Impact of History on Economy of India

Well one of my friend once asked me that he wants to learn more about the Indian economy and he asked me how to approach. I told him that he has to first learn about the history of India to understand the economy of India.

History has an impeccable influence on the current state of economy of India. To start with Indian was never a pure agriculture based society even in the ancient history. Even in ancient times, we have a full fledged industry dotted by medical practioners, goldsmits, textile, services etc. In fact India was perhaps more vibrant economy than the west till late 1000 AD. The real decline of India started after the plunder of the wealth by the invaders from current Afghan region. Later on Muslim rulers, made the real dent, they robbed India of the trust and social coherence factor, most critical factor for business to survive. Crony Capitalism entered India for the first time during Akbar regime. Akbar was afraid of the Hindu strength and hence he started a lot of equity related reforms. Most of the rules in business space was influenced by the interest of the courtiers.

Though Mughals plundered India to satisfy their whims and fancies (100 wives of Akbar, 40000 people for Taj Mahal are proof of this), the English were planned in their plundering of India. They systematically introduced the private land ownership, substituted the Indian handicraft industry

He has read a lot of Gandhi and was confused as "Why India did not adopted the Gandhian Model of development after independence?". Gandhi model of development was decentralized (Sarvodya - Gandhi translation of Ruskin Bond "universal uplift" of "unto the last") by Nehru's model ended up being  that of centrally strong planned economy. One strange question was regarding the 5 year planning process. Nehru had nostalgia of "centralized planning" from his appointment as chairman of "National Planning Commission" in 1938. Though this has been copied from the Russian Model of economic planning, it has unique Indianess in that Nehru could not dare to challenge the established big corporate houses of that time. Corporate houses have used the congress leaders as a deterrent to some time protect their interests. In fact Nehru (as well as congress) was heavily under influence of the "Bombay Plan" of influential corporates of that time under leadership of Adarsh Dalal.

Crony Capitalism strengthened its roots once again when same Adarsh Dalal was made chairman of "Planning and development department" in 1944. Gandhi has a different opinion as stated by the S.N. Agarwal and M. N. Roy in 1944 to promote
1. Small Scale
2. Labor Intensive
3. Rural Industry

Central Planning was key to Indian economy till 7th plan and was replaced by "Indicative Planning method of France" in the 8th plan.

The Role of Management Consulting | 6 AM Pacific

The Role of Management Consulting | 6 AM Pacific

The above is an intelligent piece of analysis. There are 2 very important pieces.

It is widely known that MC (Management Consulting) firms works closely with the companies and clients. This way they bring a lot of information from industry to the companies, but at the same time, they take out a lot of information (read secrets). Its for the companies to analyse whether there are on the winning end of this balance.

http://www.ft.com/cms/s/0/144e6728-4a87-11e0-82ab-00144feab49a.html#axzz1GFw13xEE


Secondly, MC provide core strategies to the businesses. This marks a big question on those businesses themselves and more so on their leaders. If some company hires an MC, it has surrendered to its useless leadership and accepted external help. The big question is what kind of future, the company holds with such leadership. No wonder why so many company failed to implement or achieve what MC has professed in their glossy PPT's. Even there is a growing outcry against MC's by companies such as Coco-Cola, GE, Arcelor Mittal etc.

But I want to add something here. Actually, MC's are really good but only if they are used as a tool. Having myself worked in MC, I can tell you MC can be helpful, but only if there is a strong leadership at the company to monitor an Consulting Engagement.

My German friend told me that 2 biggest reasons for success of Germany vis-a-vis other western world is
1. Board seat for Employee representatives (which no MC will advise for)
2. Never hire MC's (though they hire lot of Process Consulting firms and Technology Consulting firms)

McKinsey Engagement: Exclusive Behind-the-Scenes Story | Firmsconsulting – About Management Consulting

McKinsey Engagement: Exclusive Behind-the-Scenes Story | Firmsconsulting – About Management Consulting


I really found this post as a true picture of a consulting assignment. It may be a bit pro_McK but still good insight. The real picture is bit more dirty than this and their is lot of CCP (Cut Copy Paste) in consulting assignments. Recently a lot of consulting firms esp Mckinsey have been blamed for plagiarism (self-plagiarism more often),cheating, insider trading and cross selling secrets (Bench-marking in good words)

Plagiarism at Indian Schools

Today, when I was doing some browsing about the success factors for a successful M&A for Indian companies, JLR came to my mind. I first came across a research report by an Investment bank and then a project report by some IIT/IIM students. I was shocked that these project reports were copied word by word from the Investment bank report.
http://www.slideshare.net/purval/tata-motors-jlr-deal-part2
http://www.scribd.com/doc/9156583/Merger-and-Acquisition-Tata-Jlr-garg
These students would have been turned out of school if it would have been any global Business or Technology school. There is zero (and it is definitely 0) tolerance for plagiarism at any top school, but that is not the case at premium schools in India.

Well I never want to badmouth the so called premium institutes in India but then this does not mean that we become irrational. They are degrading in quality and reports about this degradation are surfacing in media. Just 2 days ago, Jairam Ramesh spoke something, which everyone knows – “Faculty and Research at IIM’s and IIT’s sucks”. There were reports of IIT’s thesis being copied and other. IIT Kanpur recently was in media for a copied thesis case. 2 days ago Sandeep Dikshit voiced the same about a reputed college.

Hope Kapil Sibal, Minister – HRD is listening and start doing something radical instead of fighting with Jairam Ramesh..........Ha Ha .......I am definitely away from any politics

What I learnt most from my MBA?

1. Structuring of my thought process - I was doing a lot of Stakeholder management in HPCL. But I was doing it based on my intuition. During my MBA, I learnt how to identify relevant stakeholders, prioritize them and map their actions based on incentives.

2. Holistic View - I used to see business as marketing and sales in Silos, but I learnt in my MBA that they are just a tiny cog in the whole business dynamics, which involves a lot of interactions between various business functions. For Example, Finance is an important consideration for designing marketing strategy to fix margins and potential investments

3. Global View - My international colleagues and my Exchange provided me an opportunity to gain view of the world as a whole. I was able to appreciate the impact of the financial crisis in Europe, by seeing their state welfare programs. On business front also, I was able to appreciate why Germans are so competitive that rest of Europe- It is the presence of the unions on the secondary board of companies.

Is Recession Round the corner?? - Part 2 (Slowdown)

This is in reference to my earlier article on recession. Now I am bit convinced that India is on edge of a slowdown at least for the moment

http://luckylehana.blogspot.com/2011/04/is-recession-round-corner.html

Consider these
1. Real Estate Slump – After a booming 2010, there is considerable overcapacity in Real Estate, which have been responsible for revival of downstream industries such as Steel and cement.

Cement have already shown that the overcapacity will push the margins downwards
http://www.moneycontrol.com/news/business/india-cement-sector-to-see-overcapacity-aheadfitch_437483.html

A very good note
http://www.thinkindia.net.in/2010/08/an-unreal-market-.html

I have myself taken note of the situation – The labor costs are cutting the margins of the small business owners

2. Governance Issues – I think (my personal opinion) Congress is responsible for many of the woes India has currently. I have lost the count of the scams and Congress leaders are still hiding around (including Manmohan, Sonia and PC). They are shedding their responsibilities by playing aloof.

Anyway, I think there are more 2G, CWG, Adarsh in the bag.

3. Outflow of Funds – India is the only BRIC country to have net outflow by FII in 2010-11. This indicates that the FII does not believe in the Indian story or they are scared away by the 2G, CWG etc

4. Inflation – I don’t buy the contention the inflation in India is only due to poor Supply Chains. Having seen the loosing of purse by the Government in 2008-09 for the cheap lending and popular schemes, I am convinced that wrong fiscal and monetary policies are responsible for this monster

I consider Inflation as the worst factor to derail the Indian growth story.
Inflation is nothing but redistribution of wealth. Inflation makes worth of the currency you hold to tumber but increases the worth of the land and the house you are building to increase. A real estate developer (assuming input prices takes time to increase) gains in real terms through inflation but the workers and the engineers working for him loses in real terms through inflation. So, inflation is equivalent to shifting of economic benefits from a lagging earner to a leading earner.

Unfortunately, increase in wages is a lagging indicator in economic recovery. Hence, wage earners will be the one, who will suffer the most in an inflation cycle.

Is Recession Round the corner??

I was thinking about the business situation in real life and found a very interesting case in my home only.

My brother has an AC sales, distribution and repair business in Gurgaon. In last 5 years, he had seen his percentage margins going south slowly but steadily. The trend accelerated in last 2 years due increase in
1. Cost of Capital (10% Fixed income rates in India)
2. Cost of Labor

The repair is the worst hit business as cost of spairs and labor cost of mechanic has increased by 100% literally, while the unit repair rates are pretty same. Much of it has to do with the 15% food/commodity inflation in India. He has to decide to either run at loss or shut down repair business totally.

I am not sure what is the way out of this situation. I have advised him that Recession is round the corner. Wait for the inputs to subsidize.

Things apart, some of the concepts of marketing such as finding blue ocean of niche segments seem to be too hard to implement if you just have 0.001% of the highly fragmented market.

Short USD Long Yen, Major Asian Currencies

Just an hour ago, US Dolloar (aka Treasury) is downgraded for the first time by US based agency - S&P. Though it has already been downgraded by the biggest investor in US economy - China. When this happened some 6 months ago, almost all my American Classmates at my Alternative investment class, in Kenan Flagler Business School, UNC were of the opinion that this is none-sense and nobody cares a damn about Chinese downgrade.

I argued a bit but then there were people, who believe that they have better knowledge of the financial world. This points out one of the biggest problems with US business Schools Graduates. They operate as just like Muslim Ghetto's and believes the world outside the ghetto is stupid. THANK GOD, I went to CEIBS to get broad outlook of world rather than narrow US based outlook of world.

Anyway, its time for some quick buck. I am sure many long-short macro funds would have milled millions by now.

Unemployed from last 2 years

Last 2 years have been wonderful journey. I went to CEIBS for my MBA with both sweet and bitter experience. This included a brief stint of 5 months to US at Kenan Flagler Business School, University of North Carolina.

From last 2 years, I have been away from the regular hectic life of being in a job and doing something which you do not enjoy sometimes. Last 2 years were bit unique in the sense that I was doing only what I really want to do. For Example - I did 3 internships during my MBA and 4th just after my MBA. This is sort of a record but I really liked working on these small projects. I believe that I have created strong impact in 2 of my internships.

This made me to realize that this unemployment of last 2 years have made me to realize something unique about me that I yearn for and enjoy creating impact. The next big challenge would be to maintain the same enthusiasm of creating impact in short span of time, when I join a new job.

I thank my luck for being unemployed for last 2 years.