Kindly go through this link
http://corporatestrategy3.blogspot.com/
Friday, July 29, 2011
Thursday, May 19, 2011
Retailing in India
Retailing in India
India has one of the best retailing systems in the world. The industry is totally fragmented and has the highest level of penetration across the length and breath of the country. This industry has the largest number of entrepreneurs in India.
The adoption of this model in countries where the unemployment is very high, would help to create many more entrepreneurs and resolving the unemployment problem .
India is the only country where a retail outlet could be seen in every street corner whether it is a town or a village.
The leading category in retailing is Food and in other categories are gold and mobile phones.s leading the table.
There were many attempts by Business groups to establish a very large Organised retail chain in India. Many a times, the companies were not able to implement this concept with big success especially in Food and Grocery items, since the value delivered by a local retailer was not matched by a large retail chain. Since retailers are a large entrepreneurial class, they were also able to wield influence in the society and able to curtail the efforts by large players in consolidating this industry.
Small retail provides lot of opportunities for entrepreneurs. When I was travelling in interiors of the county, I saw the small and village level retail has even spread its wings to retailing in other products categopreis. Earlier , the retailing was taking place in a big way only in food and grocery. Now we can find shops selling Textiles, Pharma, Electronics , Telephones and even Jewellery.
In a small retail, many players were able to achieve a Profit Before tax on Sales of close to 20% . Whereas in the case of large retailers, hardly they are able to achieve a Profit Before tax of 5% with great difficulty even after achieving a gross margin of 30 35%.
For small retailers, the operations are very simple and easy to manage.
For small retailers, the productivity per sq.ft is the highest sometimes going upto 100 times of a large retailer.
Small retailers offer small packs, which makes the buying affordable for all the sections of society. The buyers need not buy in large packs and store for long periods of time. Storage increases the cost in terms of inventory cost as well as additional cost on food/grocery items becoming stale and not good for use.
For small retailers, the overheads and expenses are very less in delivering the service. Whereas in the organized retail, the expenses on Rent is between 6 – 8% on sales, Salaries are between 4- 7%, Interest on working capital, wastages going up to 3% on sales and payment of taxes.
In fact, the cost structure of large retailers is unfavourable and large retailers have a very clear disadvantage of 16% on sale compared to the small retailer. If the large retail is not managed well then it increases the loss of cost competitiveness further.
Due to space constraints and increasing purchasing power of buyers, the large retail formats are not able to make the experience of buying pleasurable. One of the constraints is in providing parking space for large number of customers.
As of today, there are not too many managers in the Indian system with the capacity to manage the large store formats in an efficient manner.
The systems and procedures are still not uniform and it differs from store to store for the same retail chain. There is lot of discretion for store managers. Whereas in mass retailing, there is a need to follow well defined systems and procedures without having too many exemptions, discretion by the local managers. Local managers can have disecretion to decide the product portfolio of a store depending on the region based on the consumption pattern but not the administrative systems and procedures.
In vegetables and fruits, large retail formats are not able to deliver consistent quality products. The quality differs from day to day and from hour to hour. Many a times poor quality products are displayed and stock out is observed in these items.
There are still many issues relating pricing, bar coding and counter management. Many a times, there is a need for intervention by the person who is preparing the bill to manually intervene to input the prices which is leading to errors in billing and customer complaints.
Since all the products are not having a proper bar code and automatic billing , this reduces the efficiency of the billing and counter management. Counters become a major constraint in deciding the number of customers who could be served by the system. Counters decide the capacity to serve the number of customers.
Organised retailing is not able to take off in a big way due to all the above reasons especially in food and grocery categories. .
To make a large successful Organised retail chain, the following points could be taken into consideration.
1. Choose the right product mix. Emphasis should be on non perishables and items which are not sold in a big way by small retailers.
2. Follow a strategy of creating a few model stores on the format. Address all the issues relating to Store Management, Procurement, supply chain, wastage management, billing system and counter management. After making this a big success, then replicate the same model across many centres .
3. Organisation structure. Managing a large retail is more complex than managing a small retail. There are different businesses involved. The first business is the store management followed by Supply chain management and Real estate management. Each business requires different skills . Hence three separate entities to be created for each of the above. Since Indian entrepreneurs have still not mastered all the above aspects, it would be in the best interests to enter into JV’s with those who are experts in the above fields either from India or from abroad.
4. Systems and procedures. This is the key for success of the retail. Even small inefficiencies in the system , wipe away the little margins achieved by large retailers and sometime resulting in losses. This area requires more attention than the attention provided today and this area to be given the prime importance in managing the retail business.
5. Large retailers have to create strategic alliances with the small retailers in the catchment area and wherever the direct market penetration would be difficult, they could look at indirect penetration in the market through distributing private lable products through the small retailers.
6. To have better control, instead of spreading operations thin all over the country, make the expansion fast within small territories to start with and then go for national expansion.
7. Create as many private labels as possible especially in Food and Grocery and start marketing to small retailers. Quality of products should be given the prime importance.
8. Present in the entire value chain. Right from production of Agri produce to packing and branding the products and marketing them.
9. Adopt best practices in Financial and inventory management. Reduce the wastages in the system through ensuring quality at all levels.
India has one of the best retailing systems in the world. The industry is totally fragmented and has the highest level of penetration across the length and breath of the country. This industry has the largest number of entrepreneurs in India.
The adoption of this model in countries where the unemployment is very high, would help to create many more entrepreneurs and resolving the unemployment problem .
India is the only country where a retail outlet could be seen in every street corner whether it is a town or a village.
The leading category in retailing is Food and in other categories are gold and mobile phones.s leading the table.
There were many attempts by Business groups to establish a very large Organised retail chain in India. Many a times, the companies were not able to implement this concept with big success especially in Food and Grocery items, since the value delivered by a local retailer was not matched by a large retail chain. Since retailers are a large entrepreneurial class, they were also able to wield influence in the society and able to curtail the efforts by large players in consolidating this industry.
Small retail provides lot of opportunities for entrepreneurs. When I was travelling in interiors of the county, I saw the small and village level retail has even spread its wings to retailing in other products categopreis. Earlier , the retailing was taking place in a big way only in food and grocery. Now we can find shops selling Textiles, Pharma, Electronics , Telephones and even Jewellery.
In a small retail, many players were able to achieve a Profit Before tax on Sales of close to 20% . Whereas in the case of large retailers, hardly they are able to achieve a Profit Before tax of 5% with great difficulty even after achieving a gross margin of 30 35%.
For small retailers, the operations are very simple and easy to manage.
For small retailers, the productivity per sq.ft is the highest sometimes going upto 100 times of a large retailer.
Small retailers offer small packs, which makes the buying affordable for all the sections of society. The buyers need not buy in large packs and store for long periods of time. Storage increases the cost in terms of inventory cost as well as additional cost on food/grocery items becoming stale and not good for use.
For small retailers, the overheads and expenses are very less in delivering the service. Whereas in the organized retail, the expenses on Rent is between 6 – 8% on sales, Salaries are between 4- 7%, Interest on working capital, wastages going up to 3% on sales and payment of taxes.
In fact, the cost structure of large retailers is unfavourable and large retailers have a very clear disadvantage of 16% on sale compared to the small retailer. If the large retail is not managed well then it increases the loss of cost competitiveness further.
Due to space constraints and increasing purchasing power of buyers, the large retail formats are not able to make the experience of buying pleasurable. One of the constraints is in providing parking space for large number of customers.
As of today, there are not too many managers in the Indian system with the capacity to manage the large store formats in an efficient manner.
The systems and procedures are still not uniform and it differs from store to store for the same retail chain. There is lot of discretion for store managers. Whereas in mass retailing, there is a need to follow well defined systems and procedures without having too many exemptions, discretion by the local managers. Local managers can have disecretion to decide the product portfolio of a store depending on the region based on the consumption pattern but not the administrative systems and procedures.
In vegetables and fruits, large retail formats are not able to deliver consistent quality products. The quality differs from day to day and from hour to hour. Many a times poor quality products are displayed and stock out is observed in these items.
There are still many issues relating pricing, bar coding and counter management. Many a times, there is a need for intervention by the person who is preparing the bill to manually intervene to input the prices which is leading to errors in billing and customer complaints.
Since all the products are not having a proper bar code and automatic billing , this reduces the efficiency of the billing and counter management. Counters become a major constraint in deciding the number of customers who could be served by the system. Counters decide the capacity to serve the number of customers.
Organised retailing is not able to take off in a big way due to all the above reasons especially in food and grocery categories. .
To make a large successful Organised retail chain, the following points could be taken into consideration.
1. Choose the right product mix. Emphasis should be on non perishables and items which are not sold in a big way by small retailers.
2. Follow a strategy of creating a few model stores on the format. Address all the issues relating to Store Management, Procurement, supply chain, wastage management, billing system and counter management. After making this a big success, then replicate the same model across many centres .
3. Organisation structure. Managing a large retail is more complex than managing a small retail. There are different businesses involved. The first business is the store management followed by Supply chain management and Real estate management. Each business requires different skills . Hence three separate entities to be created for each of the above. Since Indian entrepreneurs have still not mastered all the above aspects, it would be in the best interests to enter into JV’s with those who are experts in the above fields either from India or from abroad.
4. Systems and procedures. This is the key for success of the retail. Even small inefficiencies in the system , wipe away the little margins achieved by large retailers and sometime resulting in losses. This area requires more attention than the attention provided today and this area to be given the prime importance in managing the retail business.
5. Large retailers have to create strategic alliances with the small retailers in the catchment area and wherever the direct market penetration would be difficult, they could look at indirect penetration in the market through distributing private lable products through the small retailers.
6. To have better control, instead of spreading operations thin all over the country, make the expansion fast within small territories to start with and then go for national expansion.
7. Create as many private labels as possible especially in Food and Grocery and start marketing to small retailers. Quality of products should be given the prime importance.
8. Present in the entire value chain. Right from production of Agri produce to packing and branding the products and marketing them.
9. Adopt best practices in Financial and inventory management. Reduce the wastages in the system through ensuring quality at all levels.
Monday, March 7, 2011
Link to the budget views
http://budget-opinion.blogspot.com/2011/02/rkannan.html
Tuesday, February 22, 2011R.Kannan
India is in a best position to do very well in the world economy today. The growth momentum in the last two years need to be continued. This is the time Indian Industries and Services require the continued boost for development. There is a need to continue the stimulus in the budget this year and increase the planned and non planned expenditure by at least 15% this year. The schemes relating to Rural and Urban poor should be continued . A minimum GDP growth of 9% could be set as the minimum target for growth. To meet the increased expenditure, there will be a need to mobilize more resources. The borrowing by government could be kept at last years’ level and interest rate expectations on the borrowing should be kept at the present levels which would help to moderate the inflationary expectations. To bridge the funding gap, innovative methods for mobilizing funds from non conventional sources including Capitalisation of land bank ( which US government has identified as one of the sources of funding in this budget ), additional collection from Telecom operators and mining licenses. Sectors like Agriculture including milk production have become profitable now and there is a need to review the subsidy to this sector and target the subsidies. A specific fund could be created for removing the bottlenecks in Infrastructure sector to use the available capacities in a optimal manner. A specific fund could be created for developing an organisation, systems and procedures to remove the mismatch in Demand and Supply of Agricultural commodities. Commercial Banks could be allowed to raise Infrastructure bonds and interest from these bonds could be exempt from tax.
Tuesday, February 22, 2011R.Kannan
India is in a best position to do very well in the world economy today. The growth momentum in the last two years need to be continued. This is the time Indian Industries and Services require the continued boost for development. There is a need to continue the stimulus in the budget this year and increase the planned and non planned expenditure by at least 15% this year. The schemes relating to Rural and Urban poor should be continued . A minimum GDP growth of 9% could be set as the minimum target for growth. To meet the increased expenditure, there will be a need to mobilize more resources. The borrowing by government could be kept at last years’ level and interest rate expectations on the borrowing should be kept at the present levels which would help to moderate the inflationary expectations. To bridge the funding gap, innovative methods for mobilizing funds from non conventional sources including Capitalisation of land bank ( which US government has identified as one of the sources of funding in this budget ), additional collection from Telecom operators and mining licenses. Sectors like Agriculture including milk production have become profitable now and there is a need to review the subsidy to this sector and target the subsidies. A specific fund could be created for removing the bottlenecks in Infrastructure sector to use the available capacities in a optimal manner. A specific fund could be created for developing an organisation, systems and procedures to remove the mismatch in Demand and Supply of Agricultural commodities. Commercial Banks could be allowed to raise Infrastructure bonds and interest from these bonds could be exempt from tax.
Tuesday, March 1, 2011
Union Budget – F 12
Union Budget – F 12
The budget was much better than the expectations of various stake holders in the Economy. There was a concern that the Stimulus given would be withdrawn by the government.
Government had seen the benefits of reducing the excise duty which has resulted in above average growth in the industries where the stimulus was very effective. The stimulus has been continued which should help to maintain the industry growth at high levels. The higher growth rates in the industry would compensate the lower excise duty.
In terms of revenue, the collection on account of taxes is likely to go up by Rs.1 trillion and the same level of reduction has been assumed in non tax revenues. Higher taxes would come from higher level of industrial , services growth, higher average crude price during the fiscal 2012 compared to fiscal 2011 and additional duties on mining. It is quite possible, the government would be able to raise additional Rs.50000 cr to Rs.75000 cr on account of non tax revenues which is possible through various sources.
The government has kept the overall expenditure growth rate target at 3.4%. This would be possible since there is no effect of sixth pay commission and there is an apparent strategy to control costs including the subsidy through better targeting of beneficiaries, the government should be able to control costs. The oil prices could play spoilsport in achieving the targets. The oil price is not likely to go below $ 70 this year and in the short term it might reach the historical peaks and will subside to reasonable levels during F 12.
Increasing the limits for investments from abroad in Corproate bonds , Infrastructure bonds and Mutual funds is likely to attract more investments from abroad and give a good impetus for Industrial and Infrastructure growth and there will be a multiplier effect on the Economy as well as the stock markets. Higher capitalization of Public Sector Banks would increase the lending capacity of these institutions. Inflow of funds into India will also help to mobilize the large untapped domestic savings for Infrastructure and Capex of corporate.
Government borrowing has been kept at the low levels which has removed the fears of crowding of government papers in the market and the inflationary expectations are lessened on account of this budgeted target.
Agriculture has been given a good boost. The credit target for agriculture has been enhanced. Several schemes were announced which would help to optimally utilize the agricultural inputs and resources. This should also help to reduce the bottlenecks in the supply chain of Agri products and should result in reasonable prices of agri commodities. With a good management, it should be possible to achieve a growth of more than 6% agriculture since our productivity levels of crops are still much below the best yields in the world.
Strategy documents have been prepared for various ministries and systematic approach to managing the economy has been put in place. This will result in improvement of systems and procedures adopted by various ministries and help to achieve the desired expense targets.
The outlay for Rural development has been kept at the same level and 22 lakh Anganwadi workers has been given a good increase in wages. Coupled with the stimulus for agriculture this should help to increase the growth of the rural economy.
There is an increased allotment for Urban development and JNNURM which should help to accelerate the growth in the urban areas.
Apart from the specific measures in the budget, there was a mention about the various bills to be passed in parliament. By taking into confidence the opposition parties, the government would be in a position to pass these bills which will provide further opportunities for increasing the economic growth rate and revenue streams for the government.
Overall, considering the present global economic scenario this is an attractive budget which should interest the investors from India, NRI’s and MNC’s from abroad.
The budget was much better than the expectations of various stake holders in the Economy. There was a concern that the Stimulus given would be withdrawn by the government.
Government had seen the benefits of reducing the excise duty which has resulted in above average growth in the industries where the stimulus was very effective. The stimulus has been continued which should help to maintain the industry growth at high levels. The higher growth rates in the industry would compensate the lower excise duty.
In terms of revenue, the collection on account of taxes is likely to go up by Rs.1 trillion and the same level of reduction has been assumed in non tax revenues. Higher taxes would come from higher level of industrial , services growth, higher average crude price during the fiscal 2012 compared to fiscal 2011 and additional duties on mining. It is quite possible, the government would be able to raise additional Rs.50000 cr to Rs.75000 cr on account of non tax revenues which is possible through various sources.
The government has kept the overall expenditure growth rate target at 3.4%. This would be possible since there is no effect of sixth pay commission and there is an apparent strategy to control costs including the subsidy through better targeting of beneficiaries, the government should be able to control costs. The oil prices could play spoilsport in achieving the targets. The oil price is not likely to go below $ 70 this year and in the short term it might reach the historical peaks and will subside to reasonable levels during F 12.
Increasing the limits for investments from abroad in Corproate bonds , Infrastructure bonds and Mutual funds is likely to attract more investments from abroad and give a good impetus for Industrial and Infrastructure growth and there will be a multiplier effect on the Economy as well as the stock markets. Higher capitalization of Public Sector Banks would increase the lending capacity of these institutions. Inflow of funds into India will also help to mobilize the large untapped domestic savings for Infrastructure and Capex of corporate.
Government borrowing has been kept at the low levels which has removed the fears of crowding of government papers in the market and the inflationary expectations are lessened on account of this budgeted target.
Agriculture has been given a good boost. The credit target for agriculture has been enhanced. Several schemes were announced which would help to optimally utilize the agricultural inputs and resources. This should also help to reduce the bottlenecks in the supply chain of Agri products and should result in reasonable prices of agri commodities. With a good management, it should be possible to achieve a growth of more than 6% agriculture since our productivity levels of crops are still much below the best yields in the world.
Strategy documents have been prepared for various ministries and systematic approach to managing the economy has been put in place. This will result in improvement of systems and procedures adopted by various ministries and help to achieve the desired expense targets.
The outlay for Rural development has been kept at the same level and 22 lakh Anganwadi workers has been given a good increase in wages. Coupled with the stimulus for agriculture this should help to increase the growth of the rural economy.
There is an increased allotment for Urban development and JNNURM which should help to accelerate the growth in the urban areas.
Apart from the specific measures in the budget, there was a mention about the various bills to be passed in parliament. By taking into confidence the opposition parties, the government would be in a position to pass these bills which will provide further opportunities for increasing the economic growth rate and revenue streams for the government.
Overall, considering the present global economic scenario this is an attractive budget which should interest the investors from India, NRI’s and MNC’s from abroad.
Tuesday, January 4, 2011
India 2011 – Outlook
India 2011 – Outlook
I am happy that the following predictions of mine had come true.
1. Continued stimulus measures by Developed countries in the world.
2. My prediction for India's Economic growth last year and this year.
3. Adoption of a concept of Permanent Crisis Management Mechanism by Euro Region based on my concept of Permanent Stimulus for Economic Growth as in my blog.
4. Higher mobilization of funds through non conventional sources by Government.
5. Capitalisation of land bank in the case of sick PSU’s.
Positives :
• US, Europe will take some more time to go back to the old robust balanced growth in the economies.
• The countries from Asia will continue to support the global economic growth in the next few years.
• Economy is likely to grow at a rate of more than 9% and the growth can go up to 9.5%. If we factor in the rise in Agri commodity prices in the last two years, this sector of the Economy must have grown at much more than 8 / 10 per cent and our Actual GDP growth must have crossed already 10 per cent. Some how , this is not reflected in the GDP growth statistics so far.
• Growth will be driven by consumption increasing among the Government employees and Rural Population ( aided by increase in food prices).
• Infrastructure will continue to grow fast since many large groups have planned to implement large power projects and Road projects.
• Indian rates of interest are very attractive. There is likely to be a big level of carry trade and further FII investments. There will be a pressure on the rupee.
• Many of the corporates have restructured their operations during the crisis and have become nimble and flexible in their operations.
• Most of the corporates have repriced their products services in this inflationary scenario, which has helped to achieve much higher profit during the year. The main beneficiaries are in FMCG sector.
• Most of the large corporates have big plans for growth , diversification and cross border acquisitions. Apart from the funds available locally, they are raising, planning to raise funds from other sources.
Risks to the Growth
• Risks to individual fast growing Industrial and services sectors on account of latest developments in relation to the regulation and competition in these sectors.
• Rupee appreciating making our exports uncompetitive.
• Oil Price climbing above $ 100 a barrel. Fanning the inflationary trends. Since we meet more than 80% of our oil requirements through imports.
• Food price inflation and inflation in all other products .
• Increase in Interest rates
• FII withdrawals from the Indian market.
• Political uncertainities
Sectors which can give a good growth and profit Potential
• Commodities trading
• Investment Banking.
• Mining
• Agriculture
Sectors with good growth potential
• Banking and Financial Services
• Pharma and Healthcare
• Realty
• Power and Unconventional Power
• Auto and Auto components
• Road Development
• Education
• Media and Communication
• IT and ITES
• Venture capital
Sectors with good growth potential but not assured profits.
• Positions in Commodities and Currencies.
• Telecom
• Retail
• Airlines
• DTH
• Microfinance
• Life Insurance.
• Mutual Funds.
I am happy that the following predictions of mine had come true.
1. Continued stimulus measures by Developed countries in the world.
2. My prediction for India's Economic growth last year and this year.
3. Adoption of a concept of Permanent Crisis Management Mechanism by Euro Region based on my concept of Permanent Stimulus for Economic Growth as in my blog.
4. Higher mobilization of funds through non conventional sources by Government.
5. Capitalisation of land bank in the case of sick PSU’s.
Positives :
• US, Europe will take some more time to go back to the old robust balanced growth in the economies.
• The countries from Asia will continue to support the global economic growth in the next few years.
• Economy is likely to grow at a rate of more than 9% and the growth can go up to 9.5%. If we factor in the rise in Agri commodity prices in the last two years, this sector of the Economy must have grown at much more than 8 / 10 per cent and our Actual GDP growth must have crossed already 10 per cent. Some how , this is not reflected in the GDP growth statistics so far.
• Growth will be driven by consumption increasing among the Government employees and Rural Population ( aided by increase in food prices).
• Infrastructure will continue to grow fast since many large groups have planned to implement large power projects and Road projects.
• Indian rates of interest are very attractive. There is likely to be a big level of carry trade and further FII investments. There will be a pressure on the rupee.
• Many of the corporates have restructured their operations during the crisis and have become nimble and flexible in their operations.
• Most of the corporates have repriced their products services in this inflationary scenario, which has helped to achieve much higher profit during the year. The main beneficiaries are in FMCG sector.
• Most of the large corporates have big plans for growth , diversification and cross border acquisitions. Apart from the funds available locally, they are raising, planning to raise funds from other sources.
Risks to the Growth
• Risks to individual fast growing Industrial and services sectors on account of latest developments in relation to the regulation and competition in these sectors.
• Rupee appreciating making our exports uncompetitive.
• Oil Price climbing above $ 100 a barrel. Fanning the inflationary trends. Since we meet more than 80% of our oil requirements through imports.
• Food price inflation and inflation in all other products .
• Increase in Interest rates
• FII withdrawals from the Indian market.
• Political uncertainities
Sectors which can give a good growth and profit Potential
• Commodities trading
• Investment Banking.
• Mining
• Agriculture
Sectors with good growth potential
• Banking and Financial Services
• Pharma and Healthcare
• Realty
• Power and Unconventional Power
• Auto and Auto components
• Road Development
• Education
• Media and Communication
• IT and ITES
• Venture capital
Sectors with good growth potential but not assured profits.
• Positions in Commodities and Currencies.
• Telecom
• Retail
• Airlines
• DTH
• Microfinance
• Life Insurance.
• Mutual Funds.
Wednesday, September 15, 2010
Telecom Sector in India
1. Business Models had undergone a big transformation in the last 10 years.
2. Initially, the model was capital intensive. Now the model is asset light.
3. The players who have higher level of variable costs in their operations are able to achieve higher operating margins. The need for high capital is less on account of very high levels of outsourcing.
4. Higher variable cost provide a high level of flexibility in operations and helps in faster ramping up with minimum risk.
5. Now almost most of the operations relating to Telecom services are outsourced.
6. India had the highest tariffs in the world . Today India has the lowest tariffs in the world.
7. More than 95% of business was post paid and now about 95% of subscribers are pre paid ( where the risk of not collecting the dues is very less ).
8. Initially, the price competition in the sector was very low and operating margins were very high. Now the price competition is very high and operating margins are coming down.
9. The core business of Telecom services is not profitable. But services related to Telecom are profitable and players in the Eco system are operating profitably. Phone manufacturers, Content Providers, Tower owners, Networking managers, Telecom Retail, BPO providers and IT services providers are part of the Eco System today. The core business of voice is not profitable any more and it has to be supported by Data and other value added services.
10. Only a few companies in the world have most of the above services and those who have the above could look at synergies and leverage of synergies available within a group.
11. Going forward, only the leading players in the field and those who consolidate their operations will survive in the market.
12. The government's proposal to allow easy exit of players should facilitate the mergers and acquisitions and optimal use of spectrum.
13. To develop a robust business model, the companies have to develop host of Products , Services based on Telecom which will add lot of value to the Product portfolio and increase the revenue . The services could include TV on Mobile, Banking on Mobile, Mobile Data Services, use of cloud computing for operations, High speed wireless, High speed Broadband and whole host of data services through mobile.
14. Going forward, Telecom industry players will be competing with Banks, DTH, Cable Services in providing Banking and Entertainment services.
15. The companies in the sector have to tailor strategies in line with the developments in the Eco system, which would ensure a development of a competitive Strategy.
2. Initially, the model was capital intensive. Now the model is asset light.
3. The players who have higher level of variable costs in their operations are able to achieve higher operating margins. The need for high capital is less on account of very high levels of outsourcing.
4. Higher variable cost provide a high level of flexibility in operations and helps in faster ramping up with minimum risk.
5. Now almost most of the operations relating to Telecom services are outsourced.
6. India had the highest tariffs in the world . Today India has the lowest tariffs in the world.
7. More than 95% of business was post paid and now about 95% of subscribers are pre paid ( where the risk of not collecting the dues is very less ).
8. Initially, the price competition in the sector was very low and operating margins were very high. Now the price competition is very high and operating margins are coming down.
9. The core business of Telecom services is not profitable. But services related to Telecom are profitable and players in the Eco system are operating profitably. Phone manufacturers, Content Providers, Tower owners, Networking managers, Telecom Retail, BPO providers and IT services providers are part of the Eco System today. The core business of voice is not profitable any more and it has to be supported by Data and other value added services.
10. Only a few companies in the world have most of the above services and those who have the above could look at synergies and leverage of synergies available within a group.
11. Going forward, only the leading players in the field and those who consolidate their operations will survive in the market.
12. The government's proposal to allow easy exit of players should facilitate the mergers and acquisitions and optimal use of spectrum.
13. To develop a robust business model, the companies have to develop host of Products , Services based on Telecom which will add lot of value to the Product portfolio and increase the revenue . The services could include TV on Mobile, Banking on Mobile, Mobile Data Services, use of cloud computing for operations, High speed wireless, High speed Broadband and whole host of data services through mobile.
14. Going forward, Telecom industry players will be competing with Banks, DTH, Cable Services in providing Banking and Entertainment services.
15. The companies in the sector have to tailor strategies in line with the developments in the Eco system, which would ensure a development of a competitive Strategy.
Wednesday, September 1, 2010
GDP Growth Q1F11
GDP Growth - 1 September 2010
I am happy that I was the first one to predict after the last year’s Union Budget that our GDP would grow close to 7.5%. We ended the year with a growth of 7.4%. At that point the best prediction of GDP was at 6.1% by the Economists in the world. Last year, the growth momentum came from various sources including a large government stimulus programme, Sixth pay commission Effect and vibrant rural Economy.
This quarter’s growth of 8.8% is encouraging and since the rainfall is good , this year agricultural growth rate is likely to be good and the year could end with a GDP growth of around 9.5%. The momentum in the private Sector has picked up in the last few months and organizations in private sector had announced plans for expansion. The Sixth pay commission effect is likely to last for another year. Rural Economy continues to do well.
The inflow of funds to government coffers were much better than the expected level mainly aided by a high collection on account of spectrum fee collected by Telecom Ministry. The government is also planning to capitalize the land bank and it is happening at both Central and state levels which should ease the pressure on Government Finances.
FDI so far was lower than last year but inflows on account of FII’s so far accounted for $ 13 bn and the year is likely to end with an inflow ranging from $ 16 – 20 bn. Since the Indian Growth Story is intact and most of the companies have shown a good Sales and Profit growth and potential for growth in the next few years is good, the Investors from abroad are likely to increase their focus on India. This will also be strengthened by the increased presence of Multinationals in various sectors in India including Auto, IT, ITES, Pharma and others. Government could liberalise few more sectors including Life insurance, which would help to attract more FDI into India.
Inflation rate is likely to soften in the light of better agricultural production which should ease the pressure on RBI to increase the interest rates. Keeping interest rates at present levels will reduce the pressure on Government finances and make easy availability of credit to the Corporates and Individuals.
Going forward, the following areas require focus to support the growth momentum
• Bottlenecks in distribution of power to be reduced on a fast track basis and achieve higher level of productivity in the existing power plants. The best practices adopted by private transmitting companies could be transferred to state owned utilities. Transmission and Distribution Loss could be reduced by increasing the monitoring of consumption of power at a transformer level covering each locality. More manufacturing capacity could be created for manufacturing power equipments. Hurdles for implementing new projects to be cleared on a fast track basis.
• In many varieties of agri produce, the productivity levels per acre of land compares very poorly with the other countries in the world. Objectives could be set to achieve the best levels of productivity in five years from now and action plans could be identified for achieving the same. So far, many new initiatives were taken by government to address the productivity. But there is a need for an institutional reform to achieve the desired productivity levels. Like what has happened in the case of Milk, the concept of Agri co-operatives can be created in all parts of India on the similar lines of NDDB and State Milk Co-operatives.
• Infrastructure. Requires a big investment. At present mega projects are awarded which requires large organizations with large financial resources. Only few organizations, have the capability to execute very large projects. To expedite the Infrastructure development, to fill the projected gap, large projects could be broken up into small projects and awarded to more companies. This will help to expedite the infrastructure development. The projects in rural and semi urban areas could be integrated with the social development schemes implemented by the government.
• The capital markets could be made more vibrant by allowing Corporate Bonds, Municipal Bonds and other securities to be listed on the exchanges. Any instrument carrying a issue value of more than Rs.10 cr could be listed on the stock exchanges. This will help to create a vibrant market for Debt and other instruments.
• The government could continue to tap the non conventional sources of funding thereby easing the pressure on Government finances and from time to time identify support measures to be provided to Export led industries so that the external balance is maintained and will be within control.
I am happy that I was the first one to predict after the last year’s Union Budget that our GDP would grow close to 7.5%. We ended the year with a growth of 7.4%. At that point the best prediction of GDP was at 6.1% by the Economists in the world. Last year, the growth momentum came from various sources including a large government stimulus programme, Sixth pay commission Effect and vibrant rural Economy.
This quarter’s growth of 8.8% is encouraging and since the rainfall is good , this year agricultural growth rate is likely to be good and the year could end with a GDP growth of around 9.5%. The momentum in the private Sector has picked up in the last few months and organizations in private sector had announced plans for expansion. The Sixth pay commission effect is likely to last for another year. Rural Economy continues to do well.
The inflow of funds to government coffers were much better than the expected level mainly aided by a high collection on account of spectrum fee collected by Telecom Ministry. The government is also planning to capitalize the land bank and it is happening at both Central and state levels which should ease the pressure on Government Finances.
FDI so far was lower than last year but inflows on account of FII’s so far accounted for $ 13 bn and the year is likely to end with an inflow ranging from $ 16 – 20 bn. Since the Indian Growth Story is intact and most of the companies have shown a good Sales and Profit growth and potential for growth in the next few years is good, the Investors from abroad are likely to increase their focus on India. This will also be strengthened by the increased presence of Multinationals in various sectors in India including Auto, IT, ITES, Pharma and others. Government could liberalise few more sectors including Life insurance, which would help to attract more FDI into India.
Inflation rate is likely to soften in the light of better agricultural production which should ease the pressure on RBI to increase the interest rates. Keeping interest rates at present levels will reduce the pressure on Government finances and make easy availability of credit to the Corporates and Individuals.
Going forward, the following areas require focus to support the growth momentum
• Bottlenecks in distribution of power to be reduced on a fast track basis and achieve higher level of productivity in the existing power plants. The best practices adopted by private transmitting companies could be transferred to state owned utilities. Transmission and Distribution Loss could be reduced by increasing the monitoring of consumption of power at a transformer level covering each locality. More manufacturing capacity could be created for manufacturing power equipments. Hurdles for implementing new projects to be cleared on a fast track basis.
• In many varieties of agri produce, the productivity levels per acre of land compares very poorly with the other countries in the world. Objectives could be set to achieve the best levels of productivity in five years from now and action plans could be identified for achieving the same. So far, many new initiatives were taken by government to address the productivity. But there is a need for an institutional reform to achieve the desired productivity levels. Like what has happened in the case of Milk, the concept of Agri co-operatives can be created in all parts of India on the similar lines of NDDB and State Milk Co-operatives.
• Infrastructure. Requires a big investment. At present mega projects are awarded which requires large organizations with large financial resources. Only few organizations, have the capability to execute very large projects. To expedite the Infrastructure development, to fill the projected gap, large projects could be broken up into small projects and awarded to more companies. This will help to expedite the infrastructure development. The projects in rural and semi urban areas could be integrated with the social development schemes implemented by the government.
• The capital markets could be made more vibrant by allowing Corporate Bonds, Municipal Bonds and other securities to be listed on the exchanges. Any instrument carrying a issue value of more than Rs.10 cr could be listed on the stock exchanges. This will help to create a vibrant market for Debt and other instruments.
• The government could continue to tap the non conventional sources of funding thereby easing the pressure on Government finances and from time to time identify support measures to be provided to Export led industries so that the external balance is maintained and will be within control.
Tuesday, April 13, 2010
Permanent Stimulus For Economic Growth
Permanent Stimulus For Economic Growth
The countries which had shown a good growth rate , growing for long periods of time, provided stimulus to the Economic growth through well defined / planned economic policies which are in contravention of the prescribed economic Policies for Growth. Two examples today are China and USA. In USA, the government went ahead providing stimulus in the form of Moral Support to Industries, Benign Policies, Low interest rates and heavy borrowing from the other countries to Sustain the Economic Growth. This was mainly supported by Dollar which is the most accepted currency in the world coupled with the fact that a robust capital market which provided avenue for raising funds through various instruments not only domestically but also from outside US . The stimulus in US was given at the cost of general health of the Economy, which is very fragile, even today.
Whereas in the case of China, the stimulus for the Economy was provided through many ways and till today, the stimulus continues for a long period of time which is helping the Economy to show continuous good rate of growth. The following factors helped the Chinese Economy to sustain the growth rate even today.
1. Grand Vision. The Political Leadership decided that China should become an Industrial power and in line with the Population rank, they should develop their industries and take them to number one in the field they were operating. With that in Mind, the plans drawn for Economic Development and Infrastructure Development were in line with the objectives of reaching number one position in many segments of the industry.
2. Export Led Strategy. The policy makers identified that to become an industrial power they had to go for cost leadership strategy which would help to achieve a very high level of exports, since the strategy would create a competitive position which would be difficult for other countries to challenge. The cost leadership was pursued with great vigour and the country achieved the cost leadership position in the areas where they became leaders in exports. This helped to increase the size of manufacturing in the overall economy as well as earn Forex in a big way. The exports were subsidized at every level of value chain in the production system.
3. Risky Lending practices. Since most of the enterprises in China belonged to Government and earlier government owned enterprises, the loans were disbursed violating the prudent practices on lending. At one point in time, in this century, the NPA in Chinese Banking system was close to 50%. Since there was no pressure for the enterprises to worry about financial management, they pursued the production targets with increased focus. The focus of corporates were on production than on any other function.
4. Low Interest Rates. The government has a full control on the banking system and ensured that the loans are available at very competitive rates. The interest constituted a very small portion of the overall cost of products. The competitive interest rates in the economy helped Large, Medium and Small Enterprises to avail loans at attractive rates. This has substituted the minimal participation of stock markets in the Chinese Economy. Only in the last few years, the stock markets have become vibrant and Investment in equity by retail investors is showing signs of promise.
5. Inflation. Since there was a good control on Interest rates and the domestic economy was under the full control of the government, Inflation levels were at reasonable levels. The government had taken concerted efforts to control inflation .At CPI level , only in 2007, the it was above 4 at 4.8 and at 5.9 in 2008 but it came down to – 0.7% in 2009.
6. Fixed Exchange rate. For a long period of time, the government pegged its currency to the dollar and even after deciding that they should move towards realistic rates, the currency was allowed to appreciate marginally, only for a few months and again a strategy of pegging the currency to the dollar policy was pursued. This helped the country to retain its competitiveness in exports.
7. Large inflow of funds. Since the economy had shown a good promise for growth and the currency fluctuation was minimized, the country was able to attract large amount of foreign funds. Despite, large inflow of foreign funds, the enterprises were certain about exchange rates and its minimal impact on financial performance . Hence they concentrated more on the core business than on managing finance.
8. Control on Cost of other resources. There is a system of permission for workers to work in one city , thereby restricting the free movement of labour across the cities/towns. Further, the workers are made to work long hours with clearly defined targets for production. Since government transferred the companies to private sector, in most cases, the transfer price of enterprises to private sector was at very low rates which resulted in lower Depreciation and other infrastructure costs.
9. Good Implementation. After planning large projects, the best practices in project implementation was adopted and mammoth projects were completed as per the plans and achievement of physical targets took precedence over the financial aspects.
10. Political System. All the above was possible , since the entire country is run like a Corporate Enterprise. Those who reach the central leadership should have demonstrated their skills at lower levels of administration ,where they were able to demonstrate their competence and management skills. When investment takes place at a provincial level, the provincial authority has the full powers to give licenses and the levels of decision making was less and the uncertainity in implementation of projects was minimized. This will be very difficult in a democratic and plural society where the views of all the stakeholders are to be taken before making decisions.
There are concerns that the Chinese growth will come to a stop and the bubble will burst. This is not likely to happen, since China is a large country and still many regions are in the process of development and many people are under poverty line. The growth in China would be sustained through the increase in Domestic consumption even if the Trade position deteriorates with developed countries but likely to be off set by trade with developing countries ( where China has started increasing the engagement with these countries in a big way). China is likely to continue the Stimulus it is providing for many more years and it has developed the required resources to support this growth. But the extent and nature of stimulus provided will vary from what was observed in the past.
It will be a challenge for Democratic countries and countries with higher level of transparency to adopt all the practices like in China but at least the aspects relating to Management of the Economy including Management of Interest rates, Inflation, Currency Management and Project Planning and Management could be strengthened to achieve higher levels of Economic Growth.
The countries which had shown a good growth rate , growing for long periods of time, provided stimulus to the Economic growth through well defined / planned economic policies which are in contravention of the prescribed economic Policies for Growth. Two examples today are China and USA. In USA, the government went ahead providing stimulus in the form of Moral Support to Industries, Benign Policies, Low interest rates and heavy borrowing from the other countries to Sustain the Economic Growth. This was mainly supported by Dollar which is the most accepted currency in the world coupled with the fact that a robust capital market which provided avenue for raising funds through various instruments not only domestically but also from outside US . The stimulus in US was given at the cost of general health of the Economy, which is very fragile, even today.
Whereas in the case of China, the stimulus for the Economy was provided through many ways and till today, the stimulus continues for a long period of time which is helping the Economy to show continuous good rate of growth. The following factors helped the Chinese Economy to sustain the growth rate even today.
1. Grand Vision. The Political Leadership decided that China should become an Industrial power and in line with the Population rank, they should develop their industries and take them to number one in the field they were operating. With that in Mind, the plans drawn for Economic Development and Infrastructure Development were in line with the objectives of reaching number one position in many segments of the industry.
2. Export Led Strategy. The policy makers identified that to become an industrial power they had to go for cost leadership strategy which would help to achieve a very high level of exports, since the strategy would create a competitive position which would be difficult for other countries to challenge. The cost leadership was pursued with great vigour and the country achieved the cost leadership position in the areas where they became leaders in exports. This helped to increase the size of manufacturing in the overall economy as well as earn Forex in a big way. The exports were subsidized at every level of value chain in the production system.
3. Risky Lending practices. Since most of the enterprises in China belonged to Government and earlier government owned enterprises, the loans were disbursed violating the prudent practices on lending. At one point in time, in this century, the NPA in Chinese Banking system was close to 50%. Since there was no pressure for the enterprises to worry about financial management, they pursued the production targets with increased focus. The focus of corporates were on production than on any other function.
4. Low Interest Rates. The government has a full control on the banking system and ensured that the loans are available at very competitive rates. The interest constituted a very small portion of the overall cost of products. The competitive interest rates in the economy helped Large, Medium and Small Enterprises to avail loans at attractive rates. This has substituted the minimal participation of stock markets in the Chinese Economy. Only in the last few years, the stock markets have become vibrant and Investment in equity by retail investors is showing signs of promise.
5. Inflation. Since there was a good control on Interest rates and the domestic economy was under the full control of the government, Inflation levels were at reasonable levels. The government had taken concerted efforts to control inflation .At CPI level , only in 2007, the it was above 4 at 4.8 and at 5.9 in 2008 but it came down to – 0.7% in 2009.
6. Fixed Exchange rate. For a long period of time, the government pegged its currency to the dollar and even after deciding that they should move towards realistic rates, the currency was allowed to appreciate marginally, only for a few months and again a strategy of pegging the currency to the dollar policy was pursued. This helped the country to retain its competitiveness in exports.
7. Large inflow of funds. Since the economy had shown a good promise for growth and the currency fluctuation was minimized, the country was able to attract large amount of foreign funds. Despite, large inflow of foreign funds, the enterprises were certain about exchange rates and its minimal impact on financial performance . Hence they concentrated more on the core business than on managing finance.
8. Control on Cost of other resources. There is a system of permission for workers to work in one city , thereby restricting the free movement of labour across the cities/towns. Further, the workers are made to work long hours with clearly defined targets for production. Since government transferred the companies to private sector, in most cases, the transfer price of enterprises to private sector was at very low rates which resulted in lower Depreciation and other infrastructure costs.
9. Good Implementation. After planning large projects, the best practices in project implementation was adopted and mammoth projects were completed as per the plans and achievement of physical targets took precedence over the financial aspects.
10. Political System. All the above was possible , since the entire country is run like a Corporate Enterprise. Those who reach the central leadership should have demonstrated their skills at lower levels of administration ,where they were able to demonstrate their competence and management skills. When investment takes place at a provincial level, the provincial authority has the full powers to give licenses and the levels of decision making was less and the uncertainity in implementation of projects was minimized. This will be very difficult in a democratic and plural society where the views of all the stakeholders are to be taken before making decisions.
There are concerns that the Chinese growth will come to a stop and the bubble will burst. This is not likely to happen, since China is a large country and still many regions are in the process of development and many people are under poverty line. The growth in China would be sustained through the increase in Domestic consumption even if the Trade position deteriorates with developed countries but likely to be off set by trade with developing countries ( where China has started increasing the engagement with these countries in a big way). China is likely to continue the Stimulus it is providing for many more years and it has developed the required resources to support this growth. But the extent and nature of stimulus provided will vary from what was observed in the past.
It will be a challenge for Democratic countries and countries with higher level of transparency to adopt all the practices like in China but at least the aspects relating to Management of the Economy including Management of Interest rates, Inflation, Currency Management and Project Planning and Management could be strengthened to achieve higher levels of Economic Growth.
Saturday, February 27, 2010
Views on the Budget F11
Budget – F11
The budget is a well balanced one and was much better than the expectations of Various stake holders from the society. Under the circumstances, when the government has to play a major role in sustaining the growth rate of the economy and need to manage its finances to ensure the stability of the economy, steps need to be taken to shore up the finances of the government. The budget has targeted an increase of 18% in tax revenue after registering a maringal growth over 2008 – 2009. The major contributor to the increase in revenue is customs duties Rs.30,000 cr after a loss of Rs.11400 cr in the previous year , Excise duties Rs.30,000 cr after a loss of Rs.6613 cr last year , increase in service tax of Rs.10000 cr and an increase in corporation tax Rs.46,000 cr with an assumption that the corporation tax will grow by 18%. The budget plans for reduction in Income tax of Rs.4400 cr over the previous year. Total tax revenue is expected to increase by Rs.113,000 cr.
They had factored in better compliance in assuming increase in taxes. They are establishing two more tax processing centres apart from Bangalore. IT is planned to be used effectively. A target has to be set to increase the number of non salaried individual assesses by 5% from the present levels.
The growth is expected to continue and the thrust for growth will come from the increased purchasing power of individuals since the tax rates were reduced, continued focus on rural development through NRGEA, increased emphasis on infrastructure , institutional strengthening efforts in the agricultural sector, increased ability of the PSU banks / RRBs to disburse more finance through recapitalization of banks supported by new licenses for Banks and Bank Branch Linceses. The stimulus for exports were continued , small and medium sector were given increased focus and housing development was given its place in the growth momentum.
Rs.1,48,118 cr is expected to be raised from non tax sources, an increase of Rs.35000 cr(3G) over the previous year. Rs.40,000 cr from privatization, Rs.35,000 cr from 3 G auction. It was assumed that dividends received would be lower by Rs.600 cr over FY 10 at Rs.51309 cr. A target increase of 18% could be looked at from Dividends. There was no mention about the use of land bank . Adopting a strategy of capitalizing the land bank with government / government undertakings and PSU’s can provide additional revenue. There has to be an increased focus on raising resources from non conventional sources and a target of at least Rs.25000 cr could be looked at for revenue from Land, in the form of sale/lease/dividends. The revenue from Non tax sources could be increased substantially , if a decision is taken to dilute stake in more profit making PSU’s coupled with sale of land in sick PSUs and declaring dividends. This would help to meet the fiscal deficit targets without much pressure on government finances. The expenditure was planned to be managed well and there should a continuous monitoring of expenses by the government in relation to the budget.
The main contributor to the increase in excise and customs duty are duties on petrol and diesel. Since fuel constitutes about 15% weightage in the index,. Inflation will increase immediately by about 0.5% from the present levels. This will have a cascading effect on all the industries. Hence the cooperation with state governments to bring down the prices of food items should be given increased focus and the infation rate has to be brought down closer to 5% level.
The budget is a well balanced one and was much better than the expectations of Various stake holders from the society. Under the circumstances, when the government has to play a major role in sustaining the growth rate of the economy and need to manage its finances to ensure the stability of the economy, steps need to be taken to shore up the finances of the government. The budget has targeted an increase of 18% in tax revenue after registering a maringal growth over 2008 – 2009. The major contributor to the increase in revenue is customs duties Rs.30,000 cr after a loss of Rs.11400 cr in the previous year , Excise duties Rs.30,000 cr after a loss of Rs.6613 cr last year , increase in service tax of Rs.10000 cr and an increase in corporation tax Rs.46,000 cr with an assumption that the corporation tax will grow by 18%. The budget plans for reduction in Income tax of Rs.4400 cr over the previous year. Total tax revenue is expected to increase by Rs.113,000 cr.
They had factored in better compliance in assuming increase in taxes. They are establishing two more tax processing centres apart from Bangalore. IT is planned to be used effectively. A target has to be set to increase the number of non salaried individual assesses by 5% from the present levels.
The growth is expected to continue and the thrust for growth will come from the increased purchasing power of individuals since the tax rates were reduced, continued focus on rural development through NRGEA, increased emphasis on infrastructure , institutional strengthening efforts in the agricultural sector, increased ability of the PSU banks / RRBs to disburse more finance through recapitalization of banks supported by new licenses for Banks and Bank Branch Linceses. The stimulus for exports were continued , small and medium sector were given increased focus and housing development was given its place in the growth momentum.
Rs.1,48,118 cr is expected to be raised from non tax sources, an increase of Rs.35000 cr(3G) over the previous year. Rs.40,000 cr from privatization, Rs.35,000 cr from 3 G auction. It was assumed that dividends received would be lower by Rs.600 cr over FY 10 at Rs.51309 cr. A target increase of 18% could be looked at from Dividends. There was no mention about the use of land bank . Adopting a strategy of capitalizing the land bank with government / government undertakings and PSU’s can provide additional revenue. There has to be an increased focus on raising resources from non conventional sources and a target of at least Rs.25000 cr could be looked at for revenue from Land, in the form of sale/lease/dividends. The revenue from Non tax sources could be increased substantially , if a decision is taken to dilute stake in more profit making PSU’s coupled with sale of land in sick PSUs and declaring dividends. This would help to meet the fiscal deficit targets without much pressure on government finances. The expenditure was planned to be managed well and there should a continuous monitoring of expenses by the government in relation to the budget.
The main contributor to the increase in excise and customs duty are duties on petrol and diesel. Since fuel constitutes about 15% weightage in the index,. Inflation will increase immediately by about 0.5% from the present levels. This will have a cascading effect on all the industries. Hence the cooperation with state governments to bring down the prices of food items should be given increased focus and the infation rate has to be brought down closer to 5% level.
Sunday, February 7, 2010
Union Budget – F11
Union Budget – F11
The Stimulus by the government has helped to a achieve higher level of economic growth. But inflation could have been kept at a lower level by better demand supply management. The recent initiative by the Central government to co-orindate with the state governments to bring balance in the demand supply is in the right direction.
GDP growth in the first quarter this year was at 6.1%, second quarter was at 7.9% and in third it is likely to be in the range of 8.2 – 8.5%. If we can end the year with a quarter growth of 8.5 – 9.5%, the overall growth for the year could be closer to 8% for the whole year.
Despite greenshoots emerging, there are sporadic reporting of failures of economic systems in a few countries which have an impact on the world Economy. Since India’s economy is more integrated with the global economy than in the past , withdrawal of stimulus has to be handled with caution.
The Budget should focus on growth and there is a need to continue the stimulus and the government should continue the stimulus in sectors which have a greater impact on consumption, investment and higher multiplier effect on the Economy.
The withdrawal should be gradual and we have to prepare a phased plan for withdrawal. We have to identify economic indicators with the target for key indicators and once the target is reached then the corresponding stimulus could be withdrawn. The targets will have corresponding action plans for Finance ministry, Commerce Ministry, RBI and SEBI. A road map could be drawn up for withdrawal of stimulus on the above lines.
The concern regarding the budget deficit could be addressed through raising funds through unconventional measures including Capitalising the land bank of the government and government enterprises in a big way. China had resorted to this strategy in a big way at the State and Central levels in the last year which helped the government to provide a very big stimulus.
The Stimulus by the government has helped to a achieve higher level of economic growth. But inflation could have been kept at a lower level by better demand supply management. The recent initiative by the Central government to co-orindate with the state governments to bring balance in the demand supply is in the right direction.
GDP growth in the first quarter this year was at 6.1%, second quarter was at 7.9% and in third it is likely to be in the range of 8.2 – 8.5%. If we can end the year with a quarter growth of 8.5 – 9.5%, the overall growth for the year could be closer to 8% for the whole year.
Despite greenshoots emerging, there are sporadic reporting of failures of economic systems in a few countries which have an impact on the world Economy. Since India’s economy is more integrated with the global economy than in the past , withdrawal of stimulus has to be handled with caution.
The Budget should focus on growth and there is a need to continue the stimulus and the government should continue the stimulus in sectors which have a greater impact on consumption, investment and higher multiplier effect on the Economy.
The withdrawal should be gradual and we have to prepare a phased plan for withdrawal. We have to identify economic indicators with the target for key indicators and once the target is reached then the corresponding stimulus could be withdrawn. The targets will have corresponding action plans for Finance ministry, Commerce Ministry, RBI and SEBI. A road map could be drawn up for withdrawal of stimulus on the above lines.
The concern regarding the budget deficit could be addressed through raising funds through unconventional measures including Capitalising the land bank of the government and government enterprises in a big way. China had resorted to this strategy in a big way at the State and Central levels in the last year which helped the government to provide a very big stimulus.
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