Lending Trouble

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Irfan M A, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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The ripples created by Vijay Mallya’s Kingfisher Airlines defaulting their repayments has not yet settled. The arrest of the top brass of IDBI Bank for approving Mallya’s loan has made the banks, especially the public sector to be cautious in dealing with the large non performing accounts.  It seems that the stressed loan accounts may  have to undergo the bankruptcy code and might not get a helping hand like they used to in the past. Previously, the banks used to take certain steps to help the corporate borrowers during stressful times. They often restructure through methods like lowering of the interest rates, increasing the payback period, conversion of debt into equity in which the bank appoint its representative in the director board, all of which actually helped these heavy borrowers to surpass their hurdles.

When the bankruptcy code is invoked as soon as the business is stressed out, without considering the restructuring option in fear of actions from enforcement agencies, the firms which otherwise might have had a huge chance of being revived, will get axed without even being given a second chance. This actually does more harm as once the firm is declared bankrupt, it can never be sold for the market valuation it had. The firms will be taken up for auction by the banks which fetches them only a depressed value or as in many cases, no takers at all. Thus the banks lose out again on a large chunk of its capital. At the end of all this the public funds are at stake due to this. Hence it is high time that the RBI come up with a structured procedure to revive large corporate firms depending upon their potential to rise again. Instead of writing off the large debts , it can actually be realized in most of the cases. The current behavior of the banks might only help the asset reconstruction firms.

Budget 2017

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Amrutha Bhamidimukkula, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


The country is fast moving from desktops to handled devices and smartphones are improving in their penetration and ease. This highlights the prominence of mobile banking in our lives. Quick adaption by a large chunk of the population, though sudden and to some extent forced, to mobile banking and e-wallets was one of the saving graces during demonetization. Making smartphones more affordable and promoting cheaper data services will be one of the key expectations. Affordable mobile handset or consumer durable items of a certain price limit may be given concessions on duties.

For the e-commerce market, particularly, major businesses have demanded clarity of FDI in B2C e-commerce through automatic route. Last year, the government allowed FDI into B2C e-commerce but disallowed the marketplaces like Flipkart and Snapdealto offer discounts to consumers thus ending the discount wars. Though consumers enjoyed the discount wars, brick and mortar stores claimed they suffered hugely due to such business tactics.

The government will want to put the country back on the high growth path. So, improving customer confidence and consumer spending will be vital as well.

H-1B visa impact on IT Sector

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Shivani Manchanda, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Information Technology Sector in India slumped by 4% after the U.S. administration proposed to renovate the H-1B work visa programme. This programme is widely used by all the Indian IT firms to send thousands of their employees to U.S. every year, now all the IT companies may have to change their business strategies as the new policy also include to double the minimum wage to $130,000 of the H-1B visa holder.

The wages are increased and it is being said that it is for the efficient hiring of talented and skilled people but as the Indian IT companies would not be able to pay this higher amount to their employees so this shows the inclination on the Trump’s campaign in one line “American jobs Americans only”. Now most of the Indian employees will be left with the offshore working and the opportunities to work onsite will reduce.

Tech centers established in U.S. are now planning to shift these in other countries as it will be difficult for them to hire people from other countries and they are also aware of the shortage of skilled workforce in U.S. like the shortage of data scientists.

Obviously this is not the best solution if the focus is really on hiring the skillful and capable employees for American companies because it is tumbling international opportunities and directly impacting the Information Technology sector of India.

India’s first international stock exchange

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Nishitha Kasara, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


IndiaINXIndia International Exchange is country’s first international exchange inaugurated by PM Modi at Gujarat International Finance-Tec(GIFT)  City in Gandhinagar. It provides an electronic trading platform for companies that are willing to go abroad.

A subsidiary of Bombay Stock Exchange, India INX is one of the world’s most advanced technology platforms with a turn-around-time of 4 micro seconds which will operate for 22 hours a day, allowing international investors and NRIs to trade from anywhere across the globe.

INX will trade initially in equity derivatives, currency derivatives, commodity derivatives including index and stocks. It plans to offer depository receipts and bonds later.This has been done with a view of enabling the Indian firms to compete on an equal footing with offshore financial centres

Indian International Exchange ( INX ) will create more Capital Inflow in Indian Economy from Global Investors in coming years. It also helps in increasing liquidity in Indian Share Market.

 

Union Budget 2017 – Income tax relief v/s Corporate tax relaxation

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

 

Ronak R Choksy, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Perhaps the only other thing in India that gets as much attention as cricket and Bollywood, is the Union budget. There already are a lot of eyes on the budget session that is coming up on the 1st of February. This year’s budget is special due to a number of reasons. Firstly, for the first time, the Union budget and the railway budget are going to be announced together and on February 1 instead of the usual February 28. Secondly, Uttar Pradesh Legislative Assembly elections are due in February. A populist budget has the potential to turn around the UP elections in BJP’s favour. And most importantly, this will be the first budget after Prime Minister Narendra Modi’s bold demonetization move in November.

Demonetization has reduced people’s spending. There are concerns over slower GDP growth of our country as a result of demonetization. IMF has cut India’s growth forecast to 6.6% from 7.6% after demonization. Hence, most people believe that the government might relax the income tax slabs to boost public spending and get the GDP back on track. According to most newspaper speculations, basic tax exemption limit should be increased to from the current Rs. 2.5 lacs. But in my opinion, such a tax relief will not help much in boosting spending because only 1%-2% of the Indians (or roughly 4% of labour force) pay taxes. Instead the budget might focus more on boosting agriculture and rural economy as they were the most hard-hit among all. The government may also consider lowering corporate tax rates to enhance the economic growth. Lower corporate tax will boost corporate investments in research and development and infrastructure and will also create more employment. This will also attract more foreign investment in India. Lower corporate tax may not necessarily mean lower revenue for the government. In fact in the past we have seen an increase in government revenue after lowering corporate taxes. Hence as compared to relaxing income tax, decreasing corporate taxes makes more sense in this situation.

Will this rat race ever end: – Indian states not catching up with richer ones?

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Abhijeet Roy, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur


India is a country of great diversity; be it culture, festivals or even wealth. On one hand, India has cities like Mumbai, Bangalore and Delhi, where people can afford luxuries in their lives. However, the country also holds several places, where people are extremely poor and are barely able to meet the ends. Despite the country’s meteoric GDP growth rate (about 8%), poverty in India is still pervasive; especially in states like Jharkhand, Manipur, Odisha, Arunachal Pradesh.

Samuel Johnson once said that “a decent provision for the poor is a true test of civilization” India is one of the fastest growing economies in the world and yet its wealth is hardly redistributed across the population. Every year the Chief Minister speaks about the upliftment of their state but in the next session again the ranking worsens. Less developed states such as Bihar, Madhya Pradesh and Chhattisgarh had started improving their relative performance. But the data shows that those developments were neither strong nor durable enough to change the underlying picture of divergence.

In Chhattisgarh about one third of its population lies below extreme poverty line. Chhattisgarh contributes 15% of the total steel produced in India yet 93% people are poor in Chhattisgarh. Similar is the case with Odisha and Madhya Pradesh. These mineral rich states despite having such huge natural resources have always secured the position below the poverty line. Doesn’t it seem weird that Per capita income of Goa is 3.01 times more than India’s average and 7.18 times more than poorest state Bihar. It is clear that the economic out-performance of some of these States is a function of their politics and policies over decades or the “maturation of democracy”. But still in this digital era where Poorer countries are catching up with richer countries, but in India, the less developed states are not catching up; instead they are, on average, falling behind the richer states,” said the Economic Survey 2016-17.

The phrase “united we stand, divided we fall”, fits perfectly within India. Unless these states do miraculously well and converge at least to some extent to the rich state India as a whole cannot develop and the phrase “achhe din aayenge” will always be a futuristic statement only

#Abhijeet Roy,VGSoM IIT Kharagpur,#Indian states #economic reform

Telecom consolidation is the way forward

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Arnab Surai, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Hugely threatened by Jio, the new kid on the block, offering services at almost free of cost and a host of other freebies, the telecom sector saw a proposal of marriage between two of largest entities, Britain’s Vodafone India division and the homegrown Idea cellular of the Aditya Birla Group. The merger can create a telecom behemoth with a combined subscriber base of about 395 million and a revenue market share of around 40 percent in the country’s telecom sector, although divestments would be needed in certain regions to comply with competition rules. This has the potential to create a market leader in the presently overcrowded and hyper-competitive telecoms sector, forcing smaller players either to merge or exit altogether.

This synergy would complement each other as Idea is stronger in rural areas and Vodafone in cities, and they would be able to cut costs mainly through reduced capital spending and network operating costs. The new giant would be a cause of a lot of worry for current market leader Bharti Airtel and Reliance Jio, that has promised free voice and data until the end of March. Intensifying competition would raise the stakes for India’s smaller wireless providers, forcing them to walk the path of consolidation to allow them to better compete against the top three players. The stakes would be especially high for small players such as Telenor, Tata Teleservices and Videocon Telecom, which are already in the process of exiting.Meanwhile, Bharti Airtel is in talks to acquire Telenor’s Indian operations, local media has widely reported.

But there is a catch, mergers won’t guarantee success in India’s telecoms sector. India remains a capital-intensive market. Spectrum costs are high and big investments in network are needed to cover a vast geography. At the same time margins are wafer-thin, as carriers offer one of the world’s cheapest data and voice prices. If it eventually becomes a market of three or four big players, good for them and the industry as a whole, all could make money.

Thin line between Patriotism and Jingoism

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Nandkishor Battinwar, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur.

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Thin line between Patriotism and Jingoism

 

Leadership must be likable, affable, cordial and most importantly above all emotions.

…..Vicente del Bosque
In the 21st century where people are fighting for freedom of speech and woman empowerment Mr. Donald Trump’s challenging the fundamentals of the free market. Recently Mr. Trump’s warning to CEOs of slamming huge border tax is a conspicuous example.

The whole world was taken aback when Mr. Donald Trump won the presidential election. America is the world power because of its military dominance, innovation, prosperity and higher standards of living but currently America is facing a big problem of unemployment. Mr. Donald trump tapped on this issue in his election campaign and he succeeded in provoking the Americans to vote for him.

Admirable public image, Plain spoken, calm composure, rational thinking and good knowledge of economics these are some of the desired qualities of a presidential candidate but Mr. Donald trump lacks in many of them. Even before release of 2005 video in which he shamelessly boasted about assaulting women and passed derogatory comments. His Ex-wife accused him of misbehaving and assaulting her. Well! It’s a mystery why people voted for him.

There is a thin line between Patriotism and Jingoism, fundamentals of Economics are capable of differentiating it. Employment cannot be generated by threatening the organizations to recruit the local people. Instead, the government should implement policies to improve the skill set of people so that organizations will naturally start recruiting from the local talent pool. Mr. Donald Trump warned CEO of companies to recruit from the local people and expand within the country or else He would slap the company by heavy border taxes. This is the right time for the industrialist to express their concerns over it instead of becoming mute spectator or else the day is not far when this authoritarian will ask the organizations to dance on his tone.

Outsourcing helps firms in converting fixed cost into variable expenses. Studies indicate that short-term price savings continue to be a predominant reason for both offshore and domestic outsourcing (Corbett, 2005 and Doig et al., 2001). Outsourcing also has long-term benefits and strategic implications. Outsourcing decisions clearly affect a firm’s cost structures, but may also affect the long-term competitive situation and alter the nature of risks that the firm must manage     ( Lisa M. EllramWendy L. Tate  2007)

Offshore outsourcing presents many opportunities that are not available domestically. For example, abundant labors at lower cost availability in china led to industrial evolution. Decades after decades China grew around 10% a year. Simply, there is much more to outsourcing than simply saving money. Offshore outsourcing creates both new opportunities and often unrecognized hazards, which may limit a firm’s prospects (Lisa M. Ellram a, Wendy L. Tate b).

The long-term costs of these unanticipated consequences can greatly overshadow the potential cost savings. As such, careful consideration should be given to outsourcing decisions including all of the potential long-term consequences. It is no wonder that there has been a call for more research on offshore outsourcing of services (Roth and Menor, 2003).

Americans cannot do anything now but can wish that Mr. President will think rationally and take decisions wisely.

References

Business process outsourcing; Professional services; Transaction costs; Case studies; Service purchasing; Offshoring , Lisa M. Ellram a, Wendy L. Tate b , Corey Billington

A content structure of the off-shoring process of the world economy from the perspective of a level approach., PUZAKOVA, Evgeniya P.; SHEPEĽ, Taťyana

 

Pre-Mortem of Demonitization

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Vaibhav Krishna Kumar, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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This has been in fashion off late in our country to do media trials of events even before the final outcome.  Recently, it was experienced in the case of demonetization where it was widely propagated that the Modi Government’s move was a huge political and economic blunder even though it had only been a week or two since the announcement of Demonetization. The government had accepted that there will be some discomfort to the people during the 50 days period and that once this period was over things will be normal. But according to what was shown in the media it seemed as if the people were facing a lot of problems and that the time and efforts that they were sacrificing would earn them no gain. Political pundits were expressing disappointment talking about the queues outside the ATMs and in Banks even though none of them were a part of any such queues while the Economic experts were busy predicting why the move would fail and slow down economy.

My point here is in order to look at the political consequences of demonetization and how the people of India have seen this move we should wait till UP elections as in democracy final verdict regarding the success of any policy remains in the hands of the people who vote and UP being a state which has always played a big role in the national politics would give us a clear idea about whether the common mass liked this move or not despite the obvious discomforts. Similarly the Economic benefits or failure of demonetization will unfold in the months to come as we look at the various indices indicating economic health. For now, the fact that money is easily available in ATMs and the queues are long gone should be enough for the media to wait before giving a final verdict on any future policies.

DEMONETISATION: A SUCCESS OR A FIASCO?

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Moumita Biswas, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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On 8th November 2016 India’s Prime Minister, Mr. Narendra Modi, announced that Rs 1000 and Rs 500 notes will no longer be the legal tender in most places. India’s two highest denomination currency bills accounted for up to 85% of the total money in cash. Owing to the fact that a high percentage of the transactions in the country took in the form of cash, the decision to demonetize caused immediate economic slowdown in the country. For a fast growing economy like India, having black money account for 20% of the GDP, it was an essential step for the government to purge the black economy of the country. The citizens were given until the end of the year to return any old notes. The solution to the cash shortage was to be met by the two new high denomination banknotes of Rs 500 and Rs 2000.

This step described by many as “draconian” received the wrath of the critics. The immediate effects could be seen in the form of inflation. Although the step was to purge the black money of the rich millionaires it affected the lifestyle of people from all strata. Office goers had to stand in queues from early morning to get cash for the rest of day as the exchange amounts were low. Villagers who are not so fluent with the working of banks and ATMs struggled to cope with the changes. Day to day life became a bout for some. To many it seemed like the ones hoarding the piles of illicit cash had an easier time dealing with the changes.

The decision was termed a “fiasco” by many based on the facts that there were numerous ways by which the black currency could be retained. The country saw what could be called “The intelligence of evil”. Black money was converted to gold or other forms jewelry by many, some companies started giving salaries in advance. Others salvaged their illegitimate wealth by employing people who would go and stand in queues to get their currency exchanged. Some resorted to the help of their poorer relatives. Criticisms came in other forms too. The lack of proper credit leading to the shutdown of small firms, religious and marriage ceremonies being halted combined with the very fact the new currency notes of 2000 gave an easier opportunity to pile up black money turned out demotivating. Owing to these facts demonetization shaved off some amount from the GDP growth of the country.

All decisions come with pros and cons and so too did demonetization. The aim of improving the economy by breaking down the shadow economy was partially fulfilled as a huge amount of money was deposited by people all over the country. The tax take of the country was boosted. As depositing a great amount of money would look conspicuous and attract the attention of the government a good amount of the money was not deposited back. This serves as an asset for the government. The RBI can reprint notes up to this value and transfer it to the government. Although the promotion of electronic methods of fund transfer came under scrutiny as various scams had previously occurred in the country, it made record keeping easy and the banking process more efficient allowing for better tracking and taxing proceedings.

Having achieved what demonetization achieved and having caused what turmoil it did one must look at the political nature of the mixed reactions of people. Every move made by the Prime Minister or any renowned political leader of the country receives harsh criticism at the hands of the political leaders of the other parties. A lot of criticism blown out of measure and a lot of appreciation lost in the midst of piling disapproval. A single move cannot be expected to take out all the dirt that floats around in the country. Backup measures that accounts for amount of money deposited in bank by wealthy people, amount of gold and jewelry bought etc. must be monitored. Keeping all aspects of the view in mind the ultimate price for the success or failure or the risky tactic is to be paid by Mr Narendra Modi. Only the next election can reveal the true effect of the radical move.