Sab waqt ki hera pehri hai – Looming Currency War

“Currency war” (jargon made popular by Brazilian prime minister) has brought out three points very clearly:

1) Too much of everything is bad, even the money.

2) Hard hit every country has taken due to the recession and even the great USA, the most ardent proponent of free market now actually not interested in free market, ask President Obama.

3) With time everything changes including the needs and perception - earlier everybody was running behind capital but now no one wants it.

Third point is going to be the centre of attraction in the article.

The lines from the song “Sab waqt ki hera pheri hai” from the Bollywood movie Hera Pheri is becoming more and more apt with each passing day. These lines mean that with the time all needs and perception change. It were the emerging economies like Brazil, India etc which wanted to capital most in early 90s, and now they want none. Earlier emerging economies were running behind the capital. Now capital is running behind these economies. Who can forget the crisis India faced because of inadequate foreign exchange. It was blessing in disguise for sure because it caused India to open its market for the world and since then India has not looked back. The growth story is there for everybody to see. Clocking above 7% growth is no mean feat, ask USA but don’t ask China.

So suddenly what has happened that caused this war of currency. As usual whatever happens nowadays, it is because of recession root of this “war” is also in recession. Huge amount of money to the tune of 12 trillion dollars as per IMF estimates is pumped by the central governments in their respective economies to revive them. But as an old saying goes you can take horse up to lake to drink water, but you cannot make it drink. So even though money was pumped in the system, people and businesses were sceptical about the recovery and demand and hence demand for money didn’t increase in these economies. Returns nosedived in sync with dip in growth of the economy. The effect is two pronged. Manufactures have to search for market and hence exports become more and more important just not for China but also for every nation in the world as consumption in their economies is not reviving. Secondly investors (read speculators) started moving out of these economies looking for good returns and growth. Their search (Even Google was not required) landed them in developing economies market.

Problem arising out of excess capital inflow is also twofold. As money inflow increased, the country in which it started flowing in, its currency started appreciating making exports more and more uncompetitive. Cost of sterilization kept rising. Secondly markets started becoming more and more speculative and volatility increased as most the capital inflow is portfolio investment. Hence to tackle these problems governments started taking measures to stop appreciation of their currency. Like Brazil’s doubling of transaction tax on fixed income flows. These kinds of measures are being taken by China for years and it is able to keep its currency down artificially to keep up its export competitiveness. Problem now is that these kinds of measures are being taken by every other government. So if all government start taking steps to depreciate their currencies, it will trigger a downward spiral which may be detrimental for the growth revival in the world and everybody will be worse off. Question is in this game who will blink first.

Soon it will be Rime of an Investor – Money money everywhere not a penny to invest.

Dushyant Chaturvedi

Sustainability: Investing in a better future

“Nothing in excess” goes the maxim often heard and taught. But in practice, we have exploited Earth’s resources like there’s no tomorrow. As a result, we are facing the consequences of our excesses manifested in Global warming, water scarcity and ruined ecosystems. Our cities have grown inorganically with huge asymmetries in their development. Just to put a figure to that; 30% of India’s 1.1 billion population lives in urban areas. Of that more than 70% resides in just 10% of the cities. Not only have the resources depleted at alarming rates, they have been grossly polluted.

‘Sustainability’ is the need of the hour. Sustainability is defined as “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” It’s all about using living in a way that resources serve us in perpetuity. So what do we need to do to live in a sustainable manner? We must reduce our ‘Ecological Footprint’. Ecological footprint a measure of humanity’s demand on nature and measures amount of land and water a given population needs to produce the resources it consumes and to absorb the wastes, using prevailing technology. A lot of green standards abound that tell us how to design our buildings in an environment friendly way. But what we actually need is better planning of our cities.

I refer to an article on building new cities in the 21^st century that compared two cities viz. Barcelona and Atlanta. Both are former Olympic hosts with populations of around 2.8 million and with roughly the same standard of living. Yet, the per capita ecological footprint of Atlanta is four times that of Barcelona! Indeed, Barcelona’s per capita environmental impact is lower than even that of many rural areas of Europe. In India the large cities are already bursting at the seams and every day newspapers are full of problems faced due to rampant in-migration. We cannot stop people from choosing where they want to live and work. The answer lies in creating sensible templates for urban planning.

So what should be our strategy for a sustainable future? We need to design compact cities and stop creating flat urban sprawls. Our Cities should have an optimized circulation plan alongwith an efficient Public transport built into the urban design. Studies suggest that reducing the sprawl and better public transport alone can bring in a 30% reduction in energy usage. Building sustainable cities would involve significant costs in modifications to existing city structures and building new cities. However, sustainable development must be treated as investment and not consumption. Only in this way will capital including our natural capital be available for future re-investment.

Neerad Swaroop

Dr. Kiran Bedi at IIM Lucknow

Dr. Kiran Bedi

Last month, we had the privilege to listen to Dr Kiran Bedi, as part of our Leadership talk series. Being the first woman IPS officer, Dr Bedi has been a role model and an icon to many of us and we all were waiting for her lecture with much anticipation. And boy, did she deliver!!

For my part I was really curious to know how a career Police woman would talk to us about the finer nuances of management. To say that it was a real enlightening experience would not be an exaggeration.


She shared her experiences on her tenure as IG Prisons of Tihar Jail - how she brought about reforms in the management of the prison, and initiated number of measures such as detoxification programs, yoga, redressing of complaints by prisoners and even literacy programs. In just about two years she took up a sick organization (if a jail can be so called) and turned it around into a self sustaining and humane organization.

When she took over as IG prisons the prison was a stinking place, literally, as MCD had stopped its cleaning operations in lieu of unpaid bills. An ingenious idea to treat this waste to make manure not only solved the problem of waste disposal but also helped in growing fresh vegetables for the prison Kitchen. This was one of the many measures which she brought about to transform an apathetic government enterprise to a well run professional organization. Leading by example, she started taking rounds of the prison facilities regularly, pointing out the deficiencies and problems in notices pasted on information boards. Her active interest forced her subordinates to emulate her and to take up corrective actions so that on the next round the highlighted issues were taken care of. She started complaint redressing programs, literacy and counselling programs for the prisoners. This was aimed at gaining the prisoners confidence and to make them shun the path of crime once free. Because according to Dr Bedi, the purpose of the prison is not just to house and punish the criminals but to reform them and make them better citizens. Though she admitted the process was not that easy or simple but it had really started showing results and a number of criminals on leaving prison were reformed, law abiding citizens.

As a good leader she also developed second rung leaders, giving them autonomy, appreciation and due credit, so that 15 years after her leaving her position, the good work is continuing and Tihar prison is still citied as a case-study for prison reforms.

Apart from her stint as IG, Tihar she shared other experiences as well and stressed a lot on “sharpening ones axe” continuously and to always be in touch with lowest level of execution as mantras for success. She also impressed on the importance of keeping a balance between ones professional and personal life.

Her experiences brought forth a number of things to us. She proved that innovative thinking can help to overcome seemingly insurmountable barriers. Also it is possible to have a humane side to management and still be immensely successful and profitable. If one has the will and the determination then the so called “chalta hai” attitude prevailing in lots of walks of our lives can also be tackled. By the time Dr Bedi finished her talk, I am sure there was not a single one of us who was not motivated and inspired by her incredible zeal and positivity to become not only inspirational mangers but above that better human beings.

Posted on behalf of Neha Saxena

Infrastructure in India - An opportunity

It takes just few minutes on a railway station in India to understand what it means when somebody says India lacks Infrastructure. No doubt India has to go a long way as far as achieving infrastructure revolution. The path will be very difficult and will require commitment not only from government but from every citizen of India. What citizens have to do with it? Isn’t building infrastructure government’s job? I think we the people of India now have to come out of this mould of leaving our issues to be resolved by some unknown hand of God. It has to be the society and people of India to come out and build the nation. It will be a painful process and the worst part of it is that those who are going to build it will not be able to enjoy its fruits. Every generation builds for the future generations and that is how nations are built.

Now after philosophy it is time for business. Economics sense says any rational investor will not take up that venture, which cannot provide economic returns. So is there profit in this market? Actually how big is the market? Is there really an opportunity? Well to answer these question just consider this fact that Indian’s eleventh five year plan envisaged Rs 20,00,000 crore requirement for infrastructure development in 5 years completing in 2012. So we are talking about a market which requires investment of tune to 9% of India’s GDP in five years. So at modest 10% return we are talking about Rs 2,00,000 crore profits over the five years i.e. 40,000 crore per year. There are not many industries who can boast of such returns. But are these returns sustainable? Definitely so if we consider the fact that above requirement is expected to remain so in the years to come with growing urban areas, development of rural areas and increasing population.

A back of the envelope analysis of the sector tells us that there are very favourable government policies to encourage investment. There is demand, which is heading north. Competition is yet not fierce. Users are too many and need the services. Suppliers are too eager to cater. So it seems that it is one of the most profitable sectors in India. But then the big question why investments are not coming up. Why it is still lagging?

Infrastructure projects generally require huge investment and generally affect large no. of people while implementation. Risk increases more so when we consider that generally these are long duration projects and for getting the returns investor may have to wait for years. The very nature and structure of this sector makes it a difficult sector to enter.

There are 2 major challenges in infrastructure projects at the moment:

1. Long term sustainable financing for these mega projects

           - It is easier to get the initial funding, but getting a sustained funding in long term is a challenge,

             which causes stoppage or delays in projects.
           - Sources of funds should be increased within the Indian economy. Currently, Banks are a major 

             source of funding. They themselves face liquidity issues in long term. Apart from Banks, other 

             financial institutions such as insurance companies should also come forward for financing.
           - Government issues infrastructure bonds for raising funds. Banks and other FIs can also look for 

             this option, though ICICI already follows this practice.
           - It is important to start generating some cash flows after some time, so as to keep the interest of 

             debtors in long term

       2. Execution Challenges

           - Land acquisition
           - Environment policies very confusing for the companies right now
           - Delays in approvals from government side

It is critical for the success of ventures to take care of above issues and create better models for implementation, models that achieve participation and support from public also. That will be most critical factor above all.

Otherwise years after years we will be standing on the same railways stations wondering why trains get late. And while waiting for the train we will be wondering why India lacks Infrastructure.

- Dushyant Chaturvedi and Rishi Khanna

My Experience In France

The intention of this article is to objectively record my personal observations during my stay in Paris as part of my international module at IIM Lucknow, and in no way to generalize or criticize any specific country or its practices.

I landed at the Paris International airport with tons of excitement, however, my first experience was not very pleasant as we had to wait over an hour to go through the immigration process because there was only one counter for non European citizens (who were around 80% of total present people) as opposed to a couple for EU citizens. It made me think whether the world has really become global in the true sense? I was not able to solve the puzzle of such inefficiency in one of the most developed & powerful nations of the world.

During our trip to the hotel, I saw lots of bikes all across the city. Initially, I was a bit surprised, however, with some discussions and reading, I figured out how by ensuring availability of bikes all across the city, the French Government is really serious about reducing the carbon foot prints of the country. The volume of bikes available for rent itself speaks for the seriousness of the Government about the initiative. We have grown up in India seeing people using bikes extensively, however, with time we gradually started moving towards other personal vehicles such as scooters, motorcycles and cars. I would really love to see the Indian Government’s focus to promote the usage of bikes in key areas of all metro cities. It would not only help in keeping the environment clean but also help in solving the traffic congestion problem. Moreover, it would also help us in reducing our trade deficit by reducing the import of fossil fuels.

My first experience with Paris’s public transit system, which is one of the most comprehensive metro networks in the world, with more than 200 stations spread over 40 sq mi, was just amazing. After having experienced some other big public transit systems e.g. that of New York and Toronto, I could say that it is the one of the best. After roaming around Paris using various Metros, RERs, Trams and Buses, I can comfortably say that this is the way to explore Paris. In India, although we have started a Metro in Delhi, however, we have a long way to go to have its presence in other Indian metros and also in term of cross connectivity with other transportation modes such as buses, trams and rail.

I was highly impressed, after moving around the city and seeing the way the city of Paris has been preserved. The French Government’s efforts to preserve all its monuments are just amazing. The way 3-4 hundred year old buildings are maintained is commendable. It really made me think, “Why couldn’t we do similar thing in India?” The condition’s of some of India’s finest monuments is abysmal. I would love to see a similar passion to preserve our own heritage. The way the whole of Paris is presented as one of the best tourist places is commendable. I feel deeply hurt to see, even though we have so many good culturally rich places in India, we don’t present it in the best possible way to the world.

Finally, my experience with the customer service at various places in Paris has not been very pleasant. After having lived for over six years in North America (US & Canada) and having experienced excellent service there, I was a disappointed to see such dismal customer service in France. However, my experience in Paris made me think, “Why, in spite of being a developed country, is there no focus on customer service in France?” I thought that my ignorance of the language could be a cause. However, after visiting places like Brussels, Bruges and Amsterdam, I knew this is not exactly the reason. I found people in Belgium and Netherlands friendlier and more open to Non EU tourists. Even though people did not understand English, they did put-in their best efforts to understand and help the tourists. I would definitely not like to have the French way of customer service in India.

A fortnight in Paris - IIM Lucknow students' international module

I got a chance recently, to go to the land of pretty girls, tall towers, large palaces and elaborately embellished places of worship. Partly because I haven't seen too many foreign countries and I was excited to do so, and partly because it was part of my curriculum at IPMX (1 year MBA program at IIM Lucknow) and I didn't have too much of a choice, I grabbed the opportunity with both hands.

Now, statistics suggest that it takes an alert person approximately 2 weeks to assimilate an alien culture, and co-incidentally, my visit was scheduled to last exactly 14 days. (Of course, like most other statistics you've come across, this one too, has been concocted on-the-spot, entirely with the intention of sounding convincing and knowledgeable about the point just made.)


So anyway, in the little time I was there, I came to know a lot about the people there. For example, the general impression about people from this part of the world is that they have w-a-y too many holidays and that they never get any real work done. Well, that is slightly true, but only slightly. The new generation is very task-oriented and is changing the work-culture dramatically, getting the job done inspite of all the holidays/ frequent strikes and closures of work. Even though the customer-service is quite literally, pathetic, the general public itself is a pretty helpful lot (which is to say that if a certain individual is paid to be helpful, he won't be; its only when you establish a momentary bond with him/ her, preferably in his/ her mother tongue, that you can hope to receive any assistance).

The country spends a good amount of time preening its history and reminiscing about the "good old days when we used to be a power to reckon with". Indeed, the country does have a fabulous military past, and judging by its considerable number of architectural masterpieces, a better-than-fair cultural heritage. There are a good number of sites of historical significance scattered in the national capital region alone.

Foodwise, the country is a gastronomer's paradise. You can hardly ever go wrong with anything you pick on the menu. And the chef's there love to compare everything with the creations of their brethren in Great Britain. Seriously, if you want to tick someone off, make a mention of the British. "I dare you to. No, I IMPLORE you to", said our professor.

People love to speak, and appear intellegent at the same time (two traits which force them to be helpful on the street, 'coz they'd hate to say "I don't know" to anything).

There's a strong sense of the family, and although it is slowly eroding, it's not quite dead. People love to engage in mind-games, speak without really saying anything of value, haggle... hmmmm..... now that I've started to write about my experience, this could easily be an account of a visit to India by a Frenchman. We aren't too different after all.