dollar per barrel and it has experienced a more than 100’ fold increase since!

Simultaneously, US has also been mandating improved fuel efficiency in automobiles.

Since the first oil crisis in 1973, such efficiency improvements have been huge. In the aftermath of the first oil shock in the 1970s, US mandated its auto manufacturers to work on 25 miles per gallon(3.8 litres); it was achieved in quick time. Now it is driving towards 55 miles per gallon(over 20 km/litre).

Contrast this with the abysmal 7km/litre by even highly branded cars in city roads. Plus the work done on hybrid engines that run on batteries plus petrol. Already Toyota’s Prius car, for instance, gives as much as 50 miles plus per gallon (3.8 litres in US), 24km/litremuch more than thrice the fuel consumption by petrol-driven compact cars in urban India.

India has a strong lesson in these successes. There was a big spurt in crude production after the discovery of oil in the Bombay High in the 1970s. For over three decades now, there has been little growth in the domestic production of crude oil. The country did experience a good deal of progress in regard to the discovery of natural gas, especially over the last 5-6 years. The policy of providing suitable incentives in the early part of this century did attract investors to explore and exploit the gas reserves.

US looked at the prospects for tapping shale gas, ie. natural gas imprisoned in shales in huge quantities. Tapping this earlier was not found economical when crude prices were low.

But with crude prices shooting up, investment on this technology is attractive.

Neglect of gas production...

The most notable success was achieved by Reliance Industries in the Krishna-Godavari basin off the Andhra coast: by 2009-10, production could peak to around 80 million cubic metres per day. Yet the golden opportunity to build on this bonanza was lost by short-sighted concerns over pricing the crude. The initial price offered around a little over two dollars for 1000 BTU was suicidal. At that point of time, not just Reliance, but several other explorers including ONGC, Cairn, Gujarat State Petroleum Corporation and Andhra Pradesh Gas Corporation, were quite optimistic about achieving a massive and quick expansion in gas production at the KG Basin. There were even estimates of production reaching 200 msmcm per day promising a measure of self sufficiency in energy requirements. Sadly, this 9

COVER STORY

The price of over $ 100 per barrel of crude and of imported natural gas ruling at over $ 16 per 1000 BTU, it just appears extremely advantageous to invite entrepreneurs to enter this lucrative field of production of shale gas. Why there has been no action in this is a puzzle!

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huge opportunity was lost by short-sighted policies and narrow views on rewarding exploration and production of oil and gas.

Despite the huge success of US in recent years in exploiting shale gas, there has been little discussion on opening up the prospects for this. India has large potential for shale gas and the technology for this is available today.

The price of over $ 100 per barrel of crude and with the price of imported natural gas ruling at over $ 16 per 1000 BTU, it appears extremely advantageous to invite entrepreneurs to enter this lucrative field. Why there has been no action in this continues to be a puzzle.

Again, the decision of Reliance Industries and other producers of natural gas to go slow on tapping gas out of the investments already made also appears to be based on the uneconomic pricing of $ 4.20 per 1000 BTU mandated by the Supreme Court until 2014.

Even when the government is conscious of the need to pay a higher price to stimulate production and investments in this area, there has been uninformed criticism on the profits that would go to the producers. Sadly, in this, the point missed is the dependence of over 80 per cent on imports for oil and gas that is going directly to the benefit, not of Indian producers, but to those outside.

There is certainly need for making those opposing this move to understand that it would be better to reward those willing to invest and produce gas from within the country and go for rational production sharing arrangements.

This will also get for the government the benefit of much higher revenues plus the huge increase in tax revenues arising out of this.

operations round the year, unlike in the US, Japan, China, Russia, Canada and other major grain producers. Why can’t there be a serious policy on achieving quantum jumps in production over the next couple of years? After all, agriculture does not require long gestation.

A suitable policy change can help achieve this in a short time. Of course, this will require a big break from conventional thinking.

The huge untapped potential for food production...

A major obstacle relates to the fragmentation of land holdings. Punjab and Rajasthan governments have taken the bold step to move towards agglomeration of land holdings by promoting lease of land over 15 years and more without alienating ownership. This policy can bring about spectacular results over the short term if only pursued with vigour. Though this change has been brought about in these states a couple of years ago, progress has not been achieved yet for want of sustained back up and consensus on the part of political parties. Such quick success can also stimulate other states to undertake such a reform.

With land prices shooting up and with so much restrictions on land acquisition, this

Why this large import of edible oil?

The second area relates to the avoidable imports of agriculture commodities. In the late 1980s, during the Rajiv Gandhi government, Sam Pitroda was appointed as the head of six technology missions. One of these was to focus on the production of oilseeds. Unfortunately, even after 15 years, this goal has not been achieved.

Last year, the outgo on import of edible oil was in excess of Rs 30,000 crore. Added to this, there is the huge outgo on import of pulses.

India has very large arable land and climatic conditions suitable for agricultural

form of agglomeration that ensures protection of ownership to the existing owners has huge merit. The government should take upon itself steps to implement this vigorously and set a time line of, say, 3-5 years, to not merely achieve self-sufficiency in the production of oilseeds and pulses, but also to work towards generating surpluses. Such success can also help achieve quantum jumps in productivity by the application of science and technology and modern management practices. After all, India has the advantage to emerge a global player in agriculture. There is also the urgency to take to this in the light of the Food Security Bill that will demand assured supply of around 80 million tonnes of food grains to sustain this welfare measure.

This amounts to a third of present level of pro-

industrial economist october 2013

COVER STORY duction and has a serious risk of distortions in case of crop failure, hoarding or failure of the public distribution system.

IE has been strongly advocating a target to produce around 500 MT of food grains on the basis of substantial improvements in productivity which is presently a fraction of the attainable levels in other countries.

Huge outgo on gold imports...

The third area relates to the wasteful import of huge quantities of gold. A drastic step, however unpopular it is, has to be taken to put a stop to this humongous drain of precious foreign exchange r e s e r v e s . Wi t h the present huge current account deficit, it appears almost criminal to spend over $ 50 billion on importing 800-900 tonnes of gold year after year that goes not for any productive purpose.

When domestic capacity is idle, why allow imports?

Another area relates to the import of capital equipment that can be produced with equal efficiency within the country. The most glaring example is import of power plant equipment. India is spending huge amounts on expanding capacity for producing power and over the years it has created large capacity to produce these equipment within the country. Apart from BHEL, new players in the private sector have also emerged with good technology tie-ups. These have built capacities much in excess of demand. Where then is the need to waste precious foreign exchange reserves on importing these, often of dubious value?

Anil Ambani’s Reliance opted to go for import of huge capacity power plant equipment from China. The capacities have not materialised even in one of the three plants for which Reliance won the tender nearly seven years after winning the contracts. Down south, BGR Energy Systems, likewise, opted to go for Chinese equipment. The 600 MW plant installed at Mettur has not proved to be quite effective. It has been two years behind schedule and the delay has been contributing more to the woes of the state suffering unprecedented levels of power cuts over the last year and more.

Can there be a moratorium on import of such equipment ? Even if international agreements come in the way, it should be possible for the Government of India to think of ways to incentivise utilities to opt for indigenous equipment. After all, those produced by BHEL over the last four decades and more have stood the test of time and have been generating power at high plant load factors.

Criminal neglect of coal...

There is much the government can do, first in terms of clarity in policies, setting targets/strict time lines for achieving these and helping to raise resources. These are dependent upon the ability of the administration to monitor progress on a day to day basis and to provide timely course corrections.

Look also at the colossal wastages involved in the import of coal for running power plants.

India has huge reserves of coal and these have been exploited at economic costs over the last

With the present huge current account deficit, it appears almost criminal to spend over $ 50 billion on importing 800-900 tonnes of gold year after year that goes not for any productive purpose.

The Korean example...

South Korea effectively built public sentiment and co-operation to get out of a crisis of humongous proportions: the 1998 collapse of the Asian currencies affected South Korea most. It had to borrow $58 billion from the IMF in 1998 (many times over and above the $5 billion India borrowed in 1991). There were concerted efforts by the government, business and most importantly, the public to get out of the crisis. Ruchir Sharma graphically describes the turnaround in his book Breakout Nations. “The sense of humiliation on the need for an IMF loan and its tough conditions touched off anti-globalisation street rallies in Seoul. It also inspired a national campaign to turn the economy around fast. While the citizens of other crisis-hit countries (including Taiwan) moved their wealth to the Cayman Islands for protection, Koreans began mobilising to pay the national debt, waiting in long lines to donate their gold jewellery to the cause. Roughly 40 per cent of the biggest Korean companies were allowed to go under, including well-known multinationals like Daewoo, and many more were sold-off to the new owners. By mid-2001 the IMF debt was repaid.�

Can we see similar concern in India to reduce this demand for gold?

industrial economist october 2013

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COVER STORY several decades. But in recent years the country has been spending huge amounts on import of coal; the major reason being a total lack of transparency and efficiency in allotting coal mines.

The coal scam reveals the depths of these deeds of the government allotting coal mines at throw away prices to parties not getting a corresponding assurance for opening these on time or for their utilisation on approved terms. We also hear a large number of fly-by-night operators entering the field, including the former Union Minister Jagatrakshagan in winning licences, but doing little to activate the licences. Opening these mines in quick time will eliminate the huge expenditure on imports.

Revenue sharing by Centre, state and local community

NLC has been generating handsome profits continuously for over three decades. It is cash rich. Its operations have been quite efficient and it has been managed well all through these last three decades and more. Set up in the 1950s, NLC has capacity of 2740 MW . NTPC, set up two decades later, has capacity for 42,000 MW. Involvement of the state can help.

A major policy change is required to ensure the involvement of the state governments in such efforts. At present, states have little or no interest in increasing exports. They just do not have any incentive for doing this and therefore they are indifferent and even hostile to cooperate with the Union government.

The US’ approach to the exploitation of shale gas provides an interesting contrast: here the land owners who lease their land for exploring shale gas reserves, the local community and the local state government all have a share in the prosperity generated.

Unfortunately, in India the fruits are the prerogative of the Union government. Of course, they do pay a royalty to the state, but that is not

considered adequate. In the absence of such a revenue-sharing agreement, there is also the resistance on the part of land owners to cooperate. Political parties should look closely at this issue.

It is simply no use enacting laws for land acquisition. But there should be a more equitable sharing of the riches generated out of such efforts. Unless this is done, the states or local communities will continue to resist attempts on the part of the Union government to embark on such projects.

Neglect of Neyveli

There are numerous instances of such impasse. We can cite the case of Neyveli

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Lignite Corporation (NLC) as the most glaring one. NLC was set up in the 1950s during the second five year plan. After nearly six decades in existence, NLC has today built a capacity for power generation of around 3000 MW. NTPC came on the scene two decades later. Today, NTPC accounts for a capacity of around 42,000 MW; and it is working on adding another 20,000 plus MW. NLC has been generating handsome profits continuously for over three decades. It is cash rich. Its operations have been quite efficient and it has been managed well all through the last three decades and more. For over five decades NLC has been supplying large quantities of power at low prices. Yet, the lack of involvement of the state has contributed to its stagnation. All political parties of the region/area have developed vested interests and often provide a stumbling block for its expansion. Because, the locals or the state do

not have a stake in their expansion or growth.

As early as 2002, IE suggested involving NLC along with BHEL, L&T, Ennore Port and TNEB as a consortium to expand power production capacity in the state to start with. This unfortunately did not take off.

The state agreed to collaborate with NLC to set up a power plant in Tuticorin, but it has been slow in taking shape. Today, a more alert Union coal minister hailing from UP, Sriprakash Jaiswal, has induced NLC to set up a Rs 6000 crore project in UP. A closer involvement of Tamil Nadu, suffering tremendous shortage of power, can certainly help exploit the huge lignite reserves at Jayamkondam and other nearby areas to great profit. In the 1990s, the Jayamkondam project evoked interests on the part of large German multinationals like Siemens and MAN Takraf and subsequently by private promoters to set up a 1500 MW power plant. Unfortunately, the lack of clarity in policy resulted in the project remaining a non-starter for more than two decades. It is important on the part of the Centre to involve state governments, provide them a stake in such development efforts and in turn, also

industrial economist october 2013

COVER STORY involve the local communities. This can bring about huge investments in mineral-rich states like Odisha, Jharkhand, Chhatisgarh… and this will also put an end to the opposition on the part of the locals for setting up large projects. Sheer tinkering with land acquisition, we believe, will not do.

There are numerous other areas where much can be done on our own. Finance Minister P Chidambaram has been pointing to 215 cleared projects involving around Rs 700,000 crore remaining in limbo for long.

Whose fault is this ? We have instances of Posco Steel in Odisha remaining a non-starter for eight years largely due to differences between the Centre and the state and the latter itself is unable to proceed ahead due to resistance from the locals. A little policy change can work wonders. The role of the Planning Commission, we believe, is also to monitor progress of the numerous projects sanctioned with great enthusiasm and bring about course corrections and close interactions with the concerned communities and the local governments. Unfortunately, this has not been done.

Communicate with states...

This brings us to the other crucial question of a lack of coordination in regard to policies between the Centre and the states. We raised this question at the annual Economic Editors’ Conference held in Delhi last year, inaugurated by the Finance Minister.

We raised the issue of lack of communication and efforts on the part of the Centre to interact on a continuous basis with the state governments. In the earlier decades such communication was effective: Union ministers used to visit state capitals and major cities in the states to interact with the local communities, businessmen, media and others. These included not just ministers, but also senior bureaucrats to explain the implications of policy, to explain the imperative for implementing these effectively and also responded to queries

industrial economist october 2013

and criticisms from the locals. These unfortunately have almost totally dried up over the last ten years. When was the last time you remember having had any communication with any Union Minister except a few (not all) hailing from the state?

In fact, it should be made mandatory for the civil servants to spend more time on such regional communication efforts rather than attending to endless meetings in the capital preparing answers for queries in the Parliament. The effort must be more towards measurable actions and results rather than on unproductive pen-pushing.

The measures outlined above are not dependant on the decisions or the pronouncements of US Federal Reserve Chairman Ben Bernanke or those by European or Japanese leaders. These actions are well within the capabilities of a National Parliament and the political leaders within the country. All it requires is a leadership that would be sensitive to the urgency of taking such steps. Such a measure will also have the effect of building consensus on crucial issues like the much awaited tax on goods and services which in itself, if implemented effectively, can bring about an increase in the growth rate by around two per cent. A quick increase in activity will also generate surpluses in the near future to take care of the crying needs of infrastructure which is in bad shape. These cumulatively will also help reduce the humongous current account deficit, in turn a reduction in fiscal deficit, which again would help contain inflation.

We remember the promise of Dr Manmohan Singh in 1991 when he launched the massive reforms era: “we have a mindset that a poor country will have to live with a high rate of inflation. I do not believe this. I will endeavour to bring down inflation to not more than 3 to 4 per cent- a level enjoyed by developing countries. Once we do this interest rates will fall. These need not be higher than 2 per cent over the inflation rate.”[IE November 1991.]

We need to remind Dr Singh of this promise which was in fact translated into reality in the late 1990s and early 2000. This in turn will also help improve the strength of the Indian rupee. After all, the rupee was so strong hardly six years ago, touching Rs 39 per dollar. At that time there was a dream of the rupee further strengthening to a level of Rs 35 per dollar.

A determined effort to strengthen the rupee through such efforts can still help the country realise this dream. After all Japan, Korea and China in recent times have achieved this. n

We raised the issue of lack of communication and efforts on the part of the Centre to interact on a continuous basis with the state governments.

In the earlier decades such communication was effective: Union ministers used to visit state capitals and major cities in the states to interact with the local communities, businessmen, media and others.

13

Economy

Indian Rupee

The Great

FALL

The Indian rupee is one of the worst performing currencies in the world during 2013. At Rs.65/$, it has slid by a big 17.5 per cent so far.

M R Raghu

Managing Director, Marmore Mena Intelligence

The current rupee level is the highest ever seen. From a low of Rs.39/dollar in Feb 2008 the fall to Rs 65/dollar in 5 years is some fall indeed! Repeated efforts by the RBI to stem the rot have gone in vain so far. The trigger for such a dramatic fall has been attributed to the US decision to roll back Quantitative Easing (QE) as the US economy has started showing signs of a pickup. The following questions emerge out of this: • Why did the rupee depreciate so fast?

• What is the further downside and where can it settle?

Let me try and answer each of these and close out with a possible strategy. Predictions can be hazardous; strategies need not be!

Why did the rupee depreciate so fast?

Technically the rupee depreciates against the dollar when people sell rupees and buy dollars.

When this happens, it results in negative capital flows leading to downward pressure on the currency. The following reasons can be explored: • US monetary policy • Slowing Indian economy • Ineffective RBI • Corporate debt and hedge • Weak domestic equity market

US monetary policy

The US Fed initiated a series of monetary easing programmes, commonly known as Quantitative Easing (QE), which created huge liquidity in the global market. The simple idea behind QE is to buy government bonds in order to keep the yields low, as low interest rate will help the economy recover. Now that the US economy is showing signs of recovery, the Fed has announced its intention to taper the QE. In response to this news, bond yields started moving up and capital has started moving back to US in search of safety. In short, capital left markets like India and has headed back to the US. Result: Investors flee other currencies and take shelter in US Treasuries causing USD to strengthen and other currencies to weaken.

Slowing Indian economy

The Indian economy has lost its sheen and grew at just 5 per cent in 2012-13. The Indian economy’s deficit is spiraling out of control. Both the fiscal and the current account deficit are headed for 14

industrial economist october 2013

economy further deterioration during 2013. While the fiscal deficit is at 4.9 per cent of GDP, the current account deficit is at 4.8 per cent in 2012-13.

The CAD is triggered primarily by trade deficit.

Not only our imports exceed exports but also within imports the dominance is by oil and gold imports, something very difficult to control. Lack of progress in deficit reduction is causing poor foreign investor confidence, which contributes to foreigners taking their money out of India.

The deficit is a long-term problem, especially the fiscal deficit. No matter which government is in place, populist policies will continue and this will ensure that the deficit does not come down.

However, if they do not go up, then that itself will be good news.

Also, during the past few years, Indian government has attained notoriety for governance lapses (2G scam) and policy missteps. Revising the Income Tax Act retrospectively from 1962 in order to bring Vodafone to book was a huge blow to global confidence in our legal structure to foreign investors. Also, there were several governance failures that keep India on the wrong side of the news globally (a good indication is the number of negative articles that appear in The Economist).

Result: Foreign investors exit by selling rupees and buying dollars

Ineffective RBI

The Reserve Bank of India is tasked with ensuring the financial stability of the economy and hence is the sole administrator of monetary policy. In the past, when currency encountered volatility, the RBI used its foreign exchange reserves to intervene in the market (through purchase or sale of dollars) and thereby reduce the volatility of the currency. However, this time around, they openly declared that they weren’t going to intervene.

This may be due to limited foreign exchange reserves; currently at $277 billion, enough to cover only 7 months of imports. For China, it amounted to 21 months of import cover, a comfortable situation to be in.

Instead, during the July and early August meetings, the RBI intervened by tightening the monetary policy. It increased short-term rates by hiking the marginal standing facility by 200 basis points. This further exacerbated the situation.

During its latest meeting, it signalled a reversal of this tightening of policy. Hence, we can clearly understand the predicament of RBI to intervene.

While RBI has not interfered directly, it has taken several steps to contain the situation: • It now requires exporters to repatriate 50 per cent of export earnings placed in special accounts • Restrictions on investments abroad by Indian companies and citizens.

• Limits on intraday net open positions of foreign exchange dealers • Restricting currency derivatives • Hiking the interest rate on NRI foreign currency deposits as also rupee deposits Result: RBI has no arsenal to arrest the slide immediately but is using other indirect means.

Corporate hedge and debt

Treasury managers relaxed when the rupee strengthened during 2010, averaging 45 (you don’t need to hedge when rupee is strengthening if you are an importer and vice-versa). They expected this to continue forever and hence did not bother to hedge their currency risk exposures.

Also, many of them resorted to foreign currency borrowing in short-term maturities disregarding the rupee depreciation danger. When the rupee started its free fall they were caught off guard and ran to hedge their exposure, which led to intense buying of dollars leading to its appreciation. Now, many short-term corporate debts are coming up for repayment, which will also witness more dollar buying adding to the rupee pressure. Also, the ability to rollover the debt will be limited by European banks due to the European crisis.

Result: Companies will have to find dollars to repay their debt and incur loss due to unhedged positions.

How does it affect various people?

A weakened rupee affects the following: • Importers (as they have to pay more rupees for the same dollar) • Economic image of the country (not able to arrest the fall) • Existing foreign investors (their investments are worth less now) • Residents (in the form of high oil price) On the other hand, it benefits the following: • Exporters (as they get more rupees for the same dollar) • Non-resident Indians (NRI’s) (as they get more rupees for the same dollar)

industrial economist october 2013

A weak rupee is good for the exporters.

They can profit by collecting more rupees.

Alternatively they can drop their dollar price to become more competitive.

Weak domestic capital market

The Indian equity market has not been able to attract investments from Foreign Institutional Investors (FIIs) due to the weak economy and the poor performance by Indian corporates. Although the equity market has seen FII inflow of around $12 billion till August 2013, it has witnessed net FII outflow of $3.1 billion from June till August 2013, which has exacerbated the fall in the value 15

Economy

Currency Performance (In percentage) Currency

Aug-13

YTD

2012

2011

2010

BRAZILIAN REAL

2.0

19.7

9.9

12.3

-4.8

RUSSIAN ROUBLE

0.4

8.5

-5.1

5.3

0.9

EURO

2.2

0.9

1.9

3.4

7.0

UK £

0.0

-4.2

4.6

0.4

3.6

JAPANESE YEN

-1.3

13.7

12.7

-5.2

-12.6

THAI BAHT

0.7

4.8

-3.0

5.0

-10.0

PAKISTAN RUPEE

2.2

6.5

8.2

4.9

1.5

INDIAN RUPEE

2.2

17.5

3.7

18.6

-3.7

SINGAPORE $

0.2

5.1

-5.8

1.1

-8.7

CHINESE RENMINBI

-0.1

-1.8

-1.0

-4.5

-3.5

YTD=Year To Date + means depreciation – means appreciation of the respective currency.

of the rupee. If you look at Table 2 the outflow seems to be more on debt than on equity. If this trend continues, it will result in further depreciation of the rupee.

Result: FIIs will continue to shun Indian equity unless the economic conditions become more favourable.

What is the further downside?

Rupee Predictions CRISIL – Rs. 60 (by Mar 2014) Barclays – Rs. 61 (next 6-7 months) UBS – Rs. 70 Credit Suisse – Rs. 65

The global financial crisis has accentuated the problem.. This has caused many currencies to fall (Table). RBI is playing a sensible role of not exhausting our forex reserves and is allowing the market to determine the level of rupee.

If required, it could call on SBI to raise external financing from NRIs like how it did in 1998 and 2000 (remember the millennium bonds?). However, the days of Rs.50-55 are gone. Political weakness is expected to continue with weak policy responses on all issues especially with the elections round the corner. In terms of where they will settle, rupee is a moving target and hence it cannot settle anywhere. In terms of calls, investment banks place at from a pessimistic Rs. 70 to an optimistic Rs. 60 in the next 6-12 months.

What is the long-term outlook for the Rupee?

The current rupee bash has raised some structural questions about its long-term potential. Any call on the rupee is a function of the long-term performance of the economy.

16

India, along with China, is among the fastest growing economies even after taking the current dip in growth. Given the right leadership and reforms, the economic potential of India appears good. India does not have any sovereign borrowings in foreign currency. Hence, the current abyss can be reversed with some wise leadership and policy reforms. With respect to global crisis, it cannot be predicted as to when and where it can arise. There are several pressure points in the world and anything can erupt anytime to cause tremors in emerging markets like India. Only sound monetary and fiscal policy can save the day for India.

What should be the strategy?

Currency and interest rates are the hardest thing to estimate in financial markets. Hence, the best thing would be to hedge and not try and anticipate currency movements. Having said that, the following could be done: If you are a domestic investor, focus on export-oriented sectors like IT for investments. They will have a great year ahead.

If you are a non-resident Indian, this is the best time to remit money to India. If you have dollar investments, it will be wise to exit the position and remit the money back to India.

If you have rupee denominated debt, partly wind it down using remittance from abroad.

If you are a corporate in India with significant foreign exchange exposure (either as importer or exporter), have some sound hedge in place as currency volatility is only expected to increase than decrease. n industrial economist october 2013

Monetary Policy

Governor’s plan

Usha Ganapathy Subramanian

The rock star bats for change The fanfare and fireworks that began when Dr Rajan was named as the new Governor of the Reserve Bank of India (RBI) hadn’t remotely slowed down when he took charge on 4 September 2013.

Dr. Rajan opened his maiden speech portraying the stark reality of the present economic situation, but he expressed confidence in tiding over these tough times.

Emphasising the need for RBI to work with transparency and predictability, he went on to unveil a long slew of measures.

Quoting the mandate for RBI to ensure monetary stability, he quipped that ensuring stable inflation is expected of a central bank. He said that a panel will look into measures to strengthen the monetary policy framework.

Road to inclusive development

In a bid to accelerate financial inclusion, he announced that soon well-run scheduled domestic commercial banks won’t need RBI’s nod to open a branch, subject to fulfilling certain inclusion criteria in underserved areas.

Speaking about new bank licences, he said that an external committee chaired by Dr. Bimal Jalan, former RBI governor, will screen applications and added that the licences will be announced around January 2014.

While recognising the contribution of foreignowned banks to India’s growth, he said that more regulatory and supervisory control over their local operations is likely to happen. Though not immediately, he hinted at reducing the requirement for banks to invest in government securities in a measured manner in order that banks will be able to lend more.

On priority sector lending, he called for greater efficiency in its implementation. A committee headed

by Dr. Nachiket Mor has been asked to assess the current approach to financial inclusion.

On financial and forex markets With respect to financial markets, he said that actions will be taken in tandem with SEBI to gradually liberalise the markets, although 18

RBI Governor Dr Raghuram Rajan had the media, the corporate honchos and everybody eating out of his hands with a strong Obama like speech.

at a cautious pace. To begin with, among others, the cap on re-booking cancelled forward exchange contracts will be increased to 50 per cent of the value of cancelled contracts for exporters and to 25 per cent for importers, to ease exchange rate woes.

The former IMF chief economist anticipated that in the longer term, as trade expands, more settlement in rupees will be pushed along with an accompanying upgrade of financial markets to serve as investment avenues for those who receive rupee payment.

As a move to bridge current account deficit with ‘safe’ money, soon banks can swap fresh FCNR(B) dollar funds with a minimum tenor of three years, at a fixed rate of 3.5 per cent per annum for the tenor of the deposit. Similarly, the current overseas borrowing limit will be raised from 50 to 100 per cent of the unimpaired Tier-I capital and banks can swap those borrowings with RBI at a concessional rate.

Building financial infrastructure

In what could be a significant move for MSMEs, auctioning MSME bills against large companies via Electronic Bill Factoring Exchanges to speed up payment is being contemplated. On the loan recovery front, he came down heavily on those promoters who mismanage, saying they “do not have a divine right” to stay at the helm of affairs nor to keep using banks’ money.

He insisted on efficiency and fairness in recovery process.

The working of Debt Recovery Tribunals and Asset Reconstruction Companies will also be accelerated and Deputy Governor Dr K C Chakrabarty has been asked to assess the level of NPAs and their recovery. RBI proposes to collect credit data and examine large common exposures across banks. He emphasised the use of Aadhaar to build individual credit histories. industrial economist october 2013

Monetary Policy

Caution on inflation...

The mid-quarter monetary policy review released on 20 September, had some surprise elements.

In his maiden policy statement, Dr. Raghuram Rajan indicated that the exceptional liquidity measures taken by the Reserve Bank of India (RBI) since July to tighten liquidity and to counter exchange rate volatility will now be eased in a calibrated manner. It is on these lines that the Marginal Standing Facility (MSF), the rate on overnight borrowings by banks from RBI has been relaxed by 75 basis points to 9.5 per cent.

The reason for the easing is cited as the improved external environment and the measures taken to narrow the Current Account Deficit (CAD). Further, while the Cash Reserve Ratio (CRR) remains at 4 per cent, to ease liquidity, the minimum daily maintenance of CRR has been lowered from 99 per cent to 95 per cent of the requirement.

However, in an unexpected move, when the growth is still sluggish, the repo rate under the Liquidity Adjustment Facility (LAF), the rate at which banks borrow money from RBI to meet short term liquidity requirements, has been increased by 25 basis points to 7.5 per cent. RBI has justified the raising of LAF repo rate stating that inflation levels had to be brought down to ‘tolerable levels’ as stated in the document released.

The net effect of these measures is expected to lower the cost of borrowing for banks, while remaining watchful of inflation.

Continuing inflation and CAD woes

The policy review document mentions that WPI inflation is increasing on account of increasing fuel prices, compounded by rupee depreciation and rising commodity prices internationally. WPI levels may remain higher in the absence of appropriate policy response, despite the negative output gap and easing of supply side constraints, which could have disinflationary effects. Although retail inflation levels, measured by CPI, continue to worry, a better Kharif output may slow down CPI. CAD has been widening due to lesser export demand and the rising oil bill owing to the geopolitical turmoil in the Middle East. Further, capital outflows triggered by the anticipated tapering of asset purchases by the US Federal Reserve have been worsening the exchange rate woes. Although the tapering has been put off for now, Rajan has acknowledged that it is still only a postponement and ultimately, the tapering will happen. He said that during

Happy households

Dr. Rajan spoke about specific measures in the pipeline for the benefit of households including issue of Inflation Indexed Savings Certificates, implementation of a national girobased Indian Bill Payment System to enable households to make any industrial economist october 2013

the interregnum, “a bullet-proof balance sheet and growth agenda” must be prepared.

The Review document explained that even as the fears regarding the widening CAD have been allayed by the steps taken by government and the RBI, now fiscal deficit and inflation have become the major determinants of the value of the rupee.

Also, RBI noted with respect to Indian economy that growth has come down owing to slow down in industry and services and dipping consumption levels. However, hopes for better growth rates are pinned on better kharif output and growth in exports.

Calibrated withdrawal of exceptional measures

RBI may have embarked on the easing of exceptional liquidity measures with the reduction in MSF rate.

However, it has cautioned that further action on these measures will depend on stability in exchange market and that the easing is not one-way.

With the easing of these exceptional measures, LAF repo rate would resume its role as the effective policy rate marking a return to normal monetary operations. The difference between MSF and the LAF repo rate is expected to be brought down to 100 basis points.

The withdrawal of exceptional measures, although at a cautious pace, is likely to be a catalyst for growth. However, RBI will keep vigil on external market conditions and growth-inflation dynamics.

RBI Guv keeps his promise

Some of the measures promised by the new RBI Governor when he took office on 4 September have already been set in motion.

Rajan pointed to the implementation of bank branching liberalisation on 19 September, intact with inclusion criteria in underserved areas. With regard to the FCNR(B) swap facility and the swap facility for bank borrowings announced to encourage banks to bring in ‘safe’ money to fund CAD, RBI had received a total of nearly 1.4 billion USD. Also, the committees envisaged for various purposes are already on the task, the process of issuing inflation indexed certificates has begun, and the central registry for large bank borrowings has been set up.

For now, the message is loud and clear: caution on inflation.

payment, and encrypted SMS-based funds transfer using an application that can run on any type of handset.

Towards improving access to financial services in remote areas, ‘white’ POS devices and mini-ATMs by non-bank entities are likely to be introduced. A good idea for sure.

Prophesying that change is risky but not changing is even riskier for India,he ended his address saying an RBI Governor doesn’t work for Facebook ‘Likes’. Markets cheered as hopes soared. But how long will the honeymoon last is the question upper most on everyone’s mind. n 19

banking

Bharathiya Mahila Bank

Dr. N K Thingalaya

A bank for women, by women While the long-awaited new banks are yet to make their appearance, an innovative bank for women, managed by women is expected to join the banking sector soon under government ownership.

Beginning its innings with six branches in metropolitan centres, it is proposed to have an all women bank with 25 branches by March 2014. A provision in the Union Budget for Rs.1000 crore is reported to have been already made. Steps have been initiated to invite applications from experienced women bank officers of different grades working in public sector banks. The success of this experiment is beyond doubt as already there are three big public sector banks managed by women chairpersons.

Gender inequality in banking

The banking sector in India has not reached out to a large percentage of female members. Female bank customers, those who have deposit accounts, are less than a fourth of the total deposit accounts handled by the banking sector. The number of deposit accounts of female customers is 21.84 crore out of the total deposit accounts of 90.32 crore as on March 2012. As the female population is 58.64 crore, hardly 37 per cent of them can be considered having access to banking. Remember, as the number of deposit accounts is not equal to the number of depositors, the percentage of female customers would be less than 37 per cent.

Employment in banks

Banking sector has been employing women in good number during the last fifty years. However, majority of them were working in clerical cadres, foregoing transfers and promotions.

The ambitious among them did accept the challenges and went up in the hierarchy. Quite a few ladies have 20

in rural and semi-urban centres. The Branchless Banking Centres (BBC) are to be managed by selected local women designated as business correspondents. Women are more suitable for this job, as they would be rendering this service from their homes. The informal atmosphere at such centres makes the villagers quite comfortable in doing their banking transactions. The scope for setting up such BBCs is immense, as there are 6.31 lakh villages in India and the number of rural branches

entered the boardrooms of big public sector banks. Incidentally, the Reserve Bank of India, the regulator of banking sector, also had two ladies as deputy governors till recently.

As a result of rapid branch expansion adopted by the Number of bank banking sector, the numemployees has ber of bank employees has increased to 11.75 increased to 11.75 lakh, of lakh as on March which women employees 2012. Of which are 2.15 lakh as on March women employees 2012. As far as bank officers are concerned, they are are 2.15 lakh.

5.02 lakh in number, while Bank officers 5.02 women officers are only lakh in number, while 84,375. The total number of women officers are women staff working in rural and semi-urban areas, is only 84,375.

56,324. Mobility of female The total number of staff, both spatial and hierwomen staff working archical, has been quite fast in rural and semiin the recent years unlike in urban areas, is the past.

In the current selection 56,324. process of bank officers conducted at the apex level by the is less than 40,000 at present. Even if Institute of Banking Personnel Selec- the banking sector proposes to extend tion (IBPS), women are found to be this facility to one lakh villages, it may participating very successfully. Some require one lakh business corresponbanks are recruiting officers in large dents. The Mahila Bank should opt for a numbers and training them through major share in this plan.

Also Self Help Groups can be gainoutside agencies by offering incentives in terms of education loans. In fully used for business expansion. the initial stages, the new Bank can Majority of their members are women take trained officers to begin the from middle income group living in towns and villages. These groups are branch level business. instrumental in reaching out to lakhs of households for expanding sales Strategy for success To be cost-effective and accessible to of some FMCG companies. Enhanclarge number of ‘unbanked house- ing the level of financial literacy can holds’, the new bank could adopt the be attempted through such field branchless banking model by opening level workers for attaining financial large number of ultra small branches inclusion. n industrial economist october 2013

Agriculture

GM Crops

S Viswanathan

Standup, scientists The technical group appointed by the Supreme Court has recommended the continuation of an indefinite moratorium on genetically modified (GM) crops.

Jairam Ramesh, as the then Environment Minister, seemed inclined to clear GM brinjal for cultivation, in 2010. But in the face of opposition from a section of scientists and antiGM lobbyists, he decided to defer this indefinitely. Three more years have lapsed and now comes the recommendation to continue with the indefinite moratorium.

I am reminded of a classic comment by a senior executive familiar with India at CIF-Alcatel, the French communications giant, in my interactions with him at Paris in 1982: “I find in India, a long time is taken to decide on a project or a proposal.

But technology is constantly changing and by that time you decide on a particular technology, vast improvements do take place; there is then the understandable desire to try a new technology. This process contributes to further delay.” I remember his pithy summing up: “one can go on chasing the ideal bride and yet remain a bachelor for his life time.”

Without field trials, no claim can be substantiated...

In a recent article in The Hindu, Dr G Padmanabhan, renowned scientist, who headed the Indian Institute of Science, Bengaluru and an Indian

National Science Academy Senior Scientist, writes with anguish and a deep sense of despair: “I am aware that scientists in India having very good leads languishing in the laboratories. Without field trials no claim can be really substantiated. One should talk to these scientists to understand their frustration. The hurdles are so many: funding, activists, loss of trial crops, no publications, no product, and no career.” (Sow the wind, reap a storm, The Hindu, 2 September 2013) He points to China working with MNCs simultaneously allowing indigenous efforts to develop BT rice.

Why are we afraid of collaborations on an equal footing? Are we afraid of MNCs or the technology, asks Padmanabhan.

In the fractured democratic polity of India, it has not been possible to build consensus on any issue. Remember the bitter battle the UPA I had to fight to liberate nuclear power development from decades of stagnation and apartheid? Or the concerted opposition to Kudankulam Nuclear Power Plant by a few activists when it was on the verge of commissioning and delaying it by two more years, even when Tamil Nadu was in the grip of unprecedented power shortage? Or the total opposition to opening up retail trade for foreign investment?

Colossal damage...

The most tragic part of this activism is being blind to the colossal damage

22

caused to the country struggling to emerge strong. Look at the poor record of agriculture relating to the potential. Unlike the US, most parts of Europe, China or Japan, India has been well-endowed with large arable land of over 400 million acres and with reasonably adequate water resources.

More important, farming can continue in most of parts of the country round the year, whereas in the mid-west US, the food bowl of that country, just one crop is possible to be raised during April-September. In India productivity levels are abysmally low: corn yields average 800 kg/acre in India against 10,000 kg/ acre in the US. Even while there are widespread concerns over under-nutrition and malnutrition, with the Food Security Bill passed with fanfare that will demand 80 million tonnes of foodgrains, nearly a third of the current levels of production, and agriculture on which still nearly 60 per cent plus of the population depend, has been growing a little over two per cent per annum on an average, just a little higher than the population growth, there is this unconcern to access science, technology and management! industrial economist october 2013

agriculture With unrestrained migration to the cities and lack of attention to skills and modernisation, this sector has been experiencing continuous fall in its share in the nation’s GDP. If one looks at taking recourse to technology like GM, to achieve quantum jumps, as has been done by China, lobbying by a small section thwarts such hopes.

Prosperity of Gujarat through Bt cotton...

In 2007, when IE was looking closely at the economy of Gujarat, we were struck by the double digit growth recorded by agriculture which ensured the fruits of development also reaching vast rural masses. Chief Minister Narendra Modi commented: “our farmers have taken to Bt cotton and production has been expanding rapidly. We do not have instances of large farmer suicides as in the Vidarbha region of Maharashtra. There is huge demand for our cotton from China and other countries.”

The switch over to Bt cotton, the product of genetic modification,

industrial economist october 2013

has helped India transform from a net importer of cotton to a handsome exporter. IE believes in such transformation in a vast range of other agriculture products including foodgrains, fruits and vegetables.

This transformation can help India emerge a large exporter of agriculture products. IE estimates the potential for such exports at around $ 100 billion per annum, a third of the present level of exports from the country.

Success of China...

The experience of China provides an exemplary instance of the success of such policy changes backed by government support. In less than a decade, China has achieved remarkable transformation of its agriculture widely benefiting from the import of technologies from the US and elsewhere. Dr Padmanabhan points to “China going full steam with almost 6000 PhDs in agri-biotech alone, whereas India has 8900 PhDs in all sciences put together!”

Unlike US, Canada, Australia, Russia or the several other countries in

South America which are large producers of agriculture products, India has been endowed with availability of meagre land on per capita basis.

There is, therefore, the imperative to get more out of the existing land through improvements in productivity. US and Canada, large producers of agriculture products, have been using GM products for decades. These highly consumerist societies, have not faced any resistance to adopt GM technology. There were also no specific health claims of serious infirmities in the use of GM crops.

A matter for concern and disappointment is that the pro-GM scientists have not raised their voices sufficiently loud. Surprisingly, Indian Science Congress organised annually in early January in which the Prime Minister and other policymakers from Delhi participate, has not bothered to focus on such issues.

Scientists like Dr M S Swaminathan who command respect and attention across the globe should provide the lead in building consensus of the scientific community on such issues. n

23

ENERGY

Nuclear Power

Dr M R Iyer

Beyond Kudankulam Progress on nuclear power has been tardy. With no definite plans the so called three stage nuclear plan and even the single stage plan remain in limbo. It was almost eight years since the Indo-US nuclear deal was concluded. The euphoria about nuclear power coming of age in our country following the Indo-US nuclear agreement has all but evaporated.

Kudankulam nuclear power plant Unit-1 would soon be synchronised with the grid and deliver 500 MW power. It is a matter of time that power is raised to its full rating of 1000 MW. The surrounding areas are bound to see industrial growth from the power station. A cursory glance of Tamil media showed that land around the project site has started appreciating in value.

For the last two years the project has been riddled with problems due to opposition from anti-nuclear activists.

As pointed out earlier (IE, April 2012), logic had been thrown to the wind, petty politics came to the forefront to exploit the situation and delicate public feelings were aroused by vested interests. For months, scientists, engineers and workers were physically prevented from entering the plant and carrying out their duties with the district authorities looking away.

Thorough evaluation by AERB...

When the public outcry was somewhat tamed, the project faced some technical problems. Were there any technical issues at all, if so what were these can at best be analysed only by reading between the lines of official statements. In the absence of any clarifications from the government spokesmen, this gave rise to wild speculation. All we know is that these led the regulatory agency to doubly check and review safety of various components in the reactor. Finally these were all overcome. But the amount of wild rumours it created could have been avoided. Summary announcements of postponement of commissioning date ad infinitum gave a poor PR image. Then came the news about finding some faulty valves which did not pass the integrated safety tests.

It is not clear how this cropped up after hot commissioning of the reactor. This is presumed to be due to the Russian contractor’s compulsion to look for alternates, since the imported components were debarred from being used in India.

These are only conjectures. What is clear is that similar units elsewhere never had problems of valves and pumps. Anyway it was good that AERB could get rectified these before 24

commissioning. This goes to prove the thoroughness of the AERB evaluation and they need to be complimented on this.

Delays due to resort to court cases

Various court cases also chipped in to the element of delays. It is easy to throw an allegation arising out of suspicion but it is difficult and time consuming to exclude these on technical grounds, particularly if the target kept moving. Take the case of emergency preparedness. This is the outermost safety measure and the authorities have to be prepared but not by actually creating a mock drill disrupting the public. In India these steps are sometimes taken to the extreme. The activists can easily point to vague scenarios and issues and one should not expect authorities to respond to these. For example, if one insists that the operation will affect life up to 250 km radius and demand safeguards, there can be no end to it. First of all such situation in itself is hypothetical.

SC verdict helps in speeding up

Attaining criticality was perhaps delayed pending clearance from courts. When the Supreme Court verdict did come, the start up operations were speeded up. The second unit is also now loaded with dummy fuel. The hydraulic and hot commissioning tests are going on. In the case of the second unit the time lag is not bound to be so long before it also starts feeding power to the grid. Down the line, the grid capacity to take such huge load of power might also come under test.

Such technical problems are bound to arise and would be sorted out. As a matter of fact all the safety concerns were effectively replied by the various committees set up by the Centre and the State Governments ( http://www.barc.gov. in/egreport.pdf). And the SC announced that the project has satisfied all the mandatory conditions and must go on and unambiguously stated that, “apprehension, however legitimate, cannot override the justification of the project.” In its judgment SC stressed that “KKNPP is safe and secure and it is necessary for economic growth of the country.” industrial economist october 2013

ENERGY The expected increase in nuclear power in India cannot be more than 5000 MWe by 2020.

The US Atomic Energy Act could be a model which has kept the safety regulation of civil and military applications clearly separate and also given a thought to their interplay.

In the Indian context these are not that deeply outfitted and this needs to be done. Any defence nuclear accidents might have its repercussions on the civilian public also.

Nuclear power scenario not encouraging...

Admittedly progress on nuclear power has been tardy also due to several other factors. With no definite plans the so called three stage nuclear plan and even the single stage plan remain in limbo. It was almost eight years since the Indo US nuclear deal was initiated and basking in the sunshine of newly found bonhomie we started talking of the revised target of 65,000 MW by 2050 without any specific plan in place. Over-dependence on India-USA nuclear agreement has been unreliable. And no worthwhile specific agreements have been realised with most of it in the back burner. Lots of one-sided concessions were given

by India. Eg. the unilateral decision to place a number of facilities under IAEA safeguards. This has only resulted in decommissioning two research reactors which were supplying radio isotopes for medical and industrial applications. Now with only one reactor in operation, the dependence on imported radio isotopes is increasing, though no data on this is available.

The euphoria about nuclear power coming of age in our country following the Indo-US nuclear agreement has all but evaporated. Today, all the embargos for imports of even peripheral items to nuclear installations are still in place.

The normal 10 years private US visas are denied even to persons retired long back from the nuclear establishments!

Additional capacity prospects bleak

The import of natural uranium is only in trickles. If the pipelines have been opened up, why NPCIL, which has the capability to put up 700 MWe PHWR reactors, does not go forward in a big way? Only four units of 700 MW each are right now under construction amounting to a total of 2800 MW. And together with 2 units of KKNPP, the expected increase in nuclear power in India cannot be more than 5000 MWe by 2020. The fast reactor project is still there but unless the first PFBR goes into smooth operation, nothing can be said definitely since it is a new evolving technology. India’s first commercial 500 MWe fast breeder reactor is stated to be ready for commissioning at Kalpakkam by September 2014 and 4 more units are planned in next 15 years. The success of the fast reactor programme depends on the reprocessing technology graduating to industrial scales and availability of the initial feed of plutonium from uranium fuelled reactors.

Thorium utilisation would still be far off!

Are we following the right strategies?

The scientists have to be congratulated on their successful mastering of PWR technology in commissioning the 83 MW INS Arihant submarine reactor which is the state-of-the-art technology for nuclear power in the world. Encouraged by this there was an announcement of going ahead with scaling it up to designing the 900 MW indigenous PWR The author is retired Director, Division of Radiation Safety, International Atomic Energy Agency (IAEA), Vienna industrial economist october 2013

The normal 10 years private US visas are denied even to persons retired long back from the nuclear establishments!

power reactors. Apart from the challenges to be faced, we need to look ahead for fuel resources for the reactor since the bilateral agreement has not made any headway in opening up the market and substantial addition to indigenous uranium resources seem to be bleak, the problems compounded with environmental issues. With the demand for enriched fuel for further submarine reactors and other strategic applications, shortage of uranium resources and the limited enrichment capability are bound to be areas of concern. We need to be introspective about trying to hatch too many eggs in the same basket. As such development of PWR reactors does not seem to be in line with the country’s long term plans.

Need for revamping the Atomic Energy Act

The regulatory issues about the submarine reactor pointed out by commentators is valid. Understandably it is out of the purview of the civilian Atomic Energy Regulatory Board. The separate regulatory outfits that are already in place for the review of strategic nuclear applications are equally effective. Presumably those have reviewed the safety aspects of the submarine nuclear reactor. But this needs to be backed up by appropriate incorporation in the Atomic Energy Act. Currently the Atomic Energy Act is silent about strategic applications (IE Dec 2008). The US Atomic Energy Act could be a model which has kept the safety regulation of civil and military applications clearly separate and also given a thought to their interplay. In the Indian context these are not that deeply outfitted and this needs to be done. Any defence nuclear accidents might have its repercussions on the civilian public also.

Re-orientation of tasks

The nuclear power plant operator and regulatory body are facing lots of court proceedings these days and the system may not be geared to this new type of activities. There is a need for a strong legal cell staffed with bright young legal professionals well-versed with nuances of atomic (IE June 2010). Just to quote an example: in the Mayapuri incident which led to the first radiation fatality in the country, no parties were convicted for violation and it showed lacunae in the areas of legislation. Though lot of lessons seem to have been learnt in the area of public relations, a concerted strategic planning does not seem to be taking shape. There is a need for setting up planning and implementation units staffed with young trained professionals with expertise in public relations and management. The solution is not in redeploying the scientific staff for these purposes. The need for deep strategy on how to communicate to the public the complex concepts of radiation safety and efforts to logically and scientifically simplify these was also pointed out by this author earlier.

In the area of legislation, the revamping of the archaic Atomic Energy Act is long overdue and nothing substantial has happened. The reasons for which are not clear. n 25

tribute

tribute TRIBUTE

A Ramakrishna

India’s Master Builder…

For 50 years, A Ramakrishna (AR) was closely involved with the evolution of India’s construction industry. His tenure with L&T ECC from the time he joined soon after taking his post graduate degree in structural engineering from the College of Engineering, Guindy in the 1960s, to his retirement, four decades later, marks a spectacular evolution of the Indian construction sector.

The giant corporate L&T had a turnover of Rs 72,724 crore last year. There have been very few large, sophisticated projects, be they relate to factories and buildings, sea ports and airports, steel plants and other industrial projects, roads and bridges, railways, sports complexes, hotels and multi specialty hospitals, IT parks, name it and you have it, with which L&T has not been associated. As one can understand, these construction jobs had undergone spectacular improvements in terms of design, engineering and construction.

AR had been associated closely with this evolution and has made rich contribution to it. A measure of this is evident from the growth recorded by L&T ECC under his stewardship during 1992-2004: the revenue of ECC grew close to 15 times from Rs 440 crore to Rs 6500 crore; profits grew from Rs 18 crore to Rs 250 crore ! This record continues; with the construction business accounting for a major share of L&T’s revenues and projects.

Construction in record time…

I have had the privilege of interacting with AR for nearly four decades. Quite a few of these were at the time of commissioning of prestigious projects like a blast furnace at the Visakhapatnam Steel Plant. On another occasion, I chanced to travel with him from Frankfurt to Chennai on a Lufthansa flight. That was the time when L&T ECC constructed a stadium for holding the world cup cricket match at Kensignton Oval, Barbados, West Indies. AR explained in detail the challenges involved in completing the project to a tight schedule at a place 10,000 miles away! The stadium was got ready in time for the world cup match!

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industrial economist october 2013

tribute Recourse to modern design and technology

AR underwent specialised training in structural design and engineering. The 18 month course at the then German Democratic Republic enabled AR to gain proficiency in German language and also to work with German institutions on state-of-the-art construction techniques. Regular visits to the giant construction fair Bauma and his other frequent trips to Germany enabled him to adopt several of the emerging practices. AR specialised in pre-stressed concrete for composite construction and in introducing alternate designs that saved on original cost estimates. He once referred to the advantages of steam curing of pre-stressed rib slabs, a practice common in Germany.

Recourse to alternate designs opened up the scope for achieving handsome economies. AR pointed to the preference for steel structures in countries in Europe and Japan thanks to plentiful availability of steel. He found that concrete structures were more suitable, especially for coastal areas and for chemical and fertilizer plants that suffered corrosion. Concrete structures also saved 15-20 per cent on total cost, as steel was expensive. This technique became industry standard and was even adopted by international construction giants like Toyo Engineering.

Focus on skills development...

Skills development and training have been receiving attention at the national level only in recent years. ECC set up a well equipped centre at Manapakkam for training construction workers in a variety of skills.

The Centre has comprehensive curriculum and training systems and sophisticated tools and equipment for training artisans in several centres spread across the country. Inhouse training facilities are provided to diploma holders and graduate engineers.

AR was closely involved in the IIT-M instituting a M-Tech programme on structural

AR pioneered the build-operate-transfer toll mode for highways...

engineering; apart from imparting theory, the programme also provides for training at L&T sites. AR also took care to include financial and personnel management as part of the curriculum thus equipping the graduates to handle managerial functions.

Andhra’s chief architect

The humility and modesty of AR were extraordinary for a business leader of his eminence. His suave nature won the esteem of business honchos and administrators alike.

Significantly, top industrial houses, including the Tatas and Reliance entrust all major jobs to L&T ECC as a matter of course. The political leadership in Andhra Pradesh made excellent use of the expertise of AR. The Construction Industry Training Centre was set up at Hyderabad. The Hi-Tech City, Hyderabad triggered the development of large IT infrastructure in the country (Murasoli Maran, then Minister of Industry, who inaugurated the Hi-Tech City was so much impressed, replicated the effort in constructing the Tidel Park, Chennai). L&T invested 89 per cent in the equity of Hi-Tech City which launched Hyderabad into the global IT software map. Hitex, the international exhibition centre at Hyderabad, is another of the

Regular visits to the giant construction fair Bauma and his other frequent trips to Germany enabled AR to adopt several of the emerging practices. AR specialised in prestressed concrete for composite construction and in introducing alternate designs that saved on original cost estimates.

Bengaluru Airport, another of AR’s innovative projects

Kensignton Oval, Barbados, West Indies-Construction in record time. industrial economist october 2013

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tribute

Sri Sathya Sai Super Speciality Hospital several prestigious projects of L&T. The first modern airport in the country promoted by GMR at Hyderabad was again constructed by L&T (AR also opted for L&T to join the Bangalore International Airport as a promoter and partner).The second road linking Tirupathi to Tirumala was constructed by L&T-ECC in a record time. The present Rs 15,000 crore Hyderabad metro rail project is being constructed and will be operated by a subsidiary of L&T. All these huge economic activities of Hyderabad can be credited to the initiative of AR.

The political leadership in Andhra Pradesh made Intensely religious excellent use of the AR was closely associated with the Sri Sathya Central Trust. L&T ECC was entrusted with expertise of AR. Sai the construction jobs of the trust. These inThe Construction clude modern hospitals, housing colonies Industry Training and marriage halls. Sri Sai Baba also entrustCentre was set ed L&T ECC with the job of lining the Telugu Ganga Canal to help Chennai metro get preup at Hyderabad. cious drinking water from the Krishna river.

The Hi-Tech City, He held AR in such affection that he presented Hyderabad triggered him with a luxury car.

AR adapted quickly to the changes that the development of flowed in cascades in the liberalisation era. large IT infrastructure L&T ECC seized opportunities for constructing in the country roads and bridges on build-operate-transfer (BOT) basis as concessionaires. Of course, it involved unknown risks like the initial resistance for paying tolls. I remember AR convincing political and administrative leaders on the need for such tolls. In quick time, the massive highway development programme adopted the BOT model as the standard.

Standardisation of construction techniques

AR was also involved in the setting up of the Construction Industry Development Council (CIDC) and was its first vice chairman. The rich expertise of L&T ECC and of AR in particular, was a big help in opting for standards in design and construction. Just look at the diseconomies and wastages suffered through lack of attention to standards in a sector that accounts for 40-50 per cent of capital expenditure of projects and massive employment of around 50 million!

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ECC standardised form works, shuttering, and concreting. AR worked consistently on educating and lobbying for the use of ready-mix concrete which ensured the right mix and consistent quality. L&T, at that time a large producer of cement, also set up dozens of RMC plants. AR can take credit for the use of RMC gaining wide acceptance in quick time. Familiar with the speed of construction in developed countries, AR once remarked: “our roads, bridges over level crossings and other projects can be standardised to some four or five basic designs. If this is done, we can complete a bridge over a railway level crossing in six months instead of the more than three years taken now!”

L&T ECC has completed large housing projects in short time. AR pointed to his company constructing 10,000 primary school buildings in different locations in Gujarat; at an average construction time of just 80 days per school thanks to extensive standardisation.

When in 2002, IE mooted a consortium of L&T-BHEL-Neyveli Lignite Corporation-Ennore Port-TNEB to look at the possibility of constructing a 1000 MW power plant at the Ennore Port abandoned by Videocon, AR evinced great interest. The chairmen/chief executives also showed interest in this new concept of the five specialist institutions coming together to pool their expertise in rapidly building power generation capacity. AR was open for such new ideas, willing to experiment and risk. The several special purpose vehicles promoted by his company helped expand its activities and increase revenues and profits mani’ fold.

A matter for disappointment is the lack of recognition on the part of Delhi and the state governments to the multifarious contributions made by AR, many of which were of a pioneering nature. Tamil Nadu leadership has been focusing largely on politics, films and social issues of mass appeal. Sadly in this the invaluable contribution made by business leaders, professionals, scientists and academics are not receiving the attention they deserve.

Just think of this Mr Builder not considered for a Padma Award! – SV industrial economist october 2013

management

Crucial decisions

Bhamy V Shenoy

Worst decisions of Indian companies A team of Editors from the US magazine Fortune led by former MIT professor Verne Harish has discussed 18 such decisions in a book titled, The Greatest Business Decisions of all Time.

One may disagree if they are really the greatest decisions. Still they give some useful insights into the art of decision making for our industry leaders. Out of these decisions only one was taken by an Indian company, Tata Steel.

In 1993, J J Irani took the unusual step of laying off people in a company where anyone getting a job got it permanently, not just for himself but also in ‘eternity’ for his family. Tata Steel till then had never laid off employees. However, when the Indian economy was forced to liberalise in 1991 and the Indian steel industry had to face foreign competition, Tatas were forced to take this step. But the way Tatas handled the Early Separation System (ESS) stunned corporate India. ESS was extremely beneficial and at first glance looked very expensive. However, the enormous goodwill generated by the counter intuitive ESS might have helped establish Tatas as an ethically driven company which always took care of its employees.

Of the 18 decisions, I have selected five to compare against what Indian oil industry and Indian economy could have been if only the managers heading India’s public sector oil companies were bold, creative and dedicated as those who took the greatest decisions.

Ford model that triggered policy change

In 1913 Henry Ford had successfully introduced the new concept of assembly line to improve the productivity of his workforce. But he had a problem. His annual labour turnover was 370 per cent. The strategy implemented by Ford, called the High-Wage plan, was to double the rate of pay to his employees. His basic premise was that if his workers were paid more than a living wage, they would be able to buy the product they produce and stimulate the economy. Ford’s masterstroke of doubling the wage not only helped his company solve the high attrition 30

issue but also contributed to his success; it also became a major factor to enact the minimum-wage act of 1938 by the US Congress. Some even claim that Ford’s policy triggered a consumer revolution to make the US one of the wealthiest nations.

Customers before profit

In 1982, seven people had died from lethal doses of potassium cyanide inserted into Tylenol capsules in Chicago suburb. Most thought that such a calamity would result in the demise of Tylenol and of its producer, Johnson & Johnson. At that time, Tylenol was the best selling painkiller in the US with Johnson & Johnson commanding 35 per cent of the market share. The way its CEO, James E. Burke, handled the crisis has become the gold standard for crisis management. Despite being urged by FBI not to recall the product, Burke decided to pull Tylenol from every shop: it cost more than $100 million. The principle that drove him to take such a decision was his firm faith that the first responsibility of the company was to its consumers and not to its shareholders. It was also the basic principle laid out by the company in 1943 before it went public.

GE-striking a difference

Soon after Jack Welch was made the CEO of GE, he decided to reduce the GE work force by 25 per cent - laying off more than 100,000 - and got the notorious title of Neutron Jack. Simultaneously he decided to spend a huge amount to upgrade industrial economist october 2013

management GE’s training facility at Crotonville, to produce future leaders to shape the destiny of GE. Today it is called the John F. Welch Leadership Development Center (LDC). Welch’s decision to invest in LDC resulted in training thousands of outstanding managers not only to contribute to the rapid development of GE, but also to lead several other companies. The center also served as a model for other companies to start ‘company universities’ to train their managers. One such outstanding example was by late Steve Job of Apple.

Apple-a bite that changed the world

Today by looking at the great success of Apple, which has become the most valuable company, one may think that it must have been such a slam dunk decision to recall Steve Job as the CEO. However, when that decision was taken by its Board it was not that simple. In 1976, Steve Jobs transformed Apple and quickly succeeded introducing the powerful Macintosh. However, in 1985, Steve Jobs was fired by its CEO, John Sculley, the man who ironically was personally headhunted by Jobs himself. But by 1996, Apple was in a rotten state (losing $816 million on $9.8 billion in sales) and its Board had already fired two more CEOs. It purchased a company NeXT promoted by Steve Jobs. Still getting him elected as the CEO became possible because of the brilliant manoeuvre by Apple’s Board member Edgar Woolard, a former DuPont CEO. As the saying goes, the rest is history.

Toyota’s quality revolution

In the 1950s, German car manufacturer Volkswagen was successful in selling small cars in the US. Detroit was not all that keen for small cars. It was in such a lucrative market. Toyota introduced its small cars in 1958. But in 1961, after selling less than 2000 cars, it decided to pull out of the US market. That was because of the poor quality of the cars. Then Toyota decided to adopt the manufacturing philosophy of total quality management with ‘zero defect’ propounded by the quality guru, Edward Deming. Deming promoted the concept that better quality will reduce expenses while increasing productivity and market share. Today, what he was teaching in Japan in the 1950s is a fully accepted management philosophy. Still how many companies are able to implement such ‘total quality management mantra’ even today? In Japan of that time adapting the principles from a foreign country was not that easy. Still, Toyota wholeheartedly embraced the concept, developed a new model Corona and successfully introduced it in the US. Thanks to the decision of following Deming’s principles of quality management, Toyota is among the largest auto companies in the world. industrial economist october 2013

When one studies the greatest decisions of all time, it is easy to argue with the advantage of hindsight that either the management was forced to make the decision that it finally took or it was sheer luck that they took the right decision. It is the same argument that is often given when examples of sound strategic planning are discussed. Let us try to see how Indian managers could have changed the destiny of their companies if only they had the foresight to take such momentous decisions.

Mouth-zipped CEOs of oil PSUs

During the last ten years, because of the sheer populist and competitive politics, the energy sector in general and oil sector in particular, has been the victim of unnecessary and costly subsidies. To subsidise PDS kerosene, residential LPG, diesel and petrol, the government has squandered Rs 567,406 crore which could have been used for worthwhile projects in education, water, health and transportation. Why did the CEOs of public sector oil marketing companies fail to stop the political parties from taking such suicidal steps? The current dramatic fall in rupee is mostly because of the accumulated government debt, unsustainable fiscal deficit and mounting current account deficit. The crisis facing the CEOs of OMCs was similar to the crisis faced by some of the CEOs reported earlier. Why did they fail to rise to the occasion?

Need for a second rung of leaders

Just like Steve Jobs, N R Narayana Murthy has been brought back to Infosys. Could Infosys have prevented this kind of situation had they trained competent managers like GE did at their Leadership Training Center? Why have none of our companies thought of starting their own universities? In fact, Indian Oil actually had one such Center in the early 1990s. In terms of hardware, it was very attractive. But when it came to the harder part of implementing the training (selecting the right experts or designing the appropriate courses) it failed spectacularly.

How often are our managers in the public or private sectors selected for their leadership qualities? Of course, there are some rare exceptions like the Tata companies and L & T. In the current Indian environment of poor governance, family-owned companies, nepotism, caste-based quota system … one succeeds or fails not because of sound management decision. If one has the right connections in the political arena and mastered the art of ‘educating’ the politicians, then success is guaranteed.

Can we forget these immortal words of Rebecca Mark of Enron who showered more than $60 million ‘to educate’ our politicians?

How the all important banking sector of India would have been different if only the then CEOs of the public sector banks had not ‘crawled’ when the loan mela guru Janardhan Poojary asked them to ‘bend’? Why did none of them oppose his hard-brained policy of giving loans which amounted to distributing the banks’ assets?

In the Indian management scenario it will be easier to write a book on the worst decisions of all time. n 31

Down memory lane

Public Transportation

S Viswanathan

How Chennai missed the bus? (rail!)

A large underground-surface rail network can help develop commuter traffic in an orderly and efficient manner and provide the commuters the fastest and safest mode of reaching their places of work. This calls for major policy changes: of separating such a system from the Indian Railway network and forming it as a part of larger metro transportation network as also integrating the rail and bus transportation modes. More important, belief in private and public partnership that can help create dozens of new enterprises.

It was 1990; a year ahead of the launch of the liberalisation era. The Chennai Metropolitan Development Authority (CMDA) and the Times Research Foundation (TRF) worked together on project Madras 2011. The mandate: to look at Chennai metro 20 years hence in terms of infrastructure, roads, railways, housing... Men with knowledge on different sectors were appointed as consultants. These included the renowned city planner G Dattadri, housing specialist P V Rajaraman and CMDA’s Anant Ranjan Das. I was invited to prepare reports on industry and transportation in 2011.

I was enthusiastic about envisaging the plan for transportation 20 years ahead. I have had the opportunity to look closely at transportation systems in Germany, France, Britain, Japan and the USA. With the poor progress of the automobile industry at that time, I felt the need

for establishing a massive public transportation system.

Remember, at that time India had just one modern automobile company in Maruti Suzuki.

Focus on urban rail network-surface and UG

In my report on transportation I suggested a large step up of investments in the railways, constructing 100 km of surface rail lines by 2000 and then going for an underground rail system, building another 100 km of such a system by 2011. Of course, the plan envisaged substantial investments. The country was not awash with funds and there was not much enthusiasm over raising large resources. Also, that was the lowest point in terms of foreign exchange reserves and with the permit - licence - raj firmly entrenched, there was not much enthusiasm on the part of global investors to invest in India.

The Metro Rail work at Chennai shaping at good speed 32

industrial economist october 2013

Down memory lane With the dismissal of the DMK government in 1991, these reports were consigned to the archives.

When London Underground extended across Thames...

Five years later, I had occasion to look at the London underground rail system, wellknown for its efficiency and commuter

E Sreedharan to build the Delhi metro rail.

Giving adequate power to the septuagenarian, the system took shape in quick time.

In just a decade, over 100 km of metro lines could be constructed in the national capital.

The popularity of the Delhi metro helped spread interest on this system to several other large cities- Bengaluru, Chennai, Hyderabad, Mumbai... joined the fray.

Colossal strides taken by China...

convenience. The metro was extending its construction across the Thames in the dockyard area. I walked through the tunnel under construction and was deeply impressed by the technology. Remember, the system under construction was below the Thames river: the safety of dozens of historic buildings like the WestministerHallhadtobeprotectedfrompossible damage through vibrations inevitable in constructing a huge underground system.

W Atkins & Co, in-charge of several underground projects across the globe, provided rich information on construction and the economics of this.

Packing commuters like sardines...

I was reinforced with my earlier conviction that such a mass transportation system is vital for India with her teeming population. Large metros face severe problems coping with massive demand for transportation facilities for commuting to work places. Mumbai suburban, accounting for nearly half the total passenger traffic of the Indian Railway, has been known for years for packing commuters like sardines.

Tamil Nadu government wasn’t too enthusiastic about spending on such large infrastructure projects. In the Indian federal system, the railways are the monopoly of the Central government; the state governments didn’t have a say and thus weren’t willing to play ball.

Delhi was the earliest to appreciate the imperative for such an underground rail system. It invited the veteran railway engineer

industrial economist october 2013

China opted to go for the metro rail. The booming Chinese economy with consistent large economic growth generating massive surpluses in foreign exchange and an alert leadership helped. When Shanghai’s metro completed an expansion three years ago, it emerged the world’s largest system designed to carry five million passengers a day with provision for expanding it to 10 million. This has happened in just 15 years. At that time, Shanghai offered 420 km of lines with close to 300 stations in 11 separate lines.

China continues its faith in this system with over a dozen major cities already having such metro systems in place with another dozen plus cities going ahead with construction. China’s capital Beijing, which opened its underground system in 1969, has a 442 km network that carries close to six million commuters a day. Of the ten largest networks of metro systems, three are in China (Beijing, Shanghai and Guangzhou).

London underground, the oldest established in 1863, has a network length of 402 km.

Chennai-Bengaluru Rapid Transport System

In 2008, IE organised a seminar in Chennai on Corridors of Excellence. The seminar suggested focusing on laying high-speed rail tracks on the lines of Delhi-Mumbai industrial corridor and suggested such a corridor from Chennai to Bengaluru. This rail line suggested by IE, can help run trains in speeds in excess of 300 km/hour. That means, travel between the two large cities of Chennai and Bengaluru can be covered in just about an hour. This can open up tremendous possibilities for the development along the entire 320 km stretch, facilitating de-congestion of the two large southern cities.

Delhi was the earliest to appreciate the imperative for an underground rail system. It invited the veteran railway engineer E Sreedharan to build the Delhi metro rail. In a little over a decade 193 km of metro rail line has been constructed.

Underground rail system along OMR on PPP mode

The seminar also suggested building an underground rail system along the Rajiv Gandhi-IT highway (OMR) connecting Thiruvanmiyur with Siruseri. This

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Down memory lane

Delhi Metro Rail zipping across...

IE suggested a three-way funding of an underground rail system: The Indian Railways and the federal government; The state government which is the beneficiary of such an infrastructure; The beneficiary industries along the route.

stretch- houses most of the large IT companies and suffers heavy traffic - hundreds of buses carry commuters to several companies and educational institutions along the corridor round-the-clock. TCS’ mega office at Siruseri with employees of over 25,000, operates around 500 buses every day to transfer its employees to the work spot and back home.

IE suggested a three-way funding of such a system : the Indian Railways and the federal government; active participation by the state government which is the beneficiary of such an infrastructure; more importantly, by the beneficiary industries along the route. It will be through public-private participation, involving the Central and state governments and also a large number of private industries. Such an arrangement can help construct the system in quick time and also ensure accountability by all the three owners. The estimated cost of such a system at that point of time was around Rs 20,000 crore. This could be met, a fourth by way of equity capital of Rs 5000 crore and the balance through long-term loans.

Such a system can help develop commuter traffic in an orderly and efficient manner and provide the commuters the fastest and safest mode of reaching their places of work. This, of course, calls for major policy changes : of separating such a system from the Indian Railway network and forming it as a part of larger metro transportation network as also integrating the rail and bus transportation modes.

A solution for future decades...

The teeming population, growing by the day and the poor road infrastructure with severe problems of land acquisition and costs, are major deterrents for such expansion. This alternative calls for large resources. But then it will be a solution for future decades. Such an experimental project can be extended to other parts of the metro and in course of a decade or so, it should be possible to provide easy commuting from one end, at Mogappair in the west to Siruseri in the south.

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This will call for a drastic re-orientation of the Central-state involvement in developing infrastructure over the longer term.

Power of the auto lobby...

The US model based on the automobile is not workable in India. The reasons are not difficult to comprehend: • Low per capita income • High prices of automobiles • Poor and crowded roads • High costs of land that comes in the way of providing parking space for vehicles.

• The difficulty of expanding the existing road systems The alternative is to focus on Mass Rapid Transport System funded largely by the government. The limited availability of land space in metros and large cities, their ballooning costs and the large and continuous influx of population from rural areas into the cities, leading to massive urbanisation; all call for planning such infrastructure to serve the needs of the long term. This is what China has done.

State governments like Tamil Nadu overtly concerned with welfare, have led to the grievous neglect of development of infrastructure. In Tamil Nadu’s budget, almost the entire revenue stream is accounted for by salaries and pensions paid to government employees, servicing of debt and the various welfare schemes and freebies and heavy subsidies on food, electricity and a host of other items. Thus, there is little surplus available for infrastructure development. This will call for consensus among the political parties to limit the amount of monies that can be offered as subsidies, a limit on government expenditure on salaries, pensions… and also to put a strong limit on public debt. These call for agreement among all political parties.

The strong automobile lobby has been responsible for this huge over-concentration on road transport sector to the neglect of the railways.

The latter alone is capable of catering to mass transit needs at an affordable cost. n industrial economist october 2013

interview Jayanthi Raghunathan

Ian Selbie, Unisys Asia Pacific

Fighting financial frauds A survey by KPMG India in 2012 pointed to 55 per cent of its respondents affected by fraud in the last two years. With increase in intellectual property fraud, piracy, remote banking fraud and identity theft, there is an urgent need for companies to revamp their fraud-tackling strategies.

Ian Selbie, Director, Solutions Program, Unisys Asia Pacific shares his insights on the steps to be taken to fight fraud. Excerpts from an interview: IE: What are the new types of threats that the Indian businesses face?

Ian Selbie (IS): Globally, account takeover is the primary fraud attack on remote banking channels such as telephone, online and mobile banking. India is likely to be in line with this trend. It occurs when customer logon information is compromised and used to perform unauthorised withdrawals. Account takeovers often extend into identity theft and as a result, these fraud attacks often involve multiple channels.

The first step in performing an account takeover is to steal access information which is done when a bank employee with access to customer data uses it themselves or sell it to others for profit. Once access information is stolen, the perpetrator moves money out of the account electronically.

IE: How equipped are Indian companies to tackle this?

IS: Policy is an essential component, but criminals will always look for the weakest links. So governments, businesses and the public need to cooperate to minimise the risk of losses.

In India, policies instituted by banks and financial institutions are often the weakest links and most attractive entry points for hackers.

Also, lack of employee awareness adds another layer of vulnerability. Taking into account the sheer volumes of accounts managed by banks and financial institutions and the ever increasing trend in online channel adoption, these organisations must enforce strong policies to curb cyber crime, while maintaining customer satisfaction. A good way for businesses to do this is by building awareness through regular seminars/knowledge sharing sessions for their staff and customers on their cyber crime policies.

IE: What makes an effective anti-fraud strategy?

IS: An effective anti-fraud strategy seeks to prevent or reduce the risk of fraud from occurring in the first place, proactively detects any instances of fraud and takes swift, corrective action when fraud does occur.

Sophisticated fraud detection software works in several ways, such as maintaining ‘fingerprints’ of customer PCs to be able to detect changes that may indicate the presence of malware. Behavioural patterns such as unusually quick inputs from a customer, which may indicate the presence of ‘man in the browser’ code performing functions in the background, or differences in the sequence in which web pages are accessed are taken into account. Financial profiles of transactions are tracked to detect both normal and abnormal actions and determine risk levels.

In addition to detection, policies and procedures are set as to whether to block, delay, or allow certain transactions based on the company’s risk appetite and desired end-user experience.

IE: What are the long term measures that need to be taken by companies?

IS: The first step for businesses is to continually educate customers and employees on how to protect their own and others’ information.

36

industrial economist october 2013

interview Secondly, financial institutions need to have strong policies in place for the use and protection of customer information. For instance, they should provide access to sensitive data on a need-to-know basis only; keep comprehensive logs of all customer data access and have stricter password policies.

Thirdly, financial institutions should ensure that their Know Your Customer (KYC) policies and procedures are up-to date and easily available to their employees.

Further, it is recommended that they refresh customer profiles reflecting recent changes in their demographics, at least once in a year.

mobile device) and ‘what they know’ (a PIN or password) but also by ‘who they are’ (a biometric such as a fingerprint or face scan) to protect sensitive assets is recommended.

Yet a truly effective security approach requires a combination of strong policy and technology as well as the means to enforce both.

A sophisticated new approach to security is attributebased access control, an emerging technology that grants access based not only on the nature of the data and the individual requesting access but also factors in the location from which access is being requested and the method used to authenticate identity.

IE: Which sectors are most affected by these crimes?

IS: According to Ernst & Young’s India Fraud Indicator report , the financial services sector has been hit the hardest by fraud, with more than 63 per cent of the total fraud cases reported in 2011–12, followed by the technology and transportation sectors. In the financial services sector, banking was the major victim with 84 per cent of the total number of reported fraud cases.

IE: Please explain Unisys’ approach to fraud detection and prevention.

IS: Unisys fraud solutions are based on a unified Financial Crime Prevention which helps to customise solutions around fraud detection and anti-money laundering.

One of Unisys’ solutions, Secure Document Delivery, ensures that the ever-increasing volume of business communication and documents are managed through e-mail in a manner that is safe, secure, and convenient for the receiver. This solution delivers rapid reduction in paper, production, and postage costs, and enhanced customer experience by revolutionising how high-volume documents are delivered, responded to, or paid.

We also have a unique Identity Management Solution that helps clients efficiently manage and audit user access to information systems, thus protecting valuable financial information and assets. The solution allows businesses to centrally manage digital user identities and is based on deep experience in designing, integrating, and operating complete life-cycle identity management systems. n

IE: How can fraud through mobile phones be curbed?

IS: In organisations, the most common threats to mobile security include malware, loss and theft of mobile devices and increasingly exploitation and misconduct on the part of employees. Organisations need to ensure that they are monitoring and supporting all company-liable and employee-owned devices 24x7 as to prevent data breaches, while ensuring convenience and ease of access to the enterprise network.

A multifactor authentication, where the employee is identified not only by ‘what they have’ (a known/trusted

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industrial economist october 2013

37

CAPITAL NOTES T N Ashok

Chennai Airport to be privatised

Infosys not to cut prices

Chennai airport, which was recently modernised by the Airports Authority of India, is to be privatised.

New Delhi (GMR), Mumbai (GVK), Bangalore (Tatas) and Hyderabad (GMR) have already been privatised and are being successfully administered by private operators. The government plans to hand over Chennai, Kolkata, Lucknow, Guwahati, Jaipur and Ahmedabad airports to private players.

Civil Aviation Minister Ajit Singh has said that the scope for privatisation of the Chennai and Kolkata airports includes the development of air side and city side facilities on a long term concession. Requests for qualification for the Chennai and Lucknow airports would be received by mid-October and financial bids would have to be placed by mid-December.

The bids would be patterned on the Delhi and Mumbai airport models and would be in the form of revenue share to be paid to the AAI. A user development fee is also being allowed as per Airports Economic Regulatory Authority (AERA) though it is a controversial issue as both passenger associations and airlines are protesting them, but they help the developer to bridge his funding gaps. The emphasis on privatisation is not on revenue that will be generated but how efficiently private operators will manage these new modernised airports.

Infosys, India’s 2nd largest software service provider will not cut prices, though it’s a major gainer from the rupee’s sharp decline in value against the USD. The company’s executive chairman N R Narayana Murthy said that instead the company will focus on increasing value to its clients.

“If you give me a dollar and I give you back two dollars of business value, the value leverage is two,” said Murthy at the Motilal Oswal Financial Services 9th Global Investor’s Conference. He further added: “but if I convince you to give me a dollar and 25 cents, and give you 3 dollars value, then the business value leverage is 2.65. This is a win-win situation for both of us as its better to add business value than reduce prices.”

The Indian rupee has fared the worst among all other currencies of developing countries and has depreciated almost 19 per cent since the beginning of this year. IT companies benefit largely from the rupee depreciation as they earn their revenues in dollars and euros and their wage bill is paid only in Indian rupees.

Smartphone prices may change Microsoft’s recent acquisition of Nokia’s handset business through the takeover of Nokia Oyj is expected to have a significant impact on the operations of both the companies in India.

Nokia has large footprint in India with aggressive sales and distribution but Microsoft , though small, has more resources particularly in the engineering section. Says Ravi Venkatesan, former Chairman of Microsoft India: “for Nokia, India is the 2nd largest market and 3rd largest in terms of smart phones.”

Asha is one of Nokia’s fast 38

moving low priced smart phones specially designed for the Indian market.

Microsoft is highly focused on the smartphone market and it is expected that it will maintain Nokia’s feature phone hold in India and as the market move is more towards the smartphone segment.

The deal between the

two companies is not likely to impact heavily Miscrosoft’s research and innovation facility, but it will on Nokia’s manufacturing facility in Chennai, which predominantly makes the Asha range.

People close to the deal claim that this is one of the global acquisitions where the Indian balance sheet heavily influenced Miscrosoft.

Microsoft will push its windows platform on the smartphones.

Some knowledgeable sources claim that sale was not a good deal for Nokia because they feel

that its handset business’s actually valued over 15 billion USD, double of what Microsoft acquired it for. Nokia is still a valued brand globally and also in India.

But in India , Nokia has steadily lost its dominant market share to Samsung and Micromax which capitalised on the emergence of the smartphone market.

Samsung today is the big boy in the cell phone market with 26 per cent market share. Micromax has cornered nearly 16 per cent of marketshare with its smart phones aggressively priced against Samsung. n

industrial economist october 2013

business briefs

World labour laws at a glance

Backpack laboratory

A study on ‘Comparison on Labour Laws: Select Countries’ compiled by the Exim Bank and MCCI was launched recently. The bank’s CMD T C A Ranganathan stated that the

The pioneers in the field of applied electronics and instrumentation, National Instruments (NI) Ltd. came up with myRio which is considered to change the future of lab study.

Priced at $250 the note book sized product powered by USB can be easily carried on your backpack.

This product myRio is the successor of myDaq that does not require a separate initiator to run it while the former requires one.

T C A Ranganathan, CMD, Exim Bank

book analyses the labour laws in 20 countries under 15 parameters. The parameters included regulations on collective bargaining and settlement of industrial disputes, contract labour and employment security based on termination, comparisons on conditions of work hours... India is way down on the list.

G l o b a l l y I n d i a ’ s ex p o r t s a r e very low and imports have risen drastically. Ranganathan pointed out that even though Indian companies managed profitability, they did not

have a place in world market due to lack of technology. On the contrary, China made a mark in world market with their cost-effective products while other developed countries had an upper hand on technology. India is still struggling to find its place between these two.

Indian labour law was enacted during the colonial period and since then no drastic change has taken place on par with the change in labour behaviour.

All the parameters mentioned above must have a change in accordance with present trend. Only six states, Maharashtra, Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh and Tamil Nadu were found to be both employer and employee-friendly in India.

India also ranked 82 in the Global Competitiveness Report by World Economic Forum and the reasons cited for this downfall were hiring and firing practice alongside restrictive labour regulations in India.

With 487 million people coming under the labour sector and a change provoking study done by the EXIM bank team, changes in these laws will lead India to be competitive in global market.

Jayram Pillai, MD-NI, India, Russia and Arabia and Dr James Truchard, CEO,NI

Students can programme the FPGA and evaluate them in real time. So it is just enough to give the necessary instructions using the software and myRio does the rest. On unveiling the product, CEO Dr James Truchard pointed out to the development of a common platform which will help people to develop their own applications just like an iOS or android did.

Gem of social service...

A hut and a part time doctor, this was Public Health Center(PHC) 60 years ago and nobody would have thought that the hut will turn into a 150 bedded multi disciplinary hospital with 70 doctors working round the clock over

the next sixty years. The diamond jubilee celebration marked its handsome growth both in service and quality.

Started by Gandhian M C Subrahmanyam(MC) with a band of young volunteers in a thatched roof in 1953,

Dr K Rosaiah, Governor of Tamilnadu releasing the souvenir and received by Mr P V Ramanujam, Trustee-PHC.(LtoR) Prof S Vittal, Endocrine Surgeon, Dr M K Srinivasan, President and Medical Director-PHC, Sri S Viji, Chairman-Sundaram Finance Ltd and Managing Director, Brakes India Ltd., Sri T A Subramanian Hon. Secretary-PHC. industrial economist october 2013

it was an experimentation to offer medical service to the local community around Mambalam. Dedicated efforts of MC who opted to remain a bachelor, inspired second and third generation volunteers. PHC treats over one lakh patients every year.

Now the hospital has state of the art Cathlab with imported equipment to provide the best cardiac treatment.

Though advancements in technology increases the price of treatment, PHC still treats patients at modest cost, thanks to the selfless volunteers.

BSVN Centre, a part of the PHC provides special training and care to mentally retarded children. Special Nandhini baby food prepared using WHO/UNICEF formula and Alochanaadvisory are given to nursing mothers through PHC. – Diwakar M 39

City corner

Chennai

Jayanthi Raghunathan

Meters return to the metro Do you dodge the auto walahs when you land in Chennai in fear of being fleeced by the exorbitant rates they charge?

Then think again, Chennai is to become the first metro with GPS based auto meter, panic button and digital printer. And this time it is to stay. With the concerted efforts of Times of India, NGOs, people from all quarters and auto drivers themselves, the auto fares have been hiked 75 per cent in tune to the prevailing fuel and other costs. The government is to spend Rs 80 crore for the 71,000 registered autos in the city to fit the GPS enabled meters by 15 October. 59 teams are policing to effect this change. The fare for the first 1.8 km is Rs 25 and Rs 12 for every additional km. Swathi Soft Solutions, an IT services company has launched an android app ‘Chennai Auto Fare’ for commuters to calculate fares based on distance. For this fair fare system to stay and to expand through the state, commuters should put a strong effort in implementing this after two decades of unrestrained fleecing of the hapless commuters by auto-drivers.

Incidentally, IE in its January 2012 issue had suggested that auto-drivers be regulated and that this would earn the undying adoration of the public.

Star studded city

Medical miracle!

From talkies to digital filming, Indian cinema has grown in technology and reach. This year marks the centenary of the silver screen that has mesmerised people of all ages.

To commemorate this, the South Indian Film Chamber of Commerce (SIFCC) organised a three-day event. The venue: Chennai; the state capital which adorned its on-screen heroes as chief ministers. Actors, directors and other cine artists from Kannada, Telugu, Malayalam and Tamil film industries gathered amongst fanfare. Adding pomp was the President of India and the chief ministers of four states who attended the function. While the history and milestone of Tamil and Malayalam cinema was elucidated the first day, the second day showcased the Telugu and Kannada movie’s history. Apart from star-studded performance on the third day, 50 stamp heads of film personalities have been released. Tamil cinema is the dream destination for many.

From rags to riches, the off-screen stories of many actors are as spicy as the on-screen tales. The love for cinemas that the Tamils share has helped the industry to move towards more practical films and has encouraged youngsters to experiment with new genres. For the state with its politics and cinema entwined, Tamil Nadu seems a perfect host for the Centenary Celebration.

Did Chitti robot live-screening a pregnancy operation in the Endhiran movie fascinate you? Perhaps this may not be far from reality in future! Dr J S Rajkumar, surgeon from Chennai has become the first in the country to live stream an operation. Google glass, which is still under development, has enabled this next step towards a medical revolution.

One of its latest offerings, the Google glass is as simple as any glass but just that it is as powerful as a smart phone. By wearing the glass, with simple voice commands, actions like taking a picture, video, sending messages, getting directions, can be done at ease. Dr Rajkumar live streamed the operation to bunch of students 500 meters away. In a country, where the medical infrastructure is poor in rural areas, this highend technology will help enhance rural health care. 2000 Google glasses have been distributed to various personnel for testing it in real time. Soon medicos can reach to the nook and corner with this gadget.

40

Overflowing garbage The city’s dump yards, at Perungudi and Kodungaiyur, have started to overflow and the Corporation still has no firm plan to tackle this problem. Chennai generates 5000 tonnes of waste per day. Compared to the other metros, Chennaites lack the awareness of segregating waste before disposal.

Though segregation was attempted before, it proved futile.

The Corporation uses outdated techniques like land filling and burning to dispose garbage, which is harmful to the environment. It pollutes the land and the stench generated from these open dump yards add to health issues in surrounding areas. Bengaluru has awakened to this need and is trying to rope in Super Star Rajnikanth to promote awareness on waste segregation and management. Clean and green Chennai has been the motto of changing governments and it is time the motto is brought into action. n industrial economist october 2013

at a glance

Direct Tax Collections Up to September 17

Contribution of Advance Tax (September Quarter) Personal Net Corporates Income 24.00%

1,03,374

10,946

65,752 89,006

7.97%

1,14,324

21.08%

Source: Ministry of Finance

FRANCE U.K. U.A.E.

655.04

2,39,947

910.35

In US $ million

2,47,013

In tonnes

3,05,516

Value

JanJan-Dec Jan2012 Sep 5 Sep 5 2012 2013

JanJan-Dec Jan2012 Sep 5 Sep 5 2012 2013

81,860.4

5,080.8

5,111.2

During Jan-Sep 5, 2013 In tonnes

5,251.4

7,042.9

8,697.0

9,818.1

14,842.3

10 16,029.4

25,733.4

60,479.9

Top

Russia Jordan Turkey Others USA Germany Belgium Slovenia Ukraine Spain

Source: Coffee Board of India

Figures are provisional

KBK Infographics

Acreage of Major Kharif Crops In lakh hectare

As on Sep 20 987.87

366.08 374.25

2012-13

8.46 8.34

114.44 113.60

50.06 48.74

173.95 193.24

175.93 195.13

2013-14 1,038.27

98.94 104.98 Rice

April-July, 2012 April-July, 2013 2,237

490 141

Pulses Coarse Oilseeds Cotton Jute & Mesta Cereals Sugarcane

Source: Ministry of Agriculture

industrial economist OCTOBER 2013

KBK Infographics

US $ million

646 112 1,080 73 180 65

Source: Department of Industrial Policy and Promotion

KBK Infographics

per the Central Pollution Control 839 Grossly Polluting Industries POLLUTING AsBoard, have been identified in the country

INDUSTRIES discharging their effluents into

surface water bodies and/or on land

Country-wise Export

Italy

From Top 10 Countries

234

Wealth Tax

Quantity

Both Indian and re-exported (Based on export permits)

FDI Equity Inflows

557 371

CYPRUS

KBK Infographics

India's Coffee Exports

860 518

GERMANY

JAPAN

Personal Securities Income Transaction Tax Tax

Corporate Taxes

1,856 520

1

733.14

Net Direct Taxes

1,853

00

309

7.97%

9,497

MAURITIUS

U.S.A.

2,210

12.5%

2,308 2,214

SINGAPORE

NETHERLANDS

9.14%

1,35,791 1,46,610

2,11,641 2,38,325

2012-13 2013-14

` crore

Uttar Pradesh Haryana Uttarakhand West Bengal Bihar Odisha Andhra Pradesh Karnataka Assam Punjab Himachal Pradesh Jharkhand Daman & Diu Gujarat Goa Kerala Maharashtra Madhya Pradesh Puducherry Sikkim Tamil Nadu

594 53 50 31 22 20 16 10 9 7 6 5 3 3 2 2 2 1 1 1 1

Source: Lok Sabha Unstarred Question # 1081; dated Aug 12, 2013

State-wise no. of Grossly Polluting Industries

KBK Infographics 41

C-BOX

C-Box

V Pattabhi Ram

Walking into the sunset

In his party, Advani was always highly respected. So should he not have walked into the sunset when people asked ‘Why’ and not when they asked, ‘Why not’?

I must concede that I have never been a fan of L K Advani. Right or wrong, I have held that his role in 1992 was responsible for bringing terrorism closer home in India.

His eternal folded hands, his “saddest day in my life,” his talk on being hard on terrorism when his own party escorted terrorists out of India in 1999 and his constant name calling of the Prime Minister as a puppet have never gone well with me. Yet, his public humiliation recently in the story of the elevation of candidate Modi made me feel sad for the eternal yatri.

Advani has a number of things to his credit. He has been in Indian politics for over 50 years. He has been responsible for the rise of the BJP, which now provides the nation with an alternative. He is not known to be corrupt. In his party, he was always highly respected. So should he not have hung his boots instead of letting this mess happen to him. Should he not have walked into the sunset at a time when people asked ‘Why’ and not when they were asking ‘Why not’?

Should he not have read the writing on the wall? Or is it that his ambition to become prime minister is so overpowering that he cannot see it?

His action has history on his side. In a party of rabble-rousers, Atal Bihari Vajpayee was a tall leader.

But he made the cardinal sin of leading the BJP in the 2004 hustings. For an octogenarian that would have meant he would be prime minister till 86. And that too while he was ailing. When the Congress surprisingly won the national elections and his party bayed for Sonia Gandhi’s blood, he kept his own counsel letting the aura around him diminish. How nice it would have been if he had retired after his innings as prime minister!

Oh would it not have enhanced his position as a statesman?

Or take Manmohan Singh. The brilliant economist, who was instrumental in turning the economy around in 1991, and who was India’s first brush with a technocrat CEO would have gone down in history as a champion following his first stint as prime minister. Perhaps the fact that he was named as the prime ministerial candidate and won the war against Advani made him feel that the office owed it to him to stay on. Even if he had left, say in the first year of his second term, it would have been great. He would not have been subjected to the kind of rebuke and ridicule that is associated with his name today. Today people are willing to embrace a politician, rather than a technocrat, for the country’s top governance job. Sad, but true.

May be there is something in the archlight of power, that holds people back. That makes it hard for them to walk into the sunset. May be they look at someone like Martina Navratilova as an inspiration. For over two decades, the grandma of world tennis had ruled the game like a colossus. When she gave it up circa 1995 she had the world at her feet. Then, some eight years later, in 2003, at age 47 she came out of retirement to compete at the professional circuit; teaming up with Leander Paes, she won the Australian Open in a game where girls, half her age, retire. Or perhaps they think of the Big B. A brand in his own right, he gets all hearts, from the seven year-olds’ to the septuagenarians’, skip a beat. The 70 plus former angry young man came out of the brink of bankruptcy and magically rebuilt his career, in a field where you are considered an oldie at forty.

Those perhaps are exceptions rather than the rule. In the world of business Jack Welch continued to stay on the job even as the search for the ‘Next-Guy’ was on. And the return of Murthy to head Infosys has raised the noise levels.

Succession planning is always a tough call to take. Ask Advani. n

Printed and published by S Viswanathan for ECONOMIST COMMUNICATIONS LTD at ECONOMIST COMMUNICATIONS LTD (PRESS), S-15 Industrial Estate, Guindy, Chennai-600 032 Editor: S Viswanathan 42

industrial economist october 2013

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