IIPM PUBLICATION AND ARTICLE

Tuesday, October 14, 2008

With the left burden off his shoulders Will arjun singh finally do some good?

For most of his term, he had his hands tied left, right and centre; arjun’s back with a vengeance
Over the decades, he has emerged as one of the most respected

entrepreneurs of post-Independence India and nurtures the powerful corporate legacy of the Godrej family. He is very optimistic about India’s future. And yet, when B&E asks Adi Godrej about one single issue that could derail India. he unhesitatingly says ‘education’. “The State has to encourage private sector participation in education. There is no other option. It is the private sector that made the third rate telecom and aviation sectors in India world class. It is the private sector that will do it in education.”

And of critical importance is the FEI (Foreign Educational Institutions: regulation of entry and operations, maintenance of quality and prevention of commercialisation) Bill, 2007, that had to be shelved last year by Arjun Singh due to stiff opposition from the Left. Granted that the current UPA government has just about a few months left to go before it is election season. But just as Prime Minister Manmohan Singh has staked his future legacy through the nuclear deal, HRD Minister Arjun Singh too has a great opportunity to stake his own legacy by reforming higher education in the country, and in a major way by getting the FEI Bill passed. In fact, the passing of this Bill could well lead to benefits that will be far more significant and enduring than the nuclear deal. And now that the UPA government is not hobbled by an obstructionist and obscurantic Left when it comes to policy making and implementation, Arjun Singh even has the space now to quickly leave a lasting imprint; if he so wishes to.

The question is, does he? It just seems, Arjun Singh wishes to do so, and this time is moving double time. “The hurdles have been removed to an extent and now the Bill should be introduced... If time is available, I would like to see it happen,” Arjun Singh commented just 48 hours after the government won the trust vote. Arjun Singh even set up an urgent meeting with state education ministers to initiate a blueprint for considerable expansion and education reforms in the next five years. But as he confirmed with his actions, the meeting was primarily with a focus on getting the FEI Bill passed quick time. Report after report and study after study has revealed the tragic truth that while India churns out millions of graduates and hundreds of thousands of doctors, engineers and managers, most of them simply do not have the basic skills required for the demanding job opportunities that 21st century India is creating. In short, India is spawning leagues of unemployable literates. The key is for the higher education system in India to ‘produce employable’ youngsters. And what better a strategy than promoting the entry of foreign institutions, already at the cutting edge of globalisation and education benchmarks that are extremely pertinent to the new world.

At the heart of the problem are lack of resources and role of UGC and AICTE, the two bodies that are supposed to regulate higher education in the country. Admits former NCERT Director J.S Rajput to B&E, “It is a fact that the government does not have requisite resources to maintain standards in higher education. So, the role and responsibilities of private educational institutions becomes critical.”

Experts comment that though UGC and AICTE could have moved mountains in improving India’s higher education framework, both of them currently face a crisis of quality, and to a certain extent, credibility. Says Dinanath Batra, Convener of the Shikhsha Bachao Andolan, “Now, the PM places more trust on reports of the Knowledge Commission.” According to the President of Centre for Civil Society, Partha Shah, the basic problem with UGC and AICTE is that they have not changed with the times. Clearly, instead of acting as change agents and effective regulators, they continue to adhere to rulebooks that have grown old beyond what today’s demanding higher education sector requires. It is not that the UGC and AICTE were set up with the objective of stopping the growth of education. In fact, these two institutions were once upon a time not so long back seen as perpetrators of processes and structures in the education sector that could have radically transformed the promised growth into higher figures.

Unfortunately, somewhere along the line, transformation got replaced by ‘regulation’, a factor that now seems to be stifling higher education to a point of death. Analysts comment that it is only when this quasi license permit raj in education is dismantled by the UGC and AICTE, will the education sector take off and become world class.

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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Monday, October 13, 2008

Arindam Chaudhuri on WHY ISB IS BETTER THAN THE IIMs and How to judge B-Schools

Introduction

First things first... Ever since we started Business & Economy, we avoided the temptation of undertaking B-school rankings for the simple reason that IIPM is a B-School we are very closely associated with; and at IIPM, we have always claimed that we are the best B-school globally. So any B-school ranking brought out by us would have had IIPM right at the top, at least in the three parameters of ‘course contents’, ‘global exposure’ and ‘research & consulting’! But if we were to have finally published such a ranking, our friends in the media would have taken no time to call them biased, however fact-based the rankings might have been. And undertaking a B-school ranking without speaking about ourselves would be next to impossible for an aggressive group like ours, which so passionately believes in our (IIPM’s) superiority. However, after the recent Zee Business B-School Survey that ranked us No.1 on at least one very very apparent criterion – of global exposure – I thought we could at least talk about Indian B-schools, if not rank them. And with the amount I personally am immersed in B-school mechanics and workings, it became but obvious that if our magazine were to do an article on the same, the story in any case would have been ghost written and dictated by me. So I thought I should anchor the story myself.

The second issue that needs clarification is that despite IIPM’s ‘Dare To Think Beyond The IIMs’ campaign, I have nothing against the IIMs; rather, all I have is sheer respect [My father was a professor at IIM Bangalore and is extremely proud of the same. My Managing Partner, my best friend at IIPM and the Editor of this magazine itself, A. Sandeep, is a product of IIPM and IIM Calcutta; and he specifically had gone to study there to have a first hand knowledge about the ‘IIM way’ before coming back to IIPM to take it up.

And finally, my best friend in school and the Head of our news portal TheDailyIndian.com, Partha Saha, is a proud product of IIM Calcutta]. We believe we are the best when it comes to education, but that doesn’t mean we don’t know how good the IIMs are or that their students get better placements than our students or even the fact that they attract the best of students of India – though we may still not accept that the final IIM product is, therefore, necessarily better! So, this article is not an attempt to malign the IIMs, but a simple attempt to analyse some facts.

Having said that, let me also state that what I am writing shouldn’t shock many; at least not those who know that the 2008 Financial Times rankings have put ISB as the 20th best B-school in the world and haven’t put any of the IIMs even in the top hundred! Yet, what I hope this article will do is bring perspective to those rankings and explain to people what management education is all about; since no magazine undertaking B-school surveys in India has even a fraction of ability to comment upon management education in India, compared to our capability. And it’s no arrogance but pure facts that we present. Almost all of Business & Economy’s editorial team comprises educated MBAs – the reason our magazine is such a sell out amongst those who love sharp analytical articles instead of pages full of incomprehensible blah blah based upon tens of quotes [the only thing typical journalists can rely upon in the absence of analytical skills].

And finally, I must say that the reference of IIPM will keep coming up from time to time, though I will try my best to keep the focus on the ‘ISB vs IIMs’ issue in order to make it read most unbiased!

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Saturday, October 11, 2008

Citi never slips?!

Citi India is waking up to danger...
Jack Welch once said, “If change is happening faster on the

outside... the end is in sight.” Citigroup Inc., the largest US banking conglomerate which has been hit by rattling losses of $14.94 billion during the past two quarters, seems to have taken Neutron Jack’s ‘global’ 10-80-10 rule (where he fired the bottom 10% performers) to heart, in India too!

With its Indian operations hit by repurcusions of the ‘great American Citi downfall’, change on the outside seems to be dangerously working faster for Citi India. As a reaction, it recently closed down 72 CitiFinancial branches in the country and laid-off more than 400 employees. Globally, it chopped-off 30,000 names off its rolls in the past five quarters, so rightly, India too became a part of its ‘slim-down’ therapy. A report on Citi’s credit opinion by Moody’s investors’ service shows that Citi is facing problems in risk positioning, efficiency, profitability and asset quality – the very pillars of any financial entity!

Citi India doesn’t have many reasons to complain about the cuts as even when the count of Citibank India employees rose by 221.80% in the past four years to touch 5,194 in 2007, the profit/employee has plummetted disgrcefully by 29.17% during the same period to Rs.1.7 million. With ROA also falling by 23.30% to a low of 2.79 during the same period, speculations are also rife that CitiFinancial India is weighing the option of hiving-off its India operations, a move not supported by an NBFC analyst who avers, “Despite global hits making life tougher for Citi in India, exiting makes no sense for Citi at this point of time.” Sandeep Hebber, Sr. Analyst, Celent also presents an explanation, “In India, default rate for unsecured loans has been rising and the risk-return ratio has been deteriorating over the past 2-3 quarters. Clearly, Citifinancial has been hit owing to the higher default rates.” With sub-prime crisis causing tightening of lending norms, thereby cutting down on portfolio of sub-prime loans, reducing operating costs by reducing manpower count is just one way out to make changes happen within, faster than without; Chop on, but never slip (sleep?)!

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Monday, September 29, 2008

Hey! Will someone now please talk governance?

Kipling thought more like the ruling power would, Democrats need to follow suit

Browsing through a used-book store Friday – in the Milwaukee airport, of all places – I came across a 1981 paperback collection of George Orwell's essays. That's how I happened to reread his 1942 essay on Rudyard Kipling. Given Orwell's perpetual ability to elucidate, one shouldn't be surprised that its argument would shed light – or so it seems to me – on contemporary American politics. Orwell offers a highly qualified appreciation of the then (and still) politically incorrect Kipling. He insists that one must admit that Kipling is "morally insensitive and aesthetically disgusting." Still, he says, Kipling "survives, while the refined people who have sniggered at him seem to wear so badly." One reason is Kipling "identified himself with the ruling power & not with the opposition."

"In a gifted writer," Orwell remarks, "this seems to us strange and even disgusting, but it did have the advantage of giving Kipling a certain grip on reality." Kipling "at least tried to imagine what action and responsibility are like." For, Orwell explains, "The ruling power is always faced with the question, 'In such and such circumstances, what would you do?', whereas the opposition is not obliged to take responsibility or make any real decisions." Furthermore, "where it is a permanent and pensioned opposition, as in England, the quality of its thought deteriorates accordingly." If I may vulgarise the implications of Orwell's argument a bit: substitute Republicans for Kipling and Democrats for the opposition, and you have a good synopsis of the current state of US politics. Having controlled the executive branch for 28 of the last 40 years, Republicans tend to think of themselves as the governing party – with some of the arrogance and narrowness that implies, but also with a sense of real-world responsibility. Many Democrats, on the other hand, no long even try to imagine what action & responsibility are like. They do, however, enjoy support of many refined people who snigger at the sometimes inept & ungraceful ways of Republicans. (And, if I may say so, the quality of thought of the Democrats' academic & media supporters – a permanent & as it were, pensioned opposition – seems to me to have deteriorated as Orwell would have predicted).

The Democrats won control of Congress in November 2006, thanks in large part to President Bush''s failures in Iraq. Then they spent the next year seeking to ensure that he couldn''t turn those failures around. Democrats were "against" the war and the surge. That was the sum and substance of their policy. They refused to acknowledge changing facts on the ground, or to debate the real consequences of withdrawal and defeat. It was, they apparently thought, the Bush administration, not America, that would lose. The 2007 congressional Democrats showed what it means to be an opposition party that takes no responsibility for the consequences of the choices involved in governing. So it continues in 2008. The director of the Central Intelligence Agency, Gen. Michael Hayden, director of national intelligence, retired Vice Adm. Mike McConnell, and the attorney general, the former federal judge Michael Mukasey, are highly respected, non-political officials with little in way of partisanship or ideology in their backgrounds. They have all testified, under oath, that in their judgments, certain legal arrangements regarding surveillance abilities are important to our national security.

Not all Democrats have refused to listen. In the Senate, Jay Rockefeller, chairman of the Intelligence Committee, took seriously the job of updating the Foreign Intelligence Surveillance Act in light of technological changes and court decisions. His committee produced an impressive report, and, by a vote of 13-2, sent legislation to the floor that would have preserved the government''s ability to listen to foreign phone calls and read foreign e-mail that passed through switching points in the US. The full Senate passed the legislation easily – with a majority of Democrats voting against, and Sens. Obama and Clinton indicating their opposition from the campaign trail. But the Democratic House leadership balked – particularly at the notion of protecting from lawsuits, companies that had cooperated with the government in surveillance efforts after Sept. 11. McConnell repeatedly explained that such private-sector cooperation is critical to anti-terror efforts, in surveillance and other areas, and that it requires the assurance of immunity. "Your country is at risk if we can''t get the private sector to help us, and that is atrophying all the time," he said. But for the House Democrats, sticking it to the phone companies – and to the Bush administration – seemed to outweigh erring on the side of safety in defending the country.

To govern is to choose, a Democrat of an earlier generation, John F. Kennedy, famously remarked. Is this generation of Democrats capable of governing?

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

Tuesday, September 23, 2008

BSE’s market capitalisation

No doubt, BSE’s market capitalisation has increased by a whopping 102.3% between April 2007 and December 2007, but volatility too has increased

at a staggering pace (the coefficient of variation, which measures volatility, rose to 15 from 9.7 during the same period). If you add to this the popular perception that this year’s Budget, being the last one for the current regime before the general election in 2009, would be generally populist, you have the mother of all gorillas. So, while it is difficult to predict the short-term behaviour of the market, experts still believe that over the next 12 months, the Sensex would be trading about 15-20% higher than the current levels of 17,000-18,000, which should be in-line with India Inc.’s earnings growth. Affirms Hitesh Agrawal, Head, Research, Angel Broking to B&E, “The Sensex is trading currently at 14-15X the FY 2010 expected earnings of its constituent companies, which is reasonable considering our expected 8-9% GDP growth.”

As such, industry experts seem optimistic about the long-term growth of the market. “With estimated GDP growth at around 9%, and inflation contained within 5%, there is little doubt about the future of the Indian bourses. Over a long term of 4-5 years, a Sensex of 50,000 is also possible. We believe that Sensex could scale the 25,000 mark in FY 2009,” says an optimistic Chakraborty of Religare.

But then, there are reports from Goldman Sachs that have maintained an underweight on India. Goldman Sachs estimates valuation support at 15X P/E – a 20% downside or a range-bound market by end-2008. And there are many who feel that the Sensex would hover between a band, without any major gain or fall. (These were the same experts who had correctly predicted when the Sensex was over 21,000 points that a deep correction could force the index down to 16,000. And which happened.)

However, one obvious question still lags. What about the future of forthcoming IPOs, after the post-listing price debacle witnessed in the case of Reliance Power, and two companies pulling out their IPOs because of a lack of investors’ response? Would the recently-concluded and hugely-successful IPO of Rural Electrification Corporation hold water on listing? “As investors become risk averse, the fundamental valuation will become the basis of subscription. As long as the IPO pricing is justified, we believe that IPOs will be subscribed,” says Religare’s Chakraborty. “The participants now need to work more on their pricing strategy,” adds Ajay Parmar, Head, Research, Emkay Shares. One upside to the crash has been that the attractiveness of many stocks, which declined in the recent past, has increased. But from here onwards, would fundamentals, and not sentiments, drive the market? Market experts feel that investors should only do two things now – ‘Pray hard, and hope for the best!’

Interest(ing) times
For policy practitioners, the question concerning growth and its relationship with interest rate and inflation has always been of interest. As per the analysis of A. Vasudevan (former Executive Director, RBI), growth and interest rates are negatively related, which is statistically significant, whereas growth and inflation are positively related, but statistically insignificantly. If the GDP projections are anything to go by (8-9% for the coming year), it is apparent that India is facing the prospect of a slowdown, or slower growth in the coming fiscal. Inflation, currently pegged at 4.07%, much in the comfort zone of RBI, is still high by global standards. As the RBI Deputy Governor, Rakesh Mohan puts it, “Our inflation is still high by world standards, and it needs to be brought down further.” Kim Eng Tan (Credit Analyst, Standard & Poors) puts forth his views, “As economic growth slows and inflation rates stay relatively high in 2008, Asia’s central banks will face a policy dilemma.”

For Complete I I P M Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative