Govt still very important for business

Ratan Tata immediately after taking over as Chairman wrote a letter to PM Modi. Yesterday he called on the LIC ( a govt Financial institution ) Chairman.

If even after 25 years of so called liberalisation, such events are happening with the largest business house of India, what does it tell us about the role of govt in business. Government is still very important. The difference between PSUs and public limited companies is not much in India. In PSUs, govt owns the stakes directly and in public limited companies, indirectly via the public FIs.

The mandarins in Delhi need to be kept in good humour if you have to do business in India. Why are we surprised that India still ranks low in ‘Ease of doing business” Social media campaigns and conferences have not changed the things on the ground. Tata actions is just one example.

Update on ‘An enigma called Siva’

C.Sivasankaran ( better known as Siva) is in the news for his mention in the Tata vs Mistry saga.

 

Many years ago I wrote a post on Siva in this blog, that I rarely update these days. Siva was known for his friends like Tata, Ruia, Mallya and Subroto Roy. I am indeed chuckling when I read my own comment “He has a friend in Mr Tata, whose sense of ethics and morals are unquestionable”.

 

Much has transpired after that. The 2G scam broke out. The Radia tapes happened. Siva declared himself bankrupt in 2014 in a Seychelles court ( He is a citizen of Seychelles).in order to avoid paying his dues to his creditors, which includes Tata Capital.In 2016, this bankruptcy order has been lifted. Siva is back in business launching a taxi aggregator in Chennai called UTOO, competing with the likes of Uber and Ola.

 

Eight years ago when I wrote it, I saw him as an enigma but today I am more likely to put him in the cabal of crooks with his friends like Mallya, Ruia and Subroto Roy.

 

https://secondtake.wordpress.com/…/an-enigma-called-siva/

The Infosys Board Reshuffle : Such a Damp Squib

The much awaited board level changes at Infosys has been announced.  Though the company has called it” Continuity with change “, it is more of continuity and less of change. Thus making it a non-event. Not unlike the recent cabinet reshuffle by Manmohan Singh. The recent resignation of Mohandas Pai from the board was a far more interesting and news-worthy event.

These board level changes were preceded by a huge media build-up. The succession planning  for Narayana Murthy at Infosys was compared with the succession planning at the Tata Group for Ratan Tata. There was a committee appointed under the leadership of Jeffrey Lehmann. After all the deliberations, they have chosen K V Kamath as the successor of Mr. Murthy as the Chairman of Infosys. Mr. Murthy however does not leave the company entirely, he will continue as Chairman Emeritus. However hard he tries to portray the image of a great renouncer, Infosys and NRN refuse to leave each other.

Mr.  Kamath, the Non-Executive Chairman of ICICI Bank has already been a member of the Infosys board since 2009. Among the non-founder directors on the board, Mr. Kamath was the only serious contender. All the other board members like Omkar Goswami , Rama Bijapurkar, Marti Subramanium, Mr.Lehman himself are either academics or consultants. None of them have any experience of chairing any large company board. If Mr. Kamath were the only pragmatic option left, was there really a need for such a media build-up?

If any contest was there, it was perhaps there between Mr Kamath and Kris Gopalakrishnan, the current MD and CEO. Even that choice has been obviated by announcing Mr  Gopalakrishnan as the Executive C0-chairman.  Shibulal takes over from Mr Gopalakrishnan as the MD and CEO.The Putin-Medvedev combination of Mr.Gopalakrishnan and Mr. Shibulal will continue to be present as Co-chairman and CEO, instead of CEO and COO. By not announcing a COO , the perception of status quo remains. If they had announced a COO, at least that would have been interesting as there are no other founders left. The only remaining founder director, Mr S.Dinesh quit as Director recently citing personal reasons. 

This blogger believes nothing much will change. An opportunity to reinvent Infosys through top-level changes has been lost. The company and the minority shareholders thereby have become a victim of the arrangement between the founders to take the top-job at Infosys by turns. It is absurd that the least capable among the founders ( a ranking which the founders made among themselves ) takes over the leadership position of the company when it has become huge. As Mr. Shibulal waited for his turn the company grew from a mid-size company to become a US 5 Billion $ company. His patience has been rewarded. But what about the other stakeholders? Thank God or shall we say thank K. Dinesh, that there are no more founders waiting for the top job.  

– G.Mohan

Why Egypt’s Revolution Should Haunt the Indian IT Industry

The revolution in Egypt is a historic event. A ruler of 30 years was overthrown by angry youth, who were not even born when Mubarak became President. These youth did not come under a common banner, nor did they have a leader. The despair was building up perhaps, for years. Social media like Facebook and Twitter helped them to find that there are many who felt the same. Some courageous young men like Google employee Wael Ghonim came out in the open. They got support from elders like Mohamed El Baradei and even the oldest political group, Muslim Brotherhood. The repressive Mubarak govt, tried to curb them by arresting Ghonim, blocking Internet and banning Al Jazeera to telecast news etc. Yet, these young people took control of Tahrir square and without worrying about the consequences were able to overthrow Mubarak in 18 days.

The anger and frustration of this youth emanated from many sources. Firstly, they felt stifled and did not feel free. Secondly, despite so many years of freedom, the unemployment was running high and their economic lot had not improved. Thirdly, their ruler Mubarak and his cronies around him had amassed huge wealth and stashed them abroad. Fourthly, the geriatric rulers just could not feel the pulse of the youth.

Before the Internet era it would have been necessary for these angry citizens to meet, discuss, organize themselves and then plan a revolt. Meeting even secretly and organizing themselves in a dictatorship like Egypt would be at great risk to life and property. Thanks to the social media, it is possible for people to meet virtually, just as they are going about their jobs and yet plan for a revolt of the kind Egypt saw.

Indian IT services companies today are large with the big ones having employees of more than 100,000 each. These companies thrive on a very young employee base. Average age of employees in many of these companies would be around 27 years. The average employee of these IT companies is part of the Internet generation.

Most large IT companies, as per company policy, do not allow access to any of the social networking sites. The stated reason is to maintain confidentiality of client information and to improve productivity. The unstated reason is not allowing their young employees to connect, form unions and express dissent of any kind.

Yet, employees are active on the social networking sites using their smart phones, home computers or even wireless modems on their laptops. When 3G will be launched India wide and gains popularity, this will become even easier. Being young they are, many might be today using them only for dating and generally socializing, but if the despair builds up these networks can easily find other uses.

Although, the despair among the employees in IT companies is nowhere near the boiling point reached in Egypt, there are a few areas which need attention. Firstly, most companies particularly the older ones are very hierarchical and do not allow the young employees to complain or give suggestions. They are just expected to take orders. Dissent is not encouraged and often punished. Secondly, the top management is from a different generation and often quite disconnected with the aspirations and frustrations of an average young employee. Thirdly, the CEOs reward themselves with huge salaries and commissions even during recession, when the salaries at lower levels are frozen. This is noticed and employees just gripe about it. Fourthly, cronyism is rampant and meritocracy is just for lip service. Their legitimacy is often questioned by the young employees, in private. Lastly, just like Mubarak’s focus to keep US happy, the top managements are focused on keeping the analysts and shareholders pleased, even at the cost of employees.

The HR departments of most IT companies are just efficient recruitment engines. They are quite occupied doing routine administration and processing. They just do not have the understanding nor the capability to manage the large human communities these organizations have become.

The HR managers will be found wanting if an Egypt like revolt erupts in their organization. They will have to go hiding behind their pile of PCMM certificates and 360 degree appraisals.

– G. Mohan

Is Cricket the Only Meritocracy Left in India?

Several authors and columnists have commented time and again that there are three obsessions that connect middle class India,   politics, Bollywood and cricket. If you suddenly are surrounded by strangers (relevant for males only) at an airport or a train journey and have to strike a small conversation, you will rarely go wrong with any of these subjects. Indians are passionate about them and almost everyone has a view.

These are nice pastimes and interests for the common folk to gossip. But when it comes to a career in any of these areas it is a totally different story altogether. One is confronted with barriers, real and imaginary.

In a democratic country, which got its freedom through a mass struggle, one would imagine that everyone had a equal chance of making a career in politics and rising up the ladder. It is far from true. It is increasingly become a closed club of sons and daughters of politicians, cutting across party lines. In a recent book, India : a portrait, Patrick French, excerpts of which has been carried by Outlook, French has analysed the backgrounds of all the members of the current Lok Sabha and has found out the following :

Every MP in the Lok Sabha under the age of 30 had in effect inherited a seat, and more than two-thirds of the 66 MPs aged 40 or under were Hereditary MPs.

French goes on to say that :

 What was the effect of a closed structure on bright, qualified people who might otherwise have entered public service? They knew they were more likely to get a break in business, or in a stable profession, than in this hereditary system. A stream of potential talent was diverted at source, away from politics.

If one looks at Bollywood, once again it is pretty evident that the top reaches of the star system belongs to the families. But for an odd Shah Rukh Khan or an Akshay Kumar, almost every other top ranking male hero is related closely to the member of the film industry. In which industry or profession, would an Abhishek Bachchan have survived for over 10 years, despite so many flops?

In the case of female top slots, where more than talent , it is beauty ( or whatever is perceived to be) that is an essential requirement. Here the beauty pageants like Miss India contests have thrown up a few top stars, who did not belong to any of the existing families for e.g., Aishwarya Rai, Priyanka Chopra. It appears the meritocracy and recognition of talent is more in creative departments like direction and scriptwriting.

There is some hope for a middle class Indian to make it big in cricket, on the basis of merit alone. During the recent IPL auctions in Bengaluru, where different IPL franchisees bought players for their teams, it became clear that player prices were largely based on merit (or perception of merit by the franchisee owners). The player to fetch the highest contract fees was Gautam Gambhir, a sum of US $ 2.1 mn. Gambhir is young. He is talented, captained India successfully as a stand-in for Dhoni. Gambhir is a first generation cricketer from an upper middle-class Delhi family.   

Umesh Yadav, a fast bowler from Vidarbha, whose base price was only US $ 50,000 was signed up by Delhi daredevils for a whopping US $ 750,000. His profile from Cricinfo is given below:

Less than two seasons after fast bowler Umesh Yadav first played with a leather ball, he was bowling against the likes of Rahul Dravid and VVS Laxman in the Duleep Trophy. What makes his ascent even more remarkable is that he represents unglamorous Vidarbha in the Plate League of the Ranji Trophy. He is the son of a coal-mine worker and was aiming to become a policeman. He only started considering a career in cricket as a 19-year-old, an age by which the best young Indian cricketers are in the running for a national cap. He bowls from wide of the crease, and his usual delivery is the one that angles into a right-hand batsman. He is capable of touching the 140kmh mark, and also possesses an effective bouncer, qualities which helped him take 20 wickets at 14.60 in four games for Vidarbha in his debut season in 2008-09. While he made waves in the domestic scene, Umesh really caught the eye during IPL 2010, where he impressed a much wider audience with his pace for Delhi Daredevils. He finally broke into the big league, when he was flown to the West Indies as a replacement for the injured Praveen Kumar during the World Twenty20 tournament in May 2010, and earned his first call-up to the India Test team for the tour of South Africa in November the same year.

Alongside the success of Gautam Gambhir, Umesh Yadav, Saurabh Tiwary, Yusuf Pathan, Rohit Sharma etc, IPL-4 auctions also snubbed the likes of Ganguly, Dravid, Laxman, Ishant Sharma etc who are perceived as spent forces/ short on performance.

 If cricket was run like politics or Bollywood, Rohan Gavaskar and not M S Dhoni would have been leading the Indian team.

– G. Mohan

Hyderabad Blues

On November 2, most newspapers in Hyderabad carried the news about the dismal performance (21 all out) by the Hyderabad cricket team in a Ranji match against Rajasthan. Debutant medium pacer Deepak Chahar ripped through the batting line-up to give Hyderabad the dubious distinction of scoring the lowest ever score in the 70 + years of Ranji trophy history.

This is almost symptomatic of the lows the city has been experiencing for the last two years.

Last year just after the Satyam scandal broke out I wrote a piece called Brand Hyderabad in Tatters. Things have not got better for Hyderabad. If anything, it has got worse.  

The untimely death of the Chief Minister YSR in a helicopter accident in September 2009 was perhaps the start of a political and administration decline in the state. Although, the Congress government remains firmly in saddle, the current Chief Minister hardly inspires any confidence in comparison to the charismatic CMs of the immediate past like YSR or Chandrababu Naidu.

The Telangana agitation has gathered momentum since end 2009 and the city has experienced repeated bandhs and tension is palpable in the city during important dates such as November 1st, the AP formation day. Many investments in the city have been put on hold waiting for the decision of the Justice Srikrishna committee which is expected to release their report in December 2010.

The SKS Microfinance IPO, a Hyderabad HQ co, was a major success. But, instead of paving the way for many Hyderabad microfinance companies to go for an IPO, there are huge controversies surrounding the entire microfinance business. SKS has only left a bitter after-taste in the mouth. SKS once again puts a taint on the Hyderabad brand.

The uncertainty about the future of the city has led to many investments moving away from the city. There are huge vacant spaces in the Hi-tech city and in the commercial hubs. Hyderabad had the largest number of IT-SEZs approved. Majority of these projects are in limbo.

In IT , Hyderabad’s loss has been the gain of Chennai and Bengaluru. In the case of pharmaceutical industries, many investments have moved to the Vizag the pharma city. Inspite of a automobile boom in the country, there is no automobile industry in the state. Hyderabad just remains a big consumer of cars and two-wheelers.  Not only investors have fled, the students of engineering , MBA, MCA have also decided to move out of the state in droves to join colleges in the neighboring states.

In the last one year, opening up of the India office of Facebook is perhaps the only major new foreign investor coming towards the city. Whereas, in terms of policy, nothing major has changed, the perception about the city and the state has changed for the worse.

One indicator of  how the city is perceived can be made out by the fact that the US President Barack Obama has given Hyderabad a miss unlike his predecessors Bill Clinton and George W Bush.It appears it is no longer a hot destination for US businessmen.

Hyderbadis can take inspiration from their Hyderabadi sport stars Saina Nehwal and VVS Laxman, who have demonstrated great strength of character in the playing field, that you can always come back from behind. Being down is not being out.

– G. Mohan

Will Indian Billionaires Sign-up for the Gates-Buffett Pledge?

 Bill Gates and Warren Buffett are not only the two richest guys in the planet, they are also the most generous. Apart from donating their own wealth, now they have started a campaign to enlist billionaires to pledge more than half of their wealth for philanthropy. In US, already they have received a good response with 40 signers which includes big names like Michael Bloomberg, Pierre Omidyar, David Rockefeller, Sandy Weill, John Doerr etc reports Wall Street Journal.

Bill Gates and Warren Buffet, now intend to take this campaign global. They are slated to visit China in September and India in March 2011. India is home to 52 billionaires as per the latest Forbes list of March’10. It has two names in the Top Ten viz.  Mukesh Ambani and Lakshmi Mittal. Hence their trip to India is a logical idea.

The question to ask is will any of the Indian billionaires sign up this pledge. One WSJ blogger Devin Banerjee has already asked this question and has asked the billionaires themselves. According to this post :

Spokespersons for the wealthy Indians contacted by India Real Time, who included Mukesh and Anil Ambani, Azim Premji and Sunil Mittal, danced around the issue or declined to comment. Requests for comment from seven Indian billionaires weren’t returned, and a spokeswoman for Dilip Shanghvi, chairman of Sun Pharmaceuticals, whose net worth is estimated at $4.6 billion, said Mr. Shanghvi “would prefer not to talk on personal philanthropy.”

The same post quotes Emily Harrison, founder of Innovaid, a Mumbai based consultancy for advising high net worth individuals on charity, “I don’t think they’re ever going to pledge half, even though I would love to see that.”

I will also be totally surprised if any billionaire signs up for the Gates-Buffett pledge. 

Indians and Indian rich in particular, give away a very small fraction of their earnings to charity. According to a Bain study, quoted by the above mentioned post, only 10 % of charity in India comes from individuals and companies in contrast to 75 % in the US. In India, the biggest donor is the government.

As to why they do not give in charity. Here is my take :

• At this stage in India’s growth, the billionaires are still accumulating wealth. The market economy has really come into its own only in the last two decades. So, the billionaires are spending money on themselves through conspicuous consumption through swanky bungalows, personal planes, fancy weddings etc. This is almost in revolt to the years of repression due to MRTP or penal income tax and other socialistic policies.  
• Even among the billionaires who do not wish to flaunt their wealth ( for e.g. Azim Premji), bequeathing their wealth (shares in their companies) to their children is top on their agenda. The inheritors of the rich not only inherit the wealth, they also get control and management positions by virtue of the shares they get from their parents. Business families may allow the companies to go to seed by having worthless inheritors ( e.g., the Dalmias ) but they would not give their wealth away for charity. If there was an inheritance tax in India, perhaps Indian rich may not accumulate so much wealth for their children. 
• Most Indians and Indian rich are Hindus, by faith. Unlike Islam, Christianity, Judaism which prescribes a portion of the income to be given away to charity, Hinduism does not give any norm. Whereas charity and generosity are seen as a virtue in Hindusm, it leaves it to the individual. Thus the rich are under no moral or religious compulsion by way of their faith to give away to charity. Some Indian business houses like the Birlas donate money to build temples and places of worship.  
• Corporate Social Responsibility is still seen largely as a public relations exercise or a business requirement. As Indian billionaires, many of whom make their wealth through ‘privatization by stealth’ (as remarked by Raghuram Rajan), they do some community work around the factories they build. This is more out of a business compulsion rather than genuine philanthropy. 
• In the pre-independence days, the rich were also involved in the freedom struggle. They contributed their wealth to the freedom movement. Sir Ratan Tata had funded Gandhiji’s struggle in South Africa  by contributing Rs125,000 ( a princely amount, those days ) in 1909. G D Birla, Jamnalal Bajaj all were big contributors. Now, the Indian rich are islands unto themselves. To be fair to them, the political leadership is hardly inspiring enough. Many of the political masters in India are themselves billionaires, except that their names do not appear in any Forbes list.

If the Gates-Buffett pledge campaign   makes philanthropy a status symbol among the rich, you could well have a few rich loosen their purse strings a wee bit. 

– G. Mohan

Reliance and Infotel: One More Telecom Scam?

Infotel, a relatively, unknown player in the telecom  business, was the sole winner of a pan-India licence for BWA spectrum. Many well known telecom players like Vodafone, Tata , Idea and Reliance Communications backed out, saying unreasonable prices. They bid an astounding sum of Rs 12, 848 crore. On the day, the results were announced Mukesh Ambani owned Reliance Industries announced that they are acquiring 95 % of Infotel for Rs 4,800 crore.

Infotel is a small Internet Service provider (ISP)  run by Anant Nahata, son of Mahendra Nahata, promoter of the infamous Himachal Futuristic Communications Limited ( HFCL). Readers may remember that HFCL had bid irrationally in 1995 acquiring 9 licences for mobile telephony ( 2G). They did not have the financial muscle to roll out the same and eventually telecom minister Sukh Ram bailed them out. Even then it was rumoured that HFCL was actually a front for the Ambanis. Readers may recall that HFCL had bid the highest as licence fees and Reliance Telecom had bid the lowest. Reliance got some category C circles like North East, West Bengal, Orissa etc for peanuts.  When HFCL did not pay up the licence fees , Indian govt not only lost over Rs 20, 000 crore in revenues, in several circles the roll-out of GSM got delayed by 2 years.

Now by acquiring Infotel and announcing it openly on the day the BWA auction results were announced, it is clear that HFCL was just a proxy for Reliance. As the Ambani brothers ironed out their differences and worked out their non-compete clauses, Infotel  the front for Mukesh Ambani was bidding for BWA. For doing the task, the Nahatas have got their Rs 4800 crore ( ?) and 5 % equity in Infotel.

By paying Rs 12, 848 crore for spectrum and additional Rs 4800 crore for Infotel, ( roll-out costs are extra)  apparently Reliance is entering what is essentially an Internet Service provider ( ISP) business using wireless technology. ISP is a business, not unfamiliar to Reliance and Mukesh Ambani-Manoj Modi duo ( Most of the Reliance Infocom top-team continues to be with Mukesh) . Reliance had an ISP service which was marketed under the name “Only Smart.”  This ISP business did not make any waves and can be dubbed a failure. This service was discontinued when Reliance Telecom changed hands from Mukesh to Anil’s. Reliance Infocom when it was launched, Mukesh Ambani during his visionary speeches, used to mention how ‘data’ business would be much bigger than ‘voice’. Reliance Infocomm was only entering ‘voice’, read ‘mobile phone services’ business , just as an additional service, the focus being data. Readers would remember how using the ‘wireless in local loop’ licence Reliance entered mobile telephony through back-door , creating a controversy. This controversy led to several changes in regulations and Reliance is now well entrenched as the No 2 player in 2G. All the so-called superiority of CDMA over GSM has been dumped, with R-Com clearly going for GSM in 2G and 3G.   

Once again Mukesh Ambani is back in his visionary role and is talking eloquently about the prospects of broadband.

“We see this as the next wave of value creation opportunity in the wireless broadband space,” says Mukesh Ambani, who is the world’s fourth richest man, said in a prepared statement. “We believe this will pole-vault India’s economy into the digital world at an accelerated pace while creating next generation tools that will enhance productivity and create world-class consumer experiences.”

“RIL sees the broadband opportunity as an opportunity to be in the forefront in providing world-class 4G network and services,” the company said, suggesting the scale of its ambitions. “[The] initiative will usher in a wireless broadband revolution in both the urban and the rural areas by providing end-to-end data solutions for business enterprises, social organizations, educational and healthcare institutions, and Indian consumers.”

 Most analysts are apprehending that Reliance and Mukesh will once again get a back door entry into the mobile telephony space using the BWA spectrum. As of now Internet telephony within India is not allowed. Once Reliance has rolled out their infrastructure for broadband, it is apprehended they will cleverly manipulate the regulators and policy makers in Delhi, in the name of low cost of telephony for ‘aam aadmi’ to open up Internet telephony. Remember, papa had said that domestic call should be cheaper than the price of a post card, the promise of Reliance. In public, politicians want to make policies that benefit the ‘aam aadmi’ , as long as they or their party is adequately compensated in private.

On earlier occasions, HFCL ( proxy for Reliance ?)   got away without honouring their licensing contracts and sabotaging India’s cellphone industry. Through back-door Reliance  entered cellphone services industry, which was an unfair competition to the existing players. Now the apprehension is using BWA, Reliance would make a backdoor entry into cellphone services  yet again by getting cheaper spectrum. 

The history of telecom industry in India is marked by a series of scams. So, what is one more scam. Politicians and businessmen create scams, media and bloggers cry hoarse about them. All in a day’s work.

– G. Mohan

Buy Local Food : They’re Safer

Whenever I visit one of the up market grocery stores in Hyderabad like Spar, or Q-Mart I feel a little depressed. It is not the ambience or the service that depresses me. They are good and nothing to complain about. It is the selection in the packaged foods section and the fruits section that really depresses me.

The packaged foods section is full of products sourced from all over the world. Biscuits from Scotland, pasta from Italy, noodles from Taiwan, Tomato puree and sauces from Spain, Cheese and chocolates from Switzerland, juice and drinks from various places and what have you. Many of these are well-known brands and are priced at multiples of Indian brands. But competing with them are unknown brands from Malaysia, Thailand, which are sold at rates far cheaper than the Indian brands.

The story at the fruits section is similar. Washington apples and Fuji apples have all but replaced the familiar Simla apples. Californian oranges, grapes from US, Kiwi fruits, sweet tamarinds, pears of different colors and sizes from all over the globe adorn the racks. Local mangoes still get their traditional space, but many other local fruits like chiku, local oranges, sweet lime, jamuns, papayas etc. have virtually gone out of the shelves of these premium grocers.

I believe that there is no reason and need for these goods, the packaged foods and fruits, to travel half the globe to reach the dining table of Indian households. India has a great cuisine and Indian companies provide a fairly good selection of products in most product categories. If some consumers indeed are habituated to some of these international brands during their stay/ visits abroad and now can afford it, I still see no reason why they should be bought.

These packed food items even if they are well within the expiry date, the consumers can never be sure under what conditions these items were transported across the different legs of the chain. I am not sure in a country like India, where the law is lax and enforcement is poor, whether the importers really abide by the Food Safety and Standards Act/ FPO guidelines. The parent company or the brand may be an international brand which may abide by all the local laws like US-FDA, but the importer is often a small-time trader/ importer from Dubai/Mumbai who does not have much of a reputation to protect. They often compromise on the cold chain and the handling required to keep the food fresh and safe. Unknown brands of food products from Malaysia/Thailand are riskier. Do not get taken in by their attractive packaging and low prices.

The green activists have been urging consumers to buy organic: buy local. The logic is if the food is traveling a long distance to reach the table, then a lot of energy is spent on transporting the food. This concept is being called as Food miles.

Foodmiles is a term which refers to the distance food is transported from the time of its production until it reaches the consumer. Food miles are one factor used when assessing the environmental impact of food, including the impact on global warming.

My appeal is straightforward, buy local packaged foods and local fruits, in your own interest, they are safer. If you believe in environmentalism, then you have the additional factor of food miles to support your decision. If you are a proud Indian, by buying food products manufactured in India, even by an MNC, you are doing your bit to the country’s economy.

– G. Mohan

U, V or W- What Shape The Economic Recovery Will Look Like ?

Recession is passé now. So it seems. If one looks at the recovery in the stock markets the world over. It looks like recession was a 2008 event and 2009 is well ready for a recovery. The BSE Sensex in India has moved from 8200 on March 9th to nearly 14500 now. A growth of over 80%. Many stocks have doubled and some have even tripled in this period.  

Does this mean that the bad news is behind us? Is the recession over? Will the real economy go back to the heady days of 2006-07 or early 2008? On that the opinions are varied.

One simple method to predict the shape of the recovery is the shape of the curve based on the shape of the alphabet. The most optimistic of the economists and analysts predict a V-shaped recovery, in which the lowest point can be considered as Nov-Dec 2008. The optimistic analysts prognosticate that there is still pain left; hence the current recovery from March onwards is just a bear-market rally. The markets will go down again and only in 2010 will the real bull market start again, hence the shape shall be a W. The pessimists indicate that the stock markets are out of touch with the real economy and the real economy will revive very gradually over the next 18 months. The shape of the curve is hence a U. The doomsday analysts say there will be no recovery at all for a long-long time like the way the Japanese economy went through in the 90s, hence the shape of the curve will be like an L.

Jamie Dimon, the CEO of J P Morgan in an interview to TOI  says, he is unsure what shape the recovery will be. He says :

“Of course, the world went through a deep recession—call it a Great Recession—and it was much worse in the US or Europe than in China or India. But I think the world is on course to stabilisation. You see it in consumer spending, business plans, confidence levels, inventory balances, purchasing indices. Sectors like housing in the US are still getting worse, but at a much slower pace. So we’re actually seeing a global bottoming out. But I don’t think anyone knows whether the recovery will be V, or U, or W-shaped. I’m not going to spend a lot of time guessing on that.”

Maybe Dimon does not have time to guess the shape of the recovery. Without using any tools or surveys, my instinct tells me that this rally is unreal, but the market and the economies will bounce back. I am betting on a W shaped recovery.

What letter are you betting on?

– G. Mohan