Month: June 2012

It’s not just a car!!!

“It’s not just a car, it’s a caaaaar” goes the TV commercial for Nissan Sunny in India.  A drive from Chennai city towards ‘Oragadam‘ the place where this CAAAAR is manufactured in India throws quite a few pleasant surprises for an outsider.  Like getting to see tall residential projects by big Mumbai names like Hiranandanis and still further down of Godrejs in such off city places or stumbling upon a  Korean restaurant or for that matter  a Japanese snack/food/essentials joint in a remote place which has nothing to do with Korea or Japan.  Or is it?  For the locals these are not of any surprise though. We are in India’s car manufacturing hub in Chennai which now houses production facilities of big names like Ford, Hyundai, Renault-Nissan, Benz,..

It’s amazing to see what one car production facility can do to the area, the whole city, the state and its people.  And here we are talking of not just one but quite a few.  Car manufacturing while it generates direct jobs in 1000’s for the skilled factory workers,  engineers, middle level supervisors and managers it generates another few thousand indirect jobs.  Right from security people manning the gates, drivers / assistants/cleaners for the containers which ferry raw material inside and finished cars to the ports, catering people who have the onus of providing food to the workers in thousands, sundry contract labour for carrying out the odd jobs, in-house but outsourced maintenance workers/engineers, tailors who supply uniforms to the 1000’s of workers..,…  Also as Car production happens always in clusters, around it you have the whole campus of ancillary units which produce the various parts and so employ again a few thousands.    I also realized as I saw in Chennai, companies have a separate subsidiary to take care of the spare parts for after-market and its logistics. Then the effect spreads to the ecosystem which throws up things like the eateries – Korean/ Japanese,.. which I mentioned before to take care of the needs of the 100’s of expat Korean/ Japanese/ French/ American/ German staff who sweat it out in Chennai ( literally )as part of the production units of their respective companies.   Smart entrepreneurs start working around the needs of these expats and build highly profitable businesses just ‘catering’ to the needs of the expats may it be groceries/ food items/ their language newspapers/magazines and the works.  ( Heard ‘Saravana Bhavan’ will have a Japanese joint shortly to add to its list- wonder what will be the name though – ‘Sarazu’ may be??? ) While it does all this as far as jobs are concerned, Car production (unlike a chemical factory or pharma factory) doesn’t pollute the environment!

A huge IT park while it generates 1000’s of white collared jobs, it doesn’t do much to elevate the overall economy.  (It does elevate the cost of living as young things try to dispose their sudden rush of income in ingenious ways)  Unlike its southern counterparts AP and Karnataka which pursued an IT led growth and are now stuttering, TN derives its growth from a combination of Manufacturing, IT services and Agriculture.  It’s really unfortunate that though Karnataka houses the production facility of a global car giant like Toyota, it still couldn’t make ‘Bidadi’ where Toyota car is produced in India, a car hub by aggressively pitching for other car manufacturers.  ( Bidadi is now a tourist attraction thanks to Swami Nityananda!!!) It’s another matter that Toyota set up its facility in Bangalore due to reasons relating to history and not economics or geography.  It’s JV partner in India for a long time the Kirloskars were Bangalore based.  In the case of Andhra while Chandrababu Naidu, it’s erstwhile energetic Chief Minister was keen on getting the F1 track in AP and to get many of the IT majors set up base in Hyderabad,was not pursuing (or I don’t recall) any car manufacturer to put up a factory there!

Some may say that it’s not easy to set up car production anywhere and it needs an ecosystem of auto component suppliers, skilled workers, supply of engineers, access to ports, and continuous supply of electricity,…,..  Well it’s a question of whether the egg comes 1st or the chicken!  In today’s world if you order the egg 1st, it comes 1st and if you order the chicken 1st, you get the chicken 1st!!  So it’s up to the state to put the ecosystem in place and pitch for investments or get the investments and build the ecosystem around.  ‘Gurgaon’ before Maruti was well, just a ‘Gaon’!!!

The effect of these in the economy of Tamil Nadu is quite visible.  It is the 2nd largest economy among the states in India and it is the 2nd industrialized state in India.  It also leads the urbanization (44%) in India.

Soon it will be the turn of Gujarat to enjoy the benefits as it starts providing stiff competition to Chennai in becoming the next preferred car manufacturing hub in India.    Thanks to the Tata Nano unit in ‘Sanand’,  we hear that already many car manufacturers have planned to put their units around ‘Sanand’. As Chennai battles its woes without power, there are opportunities for other states to get the car manufacturing pie as India with its advantages of low-cost skilled labour, domestic growth, ancillary base,…,… is poised to become one of world’s largest car manufacturing base in the next 2 decades.

While I mentioned about the so many benefits a Car production unit brings to the economy, I must not forget the effect it brings to the pride of people associated with it as well.  Most of the car plants in Chennai while they produce for India are also big time exporters of the finished cars not only to developing countries but also to developed nations.  So much so that while I was in Hyundai the gentleman I met proudly said “if you see an i20 anywhere in the world, it would have rolled out of the Chennai factory!!!”   And somebody else said “Chennai is the Detroit of Asia”!

So Chief Ministers, if you want to pursue hi growth in your state, go after a car manufacturer!

Because “its not just a car, it’s a caaaaaaaaaaar!!!

Time to elevate “Plan B” to “Plan A”

I am not sure if I’m the only one to hear this term Plan B more often these days. My guess is I’m not.

As per Wikipedia, Plan B is a popular term used to mean a reserved, secondary plan, in case a first plan (a hypothetical ‘Plan A’) fails.  The idea of having another plan came up from contingency planning I would reckon.  I.e. to have a second plan just in case the 1st plan faces hiccups or fails completely.  In that sense Plan B is nothing but a “back up” plan. The underlying assumption is that the Plan A indeed has a large probability of success and Plan B has to be activated “just in case”. Or is it?

That we all live in a challenging environment today with variables a plenty would be an understatement.   The variables range from man-made economic types to Natural ones where we have limited control. So it is enough to say that uncertainties along the way is the only certainty.  In a globalised connected world as the one we exist today, if one region sneezes, the rest of the world catches cold.    So natural disasters of the kind like Tsunami in Japan or Bird flu in China or the Floods in Thailand and man-made variety like the Lehman Shock in the US, Currency crisis in the Eurozone or Upheavals and Uprising in the Middle East leave aftershocks in other parts of the world.  Depending upon the magnitude, the tremors can measure differently in the local ‘Richter’ scales.  But the fact is that these shocks leave an impact and upset one’s plans.  As I mentioned, the impact these leave on the Plan can vary case by case but impact it surely leaves.  So invariably we are left with no option but to crank up our Plan Bs!  So, don’t you think in the past few years we have been resorting to that Plan B more often?

In general, Plan A is likely to be made out of a liberal dose of optimism with a general “as and where is “assumption of the markets, the environment,..  and Plan B is more likely to be the more realistic type which assumes that what is likely to fail will fail and accordingly a plan of action to mitigate those failures. So in line with that it also assumes a more realistic investment and spending plan.  That brings to my argument of this blog which is – Do we really need the very exuberant Plan  A which we know we will have to junk down the line and resort to the more realistic Plan B? Why not just make the Plan B the original Plan A which targets a realistic goal, takes into account the associated risks, which plans a more measured investment and spending in the 1st place?

Most of the terms we use in business and everyday life take its origin to military whether it is the most used or rather abused phrase in business namely “Strategy” or this Plan B.  In military it is very common to have a Plan B or even Plan C or Plan D and that is because one cannot get into the minds of the enemy and there is uncertainties galore. While in that military context it may still make sense to have those backup plans, I would imagine that in business or day today life it is time to call the plan coin right! Do write in with your own views and experiences on Plan A Vs Plan B.

Tail piece: While researching for this piece, I stumbled upon a drug called “Plan B” which is apparently a “Morning after pill”!  This is again an example of resorting to Plan B knowing very well that this is basically the Plan A!!!

And actually my Plan A for this post was to lament on the usual Indian politics and Plan B was to write on well – “Plan B” and here again Plan B conquered the day!

Blame it on “India Shining”!!!

Indians or should I say Middle Class Indians were ushered into the new year of 2004 with a feel good factor spread by the “India Shining” campaign launched by the then ruling front – the National Democratic Alliance ( NDA ) or rather its anchor constituent the Bharatiya Janata Party ( BJP ).  The reasoning was quite simple.  The NDA, whose term was to end in Oct 2004, thought that the time was ripe to call in early elections to cash in on the overall positive political climate.  (It is said that the then PM Atal Bihari Vajpayee was not keen on this move and felt that there was still work to be done but eventually had to give in to the more vocal party strategists).  The economy was booming, stocks markets were on a high, state election results were favourable, external affairs particularly relations with Pakistan was stable and more than everything the principal opposition the Congress was in a dilapidated state – reasons enough for this early calling of elections.   So, if I remember correct from Jan in that year onwards for a few months we were inundated with the “India Shining” campaign across all media.

1991, when India was in the verge of bankruptcy was when we were introduced to “Reforms” – both Economic and Structural.  While credit must be given to the architects of the Reforms 1.0 – Dr. Narasimha Rao, Dr. Manmohan Singh and their team, it is also not a secret that many of the items in that Reforms 1.0 were mandated by the IMF.  In the period of 1999 – 2004 during the NDA regime, we saw what I would call as Reforms 2.0.  Independent India for the 1st time had a full time minister for Disinvestment (Arun Shourie) who spiritedly fought his detractors to disinvest and unlock value in many of the Public Sector Units (PSUs) including the likes of Maruti Udyog, IPCL, VSNL,.. Petroleum Minister Ram Naik ventured into the now very sensitive area of dismantling the Administered Price Mechanism for Petrol whereby price of petrol will be decided by market forces rather than by the ministry. It was also the time when the Telecom read as Mobile revolution was slowly sweeping the hinterlands of the country.  With the benefit of hindsight one can say that from governance point of view the NDA regime didn’t do a bad job and if one realizes that it was also a cobbled up opportunistic alliance with its own compulsions, Vajpayee did manage to do a great job.

To the shock of all pundits, NDA lost and UPA came to power.  It was easy for all to blame NDA’s “India Shining” campaign for the defeat.  However there was a larger issue – far reaching conclusions were arrived by the stake holders. Some of them were – ‘India Shining campaign’ is a metaphor for reforms.  So that means if people rejected “India Shining” campaign, they rejected Reforms. Period. The political conclusion across the board was that the NDA was defeated because of the misleading “India Shining” campaign where the aam admi felt that he was not benefitted by the NDA rule while somebody else has.  The fact of the matter is NDA lost not because of their “India Shining” campaign or the reforms which they pursued but in spite of them.  While they swept the Hindi belt except Delhi, they lost the 2 important states in the South – AP and TN.  AP because Chandrababu Naidu in his obsession with the IT and the chatter class hype was completely oblivious of the strides Y.S.Rajasekhar Reddy (YSR) was making with his “Padyatra’ in the interiors of AP.  In TN, BJP made the strategic error of listening to wrong advisors and allied with Jayalalitha and let DMK go off their alliance.  These 3 states were enough to upset the electoral arithmetic.

This made the political class in both sides of the divide to firm up that reforms were never benefitting the poor.   Since then reforms in India is not a 7 letter word but a four letter one for the entire political class whether the ruling front or the opposition.

The immediate fallout was that UPA –I with the Left supporting them outside decided to “Spend” for growth rather than “Invest” for growth.  The govt. itself had a very limited reform agenda and even that was opposed by the Left.

One thought that in UPA-II without the Left and with a renewed mandate, the PM and his party-the Congress would be in a firmer wicket to push through reforms. However in UPA-II we see the spectre of Mamata who is blocking any supposedly reform initiative of the beleaguered government.  The Left is having a last laugh today because Mamata is espousing what all they believe in and in that in a much more effective way!  While Dr. Manmohan Singh risked his govt. while taking on the Left on the issue of the Civil Nuclear deal with the US during UPA-I, there is nothing of that steely nerve seen in pushing through reforms now.

And on the other side the situation is worse.   The BJP still smarting under that defeat in 2004 opposes the same reforms which they introduced in their time whether it is the GST or FDI in retail or even dismantling the APM completely.  Today while in the opposition it is clear that they are paying lip service to reforms!

I am glad that there is serious debate in the country regarding reforms today. However the political leadership across the board is not on board the Reforms bus. Under the scenario we need articulate political leaders to drive home the economical and therefore the political advantages of Reforms to their party men.  Recently I saw Dr. Shashi Tharoor using the online medium to build consensus on reforms which should be commended. Similarly Yashwant Sinha though doesn’t speak well of the reforms in the parliament has been vocally articulating the need for reforms in his columns.  Let more of this tribe emerge!

In spite of all this if “Reforms” still remains a bad word – blame it on that “India Shining”!

While on this, this piece from The Economist is a relevant read :

http://www.economist.com/node/21556576?fsrc=nlw|hig|6-7-2012|2049894|73958874|AP

P.S: In a recent article in the Economic times, N.K.Singh, Ex Finance Secretary and now Rajyasabha MP wrote, “When I walked into the room of finance minister Manmohan Singh shortly after June 21, 1991, to congratulate him, he told me that “we will change India”.

Dr. Singh – India is waiting to see that change you promised Sir!