Innholdsfortegnelse for 21-Apr-19 i Business Today

THE ECONOMIC ENVIRONMENT often plays a major role in determining electoral outcomes. Many leaders come to power because of their economic promises, while others lose because they fail to solve economic problems. In 1971, Indira Gandhi quickly figured out that Garibi Hatao – Remove Poverty – was a powerful promise to get voters to rally behind her and get back seats that the Congress had lost in previous elections. Equally, she could not keep her promise. The fact that the economy deteriorated sharply and people were beginning to feel the pinch of it, made her government extremely unpopular by the end of that term. Even if she had not imposed Emergency in 1975, she was beginning to lose favour with large swathes of the electorate. In 2004, Atal Bihari Vajpayee,…

THE SEBI’S CONSULTATION paper on differential voting rights (DVRs) for unlisted firms strikes the right balance between promoters’ interests and those of minority shareholders. Allowing start-up founders to hold superior voting rights (SR shares) will help them raise funds without losing control over the company. One SR share can have a maximum of 10 votes. If approved as proposed, the new age companies can list themselves on stock exchanges provided promoters have held SR shares for at least a year. The paper also calls for diluting the need to have a three-year-record of distributing profits to issue shares with DVRs. Meanwhile, the mandate to have a sunset clause of five years after listing and treating DVR shares as ordinary shares on crucial matters such as appointment and removal of independent…

AFTER LARSEN AND TOUBRO acquired 20.32 percent shares of Mindtree from V.G. Siddhartha, the largest single stakeholder, the company’s promoters went public about their opposition to the 'hostile takeover' bid. They made an emotional appeal questioning the need for such acquisition, given the 'cultural' differences between the two companies. With L&T’s open offer buying window beginning in mid-May, Mindtree promoters are running out of both time and options to block L&T from acquiring further stake in the company. Mindtree then set up a committee of independent directors to evaluate the bid. And though the promoters claim the board is on their side, the committee’s report will not just bring about a finality around how good or bad the acquisition is for various stakeholders but also determine the future of the…

FOR THE DOMESTIC IT sector, it is time to put on collective thinking caps, with visa rejections at an all-time high. Recent data released by United States Citizenship and Immigration Services points to increased scrutiny as rejection of H1B visa applications rose from 4 percent in 2015 to 25 percent in Q1 FY19, vis-a-vis American corporations like Microsoft, Amazon, Google where rejection rates were between 1 percent and 2 percent. REJECTION OF H1B VISA APPLICATIONS ROSE FROM 4 PERCENT IN 2015 TO 25 PERCENT IN 1Q FY19 Official demands for evidence from petitioners also shot up from the previous 21–22 percent (last three years) to 60 percent. For Indian IT, the increased discretion that the US immigration enjoys now and Washington’s move to promote local hiring mean cost restructuring is…

MISSES Manufacturing growth has remained slow in most segments Corporate earnings have taken a severe beating In agriculture, the government has not procured even half the sanctioned quantity HITS GST and Insolvency and Bankruptcy Code hold long-term benefits for India’s economy Power generation capacity, especially from solar plants, and electrification of households, have increased Food inflation has been under control EAM BT ANALYSES THE KEY SECTORS THAT BENCHMARK THE PERFORMANCE OF THE NDA GOVERNMENT LED BY PRIME MINISTER NARENDRA MODI: AGRICULTURE: Distress Signals By March 31, over 40 million small and marginal farmers would have got ₹2,000 each in their bank accounts as direct income support under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) Scheme launched early this year. The scheme, which will pay 125 million farmers’ families ₹6,000 per…

THE GOOD All homes electrified Distribution companies pushing fiscal and infrastructure reforms Renewable energy capacity is increasing, so is transmission capacity AT&C losses are coming down dramatically Power plants are running at sub-65 per cent load factor, which means scope to produce more energy THE BAD A total of 34 independent power producers are facing bankruptcy Electricity consumption is growing at sub-7 per cent Private investors as well as generation, distribution and transmission companies are in a bad shape Most projects for transmission are going to PowerGrid on a nomination basis Implementation of UDAY not on expected lines Availability of domestic coal is still a challenge Billing of consumers and realisation of payments are still big issues…

IN 1967, Messrs Ramgopal Indraprasad, which ran two cotton ginning factories besides polishing pulses, went bankrupt. The business had suffered losses and the owner family owed ₹6 lakh to friends and relatives. The family’s eldest son, then 17 years old, was asked to discontinue studies due to financial difficulties and help with the business. A chance meeting with an official of Food Corporation of India (FCI) helped the teenager strike a deal with the government’s grain-handling arm – to supply polished dal and clean barley to the Indian Army, one of the biggest buyers of grains and pulses. Two years later, the company was renamed Subhash Chandra Laxmi Narain and continued to scale new heights with new businesses. Over half a century later, the enterprising boy, now 69-year-old Subhash Chandra,…

Will the rise of populist nationalism elsewhere weaken India? The rise of populist nationalism in a country tends to accentuate worries. When these people assume power, a wave of insecurity grips neighbours; it affects anyone who is competing with that country in any field. The populist nationalist wave around the industrial world essentially augments similar sentiment in other areas. Initially, populist nationalists feed on each other, but eventually, they become antagonistic as nationalist interests are so different. Will we see trade wars like the US-China one? We have always had a protectionist streak, but reversed it with the 1991 reforms. Now you see some of it coming back – tariffs are rising in steel and other sectors. This introduces an element of arbitrariness and eventually reduces our competitiveness. If you…

India was the second-biggest importer of defence items between 2014 and 2018. This despite decades of efforts to make India self-reliant in defence. During the NDA regime, many headways were made – the Department of Defence Production took initiatives such as creation of defence manufacturing corridors and innovation & technology development centres, release of revised make-II procedures, mission Raksha Gyan Shakti, setting up of defence investor cells and thirdparty inspections. This was apart from streamlining procedures for defence exports and steps to enable contribution from SMEs. The positive side of the story is that a large number of major products have been developed. In addition, a number of products and equipment are being produced through transfer of technology. The result – defence production in India increased to over ₹70,000 crore…

Economic liberalisation, globalisation and Information Technology (IT) are intertwined in our minds as all three took place simultaneously in India in the early 1990s, doing away with the infamous Licence Raj that used to control the country’s economy. But our policymakers need to appreciate that all three have different nuances and have to be examined in isolation. Economic liberalisation should be further pursued by national consensus while globalisation will wax and wane, depending on international conditions beyond our control. Information and communication technology (ICT) continues to revolutionise the world and is a different field altogether. The global “critical infrastructure” is composed of both government and private organisations across all major sectors, and they are all connected via cyberspace, which can be described as the nervous system of the modern world.…

Mutual Fund Bhumidhar Talukdar: I want to invest ₹3,000 in a mutual fund (MF) via monthly SIP but I am not sure how to go about it although I have access to banks in the area where I live. Also, how should I buy shares from a company? Pritam Deuskar, Fund Manager at Bonanza Portfolio, replies: You have asked two different questions. One involves investing in mutual funds and the second one is about share trading. It is good to put your money in MFs, but in this case, you have not mentioned any time frame, which is very important in terms of fund selection. Assuming that you wish to invest for a longer period – say, for more than five years – you can opt for SBI Blue Chip Fund…

NOW AND THEN, one sees news reports on Apple Watch saving a life because it alerted the user to an irregular heartbeat, prompting the person to get help in time. But sceptics have expressed doubts on whether the wearable can pick up on such problems, especially those involving atrial fibrillation, or AFib, which can lead to cardiac issues. The danger of flagging false positives or not detecting changes in heart rhythm when users begin to rely on the device cannot be ignored. In response, Apple funded and conducted a massive study at Stanford University, which involved 4,19,000 volunteer Apple Watch users. It was a large sample size, but the results showed that only 0.5 percent of users received warnings about irregular heartbeats. The implication: The watch was not detecting abnormalities…

PRICE ₹52,900 IT COOLS, HEATS AND CLEANS THE AIR. As the name suggests, the latest air treatment device from the UK-based company is a multipurpose marvel that keeps the quality and temperature of indoor air at an optimal level all the year round, be it summer or winter. A magnetic remote control with dedicated buttons and an easy-to-use Dyson app ensure excellent user experience. A standard Dyson device streams clean, cool airflow (‘cool’ does not mean it can replace an air conditioner) from the front and rear of its bladeless fan, but this one also packs in heating. The heating is thermostatically controlled, which means it shuts off after reaching a preset temperature and resumes heating when the temperature falls. To make it flawless, the company has brought in the…

Jobonomics: India’s Employment Crisis and What the Future Holds By Goutam Das Publisher: Hachette India Pages: 320 Price: ₹599 TOO MANY INDIANS are stuck in bad jobs with poor pay. Although India’s economy is growing at more than 7 percent a year, jobs are not keeping up with that pace. Goutam Das, a business journalist, has not minced words in his first book that explores India’s employment crisis and asks some vital questions: Why have governments failed to create more jobs which pay well? Why are Indian companies not creating enough jobs? Why do small companies remain small? The author uses plenty of data. I prefer stories more, and Jobonomics has enough of them as well, making me read it twice over. I could visualise the scenes. There is PM…

RAHUL GANDHI, President of the Indian National Congress, has said if voted to power, his party will introduce a scheme called NYAY that will assure minimum annual income of ₹72,000 to poorest 20 percent of India’s households. Gandhi’s promise means setting aside ₹3.6 lakh crore to provide ₹6,000 a month to each to the country’s five crore poor families every year. The Congress says it is sound economics, and it will adhere to fiscal discipline, which means the amount, about 1.7 percent of the ₹210 lakh crore GDP (projection for 2019/20 in the Interim Budget) will have to be taken from the government’s existing resources. This would require a major shift in current expenditure priorities as the Budget allocation for all central sector schemes and projects for 2019/20 was ₹8.6…

THE WITHDRAWAL of Sterling Biotech Ltd’s insolvency proceedings and the manner in which it has been done has raised many eyebrows, including that of the National Company Law Tribunal (NCLT), which has asked the government to look into the case. But the larger question that Sterling Biotech has raised is the possible misuse of a provision of the Insolvency and Bankruptcy Code that allows the Committee of Creditors (CoC) to withdraw insolvency proceedings against a debtor if 90 percent of the CoC agrees. This provision, say many, including the regulator and government authorities, may be misused by unscrupulous promoters to game the system in collusion with lenders as was alleged in the Sterling Biotech case; despite the promoters absconding from the country, the lenders not only with-drew insolvency proceedings but…

IT IS OFTEN SAID that the future in healthcare is crucially linked to biotech-based products. Part of it is due the nature of diseases such as cancer where biotech-based drugs are becoming important and partly driven by a move towards personalised healthcare linked to individual body make-up. It is, therefore, important when Drug Controller General of India (DCGI), S. Eswara Reddy, says the government wants separate regulations for biological products, including vaccines and other biotech-related products – all of which are currently clubbed with overall drug regulation. The move is significant if the end purpose is to ensure effective regulations tailored for biological products with an eye on quality and to check erring manufacturers. In fact, only a few months ago, the DCGI dealt with a case of contamination in…

ALMOST 90 PERCENT of English Premier League (EPL) valuations come from its top 10 teams. A similar trend is emerging in the Indian Premier League (IPL) too. This year, Chennai Super Kings, Mumbai Indians, and Kolkata Knight Riders are known to have pocketed almost 50 percent of the sponsorship money, while others found it difficult to attract sponsors. Even the tickets for matches these teams are playing have been sold at a 30 percent to 35 percent premium. While CSK commands a premium not just by virtue of being one of the top team IPL teams, it also scores high in terms of having the largest fan base. KKR depends heavily on its owner Shahrukh Khan’s brand image, and continues to be a favourite of sponsors despite its inconsistent performance…

DIGITAL ADVERTISING in India is on an upswing. According to GroupM estimates, digital ad expenditure stood at ₹12,337 crore in 2018, and is expected to grow to ₹16,038 crore in 2019. A report by market research firm TechArc, however, has revealed that digital advertisers in India were duped of as much as $1.63 billion or ₹11,573 crore ($1 = ₹71) in 2018. The number is worrying, as total expenditure and the defrauded amount are not far removed. So, while the segment has been growing rapidly, this development can make advertisers question the actual impact of digital campaigns. The TechArc report said agencies often employ bots and fake accounts to inflate the impact of an advertising campaign and hike rates. Plus, it projects an increase of 23 percent in digital ad-fraud…

MAY LOSES BREXIT VOTE FOR 3RD TIME Prime Minister Theresa May failed to get her Brexit deal approved by the U.K. parliament for the third time, losing 344-286, a margin of 58 votes. Earlier, May told Conservative MPs she would step down if her twice-defeated proposal to leave the EU got approved. Brexit was originally scheduled for March 29, but the EU had okayed a conditional extension until May 22 if the parliament passed May’s deal. Now that May has been defeated, the new cut-off date will be April 12. Given the latest development, an emergency EU summit will be held on April 10, but a no-deal Brexit is a distinct possibility unless the country can indicate the way forward before the cut-off date. In case Britain wants to stay…

THE GOOD Decent growth in foodgrain production; average annual growth rate in agriculture and allied activities was 2.52 per cent in the first four years of the NDA regime The Pradhan Mantri Kisan Samman Nidhi Scheme assures payment of ₹6,000 per year in three instalments to 125 million farmers’ families with cultivable land holding of up to two hectares THE BAD As on March 21, agencies in charge of procurement, the Food Corporation of India and the National Agricultural Cooperative Marketing Federation of India, had procured only 45.68 per cent of the sanctioned quantity of wheat, rice and pulses during the just ended kharif season THE UGLY The Commission for Agricultural Costs and Prices says market prices of all rabi crops were below MSP in major producing states in the…

THE GOOD Relatively better rural consumption demand, driven by fiscal stimulus like farm loan waivers THE BAD Sales grew at a CAGR of just 4.8 percent between 2013/14 and 2017/18 as against 14.3 percent in FY2009-14 and 24.5 percent in FY2004-09 Corporate profits contracted at an annualised rate of 1.8 percent in last four fiscal years (FY14-18) in sharp contrast to 10.4 percent CAGR during the second stint of the UPA government NPA clean-up meant that for the first time in 25 years, public sector banks ended up with negative lending (on a net basis) during FY17 and FY18…

CONSIDER THIS. I am a loyalty member of Jet Airways, Vistara, Emirates, Etihad, Air India and a few other carriers. I am also a member of the loyalty clubs of Marriott, Hyatt, Taj, ITC, Hilton, Leela and a few more. I am a gold or platinum member of Shoppers Stop, Lifestyle and Westside. Then there are various other memberships to travel and e-commerce portals. However, I cannot be all that loyal to all these companies if I am a member of the loyalty programmes designed by competing brands. I will be more of an opportunist. It seems these so-called loyalty-marketing programmes have failed to create any sense of loyalty among millions of customers. Perhaps they are also trying to be opportunistic in a world where customer expectations are always changing.…

COUNTER MENTOR LEADERSHIP: How to Unlock the Potential of the 4-Generation Workplace BY KELLY S. RIGGS AND ROBBY RIGGS Publisher: Hachette India Pages: 368 Price: ₹499 EGO WARS AT WORKPLACES, especially between Boomers (Gen X also falls under this broad category) and Millennials (Gen Y), are nothing new. But in a fast-paced world where skills get obsolete in a blink, it is becoming difficult to strike the right balance. The millennial workforce does not blindly follow the diktat of those up the ladder. And they cannot be ignored either as it would make talent acquisition or retention even tougher. Counter Mentor, the debut book of the father-son duo Kelly Riggs and Robby Riggs, is all about this modern-day leadership dilemma and how it can be fixed, narrated in a captivating…

FOR THE SECOND YEAR in a row the Narendra Modi government met its disinvestment target. Days before the end of 2018/19, the Power Finance Corporation (PFC), a public sector enterprise, bailed out the government by acquiring 52.63 percent shares in Rural Electrification Corporation (REC), yet another state-owned power infrastructure finance company, for ₹14,500 crore. The total value of disinvestment proceeds for the whole year has touched ₹83,523.14 crore – much more than the ₹80,000 budgetary target. It will definitely help the government stick to its fiscal commitments; and perhaps is the only motive driving the government’s now familiar pattern of meeting disinvestment targets through a mix of initial public offers, buyback of government shares by PSEs, exchange-traded-funds, and the sale of stake the government holds through the mutual fund Specified…

INVESTORS ARE JITTERY. The yield on 10-year US Treasury notes has slipped below those of three-month notes, forming an inverted curve that has historically preceded a recession in the US economy. While there have been exceptions in 1966 and 1998, the inverted curve this time when US economic data is throwing mixed signals becomes significant. The US Federal Reserve was quick to assess the situation. It signalled no rate cut for this year against the market expectations of one. The US Fund futures are pricing in 60 percent chances of a rate cut by December. The slowdown in China and Germany along with uncertainty around Britain’s exit from European Union have only compounded to the worries. A global growth slowdown may indeed hit India, but a prolonged inverted yield curve…

THE GOVERNMENT has given developers the option to either levy 12 percent GST on under-construction houses and take input tax credit (ITC) or go for 5 percent GST without taking ITC. While it may seem that it has done builders a favour by giving them a choice, it is ultimately customers who will decide what GST developers can charge. That is because property prices have been stagnant for three years. With the massive unsold inventory that developers are stuck with, real estate is now a buyers’ market. Developers will have to charge what customers are willing to pay, and it is the lower rate of 5 percent. This will also benefit developers as sales and customer advances will increase due to lower taxes, resulting in less dependence on debt. With…

INDIA HAS PICKED UCO Bank to facilitate payments for crude oil from sanctions-hit Iran. A floating fund of roughly ₹13,000 crore and that too with zero cost will ensure operating profits of additional ₹500 crore. Insiders say just this one ledger entry may help UCO Bank break the jinx – it has posted losses continuously for the last 13 quarters. The bank is facing heavy losses with 27 percent of its assets turning bad. UCO Bank, with no exposure in the US and limited overseas business, can afford to circumvent the sanctions. In March this year, the IDBI Bank too got a go-ahead to facilitate Indo-Iran trade but since petroleum and related products are the big-ticket item on the tradesheet, UCO Bank is likely to walk away with the lion’s…

WHEN THE 2014 ELECTIONS were fought, there were a number of factors that gave Candidate Modi and the BJP an overwhelming edge. One was the sagging economic record of the incumbent administration, the UPA2 government’s inability to suggest any solution for that – and of course, the political paralysis. There were scandals and corruption allegations in key economic ministries. Job creation had slowed, petrol and diesel prices had shot up, and inflation remained stubbornly high. Fiscal deficit was also high, as was the current account deficit, though the then Finance Minister P. Chidambaram was trying to tame it. Apart from the BJP’s ideology and grassroots army, Candidate Modi had a simple message that resonated with large sections of the electorate – the promise of Acche Din. Candidate Modi talked of…

THE GOOD Exports to touch $330 billion in 2018/19, the highest ever, in spite of rise in protectionism across the world and fall in crude oil prices which reduced the value of fuel that Indian refineries export THE BAD The figure is close to what was achieved in the last year of the previous UPA government; this means five years of very low growth India exported $16.8 billion worth of readymade garments in 2014/15. In 2017/18, this was $16.7 billion. Leather exports fell from $6 billion to $5 billion…

GST THE GOOD Unified tax rates across the country; each transaction getting recorded; movement of goods faster across state borders THE BAD Multiple tax rates make compliance onerous: too many rate rationalisations are impacting tax buoyancy and making compliance difficult; formalisation slowed due to exemptions and delayed implementation of anti-avoidance steps IBC THE GOOD Creditors get control of the resolution process; timelines make resolution faster; anyone can initiate insolvency proceedings against a corporate debtor, whether it is vendor, employee or government agency THE BAD Suspending the board and asking resolution professionals to run the company during insolvency make the process difficult; too many liquidations; loopholes allow unscrupulous promoters to game the system…

Q: How do you connect with strangers? Reaching out to people and showing interest in their lives often look odd. Can there be a sense of camaraderie in random scenarios? A: I smile and talk to people all the time, and about 90 percent respond positively. As for the 10 percent who don’t, well, it speaks more about them than us. Try leading with a question as there is nothing weird about it. The challenge is that everyone is waiting for the other person to go first, and nobody does. Q: How should we deal with negativity? A: Think of a man who does not like his job but cannot resign because he has a family. In such a case, he must give his 100 percent to the job. He…

India is working hard to change the pattern of its weapon procurement. The short-term objective could be a diversified base of foreign suppliers which would reduce the country’s over-dependence on Russia and open up the market further to Western countries. But its long-term goal seems to be sourcing from homegrown vendors to fulfil its defence needs. In strategic areas such as nuclear weapons and ballistic missiles, the country has already indigenised design and production due to the prevalence of global curbs on any defence supply which may lead to development of such weapons. Now, India is also pushing for Indianisation of key defence platforms. The Make-in-India initiative of the Narendra Modi government is a step towards this direction. The government is restructuring defence manufacturing units and reorienting its policy towards…

THE VERY IDEA OF A ROBOT conducting a job interview would unnerve most people. Of course, it is becoming commonplace for robots like Sophie and Pepper to be interviewed by humans, but one rarely finds a robo interviewer shooting job-related questions with no big bosses in sight. But all that may change soon. TNG, one of Sweden’s largest recruitment firms, is trialling Tengai, a robot that will ask an interviewee all the right questions. The goal is not to save the time of senior leaders or cut down on costs but to eliminate bias from the job interview process as much as possible. No matter how objective humans try to be, they cannot control their subconscious bias. A hiring manager can react to a candidate’s appearance, accent, gender, religion, ethnicity…