Farmer will continue to be at the mercy.

IIPM - Admission Procedure

Vibha Batra, Co-head (Financial sector Ratings), ICRA, agrees: “A large percentage of these overdues (of Rs.60,000 crore) could be on the books of cooperative banks and rural banks. Therefore, the impact on scheduled PSBs may only be a subset of this amount. Further, the incremental hit on the PSBs’ capital (assuming no reimbursement from the government) could be still lower to the extent of unprovided NPAs, as these overdues could comprise interest overdues on NPAs (which are not booked as income).”

At the same time, economists like Swaminathan Ankleswaria Aiyar feel that the waiver will reduce demand for farm loans in the next season, thereby allowing banks to lend more to other profitable entities. This will immediately improve their bottomlines in the coming year. In many ways, the state-owned banks will suddenly be in a much-better financial position, and will also be more prepared for Basel II norms as well as for the aggressive entry of foreign banks in 2009 due to changes in FDI norms.

However, there is a flip side to the issue. In fact, there’s another catch; it’s called Catch 60,000. And this shows that what Chidambaram has done is not going to make too much of a difference. It’s only a political hype; at the socio-economic level, the lives of the impoverished and suffering farmers will not change. In addition, the loan waiver scheme goes against the letter and spirit of the finance ministry’s report in July 2007 on agriculture indebtedness by a committee, headed by R. Radhakrishna.

For instance, the Committee found that most of the farmers were indebted to non-institutional (read: non-banking) sources. In 2003, over 42% of them had taken loans from such agencies; in fact, nearly 27% of the farmers were in debt to the local private moneylenders. In states like Andhra Pradesh, Rajasthan, Bihar, and Punjab (surprise, surprise!), the farmers were more dependent on the moneylenders for finances. In Andhra Pradesh and Rajasthan, the exposure was over 65%, and the figure was over 50% in Punjab. Even in states like Tamil Nadu, it was slightly higher than 45%.

When one looked at the marginal and small farmers, the dependence on non-institutional sources went up dramatically. In the case of farmers, who owned less than 0.01 hectares, their exposure to moneylenders and traders was over 75%. Those who owned 0.01-0.40 hectares got nearly 57% of their loans from such agencies. Overall, the figure for those farmers who owned upto two hectares of land – it’s these farmers who have got the much-touted loan waiver from Chidambaram – was nearly 50%.

“It is indeed a matter of concern that in spite of all the efforts made for the spread of institutional finance (read: scheduled banks), it accounted for only two-fifths of farmers’ outstanding debt. Since the interest rates charged by non-institutional sources are high, this might have imposed heavy burden on farmers,” noted the report. Therefore, the Budget largesse means nothing, or little, for these farmers. Unfortunately, it is especially true of states, where the dependence on farming is higher than others.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Debunking the Regan myth to curry favour with conservatives

IIPM : EXECUTIVE EDUCATION

Reagan might have got it all wrong. But is there any point for US presidential candidates to time and again re-hash the same old story?

Historical narratives matter. That’s why conservatives are still writing books denouncing FDR and the New Deal; they understand that the way Americans perceive bygone eras, even eras from the seemingly distant past, affects politics today. And it’s also why the furor over Barack Obama’s praise for Ronald Reagan is not, as some think, overblown. Fact is that how we talk about the Reagan era still matters immensely for American politics.

Bill Clinton knew that in 1991, when he began his presidential campaign. “The Reagan-Bush years,” he declared, “have exalted private gain over public obligation, special interests over the common good, wealth and fame over work and family. 80s ushered in a Gilded Age of greed & selfishness, of irresponsibility & excess, and of neglect.” Contrast that with Obama’s recent statement, that Reagan offered a “sense of dynamism and entrepreneurship that had been missing.” Maybe Obama was, as his supporters insist, simply praising Reagan’s political skills. But where in his remarks was the clear declaration that Reaganomics failed? For it did fail. The Reagan economy was a one-hit wonder. Yes, there was a boom in the mid-1980s, as the economy recovered from a severe recession. But while the rich got much richer, there was little sustained economic improvement for most Americans. By the late 1980s, middle-class incomes were barely higher than they had been a decade before – and the poverty rate had actually risen. When the inevitable recession arrived, people felt betrayed – a sense of betrayal that Clinton was able to ride into the White House.

Given that reality, what was Obama talking about? Some good things did eventually happen to the US economy – but not on Reagan’s watch. I understand why conservatives want to rewrite history & pretend that good things happened while a Republican was in office. But why would a self-proclaimed progressive say anything that lends credibility to this rewriting of history – particularly right now, when Reaganomics has just failed all over again?

Like Ronald Reagan, President Bush began his term in office with big tax cuts for the rich and promises that the benefits would trickle down to the middle class. Like Reagan, he also began his term with an economic slump, then claimed that the recovery from that slump proved the success of his policies. And like Reaganomics, Bushonomics has ended in grief. Public mood today is as grim as it was in 1992. Wages are lagging behind inflation. Employment growth in the Bush years has been pathetic compared with job creation in the Clinton era. Even if we don’t have a formal recession, the optimism of 90s has evaporated. This is a time when Progressives ought to drive home the idea that right’s ideas don’t work and never have.

It’s not just a matter of what happens in the next election. Clinton won his elections, but – as Obama correctly pointed out – he didn’t change America’s trajectory the way Reagan did. Why?

The great failure of Clinton administration was the fact that it didn’t change the narrative, a fact demonstrated by the way Republicans are still claiming to be the next Ronald Reagan. Now Progressives have been granted a second chance to argue that Reaganism is fundamentally wrong: Once again, vast majority of Americans think that the country is on the wrong track. But they won’t be able to make that argument if their political leaders, whatever they meant to convey, seem to be saying that Reagan had it right.

Paul Krugman

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Entertainment Boy

IIPM : EXECUTIVE EDUCATION

Moser Baer’s Ratul Puri has taken risks & entered uncharted territories, which will test his mettle to the fullest, feels MANISH K. PANDEY

Often, leaders tend to shun complicated projects, but Ratul Puri, Executive Director, Moser Baer, thrives on them. And that aggressive stance has earned rich rewards as well, as he has played a major role in making Moser Baer a global behemoth. “Ratul is a sharp-minded professional with a proactive approach towards work. He is a visionary...,” says one of his current employees. In retrospect, his is a journey from a 3-storeyed infotech firm in Delhi’s congested Lajpat Nagar, which was on the verge of closure thrice during its initial days, to the second largest optical storage media manufacturer in the world and, finally, to the new diversifications into photovoltaic & home entertainment.

After Ratul joined Moser Baer in 1994 at the age of 22, he was instrumental in setting up Moser Baer’s Noida & Greater Noida plants to manufacture recordable compact discs (CDRs), and the plants were the first of their kind in India. Moving further, he is now leveraging Moser Baer’s robust R&D strengths to develop a new generation of storage devices, which can archive critical & sensitive data for years. Already, Moser Baer has become the leader in marketing new storage formats like Blu-ray Discs and HD DVD.

But his impeccable strategic acumen came to the forefront when the company ventured into new and unrelated areas like photo-voltaic and home entertainment. Since 2006, Ratul has bet big bucks on non-conventional energy sources. By 2010, Moser Baer aims to derive 40% of its overall revenues from selling solar panels, which is now a hot bed of opportunity. Industry sources expect the global PV business to grow over six times to $40 billion by the same year. Moreover, the demand here is price-elastic. If Ratul can offer a cheaper option, as Moser Baer has done in storage devices, he can expand this market exponentially.

By acquiring stakes in three firms – Solaria, SolFocus and Stion – and establishing thin solar film plants across India, Ratul has made his intentions clear. Moser Baer has also made investments in Slovenia-based Solarvalue, which manufactures silicon ingots/wafers. This may turn out to be a smart strategy as it will help overcome the existing supply constraints in raw materials.


Moreover, how can one forget Moser Baer’s foray into home video segment last year? It was Ratul’s vision to swamp and invade the already-entrenched market with low-priced VCDs and DVDs. The move opened up a new opportunity, as the segment is expected to grow at a CAGR of 18% over the next five years (according to joint study conducted by FICCI and PricewaterhouseCoopers). And he doesn’t want to stop there. Ratul has chalked out huge plans to mark Moser Baer’s presence across the value chain – from film production to distribution at the customer’s doorstep. As he is responsible for corporate management and financial control, Ratul has always focused on maximising shareholders’ value and raising funds from global and domestic investors. Under his leadership, Moser Baer wooed various institutions like IFC, Electra Partners and Warburg Pincus Singapore LLC to invest in the company. In fact, Electra had picked up a sizeable 17% stake in Moser Baer and offloaded 4% at huge profits. Moreover, a year ago, when the storage media industry was facing a severe global pricing pressure, coupled with competition from low-cost producers and rising raw material prices, Ratul played a crucial role in bringing Moser Baer back on the growth and profitability path. In FY 2006-07, the company not only posted a 19.8% increase in gross revenues to Rs.20.74 billion, it improved margins that drove a 2,253% growth in net profits to Rs.1.09 billion. Says Yogesh Mathur, Group CFO, Moser Baer, “I agree that two years prior to the last one were not good. But now, both the industry and Moser Baer are back on the growth and normal profitability cycle.”

So, should one give credit to Ratul or was the recovery a part of the improving business cycle in the sector? Current employees contend it was a mix of both; Ratul also imposed cost efficiencies & forced productivity improvements during that critical period. Many feel that this crisis also gave Ratul the idea to transform Moser Baer into a multi-technology organisation & ventured into solar electricity & home entertainment.

However, Ratul faces many challenges in the near future. In the storage device business, technology becomes obsolete in no time, and all players have to keep pace. Although Moser Baer has successfully transformed itself several times with changing technology, it may not be so easy in the near future. In home entertainment, distribution is still a weak link. While Moser Baer has played the price warrior card nicely, it has to soon play the premium content & technology ace too.

But Moser Baer managers are excited and enthusiastic about Ratul’s capabilities. “We are bullish about all three businesses. We see the optical storage business growing at 25-30% CAGR over the next few years. Home Entertainment is a huge opportunity and we expect this to be over half-a-billion dollar business in the coming few years,” says Mathur.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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