I would like to take a view au contraire to the recent global meltdown. With most of the companies looking at slicing off their costs by targeting their cost centers … they are doing a big mistake. What they should focus on, is how to monetize their cost centers … how to turn their cost centers into revenue centers. Instead, what do we see … job slashing … 1000 sacked! … 50000 sacked!! How is that going to help you? Yes, in the short run, your Quarterly statements might be able to absorb the hit the financial crisis has had on your revenues, but in the longer run, you have just sunk deeper into sinkhole that you are trying to rise from(pardon my french).
The entire reason why companies are seeing the financial crisis is because the finance giants were not cautious enough in making the investments on which they bet their proverbial asses, and are now reeling with the losses. So you screwed up … big time. It takes a great man to admit his mistakes, it takes an even stronger man to move on. In Hindi there is a phrase … agar yeh nahi to wohi sahi.
Organizations are there to do business, and there is business to be done. If the world says that the total amount of business has gone down … well they have to be wrong :) … or they are not just looking in the right places. So what if Lehmann Brothers closed up … what if AIG has gone for a second round of rescue … there are other firms who will step in the shoes of the fallen ones. Global business … the show … must go on. Where to look at business opportunities one might ask – see a problem, fix it … can it be simpler than that?
So lets see the world back on its feet and totter to the trot that we were used to seeing.
With the changes in the US economy, India is feeling the ripple effects pretty early on. Even before the financial giants announced to the world that they are either wrapping up or being taken over, the Indian IT sector knew that times were going to be hard. Layoffs are bound to follow. The dotcom bust 2.0 is here :-). I had earlier written about this on my previous blog. A senior management professional at TechMahindra had predicted this as early as August 2006.
If you see the graph above, the dependence of the Indian economy lies largely with the Service sector, and that dependence has been growing constantly over the past years. We had the green revolution to bolster our agricultural sector, over the past decade, we have seen the IT revolution, that has significantly bolstered our services contribution to the GDP. I know this is obvious to most of you … but did we all see it coming? And if we did see it coming, then how come none of us sat up and took action.
Would we now try to start a belated industrial revolution, giving more priority for a product-based economy instead of a service-based economy? Can we see the contribution of Indian industry to our nation’s GDP increase? Or will our aam aadmi continue giving service to the firangs, depending on derived demand to earn his daily bread.
Are we gambling too much on the Knowledge Industry? Manmohan Singh recently announced that the eleventh five year plan would be centered around increasing the infrastructure (read institutes) for a knowledge based industry. That translates into more IITs and more IIMs with the generic mix of IISCs and IIITs thrown in as well. Effectively graduation and post graduation are been given more focus here, aimed at churning out more skilled labour and management students for corporates to come to the nation and setup bases; cost effective and efficient.
But, is this not increasing our dependence on the IT sector? Whenever the INR rises against the USD, the Indian IT sector plummets by a few percent … its obvious, direct PAT is taking a hit here, for the entire industry. Stocks of all the big IT companies see a dip. When the Rupee saw a 17-month low, the IT sector saw a cumulative 0.86% rise, the big firms’ stock rose by as high as 2%. So whenever I want my INR goes down, my IT sector does well … meaning more business … meaning more exports … meaning more employment … meaning higher cumulative disposable incomes … meaning higher GDP … meaning economic development … meaning more imports (assumption here, but generally higher disposable incomes lead to higher imports – correct me if I am wrong) … meaning INR rises back. Would it be not great if the finance minister could use other industries for balancing the economy?
I just read this, only in Bengal can this happen … maybe in Kerala as well. But at least the South Indian states have realized that reform can only be ushered in through economic development of the state.
If it is good for the country, does that justify sacrificing the lifestyles of a small segment of the populace? Logically speaking, I would say yes, but as the marathi saying goes – jyachi jalte tyalach kalte. Sometimes the ruler does have to make hard decisions, and those are the times when the opposition party is waiting for … to make a big hue and cry for garnering more votes.
Ughhh! What a mess … It really is surprising that how governments get anything done.