Tuesday, April 30, 2013

Global oil market update 2012

It seems that Price rise has stopped having a negative impact on demand, at least that’s what’s happening in the oil sector. Despite rising retail prices, demand for oil has strengthened in 2012, mostly driven by overwhelming Chinese consumption. On the supply side, though the non-opec producers have fallen short, opec has filled the gap to maintain a smooth flow.

China rules the day
Global oil demand is expected to remain strong in the second quarter of 2012. This demand growth is primarily driven by accelerating non-OCED income, which has almost negated the adverse impact of higher oil prices. Region wise, oil consumption is expected to shrink in Europe and North America. And the reasons are obvious. While Europe is struggling to get its debt loaded countries out of the trap, North America is still to come out of the aftermaths of the 2008 recession. Hence, economic activity in both these regions is bound to be disappointing. On the other hand, consumption in Asia-Pacific is expected to hold on to strong growth. More so, for the overwhelming Chinese demand. China is expected to maintain its dominance in 2012, by consuming as much as 9.9 mb/d, a growth of 0.4 mb/d y-o-y.

Gasoline drives demand
Global demand for oil grew about 0.3% year-on-year in the first quarter of 2012. Average demand during this period remained at 89.5 mb/day. However, marginally improved economic activity in various parts of the world is expected to give another 0.7% y-o-y push to the oil demand during the second quarter. In total, global oil demand is expected to expand by 0.8 mb/d or 0.9% in 2012 to 90 mb/d. What’s good for the oil producers is the fact that the demand growth is expected despite a 15% rise in global crude prices during the year. This demand growth is mostly anchored by gasoline and diesel. Having fallen to around 80 kb/d last year, gasoline demand is forecasted to expand by 180 kb/d in 2012, as it continues to replace diesel and petrol.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
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Thursday, April 25, 2013

The enemy within

The BJP is in the throes of virulent factionalism with state satraps pitted against central leaders. Can they get their act together in time?

The story of little known Kuljeet Singh Chahal is symptomatic of how the Bharatiya Janata Party (BJP) continues to sideline potentially popular leaders in favour of its nominated oligarchs. It also provides an insight into the faction ridden ways of the saffron brotherhood and why the party hasn’t yet emerged a serious contender for the 2014 sweepstakes.

Chahal’s entry into politics came through the Delhi University campus. His talent was spotted quite early by party leaders and by the time he was aged 27, he became BJP’s youngest district president in Mayur Vihar. During the last Delhi Assembly elections, he wanted to contest from Vishwasnagar and that is where his troubles began. His claims were overlooked in favour of O. P. Sharma, political adviser to BJP’s Rajya Sabha MP and Leader of Opposition Arun Jaitley. Chahal was then nominated as Secretary of the Delhi unit of BJP but subsequently embroiled in a fake case after which he was sacked.

Scores of young and upcoming leaders have similarly been sacrificed at the altar of factional politics engineered by top leaders, which, in turn, threatens to gnaw at the very foundations of the party. Most media discussions, which focus on the roles of the BJP state satraps – B. S. Yeddyurappa, B. C. Khanduri, Vasundhara Raje Scindia & Narendra Modi – miss the larger picture: the ongoing, no-holds barred tussle between the BJP central leadership and its popular Chief Ministers (CMs), who may lack the elan in stylish TV debates, but more than make up for it with their mass support in the states. Says A. P. S. Chauhan, professor and head of the department of political science at the Gwalior-based Jivaji University, “The battle of attrition between central leaders and popularly elected ones is three decades old... For the BJP, it means real trouble.’’

Top central leaders of the party are too squeamish about contesting elections and prefer safe passage into the Rajya Sabha. The ones who win can only do so if they have the support of the state leaders. In fact, one of the frontrunners for the Prime Minister’s chair, Arun Jaitley, is also from the Rajya Sabha. Sushma Swaraj, Leader of Opposition in the Lok Sabha, had to go as far as Vidisha in Madhya Pradesh to win an election with the support of CM Shivraj Singh Chauhan. L. K. Advani is dependent on Gujarat CM Narendra Modi to pull his political chestnuts out of the Gandhinagar fire, while Murli Manohar Joshi and Rajnath Singh have had to change constituencies to avoid defeat.

Public statements by Yeddyurappa, Vasundhara Raje and Gujarat veteran Keshubhai Patel make no bones about vicious infighting within the party rank and file. State-level leaders, often at the receiving end of central diktats, have had enough. Top BJP leaders well ensconced in their air conditioned rooms in Delhi are hell bent on putting mass leaders in their place, even if it seriously damages the party’s poll prospects.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Tuesday, April 23, 2013

“New challenges emerge as an industry evolves”

Vinnie Mehta, Executive Director, ACMA, believes that the components industry has a bright future

B&E: Last year passengers car segment in India witnessed a major slump in sales. As growth of the auto components industry largely depends on automobile sales, how do you expect industry players to tackle the situation?
Vinnie Mehta (VM): The automotive industry in India continues to be a growth driver for the economy. In the recent past, sales of passenger vehicles have come under some pressure, however, small commercial vehicles, LCVs, tractors and two-wheelers have done well and are witnessing on-track growth. Therefore, the effect of performance of the vehicle industry on the auto components industry varies. We expect overall growth of the auto components industry to vary between 8%-10% in the current fiscal.

B&E: What are the major challenges this sector usually encounters?
VM: Although, current business sentiment in the domestic market is moderating, the long-term growth prospects of the Indian automotive industry remain intact. Primary demand drivers like aspiration for owning vehicles, growth of the economy, et al are the main reasons for this. It is this huge potential that has attracted several global companies to set up their manufacturing base in the country and has led many Indian companies to invest in capacity expansion, R&D, and product innovation. However, inflation, interest rate and fuel price hike, are major deterrents to the growth path and need intervention. Infrastructure inefficiencies and procedural delays are also few key issues that are eroding the competitive advantage of this sector. We have been urging the government to take measures to ensure availability of capital at internationally competitive rates to upgrade and innovate.

B&E: What about the structural deficiencies? What would be the best approach to deal with them?
VM: While the growth prospects of the Indian auto components industry remain promising, there are new challenges as we evolve into a critical part of the global auto ecosystem. For Indian suppliers, on one hand there is the need to maintain competitiveness in an inflationary environment and on the other they need to compete with the best in an increasingly uncertain global market. OEMs internationally are reducing the number of suppliers that they wish to work with, leading smaller Tier-Is to become supplier to the larger Tier-Is with the T1s assuming the role of ‘Systems Integrators’; this trend may well be visible in India in the near future as the industry evolves. Currently in India, Tier-IIs and Tier-IIIs are the weakest link in the supply chain.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Friday, April 19, 2013

Doing business 2012

Enabling private sector growth and ensuring that poor people can participate in its benefits are objectives that require a regulatory environment where new entrants with good ideas, regardless of their gender or ethnic origin, can start businesses with ease and where firms can invest and grow, generating more jobs. The countries which can provide this turn out to be the best places to do business

Reforms are the order of the day

Over the past year Sub-Saharan Africa has seen a sea change in terms of regulatory environment to make it easier for domestic firms to start up and operate. In a region where relatively little attention was paid to the regulatory environment only eight years ago, regulatory reforms making it easier to do business were implemented in 36 of 46 economies between June 2010 and May 2011. That represents 78% of economies in the region, compared to 56% over the previous six years. Globally in 2010-11, governments in 125 economies implemented 245 institutional and regulatory reforms as measured by Doing Business – 13% more than in the previous year. This shift has been particularly pronounced in low- and lower-middle-income economies, where 43% of all reforms were recorded.

Africa turns the heat on asia

Globally, more efficient regulatory processes often go hand in hand with stronger legal institutions and property rights protections. OECD high-income economies, by a large margin, have the world’s most business-friendly environment on both dimensions. On the other hand, economies in Sub-Saharan Africa and South Asia are most likely to have both weaker legal institutions and more complex regulatory processes. However, some regions break away from the general trend. One is the Middle East and North Africa, a region where reform efforts over the past six years have focused mainly on simplifying regulation. Today economies in the region often combine relatively weaker legal institutions with relatively more efficient regulatory processes.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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Monday, April 15, 2013

“All we are asking for is a level playing field”

KOSHY K. VARGHESE, EXECUTIVE VICE PRESIDENT – MARKETING, MRF LTD.

B&E: MRF has become the first Indian tyre company to cross the turnover of Rs.100 billion in one year. In fact, the company has registered growth in excess of 30% during the financial year ending September 30, 2011. So, how do you plan to keep pace with the rising demand in the near future, both in the aftermarket and from OEMs (original equipment manufacturers)?
Koshy K. Varghese (KKV): We have been growing at a CAGR of over 30% for the last two years, and Rs.100 billion turnover is something we are really proud of, because we are the first Indian tyre company to achieve this. However, this fiscal might not be as good as the last one, primarily because the raw material prices have gone up sharply over the last one year. As far as rising demand is concerned, the company has been investing Rs.9-10 billion annually in new plants for the last few years. In fact, we are in the process of setting up a new plant with an investment of Rs.8 billion in Trichy which will start operations by early 2012. Post the commercial operation, this new plant in Tamil Nadu will add 15% to the overall turnover of the company.

B&E: MRF is reportedly considering several overseas acquisition options. Is the decision triggered by the rising prices of raw materials in the country?
KKV: We may look at acquiring plants outside India. We have not come across anything as yet. If we do get we will definitely acquire. But it will not be just to offset the rising costs of raw materials. We are looking at it as a tool to increase our turnover. Further, as a company which has a global footprint – today exports are about 10% of our total sales – it is good to a look at options of having manufacturing bases outside the country. Therefore, we will definitely go for an acquisition if a good opportunity comes up. But it has to make business sense and fit into our overall strategy.


Source : IIPM Editorial, 2012.
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
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
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
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“We support choice & are platform agnostic”

B&E: You have recently announced the launched of Samsung Galaxy Note, a hybrid between a smartphone and a tablet. Such products haven’t really caught up in India as of yet. What make you sure of its success?
Ranjit Yadav (RY): We don’t look at Samsung Galaxy Note as a hybrid product; we have created a new category of devices. It has a smart-pen built in, which allows you to create and capture content in ways much more different than then before. This is meant for a person on the go, who can purchase this one device where he can do all his activities together, whether it’s consumption of content, portability and creation and sharing of content. So he doesn’t need to reach for his phone, MP3 player, tablet or notebook; all at the same time. This one core device can do all the disparate things of these separate devices. It has a built in Stylus, which can help in doing so many things: you can paint, write, take notes, create or capture. Within a year, we want to sell one million units of Samsung Galaxy Note.

B&E: Are you working on a converged ecosystem for Samsung products, because as you know Apple which is strong in the mobility space, is planning to launch its own television soon, which is being talked about as a strongly conversed product. Even companies like RIM have a similar strategy. What is Samsung doing in this regard?
RY: Convergence with digitisation and connectivity pipes being available is a reality. It plays very well into our plans, as our products are best suited for a converged world. Many of our devices like Galaxy Note are excellent examples of convergence devices. Similarly, in television, we have smart television. We have, as an example, a function called “All Share”, where you can share all your applications across devices. It starts from our basic central theme that we want to give consumers choice; we don’t want to choose for them. We believe they are smart and know what they want. So we will bring best in class in every aspect we can. So we have supported the Android platform, we also have our own Bada platform and we also have products on the Windows platform. We support choice, and are agnostic to platforms. And that’s our strength; we can work on multiple platforms, and bring out innovative products.

B&E: You have become the largest tablet player in India. However, the real challenge seems to be reaching out to the sub-10K tablet space that is increasingly getting crowded. What are your plans for the same?
RY: The tablet category is new, and it’s still about creation of a category here. So we are working on that front. Our emphasis is on creating the category, educating consumers, and getting the usage going. We first focus on the consumer experience, and with time and when technology costs allow us; because technology has this particular advantage with economies of scale, you can bring down costs.


Source : IIPM Editorial, 2012.
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
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
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
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Friday, April 12, 2013

Rubbing Salt in The Wounds

Post The Steepest-Ever hike in Petrol Prices since December 2008, The Government is all set to Increase The Prices of Diesel, Kerosene and LPG. There is no Respite to The Common man’s agony.

While Buddhadev Bhattacharjee, former Chief Minister of West Bengal, failed to read the pulse of the electorate and thereby played his own crucial role leading to the historic fall of the red bastion in West Bengal; but his biting observation during the electoral campaigns that a hike in oil prices would be the Centre’s gift to the electorate soon after the elections apparently seems to have come true. Soon, after the election results of the four states and a union territory were declared, the oil marketing companies (OMC’s) guided by informal advice from the Ministry of Petroleum (to be read as the central government) called for a steep hike of Rs.5 a litre in petrol prices. While, the opposition parties, for their own hidden political motives, lambasted the government for the decision, the aam admi (common man) has been left unto himself to bear the brunt of the whammy. An approximately 56% increase in the retail price of fuel over a period of two years (the retail price of a litre of petrol in New Delhi on 15 May 2009 was Rs. 40.62, which post nine successive hikes and the Rs.5 per litre hike on 15 May 2011 is pegged at Rs.63.41) is certainly too harsh for the mass. But interestingly, the government considers that the price rise in petrol will have “marginal impact” on consumer sentiment. And laughably OMC’s argue that the increase has been “moderate”. But then, certainly it’s moderate. At least when one considers the fact that the empowered group of ministers is likely to take decision on increasing the prices of diesel, kerosene and LPG very soon. The real tough time will start only after their announcement.

While the timing of the OMC’s decision was undoubtedly a political one, the economic aspect of the decision, given the crude oil prices in the international market (hovering over $110 a barrel), can not be totally criticised. The recent hike in retail prices will help the OMC’s, in particular, to reduce their under recoveries (analysts at Bank of America Merrill Lynch estimate that despite the price hike, the absolute figure of under recoveries would still be more than Rs.1 trillion). On the economic front, while the likes of Kaushik Basu, Chief Economic Advisor in the finance ministry, and Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, argue that the increase in administered retail price of petroleum products would have a relatively less harmful effect on inflation compared to a slippage in the fiscal deficit, the opposition claim that the hike will have an adverse effect. In fact, they (Left in particular) argue that if a rationalisation of the tax structure on import of crude can be done, wherein the cess revenue earned by the government due to increase in international crude oil prices is returned to the OMC’s, then there would be no need to hike the prices and unnecessarily burden the common man. Truly so, a back of the book calculation makes it amply clear that various taxes shave off around 40% of the price of petrol. At this juncture it needs to be remembered that the taxes are levied as a percentage of the basic price of the fuel and aren’t fixed per litre. However, the government on its part is unlikely to tinker with the prevailing taxes as any reduction in taxes would definitely upset its finances and blunt its effort to keep the fiscal deficit within the set target of 4.6% of GDP.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
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Thursday, April 4, 2013

Truth Vs. Statistical Truth

The Controversy over NSSO’s self Contradictory Unemployment data not only has Highlighted The Drawbacks in The survey, but has also raised a finger at Policymakers who, for The First time, questioned the same.

Soon after the results of the 66th Round of the National Sample Survey Organisation (relating to data collected in FY2009-10) were declared, it became the subject of a huge controversy and debate. In an apparent change in the scheme of affairs, the controversy this time around was spurred not by the usual critics of the government and its statistical system, but from within the government circles itself. Deputy Chairperson of the Planning Commission Montek Singh Ahluwalia slammed the National Sample Survey Organisation (NSSO) report for indicating fall in both employment and unemployment rates at the same time. He ended up claiming that there has been a ‘gross misrepresentation’ of the NSSO data. And the whole system, rather than questioning the priors, decided that the data must be wrong, and the NSSO was reprimanded for its ‘faulty’ investigative methods – something that had been accepted without question and with a lot of pride on many occasions in the past decade or so.

The controversy began when the NSSO, in its survey report titled ‘Employment and Unemployment in India’ (which was conducted between July 2009 and June 2010 and included a sample of over 1,00,000 households), found that employment in labour force had fallen from 42% in 2004-05 to 39.2% in 2009-10 and the unemployment rate had fallen from 2.3% to 2% in the same period. What this essentially translated into was that despite more than an average of 8% economic growth during these five years, sufficient jobs had not been created, suggesting that the government’s economic policy was not inclusive. But countering the argument, Ahluwalia pulled up NSSO for the self contradictory figures saying that the data collection methodology used was faulty. Subsequently, Secretary, Ministry of Programme Implementation T. C. Ananth, went on record to admit that the data was ‘confusing’. “Once you break up labour force participation for women, children and subsidiary status it becomes clear that employment has increased,” he clarified, claiming that the computation of the unemployment rate was a problem as it failed to take into account people who may be self employed. But interestingly, the NSSO data also shows a consistent fall in self-employment – an indicator that more jobs were being created because of economic growth.

As amusing as these official interventions may seem, there is no denial in the fact that the results of the latest survey of the NSSO reveal some important shifts in India’s labour markets and the nature of the growth process that determines these changes. Policymakers, who currently choose to stay in denial, need to take note of these trends seriously and analyse them in detail. For instance, there was an addition of 40-45 million people in the age group of 15-59 between 2004-05 and 2009-10 and unemployment rate for that period has fallen from 2.3% to 2% of the labour force. Agrees Pronob Sen, Former Chief Statistician of India, as he explains, “It is because of the fact that the additional people in the working-age population and some past unemployed people were given jobs, the unemployment ratio has come down.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles

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Monday, April 1, 2013

Why Hazare’s Model is Supreme

Development of Sustainable and Safe Drinking Water supplies is an Acute Challenge in India, given its High Population Density, and Increasing Depletion & Contamination of its Water Resources. To Solve The Problem, all that Government needs to do is to Conserve Water. But is it Really Working in this Direction?

They say, “the statistics speak out for themselves.” Well, they really do, at least when it comes to paucity of water in India. According to a recently released government data, while only 68.2% of households in the country have access to safe drinking water, 50% of the total Indian villages have no source of protected drinking water at all. In fact, if per capita water availability is any indication, ‘water stress’ is just beginning to show in India! Given the projected increase in population by the year 2025, the availability of fresh water per person per annum is likely to drop to below 1,000 cubic meters (1 cubic metre = 1,000 litres) from about 1,800 cubic meters at present. As per the World Bank’s Environment Report, drinking water availability in India has fallen by about 15-20% over the last two decades and will continue to shrink further if no proper steps are taken to conserve it, and that too urgently.

It’s not that the social activists haven’t initiated programmes to spread awareness about water scarcity in the country, or have not come up with projects that could help conserve water; they have, time and again, but unfortunately, such uprisings, except a few, have died down after sudden flashes of enthusiasm. In fact, today, there are very few social activists like Anna Hazare and Rajendra Singh who continue to do their bit to conserve water since 1985, when the shortage of water in comparatively dry parts of the country, like several places in Rajasthan and Maharashtra, had started turning acute as frail efforts from the government failed to provide residents with water.

While Hazare with Pani Puravatha Mandals (water supply associations) ensured proper distribution of water in Relegan Siddhi village in Maharashtra, Tarun Bharat Sangh, started by Rajendra Singh in 1985, is involved in revitalisation of five rivers, like Arvari & Ruparel, around Alwar region in Rajasthan, and is using traditional water harvesting methods like ‘Johads’ or small earthen check dams to conserve water.

Although these projects proved to be really effective when it came to meeting the rising demand of water in these areas, they, unfortunately failed in influencing the government, and in turn being replicated on a larger scale. Nevertheless, efforts by Rajendra Singh bore fruits considering that the project was extended to 1,200 villages. Even the 1990s saw some strong initiatives from politicians as well as social activists like Mathurbhai Savani, who with other MLAs from Gujarat visited Alwar to see the success of the project and took no time in replicating it within the parched lands of Gujarat. Chennai too saw similar urban experiments on water conservation in the 90s under the leadership of former IAS officer Santa Shiela Nayar. However, despite their thumping success, projects in both Chennai and Gujarat were never taken ahead by the government. “They were not concerned,” says Rajendra Singh, the water conservationist from Alwar, Rajasthan and winner of the Ramon Magsaysay Award for community leadership in 2001 for his pioneering efforts in water management. “No policies have been written down yet on water conservation. The government has the budget and it can do anything, but it is not doing enough,” Singh tells B&E.


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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