This is the question that provides the basis for a new, wide-ranging report published by the Emerging Markets Forum (EMF). While there is an element of crystal ball gazing the report provides a different angle to most studies.
The EMF claims that their report is unique due to three reasons, 1) unlike the majority of studies on India, this report is not a vertical look at a single subject, it looks broadly across interconnected issues , 2) the report takes a 30 year view of the policy debate and 3) the focus is on providing a projection of what could be, not what will be.
10% growth dependent on four factors
To hit its target the report suggests that India must increase year-on-year growth to near 10% over the period of a generation. For this to happen there must be regional peace and open and free economies. Economic stagnation must be avoided and the implications of growth on resource and the environment must be managed.
Change in role of government
A key theme is governance; the report concludes that India has grown despite government and not due to it. An important shift must take place, where government is not the decision maker and implementor but a facilitator and regulator that ensures open competition and business friendly market conditions.
The seven inter-generational issues
To realize its potential, seven inter-generational issues are identified that need immediate attention:
1. Tackle disparities and achieve inclusive growth.
2. Dramatically improve the quality of the environment.
3. Eliminate infrastructure bottlenecks—Create a competitive edge.
4. Improve the delivery of public services—Create functioning cities for sustaining growth.
5. Renew the focus on education, technological development and innovation—Keys to sustaining improvements in competitiveness.
6. Launch a revolution in energy—Ensure security and competitiveness.
7. Foster a prosperous South Asia and become a responsible global citizen—India, its neighborhood and the world.
To read the complete report, “2039: An affluent society in one generation”, click here.
Categories: Economy
Tagged: 2039: An affluent society in one generatio, Economic growth, Education, Emerging Markets Forum, Energy, Environment, Inclusive growth, India economic policy, Infrastructure, Innovation, Public services
As non-agricultural sectors grow reliance on a bumper harvest has reduced, however, lateness of this year’s monsoon is casting a shadow over the economy. Two thirds of India’s population still relies on farming for a livelihood and agriculture accounts for nearly 20% of the countries GDP.
A good harvest strengthens the rural economy as farmers make more money. A poor or late harvest means weddings – an expensive affair – and key purchases are put off to next year, damaging demand. A poor crop would also drive up – already high – food prices. The longer the country waits for the cooling effect of rain the more energy is consumed due to air conditioning, potentially leading to a widening of India’s power deficit.
Direct impact on stock market
In 2005, India’s Centre for Mathematical Modeling and Computer Simulation revised their forecast, from April prediction of 22% above normal rain, to 34% below normal, in doing so the Sensex dropped 77 points on the news.
Concern mounts
This year, Government has been bullish, claiming in reality a delay wont make much difference to the economy. However, news that rainfall from June 1st – June 17th was 45% below normal, has led to speculation that the Prime Minister’s Office is closely following the situation.
V.K. Sharma, head of research at Anagram Stockbroking believes there will be an effect if the rains stay away, ”Delay in monsoon will play the spoilsport and may hit GDP by at least 1 to 1.5 percentage points.“
FMCG’s likely to be hit
FMCG companies sell about one-third of their total products in rural areas, a fall in rural income has an impact. Nitin Paranjape, CEO and MD of Hindustan Lever is in no doubt of the monsoons importance to his business and the country, “We are watching this space and listening to what the weatherman has to say everyday. Subject to the (behaviour of) monsoon in the next few months, we should see good growth for FMCG sector. The business depends on monsoon, and the country depends on the monsoon”.
Until India upgrades agricultural infrastructure and expands irrigation systems, India’s economy, its businesses and farmers will always be at the mercy of the monsoon. India is looking to the skies.
Categories: Comment · Economy
Tagged: Anagram Stockbroking, Centre for mathematical Modeling and Computer Simulation, Hindustan Lever, Indian agriculture, Indian economy, Indian FMCG segment, Indian infrastructure investment, Monsoon, Nitin Paranjape, Rural India, V.K. Sharma
A quick test to find out whether any single mall in Mumbai stands out from the rest. Not scientific by any means but feedback to the question, “Of all the shopping malls in Mumbai which one should I see”, produced some interesting comments, one in particular was more interesting than others.
The theory
My theory is in a booming market full of eager retailers looking to expand and consumers willing to spend, building profitable shopping malls is relatively easy. When these dynamics go in to reverse things aren’t so simple, a scenario facing India.
The squeeze is being felt, AsiaProperty magazine have reported that 11 of 15 malls on MG Road, Gurgaon, have had to refit to create mixed-use schemes as demand for retail space slows. In my opinion part of the reason is that developers have been building malls, not building brands, they have been busy badging “me-too” malls instead.
While a well-positioned and clearly defined brand wont solve all problems, it will help malls stand out from the crowd. More importantly it will help the developer make informed decisions about the tenant mix and service offer based on an understanding of who their target customer is.
The question
Having asked the question, general consensus was that Inorbit Mall – due to its size – was the place to go. While the size of a mall can be important, a competitor can always build a bigger mall, in India where malls are in close proximity this would be a real problem. Regardless, I set off in a taxi with a relatively open mind.
The Taxi twist
The taxi driver spoke good English and asked what I wanted to buy. Having told my story he suggested the Oberai Mall instead. His reasons were telling, it was closer and in his opinion all Mumbai malls were the same, as he put it, they have McDonalds, cinemas and the same shops.
If taxi drivers can see this, the customers they deliver to malls can too. If the retail and leisure mix isn’t providing differentiation, the brand has to. If this scenario is correct Mumbai shoppers are likely to be visiting the mall nearest to home, making customer attraction and retention increasingly difficult.
Categories: Comment · Retail/malls
Tagged: AsiaProperty magazine, Brand differentiation, Gurgaon, Indian retail sector, Indian shopping mall brands, Indian shopping malls, Inorbit Mall, McDonalds, Mumbai, Oberai Mall
For the second year running, Nokia has topped India’s prestigious ‘Brand Equity Most Trusted Brands (MTB) Survey’. Now in its sixth year, the survey run by Nielsen on behalf of the Brand Equity publication shows the strength of India’s FMCG segment, eight of the top 10 fall in to the category of frequently purchased consumer products. The findings also show how locally established brands remain competitive against international entrants.
Hindustan Lever lead the way
Hindustan Lever (part of Unilever) dominates with three brands – Lifebuoy, Lux and Pepsodent – in the top tier, and a total of seven in the top 20. However, their Pond’s brand is also the biggest faller, dropping to sixteenth place, down eleven places on last year.
Reliable Reliance Mobile
There are two new entries in this year’s top 10. Horlicks, owned by GlaxoSmithKline and one of the oldest brands in India jumps in at number 6, following years in the top 20 but it is Reliance Mobile at number 10 which stands out most. Having never featured in the top 20, Reliance Mobile takes its place at number 10. Given its high profile sponsorship of the Twenty20 World Cup, it will be interesting to see – despite India failing to retain the trophy – whether the brand receives a boost in next years survey.
Mobile phone brand boost
Reflecting the remarkable growth of India’s mobile phone sector, it isn’t surprising to find that telecom brands are becoming increasingly influential. In addition to Nokia and Reliance Mobile, Airtel (12th), BSNL (19th) and Vodafone (30th) all break the top 30.
Local and International brands
The list contains an interesting mix of local and International brands. While mega FMCG and technology brands like Pepsi (26th), Coca-Cola (32nd), Sony (38th), Motorola (81st) and Nestle (99th) find a place in the top 100, locally established brands – some admittedly now owned by international brand owners – are represented through out.
State Bank of India (13th), Life Insurance Corporation of India (17th), Parle Products (22nd), Dabur (28th), Godrej (44th) and Fevicol (54th) prove that where “trust” is concerned, local brands can compete strongly against international brands and their owners.
To see the complete list of India’s most trusted brand click here.
Categories: Brands · Comment
Tagged: Airtel, Brand Equity Most Trusted Brands Survey, BSNL, Coca-Cola, Dabur, Fevicol, Godrej, Hindustan Lever, Horlicks, Indian FMCG segment, Life Insurance Corporation of India, Lifebuoy, Lux, Motorola, Nestle, Nielsen, Nokia, Parle Products, Pepsi, Pepsodent, Pond's, Reliance Mobile, Sony, State Bank of India, Trust brands, Vodafone
Air India has 30 days to shape up or face possible collapse
July 5, 2009 · Leave a Comment
Crisis hit Air India and India’s government are finally negotiating a financial bailout. The carrier – that suffered US$ 875 million in losses during the last fiscal year – has 30 days to submit a restructuring plan to government before any form of investment will be made.
Predictably, government has had to step in to prop up the carrier. Already struggling due to factors affecting all airlines, a bloated workforce and spiraling debt is making it near impossible for Air India to meet day-to-day operational costs.
Competition from leaner carriers
Following years of virtual monopoly, and restricted international competition, Air India is under pressure from leaner carriers. Share of passenger traffic has fallen from 38% in 2004 to 15%. Exacerbating the problem, the carrier has an employee-to-plane ratio of 210 employees, compared to industry average of about 150. In its current state Air India is no longer viable.
Leaner structure, lower costs
While Prime Minister Manmohan Singh is willing to approve investment of US$ 2 billion, it is contingent on a major business overhaul. Given Singh’s decisive national election win, he may be tempted to privatize the carrier or even let it collapse. Although unlikely, newfound power gives him leverage over management and he must hope unions.
Praful Patel, India’s aviation minister, has warned, “Air India must shape up, become leaner and trimmer, and also must put its best foot forward”.
“Harsh decisions”
Chairman and Managing Director, Arvind Jadhav is trying to prepare his 31,000 staff members for new realities, “Considering the critical financial state of the airline, we should all be prepared to face the impact of harsh decisions that will be required to be taken in the coming weeks to meet the current difficult financial situation.”
Management want to cut annual employee costs by more than 17%, or US$ 100 million, and have already asked senior staff to go without July salaries. The carrier is also looking at how to improve employee productivity and eliminate restrictive working practices. A committee has been set up to review existing wage agreements with unions. Despite Jadhav’s hopes, the Jet Airways’ experience of last year makes a union – management stand off likely.
Government is also reviewing the carrier’s order for 100 new Boeing and Airbus aircraft. Changes at board level can also expected as Delhi seeks long-term change.
Remarkable failure of management
While Air India stress that the industry at large is in trouble and company spokesman, Jitendra Bhargava pleads, “Tell me, which airline is making profit, you can’t view Air India in isolation, right?”. Industry analysts aren’t convinced by the argument.
Kapil Kaul, chief executive of Centre for Asia Pacific Aviation blames poor management and the fact that the carrier has not evolved to meet newer competition. Kaul comments, “Air India is an example of a remarkable failure, (it is) still an iconic brand, but unfortunately it has a reputation which is of an unreliable and shoddy airline.”
Drastic changers are required. The airline, its staff, government and the unions must work together – and quickly – to reach a viable solution if Air India is to remain in the skies.
→ Leave a CommentCategories: Air travel · Comment
Tagged: Air India, Air travel, Arvind Jadhav, Bailout, Centre for Asia Pacific Aviation, Indian air travel, Indian unions, Jet Airways, Jitendra Bhargava, Kapil Kaul, Manmohan Singh, Praful Patel