Tuesday, May 7, 2013

Indira Gandhi earning the name of ‘Iron Lady’

Events that led to the surrender of the Pakistani forces in 1971, saw Indira Gandhi earning the name of ‘Iron Lady’. Her uncompromising attitude won India a war that even four decades later, is highlighted in history books as event that made India proud of its empathetic foreign policy and powerful armed forces

For India, the campaign was a fine example of what can be achieved with synergy. Major General (Retd) G. D. Bakshi, a combat veteran and an author, considers it to be one of the finest moments in the history of the Indian defence forces. “In military terms, the Indian forces achieved dominance in all the three domains of land, air and water during the 1971 war. It became an example of jointmanship. The Indian Air Force (IAF) achieved remarkable success when it achieved complete air superiority in the Eastern theatre of war in the first 48 hours. This enabled the advancing Indian Army columns to move without any fear of detection even under daylight,” he says. For the Army, the five division-strong Indian forces advanced from three directions and secured choke points well in the rear. The Navy had blocked the sea and while the war was being fought, it sunk the Pakistani Ghazi submarine and also destroyed the Karachi harbour. It was as a consequence of these events that on December 16, 1971, Lt. Gen. Aurora, accepted one of modern history’s greatest surrender at the Dhaka Race Course. The Indian Army liberated Bangladesh in 12 days. The speed of operations was a text book achievement. It surprised the defenders who were never allowed to regain their balance.

While on one end, in the East, India’s infantry units were marching into enemy territory with success, Pakistani forces had opened the Western theatre as well to compel India either to divert its forces or to slow down the assault in the Eastern sector. Performance of the Indian Army in the Western front was equally commendable. The infantry units credibly operated in the deserts. The way operations were handled at Longewala is a classic example of how to hold one’s nerve as a rifle company. The 23 Punjab Regiment, under Major K. S. Chandpuri, remained rock-steady in their defences. This was despite the enemy’s well-armoured attack. They detected and intercepted the movement of the 51st Infantry Brigade of Pakistan and foiled Pakistan’s attempt to break through at Longewala. By the time the enemy got back for a second shot, the IAF came to the Army’s rescue.

Pakistan had also planned a few audacious moves with its Air Force (PAF). It launched a pre-emptive strike on 10 Indian air bases at Srinagar, Jammu, Pathankot, Amritsar, Agra, Adampur, Jodhpur, Jaisalmer, Uttarlai and Sirsa in the early hours on December 3. The aerial strikes, however, not just failed to accomplish the objectives, but also gave India an excuse to declare a full-scale war against Pakistan the same day. Under Lt. Gen. Aurora, three corps of the Indian Army invaded East Pakistan, entered Dhaka and forced Pakistani forces to surrender on December 16, 1971. Pakistan’s Lt. Gen. Niazi signed the Instrument of Surrender. The battle saw 11,000 Pakistani soldiers being killed, while in comparison, India suffered less than one-third of casualties. Pakistan lost 220 tanks during the battle. India, again less than a-third at 69. By December 16, Pakistan had lost a sizeable territory on both the Eastern and Western fronts.

The birth of Bangladesh, however came at an enormous ‘social’ cost. Before the Pakistan army was overpowered by the Indian Army, up to 3 million Bengalis had lost their lives in a span of nine ‘mad’ months.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
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Rajita Chaudhuri-The New Age Woman

ExecutiveMBA

Ever heard of a loss-making cartel?

Kingfisher is desperate for cash flow. Spicejet is aiming at market share. Jet desires to get back to its old profit-making habit. IndiGo wants to win through discounting. And Air India is simply paralysed. In such an unstable environment, will the formation of a cartel to control price satisfy the varied agendas of our aviators?
 

Economic crises breed dark ideologies. That is as true for Indian domestic carriers as it was in the case of global financial powerhouses that were forced to fall to their knees when times got tough.

Years of competent planning and incompetent execution caused havoc in the Indian domestic airline circuit. Bleeding financials, consolidations in the name of survival, illogical price wars and millions of rupees worth of checks defaulted are proof of this. And in the past few years there have been many-an-instance when the Competition Commission of India (CCI) was sent an alert that an enquiry into the activities of domestic airlines needed to be activated to check whether ethically, they are headed in the right direction. Both in 2010 and 2011, CCI gave a clean chit to airlines in India in this respect. But doubts still prevail.

Even today (in October and November this year), wisemen claim that in their attempt to turn over a new leaf, the carriers are involving themselves in an act of monopoly creation, setting floor prices, killing demand and working together behind closed doors to earn fat margins.

Such claims make it hard for onlookers to live peacefully. That the full-service carriers (FSCs) make it hard for no-frills (LCCs) to decide independently on entry price slabs isn’t amusing. There is some truth in their claims. In the past quarter (Q3, 2012), demand fell due to price hikes by airlines in the country (traffic stood at 12.61 million - a 11.16% dip y-o-y). This fall in demand, which experts claim is alarming, actually, isn’t. And the fact that demand hasn’t shrunk despite floor fares rising anywhere between 15-80% across various sectors y-o-y is good news for airline cartels operating in the country.

Various studies have attempted to arrive at a conclusive benchmark figure to explain price-demand elasticity (Ep) in the airline industry. As per a December 2007 report titled, ‘Estimating Air Travel Demand Elasticities’ by InterVISTAS, elasticities of air travel range between -1.24 to -2.34 (as concluded by Oum, Zhang, and Zhang). Another study by Oum and Yong of the Unversity of California, Berkeley, titled, ‘Concepts of Price Elasticities of Transport Demand and Recent Empirical Estimates’, puts this figure between -1.15 and -1.52. IATA adopted an econometric approach to bring out a more accurate estimation. The figure arrived at? -1.3 to -1.5 for the Intra-Asia market. At present, the busiest Delhi-Mumbai, Delhi-Bangalore, Delhi-Kolkata and Mumbai-Bangalore routes account for over 60% of domestic traffic. Air fares on these routes have increased by over 50% since December last! How should this translate into demand fall? Going by IATA’s calculated Ep of -1.3, price hikes on these four routes alone should have caused demand to fall by 65%. Assuming that prices across other hubs and spokes have remained the same since the start of 2012 (which obviously isn’t true, given that a one-month advance air ticket price on a hub-spoke route like Delhi-Guwahati has increased by 55% in the past year), the four busiest routes alone should have caused overall air demand to fall by about 40% (39% to be precise). That obviously hasn’t happened. For the first nine months of 2012, demand has fallen only by 0.99% y-o-y. Conclusion: economics fails to explain why the fall has been marginal. If the conspiracy theory is true, and airlines actually are functioning in a cartel and fixing prices, then it has benefitted them. Not a bad outcome for a loss-making sector! But as we said before, it’s a theory on paper. At least till the CCI proves someone guilty.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Can Us afford to go over the fiscal cliff?

With President Obama’s re-election, the countdown begins for lawmakers to address the 2013 fiscal cliff and the Treasury’s statutory debt limit. But unless the President and House Republicans agree to change the current law, these crises cannot be resolved.

It’s been just three weeks since US President Barack Obama won the re-election, but a doubt whether he can forge a productive second term in a divided political system has already started doing the rounds across political arenas. No doubt, the Presidency is settled, but little else is. Policy uncertainty has been one of the biggest obstacles to Uncle Sam’s economic growth over the past few years, and the outcome of the recent Presidential election is unlikely to change much. The scenario could become even worse as Washington’s fiscal debate intensifies. Reason: President Obama has two big decisions to make and that too by early 2013.

The first is what to do about the so-called fiscal cliff – the substantial tax increases and government spending cuts scheduled to hit next year under current law. The second is how to achieve fiscal sustainability; that is, what long-term tax and spending changes will make future budget deficits small enough so that the nation’s debt-to-GDP ratio (103% of US GDP) stabilises. What Obama decides today will determine how the US economy performs tomorrow.

The fiscal cliff describes what will happen if the Bush-era tax cuts, this year’s payroll-tax holiday, and the emergency unemployment insurance programme all expire on schedule, just as government spending drops according to the terms of last summer’s deal to raise the Treasury debt ceiling. Those would be on top of several temporary tax and spending adjustments that Congress normally extends each year, affecting the Alternative Minimum Tax (the so-called “AMT patch”) and Medicare’s reimbursement schedule for doctors (known as the “Medicare doc fix”). If policymakers do nothing before the end 2012, the resulting tax increases and spending cuts will total $715 billion in 2013, equal to about 4.3% of GDP.

Fiscal sustainability is attained when a country’s debt grows in tandem with its GDP. The Great Recession, by contrast, resulted in a near doubling of the US debt-to-GDP ratio over the past five years. If the fiscal policy remains unchanged, the debt load will continue to outpace growth, eventually triggering an economic crisis. Under reasonable economic assumptions, Obama needs to reduce the annual budget deficits by $3 trillion over the next decade to attain fiscal sustainability. This amount includes the $1 trillion in spending cuts agreed to as part of last summer’s increase in the Treasury debt ceiling, but not the $1 trillion in automatic spending cuts, known as sequestration, that also were part of that deal. If Obama makes these necessary changes, deficits by 2020 will equal no more than 3% of GDP. Given the expected pace of GDP growth, that will stabilise the debt-to-GDP ratio.

Going by this logic, the solution to Uncle Sam’s problem seems to be simple. Obama should decide to do nothing, stick to current law, and let the nation go over the fiscal cliff. This would solve the fiscal sustainability problem: Higher tax revenues and lower spending would make future budget deficits small enough to bring the debt-to-GDP ratio back on track. Sounds like a great plan, but only on paper. In reality, the cost of this option would be another recession in 2013. In fact, the Moody’s Analytics model of the US economy shows that going over the cliff would cut real GDP by 3.6%, below what it would be if current policies were extended next year. This outlook may be optimistic, but the risks are definitely greater on the downside. The US economy is pathetically fragile at the moment. While unemployment rate is still over 8%, the trend in the three months through October shows manufacturing down more than 3% year-on-year, the worst outcome of the recovery till date. In fact, there are several such scenarios which can nullify the initial positive effect on fiscal sustainability.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Sunday, May 5, 2013

The scope for resettlement and rehabilitation

Even after much delay over a controversial bill on land acquisitions, the same questions over the extent of required consent and the scope for resettlement and rehabilitation continue to obstruct the creation of a sound law

Even otherwise, it has been observed that the bill has been heavily diluted. “It is extremely unfortunate that putting aside every possible democratic precedent and institutions, progressive pronouncements of the Supreme Court, the UPA government is bringing a law to legitimise forcible acquisitions by the government for private and PPP projects in the name of development,” says Medha Patkar, leader of the National Alliance of People’s Movements (NAPM). NAPM’s opposition to the bill in its current form, is based on the fact that it fails to accommodate key recommendations of the Parliamentary Standing Committee comprising members from different political parties. The standing committee on land acquisitions has said that no acquisition should be allowed for private and PPP projects. “Small benefits like a house plot to those displaced are being taken away by increasing the time of residence from three years to five years prior to displacement,” said NAPM in September. It further pointed out that a separate legislation on urban evictions and displacement was the only way out.

Reportedly, Jairam had convinced Sonia that the new Bill has the best Resettlement & Rehabilitation (R&R) package as it covers families of all farmers, landless and livelihood losers who have resided in the area for five years or more with a house or one-time financial grant in lieu thereof plus annuity of Rs.2,000 per month per family for 20 years, adjustable to inflation, or employment. However, the UPA chairperson is said to have insisted that the broad contours of the bill drawn up by the National Advisory Council were in public interest and should not be rejected ‘because of lobbying by the vested interests’. Other dilutions in the bill from its earlier form include compensation of four times the land value and not six times as proposed earlier. Land size thresholds on private purchases have also been left to the discretion of states instead of the 100 acre in rural and 50 acre in urban areas decided earlier.

Rajagopal says that the biggest problem with the bill is that it refuses to see the sufferings of the people. “It is more progressive than the first one. But again, it is not a land redistribution bill, it is a land acquisition bill. That is my problem – without considering land redistribution as a major agenda, the government is acquiring land for industry,” he says.

Recently, a group of farmers, who met the rural development minister also sought stringent provisions for acquiring farm land. Disappointed with the watering down of the draft of the bill by the GoM, the farmers who had come together under the banner of Kissan Mahasangh, said that while initially, land owners had given up surplus land to the landless immediately after independence to help establish a social set up with equitable assets and opportunities, it was ironical that laws are being made to facilitate accumulation of thousands of acres of land by private companies and individuals. “Over 300 SEZs have come up on the fertile land of farmers who have not benefited from them in any way. As per the Ministry of Finance the nation has lost over Rs.1.63 trillion in revenues till 2010,” the delegation has claimed. That the delegation has also objected to the acquisition of land for private companies; creation of land pool of unutilised land and leaving the decision of the calculation compensation of land vague, was confirmed by Devinder Seharawat, the co- convener of the Kissan Mahasangh.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles
2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall

Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
BBA Management Education

Friday, May 3, 2013

Letters to the editor

Eye opening efforts
The Indian economy has been facing stifled growth for quite some time now and flipping through the cover story of Business & Economy magazine was an eye opening experience for me in terms of the economic conditions of the country. Both the government and the Reserve Bank are trying hard to get the economy back on track and the issue decently suggested how India can be safeguarded against the lately turned up pool of scams and incompetent policies. The feature was greatly supported by data and trend analysis generated by the IIPM Think Tank. I seriously believe that the economy could benefit through further liberalisation of FDI, as was discussed. It was interesting to see that a magazine has also uniquely considered the educational qualifications of our finance ministry! Talking about the rest of the package, it was a great mix of stories and analysis across various sectors.

Bobby Malhotra
Chief Executive Max Trade

Constant evolution
I have seen a constant evolution in the content, presentation and section planning. The factor that makes the magazine different from the rest is its dynamic supplements. I would like to give a special mention to BFM, which keeps me updated with the latest happenings in the world of finance. There are always some great columns in the issue for avid readers like me. In the last issue, the story on the crisis in the power sector was very timely and comprehensive. Really, for the Indian growth story to continue and be sustainable, the next phase of reforms should be in the power sector. I expect you to raise more such critical issues in the future.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman

ExecutiveMBA


Thursday, May 2, 2013

“Government is positive”

Rakesh Mehta Assistant Research Manager, Fullerton Securities & Wealth Advisors.

B&E: Much was expected from the EGoM. But with just 23% slash in the reserve price, what are your thoughts?
Rakesh Mehta (RM):
Telcos were expecting drastic reduction in reserve price for the 1,800 MHz spectrum by around 80%. But in the EGoM, the price was reduced by around 20% to Rs. 140 billion for 5 MHz spectrum. I think the major reasoning was the flexibility given to the operator to pay the stated amount in 10 years and in instalments (operator needs to pay one third of the amount in the first year, followed by a two year moratorium and the balance over the next seven years). Moreover, the operators are free to offer any service on this spectrum (mobility service, data service et al), mortgaging of spectrum et al.

B&E: What are your expectations on the upcoming auction?
RM:
The top five operators have seen a decline in revenue per minute over the last two years. Moreover, due to 3G auctions, balance sheets are too leveraged with very less option to raise additional loan at attractive costs. Telcos planning to participate need to work on the pricing and business model. There will be pressure from incumbent operators that they will overbid for the spectrum so that it is unviable for new operators. On the contrary, incumbent operators will have to be ready to pay higher charge for spectrum re-farming. The government is confident that the auction will be successful even at a reduced base price of Rs. 140 billion as some telcos have hinted that they will bid aggressively, taking the final price to Rs.200 billion.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

 

Wednesday, May 1, 2013

“There is no problem in power generation in India!”

Dipak Dasgupta, Principal Economic Adviser - Ministry of Finance, in an interview with Sray Agarwal and Ganesh K Roy, on reforms for infrastructure and transport

How do you feel about the Indian Economy right now?
Dipak Dasgupta (DD):
There is no doubt that the Indian economy has slowed down and the reason for this is a function of strategy failure and that the investors have lost their confidence. The last year scenario also has not been favorable; but this is not a new thing rather it’s the investment cycle which remains in every developing economy all around the world. That [investment cycle] is what drives the course of any economy. At the same time, the problems in Europe and US have hampered the growth of many countries and we are not alone. China too is going through this phase. The last time we had that cycle was in the year 2008. Export markets are growing very badly. We also need a logistics revolution so that growth can been accelerated. Despite having poor infrastructure, we have been able to grow at such a high rate; but now we need a major infrastructure revolution so that we can again reach to the erstwhile levels. Ours is a large landlocked country, which is much like a continent; so we need to connect all the corridors to achieve better growth. But we don’t have that kind of a system right now in our country. We have a young population which will help us to grow in the long run. We need more public private partnerships in India to make things better. There is a huge skills gap between public and private firms – which makes it imperative for the PPP model to flourish in India. We are in a marathon race and not in a 100 metres race; so we need long term plans which will enhance our economy. 

Power failures, time overruns, cost overruns, are the indicators of structural flaws in the economy. How do you think India can overcome these hurdles?
DD:
Power generation is growing at 8.8 % in India. In fact, contrary to the general perception, there are huge power plants coming up in India; this shows the level of development that we are going through. Yes, here we have a system where some states are producing huge amount of power and some are not and the demand is also not equal in each state. There is no problem at the production end; rather, we have a problem at the distribution end and in the channels. We have built a state of the art facility in the field of power generation so there is no problem at the generation part.

But the slowdown did not happen overnight. Do you think the government’s policy paralysis added on to this situation?
DD:
We need to do things every day because doing things once in a year won’t do well for any economy. We need to bring in reforms every now and then so that the growth story is kept on going. In the government sector, incentives are less and performance parameter are also not standardized. Politicians respond to what the electorate wants. How to make the public sector work better is the challenge. A strong leadership is the need of the hour.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles