Showing posts with label China. Show all posts
Showing posts with label China. Show all posts

Wednesday, February 6, 2013

Indebted and inequitable?

The lack of capital is a serious blot on India’s entrepreneurial growth story. Small and medium enterprises have a very faint idea about organised sources of finance, leave banks. It’s time for the establishment to look into this in an extremely urgent manner

Entrepreneurship. It’s a word that inspires much excitement, and symbolizes the aggression, dynamism and can-do attitude that most of us would like to be associated with. But then again, it’s an ocean that few dare to plug in.

To an economy like India, which has, unlike China, succeeded despite its political class, rather than because of it, entrepreneurship is a valuable enabler for its bottom up economic growth story. Right from the travel agency with a single computer office to software giants like Infosys and Wipro, the potential of entrepreneurship in our country is far more evident today than it was two decades ago.

Backed with a wealth of precedents, and with a resilient economy, one would like to believe that it’s an iterative loop with businesses being set up and scaling at a massive pace. We need both these things to happen at a ridiculously fast pace to solve India’s problems of wealth creation and poverty alleviation. There’s no dearth of talent, ideas or the will. But as B&E analyses after a considered study of various trends, the ability to raise capital, as well as the nature of the capital being raised, are two critical hurdles that continue to stymie the pace of Indian business.

Firstly, it’s the nature of capital. As Bloomberg’s League Tables for 2009 pointed out earlier this year, India’s capital raising pattern for the year was an amalgamation of change and consistency. QIPs emerged as a major route for raising capital, as Rs.341 billion was raised through that route. But overwhelmingly leading the pack, as usual were domestic bonds (debt), through which a massive Rs.1.45 trillion was raised. QIPs were followed by domestic IPOs (Rs.193 billion), overseas equity (Rs.155.13 billion) and overseas debt (Rs.83.55 billion) in the pecking order.

This scenario brings to light a number of issues, particularly for potential start ups and SMEs (which account for 90% of Indian industrial units, employ 33 million people and contribute 35% to India’s exports) that are looking to scale up. An overwhelming reliance on domestic debt fuelled growth has its disadvantages; especially considering India’s relatively high interest rates. But even when lower interest rates are available outside, most Indian companies haven’t yet considered taking that route as the data shows.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Tuesday, January 22, 2013

China 1989-2009 Heading for TIANANMEN Square part-II?

The memories are scattered and yet intense in fragments. We (a few young journalists) were sitting inside the decrepit and fashionably shabby Press Club of India in Delhi. The debate was about what exactly was happening in Eastern Europe and China and how Mikhail Gorbachov was bringing radical changes in the world of Communism. The discussion inevitably veered towards China where a group of students had led a protest movement demanding more accountability and more democracy from Chinese leaders. Most of us thought that the presence of hundreds of thousands of protestors at Tiananmen Square would inevitably lead to democracy in China. Just then, a senior sauntered in and gave us a lesson in realism by announcing that tanks had rolled into the square and hundreds of protestors had been killed.

The day was June 4, 1989. The bamboo curtain came crashing down on the Middle Kingdom and censorship ensured that not much was known about what really triggered the Tiananmen Square protests. It is only subsequent research by scholars that revealed why China was ready to explode in 1989. After ten years of rapid growth and growing employment opportunities since 1978 when Deng Xiao Peng unleashed economic reforms, the Chinese economy tanked in 1988-89. The GDP growth rate crashed and unemployment soared. Rapidly rising inflation too added to the woes of the Chinese. Then, there was massive anger at widespread corruption and cronyism in the Communist Party. Educated Chinese started thinking seriously that they were paying a heavy price for the economic downturn while those favoured by the party were having a ball.

The most agonising question that must engage all those who care about the future of the world is: Are conditions in China in early 2009 similar to what prevailed 20 years ago in 1989? The more important follow up question: how intense and widespread will the protests be in 2009? The most important question is this: How will the Chinese State now handle the protests? Will Tiananmen Square of 1989 be repeated or will China ‘manage’ to control the looming unrest by moving towards ‘more’ democracy and personal freedom?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Friday, November 9, 2012

RESURGENCE: INDIA

While the West is both excited and paranoid about India’s potential, the average Indian is still not empowered as the polity continues to wither India’s intrinsic potential...

Don’t you see the way they are encouraging the formation of smaller countries like Kosovo? All the jobs are in any case shifting to your country and your neighbour? And now what is that is left to learn?’ Such replies are common and not unjustified either. But it also proves the sheer irony and vindicates the old adage which says that the grass is always greener on the other side of the river. So when young Indians going on a sabbatical, trying to escape from the Third World dust to learn from First World serenity but get greeted with such accolade, admiration and praise about the potential of India, after a long time the pride of being an Indian has its visible impact on the glowing faces, something which is even bigger than the impact created by India’s crushing of the Australian cricket team.

As a senior Indian official in France would put it that the perception about India in Western Europe can be distinctly divided between the phase before 1998 and the one after that. Before 1998, for the first 50 years India was more of an economically poor but culturally rich nation of philosophers who distinctly had a paradigm impact on modern Europe. India in those days was synonymous with mysticism, being a country known more for black magic, snake charmers and tigers than for its soft power and software. Yet 1998 and the assertion India made with its testing of five thermonuclear devices changed it all. Here was a country which through those tests was asking for its legitimate rights and venting out its frustration against a world which never paid heed to its concerns of terrorism and threats from China. It wasn’t just the nuclear test but the economic embargo in its aftermath imposed by the Americans and its stooges that made all the difference and that exposed the fundamental strength of an otherwise shy and a reclusive India. One has to remember the sheer impact of economic sanctions when imposed by Uncle Sam, something that crippled Iraq for a decade due to the oil embargo. It caused the death of thousands of children owing to lack of basic medicines and Iraq was doomed for ever. Yet when those same sanctions were imposed on India, the loss to American companies in terms of cancellation of governmental contracts was more than what a resilient India suffered. By then, seven years of liberalised economy had already solved the problem of forex reserve and to mitigate any eventual problem of the future, the government of India issued Resurgent Indian Bonds to be subscribed by the Non-Resident Indians. The bonds were over subscribed and ironically by the NRIs from USA being one of the largest contributors. Unlike Pakistan, India was not reduced to an Iraq by the crippling sanctions. On the contrary, US had to backtrack. Within a couple of years, the then American President came dancing to India.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
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