OCTOBER 10’2012

Dear Reader,

"Money, Money, Money; it’s so funny; it rules the world", sang the group ABBA in the 60's . Money reigns supreme and

different currencies jostle to be numero uno . The cover issue is a well written piece by Prof Gary wherein he compares

the INR to Dollar.

There is another movement, albeit small, that cannot be ignored. It is the barter exchange. This barter is made possible

by technology, social media, economic crisis, weak monetary policy, demographic changes and alternate value

propositions. To begin with, barter was the form of exchange in most civilizations, the advent of money was considered

an improvement over the existing system and a panacea for all cures. Rules were made along the line and put in practice

for economic supremacy by different nations.

Barter is now being rediscovered and packaged differently to suit the needs of this generation. Jessie J sings it all in

Price Tag -- "it’s not about the money, money, money. We don't need your money, money, money. We just want to

make the world dance. Forget about the price tag ".

Happy Reading

Prof.Shirani Nayar

Dean - Academics

IIPM Hyderabad

FROM THE DESK

Dear Reader

Few days back when I was going to college with my friend I came across newly decorated roads all the way

from banjara hills to hitec city. I asked her the reason then she mentioned that India is hosting the 11th

Conference of the parties to the Convention on Biological Diversity (CBD) in Hyderabad. Government released

some amount (crores) to develop infrastructure as internationally many people are going to attend this

conference.

Here the question comes why infrastructure, why not the poor and illiterate people, wh y only Hitex why not

old city, why not rural areas, why not fluorinated areas like Nalgonda. I am not saying that to develop

infrastructure is wrong but why don’t they care about people when they care about the looks of country.

A politician will come to people for the next election – our leaders always proved it and if I am not wrong

they will prove it even in future till we common people stop voting to these politicians who loves money than

humans.

“The greatness of a nation can be judged by the way its animals are treated “– Mahatma Gandhi

But the greatness of our nation can be judged by the homeless people lying there on roads. Hope a day will

come when a politician get down from his/her vehicle and take care of at least one homeless person. (May be

it is a day dream about our Nation)

“You must be the change you want to see in the world “

We CRUCIBLES – may not change the world but we can change at least few members .We are trying to come

up with new projects. Wish us all the best

EDITORIAL TEAM :

SANDEEP, BABITA, LIKITHA RAJ,BENJAMIN TAYLOR, AIJAZUDDIN AHMED

EDITORIAL DESK

WARM REGARDS

Susmitha

Head Editorial

Rupee vs

Dollar

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The value of Indian Rupee in US dollars is decided on the basis of amount of goods/services that costs in both the

countries. For example, if one dollar is equal to Rs. 52, then it simply means that the good/services which costs 1 US

dollar in United States would cost Rs. 52 in India. If the value of a currency increases against another currency, it is

called currency appreciation and drop in the value of a currency against the other is called currency depreciation.

In 2008, 1 US dollar was equal to around Rs.40, now it is Rs. 52.54. It means rupee is depreciated against dollar a

lot. Graph below shows rupee vs. dollar in the spam of last 4 years.

Some of the reasons for rupee depreciation are as follows:

Indian Stock exchanges: Indian stock exchanges are highly dependent on foreign investors. When Indian

economy is doing well, foreign investors will be more eager to invest here than anywhere else. However when

the stock market is not performing well, the foreign investors pull the money out form Indian markets, it

means selling rupees and therefore result in rupee’s fall in value.

Global Sentiments: US downgrade and Euro zone crisis lead the overseas investors to sell in India and buy US

dollars. Simply because USD is considered to be the safest currency in the world. Some investors fear that

the increased gold price is a bubble and may burst some time, therefore not safe to invest in gold rather buy

USD.

Inflation: Inflation is very high in India. High inflation causes decrease in the purchasing power against other

currencies. It results in currency depreciation.

Current Account Deficit: CAD happens when a country’s total import is higher than the total exports. India has

a CAD, it means India is spending more money outside than it is earning inside. As a result India needs to buy

more foreign currency, therefore depreciation of Indian currency.

Government Deficit: The govt. finances (Central and State Govt.) are in bad shape; therefore foreign investors

are losing faith in the Indian economy and withdrawing their investments. It results in depreciation of the

currency.

Political Uncertainty and Corruption: political uncertainty and corruption is also the major reason why

investors are losing faith.

Now the next question is how the depreciating rupee is going to affect you? Some of the impacts are following:

Imported goods, such as crude oil, pharmaceutical products, and fertilizers become more expensive due to

depreciating rupee.

Depreciating rupee is good for companies which are exporting items and bad for companies which are

importing items.

If you are working abroad and earning in dollars, you will get more rupees for the same dollars.

If you are studying overseas, you cost will increase.

If you are planning for a foreign vacation, it will cost you more.

Finally, I have put forward a few suggestions to stop rupee depreciation against dollar.

Instead of curbing demand, India is subsidizing petroleum, oil and lubricant products, which promotes their

consumption. Elimination of subsidies would force the economy to be more fuel efficient and explore

alternation sources such as solar or wind power.

Real interest rates in fixed deposits are negative, which forces households to save in gold. If Indian government

makes the real returns on fixed deposits positive, after accounting for inflation, the demand for gold will disappear.

As a result rupee depreciation against dollar will stop.

Govt. need to make policies friendly for foreign investors in order to increase the flow of foreign currency. It also

needs to avoid things like retrospective tax to gain the trust of investors.

Investors are losing faith due to political uncertainty and corruption. India needs political change to gain

confidence among the investors.

BY

Prof. Gary Sandhu

Faculty: Finance & Strategy,

IIPM HYDERABAD

BHAGAT SINGH – A GREAT LEADER

COURAGE is the word which epitomises everything about Bhagat Singh. In a country like ours where the freedom

movement is mostly attributed to the efforts of a few big names of the Indian National Congress, forgetting about

all of those who never thought twice before sacrificing their life for their motherland is not called for. Such were the

values that drove several Indians to give up everything and live for the national cause.

Belonging to a family of freedom fighters, Bhagat Singh was greatly inspired by his uncle Sardar Jit Singh. He was

very active and enthusiastic by taking part in events against the British rule. The incident at Jallianwala Bagh had a

great impact on him and it was after this horrific massacre that he decided to devote his entire life for his country's

freedom.

What is generally known about Bhagat Singh is that he followed a path of violence. But we should understand that

this is just one side of the coin and very few people actually know about the other aspects of his life, which would

prompt any individual to hold Bhagat Singh’s name in the highest degree of respect. He followed a path of violence

because he felt that “Behero ko sunane ke leye dhamaki ke zarurat hoti hai”. Apart from being a revolutionist, he

was highly intellectual. He was an avid reader. He was also greatly inspired by the Russian revolution and his ideas

were influenced towards socialism. Thus we understand that he was a Marxist in the true sense.

Besides having a plan for attaining independence, he had visions for a prosperous India too. He wanted to see an

egalitarian society in India. It was only after his imprisonment that his writings were made public. It then became

public that he was an avid reader and a great intellectual. At just 23 years of age, he possessed great knowledge and

had a great command over the English language too.

“INQUILAB ZINDABAD” was the term coined by Bhagat Singh and remained the war cry for the rest of the

Independence movement. 81 years later Lahore tributes its martyrs. Shadman Chowk in Lahore which was where

Bhagat Singh and his comrades were executed has been recently renamed as the “BHAGAT SINGH CHOWK”. Truly,

recognition comes to this great son of our motherland-India…!!!!

JAI HIND….!!

BY

HEET MEHTHA

IAS ASPIRENT

Whom to blame?

(An insider’s view about Maruti-Suzuki, Manesar plant labor unrest in India)

The recent untoward incidents of violence at the MSIL (Maruti-Suzuki India Ltd.) plant at Manesar,

was a shock to the nation. Are we again going back to the militant trade union era? Socialism is

inscribed in our constitution. ‘The right to organize’ is a basic fundamental right of every citizen. The

world economy is slowing down. Most of the credit rating agencies like S & P, Moody’s, etc. have

downgraded India. The only way to recover the economic activity is to attract FDI (Foreign Direct

Investments), generating more jobs and thereby increasing the PPP (Purchasing Power Parity) of the

Indian middle class. MSIL was the poster boy of India’s liberalization. But on our path to become a

globalized economy, did we forget to balance the three factors of production? Land, Labor, Capital.

Manufacturing brings in more jobs to our country, but it’s high time that our nation builders must have

a more holistic view about the so called ‘inclusive growth’. Managing the blue collar jobs is becoming

more complicated in India. With increased production targets, Quality standards, decreasing margins &

high competition, our country is losing the competitive edge as a ‘destination to manufacture’ in the

investment map of global automobile companies.

To understand the labor unrest at MSIL, one must understand the history of MSIL. ‘Maruti-Suzuki’

is a joint venture (JV) company started by the Indian government and the Suzuki motor corporation of

Japan, when the erstwhile Maruti technical services, owned by Mr.Sanjay Gandhi went into trouble and

got liquidated. The New-Delhi headquartered Maruti Udyog Ltd was renamed as Maruti-Suzuki India Ltd

(MSIL) in the year 2007. The Indian government held an initial public offering (IPO) of its 25 % shares in

the year 2003. As of now, as per the Bombay Stock Exchange (BSE) records, Suzuki motor co of Japan

owns 54.5 % shares of MSIL, and the rest of the shares are with Indian financial institutions. MSIL is the

largest car manufacturer in the Indian Subcontinent. MSIL commands 45 % of passenger car sales in

India.

By

Praveen Paul

They have two state of art manufacturing facilities in India: Gurgaon and Manesar (located in the state

of Haryana). The management has recently announced the opening of a new plant in the state of

Gujarat. They have the best dealer networks and service stations across India’s tier-1, tier-2 cities &

rural areas. It’s still the ‘most preferred car’ among the Indian Middle class consumers.

Labor issues at the MSIL have been reported since the days of disinvestment and sale of major shares by

the government in the joint entity. The Japanese got an upper hand in the management decision

making. It’s been told by the shop floor workers that their woes have not been properly addressed and

that they are underrepresented in the management committee. The recent labor issues at MSIL broke

out when the shop floor workers initiated a new union called the MSKU (Maruti-Suzuki Kamgar Union),

which was not recognized by the management. As per ‘Trade Unions act 1926’ laborers need only 8

permanent workers to form a union. The workers said that the existing union is run by the management

and the partisan political parties. Their voices for better working and living conditions were totally

ignored. Last year saw the major uprising of the workers of MSIL in Manesar plant, under the young

leadership of Mr.Sonu Gujjar.

The management successfully managed the situation by offering huge sums of money for the

voluntary retirement of the union leaders. Any problem must be solved from its roots, but in case of

MSIL, the management tried to bridge the gap with wrong foundations. Instead of trying to solve the

issues in a long term purview, they tried for a short term solution. This led to the second uprising, when

there was a caste based remark towards a worker by one of the supervisors. The scenario went pathetic

when the workers went on a rampage leading to the killing of a Human Resource manager and injuring

another hundred executives. The MSIL incurred a loss of Rupees 1500 crores excluding the collateral

damage after the burning of the factory and machinery. The delayed delivery of the company’s flagship

brands like SWIFT & DESIRE swayed the market share of MSIL by 20%.

The title of this article is: Whom to be blamed? Can we blame the MSIL management? Workers? Labor

Unions? Governments? Our legal system? Politicians? Blame game won’t solve the real issues! The

widening gap of rich and poor in India is ever increasing. One decade back, the small industrial belt of

Manesar was a village with very low standards of living. That was the time when a Maruti employee

enjoyed credit at the local Kirana store (pop & mom stores) and vegetable vendors. Across years, more

manufacturing and ancillary units sprouted in Manesar and the NCR (National Capital Region). Malls and

hyper markets came up in the nook and corner of NCR. The living standards of manufacturing

employees increased many fold. The double digit food inflation rates made the manufacturing workers

to struggle for their basic needs of ROTI-KAPDA-MAKAAN (Food Shelter & Clothing). The average salary

of the middle class employees remained the same. The shop floor workers felt that their hard labor is

only used to give salary hikes for their white collar counterparts.

So, what must be done? The current decision of MSIL management to hike the wages of shop floor

workers by 40% is being welcomed by in industry veterans. The MSIL management had already

announced their decision that they are not going to use contract laborers at their manufacturing

facilities. This is a benchmark for other automobile majors in India. But the confrontation and the

economic loss could have been avoided. Remember the great socialist leader late Dr. Ram Manohar

Lohia's criteria that the difference between the lowest and highest incomes should not be more than

ten times. Bridging the gap between the pay cheques of white collar and the blue color jobs is the key

to inclusive growth in the manufacturing and our nation’s economic progress. Ignoring the basic needs

of the ‘Aam Aadmi’ (common man) is the worst thing that any business can do. Being the future Human

Resource leaders, young generation of B-School grads must try to learn from our community.

Mail your views and comments to: praveenpaul.ibt@gmail.com

By

Benjamin Taylor

INDIA-

THE LACKLUSTER PERFORMANCE OF A PERFORMING NATION

As India is slowly realizing the importance of performing better at the Olympics, with special focus on the

Summer Olympics, we see that there has been huge public investment and non-profit initiatives like the Olympics

Gold Quest and the Mittal Champions Trust, where promising individuals are being nurtured and trained, thus

helping us “succeed” according to us Indians.

The biggest problem that athletes in India face is the lack of institutional or financial support. Take ourselves

for example. Among our circle of friends or college mates, there are hardly a couple who bother to play sports to

make it as a profession. An immediate solution would be the creation of a grass-root level sports culture which

would go a long way in improving the shambles that this discipline is in today.

“The Olympics remain the most compelling search for excellence that exists in sport,

and maybe in life itself.”-Dawn Fraser (Australian swimmer, 3-time winner of Olympic

Games). In the event of our best Olympics’ performance yet, with the Indian athletes

grabbing 6 medals at London 2012, I’d like to emphasize what this signifies to the growth of

sports in India, while also throwing light at some facts and figures at the way we are lagging

behind.

While it is noteworthy that Abhinav Bindra, Rajyavardhan Singh Rathore, Vijay Kumar and Sushil Kumar

have done us proud by winning the only individual medals in the recent past, we see that in a country of over

1.3 billion people, it’s been a paltry performance by India at the world stage. If you adjust the medals tally to

its population and the size of its economy, the result is even less phenomenal. A total of six medals for India

averages to one medal for roughly every 207 million inhabitants, one medal for every 15.5 million people in

China(for a total of 87 medals) or the U.S., with one medal for every three million Americans. “In 1998, our

sports budget was 1.5 billion rupees ($27 million) while China’s was 15 billion rupees. China won 10 times the

number of medals India won at the 1998 Asian Games”, said Geet Sethi.

The introduction of computers was to create structural unemployment way back in the 1980s.

The irony - FDI in Multi Brand Retail is also expected to create unemployment to millions in

India.

Retailing accounts for about 14% of India's GDP. Estimated at approximately US$ 450b, the Indian retail market is the fifth

most favorable destination for international retailers. It is also one of the fastest growing markets in the world.

India's retailing industry consists of over 90% small manned stores while organized retail penetration remains low, at 6%.

Food constitutes 70% of retail sector, which means it has a direct link with the rural economy.

FDI IN RETAIL

A GAME CHANGER

So, why do big retailers see India as a lucrative market?

Improved ability to spend

Greater disposable income

Over 50% of the population is less than 25 years of age

Increase in urbanization

Retail credit availability

Expanding education sector

Increased impact of media

Enhanced logistics

By

Abhishek chinta

ISBE-A/FW/10-12

Advantages of FDI in retail sector in India:

The global retailers have advanced management know how in merchandising and inventory

management and have adopted new technologies which can significantly improve

productivity and efficiency in retailing.

Entry of large low-cost retailers and adoption of integrated supply chain management by them is

likely to lower down the prices.

FDI in retailing can easily assure the quality of product, better shopping experience

and customer services.

They promote the linkage of local suppliers, farmers and manufacturers, no doubt only

those who can meet the quality and safety standards, to global market and this will

ensure a reliable and profitable market to these local players.

As multinational players are spreading their operation, regional players are also developing

their supply chain differentiating their strategies and improving their operations to

counter the size of international players. This all will encourage the investment and

employment in supply chain management.

Joint ventures would ease capital constraints of existing organized retailers.

FDI would lead to development of different retail formats and modernization of the sector.

FDI would lead to expansion of opposite sell formats as good as modernization of a sector.

Industry trends for retail sector indicate that organized retailing has major impact

in controlling inflation because large organized retailers are able to buy directly from

producers at most competitive prices

The reform policy for FDI in Multi Brand Retail states:

Foreign equity players will own up to 51% of the stake through the government approval route.

The policy will be rolled out only to cities with a population of over 1 million people and there are

currently only 53 such cities in India – out of a total of 7935 cities.

A minimum investment of a $100m is required and half of that should be in backend infrastructure

like cold chains, transportation etc.

They have to source a minimum of 30% from Indian micro and small industry having capital

investment of less than a million dollars.

As foreign investors exploring their potentials in the retail sector are keen on developing

malls in India, the size of organized retailing is expected to touch $30 billion by 2010

or approximately 10 per cent of the total. This has initiated market-entry announcement from

some retailers and has signaled to international retailers about India‘s seriousness in

promoting the sector.

India is already a key sourcing country for some global retailers. The entry of foreign

retailers is likely to further promote India‘s manufacturing and export sectors, leading

to a double bonus for the economy.

Allowing FDI in multi-brand retail can give a big push to the country‘s social agenda, too, and

has the potential to even positively impact and promote tourism, MIS, government‘s

ability to influence trade when required, address issues such as inflation, control over food

hygiene, better food quality assurance and accountability, increased direct and indirect

employment, push to real estate and availability of better managerial talent, among others.

Disadvantages of FDI in retail sector in India:

Indian retailers have yet to consolidate their position. The existing retailing scenario is

characterized by the presence of a large number of fragmented family owned businesses,

who would not be able to survive the competition from global players.

The examples of South East Asian countries show that after allowing FDI, the

domestic retailers were marginalized and this led to unemployment.

FDI in retailing can upset the import balance, as large international retailers may prefer to

source majority of their products globally rather than investing in local products.

Global retailers might resort to predatory pricing. Due to their financial clout, they often

sell below cost in the new markets. Once the domestic players are wiped out of the market

foreign players enjoy a monopoly position which allows them to increase prices and earn

profits.

Indian retailers have argued that since lending rates are much higher in India, Indian

retailers, especially small retailers, are at a disadvantageous position compared to foreign

retailers who have access to International funds at lower interest rates. High cost of

borrowing forces the domestic players to charge higher prices for the products.

The opening up of the retail sector would affect the sales in the unorganized sector. As a

result the employment it provides would be affected. Also, by reducing the number of

intermediaries, organized retailing will lead to some job displacement.

It is said that FDI would provide employment opportunities. But, the fact is that they

cannot provide employment opportunities to semi-illiterate people. Though they can

provide employment opportunities like drivers, watchman etc. but this argument gets

more attention because in India semi-illiterate people in quiet large in number.

Some fear that, if FDI is allowed in retailing then it would result in lowering of prices

because FDI will result in good technology, supply chain, etc. If prices were lowered then it

would lower the margin of unorganized players. As a result the unorganized market will be

affected.

FDI in retail trade would not attract large inflows of foreign investment since very little

investment is required to conduct retail business. Goods are bought on credit and sales are

made on cash basis. Hence, the working capital requirement is negligible. On the contrary;

after making initial investment on basic infrastructure, the multinational retailers may

remit the higher amount of profits earned in India to their own country.

Loss of cultural and ethical values due to more influence of the other cultures.

The organizational form of rural producers as they interact with Big Retail is still not being

done. Small farmers can undertake contract farming, but they have no bargaining power

and will be at the mercy of their buyers. Small producers need to be organized into farmer

companies or producer cooperatives that can deal with Big Retail from a much stronger

position. So that their interests are not lost.

Conclusion:

FDI will have minimal affect on unorganized players. The unorganized players have unique advantages, like home-grown processes, skills in retaining customers, nearness, convenience and services. Also, global retailers investing in new markets will not hampered local retailers as they can only exist in large cities.

Lowering of prices is not a disadvantage as foreign players in India make goods available at cheaper prices. Also global retailers bring along good technology, supply chain etc. that makes the product cost cheaper. Moreover, as the price decreases, the purchasing power of the people increases.

G R A P E

V I

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