disinvestment..!

The new government has realised the merits of disinvestment and has sold stakes in NHPC and oil india limited through an IPO offer. It has plans to sell 10% stake in SAIL. BSNL is expected to come up with an IPO within 6 months. The earlier left supported government couldn't proceed on disinvestment due to strong protest from left-wing parties. Such funds generated can be spent on social sector whereby the benefits can directly reach the masses. The proceeds from the stake sales are deposited in a special purpose vehicle known as National Investment Fund. Such stake sales subject these firms to market discipline and increase their market capitalization. It puts management to constant scrutiny as they can be judged on parameters like share price and EPS.

However, there are certain issues which need to be considered to make this disinvestment story a real success. First of all, it should be ensured that state assets are not sold at thrown away prices. Secondly, employees of such companies must be taken into confidence before such stake sale as fear of job loss often make them oppose such disinvestment. Thirdly, government should try to have its IPOs priced in a way such that retail investors realize listing gains on the first day of trading.It will increase the marketability of new IPOs.

india's telecom story..!!

Telecom sector has been undergoing a revolution for last few years. Its an example of what competition and right regulatory framework can do to a sector. At present, India has more than 400million mobile subscribers and it has become the fastest growing market of mobile phones in the world with 10 million additions each month. The appropriate regulatory framework allowed private sector firms like Airtel and Reliance to play leading roles in shaping up the mobile telephony business in india. In recent times we have seen many foreign companies having plans to start operations in india. This sector can serve as an example to other sectors as how the judicious combination of right policy and environment can help to achieve accelerated growth.

However, the slow pace of bureaucratic decision making has affected the technological upgradation of the sector. We are still caught up in the 2G mobile telephony and the introduction of 3G technology seems to be trapped in red tapism. Moreover, there appears to be some discretion on the part of ministry as far as allocation of spectrum is concerned and it is not a good sign if we want to promote our country as an ideal business destination.

WTO: stumbling blocks to Doha round.!!

It has been close to a decade since Doha round was launched in 2001 to ensure free trade between member countries. In spite of numerous negotiations between the developed and developing countries, there has not been any convergence of thoughts on major trade issues. The US and Europe are not ready to remove subsidies available to their farmers and have been demanding greater market access for their goods in developing countries. The developing countries led by india and china have termed such demands totally unfair as they feel that they are not able to export agricultural products due to subsidies available to western farmers. This has affected the livelihood of a number of farmers in Asia and Africa. Moreover, it has severely depressed the income of these farmers. Therefore , it is unwise for developing countries to open up their markets for western goods when they face huge trade distorting subsidies in the case of agricultural products.

Its time for western countries to be pragmatic in their approach and should implement free trade in practice rather than giving seminars about the benefits of free trade. There appears to be consensus in the international community to hasten the Doha round and seek its early conclusion by 2010. However, it all depends on compromises which different countries will have to make to enjoy the benefits of free trade in true sense

CEO's compensation

There has been a heated debate in media about huge pay packages drawn by top corporate executives. This debate was initiated by our corporate affairs minister as a way to generate support for his so called "austerity drive". It was not received favorably by the industry which has been of the opinion that shareholders are the best judge for deciding the compensation of top corporate honchos. The argument given by the government is that such huge salaries create social unrest due to rising income inequality. The government has not been able to get rid over its socialistic past which gave rise to a culture which never recognised talent resulting in massive brain drain. However, with the passage of time ,our government realised the positive impact these MNCs can have on our economy which led to the liberalization of our economy in early 1990's.

Moreover, bureaucrats and politicians have not been able to digest such huge pay packages in MNCs. Everyone knows about ways in which these people have been using state machinery for personal benefit. They occasionally come up with beautifully coined words like 'austerity drives' to deceive the common public that taxpayers's money is being put to optimum use. Its high time that our government stop cribbing about CEO's salaries and start focusing on improving the productivity of government institutions which will inturn ensure high salaries for its bureaucrats. Any attempt to put artificial caps on pay packages in the private sector will be counter productive as it will result in brain drain and flight of capital from this country

google vs microsoft: new frontiers..!

Microsoft is about to come up with its new operating system windows 7 in couple of days. Moreover, it has already launched an upfront assault on Google by launching its own search engine, Bing ,few months ago. In a bid to diversify, it is targeting new revenue streams from online advertisements . Microsoft appears to be a company which has grossly underestimated the power of internet and it is evident from the lack of viable revenue generating online products in its portfolio. However, it has realized its folly as can be seen in its desperate bid to go online and utilize the potential of internet. The real innovation from Microsoft came about a decade ago, when it launched windows OS meant for personal computers. The product was a huge success as people found the OS simpler to use and it became the most popular operating systems of personal computers but success breeds its own problems like complacency and lack of passion to come up with next breakthrough.

On the other hand , Google has utilized the potential of internet to the maximum extent. Most of its online products are available for free to the end users with economic viability ensured by the revenues from advertisements. The launch of its internet browser ,google chrome ,was a big success and it even plans to come up with an online operating system for personal computers which will be available for free to end users. Thus, a robust business model backed by an innovative spirit has enabled it to grow in leaps and bounds.

The upward journey of Rupee..!

There has been significant appreciation in the value of indian rupee in the last couple of months. It has appreciated close to 10% against dollar from its lows of 52 Rs/$ reached at the end of may.The rupee is expected to stabilize around 40Rs/$ by the middle of next year. This turnaround has been primarily due to huge inflows of dollars in the form of FIIs. A reform oriented government and the prospects of high returns has been able to attract foreign investors .Moreover, the stability of the indian economy amid this financial turmoil has made india one of the favoured destination for investments.

However,the appreciation of our currency has its own pros and cons. On one hand, it has made our imports cheaper and has been a boon for industries which import their raw materials from abroad. However, the appreciation has adversely affected our export competitiveness as our exports have to be priced higher in dollar terms due to decline in value of dollar against rupee. This makes it difficult to compete against other low cost manufacturers like china. Finally, such wide fluctuation in the exchange rates result in huge uncertainty and increase the cost of doing business.

climate change : hoax or reality.!!

There has been increase in public awareness about issues related to climate change and the steps needed to mitigate the impact of climate change. However,its not for the first time that the surface temperature of the earth has increased. Our earth has faced several cycles when the temperature of the earth has risen on account of changes in solar activity and such events have often been accompanied with fall in temperatures which resulted in ice ages. The last ice age on this earth occured around 10000 BC. Therefore , we need to be sure whether the recent increase in earth's temperature is due to human activity or some natural phenomena. Otherwise, we may end up spending huge sums of money trying to tame some unknown phenomena.

However, recent evidences indicate that human activity is one of the primary reason behind the increase in earth's temperature in the last couple of decades and these are largely attributed to the growing presence of greenhouse gases in the atmosphere. We need to take steps to avoid our reliance on fossil fuels and there should be binding emissions norms for industrialized countries of the world. On the other hand, more funds should be allocated to research activities for the development of renewable sources of energy. The kyoto protocol was a significant step in this regard and the entire world is banking on the Copenhagen summit in Dec, 2009 for some concrete outcomes whereby different countries are given targets for reduction in their greenhouse gases depending upon their abilities. Otherwise, the day is not far off when our greed for development will become one of the reasons for the destruction of human species.