A quarter ends

The first quarter of the Financial Year 2013-14 has ended on a note of more uncertainty than when the year began. Global economies continue to be sluggish, the tapering off of QE 3  ( Quantitative Easing or the Bond Buying program in the US ) has caused occasional tremors in the US markets and flight of capital from emerging economies like India.

The resultant rapid depreciation of the rupee ( it even touched  60 briefly last week ) is bad for the Indian economy which is already plagued with sluggish economic growth. However it could be good in the short term for exporters and I am sure many results this quarter will show that impact.

However there are dark clouds over Indian IT too. The passage of the Immigration Bill in the Senate is causing some trepidation since this will at a minimum increase visa costs and in the extreme case cause a fundamental change in the employee mix and the business models of Indian companies in our main market.

There is still time - a more sensible version of the Bill is likely to pass the House of Representatives and the real action will start when the two bill versions have to be reconciled before the House and Senate clear them again and the President signs it into Law !

Interesting times lie ahead for all of us !

Ganesh

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The problem of being Narayana Murthy

If you are NR Narayana Murthy you need to have the Midas touch. A company you created with a bunch of friends and built with vision and values has fallen a little out of step with the world of IT and lost out in the pace of change to competitors like TCS Cognizant and even HCL.

The problem today is that the world has changed. The SMAC ( Social Media Mobility Analytics & Cloud ) revolution has changed motivations though it hasnt resulted in big contracts yet. And you need a deep understanding of the new world and yet retain the capabilities in traditional areas to succeed.

Can Murthy do it - of course he can ! How long will it take him - only time will tell. But here's wishing him al the best !

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India Summit – many questions, some revelations!

The Economist is arguably the finest magazine in the world with its outstanding coverage of world events and commentaries on the economy, politics and every aspect of the dynamics of the world we live in. And the India Summit held in Delhi end April not only lived up to the hype but met most expectations of the hundreds of CEOs, academicians and thinkers assembled to understand the state of our nation – India !

The biggest note of confidence was struck at the inauguration itself by none other than Finance Minister P.Chidambaram, whose confidence that the fiscal deficit would be contained to about 4.7 % by the end of the current financial year quickly caught the attention of tweeters and the hordes of electronic media assembled in the room. The current account deficit continues to be a worry though the recent decline in oil and gold prices and the slew of initiatives to boost exports should provide some relief. The FM’s confidence that the GST would receive a thumbs up from the states and there was a seventy percent chance of it being implemented in the current term of the Government and his downplaying the impact of the new land bill and the absence of labour reforms ended the session with the feeling that it was only political grandstanding by the opposition that could come in the way of India’s climb back to six percent plus growth in the current year.

A note of caution was immediately struck by former Chief Economic Advisor to the Government, Shankar Acharya who accused the Government of completely losing control of the macro-economy after 2008 with its increase of subsidies from 1.5 to 2.5 % of GDP and the warning that the political grandstanding combined with poor pace of land and labour reforms would put the economy in a cul de sac! The weak infrastructure with its resultant impact on manufacturing was stressed by FICCI President and HSBC CEO Naina Lal Kidwai while the Chairman of the Economic Advisory Council to the Prime Minister C.Rangarajan put on a brave face and downplayed the impact weak supply side responses could have on inflation once economic growth picked up again.

Two successive industry panels, on Education with Rajendra Pawar of NIIT and Shantanu Prakash of Educomp and Industry with Sunil Munjal of Hero group and Malvinder Singh of Fortis failed deliver any answers to the questions raised by the economists as well as many of us the CEO participants during the day and it was left to Shashi Tharoor in his inimitable style to add a touch of class to the proceedings with his positive comments on India’s role in the world. He did add a word of caution though by stating that youth in 165 out of 625 districts in the country were already frustrated with the lack of job creation and “falling prey to the blandishments of the gun”. A timely warning that economic growth must lead to job creation and enough skills initiatives must proliferate to avoid the disintegration of the demographic dividend into a demographic nightmare for the country!

If there was one complaint one could have about the summit, it was the absence of political leadership from the opposition and the lack of focus on the services industries, but overall the sessions were excellent and it was a day well spent in the national capital! The Indian economy is at a crossroads and while there are signs that the economy has bottomed out and will grow again, albeit slowly, there is much that has to be done to return to the heady years of eight percent growth on a consistent basis!

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