2012 - MAD IN INDIA
Raunaq Dubey
2nd Year, MBA++ Finance

Bill Vaughan once said; an optimist stays up until midnight to see the new year in and a pessimist stays up to make sure the old year leaves. Many believe the kind of year 2011 has been for the global economy the major economies throughout the world excluding the two Asian giants will surely extract a good sense in dedicating the 31st celebrations to 2011’s departure then 2012’s welcome.

The Asian giants- India and China, the countries with nearly 5000 year long histories were previously the victims of ‘globalisation’ in the name of European Colonialism but they bounced back big time and today they are perceived as the saviours of the global economy by economies not only in the west but throughout!

Here, I would like to differ and put even India in ‘31st celebrations to 2011’s departure’ club because the domestic economical, governance and policy issues have resulted into multiple worries which in nature are far beyond the understanding of typical board rooms and MBA class rooms. They have struck the Small & Medium Business hard. The status of our manufacturing sector vis a vis China is not very encouraging. We are far from making India a manufacturing friendly nation. A young entrepreneur, even today is discouraged by all the unhealthy governance practices so widely prevalent and rapidly choking our manufacturing sector. The potential future manufacturers are chalking down new career paths and many existing manufacturers are turning traders, while continuing with bare manufacturing, assembly & re-packaging. If all this was not less the RBI policies in themselves pose to be the real threat to our economy. 13 interest rate hikes have failed to keep the inflation at check. Simple arithmetic exposes the intent full neglect of the central bank on manufacturing/MSME sector. 1% increase in interest rates brings down the net profit of SME by about 10 -15%. Understand for every Rs.1 crore of credit, we'll pay almost Rs. 2.8 lac more as interest this year as compared to the interest paid two years back.

The Chinese story on the contrary is very different. From Christmas to Halloween to Diwali, every festival in the world is, in fact, celebrated in China in terms of business opportunity and money inflow. On khalifa Dubai inauguration ceremony, Indian diplomats are presented ‘Khalifa’ monuments by Dubai because of Dubai but MADE IN CHINA. On manufacturing we need to be realistic and understand China today is far ahead of even our Gen next manufactures.

Although the already choked up manufacturing sector is not the only challenge we will face in 2012. 3 increases in Fuel Cost this year, 13 Interest rate hikes in 18 months, Currency Fluctuations, disappointing IIP, directionless rigid political agendas and rivalry have butchered the ambitions of radical economic growth, Retail FDI, UID, Insurance sector reforms being shot down are a few of the several highlighting examples.

The challenges for our economy change every year. While 2009-10 was all about increasing sales & reviving markets, the 2011 was about managing our businesses in the storm of rising costs and so 2012 promises to be imposing even variegated, visible, nasty and tougher challenges. The elections in 5 states, the budget session, the strong Lokpal Bill furore is likely to further push these radical and urgent economic reforms on the backseat and the rising costs on all fronts- Raw Material, Inputs, Consumables, Wages, Salaries, Interest rates, Oil, Energy is surely going to hit the bottom lines like never before.

Today, it scares me to read the financial newspapers. The situation is getting worse from bad and still no adroit corrective measures are witnessed. What is expected from the government and policy makers is the new approach. The existing business environment and governance need to break out of the routine and take some bold historical decisions.

Wake up!! Wake up before we reach the point of no return.