'Now, the whole country is turning into BIMARU'

Q&A with Ashish Bose, the economist who coined BIMARU to highlight backwardness of Bihar, MP, Rajasthan & UP

Ashish Bose is an economist who in a paper submitted to then Prime Minister Rajiv Gandhi in 1980s termed Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh as BIMARU to highlight economic backwardness in these states. The economist tells Somesh Jha that he is not inspired by the recent povertyfigures given by the Planning Commission, which in his view should wind up. He says the debate between nobel laureate Amartya Sen and eminent trade economist Jagdish Bhagwati is just for the heck of glamour. Edited interview: 

You coined the term 'BIMARU', but these states performed well in alleviating poverty in 2011-12 compared to 2004-05. Do you think that these states are slowly shedding this tag? 

I feel BIMARU states are still BIMARU because all this data which show that poverty has reduced magnificently are tall talks and nothing more. Look at the recent tragedy in Bihar where so many children died. Hence, the administration is rotten there till date. There are no second thoughts that Rajasthan is doing slightly better but Madhya Pradesh and Uttar Pradesh are still very backward states. In fact, the list of my original BIMARU term is ever growing with states like Odisha and Assam also joining the league. 

What do you have to say about the Planning Commission's latest estimate on poverty which says that the poverty rate has reduced to 21.9 per cent in 2011-12 from 37.2 per cent in 2004-05? 

I believe that the Planning Commission should wind up. It sometimes gives bogus numbers and I do not agree at all with whatever they are doing. If you say you are a market economy, why do you need the Commission? Let each state in the country fend for itself and produce its own plan. We do not want a national plan. The Commission more or less speaks for the government in power and nothing else. 

So do you mean to say that the poverty numbers were underestimated? 

The poverty rates have, in fact, increased. The price of even the basic food items have gone up considerably in all these years and vegetables are equally costlier. All this hocus-pocus is going on in the name of 'aam aadmi'. Has any of these great politicians gone and stayed with the common man? Rahul Gandhi goes to villages and stays there for a night, which is all symbolic, with all his security staff. I say go alone and stay like you are the common man. Then, you will experience the real world and not with your entire crew. 

The UPA claimed that the poverty reduction in their stints has been double than what it was a decade prior to their rule. Are you saying it has not really happened? 

These are all statistical claims. We were taught in college that statistics is a good way of telling a lie.  

What do you think can be the method adopted to alleviate poverty then? 

The government should truthfully introduce the welfare programmes, without leakages. All these poverty alleviation programmes are of no use if there is corruption prevalent in the economy. My driver told me that he was asked for bribe for renewing his voter identity card. What does one expect if you can steal the pockets of the poor as well? With the level of corruption still eating away the economy, the whole country seems to be turning into a BIMARU country. 

At present, a debate has been going on between Amartya Sen and Jagdish Bhagwati over economic growth versus redistribution. What is your take on the debate? 

Both are good scholars but both live abroad. They come to India for occasional visits and hence, they cannot appropriately tell about the level of poverty in the country. Whatever they say on television and international press is for glamour. 

The Planning Commission said that anyone who spends up to Rs 27.2 per day in villages and Rs 33.33 in urban areas are poor. Do you think that this poverty line is appropriate? 

There is no such thing as poverty line for a country as a whole. One should take poverty estimation as a unit. Each state is different so this macro-approach is not acceptable to me. This is not the way of estimating poverty. One should have own indices as to what explains poverty in that particular state. There cannot be a single point of reference for the estimation. 

Some politicians, a few days back said that one can have food for Rs 5 or Rs 12. What is it going on? A great "tamasha". It’s a joke on the poor people that these politicians are senselessly making. 

So what do you think the poverty level in India looks like? 

My estimate is that in India majority of the people are poor undoubtedly and in some places even more than 70 per cent. Actually, it all depends on the level of urbanisation and the nature of the sector whether formal or informal that one is employed. The Sen Gupta Commission came out with a report on the informal sector a few years back which said that 90 per cent of the workers are in the informal sector and they are all poor. 

Do you think that measures like Mahatma Gandhi National Rural Employment Guarantee Scheme have worked well for the rural areas? 

One must generate incomes before coming out with populist measures. You create 100 days of employment. But, what about rest 265 days where they are still deprived of work? 

http://www.business-standard.com/article/economy-policy/now-the-whole-country-is-turning-into-bimaru-113072800110_1.html

HCL Tech's problems!!!!!!!!!!!

Apr 26, 2013, 06.51 PM IST

HCL Tech's problems with new recruits

N.S. Ramnath/ Forbes India

HCL Technologies bucked the slump with its upbeat financial performance. Then why has it been reluctant about onboarding freshers?

S Anand Kumar is an angry young man. In November 2011, the 23-year-old was offered a job by HCL Technologies during campus placements, even before he earned his engineering degree. That was then. Over a year later, he is still in the dark about his joining date. The endless wait is frustrating for Anand Kumar as well as several others who passed out of engineering colleges across the country in 2012. (Around 5,000 offers were made, a number that HCL wouldn't confirm or deny.)

Over the last few weeks, their frustration found vent on Facebook and eventually erupted as protests, both online and in evocative locations. Recently, in Bangalore, around 50 of them went on a hunger strike at Freedom Park, the same venue where hundreds gathered to show support for Anna Hazare in 2011. 

Interestingly, HCL Technology is not the only company that’s struggling to bring new recruits on board. Even Infosys has staggered onboarding by several months. “Since the 2008 meltdown, the business cycles around the world have been volatile and IT companies are still unable to get a clear visibility into the future trend,” says E Balaji, CEO of Randstad India. Yet, only HCL seems to have provoked this response. It’s all the more surprising if one takes a look at the company’s performance.

While almost every player in the country was giving a cautious outlook, HCL Tech not only sounded positive, it also followed up with its performance. Compared to 2009, its revenues have risen by close to 80 percent (bettered only by TCS and Cognizant, among the top five) and its net profit has more than doubled (net profit margins for the calendar year rose by 4 percentage points). On the stock market, its share price has grown faster than its peers (by a big margin, in the last one year, and a smaller margin in the last four). Bhavin Shah, CEO of Equirus, says its financial performance in the last few quarters had allayed the concerns investors had about the company even a year ago. 

There are two more reasons why the reluctance to onboard employees surprised many. Top IT companies have gone slow on hiring because for every three employees who were deployed in a project, they had one who wasn’t. For HCL, this ratio is 4:1, considered to be optimal. In the last few years, it has been propounding an ‘employees first’ philosophy that purportedly places employees even ahead of customers. Surely, it could treat its new hires with more respect? 

Its reluctance to onboard freshers—when its numbers seem healthy, and when its management philosophy seems clear-cut—has raised questions about both the assumptions. How do they all add up? For answers, we need to look at its performance in a more granular fashion.

First, its financial performance. Despite the hype around the big wins, HCL’s real achievement in the last couple of years has not been so much about revenue growth as it is about the margins. In 2012, despite its smaller size, it grew slower than both TCS and Cognizant. Besides, its growth rate also dropped from 26 percent during both 2010 and 2011 to 12 percent in 2012. But, more importantly, even this growth came predominantly from remote infrastructure management projects. Last quarter, this segment saw a year-on-year growth of 37 percent. (In contrast its other three big service lines—enterprise applications, engineering and R&D, custom applications—grew at 5 percent.) Over the last two years, nearly half its growth came from infrastructure services. From 15 percent of its total business in 2009, infrastructure management now accounts for close to 30 percent. 

So, jobs are likely to be generated in infrastructure, rather than in software services. (Campus hires were made by individual service lines and software services, which looked promising in 2011, ended up otherwise.) 

Krishnan Chatterjee, vice president and head, strategic marketing, HCL, says the company has opened infrastructure management positions for campus hires, and over 1,200 have applied. (It has a good momentum. The current CEO, Anant Gupta, started his career there, he says.) 

However, for campus hires, that would mean taking a cut in the salary. (While starting salary for software services is Rs 3.25 lakh a year, it's Rs 2.75 lakh a year for infrastructure. But, even this doesn’t mean you join the company straight away. You only get the date of joining, says Anand.  “Further, they told us we cannot shift from infrastructure to software.”)

Why doesn't the company avoid all the bad press—and the bad blood—by taking them on board? (In the worst case scenario, a campus hire waits till the end of the calendar year in which he graduated.) A few years ago, questions would have been raised about the company’s cash flow. But today, it’s mostly seen as the management’s desire not to dent the margins. “It's about financial discipline,” says Shah of Equiris. Chatterjee insists it's not about margins, but it's about the concern for the campus hires. “Would you rather we hire them and place them on bench? Now they have an option to look for other jobs,” he says.

The big concern about HCL Tech is that a good part of even those inside might be doing that. For a company that goes by the tag line ‘employees first’, its attrition rates are high. It's not immediately evident from the numbers the company gives out every quarter. According to HCL Tech’, its attrition rates for the December quarter is 13 percent, which is much better than even TCS and Infosys. But, the devil is in the way the numbers are calculated. If one applies a common formula, in the last four quarters, HCL’s annualised attrition rate has been around 24-25 percent, (compared to TCS’ 13 percent, Infosys’ & Wipro’s around 17 percent—see table on pg 30). Chatterjee says it’s not a bad thing. HCL Tech has been a hunting ground for other companies because of the training it gives to its employees, he says. 

This, and the company’s reluctance to bring the campus hires on board, has highlighted a point that’s often missed amidst its employees-first slogan. It’s not so much about employee satisfaction as it is about enabling them to bring in more revenues. (HCL’s revenue per employee has grown in the last three years, while it came down for its peers.) Chatterjee says the philosophy came out of the recognition that value is created in the zone where an employee engages with the customer. The idea behind employees-first management is to enable him to create that value. “If there is no customer, there is no value,” he said. 

It's when the tide turns, that we get a truer view of management ideas.

Click here to read more

http://www.moneycontrol.com/news/features/hcl-techs-problemsnew-recruits_855489.html

PE, VC investments may halt......

Sun, Jan 20, 2013 at 16:15

PE, VC investments likely to be subdued this year

Investments by private equity and venture capital funds in the country are likely to be subdued this year due to growth concerns coupled with regulatory/tax uncertainties, an official of the Indian Private Equity & Venture Capital Association said.

Investments by private equity and venture capital funds in the country are likely to be subdued this year due to growth concerns coupled with regulatory/tax uncertainties, an official of the Indian Private Equity & Venture Capital Association said.

"Growth in the PE and VC spaces is likely to be subdued in 2013 due to slowing of the domestic economy. Also, policy uncertainty on the tax front such as the GAAR ( General Anti- Avoidance Rule) is another drag on the sentiment," Association President Mahendra Swarup told PTI.  

He also said that despite the deferment of GAAR to April 2016, there is lack of clarity regarding the retrospective nature of its implementation.

On the amount of PE funds likely to flow in, Swarup said, "It will be same as 2012...We expect USD 8-10 billion." 

The money-raising by fund houses too will remain subdued, he added. 

Swarup also said if the stock market does well this year as predicted, there would be exits by PE funds. "There are many funds which have invested during 2005-06 and are looking for exiting their present portfolios. If there is good run in the stock market, then these funds will exit." 

Many destinations in the world are competing with India for PE money and we will lose out if the real economy doesn't recover in the near future, he warned. "The real economy should witness growth to attract PE funds. Unless it does good funds will be reluctant to commit money as they have to show return to their investors."

http://www.moneycontrol.com/news/business/pe-vc-investments-likely-to-be-subdued-this-year_810466.html#toptag