States in India and their Competitiveness
India is the largest democracy in the world and it has one of the most elaborate federal system of Governance. The Hierarchy of Governance is really deep compared to other parts of the world. The Governance system starts with The Central Government and then it is divided further into States, Districts, Corporations / Municipalities and Panchayats.
In terms of division of responsibility, the powers are available to those governing even at the Panchayat level. The Division of States is for administrative convenience. The states in India typically have a large City around which the entire states’ fortune revolves. The other Cities in the State after the large city are generally smaller compared to the large city and their contribution to the Economy is not very significant. In fact, the leading cities in states act as hubs around which all other cities and towns operate. The hub city provides the competitive advantage for others places in the State.
The states in India are already well divided and they have a system of Governance in all the levels as mentioned above. The initiatives taken by the Central government in the past have catalysed the management capacity of the governing systems at local levels and best management practices are being followed even at Panchayat levels in most of the states. In a few states, the governance systems at local levels are yet to be improved. But the efforts are on by the government to improve the capacity of these institutions across India. The evolution of IT in India is going to make the governance of these systems much easier going forward.
India is the only country where, people from different parties can represent the same population. People have the choice to choose a candidate from a party for the Lok Sabha. They can choose another candidate from the Second party from the same area for the Legislature. Third party can govern the Corporation/Municipality or Panchayat. Three parties can be chosen by people from the same area for Parliament, Legislature and the Local Body. The parties have the full freedom to compete for all the three and they have a chance to get elected for all the three.
The parties can create an environment whereby they can persuasively convince the electorate to vote for them based on the past performance as well as the Agenda being put forward to the Electorate. Since we have one of the best functioning democracies in the world, parties should give importance to the verdict of the people and if the mandate is for the party , then whatever promises made could be fulfilled.
Since we already have a well defined functioning governance system , what needs to be done is improving the existing systems to achieve higher levels of performance. Division of states further will lead to higher costs of governance and affecting the viability of the states. Further , the new states would require support from government which would put lot of financial burden on the Central Government and affect its finances.
The division of States should be based mainly on Economic considerations and the criterion to divide states based on any other consideration should be mainly avoided. Before dividing the state, an hub city has to be identified which can provide the competitiveness and the required resources for the divided states operations. There has to be a detailed cost benefit analysis for dividing the states and only if benefits outweigh the costs, then the division should happen. As mentioned earlier, since there is various levels of governance, there is an opportunity for parties to campaign and win elections which would help them to achieve the desired objectives.
The parties wanting the division should try and get the mandate at the various levels of governance and try and implement the ideas. In the recent past, various state governments in India had taken initiatives addressing the needs of masses. This has helped many states to increase their competitiveness in the past.
Going forward, the parties wanting division of states, should clearly define their objectives for the division of states and once the objectives are stated, then they should try and achieve those objectives through the existing systems of governance instead of disturbing the viable economic systems in the states/county. It is possible to achieve those objectives with the deep governance system we have and this could be achieved through concerted efforts and ways and means could be identified to achieve using the present systems.
The Indian advantage today is that the best practices in Economics and Commerce are gainfully applied to the management of the Economy which has resulted in one of the enviable economic growth rates in the world. This augurs well for making our states more competitive which will provide the resilience to the Entire Economy.
Thursday, December 31, 2009
Friday, October 30, 2009
Interest Rates and Competitiveness
Interest rates prevailing in an Economy determines the competitiveness of a Country, Companies and the purchasing power of Individuals. Low interest rates in an Economy provides a conducive climate for the growth of an Economy.
In India , lowest interest on any product or service is the Current account offered by banks , where there is no interest. On the other extreme, the people who borrow small sums on a daily basis pay up to Rs.10 on Rs.90 borrowed, which works out to more than 4000% interest per annum. The interest rate in the Economy ranges from 0 % to 4000%.
The rate of interest by itself does not decide the competitiveness of different customer segments in the society but it is the particular segments’ affordability to pay the interest charged determines the competitiveness.
The starting point of high Economic growth was the steps taken by government in liberalizing the economy but this gained momentum when a private bank started offering low interest rates to various segments of its customers. When the loans became affordable, various customer segments started availing the loans for investment and consumption needs. This gave a big fillip to the economic growth. Then we witnessed a very low interest rate environment in the Economy as a whole which has also stimulated the consumer boom in the country.
The IT has enabled the banks in the country to penetrate the rural areas and offer affordable interest rates to the rural population. In many areas, where the banking penetration has improved the quality of life has improved for many people they were able to start and run viable rural enterprises. This is one of the main reasons why demand in rural areas continue to be strong. When we visit our villages today, we witnessed a sea change.
There is a need to keep the interest rates at a low level in the Economy so that the potential for higher growth can be realized to the full extent. The low interest rates increases the affordability and purchasing power resulting in higher economic growth.\
Benefits to the Government :
Government is the largest borrower in the Economy. The low interest rates help to reduce the interest expenditure for the government . This results in lowering the fiscal deficit and the need for additional borrowing and increasing the sources of other revenue. Low interest rates help the government to manage the fiscal position of the economy better and keep the tax levels in the Economy lower. Lower taxes in the Economy also helps to improve the competitiveness of enterprises.
Benefits to the Corporates :
Corporates in Government/Private sector borrow for Working capital and projects. The interest component for corporates on the total income today stands at more than 10% of the income . Any further increase from the present levels will affect the viability of enterprises in a big way. The impact will be more in project related activities of corporates , especially when they implement long gestation projects. In such cases, they have to capitalise the interest which increases the overall cost of the projects , thereby affecting the overall project viability.
Benefits to the individual customers :
The low interest rates and the concept of EMI has changed the customer behaviour in the Indian Economy in the last few year. Most of the individual customers buy homes, cars and consumer durables on EMI basis. A small change in interest rate , makes a big difference in EMIs as well as the tenure of repayment. This in turn affects the affordability of individual consumers. If interest rates are at a high level many of the individuals lose an opportunity to buy many of these products which in turn affects the demand for these products.
By keeping the interest rates low, all the sections of the society benefit immensely and there is a strong case for keeping the interest rates at a very low level in the Economy. The concerns regarding inflation are well justified but by managing the demand supply situation for products and services inflation can be kept at manageable levels in the Economy. By focusing on demand , supply and reducing the mismatch in demand supply, we can have low interest rates, moderate inflation and higher economic growth.
In India , lowest interest on any product or service is the Current account offered by banks , where there is no interest. On the other extreme, the people who borrow small sums on a daily basis pay up to Rs.10 on Rs.90 borrowed, which works out to more than 4000% interest per annum. The interest rate in the Economy ranges from 0 % to 4000%.
The rate of interest by itself does not decide the competitiveness of different customer segments in the society but it is the particular segments’ affordability to pay the interest charged determines the competitiveness.
The starting point of high Economic growth was the steps taken by government in liberalizing the economy but this gained momentum when a private bank started offering low interest rates to various segments of its customers. When the loans became affordable, various customer segments started availing the loans for investment and consumption needs. This gave a big fillip to the economic growth. Then we witnessed a very low interest rate environment in the Economy as a whole which has also stimulated the consumer boom in the country.
The IT has enabled the banks in the country to penetrate the rural areas and offer affordable interest rates to the rural population. In many areas, where the banking penetration has improved the quality of life has improved for many people they were able to start and run viable rural enterprises. This is one of the main reasons why demand in rural areas continue to be strong. When we visit our villages today, we witnessed a sea change.
There is a need to keep the interest rates at a low level in the Economy so that the potential for higher growth can be realized to the full extent. The low interest rates increases the affordability and purchasing power resulting in higher economic growth.\
Benefits to the Government :
Government is the largest borrower in the Economy. The low interest rates help to reduce the interest expenditure for the government . This results in lowering the fiscal deficit and the need for additional borrowing and increasing the sources of other revenue. Low interest rates help the government to manage the fiscal position of the economy better and keep the tax levels in the Economy lower. Lower taxes in the Economy also helps to improve the competitiveness of enterprises.
Benefits to the Corporates :
Corporates in Government/Private sector borrow for Working capital and projects. The interest component for corporates on the total income today stands at more than 10% of the income . Any further increase from the present levels will affect the viability of enterprises in a big way. The impact will be more in project related activities of corporates , especially when they implement long gestation projects. In such cases, they have to capitalise the interest which increases the overall cost of the projects , thereby affecting the overall project viability.
Benefits to the individual customers :
The low interest rates and the concept of EMI has changed the customer behaviour in the Indian Economy in the last few year. Most of the individual customers buy homes, cars and consumer durables on EMI basis. A small change in interest rate , makes a big difference in EMIs as well as the tenure of repayment. This in turn affects the affordability of individual consumers. If interest rates are at a high level many of the individuals lose an opportunity to buy many of these products which in turn affects the demand for these products.
By keeping the interest rates low, all the sections of the society benefit immensely and there is a strong case for keeping the interest rates at a very low level in the Economy. The concerns regarding inflation are well justified but by managing the demand supply situation for products and services inflation can be kept at manageable levels in the Economy. By focusing on demand , supply and reducing the mismatch in demand supply, we can have low interest rates, moderate inflation and higher economic growth.
Wednesday, October 7, 2009
Corporate Results
Corporate Results
Q1 F 10 of 3789 companies
For the quarter the Core income all the companies listed in the stock exchanges fell by %5 over the previous year’s level. Considering the corporate performance many other countries, the performance of Indian companies was much better. The companies in Banking, FMCG , IT continue to do well. Certain segments of other sectors also had shown buoyancy in performance. But Y-o-Y, on rolling 12 month basis, the companies have reported a growth of 20% in their core income.
Part of the loss in core income was off set by increase in other income which rose by 42.5% over the previous year in this quarter. But over the previous year, other income was down by 1.4% over the previous 12 months.
Interest costs are rising and it was at 11.32% of the total revenue in this quarter but it was much lower for the 12 month period at 10.44%. Already interest cost ratio for corporates are at a high level and any increase in interest rates and debt levels will increase the interest cost further.
One redeeming feature was that corporates were able to improve their operational efficiency in procurement as well as their internal operations, which has resulted in very good operating profit. The operating profit ratio for the quarter on the total income was very healthy at 28.7%. 1.In absolute term it was at Rs. 211457 cr, 18.8% higher than the last year same period. YTD, margin was 23.91%.
PBT: Reported profit of all the companies were at Rs. 102074 cr during Q 1, 19% higher than the previous year same quarter. The ratio also improved substantially and it was at 13.85% compared to the 12 month performance of 10.46%.
PAT . It was in double digits at more than 10% for the quarter and had shown a substantial improvement over the previous year.
The companies should continue to focus on improving the operational efficiencies, which should help in achieving an excellent corporate performance in the fiscal F10, The improving economic conditions world over and in India should help to sustain the corporate performance in India going forward.
Q1 F 10 of 3789 companies
For the quarter the Core income all the companies listed in the stock exchanges fell by %5 over the previous year’s level. Considering the corporate performance many other countries, the performance of Indian companies was much better. The companies in Banking, FMCG , IT continue to do well. Certain segments of other sectors also had shown buoyancy in performance. But Y-o-Y, on rolling 12 month basis, the companies have reported a growth of 20% in their core income.
Part of the loss in core income was off set by increase in other income which rose by 42.5% over the previous year in this quarter. But over the previous year, other income was down by 1.4% over the previous 12 months.
Interest costs are rising and it was at 11.32% of the total revenue in this quarter but it was much lower for the 12 month period at 10.44%. Already interest cost ratio for corporates are at a high level and any increase in interest rates and debt levels will increase the interest cost further.
One redeeming feature was that corporates were able to improve their operational efficiency in procurement as well as their internal operations, which has resulted in very good operating profit. The operating profit ratio for the quarter on the total income was very healthy at 28.7%. 1.In absolute term it was at Rs. 211457 cr, 18.8% higher than the last year same period. YTD, margin was 23.91%.
PBT: Reported profit of all the companies were at Rs. 102074 cr during Q 1, 19% higher than the previous year same quarter. The ratio also improved substantially and it was at 13.85% compared to the 12 month performance of 10.46%.
PAT . It was in double digits at more than 10% for the quarter and had shown a substantial improvement over the previous year.
The companies should continue to focus on improving the operational efficiencies, which should help in achieving an excellent corporate performance in the fiscal F10, The improving economic conditions world over and in India should help to sustain the corporate performance in India going forward.
Wednesday, August 12, 2009
Union Budget F10
Union Budget – F10
The budget is a growth oriented budget. In FY09, if we had seen an Economic growth of 6.7% ,one of the major contributors to this growth was the government expenditure and the stimulus packages by the government. Since the budget provides for a substantial increase in government expenditure, this alone is going to increase the growth rate of the economy in a big way. We can expect a growth rate at least 7.5% and as other segments of the economy start picking up , the economic growth may go even higher . If it reaches, 8 – 8.5% in FY 10, it should not come as a surprise. The government has done what it could do best at this moment. i.e., to stimulate the consumption and investment in the Economy. The consumption push will come 1) From increased government expenditure 2 ) From rural areas since agricultural credit is likely to be increased substantially and the coverage of NREGS has been widened 3) From the salaried class including government employees due to VI commission and reduced tax levels. The investment push will come from increased focus on Urban Development and Infrastructure development. The push on both consumption and investment is likely to increase the demand for other industries.
The budget deficit looks big but at this moment . But this could be bridged without putting too much strain on the Economy.
The government could look at the following targets , which would help to reduce the pressure on fisc .
1) Look at an FDI of $ 40 bn and accordingly identify the sectors for further liberalisation. The sectors which could help to achieve this target include Telecom, Insurance , Airlines and Retail.
2) Set a target to attract remittances of $ 50 bn from Indians living abroad.
3) Float a tax free infrastructure bond for Rs.50000 cr and those who invest in these bonds could be exempt from declaring the source of income .
4) Set a target to achieve disinvestment proceeds of Rs.50,000 cr.
5) Additional resources raising from Telecom Sector . Rs.50,000 cr. Auctioning of spectrum and other revenues including additional revenues from growth of this sector.
6) Generate additional revenues from capitalizing the land resources available with Railways and PSU’s. The additional income generated by these entities could be paid to the government in the form of dividend. The government could target a dividend income from PSUs of Rs.50000 cr this year.
7) Government can raise resources through direct land sale.
8) Quantitative easing can generate another Rs.1,00,000 cr. This strategy has been adopted by many countries in the world today .
9) For Infrastructure and Urban Development , the government can target to raise not less than $ 10 bn from aid agencies like World Bank, ADB and Partner countries like Japan.
The above measures would help to keep our currency stable and stock markets buoyant. The companies can raise capital for their growth. We can expect to bring another $ 7 - $ 8 bn of FII money into the country and for the whole fiscal we can target to get back $ 14 bn through FII’s which will be slightly higher than the outgo in 2008..
The budget is a growth oriented budget. In FY09, if we had seen an Economic growth of 6.7% ,one of the major contributors to this growth was the government expenditure and the stimulus packages by the government. Since the budget provides for a substantial increase in government expenditure, this alone is going to increase the growth rate of the economy in a big way. We can expect a growth rate at least 7.5% and as other segments of the economy start picking up , the economic growth may go even higher . If it reaches, 8 – 8.5% in FY 10, it should not come as a surprise. The government has done what it could do best at this moment. i.e., to stimulate the consumption and investment in the Economy. The consumption push will come 1) From increased government expenditure 2 ) From rural areas since agricultural credit is likely to be increased substantially and the coverage of NREGS has been widened 3) From the salaried class including government employees due to VI commission and reduced tax levels. The investment push will come from increased focus on Urban Development and Infrastructure development. The push on both consumption and investment is likely to increase the demand for other industries.
The budget deficit looks big but at this moment . But this could be bridged without putting too much strain on the Economy.
The government could look at the following targets , which would help to reduce the pressure on fisc .
1) Look at an FDI of $ 40 bn and accordingly identify the sectors for further liberalisation. The sectors which could help to achieve this target include Telecom, Insurance , Airlines and Retail.
2) Set a target to attract remittances of $ 50 bn from Indians living abroad.
3) Float a tax free infrastructure bond for Rs.50000 cr and those who invest in these bonds could be exempt from declaring the source of income .
4) Set a target to achieve disinvestment proceeds of Rs.50,000 cr.
5) Additional resources raising from Telecom Sector . Rs.50,000 cr. Auctioning of spectrum and other revenues including additional revenues from growth of this sector.
6) Generate additional revenues from capitalizing the land resources available with Railways and PSU’s. The additional income generated by these entities could be paid to the government in the form of dividend. The government could target a dividend income from PSUs of Rs.50000 cr this year.
7) Government can raise resources through direct land sale.
8) Quantitative easing can generate another Rs.1,00,000 cr. This strategy has been adopted by many countries in the world today .
9) For Infrastructure and Urban Development , the government can target to raise not less than $ 10 bn from aid agencies like World Bank, ADB and Partner countries like Japan.
The above measures would help to keep our currency stable and stock markets buoyant. The companies can raise capital for their growth. We can expect to bring another $ 7 - $ 8 bn of FII money into the country and for the whole fiscal we can target to get back $ 14 bn through FII’s which will be slightly higher than the outgo in 2008..
Revival of the Economy
The present crisis for the first time in the modern history has created a deeper impact across the world and reduced the demand for goods and services and consumption was down. The free flow of money has come to a stand still and there is a loss of trust and confidence in business dealings .
India did not escape this impact but unlike in other countries, the impact was not very severe but still many industries witnessed a sharp fall in demand. The large domestic market supported by stimulus measures initiated by government and RBI helped to face the downturn.
Around the world, banks and companies have used this as an opportunity to restructure their businesses and become more competitive so that they can capitalize on the opportunities when the revival takes place.
In the present scenario, the governments are playing a major role in sustaining the Economic growth momentum. The stimulus packages implemented by governments across the world has helped to increase the economic growth in all parts of the world. In India, the measures adopted by the government has gone a big way in achieving an healthy Economic growth in 2008 – 2009. The crisis has not yet come to an end and there are predictions ranging from bottom is yet to be seen to green shoots have started appearing.
To prevent worsening of the situation and to stimulate the growth, the governments have to play a major role for at least another two / three years so that the world can come back to its old momentum. From Indian perspective, the following measures would help to revive the economy faster.
1. The Indian Government should continue to provide the stimulus measures for at least one more year . Now that the statistics is being collected on the sectors which are most affected, unemployment, etc. Stimulus measures should be developed targeted at sectors where the impact is very high in terms of loss of business, forex earning, jobs and high erosion in margins .
2. The government spending should be kept at high levels and as Planned , the scope of NREGS should be widened to cover more beneficiaries. A scheme like NREGS should be introduced targeted at urban poor. This will help to retain the purchasing power among in both urban and rural areas.
3. The sixth pay commission has increased the purchasing power of employees at the Centre as well as states. To increase the demand for consumption goods , the banks should formulate lending schemes targeted at Government employees for the purchase of consumer goods. The stimulus required in housing has already happened and nationalized banks are offering loans at very attractive rates. This should be continued for one more year.
4. The growth of Infrastructure and housing development creates demand for many industries. Hence there should be an increased focus on the higher growth of these sectors in the Economy. Government should continue the initiatives taken so far in these sectors and identify further scope for increasing the allocation.
5. Since the government expenditure is very high on account of stimulus measures, it is going to put an additional pressure on government finances and the budget deficit is likely to go up. This will result in higher borrowing by government which will result in higher interest rates in the Economy. But there is a need to keep the interest rates at low and competitive levels so that the borrowers financial strength is not affected. To reduce the risk of increasing interest rates, the government has to resort to non conventional sources financing the Union budget and additional resources could be generated by improving the efficiency of PSUs, capitalizing the land bank available with the government and PSUs, higher dividend from PSU’s and from government institutions like RBI and LIC.
6. Monetary policy. Monetary policy should be growth oriented . The interest rates in the Economy should be kept at a low level and the inflation should be targeted. The policy should be able to moderate the inflationary expectations and help to achieve a lower level of inflation. Despite inflation is very low at the WPI level due to the basket of goods in the index does not take care of the present reality, for decision making, the CPI should be looked at.
7. Bank Credit. There was a decline over the previous year, since companies have reduced their debt levels as a result of financial restructuring. There should be an healthy growth of credit . The banks have to identify the sectors which are still growing and generating employment and start offering credit to these sectors. They can identify the firms which have become more competitive and provide the required financing for growth.
8. The government has to closely monitor the prices of essential commodities, which form the main items of consumption among the poor and bring in control in pricing of essential commodities in the economy.
9. The global trade had witnessed a decline and part of the export demand vanished. Hence going forward there has to be an increased focus on creating and meeting the domestic demand. There are many sectors like IT, Apparels, Gems and Jewellery which were focused on exports can partly offset the loss of demand on account of recession through increasing their presence in India.
10. The present crisis has forced many companies to restructure their operations. But still many more companies are yet to achieve the optimum efficiency level in operations. If companies have already become lean in their operations and generating cash , then they should identify action plans for sustaining this momentum and explore further scope for improving the competitiveness. Others who have embarked on this exercise, should identify and adopt the best practices in the industry.
11. Capital markets. In India, sentiments have turned positive after the election results were announced and this has resulted in positive developments in the stock markets. After a big interval, companies have started raising funds through IPOs, ECBs, QIPs. FIIs have started investing again. These sentiments have to be sustained through confidence building measures and the government has to play a major role in bringing back the confidence levels.
12. FDI. Looking at the potential for growth, companies from around the world across sectors had shown interest in fresh investments, additional investments in India. Liberalisation of FDI has taken place in many sectors. The liberalization should continue and the government should liberalise few more sectors which are growing fast which would help to attract the foreign capital.
India did not escape this impact but unlike in other countries, the impact was not very severe but still many industries witnessed a sharp fall in demand. The large domestic market supported by stimulus measures initiated by government and RBI helped to face the downturn.
Around the world, banks and companies have used this as an opportunity to restructure their businesses and become more competitive so that they can capitalize on the opportunities when the revival takes place.
In the present scenario, the governments are playing a major role in sustaining the Economic growth momentum. The stimulus packages implemented by governments across the world has helped to increase the economic growth in all parts of the world. In India, the measures adopted by the government has gone a big way in achieving an healthy Economic growth in 2008 – 2009. The crisis has not yet come to an end and there are predictions ranging from bottom is yet to be seen to green shoots have started appearing.
To prevent worsening of the situation and to stimulate the growth, the governments have to play a major role for at least another two / three years so that the world can come back to its old momentum. From Indian perspective, the following measures would help to revive the economy faster.
1. The Indian Government should continue to provide the stimulus measures for at least one more year . Now that the statistics is being collected on the sectors which are most affected, unemployment, etc. Stimulus measures should be developed targeted at sectors where the impact is very high in terms of loss of business, forex earning, jobs and high erosion in margins .
2. The government spending should be kept at high levels and as Planned , the scope of NREGS should be widened to cover more beneficiaries. A scheme like NREGS should be introduced targeted at urban poor. This will help to retain the purchasing power among in both urban and rural areas.
3. The sixth pay commission has increased the purchasing power of employees at the Centre as well as states. To increase the demand for consumption goods , the banks should formulate lending schemes targeted at Government employees for the purchase of consumer goods. The stimulus required in housing has already happened and nationalized banks are offering loans at very attractive rates. This should be continued for one more year.
4. The growth of Infrastructure and housing development creates demand for many industries. Hence there should be an increased focus on the higher growth of these sectors in the Economy. Government should continue the initiatives taken so far in these sectors and identify further scope for increasing the allocation.
5. Since the government expenditure is very high on account of stimulus measures, it is going to put an additional pressure on government finances and the budget deficit is likely to go up. This will result in higher borrowing by government which will result in higher interest rates in the Economy. But there is a need to keep the interest rates at low and competitive levels so that the borrowers financial strength is not affected. To reduce the risk of increasing interest rates, the government has to resort to non conventional sources financing the Union budget and additional resources could be generated by improving the efficiency of PSUs, capitalizing the land bank available with the government and PSUs, higher dividend from PSU’s and from government institutions like RBI and LIC.
6. Monetary policy. Monetary policy should be growth oriented . The interest rates in the Economy should be kept at a low level and the inflation should be targeted. The policy should be able to moderate the inflationary expectations and help to achieve a lower level of inflation. Despite inflation is very low at the WPI level due to the basket of goods in the index does not take care of the present reality, for decision making, the CPI should be looked at.
7. Bank Credit. There was a decline over the previous year, since companies have reduced their debt levels as a result of financial restructuring. There should be an healthy growth of credit . The banks have to identify the sectors which are still growing and generating employment and start offering credit to these sectors. They can identify the firms which have become more competitive and provide the required financing for growth.
8. The government has to closely monitor the prices of essential commodities, which form the main items of consumption among the poor and bring in control in pricing of essential commodities in the economy.
9. The global trade had witnessed a decline and part of the export demand vanished. Hence going forward there has to be an increased focus on creating and meeting the domestic demand. There are many sectors like IT, Apparels, Gems and Jewellery which were focused on exports can partly offset the loss of demand on account of recession through increasing their presence in India.
10. The present crisis has forced many companies to restructure their operations. But still many more companies are yet to achieve the optimum efficiency level in operations. If companies have already become lean in their operations and generating cash , then they should identify action plans for sustaining this momentum and explore further scope for improving the competitiveness. Others who have embarked on this exercise, should identify and adopt the best practices in the industry.
11. Capital markets. In India, sentiments have turned positive after the election results were announced and this has resulted in positive developments in the stock markets. After a big interval, companies have started raising funds through IPOs, ECBs, QIPs. FIIs have started investing again. These sentiments have to be sustained through confidence building measures and the government has to play a major role in bringing back the confidence levels.
12. FDI. Looking at the potential for growth, companies from around the world across sectors had shown interest in fresh investments, additional investments in India. Liberalisation of FDI has taken place in many sectors. The liberalization should continue and the government should liberalise few more sectors which are growing fast which would help to attract the foreign capital.
Thursday, July 9, 2009
India@10
How to Achieve 10% Growth
There were lot for discussions on how India can achieve higher levels of GDP growth. The days are not far off, when we will hear about India achieving 10% Economic growth like the performance of Chinese Economy.
In this crisis, India is better placed than other economies in terms of opportunities for growth and the stimulus which can come from both dometic and global factors.
What is required to achieve this growth level. The targets for growth has to be set for each sector and sub sector , Each state, Disctrict and Panchayat and the action plans to be identifed for each area. Once the action plans are identified, the organisation structure could be put in place to implement these action plans. At each level the scope for acheiving 10% growth and strategies for achieving 10% growth to be identified.
In India, many states are still growing at 3,4 and 5% and their growth rate could be aceelearated to 8 - 9%. Since our agricultural productivity is one of the lowest in the world, this sector offers lot of opportunities for improvement and it should not be difficult to look at a growth of not less than 6% and most of this growth would come from increasing in productivity at the farm level and the processing of foodgrains.
Industy, India is well poised to addressed the opportunities and already many of the high end work has started coming to India. Growth in R&D activities and Engineering can give a good boost. The report by Indias manufacturing council clearly brings out the Indias' competitiveness in manufacturing and scope for making India a manufacturing Giant. Already, India has become a small car manufacturing centre of the world.
To achieve this growth some basic conditions have to prevail. Easy Availability of funds for good projects at lower interest rates, stable currecny, low inflation , continuity of government policies, futher liberalisation, highe flow of foreign funds into India in the form of FDI flows and FII flows, higher level of adoption of IT across sectors and increased trade flow between the states in India.
In this crisis, India is better placed than other economies in terms of opportunities for growth and the stimulus which can come from both dometic and global factors.
What is required to achieve this growth level. The targets for growth has to be set for each sector and sub sector , Each state, Disctrict and Panchayat and the action plans to be identifed for each area. Once the action plans are identified, the organisation structure could be put in place to implement these action plans. At each level the scope for acheiving 10% growth and strategies for achieving 10% growth to be identified.
In India, many states are still growing at 3,4 and 5% and their growth rate could be aceelearated to 8 - 9%. Since our agricultural productivity is one of the lowest in the world, this sector offers lot of opportunities for improvement and it should not be difficult to look at a growth of not less than 6% and most of this growth would come from increasing in productivity at the farm level and the processing of foodgrains.
Industy, India is well poised to addressed the opportunities and already many of the high end work has started coming to India. Growth in R&D activities and Engineering can give a good boost. The report by Indias manufacturing council clearly brings out the Indias' competitiveness in manufacturing and scope for making India a manufacturing Giant. Already, India has become a small car manufacturing centre of the world.
To achieve this growth some basic conditions have to prevail. Easy Availability of funds for good projects at lower interest rates, stable currecny, low inflation , continuity of government policies, futher liberalisation, highe flow of foreign funds into India in the form of FDI flows and FII flows, higher level of adoption of IT across sectors and increased trade flow between the states in India.
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