Gujarat & China show the way…!

Gujarat chief minister Narendra Modi recently announced major investments in the state. According to estimates, Gujarat has cornered about 22% of total investments lined up for India this financial year, the highest by any state. Gujarat Government has been able to achieve this feat on account of its good infrastructure and governance. Modi said that his government will continue to spend heavily on infrastructure projects and that the economic slowdown doesn’t trouble him. He said that the heavy infrastructure spending from the government coffers will stimulate growth and consumption in the state. He also announced a loan interest subsidizing scheme for infrastructure projects in the state rather than letting the private sector put them on hold.
China too recently announced a massive $ 576 billion bailout package for the Chinese economy. Looking into the nuances of the package, a major part of it is directed towards building infrastructure which was not planned earlier. The Chinese government surely sees this slowdown as an opportunity to build up on the areas it is already good at. Such a massive unplanned additional government expenditure on infrastructure will give necessary boost to the economy and also help build infrastructure for the future. The government is ready and willing to sacrifice short term fiscal targets for long term prosperity of the Chinese state.
Back to India, after cutting repo rate by more than 2.5 % and infusing about INR 1,45,000 crore in the Indian economy, we are still in the midst of a major economic slowdown. The measure has been effective but not had the desired effect. The government by reducing borrowing costs & making the required capital available to the industry is doing its bit in not letting the private infrastructure projects go out of stream. But the Indian & the various governments also need to gear up their own spending. Such measures will affect fiscal targets in the short term, but go a long way in maintaining the 8%+ growth rate for India apart from promising good infrastructure. Gujarat & China have taken the lead, now India should follow the path.

How Predictions fool us…

India will grow in FY 08-09 at 9%...8%....!! Oil will peak at $ 200 / barrel by the end of this financial year. Indian aviation industry will continue to grow at 30% and will require around 900 new aircraft by 2020. These are just some of the many predictions reached after thorough analysis by some of the most prestigious institutions throughout the world last year. It’s hardly a year and we know how much has really turned out to be true!!
Sure, the economic conditions have gone through a sea change from the time these predictions were made but isn’t the risk supposed to be factored in while making such predictions?? This is truer especially when such predictions are the base upon which huge business and strategic decisions are made by the government, big organizations and also the investors. These organizations stand to lose billions because of decisions made on the basis of such faulty predictions. Most of this is taxpayers and investors hard earned money.

Is it that when the going is good, we tend to accept any rosy predictions that come our way without really contemplating over the basis of such predictions?? Why we don’t take such predictions with a pinch of salt?? Why we lose our rationality during such good times?? Its only know that all the previous predictions are being re-analyzed and new rational targets set, but the damage already done cant be repaired.

Obama: a hero or superhero for India Inc.??

Finally the confusion is over, Barack Obama will be the new US president and the most powerful personality on this planet atleast for 4 yrs to come!! Love him or hate him, but one has to bear him. So what does it imply for India Inc.? for India Politics Inc.?? The questions are many and answers still many. One thing is for sure that the new president cant afford to ignore the mighty strength of the insurgent India. Mr. President for whatever reasons will be a good friend of India but the extent to which India benefits from this relationship needs to be seen...because the devil lies in the details. Although Bush administration was a global failure, it was big success for India..arguably the best US government so far for India. Apart from the Nuclear Pact, it was the Bush administration that in the name of countering terrorism, forced Pakistan to check the rampant terrorist activity on its soil. Bush administration took India-US relations to new heights.
It is quite evident that the current economic conditions will force Obama to adopt short term protectionist business policies in order to enable US Inc. to tide over the current recessionary pressures and also fight unemployment. Also more stricter regulations are in the offing. Indian companies dependent on US for business may suffer in the short term with uncertainty in the long term. Outsourcing will become the culprit once more and some regulations against it are also in the offing. but the finer print will decide the final implications.
For the time being, India Inc. should adopt a wait and watch policy, as even the Indian government will oppose any regulation that might threaten indian industries.