Its not the smile stupid...

The main thing is to maintain the main thing as the main thing. The main thing is not personality. The main thing is character. When we look around and see rabid mushrooming of personality development schools who profess to teach you how to dress up well, smile and shake hands to make you super successful in life we know that there is something wrong with the picture. Personality development though important is useless unless we focus on character. Shakespeare’s quotation from Hamlet, “ One may smile and smile and be a villain,” some how seems relevant. It is not what you do on the surface but what you are deep inside, that matters. What are your values and your principles will determine whether you will be a good person or a villain. Only a good person will make a good manager. Not only that, a good person will make a good spouse, a good parent, a good friend and a good son or daughter.

So your endeavour has to be to improve yourself on a daily basis. You can live by Emile Coue’s affirmation, “every day in every way I am trying to become better and better." Becoming better is an inside job. It is not the smile as much as it is the soul. You are not just working on the effect of power dressing on the interviewer you are working on the impact your character will have on the organisation and anyone who comes in contact with you. No body cares whether you know the capital cities of all the countries or their currencies and can even rattle off the exchange-rates if you are dishonest and lack integrity. That doesn't mean you don’t work on your general knowledge. What good is it if you have a very firm handshake and fantastic communication skills but you don’t think twice about cheating and are a habitual liar. Employers won’t touch such a person with a barge pole. Businessmen know you can’t do a good deal with a bad person.

The main thing is to keep the main thing the main thing. The main thing is to focus on your character. The main thing is to follow the golden rule. The golden rule implies that people will treat you the way you treat them. You treat people well they will treat you well. You respect them they will respect you. You give them love they return the compliment. You care for them they will care for you. People do not care how much you know till they know how much you care. Companies are no different.

Positive Thinking

One of the most involving discussions we had in our ‘Saturday Special’ was on attitude and positive thinking. It was sparked off by my rather casual introductory comment that the finest outcome of having a positive attitude is that you begin to think positive. The discussion went a bit overboard as a raging debate ensued whether positive thinking was an outcome of positive attitude or is it the other way round? Is it possible to have negative thinking and a positive attitude? Is it possible to train oneself to think positive or learn to have a positive attitude? We had to wait till the next session for everyone to calm down and have a meaningful discussion. We decided that for our purpose it does not make a difference as long as we ensure that we have a positive frame of mind because negative attitude and negative thinking can be major hurdles in the way of happiness and success.

Remember, successful people take their sunshine along wherever they go. As Robert Hastings said, “Places and circumstances never guarantee happiness. You must decide within yourself whether you want to be happy. And once you have decided, happiness comes much easier.” It boils down to ownership again. You decide. You fashion your own environment with your thoughts, your beliefs, your philosophy, your attitude and above all by your actions.

People who will be successful do not wait to feel positive before they act. They act and feel good about having acted. You can see people’s attitude only through their actions. In that sense attitude follows action. Once you get into the action mode you will begin to have positive thoughts. People who start of with negative thoughts for whatever reason are crippled by fear. The only remedy for fear is action. Action cures fear. Action leads to positive thoughts. Positive thoughts lead to positive attitude. You see it comes full circle. So we need not worry whether positive attitude comes first or positive thinking. For people who want to be successful action comes first and everything else follows and everything falls in place. Your action will start a chain reaction and slowly you will exude confidence, energy and positive attitude making you very attractive.

Attitude

The first impact of owning your life and taking responsibility for all your actions that you will notice will be on your attitude. You can’t complain you can’t blame. If you are late for the class or a meeting you cannot blame it on a flat tyre or bad traffic. You cannot postpone the date of submitting your assignment because you fell ill. You cannot even blame a bad teacher for the low grades you get. In school you perhaps could have because the teacher was responsible for making you learn. Not at this level. Now you are responsible. So you figure out how are you are going to learn. One of the first things I tell my class right at the beginning of the new session is that I am a bad teacher and that they better pull all their resources to get good results. It scares those who have not yet taken ownership of their lives. Others know better.

You cannot complain that you were born poor or that you did not get to go to a renowned school or that you were a sickly child and that your friends bullied you. That time has passed. That time is over. You cannot weep, wale or whine. Today is the first day of the rest of your life and you can take the first step towards achieving whatever you set out to achieve. That is the attitude you have to have because you are only an attitude away from success. You cannot go through life thinking about your past failure. You have to count your blessings and make the best of the hand you have been dealt.

I am sure none of us have been dealt a hand as bad as Victor Frankl. Victor E. Frankl was a Jew born in Vienna, Austria in 1905. A brilliant student he grew up in Vienna and studied psychiatry and medicine. In 1930 he joined a hospital there as a young doctor. When Germany seized control of Austria eight years later, the Nazis made Frankl head of the Rothschild Hospital.

Frankl got married in 1942 and nine months later, he was arrested for being a Jew along with his parents and wife. They were deported to a concentration camp near Prague. Even though Frankl was in four Nazi camps, he survived the Holocaust, including Auschwitz in Poland from 1942-45, where the incoming prisoners were divided into two lines. Those in the line moving left were to go to the gas chambers, while those in the line moving right were to be spared. Frankl was directed to join the line moving left, but managed to save his life by slipping into the other line without being noticed. Other members of his family were not so fortunate. Except for his sister his entire family perished in the in the concentration camps.

One day, naked and alone in a small prison cell, he realized that the Germans can torture him and take away every one of his material possessions but one thing they cannot take away is his freedom - freedom to respond to what they did to him. He determined that he and he alone, not his captors, will decide how his circumstances will affect him. He decided that he will choose the response to whatever is done to him. “The last of human freedoms,” he said, “is to choose one’s attitude in any set of circumstances.” Even in extreme cases while he was being tortured by the Nazis he would retreat into his mind and picture himself as lecturing to his students or examining a patient. He grew so much in stature because of his confidence in himself and his thinking that his captors just could not conquer his mind. He not only survived the Holocaust but went on to lead a very successful life, influencing millions of people not only by his example but also as a mentor and motivator.

People who will be successful do not wait for the weather to be good before they go out they take their sunshine along wherever they go. They do not wait to feel good before they act; they act and feel good that they took action. They do not whine that they have been given a raw deal. If they get lemons they make lemonade. What kind of an attitude are you going to have now that you know that you are just an attitude away from success.

OWNERSHIP

You are responsible for being where you are in your life today. Congratulations if you are successful and living your dream life; you get the credit for creating your dream life. But if you are living a mediocre life and consider yourself to be a failure or are anything less than successful, you and only you have to be blamed for it; no one else shares the blame with you. Maybe you are too young and have just joined a professional course and are pretty happy with what you have achieved in life up to now but are not very sure how life will pan out and are perhaps a bit apprehensive about it too. Let me tell you that the most important thing for you is to brace up to reality and take ownership of your life and take responsibility for the consequences of all your actions. You have to tell yourself that if you are successful in life you will create that success and if you end up on the monumental pile of mediocrity no one else is to be blamed except you.

So first thing you got to do is to take ownership of your life. You will, from now onwards design the life you want to live and not just drift with the wind. Where you will be in life five or ten years from now will depend on the decisions you take, the company you keep and the books you read. But most important of them is being capable of taking decisions for your self. You cannot begin to take decisions for yourself till you own your life and say to yourself that I am responsible for my actions, my success and my failure. You will have to grow up and it takes a decision, a conscious decision, to grow up. Maybe you can take that decision right away. Maybe this is your first independent decision and you want to mull over it. But do not read further till you take this decision. I don’t care if you are fifteen years of age or fifty ; till you take this decision you are still a little boy or a girl. I am writing this for men and women; for ladies and gentlemen; not boys and girls.

Congratulations if you are still reading because it means you have taken the all important decision and crossed the first hurdle to success. Taking ownership of your life is both scary and liberating. Scary because now you know you are on your own and responsible for whatever you do in life. It is very liberating because you have now empowered yourself to achieve whatever you set out to achieve. There is a very illustrative saying: “ To the person you give responsibility, you give power.” Now you are in a position to script your success. Nothing can hold you back. Neither your negative friends or relatives nor any adverse circumstances can stop you from achieving every goal you set yourself because you know you cannot blame them. You have to find a way in spite of them. You cannot make excuses, you cannot blame, you cannot complain. Your attitude will change because you took ownership of your life. You still will not be able to control what happens to you but you will certainly be able to respond the way you want to, to what happens to you. You will become more proactive because you have your own agenda and goal in life. You will create your own circumstances rather than be a product of the circumstances. You will consciously and deliberately inculcate success habits. You will pay attention to details. You will get the results because you own your life. You have now starting to live out your story and it is your responsibility to insure that, at the end of it, you have a great story to tell

Saturday Special

It started as a bit of a banter with a small bunch of students who surprisingly showed up in the last period of the week on a hot sultry Saturday afternoon in August.
"What are you doing here?" I asked the stunned scholars who were as stupefied by the question as I was stumped by their presence. They were perhaps expecting to hear a word of praise. After all they had proved to be the disciplined ones who opted to attend the class at that stifling hour when everyone else had either gone home or decided to start their weekend early and had either hit the bar or gone for movies. My query was only half in jest; I was pretty serious.
Most students have the same perception about 'Soft Skills' classes in a Business School as the domain faculty - an unnecessary appendage. Soft skills faculty does precious little to allay the impression. Who wants to sit through another lecture on, ' how to make an effective presentation' or on, 'how to write a cover letter for your resume' anyway; that to at the fag end of a tiring six day week? My sympathies are actually with the students in this regard. I don't blame them too much if they want to travel to their home town to meet their parents or watch a good movie or even an ordinary one. 'Soft Skills' they reason is not even a credit course.

Not wanting to do anything from the syllabus in the absence of majority of the students, we decided that we will have a freewheeling discussion on whatever topic came up randomly. We actually had a very lively and enjoyable session. Surprisingly we had a bigger number of students who stayed back for the class the next week. Slowly our Saturday sessions became more and more rewarding and the class began to fill up till we had more students on Saturdays than on week days. We continued with discussing topics picked up randomly by students rather than anything from the syllabus. Everyone participated in the discussions and we had a lot of fun. I knew we had a good thing going when one day a student came to my cabin and said,
" Sir, I have to go home because it is my younger sister's birthday but I do not want to miss the Saturday Special."
The series of articles I am writing are a result of the wonderful time we had on these special Saturdays.

IPL - The Business of Cricket

IPL - The Business of Cricket

Whether the game of cricket came out winner or not at the end of the first season of Indian Premier League will depend on a person’s perspective and on the definition of success but it has to be accepted that the event succeeded in converting cricket into a big business opportunity. You can praise IPL or you can criticize it but if you live in a cricket playing nation you cannot ignore it. Players from all major and new cricket playing countries want to play in IPL and the media companies are vying to get a piece of the pie. The spectators can’t seem to get enough of the action. IPL has truly touched a chord in the hearts of not only the younger generation that want rapid fire action on the field but also the older people who felt five days was too long a period to wait to get a result. The purists who felt the game has been eroded of its basic nature are beginning to realize that it is still cricket and not very different from the real thing except that it is faster paced. They are slowly converting to the new religion and have started nodding in approval though they are still a bit nostalgic and a little overwhelmed.

Indian Premier League (IPL) in its first avatar had everything it promised: exciting Twenty20 games full of 6s and 4s, glamour in the form of various business tycoons and Bollywood biggies endorsing most of the teams, big crowds and who can forget the red skin cheerleaders trying to excite an already ecstatic crowd. Though they put on an impressive show but had it not been for the TV cameramen, who kept focusing on their calisthenics every time a boundary was hit or a wicket fell, they would have perhaps not even be noticed after the initial curiosity had worn off. Then there were the inevitable blame games and the media hype associated with it. All these together with the millions of dollars finding their way to the coffers of the Board of Control of Cricket of India (BCCI) truly made the tournament the biggest cricketing event in the history of cricket. IPL certainly took its time settling down and in due course various lessons would have been learnt by everyone connected with the game and the business of cricket. The organizers, players, captains and even the viewers can all contribute in making the second IPL season a bigger and better event.

Cricket has evolved over the years and the rate of evolution (if the expression is acceptable) has increased tremendously over the last two decades. After sticking to the longer version of the game for centuries the game was transformed by the introduction of a 65-over one day game in 1962 in England. One-day cricket began between English county teams on May 2, 1962. Leicestershire beat Derbyshire and Northamptonshire beat Nottinghamshire over 65 overs in the "Midlands Knock-Out Cup". The first One-day International (ODI) match was played in Melbourne in 1971, and the quadrennial cricket World Cup began in 1975. Many of the "packaging" innovations, such as coloured clothing, were introduced in the ‘World Series’ Cricket, a "rebel" series set up outside the cricketing establishment by Australian entrepreneur, the late Kerry Packer, who saw the great business potential of “instant cricket’ which promised a result at the end of 60 overs in 99% of the games played where as most five day and three day games ended in a draw. There was a great hue and cry raised then by the ‘purists’ of the game who felt that the great game of cricket had been compromised and its principles diluted. They felt that cricket had been commercialized and no longer remained a gentleman’s game. And just when instant cricket came to be accepted by the end of the twentieth century with as many as seven ‘one day’ world cups organized successfully and ‘One Day Internationals’ (ODIs) becoming an integral part of international cricket tours, along came the Twenty20 version to shake up purists out of their cocoon one more time. India was slow to accept it. There were hardly any twenty20 tournaments played in India at any level when Dhoni and his ‘dare devils’ stormed the bastions of the relatively more experienced teams and claimed the first ever world cup in this version of the game. It fired up an already crazy nation which had been itching to celebrate a major achievement ever since Kapil Dev’s giant killing team won the cricket world cup in the fifty over version, way back in 1983. National and International tournaments have been lined up for the next couple of years. Many clubs have been organized and new organizations have sprung up to challenge and question the monopoly of the BCCI in India. Even the blind could see the fantastic business opportunity that would change the economics of the game locally and globally. Sahara India with Kapil Dev’s blessings saw the opening and immediately took the lead.

Sahara sponsored ICL (Indian Cricket League) seized the opportunity and started a domestic 20Twenty tournament with players drawn from all cricketing nations. ICL had quite a successful first season despite tremendous opposition from the establishment (read BCCI), what with not allowing their grounds to be used for the games and threat to ban the players who participated in what was construed to be a rebel organization, reminiscent of the Kerry Packer rebel World Series. Though the BCCI was caught napping and was late of the blocks but by organizing the IPL it has put the stamp of approval on the 20Twenty version of the game in India. There are a lot of matters, legal and other, which still have to be sorted out but one thing is certain that Cricket has won a major victory and it is healthier and richer because of IPL. Things can only get better and more exciting for everyone involved. No one knows what will be the next visible change in the format in the world of cricket yet one thing beautiful about the evolution process here is that it is not Darwinian in nature in the sense that it is not about survival of the fittest. All versions of the game are alive and kicking. One is already waiting for the next avatar. Though the first inaugural Champion of Champions tournament, to be played between the top eight teams drawn from India, England, South Africa and Pakistan had to be postponed, it has already been conceptualized and it is only a matter of time when we have ‘World Club Cricket’ championship which could be the next big thing in the sporting world. Its payout was supposed to be to the tune of $3,000000.

Purists often speak of Twenty20 cricket disparagingly. They felt as if a sacred vow had been broken; as if the fine game of cricket had been reduced to something absurdly simplistic; where ‘sloggers’ rule the roost, where hand-eye co-ordination mattered more than finely honed cricketing technique perfected at the playgrounds of Eton, Harrow or Indian Public schools and where bowlers are irrelevant. If you’ve been watching carefully, you will know this isn’t true. Twenty20 is not a dilution of the game but an intensification of it. It is filled with life-and-death urgency. Each team gets to face just 120 deliveries in a match, and every ball counts. There is no space for sloppiness, error or sluggishness. A single mistake can shift the momentum a single over can change the pattern of the game and it can happen many times in the span of just twenty overs. The batsmen have to try and score off every ball. The demands on the batsmen, bowlers and fielders are much greater in a 20 Twenty match than in the longer versions. But this is cricket. The more it changes the more it is the same and everyone is loving it. All this makes for a fantastic spectacle. The game of cricket has changed beyond recognition as far as the pace it is played at is concerned. We are witnessing more results even in Test matches because players have positive result oriented mindset. Losing one day is not a big deal because; with so many matches being played they know they will find themselves on the winning side on another day. They play the game like a game should be played; intensely not seriously. They play with intent to win but without much fear of loss. So IPL and 20Twenty cricket make good cricketing sense.

The best reason IPL is good for cricket is that it is good for cricketers. Local and International cricketers are earning so much from it that there is loose talk of them preferring the IPL to Test cricket. Honestly, that is a problem that cricket control boards will grapple with for the ICC to sort out. Increased opportunities for players can only be good. And in the IPL, these opportunities are very widespread. First to benefit from IPL are India’s domestic players – they no longer have to battle regional politics to get into state sides, or fight to get into the exclusive and elitist national team. They have eight buyers for their services, all made to compete, by market forces, for the best talent. A domestic player who plays two seasons of the IPL or even the ICL stands to make more money than he would in an entire ‘Ranji’ career. Suddenly players like Virat Kohli, Ashok Dinda and Prasanta Saha become known personalities all over the country despite the fact that they did not have a great outing. Youngsters are getting a look in and are rubbing shoulders with the veterans. There were as many as sixteen under nineteen players playing in IPL. They along with other young players like Suresh Raina, Praveen Kumar, Robin Uthapa, Shaun Marsh, Manpreet Gony, Sreesanth,
Yuvraj, Ishanth Sharma, Yousuf Pathan, Tanvir, to name a few had a phenomenal learning experience. They hobnobbed with the titans of the game and learned valuable cricketing lessons. It is a great time to be a young cricketer.

There is one niggling issue though which probably is not good for cricket and that is the issue of confrontation between BCCI over rivalry between the promoters of ICL with BCCI. BCCI is running rough shod and is giving critics of the game of cricket a chance to train their guns on it. ICL (the rival cricket league) whose players are being shut out by the crass behaviour of the BCCI is matter of concern and needs to be resolved in the spirit of democracy. There may not be easy solutions at hand but massive efforts must be made to find a way out. The ICL forced the IPL into existence by providing competition to the establishment, but is now losing money, and may not last long. It is a problem rooted in the nature of many sports boards across the world: the BCCI is not a public limited company and therefore is not accountable to shareholders; nor is it a government body, accountable to taxpayers. It has a monopoly on representative international cricket and on the domestic feeder systems for it. There is no legal precedent anywhere in the world, for breaking this up. The ICL tried to provide competition to BCCI, as Kerry Packer once did to the International body, but the BCCI craftily countered it with the IPL. The IPL introduces some competition within the world of cricket – but that world remains governed by one unaccountable body. But legal hassles are beyond the scope this essay.

Though there are some disturbing issues that will have to be resolved IPL is not only good cricket but more importantly it is also good economics. It is expected to bring in an income of $1 billion for the BCCI over the next ten years. All this revenue will be directed to a central pool, 40% of which will go to IPL, 54% to franchisees and 6% as prize money. After ten years IPL will get 50%, franchisees 45% and prize money 5%. Television rights alone that have gone to a consortium consisting of India’s Sony Entertainment Television and the Singapore based World Sport Group (WSG) will bring in $ 1.026 billion dollars by 2017. It is envisaged that IPL will go public by 2012 and be listed on the bourses in India and abroad. Sony-WSG have re-sold parts of the broadcasting rights geographically to other companies and is expected to make a huge profit though terms of all their resale of rights is not entirely known. This is just the beginning. IPL has the potential of marketing the game on a truly global scale which could become as big as the ‘football’ market. Two of the franchisees i.e. Kolkata Knightrider and Rajasthan Royals have already broken even with a profit of thirteen crore and six crore respectively in the very first season which is remarkable. It augers well for the teams in future as highest profit shown by Kolkata Knightriders, which finished third from the bottom makes it clear that good management can help make decent profits in the game. IPL has opened up tremendous business and professional opportunities for entrepreneurs, advertisement professionals, sports managers, TV presenters, sport commentators and journalists, physiotherapists and sport psychologists, cheer leaders and event management companies. There is buzz of excitement and expectation all around. It has turned cricket into a big business opportunity.

Its not economics, stupid!

I am not sure if there is any one among the common people who understands what this world financial crisis is all about and how exactly is it going to affect them but I am quite convinced the experts don’t get it. Right up to the time when some of the strongest pillars of American capitalism were going bankrupt or were bailed out with unprecedented infusion of funds the experts were confidently reassuring the common people that all was well with the financial markets and the banks. Now when the party is over; the housing bubble caused mainly by aggressive sub prime lending has burst destroying trillions of dollars of investor’s wealth across the world, the experts are back, saying it was inevitable; as if they always knew this was coming.
The ‘bust’ has exploded many a myth. One of them being banks and insurance companies never fail and that people’s money in safe deposit with them, especially the bigger banks, is absolutely safe. The credit crisis has claimed retail banks like Washington Mutual Inc. which closed down and investment banks like Bear Sterns which was taken over by J P Morgan with dollops of help from the Federal Reserve. Filing for bankruptcy by Lehman Brothers, investment bankers that defined US financial systems for over a century, sent shock waves around the world leading to a global turmoil. American International Group, one of the most venerable insurers in the world, had to be taken over by the government for about $85 billion. It compelled Allen Greenspan, former chairman of the US Federal Reserve, who presided over much of the excess lending and expansion of the sub prime mortgage market that prompted the current global economic crisis, to say that he is in a state of “shocked disbelief”. He said, "This crisis has turned out to be much broader than anything I could have imagined. The world is going through a once in a century "credit tsunami". If Greenspan could not understand what hit the economy can you blame common people if they are wondering whether their deposits in the bank are safe or if the good old stocking is a more secure option to keep their money in? If the Banks in the US of A can fail how well equipped or capitalized are they in India to cope with a similar situation? Will the ‘$ 800 billion bailout package’ prove to be enough to tide over a $3 trillion crises without damaging the confidence of the banks, the financial institutions and above all the ordinary people not only in the USA but also in countries that are either directly affected because they funded the sub prime lending or others like India whose direct exposure is perhaps limited but where the signs of the impact of the ripple effect are now becoming ominously visible?
The experts were out again and were telling us that the Indian economy was insulated from whatever is happening in the US and Europe. The Indian banking system, they said, was very robust and the Banks were adequately capitalized and well equipped to face any challenges. The government and the Reserve bank of India, they opine, are on top of the situation and will do everything necessary to insure that the common man is not too affected by the ripple effect of the world financial crisis. The question is not whether the experts in the government and the RBI are willing to something or not. The question is do they know what to do? Will monetary measures taken by the government be enough when the problem is only partly economic and more psychological? Yet it is necessary to know how the Indian economy could be impacted and more importantly how the psyche of the Indian investor can be affected. Above all what is the opportunity side of this crisis.
It is naïve to think that India is so insulated from the world economy that it will remain completely unaffected by the momentous events in the USA and Europe. Indian economy is bound to be impacted since most US companies do business with companies in India. After all despite the tremendous progress made by the Asian tigers the USA and Europe still make up over 60% of the world economy. The whole world, let alone India, is expected to reel under the effect of the current financial crises considered as the worst since the Great Depression of 1929. That is the bad news. The good news is that India will, in all likelihood come out stronger if the government and the people recognize the opportunity to build infrastructure, invest in human capital and build social security safety nets.
At the macro level what we can see is that the Sensex has gone well below the psychologically important 10000 mark and sunk even breached 8000 a day before Diwali on black Monday the 27^th of October, 2008. It has eroding more than half of shareholder’s wealth in less than nine months. The Rupee is reeling at all time low and breached fifty to a dollar. Industrial production is growing at less than 5 percent against nearly 10 percent a couple of years ago. The trade deficit at $ 63.17 billion compares very unfavourably with the 12.6 billion deficit in 2006. Fiscal deficit today is at 1,16,890 crore against 77,740 crore in 2006. So fast has been the slide that people are reeling under the impact. Investors and speculators are still trying to figure out what hit them while TV news channels are leaving no stone unturned in fanning the fire and creating a Gloom and Doom situation. The good news about three bumper back to back harvests does not seem to mean anything to the media. Suffice it to say that the media is focused on less than ten million families or forty million people affected by the ups and downs of the stock markets and not concerned about the rest of the 960 million people who also live in India. They are not exactly rolling in luxury but are celebrating a happier Diwali than they have in years.
While it is true that the economic impact of the global financial crisis on India may not be as much as it will be on some of the countries whose banks funded the sub prime lending in the US the psychological impact could be tremendous. Some of the policy decisions the government took in the past have helped prevent a full blown impact on Indian banking and financial system. For example the conservative stance on total globalization and reluctance to go ahead with capital account convertibility shielded India to an extent while some other more integrated countries are finding it very hard to bear the onslaught of a Tsunami of a financial crisis. Yet companies like Lehman Brothers, Merrill Lynch, AIG and Morgan Stanley and many others have their captive research units, brokerage arms, investment banking arms in India employing several hundred thousand people in what is popularly known as BPOs (Business Process Outsourcing) and KPOs (Knowledge Process Outsourcing). Some of these jobs could be in jeopardy. For example Lehman Brothers’ Powai unit alone employed over 2,000 people most of whom will be rendered unemployed unless some other company buys out Lehman’s India operations and keeps the wheels running like TCS has bought out Citigroup Global Services Limited. Otherwise these companies will have to downsize their workforce to remain profitable and to cut costs. Goldman Sachs has already announced it will cut 10% of its global strength. That means 200 people in their India operations will lose their jobs. A lot of US companies have also outsourced their technology-related jobs to Indian companies like Satyam Computers, TCS, and Infosys which might be affected in the near future. However this might even turn out to be an opportunity for these companies as many more US banks and companies may want to outsource work to Indian companies to reduce costs.
Sectors like real estate, aviation, and information technology have already started downsizing their employee strength. Even though Subhash Goyal of Jet Air was arm twisted into taking back the 1900 employees, a day after they were sacked, there are newspaper reports about DLF and Kingfisher reducing their staff strength by 300 because of cash crunch and sluggish business. Technology companies like TCS and IBM had removed more than 500 people each citing poor performance long before the US woke up to the financial crisis. Tata Steel laid off 300. Young graduates and professionals who have been planning to take up jobs may have to wait longer and/or accept lower packages. In the absence of any significant safety net downsizing and lay offs could hit people who lose their jobs very hard. The Government needs to act and act fast. It must convert this crisis into an opportunity to institute safety nets for the urban and rural employees who could lose their jobs because of downsizing or else we might have an epidemic of suicides which may not be as severe as the farmers’ suicides of the last decade but could be a pretty serious matter. The gruesome killing by Karthik Rajaram, a 45-year-old Indian American, who lost his high-profile job to the global financial meltdown, of his wife, mother-in-law and three children before taking his own life, is both tragic and foreboding. It is critical to step up and recognize we are in some pretty troubled times.
Another trend, a consequence of the world economic crisis, which could hit the middle class in India is raising interest rates. In the last couple of years it was the inflation rate that spoilt the party for Indian borrowers of home loans, personal loans and credit card purchases. Now it seems rising cost of money, because of illiquidity caused by distrust between banks, among other factors, will send interest rates soaring north. Banks have become so distrustful and wary of each other that inter bank lending, so crucial to smooth running of the banking industry, have dried up. They refuse to lend t each other for fear of default. Fear psychosis has gripped the banking sector and this is the real problem. If Lehman Brothers can file for bankruptcy what is a small Indian bank in comparison? So much for the Indian banking system being insulated from the events in the US. So the interest rates are headed north for some time to come whether we like it or not. Though the government has acted swiftly and has infused over Rs.185,000 crore in the economy with some desperate measures that led to easing of inter bank lending rates for the time being; rising interest rates is a trend which will take its time before it reverses. There is nothing much the government can do about it in the short run but can certainly pursue policies which will insure lower interest rates once the trend has run its course.
Similarly RBI’s effort to stop the slide in the value of the Indian Rupee against the dollar has failed miserably. India’s foreign exchange reserves were $274 billion down from $316 billion in May. The pile of reserves has come down as the RBI’s has been aggressively selling dollars in the market in an effort to stem the slide of the rupee against the US dollar. Yet that effort could not stop the rupee from slumping to its lowest level ever. The truth is when economics and psychology clash it is normally the later that triumphs. There is no other way to explain the failure of such massive government efforts to stem the economic rot. The problem in India is not that there is any real danger of a major bank failing or the government going bankrupt (like Iceland); the problem is that of confidence. There does not seem to be any dearth of capital as the government and the Reserve Bank have amply demonstrated; the problem is that of credence. The inter bank credit dried up not because there is no cash. It dried up because the banks don’t trust each other. The American sub prime lending crisis was caused by overzealous bankers disbursing loans to people who did not have means to return them. It would not be surprising if the Banks go to the other extreme now and become extremely skeptical and use extreme caution in sanctioning loans leading to lower lending and higher interest rates. ‘Greed’ was the force behind sub prime lending ‘fear’ has griped the market now. The confidence that borrowers will repay the banks’ money with interest every month has been shattered in the US and Indian borrowers will have to bear the brunt of this lack of confidence in the days to come. Some banks have already started charging higher interest on your credit card dues. What can you and I do about it. Well, pay off your loans and credit card dues as soon as possible. At least make a systematic plan and pay them off in the next three to six months. Else brace up for higher interest rates for that is the trend. With due apologies to Victor Hugo; you can stop invading armies but you can’t stop a trend once it has gained momentum and taken control of people’s psyche. A trend will run its course and that takes time.
There is some good news though, for people who have been wondering whether they will ever be able to buy a house during their life time. Real estate prices in Indian towns and cities are likely to come down by 10-15 per cent in the next few months. If the trend catches on the real estate prices could fall very sharply as developers are going to be hard pressed for cash with banks becoming so paranoid with news of housing loans being at the epicentre of the world financial crisis. Once again it is the psychology taking precedence over hard headed economics. The outcome could be developers lowering rates to lure buyers to shore up cash flows. The looming recession in the USA and Europe has brought steel and cement prices down. That should be a good news for the housing and we could see the revival of the housing activity sooner than most people expect.
The best way to begin to deal with the situation is to recognize the situation for what it is. In India it is critical but not crippling. People in the government also needs to remember that at such times it is not economic measures alone that will work. The government needs to work on the psychological and social aspects. The least it can do is not panic and not be seen to panic and have a long term perspective. The flip side of crisis is opportunity. The government can seize the opportunity and step up pace of building infrastructure when the cost of building it is low so that we are ready for the boom that will certainly follow these critical times. Whatever the state of the stock markets, commodity markets or even the currency markets the real Indian economy is still very robust and poised for another round of super growth albeit after a breather.