Narendra Modi - IBS Business School


Narendra Modi - IBS Business School
Dial ‘E’ for Exit? The 4D Approach Emerging Challenges
A Triangular Relationship in a Multipolar World
June 2014
A Business & Finance Monthly
Vol: 3, Issue 6
Narendra Modi
India’s Second Man of Destiny
A Media Five Publications Flagship
The Global Analyst | JUNE 2014
The Global Analyst | JUNE 2014
June 2014
An Unchecked Mandate - A Fantastic Start
four-letter word “Modi” has become
the chant of a new generation of
Indians and hundreds of millions of
their seniors, including the minorities
have given India’s most decisive
mandate since 1984. Yes, Narendra Modi is going
to be Independent India’s most-hated and mostexciting Prime Minister in an election in which the
world and India got divided in swinging from one
side to another in an excruciatingly arduous ninephased election - inarguably, the world’s largest
free and fair democratic eleciton.
For the world as well as India, Modi’s rise to
the top has huge implications as it may involve
a radical departure from status quo on policies
from foreigin policy, governance and definition of
socialism and secularism besides ground-shifting
economic policies and initiatives. While the
Congress has governed almost 82 per cent of the
country’s 67-year old history, it has been decimated
to a tally in Lok Sabha that doesn’t even officially
qualify it as opposition.
The mandate has many implications even as it
raises crucial questions on what to expect for the
country. Firstly, it is the most unchecked mandate
in a generation not seen since Rajiv Gandhi’s
times. Two, India’s growth rate has halted to
a virtual stop that almost makes it look like a
cookie that crumbled. Three, there is widespread
apprehension amongst India’s minorities, mostly
the Muslims about the policies of inclusiveness,
religious freedom and develoopment. Four,
there is great curiosity about the way forward on
India’s economy and governance which has seen
near-paralysis over the past one decade. Five, it is
goodbye to coaltion politics which made the PM’s
office run like a consensus party and so all eyes are
on whether Modi will continue to include people
or exclude wide sections of the population and
their representatives whose support, his party in
government does not really need.
Lastly, whether India’s foreign policy will be one
that is beligerant or one that continues to press
forward its agenda with a bias for soft power. There
are questions to be answered all along.
Turn the page 32...
- Team Global ANALYST
Vol. 3 | No.6
- N Janardhan Rao
- D Nagavender Rao
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Advisory Board
Dr. Paritosh Basu, Former Group Controller, Essar Group
N Harinath Reddy, Advocate & Sr. Partner, H&B Law
Offices (Hyd)
Sanjay Banka, Chief Financial Officer
Landmark Group, Saudi Arabia
Prashant Gupta, IIT-K, IIM-L, CEO - Edunirvana
Dr David Wyss, Former Chief Economist,
S&P & Visiting Fellow, Watson Institute at Brown University.
Dean Baker, Economist and Co-founder
Center for Economic and Policy, Washington, US
William Gamble, President, Emerging Market Strategies, US
Andrew K P Leung, International and Independent China,
Specialist at Andrew Leung, International Consultants, Hong
M G Warrier, Former GM, RBI
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The Global Analyst | JUNE 2014
Inflation management and fiscal consolidation as the
key challenges before the new government while
promising expeditious decisionmaking over the next
few months.
- Arun Jaitley, Finance Minister
The current non-system in international monetary
policy is, in my view, a source of substantial risk,
both to sustainable growth as well as to the
financial sector. It is not an industrial country
problem, nor an emerging market problem; it
is a problem of collective action. The sooner
we recognise that, the more sustainable world
growth we will have. Raghuram Rajan, Governor, RBI
The main obstacles to the economic growth
forecast are an uncertainty on monsoon and
a delay in fast-tracking projects, if any, by
the new government. The key risk is that
expectations from the new government
are so high, and that it does not deliver in
a commensurate fashion to de-bottleneck
the supply side. Despite these risks, India’s
medium-term growth prospects are good and will benefit from a
stable government for the next five years.
- Tushar Poddar, India Chief Economist, Goldman Sachs
Every good company knows that a customercentric focus enables them to enhance the value
for all its stakeholders. Every good government
knows that credible policies with accountability
and governance enable the country and the people
to prosper. The key is effective implementation
and execution.
In a positive scenario,
the Sensex would
move up to 30,000 by
December end. FY15
will be a key year to
watch out for corporate
profits. Banking, capital
goods, infrastructure,
and power sectors will
be chased.
Modi should find a way
to disinvest as valuations
would be good in
euphoric times. Large
investors should stick
to large-cap stocks and
small investors can buy
selective mid-caps as it is
a bottom-up market.
- Nirmal Jain,
India Infoline
- S Chandramohan, Group CFO, TAFE
According to Reserve Bank of India (RBI) report published in February
2014, there were nearly 350 million debit cards compared to 19 million
credit cards. Credit card penetration in India has been on a downward
journey and the cannibalization is benefiting debit cards and Internet
banking. In 2012, the number of credit cards were 10-15 per cent higher
than what it was in 2013 as banks are restricting the issuance of credit
cards due to credit risk and higher non performing assets (NPAs).
- Vishwas Patel, Chairman, PCI
Indian citizens have placed their hopes in a new political configuration
that’s capable of reviving the economy and enabling it to meet its
considerable potential. If Modi is serious about meeting those hopes, he
should frame a detailed initial response around speed — and make it a
point that his administration takes decisive steps in its first 100 days.
- Bloomberg
4 4
Analyst | |june
The RBI should designate
a specific category of
investors in banks known
as authorized bank
investors (ABI), who
would be allowed to hold
as much as 20 per cent in
banks without regulatory
approval. Such investors
would include funds with
diversified investors.
- RBI (Nayak) Panel on
Governance of Bank
The Global Analyst | JUNE 2014
India’s Second Man of Destiny..........32
If NAMO focuses on the right issues, in a manner that uses
up India’s current and latent potential in all the seven areas
discussed in this analysis, India will have a golden run. This is
the tipping point, the turning point and the inflection point
in India’s tryst with destiny. We hope Modi gets all the godspeed and support to succeed at India’s highest office at its
most needed hour.
There was never another point like this in a nation’s history
that a mandate this strong came to a man so revered and
yet paradoxically so hated that millions of voters in India,
young and old have placed in a leap of faith. Hope Modi and
his team grabs this and help India leapfrog to the status of
developed nations that it desperately deserves...
Dial ‘E’ for Exit? The 4D Approach Emerging Challenges
A Triangular Relationship in a Multipolar World
June 2014
Vol: 3, Issue 6
Narendra Modi
India’s Second Man of Destiny
A Media Five Publications Flagship
The Global AnAlyst | JUNe 2014
12 The New Government - Two Policy Challenges
Amids the Western media often refers to India is as the ‘noisy’ democracy. As always,
the noise has reached its peak during the electoral phase, but we can look forward to
the dust settling after the new government formation. A stable regime at the centre
will ensure that India regains its growth trajectory,
14 Election Results - Impact on Real Estate
No government has a magic wand which can solve all problems at once. Reforming the economy is a gradual process,
and we need to be patient. A stable government at the centre has potential to boost the sentiments and in return,
attract foreign money.
16 Indian Banking Sector - Realty Bites!
Banks will have to recognize the fact that retail credit has its own risks and exposes them to individuals in large volumes as
compared to corporate loans. The whole appraisal process and risk underwriting process has to take this into account.
25 Effective Bank Audit - Emerging Challenges
History will remember with gratitude names like Vinod Rai, Raghuram Rajan, Seshan, Sam Pitroda and Sreedharan
who became legends in their own times for the contributions they made to the causes they took to heart. Here we
look at the role of auditors in protecting the country’s resources and ensuring prudence in exploitation and use of
precious resources for economic development.
18 Telecom - Dial ‘E’ for Exit?
Almost CARE Research believes that the increased market share limit (50 per
cent from earlier 35 per cent) would avail enough room for larger players like Bharti Airtel and Vodafone to go for
acquisitions in most of the circles. Consolidation would provide much needed exit to some of the weaker players along
with reducing the hyper-competitive environment in the sector.
53 E-Tailing in India - On a Firm Footing
Studies indicate that India will go the China way in terms of web-only players dominating the online market, given the
low organized retail penetration.
The Global Analyst | JUNE 2014
June 2014
Vol. 3 | No.6
22 Assessing Fund Manager - The 4D Approach
Mutual fund investors generally prefer a fund due to its historical performance. In the context of
an equity fund, the primary expectation is that the fund manager should outperform his stated
benchmark. For eg., if his benchmark is that of Nifty 50 or Sensex, the fund’s performance should
be better than the benchmark to justify investor confidence in the fund. The extent to which the
manager outperforms the benchmark is the second important element of attraction.
30 2CSR
In an exclusive interview with The Global ANALYST, Sonia Agarwal, Co-Founder, 2CSR.
shares her entrepreneurial journey, what prompted her to start 2CSR, challenges and
strategies to combat these challenges in five years from now.
38 Russian Economy - The Challenges Ahead
With dark clouds of economic and political sanctions looming over Russia in the backdrop of the Crimean
accession, Russia’s economic future is being arguably considered as shaky by many western economic and
political pundits while the others from the pro-Russian bloc are upbeat about the country’s economic future
in view of the speedy growth and market reforms undertaken by the government in recent times, which
according to them would crenelate Russia from the ensuing embargos.
49 A Rising China, India and the US - A Triangular Relationship in a Multipolar World
The world has become increasingly multi-polar, inter-connected, and interdependent. Unlike previous times,
American primacy will not always work. The shape and dynamics of the global order, however defined, are
clearly changing rapidly in a multi-polar world.
44 One Person Company - Transforming form of Proprietorship
A new business ownership concept is an alternative for Indians, who typically operate using the risky concept of
a proprietorship.
CEO Corner
46 Management Education / B-Schools
03 Editorial
04 Leaderspeak
08 Decoding Data
10 In-Depth ANALYST
55 Bookshelf
57 Apolitical
In In an exclusive interview with
The Global ANALYST, Akhil
Shahani, Managing Director,
Thadomal Shahani Centre For
Management (TSCFM) discusses
about management education
scenario in the country and
the ways to tackle the lack of
employability skills among the
B-School grads etc.
58 Test Your Biz IQ
The Global Analyst | JUNE 2014
dEcodinG Data
The Global Information Technology Report, Big Data 2014
hen The Global Information Technology Report
(GITR) and the Networked Readiness Index (NRI)
were created more than 13 years
ago, the attention of decision makers was focused on how to develop
strategies that would allow them to
benefit from what Time Magazine
had described as “the new economy”: a new way of organizing and
managing economic activity based
on the new opportunities that the
Internet provided for businesses.1
At present, the world is slowly
emerging from one of the worst financial and economic crises in decades, and policymakers, business
leaders, and civil society are looking into new opportunities that
can consolidate growth, generate
new employment, and create business opportunities. Information
and communication technologies
(ICTs) continue to rank high on
the list as one of the key sources of
new opportunities to foster innovation and boost economic and social
prosperity, for both advanced and
emerging economies.
For more than 13 years, the NRI
has provided decision makers with
a useful conceptual framework to
evaluate the impact of ICTs at a
global level and to benchmark the
ICT readiness and usage of their
Extracting Value from Big Data
Data have always had strategic
value, but with the magnitude of
data available today—and our
capability to process them—they
have become a new form of asset
class. In a very real sense, data are
now the equivalent of oil or gold.
And today we are seeing a data
boom rivaling the Texas oil boom
of the 20th century and the San
Francisco gold rush of the 1800s.
It has spawned an entire support
industry and has attracted a great
deal of business press in recent
Big data can take the form of
The Global Analyst | JUNE 2014
India: Networked Readiness Index (NRI)
(out of
Networked Readiness Index 2014
Networked Readiness Index 2013 (out of 144)
A. Environment subindex
1st pillar: Political and regulatory environment
2nd pillar: Business and innovation environment
B. Readiness subindex
3rd pillar: Infrastructure and digital content
5th pillar: Skills
C. Usage subindex
6th pillar: Individual usage
7th pillar: Business usage
8th pillar: Government usage
D. Impact subindex
9th pillar: Economic impacts
10th pillar: Social impacts
4th pillar: Affordability
structured data such as financial
transactions or unstructured
data such as photographs or
blog posts. It can be crowdsourced or obtained from proprietary data sources. Big data has
been fueled by both technological advances (such as the spread
of radio-frequency identification,
or RFID, chips) and social trends
(such as the widespread adoption
of social media).
Big data has arrived. It is changing our lives and changing the
way we do business. But succeeding with big data requires
more than just data. Data-based
value creation requires the identification of patterns from which
predictions can be inferred and
decisions made. Businesses need
to decide which data to use. The
data each business owns might
be as different as the businesses
themselves; these data range
from log files and GPS data
to customer- or machine-tomachine data. Each business will
need to select the data source it
will use to create value. Moreover, creating this value will require the right way of dissecting
and then analyzing those data
with the right analytics. It will
require knowing how to separate valuable information from
hype. This world of big data has
also become a source of concern.
The consequences of big data
for issues of privacy and other
areas of society are not yet fully
understood. Some prominent
critics, such as Jaron Lanier,2 call
on us to be cautious about readily believing any result created
by the “wisdom of the crowd.”
Moreover, applications of big
data in military intelligence have
created a growing concern for
privacy around the world.
Indeed, we are now living in
a world where anything and
everything can be measured.
“Data” could become a new
Courtesy: World Economic Forumw
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The Global Analyst | JUNE 2014
A mandate to take much-needed hard decisions: CRISIL
Debottlenecking in the short-term, improving the economy’s
growth potential and employment generation ability in the
medium term.
he decisive mandate at the 2014 general elections has created the best environment in a long time to bite the
bullet on government finances so as
to ensure a long and healthy phase of
economic growth in India.
CRISIL believes the new government’s to-do list to
revive the economy is a long one, but unfortunately, there is limited ability to use growth-supportive
monetary and fiscal policies.
Typically, monetary (cut in interest rates) and fiscal instruments (increase in government spending)
are used to prop up a sagging economy in the short
run. However, India has run out of such countercyclical policy ammunition as its inflation and deficits remain high and, in fact, need to be trimmed.
Says Roopa Kudva, CEO & Managing Director,
CRISIL: “The lowest-hanging fruits are fast-tracking of projects in pipeline and resolving iron ore
and coal mining issues. This will improve the efficiency of capital that is now stuck, pave the way
for better returns on investment, create jobs, lift
income growth and spur private consumption demand.”
The other 5 imperatives for the new government are:
1. Taming inflation:
This will require better monetary and fiscal policy coordination, reducing food inflation through
measures such as dismantling the APMC Act, and
also bringing about a sea-change in the country’s
storage and distribution capacities for fruits and
vegetables. This is particularly important in the
current year in view of the rising risks of monsoon
failure spurred by El Nino.
2. Pragmatic fiscal consolidation:
CRISIL believes this will entail reducing subsidies and curbing expenditure, and ensuring that
the money spent on social welfare schemes create
durable assets than remain just cash handouts. It
is also critical to simultaneously introduce growth
and revenue-enhancing measures such as clearing
the long-pending Goods & Services Tax (GST) and
improving tax compliance.
3. Improving asset quality at banks and recapitalisation: The ability of banks to finance higher
growth is limited because of the festering problem
The Global Analyst | JUNE 2014
Dreams are not seen when
you sleep,
Dreams are those that
don’t let you sleep.
of bad assets and inadequate capital. We will be
looking out for decisive steps on distressed assets
and capital infusion.
4. Encourage debt markets:
CRISIL believes India’s corporate debt market
needs to be fostered for growth to be sustainably funded. Banks alone cannot deliver the large
amount of capital required to build out India.
5. Booster shot for manufacturing and employment:
Steps to revive the manufacturing sector will be
critical. Clarity on land acquisition, environmental
clearances, better infrastructure, and labor law reforms - such as shifting its purview to the states -will be critical to improve the business climate and
boost manufacturing, which is in its worst phase
in the last two decades. India’s manufacturing engine - represented in large measure by micro, small
and medium enterprises - needs to do well if its
fast-multiplying workforce has to find gainful employment.
Says Dharmakirti Joshi, Chief Economist, CRISIL:
“Such an agenda will improve India’s competitive
efficiencies and pave the way for its re-entry into
the orbit of 6.5-7 per cent annual GDP growth.”
We have guided more
than 50 companies and
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The Global Analyst | JUNE 2014
The New Government
Two Policy Challenges
The Western media often refers to India is as the ‘noisy’ democracy. As always, the
noise has reached its peak during the electoral phase, but we can look forward to
the dust settling after the new government formation. A stable regime at the centre
will ensure that India regains its growth trajectory, says Subhankar Mitra, Head Strategic Consulting (West), JLL India.
here are several areas where reforms
and interventions are required to propel this growth. Out of these, two
policies which have been delayed for a
long time can dramatically change the
macro economic scenario - GST and
Goods and Service Tax (GST)
One of the biggest taxation reforms in India, Goods
and Service Tax (GST) will integrate State economies
and boost overall growth by creating a single, unified Indian market. While presenting his Budget in
July 2006, Finance Minister Pranab Mukherjee had
indicated that GST would come into effect from
April 2010. However, up to the last budget no decision has been taken.
The implementation of GST will phase out other
taxes such as octroi, Central Sales Tax, State-level
sales tax, entry tax, stamp duty, telecom license fees,
turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, et
cetera. It is the only way out of the multiple layers of
taxation that currently exist in India.
What is GST?
Goods and Services Tax is a comprehensive tax
levy on the manufacture, sale and consumption of
goods and services at a national level. It employs a
tax a credit mechanism to collect tax on value-added
goods and services at each stage of sale or purchase
in the supply chain.
The system allows the set-off of GST paid on the
procurement of goods and services against the GST
which is payable on the supply of goods or services.
However, the end consumer bears this tax as he is
the last person in the supply chain. GST is likely to
improve tax collections and boost India’s economic
development by breaking tax barriers between States
and integrating the country through a uniform tax
What are the Benefits of GST?
Under GST, the taxation burden will be divided equi12
The Global Analyst | JUNE 2014
tably between manufacturing and services through a
lower tax rate by increasing the tax base and minimizing exemptions. Such a system is a major step
towards transparent and corruption-free tax administration. GST will be is levied only at the destination and not at various points (from manufacturing
to retail outlets). Currently, a manufacturer needs to
pay tax when a finished product moves out of a factory, after which it is again taxed at the retail outlet
when sold.
Benefits to Centre and States
It is estimated that India will gain $15 billion a year
by implementing the Goods and Services Tax, as
it would promote exports, raise employment and
boost growth. It will divide the tax burden equitably
between manufacturing and services.
Benefits to Individuals and Companies
In the GST system, both Central and State taxes will
be collected at the point of sale. Both components
(viz. the Central and State GST) will be charged on
the manufacturing cost. This will benefit individuals, as prices are likely to come down. Lower prices
will lead to more consumption, thereby helping
If implemented the GST regime will revolutionize
the logistics sector. It will also help create small and
medium size enterprises and thereby create more
employment. Various hinterland cities like Nagpur,
Indore etc. will emerge as hotspots with robust demand for real estate.
Two Policy Challenges
Challenges for Implementation of GST
The biggest impediment on the way of implementing
GST is getting all the state government on the board.
Various State finance ministers have expressed their
apprehension that it will reduce financial autonomy
of the States and make them more dependent on the
The success of the policy will depend on the derivation of right kind of revenue-sharing mechanism
between the Centre and the States. We hope that a
stable and decisive Central Government will be able
to crack the deadlock.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is a company
that owns, and in most cases operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping
malls, hotels and even timberlands. Some REITs also
engage in financing real estate.
The REIT system was designed to provide a real
estate investment structure similar to the kind that
mutual funds provide for investment in stocks. REITs can be publicly or privately held, but only public
REITs may be listed on public stock exchanges. REITs can be classified as equity, mortgage or a hybrid.
REITs were created in the United States when President Dwight D. Eisenhower signed into law the
REIT Act. REITs were created by the US Congress
in to give all investors the opportunity to invest in
large-scale, diversified portfolios of income-producing real estate in the same way they typically invest
in other asset classes – through the purchase and sale
of liquid securities.
Since then, more than 20 countries around the world
have established REIT regimes, with more countries
actively considering them. The spread of the REIT
approach to real estate investment around the world
has also increased awareness and acceptance of investing in global real estate securities.
The Government of India is still in the process of
formulating legislations for REITs in the Indian real
estate market. SEBI published its draft regulation in
the last quarter of 2012. Once implemented, Indian
REITs will help individual investors reap the benefits of owning interest in the securitized real estate
The greatest benefit will be that of fast and easy liquidation of investments in the real estate market, in
marked contrast to the traditional manner of disposing of real estate. The government and Securities and
Exchange Board of India, through various notifications, is in the process of making it easier to invest
in real estate in India directly and indirectly through
foreign direct investment, via listed real estate companies and mutual funds.
Benefits for Indian Real Estate
REITs will enable retail investors to participate in the
real estate space with small investment sizes. This
will unlock a new source of project financing for real
estate. As of now there is very little holding power
available with the developers. Therefore, there is
little interest with them to create high-grade commercial, retail or any other income generating assets.
Even large developers strata sell commercial or retail projects to multiple HNI investors. Such a situation creates complexity in maintaining and promoting these spaces, apart from creating title issues and
many other complications. Once a REIT takes charge
of a commercial property, the scenario improves significantly.
Smaller developers will also be encouraged to create
lease-hold assets, because REITs will provide them
with exits and an incentive to develop high-grade
buildings. This would have a very positive impact
on the overall real estate industry, since developers who are currently doing only residential projects would be able to diversify their portfolios and
achieve a more balanced growth.
There would definitely be more momentum on
the market, and various new asset classes hitherto
considered non-viable by many developers would
emerge in strength – for instance, student housing,
senior living projects and rental housing schemes.
Challenges for REITs
There are several challenges to overcome before
the successful implementation of REITs in India. To
begin with, title certification in India is an ambiguous and cumbersome process, and this complexity
discourages many potential foreign and domestic
investors from buying into income-yielding properties.
Another issue is the valuation mechanism. Real estate valuation in India is largely unregulated and
lacks a standard code of practice or ethics. In order
to implement REITs, the government will have to address these issues via making and amending multiple legislatures.
It is to be hoped that the new government will seriously look into the urban development and focus
on the creation of right kind of built infrastructure
that is the key for sustainable growth. REITs and the
associated changes in the legislature need to find a
place on a priority list that aims for larger developments and subsequent employment creation.
The Global Analyst | JUNE 2014
Impact On Real Estate
No government has a magic wand which can solve all problems at once. Reforming
the economy is a gradual process, and we need to be patient. As already stated, a
stable government at the centre has potential to boost the sentiments and in return,
attract foreign money, says Anuj Puri, Chairman & Country Head, JLL India.
n improvement can
definitely be expected
in the near-term investment sentiment. This
will have an impact on
the investment growth
within the GDP. As a
testimony to that, industrial GDP (comprising
of investment-heavy sectors such as mining, manufacturing etc.) is forecast to grow at 3.5 per cent y/y
(consensus of professional forecasters empanelled
by the RBI) during current fiscal year 2014-15 as opposed to an abysmal 0.6 per cent y/y in the previous
fiscal year.
Our day-to-day interactions with various investors
clearly suggest that domestic money is in the search
for good investment options; investors are eager to
strike a deal at attractive valuations. However, foreign money has been waiting in the wings and awaiting political stability before entering India. In that
respect, a clear majority is the best possible scenario.
Most investors are comfortable with a government
with minor alliances as long as there is a clear agendas and strong voice dictating those agendas. What
investors are looking for in a ruling government is
clear goals and the will and strength to achieve them.
With the BJP winning by an overwhelming majority,
there now a clear sentiment that this has indeed been
Over the past few months, we have already seen
improvement in the real estate investment scenario.
Currently, at least USD 1.8 billion worth of funds are
in the process of getting raised. With the BJP now
in the driver’s seat, we expect the space to see a lot
more traction and various investors to enter into the
Immediate Turnaround?
No government has a magic wand which can solve
all problems at once. Reforming the economy is a
The Global Analyst | JUNE 2014
gradual process, and we need to be patient. As already stated, a stable government at the centre has
potential to boost the sentiments and in return, attract foreign money. However, we cannot expect
property prices to display the kind of sharp upward
movement that were achieved before the Global Financial Crisis (GFC). Any such movement - or reduction in cap rate - is, in my belief, at least 12-18
months away.
Affordable Housing
India’s housing shortage is legendary, and the Indian government has always kept low-cost housing
in the focus. However, most developers have shied
away from focusing on this space because affordable
housing is a relatively low-margin business; and in
high inflationary scenario, profitability remains a
key concern. Equity participation by PE funds has
also been limited in the budget housing space.
The new Government may look at helping on quicker land acquisition, faster approvals, easy and low
cost funding availability and better infrastructure to
make it a more interesting proposition for developers and investors. In Gujarat (the home state of Mr.
Narendra Modi), the government has been extending a helping hand to developers who construct lowcost homes, although availability of cheap capital,
lengthy approval process and affordable land availability continue to remain challenges.
Impact on Real Estate
There is no doubt that adopting GST will be a major point on the new government’s agenda. The key
challenge is to convince State authorities who currently feel threatened over their tax autonomy. The
biggest beneficiary of GST would be the logistics
and warehousing sectors, as they would become
more organized and could achieve the desired economies of scale. This has strong and favorable implications for real estate in India. Developers can expect streamlining of taxation process as GST would
free them from disparate levies such as stamp duty,
electricity duty etc.
FDI Policy
• With a view to protect the interest of small and
medium retailers and SMEs, the new government’s manifesto has more or less conveyed its
resistance to opening up FDI in certain sectors.
• Retail is in the negative list as per the manifesto;
however, if the country has to welcome FDI and
international investors, it might need to consider the number of international retailers waiting
on the side-lines in wait-and–watch mode.
• A few retailers have already announced their
plans to go ahead with the cash & carry model
of operation in India, therefore kick-starting a
new cycle of investment in retail.
• The overall FDI policy will be conducive, as the
new government is committed to promote FDI
in other sectors and also to reforming the Foreign Investment Promotion Board (FIPB) functioning to make it investor-friendly.
Hospitality Sector
I foresee healthy growth of the hospitality sector in
the medium term, as the new government has a clear
mandate to uplift tourism across various circuits
and regions. Its focus is to build 50 tourist circuits
with provision of affordable hotel amenities. Even
in developed cities like Mumbai, budget hotels or
serviced apartments, and midscale hotels together
account for not more than 17-20 per cent of the total
room inventory. This category, therefore, is poised
to witness significant growth.
With increased focus on shifting a portion of the
commuter traffic from road and rail to inland and
coastal waterways, the productivity of existing roadrail infrastructure will improve.
New rail corridors such as Agri-rail and tourist rail
networks will create newer opportunities in the
warehousing, cold storage and hospitality sectors,
which definitely benefits real estate. All industrial
corridor development plans envisaged but not implemented by the previous government are likely to
be fast-tracked.
National Land Use Policy
On the lines of the existing National Land Use Policy, the new government is committed to streamline
the process of acquiring non-cultivable land. The
policy framework will be governed by the National
Land Use Authority and will have to work closely
with its factions at the State level and, also possibly,
at the district level.
Business Optimism
• According to a report by Grant Thornton this
year, optimism amongst Indian business owners has improved on the back of expectation of a
new and stable government
• 69 per cent of businesses expressed optimism
over the country’s economy in 2014, as compared to 57 per cent in the third quarter of last
calendar year
• 90 per cent of Indian businesses believe their revenues will rise in 2014 while 76 per cent are most
optimistic for increasing profitability this year
• As per a survey of leading recruitment firms by
the media, hiring in India has been rising since
the advent of the current financial year.
• Expectation is that hiring could rise anywhere
in the range of 10-25 per cent in the April-June
2014 quarter over the Jan-Mar 2014 quarter.
• This change reflects the favorable transition of
business sentiment rather than hard economic
Final Thoughts
• Inflation and rupee health: The electoral result
may not have direct implications on the inflation story. With higher investments flowing into
the economy, the rupee will gain strength in the
near-to-medium term
• Exports: Exports is an external sector and is more
dependent on the health of global economies
than sentiment change in India. On the contrary,
an immediate rise in business sentiment in India could lead to higher imports, which would
worsen the CAD to some extent
The Global Analyst | JUNE 2014
to be
cautious when it comes to
growing their commercial real
estate (CRE) and home loan
portfolios. In FY2014, banks
loan growth in the CRE segment
was higher, at 22.4 per cent
(year-on-year) as against 11.9
per cent in the previous year. In
absolute terms, in FY2014, banks
disbursed loans aggregating
to Rs.28,300 crore to the CRE
segment against Rs.13,400 crore
in the year-ago period.
The credit rating agency said
the higher growth rate in credit
to commercial real estate would
have to be dealt with caution
given the vulnerability of this
sector in terms of asset quality.
Given, how the troubles at reality
sector are going to hurt banks
and how they should tackle this
Since 2005, the Indian real estate
industry has seen many highs
& lows. First the boom in the
investment & development activity resulting from the government’s policy to allow Foreign
Direct Investment (FDI) in this
sector that made the sector not
only witness the entry of many
new domestic realty players but
also the arrival of many foreign
real estate investment companies
including private equity funds,
pension funds and development
companies the sector lured by the
high returns on investments.
The industry reached new
heights during 2007 and early
2008, along with a growth
in demand, substantial
development and increased
foreign investments. However,
by mid 2008, the effects of the
The Global Analyst | JUNE 2014
Banks will have to recognize the fact that
retail credit has its own risks and exposes
them to individuals in large volumes as
compared to corporate loans. The whole
appraisal process and risk underwriting
process has to take this into account, says
CA Rishabh Adukia, ACA, ACS, LLB, Certified
Financial Planner, Mumbai.
[email protected]
global economic slowdown
were evident here too, and the
industry reversed the course.
FDI inflow into real estate
dropped significantly and what
had emerged as one of the most
promising markets for foreign
investments experienced a
downturn. A great degree of
political uncertainty, liquidity
issues, high interest rates and
cautious sentiments are expected
to underpin the real estate sector
in 2014 too.
As salary increases haven’t
kept pace with the rise in home
prices, Indians are getting more
leveraged than they were a
decade back, burdening them
with larger monthly loan
payments. Such leveraged
consumer, coupled with inflated
home prices, can pose a risk to
banks’ balance sheets.
Another important indicator
is the inventory data of unsold
homes. According to the figures
from property research firm
Liasas Foras, Mumbai saw the
maximum inventory of unsold
homes at 155.27 million square
feet or 48 months of unsold
inventory during the first quarter
of FY14. For NCR, the inventory
Realty Bites
CA Rishabh Adukia
acceleration in housing prices
in all tier I and a couple of tier II
cities in 2012-13.
The situation has deteriorated
in the real estate segment with
loans amounting to an estimated
Rs 7,700 crore tied to commercial
and residential properties loans
up for sale, according to data
compiled by, a
portal that focuses on stressed
has more than doubled to 31
months in the first quarter of
FY14, while for Mumbai it has
risen from 17 months to 40
months. Inventory denotes the
number of months required to
clear the stock at the existing
absorption rate. An ideal scenario
implies inventory should be in
the range of eight to 10 months.
But Mumbai would take four
years to sell these homes despite
a slew of discount schemes,
new launches and back-room
As per the NHB’s Residex, the
index which tracks housing
prices across 26 prominent cities
in India, 16 cities saw a rise in
the housing prices in the quarter
ended December 2013. Latest
figures released by the RBI
indicate that the total exposure to
this segment has surged 17.3 per
cent to Rs 9.33 lakh crore during
the financial year ended March
2013. This expansion needs to
be viewed in light of the steep
Time to Face the Realty
S&C Bank
Top 10 Banks’ Exposure to Real Estate (Rs.Cr)
Axis Bank
20000 40000 60000 80000 100000 120000 140000 160000
What is alarming is that the
increase in exposure to the real
estate segment is followed by the
rise in the non performing assets
(NPAs) as well. The gross NPAs
in the financial system is set to
rise 4.6 per cent to Rs 2.29 lakh
crore by September 2014 from
Rs 1.67 lakh crore or 4.2 per cent
in September 2013, the Reserve
Bank of India (RBI) said in its Financial Stability Report released
in May first week.
A correction could lead to
reduced value of bank collaterals,
thus more NPAs, which could
then lead to an automatic cycle
of an inherent correction in
the economy. No asset class
including real estate can remain
inflated for an indefinite time. At
some point, these will become
big enough for a crash. A sudden
fall, however, will be detrimental
to the financial system and the
economy at large. Banks will
have to recognize the fact that
retail credit has its own risks
and exposes them to individuals
in large volumes as compared
to corporate loans. The whole
appraisal process and risk
underwriting process has to take
this into account.
The Global Analyst | JUNE 2014
Dial ‘E’ for Exit?
CARE Research believes that the increased market share limit (50 per
cent from earlier 35 per cent) would avail enough room for larger
players like Bharti Airtel and Vodafone to go for acquisitions in most
of the circles. Consolidation would provide much needed exit to some
of the weaker players along with reducing the hyper-competitive
environment in the sector.
At the same time, with increased market-share, larger players would
get some pricing power but would not result in substantial change
in the dynamics of the sector as voice and, to some extent, the data
business being commoditized in nature. It will also lead to better
utilization of passive infrastructure like telecom towers and networks.
- Revati Kasture, CGM and Head - CARE Research & Grading Services
along with Anand Kulkarni, Sector Specialist - Telecom, Media and Technology
The Global Analyst | JUNE 2014
Dial ‘E’ for Exit?
ndian Telecom industry
has been a fascinating
story of super-normal
growth of subscriber
penetration, making
India second largest
market in terms of subscribers.
One prominent change over the
years has been the shift from
‘administratively allocated’
spectrum to ‘auction based’
spectrum allocation, making
the survival difficult for the
weaker players in the industry
considering the price of the
spectrum. Over the years,
Government kept on introducing
more players in the telecom
market fuelling the competition.
The tally of operators per circle
went up from 2-3 in mid-90s to
14-16 in 2008, resulting in hypercompetition, after Government
allotted new licenses in 2008.
The phenomenal growth in
the Indian telecom markets
attracted many foreign telcos
to Indian shores. This created
a divide amongst the players –
incumbents, with higher market
share, established brand name
and more spectrum against the
new comers who used price as
the primary differentiator. Due to
the presence of large number of
operators, spectrum holding per
operator in India is considerably
lower as compared to their global
heavily, looking for exit options.
Cancellation of 122 Licenses by
the Supreme Court – A Forced
Revati Kasture
One of the fall outs of hypercompetition is erosion of
profitability for telcos over
the period. When half a dozen
new players entered the Indian
markets in 2008, with their
international partners with
deep pockets, their first target
was to gain the market-share,
either by eating into the pie of
existing players or increasing the
penetration in the Indian market
further or both. With a very
high price elasticity of demand
in the Indian markets, the new
players kept on reducing the
tariffs, forcing their incumbent
competitors to follow through.
The incumbent players had the
cushion of efficient spectrum,
higher ARPU subscribers,
higher VAS composition in their
revenue, established networks
whereas the new players were
completely exposed to these
parameters started bleeding
In February 2012, the Supreme
Court of India cancelled 122
telecom licenses issued in 2008,
after the alleged irregularities
in license allocation process and
ordered to auction the spectrum
going forward. This was the
beginning of consolidation as
international players like Etisalat
and S Tel closed their operations
in India whereas others like
Telenor, Sistema and Videocon
reduced their footprints from a
pan-India to a few circles, after
cancellation of licenses. This led
to average number of players in a
circle coming down
from 14-16 to 8-9. By looking
at the global standards of 3-4
players, CARE Research believes
that Indian telecom space would
eventually be reduced to 5-6 large
players with 1-2 regional players.
Spectrum Auctions – A great
Higher spectrum prices have
raised the entry barriers for
telecom service providers to a
great extent. The auctions held in
February 2014 have established
‘Spectrum as the most strategic
asset’ for the operators. Top 3
operators (Bharti Airtel, Vodafone
and Idea) gulped almost 71
Competition Eroded Profitability
per cent of the total spectrum,
Spectrum Share - Overall
Spectrum Share - Feb 2014 Auctions widening the divide between
Top 3 and weaker ones even
further. The higher spectrum
prices, being unaffordable to
the bleeding operators, would
compel them to get acquired by
the larger operators, leading to
much needed consolidation in the
Indian telecom space.
Top 3 Players
Top 3 Players
Source: Department of Telecom (DoT), Telecom Regulatory Authority of India (TRAI) and CARE Research
Note: Top3 Players – Bharti Airtel, Vodafone, Idea Cellular
Subscriber Share is Consolidating
with Top 3 players
Over the years, subscriber and
revenue market share is slowly
The Global Analyst | JUNE 2014
Dial ‘E’ for Exit?
being consolidated with the top
3 players as the same is being
witnessed in spectrum holding.
There are multiple factors
responsible for attracting existing
and new subscribers towards
the top players – better network
expansion by the top 3 players,
better quality compared to the
new players, data offerings,
aggressive marketing etc. As
a result, subscribers who got
attracted towards the newer
players because of the lower
tariffs are now moving towards
the top 3. Also, the top 3 are
attracting sizeable portion of the
incremental subscriber addition.
At the end of March 2014, top
3 players had more than 50 per
cent of the total subscriber share
whereas during FY14, their
share of incremental subscriber
addition was more than that
of all the subscribers. This can
be attributed to the positive
subscriber addition across top
3 players whereas rest of the
players removed inactive players
resulting in a negative growth.
4G – Threat Looms for pure 2G
Data Players
Most of the existing 2G operators
are preparing themselves for the
data battle which is expected to
be witnessed once 4G services are
rolled out by the likes of Reliance
Jio. Threat of 4G cannibalizing
the existing telecom services
is primarily limited to data
Anand Kulkarni
services as voice capabilities of
LTE are yet to be proven. But as
contribution of data revenue in
the total revenue is on the rise
and as subscribers are looking
for more integrated players,
offering 2G, 3G etc, pure play 2G
operators are expected to suffer
and will be the primary targets
for acquisition.
M&A Guidelines – Clarity is
With clarity on M&A guidelines
emerging, the activity is
expected to gather momentum
as witnessed by the recently
announced acquisition of
Loop Mobile by Bharti Airtel.
Considering that the acquirer
has to pay market price for
the spectrum of the acquired
company if the same is
obtained through administered
mechanism, CARE Research
believes that spectrum will
no longer be the driver for
Subscriber Share – Consolidation (March – 2014)
Subscriber Share - Top 3 vs Rest
Source: TRAI and CARE Research
Top 3 Players
The Global Analyst | JUNE 2014
Incremental (Last 1
Telecom wireless space in
India is getting divided on
the following lines – (i) Top 3
incumbents with deep pockets
– Bharti Airtel, Vodafone, Idea,
(ii) Other incumbents with
struggling balance sheets –
Rcom, Tata Teleservices, Aircel,
Loop, (iii) Government owned
– BSNL and MTNL (iv) the
new comers - Telewings and
Sistema with backing from their
foreign parents and, (v) new
players with Indian parent like
Videocon. Consolidation would
be driven to acquire subscriber
base or spectrum. Incumbents
are the major contenders for the
‘consolidator’ tag. There might
be possibilities of a three-way
merger among Tier-II players like
Tata Teleservices, Sistema, Aircel,
HFCL etc.
As per the new M&A guidelines,
the market share of a merged
entity has now been raised to
50 per cent of the subscriber
and revenue base as against
35 per cent ceiling that existed
earlier. CARE Research believes
that the increased market share
limit (50 per cent from earlier 35
per cent) would avail enough
room for larger players like
Bharti Airtel and Vodafone to
go for acquisitions in most of
the circles. Consolidation would
provide much needed exit to
some of the weaker players
along with reducing the hypercompetitive environment in the
sector. At the same time, with
increased market-share, larger
players would get some pricing
power but would not result
in substantial change in the
dynamics of the sector as voice
and, to some extent, the data
business being commoditized
in nature. It will also lead to
better utilization of passive
infrastructure like telecom towers
and networks.
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The Global Analyst | JUNE 2014
The 4D Approach
Mutual fund investors generally prefer a fund due to its
historical performance. In the context of an equity fund,
the primary expectation is that the fund manager should
outperform his stated benchmark. For eg., if his benchmark
is that of Nifty 50 or Sensex, the fund’s performance should
be better than the benchmark to justify investor confidence
in the fund. The extent to which the manager outperforms
the benchmark is the second important element of
attraction. says M R Raghu, CFA FRM, Senior Vice President &
Head of Research, Kuwait Financial Centre (Markaz), Middle East.
The author thanks Karthik Ramesh and Rajesh Dheenathayalan for assistance.
The Global Analyst | JUNE 2014
The 4-Dimensional Approach to Assess Fund Managers’ Performance
In an attempt to beat the benchmark, the fund manager is
always in pursuit of winners
and tactful in avoiding losers
while selecting stocks. Where the
winners outnumber the losers
and where the fund manager’s
commitment to winners (in
terms of allocation) is better than
the losers, he or she will generate out performance or what is
technically called as alpha (excess
performance over the benchmark). In other words, where a
fund manager generates superior
performance through consistently beating the benchmark, he/
she is good at picking winners
and avoiding losers. While this
assessment sounds simplistic
and hence reasonable, more often
than not this 2 dimensional approach to assessing fund manager performance may not be
In my view, the issue of fund
management in the context
of equity revolves around the
concept of bets. There are bets
that the fund manager sticks with
and there are bets that he avoids.
Hence, we need to view the issue
from a 4-D perspective:
Dimension 1: Persistent Bets
These are bets that the fund manager is sticking with resolutely
and believes in them strongly.
A simple way to figure this out
is to see if a particular stock is
present at the beginning as well
as end of an evaluation period.
The reason why he persists with
these stocks can be borne out of
a thorough research and fund
managers’ conviction about its
future ability to perform. If the
stock price of persistent bets
move up, the manager gains and
Dimension 2: Discarded Bets
These are bets that the fund manager has lost faith in and therefore sold out. A way to find this
The 4-Dimensional Approach to Assess Fund Managers’ Performance
Persistent Bets
Missed Bets
Discarded Bets
4 Dimensional
New Bets
out is to see if a particular stock
figures in the beginning portfolio
but not in the end period portfolio. In this scenario, if the stock
price gains after the manager has
discarded them, the manager
tends to lose out on performance.
Conventional View
Better Perspective
we can perform a 4-D analysis on
Dimension 1: Persistent Bets:
Performance2013 (%)
Dimension 3
Missed Bets: These are bets that
the manager did not take or we
can call it as “failed to buy” scenario. These bets will not figure
either in the beginning portfolio
or end portfolio. In such cases,
where the stock price moves up,
the manager loses out in terms of
opportunity gain and vice-versa.
Dimension 4: New Bets: These
are bets that the manager took
recently. A simple way to figure
them out is when such stocks are
present in the end period portfolio and not in the beginning
period portfolio. Like persistent
bets, the manager gains when
such stocks move up and viceversa.
Case Study: HDFC Top 200
Let us run through this 4D
concept through the evaluation
of the performance of HDFC Top
200 fund, one of the most popular equity funds in India.
Fund Return-2013
Benchmark, BSE 200
As we can see, the fund has
underperformed the benchmark
albeit slightly during 2013.
However, dissecting this further,
Tata Motors
Bank of Baroda
The manager persisted with
55 stocks in his portfolio that
figured both in the beginning and
end portfolios.
The above table provides the list
of top 10 arranged in terms of
weight. As we can see, most of
these persistent bets are large cap
blue chip heavy weights and are
reputable names in the Indian
stock market. Excepting for a few
like ICICI Bank, SBI, HDFC Bank
and Bank of Baroda (all bank
stocks incidentally!), all others
have done well especially TCS
and Infosys (IT stocks incidentally!). The weighted average
performance of persistent bets is
6.71 per cent which is commendable.
Dimension 2: Discarded Bets
During the year, the fund manager sold out (or discarded) 19
The Global Analyst | JUNE 2014
Assessing Fund Manager
stocks while the table presents
the top 10 in terms of weights.
In some cases, the fund manager
was right as in the case of LIC
Housing finance, Tata Power,
Titan, etc. But in many cases the
fund manager paid a penalty of
discarding some stocks whose
performance later turned out to
be very good.
Good examples include Hindustan Lever, Sun Pharma, CMC
and Britannia. The weighted
performance of discarded bets is
0.49 per cent. In other words, had
he not discarded them, he would
have added 0.49 per cent to the
portfolio performance.
Discarded Bets
2013 %
(Beginning %)
LIC Hou.Fin.
Sun Pharma
Tata Power Co. -17
Titan Inds
Cairn India
Britannia Inds
Dimension 3: Missed Bets
Missed Bets
HCL Tech
Kotak Mahindra
Hindustan Zinc
Asian Paints
Adani Enterprises
Hero Motors
The Global Analyst | JUNE 2014
The table in the previous colum
displays a list of stocks that the
fund manager did not look at all
and in this case it runs into 125
However, a perusal of the top 10
among them in terms of weights
reveals some interesting stuff.
The greatest miss has been HCL
Tech that performed more than
100 per cent during 2013.
Given the names like TCS and
Infosys in the persistent bets list,
it is surprising to see HCL Tech
missing. The list of missed bets is
a mixed bag with many posting
negative performance (NTPC, Ultratech, BHEL, etc). The weighted
performance of this list is 2.55 per
cent which is quite significant.
In other words, had he pursued
these bets, the portfolio performance would be better by 2.55
per cent.
Dimension 4: New Bets
New Bets
(End %)
2013 %
Sesa Sterlite
Idea Cellular
Power Ventures
Alstom T&D
Jet Airways
Above list is the smallest comprising in all 6 stocks. The biggest new
bet is that of Sesa Sterlite that performed just 3 per cent while block
buster performance of 61 per cent
of Idea Cellular did not benefit
much due to low weight. Similarly disastrous performance of
stocks like Jaiprakash Power and
Jet Airways did not hurt much
due to lower weights. The total
weighted performance of new
bets is 0.09 per cent.
In summary, we can tabulate thus:
Weighted Returns (%)
Persistent bets
Missed bets
Discarded bets
New bets
While the portfolio benefited
hugely through the persistent
bets, it also suffered due to
missed bets while the impact of
discarded bets and new bets has
not been pronounced.
Caveat: In hindsight things
always look very clear. Secondly,
this analysis was performed
taking into account the portfolio
composition at the beginning
and end of the evaluation period
(2013). The performance of a
portfolio is also affected by several transactions that happens in
the intervening period and hence
may cloud the analysis.
Having highlighted the caveats,
the idea of this research is to take
the literature of fund manager
performance one step higher by
looking at the opportunity cost
of missing something and also
the opportunity cost of sticking with bad choices which can
take a heavy toll on the portfolio
What makes a fund manager
stick with a bet, discard a bet,
miss a bet or take a new bet is a
combination of several factors including his ability to pick stocks,
ability not to get distracted by
peer group pressure, ability to
have sound advice and being
vigilant. In the end, the aim of
any active fund manager is to
generate alpha which is the only
reason why investors are ready
to pay management fees. In the
absence of such a proposition,
an Exchange Traded Fund (ETF)
can simply do the job. In an ETF
scenario, there is only one bet i.e,
Index composition!.
Emerging Challenges
History will remember with gratitude names like
Vinod Rai, Raghuram Rajan, Seshan, Sam Pitroda
and Sreedharan who became legends in their own
times for the contributions they made to the causes
they took to heart. Here we look at the role of
auditors in protecting the country’s resources and
ensuring prudence in exploitation and use of precious
resources for economic development.
- M G Warrier, Former General Manager, Reserve
Bank of India
The Global Analyst | JUNE 2014
Effective Bank Audit
When the history of the first leg
of LPG (Liberalization-Privatization-Globalization) reforms in India covering the period 1990-2014
will be written, after a couple
of decades, the role of institutions like the Supreme Court,
Comptroller and Auditor General
(CAG), Reserve bank of India
and Election Commission will be
critically analyzed. These institutions made up for the lapses of
the legislators and the executive
and made possible the emergence
of India Growth Story.
India is a country which has
viewed audit with respect and
has integrated the audit function
in almost all financial transactions managed by institutions
including banks, government and
corporates. CAG functioning
with head office in New Delhi
and offices in all important state
capitals, about 2 lakh chartered
accountants and offices of the
state registrars of cooperative
societies cover the organizations
in government, private and cooperative sectors.
In his April 2014 message in the
Institute’s in-house magazine, CA.
K Raghu, President, Institute of
Chartered Accountants of India
(ICAI) said:
“Let’s Gear Up for Effective
Bank Audit
As you are aware, a healthy
banking industry is the backbone
of sustainable socio-economic
growth in our country. However,
I am constrained to note that
our banking system is under
strain because of mounting Non
Performing Assets (NPAs), which
according to Assocham study, is
expected to reach 1,50,000 crore
mark by end of FY14.
As the keepers of financial
discipline in the country, this
situation should worry us all the
more. Given our training, exposure and skills, we can play a crucial role in reversing rising trend
The Global Analyst | JUNE 2014
of NPAs and vigilantly keeping
our banking system healthy. By
lending credibility to their financial statements, audits and auditors have an extremely important
role to play in building a resilient
banking industry. As such, the
exercise of Bank Branch Audit assumes paramount importance for
the banking industry, the banking
regulator, our members, as well
as the nation as a whole.
Let’s conduct these audits in
the most professional manner
keeping a broader national vision in mind. You will be aware
that to help you to carry out this
nationally important assignment
in most proficient and ‘value
add’ manner, the Auditing and
Assurance Standards Board has
recently released its 2014 Guidance Note on Audit of Banks.
This Guidance note contains
comprehensive guidance on the
various critical aspects that the
members need to be wary of
while conducting Bank Branch
Audits. Let’s also ensure compliance with relevant Standards on
Auditing while carrying out Bank
Audit engagement.”
This signifies the importance
given to bank audit by the Institute of Chartered Accountants.
In some of the recent rulings
the Apex Court has upheld the
CAG’s powers to audit the accounts of organisations in public
and private sectors. The commendable work being done by
CAG now, is not the brain-wave
of Vinod Rai or his predecessor
who have sharpened the tools of
audit to make them effective in
the present context.
Performance audit is a concept
introduced as part of commercial audit carried out by the
then Indian Audit and Accounts
Department in the late 60s. The
purpose was to go beyond mere
checking of accounts and ensuring that each item of expenditure
was backed by a ‘voucher’ and
find out whether the expenditure
from public funds actually served
the purpose envisaged when
the outlay of expenditure was
In the years that followed, the
scope of audit has expanded
along with the growth in public expenditure, multiplicity of
sectors and ever-growing size
of projects and extending geographies. As the funding comes
ultimately from the taxpayer, the
difference between public and
private sectors is also getting
narrowed down. Suffice to say,
when CAG comments on nation’s
resources ‘sold out’ to private sector, traditional accountants get a
doubt about his jurisdiction.
India’s resources including
financial resources deserve a
more dignified treatment. If
government or political leadership feel that CAG or for that
matter any of the regulatory
authorities should not comment
on the performance part of policy
decisions by ministries, it is time
the country thought about having
a separate authority to do the job.
GOI should set up a ‘Performance
Audit Authority’ which should
have powers and competence to
act as a watchdog to ensure that
public expenditure is insulated
from pilferages and leakages
of the kind that are coming out
every day. The present efforts
of CAG, commendable though
they are, do not result in online
corrective measures which alone
can minimize plundering of resources. Healthcare, not reasons
for death through post-mortem,
is the need of the hour for the
Indian Economy as a whole.
Sometime back, the Supreme
Court dismissed a Public Interest
Litigation (PIL), which argued
that the Comptroller and Auditor General’s reports on Coalgate, airport privatization and
power sector went beyond CAG’s
Effective Bank Audit
constitutional mandate. While
dismissing the PIL, the Apex
court re-emphasized the statutory
mandate of CAG and explaining the processes which the CAG
reports go through, clarified that,
if the CAG exceeded his brief,
Parliament will surely correct him
and tell him that the methodology
adopted by him for the preparation of the report was not correct.
This prima facie innocuous observation by the court would not
have attracted the attention the
ruling did, but for the celebration
of the Apex Court ruling on the
Presidential reference on allocation of natural resources. On the
Presidential reference as it was
duty-bound, gave the court’s
view upholding the supremacy of
Parliament on policy issues and
in fact did not give any adverse
view against any statutory body
including CAG. During almost
the entire tenure of Vinod Rai
as CAG, the institution of CAG
was being harassed and criticized
for performing normal duties
expected of the organisation, by
a government caged by the rich
and the powerful. Performance
Audit has been a tool used by
CAG since 1960’s. What Vinod
Rai and his predecessor had done
was just to sharpen the tool by
infusing expertise into the audit
team. By training and educating
cadres down below and bringing
professionalism in the performance of audit function, they improved the functional efficiency
of the office. If similar initiatives
had come from his counterparts
heading several government
departments and public sector
or statutory organizations, the agony UPA II government suffered
during its fag end would have
been much less.
The Apex court minced no words
in clarifying that CAG is not a
mere account-keeper. The critiques who were of the view that
accountant and auditor should
bother only about the accuracy
We are heavily dependent on government’s other
arms like CAG and judiciary to come to rescue when
extraneous compulsions force government departments
and public sector organizations to misappropriate or
divert public funds to the advantage of their masters or
greedy corporates and individuals.
of figures were, for reasons best
known to them, pleading ignorance of the changes that had
happened in the law and practice of accounting and audit and
the reforms in the CAG’s office
brought about by Vinod Roy and
his predecessor, who understood
the post-LPG scenario better. The
present political leadership is the
‘who’s who’ of the rich and influential class which has its own
constituency interests to protect.
options as several departments/
ministries were slow in decisiontaking. To the total discomfort
of the government, this time
around, even the mainstream
media which usually shows some
eagerness to protect governments
from disgrace, refused to buy
the government story without
riders (Remember the zero-loss
2G Spectrum story of Kapil Sibal
which was initially swallowed by
a section of the media!).
We are heavily dependent on
government’s other arms like
CAG and judiciary to come to
rescue when extraneous compulsions force government departments and public sector organizations to misappropriate or divert
public funds to the advantage of
their masters or greedy corporates and individuals. The
differentiation between public
funds and private resources is
getting diluted, as either public
resources are freely flowing to
private sector or the exchequer
is becoming responsible to make
good the losses incurred by
greedy individuals across sectors
by mismanagement of businesses
they own or operate.
Some analysts in the media who
were not so much aware of the
strength of the institution (CAG),
even expressed the fear that the
CAG-government face-off in the
context of 2G controversy could
see another oversight institution fall by the wayside. That
was far-fetched cynicism. In
fact, the debate on 2G auction
and CAG Vinod Rai’s observation on government’s credibility
as were healthy signs of India
moving forward to a participative
democratic system. Despite the
massive efforts by UPA-II to play
down the significance of CAG’s
observations relating to the
losses in the 2G scam, the audit
report did play a proactive role
in creating awareness about the
corrupt practices in government,
and across public and private
sector organizations. Rai was
successful in drawing attention
to the erosion of people’s faith
in government. At this stage of
development, prudence demands
that the average Indian should be
credited with the maturity to understand that the statement had
implications beyond Rai’s own
The initial response from government spokespersons to any
revelations in reports of CAG is
on dotted lines these days. First,
CAG has exceeded his brief.
Then, all his presumptions are
not right. Third, even if some
findings have some basis, losses
are not as huge as are made out.
Fourth, and that is the icing (as
in Coalgate), in the given circumstances, there were not many
The Global Analyst | JUNE 2014
Effective Bank Audit
personal defense in the 2G report
The shock to some in the context
of report after report from CAG
with more and more revelations
about corrupt practices can be
traced to the refusal of government and media in publicizing
the evolution of the institution
of CAG which has been silently
molding itself in recent times to
meet the challenges of changing
times. Destiny had put Vinod
Rai as CAG at a time when the
country needed a person of
his stature in that position. His
having gone through the thick
and thin of finance ministry and
certain other tough assignments
gave him the analytical mind
and investigative skill needed to
expose mega scams.
The remarkable achievements of
the CAG during his tenure are
more attributable to the interest
shown by an individual in protecting public funds.
To ensure that the same thrust on
‘conscience keeping’ continues,
the present approach of the CAG
will have to be institutionalized
by providing necessary legislative and administrative support.
CAG’s role in protecting the interest of the country in regard to
public funds is similar to the role
of the judiciary in protecting life
and property. This points to the
need to empower CAG to cause
audit of any transaction involving national resources and more
importantly, to equip CAG’s
office for the purpose.
A large number of the people’s
representatives in legislatures
continuing to be those who are
rich and powerful in their own
way and capable of managing
politics and vote banks and not
necessarily interested in the
sound management of nation’s
resources, we are dependent on
government’s other arms like
CAG and judiciary to come to
The Global Analyst | JUNE 2014
External Audits of Banks - Overview
of the Principles
Principle 1: The audit committee should have a robust
process for approving, or recommending for approval, the
appointment, reappointment, removal and remuneration
of the external auditor.
Principle 2: The audit committee should monitor and
assess the independence of the external auditor.
Principle 3: The audit committee should monitor and
assess the effectiveness of the external audit.
Principle 4: The audit committee should have effective
communication with the external auditor to enable the
audit committee to carry out its oversight responsibilities
and to enhance the quality of the audit.
Principle 5: The audit committee should require the
external auditor to report to it on all relevant matters
to enable the audit committee to carry out its oversight
Principle 6: The supervisor and the external auditor
should have an effective relationship that includes
appropriate communication channels for the exchange
of information relevant to carrying out their respective
statutory responsibilities.
Principle 7: The supervisor should require the external
auditor to report to it directly15 on matters arising from
the audit that are likely to be of material significance16 to
the functions of the supervisor.
Principle 8: There should be open, timely and regular
communication between the banking supervisory
authority, audit firms and the accounting profession as a
whole on key risks and systemic issues as well as a regular
exchange of views on appropriate accounting techniques
and auditing issues.
Principle 9: There should be regular and effective
dialogue between the banking supervisory authority and
the relevant audit oversight body.
Courtesy:Bank for International Settlements (Basel)
rescue when extraneous compulsions force public sector organizations to misappropriate or
divert public funds.
As CAG’s audit is mostly a postevent affair and judiciary will
take a view only when issues
reach them after due process, media has a major role to play. With
the exception of some financial
newspapers and a few national
dailies, media generally show
interest in the sensation value of
issues and refuse to take on themselves the burden of working
like a watchdog and educating
their readers/viewers about how
the drain on country’s resources
Effective Bank Audit
affect their pockets and living
The changes brought about in the
vision and mission of the office
of the Comptroller and Auditor
General in recent years are worth
accepting as a model for adapting
with appropriate modifications
by other arms of governance in
Centre and states. These changes
in the approach of CAG’s audit
are consistent with the vanishing
line between public and private
funds as both originate from the
nation’s ‘sovereign’ resources and
the hard work of its people. We
should sooner than later come
out of the legacy of British rule
inherited by us which has drawn
a clear distinction between the
assets owned by the rulers (read
public funds in the present context) and wealth with the private
sector or individuals, individual
families or trusts/companies
formed outside government ownership. This distinction is causing
several unethical practices in our
country. Sometime back while
talking to media, Vinod Rai has
gone on record saying that he
was open to guidance and expert
advice from eminent statesmen.
Central and state governments
should join hands with CAG’s efforts to ensure that the country’s
assets irrespective of the nature
of ownership are not plundered
by unscrupulous elements. When
CAG’s reports bring out glaringly corrupt practices or make
suggestions for incorporating
better practices to avoid earlier
mistakes, looking at them from
mere legal or accounting angle
or defending individuals and
organizations instead of learning
from past mistakes, correcting
them before further proceeding
are not in the best interests of the
Performance Audit
Performance audit involves
assessing whether government
policies, programs, and institutions are well managed and are
being run economically, efficiently, and effectively. This is a task
of potentially great significance
- at a practical level for citizens,
and at a more abstract level for
the health and vitality of democratic governance.
For performance auditing to
focus on citizen trust in government, government audit organizations should be equipped
to design their audits to focus
on equity as well as efficiency,
and effectiveness. They need
to provide work that allows
citizens and elected officials to
exercise accountability for the
use of authority as well as the
use of funds. When selecting and
designing audits, audit organizations should consider at least the
following types of equity: costs,
services, access and coercion. It
is a matter of comfort that in the
Indian context, CAG has evolved
a system of Performance Audit
which can meet these challenges effectively. But neither the
present audit arrangement nor
the regulatory and supervisory
framework goes beyond ‘compliance’ issues. When lawyers take
charge of governance, laws get
manipulated to suit the convenience of the masters who put
them in charge of governance. It
is in this context the concept of
‘service audit’ or behavior audit’
becomes relevant.
Long back, Kiran Bedi told an
interviewer that every day,
before going to sleep, she used
to ‘audit’ her own interactions
and activities during the day
and satisfy herself that she was
on the right track. This, she said,
helped her to make necessary and
appropriate corrections, where
necessary, quickly. The service
audit discussed here is expected
to help institutions and through
them the society to make online
corrections in policy formulation
and implementation. Two recent
incidents shocked those who took
those in authority when they said
‘let law take its course’ seriously.
One, the reported revelation that
there was an apparent conspiracy
between the CBI prosecutor in
the 2G scam investigation and
one of the accused in the scam.
Two, in Kerala, the Director
General of prosecutions advised
the state government against
reinvestigation of a sex scandal,
despite the Apex Court having
recommitted the main case to
High Court rejecting a state
government appeal. In both the
cases, the public feeling is that
individuals who took quasijudicial/judicial decisions or
gave opinion were guided by the
support the accused garnered
from the powers that be.
The institution of service audit
should be responsible
To take cognizance of biased
decisions by public servants
including those in private sector
who either handle public funds,
like banks which accept public
deposits or corporates which
mobilize capital and funds from
To provide broad guidelines for
formulating appropriate norms
for a ‘code of conduct’ for such
public servants.
To conduct selective audits and
bring out reports for government
to frame appropriate policy to
ensure that service providers and
public servants do not hijack the
law of the land.
The above suggestions are
illustrative and once accepted ‘in
principle’ government may have
to cause a comprehensive study
before considering an appropriate
legislative framework to support
introduction of service audit.
The Global Analyst | JUNE 2014
A lot of companies don’t understand the new corporate
law, and also confuse corporate social responsibility (CSR)
with charity and philanthropy. What we want to do is help
them understand how best to strategically invest in CSR
activities, to make it a revenue generating process, given
that this is allowed in the law.
- Sonia Agarwal, Co-Founder, 2CSR.
Mumbai-based 2CSR, the
young CSR consultancy
firm scouts for clients who
want to know how to ‘give’
for social initiatives under a new corporate law.
Thus it brings together the
government, the corporates
and the people - to create long-term sustainable
impact in innovative ways.
2CSR came into existence
with a mission to help such
companies execute their
CSR requirements, as per
the law, wisely, sustainably, and economically.
The promoters of 2CSR
believe that CSR activities,
if planned correctly and
thoughtfully, can help a
company become sustainable, reputable and establish a stronger connection
with its stakeholders, customers, environment and
its community - all while
cutting costs.
In an exclusive interview
with The Global ANALYST,
Sonia Agarwal shares her
entrepreneurial journey,
what prompted her to
start 2CSR, challenges and
strategies to combat these
challenges in five years
from now.
The Global Analyst | JUNE 2014
sonia agarwal
Priyam Gandhi
How the idea to start your startup took shape? How it all did
Priyam and I met at a family
function and within minutes of
meeting each other, we found
ourselves to be discussing the
economic landscape of India,
sharing our perspectives on how
corporates and communities
should interact and by the end
of that week, we had decided to
start a CSR consulting company
to help companies structure their
CSR initiatives.
While Priyam was trained to be
a policy analyst who worked at
a Think Tank, I had worked with
multiple retail and media companies, and had established two
award winning entrepreneurial
ventures; we both had similar
driving forces and had the ability
to design innovative and sustainable systems and solutions.
Could you discuss the business
model of the start-up?
2CSR is a very new establishment that charges their corporate
clients an affordable fee to help
their clients understand their CSR
requirements, strategy and ink an
action plan, identify suitable metrics to evaluate impact and assist
their clients to report their CSR
initiatives. 2CSR helps their clients
facilitate the action plan by connecting their clients to the appropriate NGOs and social ventures.
What are the focus areas of the firm?
2CSR focuses on identifying a
strategic CSR plan, that is not
philanthropic but of economic value
to the client and the community.
How do you define the USP of
the start-up?
We pioneer in innovating CSR
strategies that help our clients
achieve their CSR objectives; all
while getting a greater return
on investment, by cutting future
costs, and/or revenue generating.
We understand that all CSR
activities have a direct impact
on the company’s cash flow and
often come with high opportunity
2CSR offers a comprehensive and a personalized solution for their clients, in a
manner that is quantifiable, measurable, engaging and objective. These include:
Strategy Building: An in-depth needs assessment of your company, and the
surrounding localities that can help the management arrive at suitable targets
and a plausible action plan for their CSR initiative.
Execution: Working closely with various divisions of the management such
as marketing, human resources, accounting and operations to help execute
the agreed action plan for their CSR initiative. 2CSR will assist your company
to identify and formalize the partnership with the right entities that include
NGOs, social ventures and other supporting organizations.
Impact Evaluation: A comprehensive evaluation of the executed CSR initiatives, by conducting a meticulous impact analysis based on the preset metrics.
Reporting: The new Companies Act, 2013, also mandates the qualifying
companies to report their CSR activities and impact using defined reporting
guidelines. 2CSR prepares these reports and professionally made microvideos, brochures and other creative collaterals, for your company to proudly
share with the government, shareholders, customers, suppliers and other
supporting entities, of their CSR initiatives.
costs; thus, we help our clients
design CSR plans that are
symbiotic in nature making more
initiatives feasible, sustainable
and impactful.
How do you view the market potential?
According to the Indian Institute
companies are required to comply
with the new CSR regulations this
year; resulting in close to Rs.20,000
crore being invested in various
CSR initiatives. With few capable
players in the market, this is a
large and a promising market to
service. The number of companies
needing advice and the CSR pools
will only expand further as India
continue to progress.
Which are the major markets for
your company?
The law applies to companies that
are registered or have established
operations in India. Given our
positioning and offering, we have
been of value to many corporates
currently catering to companies
headquartered in Mumbai and
will expand our client base to
other cities in due time.
Kindly share your experiences so
far, the major challenges, and
how did you overcome them?
One of the biggest challenges so
far has been to understand the
grey areas of the law. While some
areas continue to be undefined by
the law, 2CSR has discussed and
vetted the strategies they work by
certified accountants, reputable
lawyers and the Ministry of
Corporate Affairs.
How do you view the performance
of the company so far?
2CSR came into existence in a
timely manner. We have been able
to create a sound knowledge base
and network of facilitators to allow
us to devise CSR plans that will be
most appropriate for our clients.
How is the competitive scenario
in its key markets?
Initially corporates were resistant
to undertaking CSR initiative;
but now understanding not only
their legal obligations but also the
benefits attached to exercising a
right CSR program.
What are your future plans?
Where do you see the company
five years from now?
Priyam and I find 2CSR to be a
very promising entity, by which
we wish to provide solutions
for current social challenges by
creating effective people-privatepublic (PPP). With 2CSR, we hope
to inspire more individuals and
corporates to regard CSR in the
right light and participate towards
making a positive impact in India.
What is your message for budding
Be the difference you want to see.
The Global Analyst | JUNE 2014
Great Expectations from Game-changer NAMO
Modi’s overwhelming mandate has given a great hope to
the country – at a time when “India Shining” became “India
whining”. Where does the hope come from? It comes
from Narendra Modi’s track-record as Gujarat Chief
Minister which has created a unique style of governance
that replaced ad hoc policies with strategic policy-making
and precise delivery mechanism with innovative ideas in
smart governance. But before that, let’s address the basic
What is on Modi’s mind? Will he back his political posturing
with actions on the ground that will rattle the secularist
traditions of the country? What exactly is Modinomics?
What will be the basic thrust of his economic policies? What
will be the foreign policy like? What will be the broad policy
framework and the style of governance? Let us look at all
of that in detail...
The Global Analyst | JUNE 2014
NAMO – India’s Second Man of Destiny
2014 when the
world’s eyeballs
were pivoted to
the Great Indian
Election Results,
India had delivered the most
stunning verdict not seen in a
generation. The BJP got a massive
mandate which decimated the
Congress-I party in a landslide not
seen since 1984. The Indian voter
had delivered the most decisive
verdict on showing the door to
Congress-I giving them a tally of
just 44 seats out of 500 seats while
the NDA-led combine has bagged
334 seats. The man of the moment
– Narendra Damodardas Modi –
who at 63 led the most-successful
campaign in the history of any
democratic country in the world
had the most emphatic victory
making him ascend the post of
Prime Ministership of the country.
Having fought off massive media
and public negativity on various
aspects of his personal life and
public perceptions built on the
pogrom of 2002, Modi has risen
from the ranks of a tea vendor
to karsevak to party secretary to
Gujarat CM to becoming the 15th
Prime Minister of the country. His
main planks, contrary to what a
clueless Congress-I and a farcical AAP Party ran were a combination of three forces – Smart,
Clean and Corruption-free Governance, Development and Inclusive Growth for the Poor and the
It stirred a nation in an unprecedented way because for the last
ten years, India had become the
cookie that crumbled amongst all
developing nations after taking
over from an energetic government led by NDA until 2004. GDP
growth fell from 9.5 per cent to
4.83 per cent, FDI has dwindled
to just 4 per cent of the GDP, FII
flows have shrunk to a mere 1 per
cent of the GDP and the country’s
potential itself became a mockery
of its former glory; while China
grew its GDP touching almost
$9 billion, India has languished
below $2.3 billion. Not just that,
there were two downgrades in
Sovereign Rating, inflation soared
to 9 per cent and remained stubbornly at that for the last two
years, corruption scandals shook
the country’s three or all the four
pillars of democracy with a magnitude unheard of and a currency
crisis almost bludgeoned for warroom attention until dissipated.
All these had a toll not just on the
polity, markets and the foreign
investors as they pulled back but
also took a heavy toll on the country’s businessmen and government machinery. Policy paralysis
reined large, businessmen in India made outbound investments
instead of looking at the domestic
consumer, projects to the tune of
$125 billion got stalled due to various issues, that’s roughly 8 per
cent of India’s GDP.
Hope amidst Agony
First things first: With 337 seats,
the NDA led by Narendra Modi
has formed the government with
45 cabinet ministers - excluding the PM. The tally both for the
NDA and the for the BJP makes
Modi the most powerful prime
minister in three decades setting
aside any need for coalition politics or consensus-building which
made previous regimes usher in
reforms at a snail’s pace. There
is no foreseeable need to cosy up
to left-winged and centrist coalition partners who are whimsical.
Modi and his team at NDA alone
can call the shots. Of course, the
Upper House is still not in BJP’s
control but history proves that
gaining control of the lower house
is half the job done. It is not a serious challenge at this time as more
members retire and NDA alliance
is gaining stronghold across the
Secondly: With one of the leanest
teams in place, Modi has kept his
word on the business-like expediency with which he would like to
run the government. Let’s begin
with the cabinet formation on
Day zero. True to the manifesto,
Modi adhered to the slogan: Minimum Government, Maximum
Governance. Key portfolios with
huge overlapping areas of decision-making and clearances were
merged with limited resources.
For example, Arun Jaitley, the
new Finance Minister has got additional portfolios of Defence and
Corporate Affairs. Now, Corporate Affairs is something that has
a deep wedge with policies dictated by the Finance Ministry for
investments, capacity-building,
foreign investments etc. Similarly,
the rural affairs ministry along
with Panchayat Raj have been
merged under the portfolios of
one minister Venkaiah Naidu.
Another example, coal and power
sectors – depending on each other
for fuel linkages will be under one
ministry. Similarly, the planning
and statistics ministries will have
one minister. Economists say this
is an essential facet of Modinomics where many ministries with
close-linkages are being collapsed
into one unit, thereby being consistent with supply-side economics – which focuses on efficiency
of resources and synergization
among various aspects of governance.
Eventually, this kind of approach
is increasingly pro-business,
speedens government decisionmaking and removes bureaucratic
hurdles. In his previous avatar, in
Gujarat, where he was the Chief
Minister for over 12 years before
anointing a successor, a woman
in his previous cabinet, Modi had
the same model of ministries – all
of 16 ministers ran the entire state
of Gujarat to become the top state
in the country run like a clean and
business-friendly state.
Thirdly: Coming back to the cabinet selection, by picking a strong
team of new faces as well as regulars, he has already given a stern
message that he is here for changing the status quo. By capping
the maximum age of entry for a
cabinet berth at 75 years, he has
The Global Analyst | JUNE 2014
NAMO – India’s Second Man of Destiny
cleverly weeded out the veterans
in the BJP party like LK Advani
and Murli Manohar Joshi to sit
outside. By getting seven women
ministers, he has stuck to his election promise of getting more empowerment to women politicians.
By giving a chance to rank new
comers with strong technical background like Piyush Goel (Power)
and Gen.V.K Singh (MoS for External Affairs and North-East affairs), he has set the tone for fresh
thinking in taking the inputs from
technocrats and experts.
Creating a ministry for NorthEastern States itself tells you that
Modi wants to set right the imbalances crept into the system for the
past several decades in isolating an
important part of India that is seeing more and more isolation and
increasing incursions by China on
the other hand. Piyush Goel, Minister for Power, Renewables and
Coal etc. is a rank-holder CA with
impeccable track-record in ensuring Gujarat became a zero-deficit
state with excellent financial management of the state Discoms
(Power Distribution Companies)
Fourthly: Though the Manifesto
has outlined some contentious issues like Uniform Civil Code, Article 370, Ram Mandir, Cow Worship, etc. our understanding of the
Man and the mandate is that given
the state of the nation and still precarious economic vulnerabilities
of the Indian economy, we are
unlikely to see a Modi reminiscent
of the recalcitrant days of 2002 or
those rare electioneering posturing attempted at times giving lot
of discomfort to the minorities and
the liberals. Since the main issue in
the election has been the economy
and governance (or lack of it), the
electorate was galvanized to vote
for NDA based on Modi’s excellent economic track record as the
CEO of the state of Gujarat. (See
Box: Gujarat Rocks!).
There would be little time in the
first five years or even in the first
eighteen months to expend energies into re-set of a social agenda
The Global Analyst | JUNE 2014
that the hardliners in RSS or the
party or the man himself will create. If he spends too much political
capital on recreating a social fabric, Modi may run out of time to
carry out the promises on which
his administration and performance will be judged. It is important to note that the transparency
and openness with which a new
website for PMO (
was created within minutes of the
swearing-in ceremony show the
resolve to think beyond the election issue matters. That’s where
the greatest hope and redemption
lies for Modi and his ministers –
focus on the economy, stupid. Everything else is distraction.
Foreign Affairs
In the previous stint between
1998-2004, BJP realised the importance of governing without any
deviations on the socio-religious
front. That’s what got them here.
If the BJP has been voted overwhelmingly, the support has
come not only from the Hindus
but also India’s non-Hindus, over
200 million of them, a population
larger than those of all but five of
the world’s most populous nations. Hence, it is logical to expect
that BJP will not get side-tracked
into clipping their “special privileges” and make school history
books rewritten with Hindu nationalistic ideas. What will be at
the forefront is the policy on backing up Modi’s fiery rhetoric on
domestic and international issues
with actions on the ground – like
expelling Bangaladeshi immigrants from India, talking tough
with Pakistan on the trials of suspects in the 2008 terrorist attacks
on Mumbai and taking on China
over the disputed borders in Ladakh and Arunachal Pradesh.
Talk about China in particular and
foreign policy in general, the day
one moves by Modi in combing
up the comity of nations on the
periphery of the Indian Ocean
is a master-stroke in diplomacy
and foreign relations because it
attempts to thwart the sinister
moves by China to encircle Indian
subcontinent through its “string
of pearls” in the Indian Ocean. It
is therefore, a pre-emptive strike
to take India’s neighbours - Maldives, Mauritius, SriLanka, Bangladesh, Bhutan, Nepal, Pakistan
and Afghanistan alongside in
order to wean them away in the
medium term from China’s overtures. Having said that, India under Modi will have to collaborate
more with China, if there is to be
accelerator on the growth paths of
the two countries.
Strategically, China and India
have had far closer economic ties
before colonial powers overpowered their economies. Similarly,
Russia, which used to be an old
ally, might just become closer to
India in view of the new Eurasian
drive of Russian Premier Putin.
Japan, let’s not forget is going to
be another soft superpower that
has had great equation with Modi
government in Gujarat. Whether
it is bullet trains or port infrastructure, the Japanese are coming to India in a big way and Modi
may well make his first visit to the
land of the rising Sun.
It now remains to be seen whether India’s relations with the big
four- US, UK, Germany, Japan
and France will be as dynamic as
has been so far except the minor
irritants like the US Visa issue
denied to Modi. On the whole,
expect plenty of fireworks from
Narendra Modi on the foreign affairs. Modi will surely recognize
the benefits of a mature foreign
policy with the sole superpower
America because both the countries need each other in rebuilding a modern world free from
terrorism, tyranny and threats to
There is equal pressure from
Obama Administration on the US
President to make a quick dash to
India to remove the blocks on the
US-India relations. Expect enormous engagement between US
once the dust settles down at 7
NAMO – India’s Second Man of Destiny
Race Course Road. US-American
relations have been always in an
overdrive under the Vajpayee
Government and also the UPA
regimes. So, do not write off the
American juggernaut yet notwithstanding the cold vibes so far. Modi’s team has the tactical nerve to
smoothen the relations with US in
the long-run.
What to Expect from Modinomics
Modinomics has entered the
world of tweets and blogs much
before Modi entered the PMO.
What does it mean really? Modinomics is actually the refined
macroeconomic thinking that is
closest to supply-side economics which goes beyond what
Keynism, monetarism, and now
the classical economics mandate.
It boils down to lowering of barriers for people to supply goods
and services as well as by investing capital. Modinomics, as has
been proved in Gujarat, goes to
make economic thinking essentially supply-side oriented as opposed to the demand-side emphasis of Keynesian economics. While
that had its say in the economies
of the war years, today’s world
demands more innovative ways
of increasing the potential supply of output be it capital, technological progress, quality of human
resources, removal of trade and
regulatory bottlenecks and so on.
Modi has achieved supply-side
economics by a mile in Gujarat.
How does Gujarat score in this?
Exceedingly well.
A case in point: Jim O’Neil, the
father of BRIC concept of investing in Brazil, Russia, India and
China made a ten-point thesis in
his treatise that received global
recognition and set capital markets flocking to these markets. He
predicted that if the BRIC nations
follow his 10-point formula which
helps in creating a Growth Environment Score (GES), they could
overtake the G-7 in future. In
2012, O’Neil was in Gandhinagar,
Gujarat to deliver a talk on his
NAMO’s list of top 10 priorities for the Economy
Giving special emphasis to governance, Prime Minister unveiled a top
10 priorities’ list for the government. The aim is to kick-start economic
growth and ensure a smooth decision making process.
1. Build Confidence in Bureaucracy
2. Welcome Innovative ideas and Babus to be given freedom to work
3. Education, Health, Water, Energy and Roads will be priority
4. Transparency in the government. E-auction to be promoted
5. System will be placed for inter-ministerial issues
6. People oriented system to be in placed in Government Machinery
7. Addressing concerns relating to Economy
8. Infrastructure and Investment Reforms
9. Implement Policy in time bound manner
10. Stability and Sustainability in Government Policy
economic theory to Modi and his
top bureaucrats. As he came to the
slide on the 10-point GES listing
out the points, as many as 7 out of
the 10 GES points, he said, could
be technically implementable by
an Indian State and on all of them
Gujarat had made great strides in
the last decade almost similar to
what South Korea has achieved.
O’Neil gave his endorsement of
Modinomics then itself: “Narendra
Modi’s economics seems to be in the
right place”, he said in an interview
after his meeting with Modi. What
are those 7 GES score points? 1. Improve Governance 2. Raise the level of
education 3. Improve the quality and
quantity of universities 4. Increase
agricultural productivity 5. Improve
Infrastructure 6. Introduce a credible
fiscal policy. 7. Improve environmental quality.
There are three points, but Modi
knows the distinction path to acing up the curve of development
in leapfrogging from a vicious cycle to virtuous cycle of all-round
On all these fronts, Narendra Modi’s government scored high in
putting Gujarat on a high-growth
pedestal. And understanding Gujarat’s achievements will give us
a better sense of what to expect
from the man of the moment –
Modi. Gujarat is today considered
the petro capital of India with the
most developed gas pipeline net-
work, supplying piped natural
gas to nearly 12,34,292 domestic
households, 14870 commercial establishments, 3760 industrial consumers and 325 CNG stations. A
2,200 kilometre gas-grid supplies
gas to the industrial areas.
Gujarat has 42 ports, 13 domestic airports and one international
airport, its infrastructure is well
ahead of other states, has an extensive road and rail network.
There are 83 product clusters, 257
industrial estates, 32 notified special economic zones (SEZs) and
the upcoming Delhi-Mumbai Industrial Corridor (DMIC).
In the ten years between 200102 and 2011-12, the GDP of the
state grew at an annual average
rate of more than 10 per cent per
year. While the rest of India languished at a paltry agricultural
growth of below 4 per cent, Gujarat alone achieved a growth of 11
per cent. Gujarat also stands as a
replicable model of development
and competitiveness despite having just fewer than 5 per cent of
the total population of the country. The Economist magazine observed whether Gujarat could do
for India in the 21st century what
Guangdong province did for China in the 1990s.
There are other achievements that
Gujarat has achieved which make
it a model worth emulating. It attracted 13 FDI proposals worth
The Global Analyst | JUNE 2014
NAMO – India’s Second Man of Destiny
Modi’s Mantra of Hope
A quick look at what’s Coming
• Jobs, Jobs, Jobs: Narendra Modi’s
main plank for coming to power has
been jobs and Modi’s first target is
to achieve more than a crore jobs,
of course, he can do this partially
by lowering the retirement age
of workers but going by the past
record, Modi will bring in more
projects of national scale which
will bring in private-public partnerships, wider foreign participations,
long-term financing of projects etc.
to get the job market red-hot.
• GST: A uniform Goods Services
Tax will replace all indirect taxes
such as VAT, sales tax, central excise
and service taxes. It is expected to
bring down inflation as multiple
layers of taxation that exist in India
are going to go. Estimates say, GST
introduction itself can boost India’s
GDP by 2 per cent p.a. Of course,
there are challenges!
• A combination of Rajan-JaitleyModi: This is similar to the famous
Volcker-Reagan era where the duo
broke the back of inflation and put
America back in business to rise to
the top of the Superpower status
in the 80s. At the moment, despite
qualms about retaining Raghuram
Rajan as RBI Governor, sanity is
prevailing over the think-tank in
Modi Team to allow free hand to
Rajan in reining in inflation. Of
course, even Rajan has come around
to the view of the government that a
balance between growth and inflation is in order.
For NDA government regime,
economists like Arvind Panagriya
and Jagadish Bhagwati who have
successfully given inputs for Gujarat turnaround are going to be the
standing army for Modi’s government. Already, Arvind Panagriya
outlined that since the CAD (Current Account Deficit) has shrunk
to less than 2 per cent of the GDP,
there is a leeway to go up to 5.5 per
cent of GDP to finance the CAD. Interesting times for both Modi Team
and Rajan to work together and get
India back to a roaring growth path.
• Clearance of pending Infra proj36
The Global Analyst | JUNE 2014
ects: As around $125 Billion worth
of projects are caught up due to
policy paralysis and fuel linkage issues, NDA government is expected
to kick-start these projects as getting
these back up on their feet gives an
impetus to GDP. Immediate monetisation, re-awarding to stronger
financial partners, clearances from
various authorities, or encouraging
bids from renewed interest groups
is going to be a key focus area.
• Subsidies and Privatization:
PSUs getting privatized is always
the in-thing with NDA government
and Modi-led governance. Subsidies will also be redirected after
proper rationalization and institutionalisation to prevent leakages.
Since the NDA government has received a major drubbing in 2004 due
to perceived indifference to welfare
economics, some of the better subsidy measures are expected to continue.
• Defence Privatization: By giving Jaitley the power over finance
overlooking defence, Modi sent out
a strong message to expect more
fireworks in defence itself. There
will be more privatization and even
foreign ownership of hardware facilities needed to modernise the
defence. Expect quick deals with
countries like Israel, Russia, France,
Germany, Japan and UK.
• Labour Reforms: This is going to
be deep-dived by NDA government
to bring out acceptable models of
expediency in labour reforms to
trade unions, workers and employers. If you read Raghuram Rajan’s
chapter on labor reforms in the
Economic Survey of 2011-12 which
covers skill development, inter alia,
you will know what’s coming next.
Also expect more repeal of useless
laws – there are about 50-60 legislations and most of them are going to
see their last appearance in this government regime.
• Big Bang reforms in Insurance,
Banking, Coal, Power and Agriculture: Following the success of
the Gujarat model of governance,
expect wider access to foreigners to
get a pie of banking and insurance
pies with emphasis on reciprocity
for Indian firms expanding overseas. But the biggest game-changer
will be in Agriculture. Modi has
always had fresh ideas in making
farming more productive for the
farmers by making it more supplydriven, giving better credit, access to
soil preservation methods, making
agriculture less input-intensive and
more remunerative from a price realisation standpoint for the farmer.
Expect a pan-India framework for
a debate on Agricultural revolution
with far-reaching reforms. (More on
that later in the coming issues.)
• Urbanisation: Whether it is the
Freight Corridor, revival of the
Road linking project or the 100 cities
mega infrastructure project, huge
urbanisation is going to be the hallmark of this government.
• Some Swadesi, Some Videsi
mostly inclusive: Since Modi has
always had a nationalistic fervour
in his speeches; one can expect that
most of the policies in economics,
politics and foreign affairs will have
the interests of domestic populace
at centre-stage. Hence, we can expect a tinge of nationalism in some
of the indigenous industries of our
ancient heritage and culture like
the Indian systems of medicine of
Ayurveda, Hatha Yoga, Unani and
handicrafts to be revived and made
a centrepiece. This is because Modi
has a feeling of pride in things national while allowing the foreigners
come to India at our terms, where
we cannot add value.
In short, Swadeshi economics is
the fulcrum of Modinomics, it
must be said. At the same time inclusive economics and inclusive
governance in the seven areas have
made all the difference to Gujarat
in the last decade. These include,
the economy, managing growth,
agriculture, infrastructure, human
capital, grassroots development
and sustainability.
NAMO – India’s Second Man of Destiny
Inside the Gujarat Infra Model
There are various aspects of the Gujarat Infra Model and
some of the key areas of development in the state are:
1. Quality of Road Infra 2. Water Supply 3. Port Infra 4.
New Cities 5. Renewable Investments and 5. Health of State
2. Take Power Discoms: The balance sheet of the Gujarat
State Discoms has been relatively healthy with overall debt
declining gradually from Rs.33 billion in FY07 to Rs.15 billion
in FY12. Overall debt at the national level, on the other
hand, has increased steeply with negative overall net worth
as a result of continued losses at the state discoms.
3. Power Generation: Gujarat’s success is that power
generation capacity in Gujarat has been driven by the private
sector with 14GW added led by 8GW of coal capacity and
4GW of renewable capacity addition. Nationally, whereas
private sector has 34 per cent contribution to the installed
capacity, in Gujarat it is more than 61 per cent. Gujarat is
today the only state with zero power deficit in FY14.
4. Solar Policy: Gujarat has pioneered the country’s solar
policy with a better flexibility to the developers. While
the National Solar Mission makes the tariff decided by the
reverse bidding process, in Gujarat preferential tariff is
fixed by the government for the operation period. High
irradiation, availability of land and effective policy structures
has made Gujarat conducive for solar power installation.
Another highlight of Gujarat Solar policy is the project to
set up solar power plants over the 19000 kim long canal
network of Narmada river. Not only does this prevent the
evaporation of water but uses the natural river network has
helped in producing more than 1.5mn units of energy.
5. Roads: Gujarat’s focus is on upgradation and maintenance
with a focus on connecting all the villages – almost 99 per
cent of the villages are now connected by “pucca” roads.
6. Water: Gujarat is a water-scarce state. On one side,
there is desert and on the other side, it is Pakistan, as they
say. Yet Gujarat has now become a water-surplus state with
the largest desalination plant in Asia with a capacity of 336
million litres per day.
7. New Cities: Gujarat International Finance Tech City is a
project which aims to provide world-class infrastructure to
the finance and technology firms, incentivising them to set
up their base in Gujarat.
$3.7 Billion over 2011-12 and became the state with the second
highest number of FDI proposals.
Gujarat is the top milk procuring
state in the country with 12.4 million kilograms of milk procured
per day (roughly 38 per cent of
India’s total milk procurement)
during 2012-13. It is the fourth
largest milk producing state. It is
the largest producer of processed
diamonds- accounting for 80 per
cent of India’s diamond exports.
It is the largest denim producer in
the country and the third largest
in the world. It is the largest cotton producer and exporter in the
country. On the infrastructure
front, Gujarat leads the country. It
has the highest number of operational and commercial cargo ports
in India. (See box: Inside the Gujarat
Infra Model).
With such a rich legacy, it is quite
plausible to now to expect what
Modinomics will do for India
– more supply-side economics,
strong and decisive policies for a
balanced development of all the
three sectors – Agriculture, Industry and Services.
An Unchecked Mandate - A Fantastic Start
Modi has got all that he asked for
now. And a pan-India appeal that
puts him in a ratified field of reverence - he has a twitter handle that
counts over 3 million (followed by
even some heads of state) and a
Hindi-heartland appeal that will
shame any other national leader.
If he focuses on the right issues as
outlined above, in a manner that
uses up India’s current and latent
potential in all the seven areas,
India will have a golden run. This
is the tipping point, the turning
point and the inflection point in
India’s tryst with destiny.
We hope Modi gets all the godspeed and support to succeed at
India’s highest office at its most
needed hour. There was never another point like this in a nation’s
history that a mandate this strong
came to a man so revered and yet
paradoxically so hated that millions of voters in India, young and
old have placed in a leap of faith.
Hope Modi and his team grabs
this and help India leapfrog to the
status of developed nations that it
desperately deserves.
- S Sridhar
The Global Analyst | JUNE 2014
The Challenges Ahead
With dark clouds of economic and political sanctions looming
over Russia in the backdrop of the Crimean accession,
Russia’s economic future is being arguably considered as
shaky by many western economic and political pundits while
the others from the pro-Russian bloc are upbeat about the
country’s economic future in view of the speedy growth and
market reforms undertaken by the government in recent
times, which according to them would crenelate Russia
from the ensuing embargos, says Hyma Goparaju, Managing
Director, Indigen Technologies (P) Ltd.
The Global Analyst | JUNE 2014
grown at
a steady
rate of 4
per cent
post the
recession, the IMF, as an after
effect of the geopolitical turmoil,
has revised Russia’s growth forecast to a near zero rate at around
0.2 per cent for the year of 2014.
With milder sanctions already
being imposed in the form of
visa restrictions, asset freezing
and blacklisting of a few Russian
companies, it becomes imperative to look at all possible probabilities of the impact of stricter
sanctions not just on the Russian
economy but on the fallout on the
European Union and the rest of
the world as well.
Economy – A Bird’s Eye View
With a GDP of $ 2 trillion (2012
figs), Russia is the eight largest
economy representing close to 3
per cent of the world economy.
After the collapse of the erstwhile
USSR in 1991, Russia unleashed
a slew of reforms by embracing
market economy and globalization and as the iron curtain fell,
the country went through a
tumultuous decade of economic,
social and political transformation. Post 2000, Russia grew at an
Russian Economy
average rate of 7 per cent riding on the upward rising global
growth curve and leapfrogged
its GDP to $ 2 trillion. The once
centrally planned economy today
houses more than a hundred
billionaires and is ranked third
in the list of billionaires across
the world just behind the US
and China. Russia is one country
which has enjoyed a geostrategic advantage in availability of
natural resources and is extensively rich in oil, gas, metals and
minerals. The country exports
these commodities which form
raw materials for many manufacturing units and factories across
the globe.
While the services industry
comprises 60 per cent of its GDP,
manufacturing has a share of 36
per cent and agriculture holds
a slice of 4 per cent in the pie of
the Russian economy. Oil and
gas constitute about 58 per cent
of Russia’s export revenues with
China and Germany being the
topmost trading partners of the
country. While the Russian economy is completely commodity
driven, 90 per cent of its exports
to the US constitute minerals and
raw materials.
After having grappled with a
negative CAD in the initial years,
Russia began recording current
account surpluses. Having got
Unprecedented Macroeconomic Stability
tremendously benefited from
the rise in oil price post 2000,
the Russian exchequer reaped a
windfall of petrodollars during the period of energy crises
when prices of crude surpassed
$ 100 per barrel. High oil prices
from 2004 were a blessing for
Russia and between 2000 and
2008 the country’s GDP doubled
with the highest growth being
achieved in 2007 at 8.3 per cent
and the World Bank stated that
year that Russia had achieved
“unprecedented macroeconomic
From Russia, with Love
Russia has the largest reserves of
commodities including oil, gas,
metal and timber in the world
which comprise 80 per cent of
its global exports. Russia is the
eighth largest gold holding country in the world and is aiming at
pinning down the petrodollar by
making the ruble a reserve currency in the coming years. Also
90 per cent of the country’s trade
happens in dollars, the highest in any emerging economy,
thanks to its oil exports which
is why Russia is in a serious
contemplation to end its dollar
dependence. The Russian Central bank recently even adopted
the golden ruble as a symbol of
financial stability sending strong
signals to the west by bulwarking its local currency and airing
its lofty plans. Russia has a
foreign exchange reserve of $ 486
billion piled up as result of soaring oil revenues.
The country caters to 24 per cent
of EU’s gas and 30 per cent of its
oil requirements. Russia’s budget deficit stands at 1.3 per cent
of GDP against a 3.3 per cent for
EU and government debt stands
at 1.3 per cent of GDP against a
whopping 87 per cent for EU. In
the last decade, Russia brought
down its Debt to GDP ratio drastically from a high of 70 per cent
Source: Rosstat, Ministry of Economic Development of the Russian Federation
The Global Analyst | JUNE 2014
Russia GDP Growth Rate
cut its forecast to 0.2 per cent for
2014 down from 1.3 per cent it
registered in 2013. The stock markets have fallen 20 per cent. The
Russia is the ninth largest
ruble has weakened to an 8 per
consumer market in the world
cent against the dollar and close
and fourth largest in Europe.
to $ 64 billion has left the country
With a per capita income hoverwhich the Russian Central Bank
ing around $ 14,000, an average
has stated are the rubles that
Russian is more attractive to a
have been converted to foreign
global marketer compared to an
exchange. As a consequence, the
Indian or a Chinese with considCentral Bank has raised the lenderably lower per capita income.
ing rate to 7.5 per cent to arrest
A remarkably high literacy rate
the flight of capital and to bolster
of 99.7, one of the highest in the
the falling ruble. With the UN
world, unemployment is at a rea- and IMF monitoring the developsonably low level at around 5.4
ments in Russia closely and the
per cent in the country. Having
UN not recognizing Crimea as
made all the right moves, Russia
a part of Russia yet, the threat
soon burst into the global scene
of sanctions gets serious. In the
as an economic power to reckon
event of the inflow of investwith.
ments getting clogged and flight
of capital increasing, the first
However, the 2013-14 figures
have not replicated the economic task of the Russian Central Bank
would be to protect the ruble
buoyancy of the previous years
which it could do by ploughing
and the political turmoil caused
into its forex reserves and buying
as a result of the Crimean crisis
rubles to hold it as it did during
is threatening to alter the macrothe 1998 Russian Financial crisis
economic fulcrum attained after
a decade long concerted effort by when the Russian government
spent $27 billion to save the
unleashing reforms and entreruble’s floating peg by widening
preneurship. The first quarter of
its currency band and eventu2014 posted a growth rate of a
ally floating it freely. But such a
meager 0.5 per cent and hopemove would mean diminishing
fully alarm bells have gonged
the foreign reserves and making
loud enough in the Central Bank
the economy vulnerable to an exof the Russian Federation which
came into existence as recently as ternal default. Alternatively, the
central bank could let the ruble
in the year 1990.
drop freely in the event of large
The Russian – Ukrainian Rip- exodus of capital but that move
would generate massive inflation
which could end up triggering a
The IMF has recently cautioned
Russia of capital outflow of $ 100 domestic banking crisis.
billion due to political unrest and It is also important to note that
The Global Analyst | JUNE 2014
any kind of sanctions imposed
on Russia could now have serious global ramifications. Russia
exports 200 billion euros worth
goods to the European Union of
which 130 billion euros constitute
oil. The EU imports around 30
per cent of its oil and gas, each
from Russia and an embargo
would pose an immediate threat
to the economic equilibrium of
the already battered EU which is
just about beginning to recover
from the Euro crisis that shook
the world.
to 9 per cent. The country is currently running a current account
surplus of 2.1 per cent of its GDP
which is roughly four times its
external financing requirements.
It is also the third largest FDI attracting country and brought in $
94 billion in 2013. Russia became
a member of the WTO in 2012
after two decades of negotiations
and with a population of 143
million, boasts of more than 50
per cent internet penetration and
Russia’s FDI (64 per cent) projects
came from Europe and Russia is
the third largest trading partner
with the continent. Close to 47
per cent of FDI into Russia goes
into the manufacturing sector
with automotive industry getting
the lion’s share and the sector
generates the maximum amount
of employment in the country.
Russia has the largest number of
automotive manufacturing units
in Europe after Germany and
France and many big auto names
have invested in building capacities to take advantage of trained
manpower and economies of
scales. As a result of which, sanctions would adversely affect the
global auto industry that is gradually limping back to normalcy.
US’s discovery of shale gas
however lightens the burden off
it as it would not have to import
gas from Russia in the event of
sanctions. But the USA does depend on Russia for several of its
mineral and metal requirements,
one such being titanium which
is used by Boeing and sanctions
Source:, Federal State Statistics Service
Russian Economy
Russian Economy
could impinge upon the financial
tightness of the global automotive industry.
It is yet another matter of concern
that while in the year 2010, Russia received 201 FDI projects, the
year 2012 welcomed only 128 and
this was prior to the Crimean crisis. Russia is overly dependent on
its oil, metal and mineral industry for its growth and sustenance
and has turned itself into the supplier of raw material for the global factory. Close to fifty per cent
of the Russian railway freight is
exported and is raw material for
the world. Finished or branded
products churning out from Russian factories are miniscule and
the situation calls for a thorough
re-evaluation of its manufacturing model. Russian brands are
hardly known and other than
vodka which is what comes to
any layman’s mind when asked
to recall a Russian product, no
other name is invoked.
While the country has continued
to attract large FDI investments,
domestic capital buildup and
government investments are
lower than the normal averages
for emerging economies. Russian
economy is chiefly dominated by
large energy and metal industries which have also helped in
creating massive employment.
However, the small and medium
sector which is where entrepreneurship spawns is a laggard in
Russia accounting for only onefourth of employment as compared to half in OECD countries
and is also one of the reasons for
low innovation activity in the
While capacity utilization in
Russia is remarkable, which is
also the primary reason for low
levels of unemployment resulting in higher inflation levels; it is
largely a result of the giant corporations like Gazprom, Rosnefit
and Novatek that have generated
massive employment. To make
Ukraine Crisis Sends Russian Stock Market Tumbling
Russia’s MICEX Index
its enterprises more competitive,
Russia needs to improve governance, reduce corruption, induce
innovation and competition,
encourage entrepreneurship at
micro level and enhance domestic
investments and productivity.
Russia – India, a firm Handshake
The erstwhile Soviet Union and
India have always maintained
good relations ever since India’s
independence. The five year
plans in India were replicated
from the central planning model
of the Soviet Union and the country also helped India in setting up
large industries and dams. With
the signing of the 1971 IndoSoviet treaty of friendship the
two countries took a step ahead
in taking the cooperation between
them forward and even after its
expiry in 1991, Russia continued
to support India in defence, security and strategic parameters.
Bilateral trade between Russia and India as on March 2013
stands at $ 6.25 billion which is
negligible when compared with
$ 100 billion with the USA and
even China at $ 65 billion. While
with Ukraine, the trade volumes
are even lower at $ 2 billion, however, Ukraine has been a strategic
market for Indian pharmaceutical
and electrical machinery exports.
Pharma exports constitute 32 per
cent of the $ 2 billion trade with
If the Russia-Ukraine standoff
lingers for a longer time, there is
the possibility of oil prices shooting up which would directly
affect India’s import bill. Large
oil imports into India result in
a widened CAD. In the last one
year, the government of India
and the RBI have worked in
tandem to tame the CAD to lower
levels. But if global oil prices
rise, CAD is at a risk of receding
to higher values. Also higher oil
prices pressurize the rupee by
weakening it further which could
snowball into an inflation cycle.
A similar or worse situation
could be anticipated to emerge in
countries whose economies are
fragile and dependent on energy
While addressing the current
crisis is certainly a humungous
challenge for Russia, the developed economies must also realize
that economic embargos and
sanctions are not the best ways
and means to resolve geopolitical
standoffs. As the global economy
is beginning to relieve itself from
the throes of a severe financial
crisis, any sanction imposed on
a large economy of the size of
Russia can have a serial domino
effect with the smaller neighboring countries getting affected
instantly, the ripples of which
could travel far and wide in no
The Global Analyst | JUNE 2014
ECGC reports all round impressive performance during 2013-14
• Risk
(Rs.2,60,528 crores in
2012-13 )
• Gross Premium - Rs.1304
crores (Rs.1157 crores in
• Gross Claims paid - Rs.898
crores (Rs.548 crores in
• Profit after Tax - Rs.360.69
crores (Rs.242.79 crores in 2012-13)
• Proposed Dividend to Govt. – Rs. 88 crores (Rs.60
crores in 2012-13)
xport Credit Guarantee Corporation of India Ltd.
(ECGC) registered an overall impressive performance
during the FY 2013-14 with substantial growth in business, premium income, claim pay out as well as recoveries in its credit insurance business. ECGC was established in the
year 1957 to support and strengthen Indian exports by providing export credit insurance to Indian exporters and banks offering credit towards exports. The organization is ‘iAAA’‘rated by
ICRA which denotes highest claim paying ability. The Authorised
Capital of the Corporation was increased from Rs.1000 crores to
Rs.5000 crores in July 2013.
Addressing a media meet to highlight business performance for
the FY 2013-14, Shri N. Shankar, Chairman-cum-Managing Director of ECGC mentioned that the Corporation was able to
meet expectations of its customers as well as its stakeholders
during the FY 2013-14.Though there have been signs of economic recovery in USA and Europe in 2013, political instability
and strife in many countries like Libya, Syria, Egypt, Afghanistan,
Sudan, Iraq, Turkey and Ukraine, heightened risks for exporters
and financing banks.
Therefore, the role of ECGC, the national export credit insurer
of India, continues to be very important and crucial as exporting without suitable credit insurance is fraught with huge risks.
During FY 2013-14, ECGC paid out 381 claims worth Rs.109.29
crores to exporters under Policies issued to them and 175 claims
worth Rs.639.55 crores to financing banks under Export Credit
Insurance for Banks (ECIB) scheme. Average Annual Gross
Claims Paid during the past three years is Rs.720 crores. Major
sectors under which the claims arose in FY 2013-14 are Gems
and Jewellery, readymade garments and textiles, engineering
goods, chemicals, and agro products.
During FY 2013-14, ECGC earned a gross premium of
Rs.1303.73 crores, registering a growth of 12.7% over the previous year. Average Annual Gross Premium Income for past three
years is Rs.1155 crores and Average Annual Claim/Premium Ratio is 62.34%. The aggregate Risk Value covered by ECGC at
Rs.2,79,254 crores during F.Y. 2013-14comprises those under
Policies issued to exporters (49%) and that pertaining to covers given to banks (51%). As on 31.03.2014,11,109 short term
Policies and 311 ECIB covers were in force. ECGC has issued
78 Whole Turnover covers to banks under the ECIB scheme
and 29426 accounts of exporters with 3677 branches of banks
are covered. The Corporation presently covers around 55%
of total export credit outstanding of banks in India. As regards
Policy business, the Corporation presently underwrites risks on
237 countries of the world and maintains records of more than
The Global Analyst | JUNE 2014
1,00,000 active buyers all over the world. The data on the importers is used for underwriting commercial risks on the overseas buyers. During the FY 2013-14, the Corporation added
17201 new buyers to its database.
ECGC also covers risks of project exporters and financing banks
involved in medium and long term exports. Under this segment,
the Corporation issued 19 fresh Policy covers to exporters and 96
covers to banks during FY2013-14 for projects that are being executed in Oman, Nepal, Bahrain and Malaysia. The Corporation
proposes to pay a Dividend of Rs.88 crores to Government of India. The Solvency Ratio of ECGC stood at 11.02 as on 31.03.2014
as against the minimum solvency ratio of 1.5 prescribed by Insurance Regulatory and Development Authority. The Corporation
achieved most of its financial and non-financial targets as per the
MOU signed with Ministry of Commerce & Industry and expects
to get excellent grading for the year FY 2013-14.
On the international front, ECGC continues to play an important role in representing India as a national Export Credit Agency
(ECA). ECGC is a member of International Association of Credit
& Investment Insurers (Berne Union). During the year 2013-14,
ECGC has signed a Memorandum of Understanding (MOU)
with The African Trade Insurance Agency and two Co-operation
Agreements with the Export-Import Bank of the Republic of
China and the Exim Bank SR, Slovakia.
During the FY 2013-14, ECGC took various initiatives to promote
exports and improve services to its customers viz. exporters &
banks. The Corporation organized Export Risk Management
Conclaves in association with D&B at important export centers
in India during the FY as a part of its customer education and
insurance awareness initiatives. Also, the Corporation organized
export promotion seminars in association with Trade Bodies and
Export Promotion Councils at various export centers. The Corporation provides a special window of cover to exporters and
banks in respect of exports to Iran. The Corporation introduced
three new products viz. Multi Buyer Exposure Policy for medium
based exporters, Policy for small exporters and micro exporters
during the FY. A comprehensive Buyer Score Card System has
been implemented towards objective and expeditious credit limit
The Corporation introduced a new country risk rating system
with new features. The CMD also informed that the Corporation opened its first overseas office at London in September,
2013. The overseas office mainly facilities better assessment and
management of risks and also recovery of claims paid in European markets. The Corporation on its own will be shortly launching
a full ledged Factoring services for exporters. The Corporation
proposes to open -3- new domestic branches in 2014-15. Overall, the Corporation expects to grow its business and also strive
for better customer satisfaction during 2013-14.
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The Global Analyst | JUNE 2014
Transforming form of Proprietorship
The concept of One Person Company (OPC) has been introduced
in India, through Section 2(62) of Companies Act 2013, which was
first recommended by Dr. JJ Irani Committee in the year 2005. OPC
is basically a legal entity which functions on the same principle as a
limited company, but with only one member and one shareholder. A
new business ownership concept is an alternative for Indians, who
typically operate using the risky concept of a proprietorship, says
Bunty Hudda, CS, MBA (Finance) and LLB, Practicing Company
Secretary, Ahmedabad, Gujarat.
ow, a person
can start his
or her own
One Person
(OPC) is a new concept in India
which has been introduced by the
Companies Act, 2013.
The Ministry of Corporate Affairs
(MCA) has notified OPC concept vide notification dated 26th
March, 2014 w.e.f. April 01, 2014
i.e. OPC concept is now a reality
in India like other foreign countries like the US, China and the
OPC combines benefits of a sole
proprietorship and a company
form of business. One Person
Company is defined in the Companies Act as a Company which
has only one member. A single
shareholder holds 100 per cent
shareholding and same person
can become a Director in a Company.
Technical Aspects: Member,
Shareholding and Directors
One Person Company is defined
The Global Analyst | JUNE 2014
in the Companies Act as a Company which has only one member. A single shareholder holds
100 per cent shareholding and
same person can become a Director in a Company (Only a natural
person who is a resident of India
and also a citizen of India can
form an OPC). Further the rules
also specify that a person can be
a shareholder in only one OPC at
any given time. It simply means
an individual cannot have two
different OPCs in his name.
There is no bar on more number
of directors. However, as per the
Act, the total number of directors
shall not be more than 15.
Minimum Capital Requirement:
OPC will be formed as a ‘Private
Limited Company’. Hence, minimum paid up capital will be Rs.
1, 00,000.
The person forming OPC has to
nominate a Nominee with his
written consent who, in the event
of death or inability to contract of
the sole shareholder of OPC, shall
come forward and take over the
reins of the one person company.
(Minor cannot become Member or
Nominee in OPC. He cannot hold
shares with beneficial interest).
When a member in one OPC becomes member in another OPC
by virtue of his being a nominee
in that another OPC, he shall need
to comply with above mentioned
requirement within 180 days.
The finance ministry has not specified anything on tax rate of OPC,
it is assumed that the rates of taxation applicable for a private limited company shall apply to OPC.
Meetings of OPC
Every company shall hold first
meeting of Board within 30 days
Transforming form of Proprietorship
of date of incorporation and
thereafter hold a minimum 4
board meetings every year in such
a manner that not more than 120
days shall intervene between two
consecutive board meeting.
OPC shall be deemed to be complied with above provisions if at
least one board meeting has been
conducted in each half of a calendar year and gap between such
two meetings is not less than 90
If there is only one director, no
need to hold board meeting. It
shall be sufficient compliance
if all resolutions required to be
passed by such a company at a
board meeting are entered in a
minute book – signed and dated
by the member and such date
shall be deemed to have the date
of the board meeting for all the
Mandatory Conversion of OPC
into another company
When paid up share capital of
OPC exceeds Rs. 50 lakhs or
its average annual turnover of
relevant period exceeds Rs. 2
crores, it shall cease to be entitled
to continue as OPC (Here relevant
period means period immediately
preceding 3 consecutive financial
years). Such OPC shall be required
to convert itself, within 6 months
of exceeding its limit, into either
private company with minimum
two members and two directors
or Public company with seven
members and three directors.
Conversion of Private Company into OPC
A Private Company (other than
Section 8 - Companies with charitable objects), having paid up
capital of Rs. 50 lakhs or less or
average annual turnover during
relevant period of Rs. 2 crores or
less, may convert itself into OPC
by passing Special Resolution in
General Meeting after taking NOC
form members and creditors.
Process to start a One Person
Company is as followsThe sole
shareholder (Applicant) is required to obtain a Director Identification Number (DIN) as well as
a digital signature certificate.
• Apply for the name of the company.
• Get the consent of the nominee
File the consent along with
the final incorporation forms
with the Memorandum and
Articles and other required
• After inspection of forms and
documents, Registrar of Companies (ROC) will issue certificate of incorporation.
OPC is best form of business due
to following advantages:
Steps to Incorporate OPC
• Obtain Digital Signature Certificate (DSC) for the proposed
• Obtain Director Identification Number [DIN] for the proposed
• Select suitable Company Name, and make an application to the Ministry of Corporate Office for availability of name.
• Draft Memorandum of Association and Articles of Association [MOA
& AOA].
• Sign and file various documents including MOA & AOA with the
Registrar of Companies electronically.
• Payment of Requisite fee to Ministry of Corporate Affairs and also
Stamp Duty.
• Scrutiny of documents at Registrar of Companies [ROC].
• The biggest advantage of OPC
over a sole proprietorship
would be that in case of OPC,
liability in case the business
fails, is limited to only the
business assets.
• Comparatively less stringent
compliances with lower fees is
applicable to OPC.
• Annual returns can be signed
by the Director himself instead
of a Company Secretary.
• Provisions of Section 139 regarding Compulsory Rotation
of Auditors shall not apply to
OPC as per Rule 5 of Companies (Audit and Auditors)
Rules, 2014
• Provisions of Section 98 and
Section 100 to 111 (both inclusive) shall not apply to OPC
i.e. relating to Tribunal’s power to call Members’ meeting,
Calling of EGM, Notice and
Quorum for Meeting, Proxies,
Voting rights, Postal Ballot,
Circulation of members’ resolution etc. are not applicable to
On the point of rules and
regulations, there are definitely
fewer rules and regulations
surrounding a One Person
Company. The OPC will definitely
encourage more proprietors to
start OPC instead of forming a
proprietorship. The concept is
set to organize the unorganized
sector of proprietorship firms.
OPC is next big thing in India and
will boost flow of foreign funds
in India as the requirement of
nominee shareholder would be
done away with.
However, experts feel the key
challenge for such a company
will be to ensure that supporting
legislations also recognise such
a company as an entity and
not just an extension of a sole
• Receipt of Certificate of Registration/Incorporation from ROC.
The Global Analyst | JUNE 2014
CEO Corner
“B-Schools themselves will need to adapt the best
competitive practices that they teach in their classes to
remain relevant to the ever changing business world.”
Akhil Shahani, Managing Director Centre
for Management. He
is also a Director at
Kaizen Management
Advisors Pvt. Ltd. He
has a vast network in
the education space to
Kaizen. He has been in
the education sector
for the last 60 years
and is involved in managing 24 institutions in
Mumbai. He runs the
non-profit SAGE Foundation which provides
education and skills
training for 100 villages
in Maharashtra. He is
a Past President of the
American Alumni Association, which promotes academic linkages between US and
Indian Universities.
Regular speaker at educational conferences and had been profiled in media. He has received the
‘Bharat Shiromani Award’ for his work in the education. After completing
his MBA over 18 years ago, he started a range of ventures in the educational sector. These include a business school for his educational trust and
a vocational training franchise. Mr. Shahani earned his MBA from Kellogg
Graduate School of Management.
In an exclusive interview with The Global ANALYST, Akhil Shahani,
Managing Director, Thadomal Shahani Centre For Management (TSCFM)
discusses about management education scenario in the country and the
ways to tackle the lack of employability skills among the B-School grads,
and TSCFM’s future plans.
The Global Analyst | JUNE 2014
Management Education
A recent survey says that 79 per
cent of MBA graduates are not
industry ready. Why do you feel
that has happened?
Peter Drucker, the father of modern management thinking said;
“What can be measured, can be
managed”. The key to the issue
of why MBA colleges are not able
to graduate students as per the
needs of recruiters is that both
parties are using different measures to determine quality. Recruiters measure candidate quality through personal interviews
and aptitude tests that determine
if the job seeker has the right attitude, skills and industry knowledge for the role. On the other
hand, colleges measure graduate
student quality using exams that
primarily determine the students’
ability to memorize management
theories. Although both colleges
and recruiters are doing their best
to focus on quality, since their
quality parameters are different,
there is a mismatch between what
recruiters expect, and what colleges deliver.
We need a revolution in MBA
education that better aligns the
needs of recruiters to what is
provided by colleges.
What can a college do to get
students industry ready?
The key focus of a college is
to understand each student’s
personal career goal on graduation
and give that student the
education required to reach that
goal. This requires understanding
of each student’s strengths and
weaknesses and how they match
to the chosen job role. Enabling
each student to understand what
aspects of the course they need to
concentrate on to help them build
the specific skills & knowledge
needed to get their desired job e.g.
a student who aspires to work in
a PR firm should build skills in
presentation and knowledge of
market positioning as opposed to
India needs a revolution
in MBA Education that
better aligns the needs
of recruiters to what is
provided by colleges.
- Akhil Shahani,
Managing Director,
Thadomal Shahani Centre for
Management, Mumbai
a student who aspires to work as
an investment bank analyst where
he needs to develop skills in
problem solving and knowledge
of excel spreadsheet models. The
college then needs to connect the
specific student to the companies
that have the job roles they aspire
for. No point in giving a shy
student a job interview in sales or
a creative student a job interview
in accounting, as they would
probably do badly at that job even
if they are selected.
What can industry do to help
colleges produce job ready
It is in the interest of industry
recruiters to have access to a
large pool of talented candidates
that require minimal training
once they join their allocated
job roles. This can be achieved
through having colleges that
already provide this required
skills and knowledge training
in their curriculum before their
students graduate. Recruiters can
proactively connect to colleges
and give inputs on what they are
looking for in job candidates and
how these colleges can alter their
curricula to create this candidate
pool. They can also have frequent
guest sessions with students to
share their experiences of how it
is to really work in their industry,
to give students a flavor outside
can also offer short internships
with actual project outcomes to
students instead of looking at
student interns as a source of
low cost labor to do mundane
activities. Successful internship
projects give companies a chance
to identify and train talented
future job candidates while giving
these talented candidates a reason
to choose to work in this company
on graduation.
Tell us more about Thadomal
Shahani Centre For Management
I am a big believer in practicing
what you preach. We built TSCFM
with the purpose of creating MBA
graduates who are truly job ready.
Many of the points I’ve suggested
above to other MBA colleges
are already being executed in
TSCFM. We have created a
unique education environment
that we call the “Responsive
Learning System”. In this, we
conduct psychometric tests for
each student to understand their
strengths. We then ask students to
determine their individual dream
job role on graduation from
TSCFM. We counsel them using a
‘Career Development Sheet’ that
maps their unique strengths with
the skills and knowledge needed
to get the job role they want
and show them what aspects of
TSCFM’s curriculum they need to
concentrate on to get there.
The curriculum has been created to
holistically develop our students’
The Global Analyst | JUNE 2014
Management Education
attitudes and skills along with
industry knowledge to create a
well-rounded job candidate. Each
student’s progress through the
two years with us is measured
using a Corporate Readiness Score
(CRS) that measures the students
on the five parameters most
desired by industry recruiters,
namely; communication skills,
professionalism. Along with this
we have corporate guest sessions
almost every week so students get
a deep understanding of industry
realities from senior managers.
These initiatives have been
developed with inputs from
recruiters. We believe that the
more we align our MBA education
to what recruiters look for, the
more job ready and successful our
graduates will be.
Why do so many business schools
have vacant seats?
I personally feel that this is a
good thing. Like other parts of
India’s economy, stiff competition
has entered the management
education space with many
institutes over the last five years.
Students now have a wide variety
of MBA college options in front
of them and have the freedom
to select the one that best suits
their needs. This will improve
the overall quality of education
provided by colleges and they
can no longer get away with
having mediocre faculty teaching
outdated curriculum leading to
poor placements. Already, I have
seen some of these weaker new
colleges closing down due to lack
of students & I believe that there
will be more to follow.
What is the future of Management
Management education has a
very bright future globally. This
is because business is getting
The Global Analyst | JUNE 2014
more competitive and complex
each year. Companies need to
hire managers with the latest
industry knowledge if they want
to succeed. MBA institutes are
the only source of structured
enable freshers and working
professionals build the sort of
industry knowledge needed by
these companies. In fact, a greater
number of students are looking at
doing an MBA regardless of what
their undergraduate degree is.
However, I feel that management
education will evolve over the
next decade to include more
specialized courses based on
industry sectors and functional
roles. Colleges themselves will
need to adapt the best competitive
practices that they teach in their
classes to remain relevant to the
ever changing business world.
What is your outlook on the
Indian economy in 2014?
The Indian economy is already
recovering from the downturn of
the last couple of years, with new
optimism among industry leaders
and new investments happening.
Although we consider a 5 per cent
annual growth rate to be less than
ideal, this is much higher than
what investors see in developed
economies like US and Europe.
With even China slowing down,
many global investors are putting
their money back into India.
This means that companies will
grow faster over the next few
years and will need to hire more
MBA graduates to help them
achieve their targets.
What would be your advice to a
budding manager/MBA aspirant?
Too many MBA aspirants are
not clear what sort of career they
want. When I ask them what their
dream job is like, they say vaguely
that they want a “good job in a
good company”, but are not able
to explain further as to what this
means. If you don’t know what
you want, you will just accept
what is given to you and you may
spend years moving from one
unsatisfying job to another.
With the abundance of information
and resources available today,
there is no excuse not to research
on the industries, companies and
job role options out there. Identify
what looks interesting to you and
figure out which college (MBA or
non-MBA) could help you reach
The key piece of advice I would
give any budding manager is to
make efforts to understand what
they want from their career and
also identify the best way to reach
those goals.
A Triangular Relationship in a Multipolar World
The world has become increasingly multi-polar, inter-connected, and interdependent. Unlike previous times, American primacy will not always work.
The shape and dynamics of the global order, however defined, are clearly
changing rapidly in a multi-polar world. History doesn’t end, Americana is
not likely to be the same again, says Andrew K P Leung, SBS, FRSA,
International and Independent China Specialist, Chairman, Andrew Leung
International Consultants Limited, Hong Kong.
he paradox of
GDP per capita
to the World
B a n k ’ s
Comparison Program, in the
course of this year, the Chinese
economy will become the world’s
largest in terms of purchasing
power parity (PPP). This is the
first time a developing country
achieves this top slot, which has
been held by the United States
since 1872.
Measured in money-of-the-day
terms, however, there is a tremendous gap between the two economies. Last year, China’s GDP was
estimated to be 9.3 trillion U.S.
dollars while the America’s economy reached 16.8 trillion. However, there is also a similar gap
between the two countries’ GDP
growth rates. In the first quarter
of 2014, China’s economy, albeit
slowing, registered 7.4 per cent
growth, compared with America’s 0.1 per cent. Taking into account past trends, there is general
consensus that China’s economy
in nominal terms will overtake
America’s by the early 2020s, if
not sooner.
measure of a country’s living standards, let alone global power and
gravitas? Not necessarily. According to the World Fact Book of the
Central Intelligence Agency, measured in PPP, Macao and the Falkland Islands occupy the world’s
4th and 9th positions, ahead of the
United States at 13th position and
Switzerland at 15th.
But, even though China will soon
be able to claim the top spot, the
living standards of the average
Chinese citizen are likely to remain far lower than many other
countries, both developed and
developing. This is the paradox of
China’s vast population. According to the International Monetary
Fund, China’s economy ranks
93rd in per capita purchasing
power parity terms, just ahead
of Turkmenistan and Albania but
well behind Libya and Azerbaijan.
The Middle Income Trap
Yet, is GDP per capita a sure-fired
However, experience has shown
that when developing countries
reach a certain level of per capita income up to $12,000 in 2010
money terms, most languish in a
low-value-added development,
unable to lift the income and living standards to the next higherincome level. They tend to be
trapped in low investment ratios,
slow manufacturing growth; limited industrial diversification; and
poor labour market conditions.
Examples include South Africa,
The Global Analyst | JUNE 2014
A rising China, India and the US
Thailand, Malaysia and Indonesia, to quote but a few. In the case
of China (GDP per capita at $6,091
in 2012 money terms), added
challenges include the exhaustion of demographic dividend
as the population ages as well as
ecological constraints inhibiting
resource-intensive growth.
China’s New
That’s why China had to introduce
unprecedented reforms at the latest Third Plenum of the 18th Party
Congress last November, ushering an about-turn towards more
sustainable and inclusive growth.
This comprises rural land reform
allowing peasants to mortgage
or rent out their land; revamping
the household registration system (hukou) so that rural migrant
workers may be integrated in cities; and boosting investments in
education, healthcare and welfare
provisions across the board so
that people do not have to save
money under the mattress (or in
banks with suppressed deposit
interest rates).
All these measures will accelerate
the growth of a better-educated,
and better-cared-for consuming
middle class who will serve to rebalance an economy too dependent on low-value-added manufacture. The One China Policy
is to be modified to add young
blood in the aging demography.
In addition, some seven million
university graduates are now produced every year. By 2020, the
country will have over 195 million
graduates, more than the current
workforce of the United States.
Even as the quality of China’s
graduates leaves a lot to be desired, China already registers advances in innovation. According
to a 2012 report of the World Intellectual Property Organization
(WIPO), for the first time ever,
China as a developing country
tops the world in the filing of pat50
The Global Analyst | JUNE 2014
ents, trademarks and industrial
designs. According to the Royal
Society of the United Kingdom,
China is overtaking the United
States in the number of scientific
citations this year.
As far as infrastructure is concerned, China is unrivalled. She
now has the world’s largest highspeed rail system criss-crossing
the country at more cautious
speeds exceeding 200 km an hour.
An internet-enabled environment
spawns the world’s largest internet user population in excess of
618 million by the end of 2013.
There is a great deal of free flow
of information across the various
strata of the society, the state’s
“Great Firewall” notwithstanding.
Moreover, China’s capital is rapidly going global, acquiring assets, resources, technologies and
markets. Meanwhile, the process
of turning the renminbi, the Chinese yuan, into a commonly accepted international currency
is gathering pace. According to
the Petersen Institute of International Economics, Washington
D.C. (Subramanian, 2011), more
currencies now move in tandem
with the yuan than with the dollar. Pending full capital-account
convertibility, the days when the
yuan becomes an international reserve currency would not be very
far away.
All these reforms are supported by
the entrenchment of China as the
central hub of a global supply and
value chain. This is manifested by
the fact that six of the world’s top
busiest container ports are located
in China, including Hong Kong.
the world in solar, wind, and water energy capacities. According
to a Bloomberg report (19 February, 2014), China spent more on
smart grids than the U.S. for the
first time in 2013, with $4.3 billion
invested, accounting for almost a
third of the world’s total.
Challenges to the extant World
Order and New Great Power
China’s economic and geopolitical
footprints are now truly global.
They are evident in distant shores
such as Central Asia and Africa,
and outward global investments
in enterprises, resources and other assets in the four corners of the
world. In addition to growing economic dominance, China has also
witnessed milestone advances in
space exploration, a rapid buildup of military capabilities, and a
more assertive foreign policy, especially over disputed territories
in the East and South China Seas.
All these developments are seen
to challenge extant American primacy in the world order.
Throughout history, from Grecian times to the two World Wars,
most great power transitions resulted in wars. This is known as
the Thucydides Trap. Will history
repeat itself? What does China’s
President Xi have in mind when
he referred to “New Great Power
Relations”? What are some of the
ingredients of his concept and
how could they be applied in reality? The answer may become
more apparent in the context of
the following regional geopolitical developments.
A greener China in the Making
China Containment Strategy
and the Indian Ocean
As smogs choke China’s cities
while drying and polluted waters threaten the very survival of
the Chinese people, the country
is becoming the world’s biggest
polluter and leading green energy
developer all at once. China tops
According to successive National
Intelligence Council reports, U.S.
global leadership will remain but
her capacity to lead is declining
owing to financial constraints,
rise of emerging powers particularly China, as well as new state
A rising China, India and the US
and non-state actors. Hence, a
convert China containment strategy in all but name has been introduced in the form of America’s
Asian Pivot, now re-branded as
Asian Re-balancing. This has two
prongs, military and economic.
First, military ties are reinforced
with a string of American allies in
the Asia-Pacific. This also entails
moving 60 per cent of America’s
global naval assets to the region
and strengthening American military ties with India. Second, a
massive America-centric regional
economic alliance is being negotiated in the form of a new Trans
Pacific Partnership (TPP) initially
excluding China.
Then there is the India Ocean. Its
strategic importance to America’s
China containment strategy is
made evident in a seminal book
- “Monsoon – The Indian Ocean
and The Future of American Power, Random House, New York,
2010” - by Robert D Kaplan, senior fellow at the Centre for New
American Security in Washington
D.C., a national correspondent at
The Atlantic, and a Member of the
Pentagon’s Defence Policy Board.
The “Monsoon” idea springs from
the reality that much of China’s
lifeblood of energy imports and
trade flows traverses the East and
South China Seas via the Indian
Ocean. These economic routes
are exposed to U.S. global naval
dominance in the form of eleven
aircraft-carrier battle-groups and
various naval outposts in the Pacific and beyond. In particular,
the narrow but indispensable Malacca Strait near Singapore, under
the influence of the 7th Fleet, acts
as a crucial choke-point. Linking
this naval dominance with India
in the Indian Ocean would tighten the containment loose against
Rivalry and Inter-dependence
America and China’s mutual
inter-dependence is well-known.
Apart from certain common secu-
Global economic imbalance between America and
China is an irony of the century, where a relatively poor
developing country (in per capita terms) becomes the
biggest creditor to one of the world’s richest and most
powerful. This is unsustainable, and China is beginning
to change course. However, adjustment will take time.
However, adjustment will take time. Much will depend on
the extent of global acceptance of the Chinese yuan as a
trading, investment and reserve currency.
rity interests such as over North
Korea and anti-piracy, China
needs the American market for
exports and jobs-creation back
home while America eyes China’s
gigantic market for US investment
and exports. In particular, China
builds up excess savings through
financial repression pending development of a sound financial
system. Such excess savings are
sterilized through massive investment in US treasuries, supported
by the greenback’s “exorbitant
America’s low interest rates, low
inflation, excessive consumption,
minuscule savings, and use of
“quantitative easing” (or moneyprinting) as an easy way to keep
things on an even keel.
This global economic imbalance
between America and China is an
irony of the century, where a relatively poor developing country (in
per capita terms) becomes the biggest creditor to one of the world’s
richest and most powerful. This
is unsustainable, and China is beginning to change course. However, adjustment will take time.
Much will depend on the extent of
global acceptance of the Chinese
yuan as a trading, investment and
reserve currency. In other words,
the endurance of the greenback’s
“exorbitant privilege”.
Emerging India
On her part, India is also both a
serious rival and close economic
partner with China. According
to a study by the PHD Chamber
of Commerce, an industry trade
group in New Delhi, China has
become India’s largest trading
partner, with Sino-Indian trade
reaching $49.5 billion during
the first nine months of the current fiscal year. According to the
study, China has edged out the
United Arab Emirates—India’s
previous top trading partner—
and is comfortably ahead of the
US and Saudi Arabia. As China
grows domestic consumption to
re-balance her economy, the prospects for massive Indian exports
to China are alluring.
Moreover, there are many instances where India and China’s
interests coincide. For example,
in the World Trade Organization,
both countries act as leaders in coordinating negotiating strategies
amongst developing countries. At
international forums such as those
on Climate Change, the positions
of India and China are virtually
There are also mutual opportunities for learning from each other
– India from China’s excellent
infrastructural development and
China from India’s creative and
inclusive society and its global entrepreneurial flair.
In the final analysis, while America remains a staunch ally for India, not least as a leverage against
perceived China’s Indian encirclement, India has never allowed
herself to be at America’s beck
The Global Analyst | JUNE 2014
A rising China, India and the US
and call. India’s sovereignty and
foreign policy independence are
guarded jealously.
Shifting Sands of Geopolitics
On the other hand, China has not
been idle with a counter-containment strategy. Subtly, the Shanghai Cooperation Organization
(SCO) has now developed as a
Central Asian alliance on a broad
front, well extending beyond its
original purpose of fighting terrorism and Muslim separatism. It
now covers trade, investment, diplomacy, military ties, culture and
other exchanges. All in all, this
provides China with a far-more
secure, land-based supply routes
for oil, gas and other resources
from the Middle East and Central
Asia, away from the Asia-Pacific
maritime choke-points. China is
also developing strong relations
with the Middle East and Israel, as
American interests there seem to
wane in recent years. This comes
in the wake of America’s recent
attempts at rapprochement with
Iran and America’s shale gas revolution, which promises to turn
the US into a net energy exporter
in the not distant future.
Meanwhile, China has been cultivating Europe as the largest
trading partner and investment
destination. At a time of European
economic anaemia, China is being
welcomed by the European Union
with open arms. The United Kingdom, for example, wants to grow
London as the world’s premier
offshore RMB financial centre as
the yuan continues its ascendency
towards becoming an international reserve currency.
Meanwhile, quietly, China is developing a monumental “Third
Eurasian Land Bridge”, linking
Europe through Turkey and Central Asia to China’s industrial seaboard by high-speed rail. In addition, the Nicaraguan Parliament
has approved the construction
by a Chinese company of a much
wider and deeper canal linking
The Global Analyst | JUNE 2014
the Atlantic with the Pacific, to facilitate passage of huge container
ships which even a widened Panama Canal cannot accommodate.
The only container port able to
berth these juggernauts is the Lianyuangang deep-sea port outside Shanghai.
Additionally, even before the latest Ukrainian crisis, a revanchist
Putin has signed a deal tripling
Russian gas exports to China,
making it Russia’s largest energy
customer by 2018. Russia is also
eyeing China’s Union Pay, a credit-card-cum-international
payment system that has already captured the world’s second largest
market share by transaction value.
Both are calculated to neutralize
American anti-Russia economic
sanctions. In sum, increasingly
China is being wooed by Russia to
balance against the United States,
while the latter is also likely to
prefer China on the side of America to balance against Russia. India, on her part, also has economic
and diplomatic ties with Russia
and is also likely to act in India’s
best national interests.
A Triangular Partnership between
China, India and the United States
In other words, the world has
become increasingly multi-polar,
inter-connected, and inter-dependent. Unlike previous times,
American primacy will not always work.
For the US, what counts is to
maintain American global leadership in the Asia Pacific and
in Europe’s heartlands. This is
where Zbigniew Brzezinski calls
“a Complex East” and “the Larger
West” (encompassing Turkey and
hopefully if not wishfully, Russia eventually) (Strategic Vision,
America and the Crisis of Global
Power, Basic Books, New York,
2012). This entails a more accommodating stance towards China’s
core interests in the region, or at
least avoiding too overt a confrontation. It also suggests greater
trust-building and more coop-
erative ventures between the two
For India, the need to maintain
national sovereignty and an independent foreign policy is likely to
remain in the foreseeable future.
This may rule out a US-Indian
anti-China bloc. Nor, according
to Brzezinsky (ibid. Page 165),
would such a bloc be in the best
interest of America as it could
gratuitously relieve Russia of
some of the burden of balancing
against China. More importantly, it is likely to be misconstrued
as an American alliance against
Pakistan and its Muslim allies and
proxies. The best option for India
would appear to be developing
even closer economic ties with
China to exploit its vast market
potential. Additionally, carefully
selected military and other ties
may be considered as a balancing
ploy against Pakistan. At the same
time, closer ties with the United
States should continue as a bulwark without sacrificing cordial
relations with Russia.
Future Outlook
On 23 November 2013, The Economist featured a Special Report
arguing that American global
primacy will endure for the foreseeable future. China is likely to
want to compete within rather
than overturn a long America-entrenched international order. This
may be true. Nevertheless, the report asks the tale-telling question
at the end whether such primacy
would remain workable when
other emerging powers such as
India, Turkey, Brazil and Indonesia, also want to share influence
within the system. Whatever the
arguments, the shape and dynamics of the global order, however
defined, are clearly changing rapidly in a multi-polar world. History doesn’t end, as Francis Fukuyama predicted earlier (The End
of History and the Last Man, Free
Press, 2006). Pax Americana is not
likely to be the same again.
On a Firm Footing
E-tailing is a subset of e-commerce, is estimated to grow from $2.6 billion in 2014 to
touch $76 billion by 2021, accounting for 7 per cent of the total retail market. Studies
indicate that India will go the China way in terms of web-only players dominating the
online market, given the low organized retail penetration, says Ashish Jhalani
Founder & CEO, eTailing India.
he total size of the business of
selling retail goods on the internet is commonly known as
e-tailing. It is approximately
$2.billion. In India, e-tailing
has the potential to grow more
than hundred-fold in the next
nine years to reach a value of
$76 billion by 2021. The country’s growing internet-habituated consumer base,
which will comprise 180 million broadband users
by 2020, along with a burgeoning class of mobile internet users, will drive the e-tailing story, The study
titled - ‘E-tailing in India: Unlocking the Potential
done by Technopark.
The whitepaper reveals that e-tailing can provide
employment to 1.45 million people by 2021. Its
growth will spur the creation of new capabilities and
human skills in the areas of logistics, packaging, and
technology. Additionally, such growth will promote
the rise of service entrepreneurs who will have the
potential to earn $7.5 billion, annually, by 2021. It
will open up international markets for the SME sector and can become an important facilitator for the
growth of the telecom and domestic air cargo industries. Technopark.
Corporatized Retail – Leading the Way
Technopak estimates that, by 2021, the share of total
corporatized retail, even in the best-case scenario,
will increase from the current 7 per cent to 20 per
cent. This implies that, on one hand, private consumption will continue to grow annually at 6 per
cent, in real terms (or 13 per cent in nominal terms),
while on the other hand traditional retail will still
capture the bulk of the increase in consumption. In
absolute terms, traditional retail will grow from $455
billion in 2012 to $1152 billion in 2021. The growth
of traditional retail, in the current form, implies the
growth of neighbourhood convenience stores in
new urban centres and clusters, and the continued
growth of informal retail (primarily of the Food &
Grocery segment).
It further adds that corporatized brick & mortar retail will increase in value from $34 billion to $212
billion by 2021, and its share of the total retail pie
will just over double from the current 7 to 14.7 per
cent. However, this type of brick & mortar retail will
continue to face structural issues within the retailing
ecosystem, which will be a challenge for retailers to
address individually.
On the other hand, one key indicator that is not
highlighted but it is the main driving force for the etailing growth; more than 51 per cent of online purchases are from tier 2-4 towns. The major reason for
tier 2-4 towns lead the online purchasing trend is the
low penetration of organized retail in these geographies. Customers that have the disposable income
in these geographies (due to growth in real estate
prices) are unable to find “branded” merchandise
for sale that they aspire to buy. As internet and logistics infrastructure improves in these geographies
we will see a surge in online purchasing which will
be the major driving force in the growth.
The 2nd largest growth factor would come from
adoption of 4G by telecommunication companies
and the increase in internet penetration. With wider
reach and faster speeds, more consumers will be online thus pushing online sales higher.
The 3rd largest factor would be availability of smart
phones at very economical costs. Along with internet
The Global Analyst | JUNE 2014
E-Tailing in India
it comes to online commerce. The B2B
opportunity in sheer numbers is much
larger than B2C (Business to Consumer). In the US, the B2C eCommerce is
$262 Billion versus B2B eCommerce,
whichis almost $1 trillion. It is estimated that B2B eCommerce in India
is close to $50 Billion. For businesses,
this is a huge opportunity for growth.
penetration and faster internet speeds,
the smart phones will drive more online
sales or online driver sales.
The 4th largest growth factor would be
the shortage of time for the fast growing middle class where multiple family
members work. As disposable income
rises and the time to spend that decreases, more and more consumers will look
to online for both everyday essentials
and one time buys. Online shopping
Ashish Jhalani
The 5th growth factor would be the availability of
larger product selection online. Online stores have
“limitless real estate” and companies are able to list
larger set of products available without worry about
larger real estate investments. Consumers get choices they have never gotten at “one” place. In addition
larger international brands have taken the online
only route to enter India thus driving demand of
those products to online companies.
The 6th growth factor would be transparency of
pricing across multiple sellers. Consumers are able
to quickly compare prices and find the seller that
has the best offer. The same exercise offline at best
would take several days or even impossible to do
given distances between stores.
The 7th growth factor would be the innovation in
payments for online purchases. As the cash on delivery (which is the largest single payment method
today in India) reduces and consumers adopt more
payment options, this will drive online sales. COD
though enabling eCommerce today has many issues
with security, reach and reconciliation. As alternate
payment methods are adopted, it would push online
sales growth.
B2B Opportunity
Business to Business is a less talked about topic when
Ecommerce Growth in India
Brick & Mortar Dilemma
India, just like China, will see the rise of online
brands and companies. We may even see online
brands venturing into brick and mortar models to
capture additional retail market share. Some online
companies have already started and some have announced temporary or permanent stores to complement their online business.
Traditional brick and mortar brands and companies
in India need to accept and adopt online – being
the fastest growing sales channel and work on their
omni-channel strategies. Omni-Channel is a strategy where all the sales, customer service and supply
channels are seamlessly integrated. Online retail traditionally will not make brick and mortar retail sales
growth negative but it will slow down the growth.
Companies such as Macys and Walmart in the US
have successfully adopted and implemented omnichannel strategies. Both are on cutting edge of what
they offer there digital savvy customers and ensure
that they capture larger piece of the growth pie. They
have been also successful at not losing any large
number of customers to sites such as Amazon.
Online retail is today’s reality; it is no longer the future anymore. What we will continue to see is the
enormous growth of online retailers; growth of online only brands; adoption of online commerce by
more brick and mortar retailers and brands; Online
will continue to influence more retail purchasing decisions; Mobile and Tablets will become the largest
online buying platform; Digital savvy customers will
demand innovation from retailers etc.,
Nevertheless, experts warn that the potential of India’s e-tailing will continue to remain untapped if
the current mindset, of exclusion and seeing e-tailing as a “passing fad”, prevails. E-tailing is different
from retail and therefore requires a different mindset
and fresh thinking from the policy makers as well as
the private sector.
The Global Analyst | JUNE 2014
Books from the World of Business Management, Finance & Economics
Hot New Releases
The founder of Nasty Gal offers a sassy and irreverent manifesto for ambitious young women
t seventeen, Sophia Amoruso decided to forgo continuing education to pursue a life of
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Sophia Amoruso turned her hobby selling vintage clothing on eBay into Nasty Gal, one of the fastest growing companies in
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Own It
Powerful Speaking For Powerful Women
veryone recognises a woman who “owns it.” She stands out for her ability to command
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About the Author
Tricia Karp is an executive coach, workshop leader, trainer and speaker. She founded The Powerful Speaking Intensive, a
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The Global Analyst | JUNE 2014
The Charles Schwab Guide to Finances After Fifty
Answers to Your Most Important Money Questions
The financial world is more complex than ever, and people are struggling to make sense of it all.
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Lean In
For Graduates
Facebook CEO and author Sheryl Sandberg is pivoting off her earlier success with a new edition
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Expanded and updated exclusively for graduates just entering the workforce, this extraordinary
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chapters from experts offering advice on finding and getting the most out of a first job; resume
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who you are; and leaning in for millennial men.
Release Date:
April 08, 2014
Hardcover Rs.1,222
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In 2013, Sheryl Sandberg’s “Lean In” became a massive cultural phenomenon and its title
became an instant catchphrase for empowering women. The book soared to the top of
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and ambition. Sandberg packed theaters, dominated op-ed pages, appeared on every major
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women and leadership. Now, this enhanced edition provides the entire text of the original book
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About the Author
Sheryl Sandberg is chief operating officer at Facebook. Prior to joining Facebook, she was vice
president of Global Online Sales and Operations at Google and chief of staff at the United States
Treasury Department. She lives in Northern California with her husband and their two children.
The Global Analyst | JUNE 2014
History will be kinder to you tomorrow
If the price of silence to unbridled corruption and loot of national
wealth is a tenure to India’s third longest-serving Prime Ministership,
Dr Singh has earned his place too in history books in more roles
than what any son of a humble upbringing could have got. For that,
Manmohan Singh gets my toast after stunning BJP victory. If only his
personal integrity and scholarship and his crisis-management during
the tumult of 1991 and again in 2008 had got a better say than his
conscience which remained a mute spectator to the misdeeds of
et me the number of Prof. Manmohan Singh,
PV Narasimha Rao ordered his PA. His PA
didn’t know the number. Rao said, “I want
him to be called in 10 minutes. Find out from
wherever, he teaches at Delhi University.” PA
found his number by dialling some contacts and connected
Dr Singh to Narasimha Rao.
It was 6 am. And Rao came on line to speak to Dr Singh.
“Kya Professor Saheb. Bacchon ko Padhaare kyaa? Can you
meet me at 9am today?” Dr Singh spoke in monosyllables of
“yes” or “no” right from then. He said “yes” to Narasimha
Rao’s request. The meeting turned into one of India’s most
dramatic inflection points. For the first time, an RBI Governor whose signature appears on a one rupee note becomes
India’s new Finance Minister - and the rest has earned both
Narasimha Rao and Manmohan Singh a place in history
books. The duo along with a few other hand-picked talents
took decisions that transformed the economic landscape of
India forever.
Dr Singh credited most of his success and boldness of decision-making to Rao’s unflinching support. But when the
time came for Rao to bid a goodbye to this world amidst
unprecedented Machiavellian drama and back-stabbing,
Dr Singh, as per reliable sources did not even visit the hospital ward of Narasimha Rao before he passed out. For all
the talk of “structural adjustments with a human face”, Dr
Singh didn’t have the courage to bypass Sonia to even call
on a person who he always called as his mentor.
Twenty years after Narasimha Rao cherry-picked Singh to
India’s most prestigious Ministerial portfolio, Dr Singh did
a similar gesture in beckoning Dr. Raghuram Rajan to India, to test his erudition, prescience and academic brilliance
in the laboratory of the Monetary Policy at RBI. History will
judge Dr Singh in different light than the judgements passing on him now in the heat of the bitter most election just as
history now sheds kinder light on Narasimha Rao’s Prime
Ministership long after the suitcase scams and JMIM bribery cases faded into oblivion.
While individual achievements in academics, intellectual
prowess and the body of contribution to Economic thoughtleadership besides the economic reforms unleashed as FM
will take many more years to deep-mine, his ascent to
Prime Ministership has been his finest hour and most
fallible moment. If you take the history of most Congress
Prime Ministers outside of Gandhi dynasty anointed by
a demagogic group of politicians, then Manmohan Singh
has taken the brunt of brinksmanship and blindmanships
all on himself unlike the rest.
Guljarilal Nanda was always a standby PM. Whereas Lal
Bahadur Shastri actually broke the back of Indira Gandhi
to the point of almost driving her out of India to London
because he took no nonsense from anyone, least of all
encourage the nepotistic ways of Indira Gandhi. wThat
leaves Narasimha Rao alone who took on the most umbrageous steps of taming the Gandhi parivar, taking baby
steps and later giant strides to thwart the dynastic rule
in its shameless march. He was checkmated by a confederacy of dunces and a conspiracy of sycophants. That
must have played out heavily in the mind of Dr Singh as
he took on the role of ‘The Accidental Prime Minister’.
He became silent and abrogated the responsibility of the
chair of Prime Ministership by being blind to all that is
happening under his ecosystem.
He may have avoided the wrath of Sonia and the party
colleagues but by becoming a Bakra for someone else’s
surreptitious ways and ruthless pursuit of power without accountability, Dr Singh has earned only shame and
sympathy in his last few years. It could be a “Saturn”
dasa but his redemption in history can only come after
time obliterates his scam-ridden second innings from
public memory.
Dr Singh’s story reminds me of the quote which sums up
what happens when you don’t speak your mind:
First they came for the Socialists, and I did not speak out- Because I was not a Socialist.
Then they came for the Trade Unionists, and I did not
speak out-- Because I was not a Trade Unionist.
Then they came for the Jews, and I did not speak out-Because I was not a Jew.
Then they came for me--and there was no one left to
speak for me.
A sad story. But as I said, history will judge Dr Singh
better than what clouds our recent memory of his
S Sridhar
The Global Analyst | JUNE 2014
Test Your Biz IQ
Q.1 Google recently bought a start-up which specializes in using smartphones
to translate signs, billboards
or other written words in real
time. Identify the start-up.
Ans. Quest Visual
Q.2 This Beijing-based became
smartphone vendor in the first quarter of 2014. The
smartphone maker valued at $10 billion is planning
to release a tablet computer
in China next month as it
steps up efforts to compete
effectively with Apple Inc
and Samsung. Which is this
Ans. Xiaomi
Q.3 Relativity Media LLC, the US film and television
producer run by Ryan Kavanaugh, is entering the Indian market in a $100 million joint
venture with B4U, a Bollywood network controlled by a India-born
steel magnate. Who is he?
Ans.Lakshmi Mittal.
Q.4 US-based life sciences company Cancer Genetics recently acquired Hyderabad-based genomics services provider for $1.9 million (Rs 11 crore).
Identify the company?
Ans. BioServe India
Q.5 Farmers in this country, the world’s second-
biggest rice and wheat producer, harvested 257.13
million tonnes of grains in the crop
year to June 2013. Which is this
Ans. India
Q.6 A London-based company,
which claims to have developed
the world’s first Braille phone,
costing just 60 pounds, for sale in UK. Which is this
Ans. OwnFone
Q.7 With the launch of RuPay in May this year, India
joins the select group of nations which have their
own card payment
the seventh payment gateway in
the world, will also
facilitate ATM withdrawals, payments
The Global Analyst | JUNE 2014
at merchant outlets and online purchases.
Ans. National Payments
Corporation of India
Q.8 Workers seeking
higher pay protested
around the globe at
chains such as McDonald’s, Burger King and Wendy’s amid a broader debate about raising the
minimum wage. Which
industry they represent?
Zee EntertainQ.9
ment Enterprises Limited
(ZEEL) enters into the music label
space with a latest venture. What is
the name of its new venture?
Ans.Zee Music Company
Q.10 Expand the following - CEPCI?
Ans. Cashew Export Promotion Council of India
Q.11 The TIME name for the magazine is actually
an acronym. What is the full form of TIME?
Ans. The International Magazine of
which company is called the ‘Woodstock for the
Ans. Berkshire Hathaway
Q.13 Who has acquired the apparel
brand Spykar recently?
Kishore Biyani
Q.14 Who is
the author of
Amazon best
seller ” Capital in the
twenty-first century”?
Ans. Thomas Piketty
Q . 1 5
is the
beer in
Ans. Bud Light
The Global Analyst | JUNE 2014
RNI No. APENG/2012/47303 - Postal Regn. No. HD/1175/2013-15. Posting date on 1st & 2nd of every month, June 2014.
Date of Publication - 30th of every previous month
The Global Analyst | JUNE 2014