The Chanakya November 2013

From the Director

Editorial

1 The Chanakya, November 2013

s I write this piece, the Industry-Readiness program I Amentioned in the previous Chanakya (Sept 2013) is well underway. Industry has been an active partner in this process in guiding students on their career path - we had over 16 executives from various industries and different levels participating in a 'jamboree' spread over 4 days on both locations Harihar and Pune. Such involvement by industry is one example of our Industry Integration Initiative about which I am writing in this issue.

I am sure that what we are doing is not rocket science, but the way we have structured the Industry Integration Initiative offers numerous touch points from which the executives (and companies) can take their pick for interaction. Basically the initiatives are clustered under 4 broad heads: (1) Academic Process Oriented; (2) Relationship Process Oriented; (3) Placement Process Oriented; (4) Business Oriented

Under Academic Processes, we have designed involvement both in and outside the class room. We hold Guest Lectures and Seminars, as well as invite executives to teach a course. A unique element of the design is participation in a regular class through Skype for the last 10 minutes of a lecture. This would allow students to immediately dialogue with an executive to get the practical slant to the concepts just delivered. We also constantly hunt for live assignments which may involve assisting with a problem the executive is facing at work. Summer Internship is a standard mode of interaction with industry. And finally, we look to work with organisations for design and delivery of specific courses.

Relationship Processes centre around mentoring individual students, as well as students in functional groups. This helps students in understanding industry expectations at entry level. As an example, students who wanted to make an impact in 'branding' realised that the start could be anything but glamorous and yet it would surely lead to the glamour position in due time. It was almost like “scales falling off one's eyes”! Many executives participate in our assessment processes (SIP, Capstone) as panel members; for us this is more relationship oriented than academic oriented. For through the assessment process strong bonds are formed with the executives, who then extend a helping hand in our processes.

Though it really was not our intention, we did have one organisation invite two students to look at placement opportunities, mainly through interacting in these forums.

While the above is more student-centric, Institute level relationships are formed through accepting to be on our curriculum committee, being keynote speakers in major events, and similar activities. I must point out that it is not always one-way. We have in fact designed another unique KIAMS offering so that the 'two-way' starts. Under this initiative, our faculty will hold an “Academic Hour” on the company's premise, where relevant executives could meet them over a cup of tea and discuss conceptual advances in their field

Placement Processes make available our students to meet the entry-level requirements of industry. This is also two-way, as mutual needs are met. We have strong bonds with quite a few organisations who are our regular recruiters. We try to expand this pool by reaching to more and more new companies. In the last year we almost doubled the number of companies visiting our Institute and that too in times of economic duress. Even as I write, more than last year's numbers have shown positive inclination to visit us. We do know there will be attrition when the time to recruit comes, but we are still confident of maintaining our rising trend of getting companies to be interested in recruiting from us. We also had a small beginning in International Placements last year and we look forward to building on it.

Finally, we have very strong Business Offerings to industry through our pedigreed MDPs, Training, Consultancy and OD interventions - this has been our forte since 1991. Here our reach extends overseas. These offerings include both our group companies as well as outside group companies.

With such a wide-ranging portfolio of Industry Integration, we are continuously strengthening our industry relations. This is the first year we have made our Industry Integration Initiative so structured. Some of the components are well entrenched, while others have yet to be initiated. We know it is a long haul, but the most substantial steps on the 1000-mile journey have been taken.

Dear Reader,

inancial crises have been pervasive for many years. The Frigorous efforts made by many financial wizards to restraint the economic crisis, at times left them with discontented experiences and unfortunately, the present global economic scenario is one among them. The financial crisis that had its genesis in the summer of 2007, which was observed as a puny disturbance in the U.S. subprime mortgage market, gradually escalated and started affecting the financial status of the nation and ultimately shuddered the world economy. The crisis has changed the financial landscape worldwide and its full costs are yet to be evaluated.

As perfectly said by the former U.S. President Bill Clinton, “No generation has had the opportunity, as we now have, to build a global economy that leaves no-one behind. It is a wonderful

opportunity, but also a profound responsibility”. The above quotation is surely an undisputed fact as our generation has got the best opportunity to build a strong global economy. But the question of 'how much time would it really take to build such a sturdy global economy?' is something which is yet to be answered.

With a vision of exploring an answer to the above question, Team Chanakya, with “Global Economy” as its primary focus, tries to provide the readers with a holistic view of all the aspects that contributes to the fortification of the same.

Also through this editorial we would like to wish all our seniors, Batch 15, the very best for their final placements.

Happy reading!!!Team Chanakya

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Global Economic Scenario

2

Global Economy

The Chanakya, November 2013

The global economy has yet to shake off the fallout from the crisis of 2008-2009. Global growth dropped to almost 3 percent in

2012, which indicates that about a half a percentage point has been shaved off the long-term trend since the crisis emerged. This slowing trend will likely continue with the growth of the global economy for the remainder of 2013 remaining a mix of a cautious improvement in economic conditions in mature economies and a stabilization of the slower growth rates in major emerging markets. Overall the global growth rate will end up at a disappointingly low 2.9 percent for the year, about 0.3 percentage points below the global growth performance in 2012.

The global economic environment shows signs of improving, but in bits and pieces. Disturbing events keep getting in the way of an unambiguously positive story. Still, the story appears to be getting better. Financial market stress in Europe remains at manageable levels despite the crisis in Cyprus. In the United States, a substantial contraction of fiscal policy appears to be offset by other positive factors. In Japan, a new monetary policy holds promise of better growth.

What was until now a two-speed recovery, strong in emerging market and developing economies but weaker in advanced economies, is becoming a three-speed recovery. Emerging market and developing economies are still going strong, but in advanced economies, there appears to be a growing bifurcation between the United States on one hand and the euro area on the other

Let's us now look at major economies and their performances.

United States: Improved economic fundamentals, as reflected in rising household wealth and a recovering housing market, have positioned the US economy on the verge of entering a period of accelerating growth. The spark igniting the acceleration will come as the slowly improving employment situation finally reaches a tipping point where it begins unleashing years of pent-up demand from people who have been prevented by economic circumstances from establishing separate living units. The combination of higher taxes particularly the expiration of the temporary payroll tax reduction and the fiscal austerity measures known as “sequestration” will definitely dampen the rate of acceleration, but will not be sufficient to actually stop it

Whatever the strengths and weaknesses of the composition of growth in 2012, it was clearly not sufficient to ignite strong employment growth. As shown in figure 2, employment growth over the course of both 2011 and 2012 was slow averaging 175,000 jobs per month in 2011 and 183,000 per month in 2012

Total employment still remains well below its pre-recession peak. As a result of the slow growth in employment, the unemployment rate is coming down very slowly (Below figure), and 12 million people are continuing to look for work three and a half years after the end of the recession.

Federal Shutdown: The U.S. government shutdown is due to the House of Representatives and Senate's failure to pass a continuing resolution (CR), which is “legislation that permits a government

agency to continue to operate at existing funding levels if a new appropriations bill to fund its operations has not been adopted by the start of the fiscal year (Oct. 1, 2013)”.

T h e g o v e r n m e n t shutdown affec ts many “non-essential” federal departments across the country. According to New York Daily News, government services t ha t have cea se s during the shutdown i n c l u d e S m a l l B u s i n e s s L o a n , Medicare and Social

Security Benefits applications, visitation of National Parks, Museums and monuments, as well as IRS auditing. In addition, an estimated 800,000 federal workers have been furloughed, costing the U.S. almost 1 billion dollars a week in lost pay, according to CNN correspondents Holly Yan and Tom Cohen.

On the surface all appears calm, but the longer the shutdown lasts, the worse off the U.S. economy will be. According to Secretary of the Treasury Jacob Lew, the U.S. government is predicted to run out

of borrowing authority (our money) “as soon as Oct. 17,” just a little over a week from now ( U S A T o d a y ) . Furthermore, according t o N B C N e w s c o n t r i b u t o r, S t e v e James, the cost of the government shutdown is “about $1.6 billion a

week, $300 million a day, or $12.5 million an hour.”

Eurozone:First quarter of this year looked as if the euro crisis would raise its head again. Italy's elections were considered the biggest risk for the stability of the Eurozone in early 2013. Indeed, their inconclusive results, along with the looming risk of paralysis in government formation and reform implementation, seemed to reinforce investors' biggest fears. Nevertheless, markets got over it remarkably well. After a short jump in interest-rate spreads, they eased at a level well below last year's peak. Also, the uncertainties and the policy confusion about the rescue package for Cyprus have not unsettled the financial markets in a substantial way. At the same time, other crisis countries could restore their access to the capital marketsThe biggest danger for the Eurozone to fall into a low-growth trap comes from a dramatic investment gap.

Longer-term growth and employment prospects depend on investments. Looking at the main components of the Eurozone's GDP shows that investments have been the hardest-hit component during the crisis. As displayed in figure 2, the growth rates of

-Mr. Krishna Chaitanya

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g o v e r n m e n t e x p e n d i t u r e a n d household expenditure declined substantially but continued to grow since the onset of the crisis, compared to the preceding boom years.

The most dramatic drop, however, took place in

investment activity. While investments grew by 30 percent (in nominal terms) between 2003 and 2007, they fell by 12 percent between 2008 and 2012. Investments in 2012. Were €220 billion below the 2007 value. At the same time, corporate cash holdings rose massively, indicating a grossly heightened risk aversion on the part of companies.

The worst part of the current downturn in the Eurozone seems to be ending, and it is likely that a shaky recovery will set in. Exports are the main driver for this recovery, while demand and investments do not lend support to economic growth. The Eurozone continues to struggle with many growth-inhibiting aftereffects of the financial crisis and the euro crisis, and with a deeply divided economic performance. Seen from this perspective, even a shaky recovery would be good news and something to build upon.

China:There are indications that China's recovery from the slow growth of 2012 is weaker than anticipated. Data for January and February - the two months are combined due to the Chinese New Year showed that industrial production and retail sales increased more slowly than expected. Industrial production in the first two months of the year rose 9.9 percent from a year earlier, the slowest start to the year since 2009. Retail sales for the first two months of the year were up merely 12.3 percent. The slowdown in retail spending was partly due to an official effort to curtail spending on entertaining officials. At the same time, exports and fixed asset investment are growing strongly, suggesting that China's expansion is reverting to the old pattern of exports and investment rather than consumer spending. In the long term, this is not a sustainable pattern for China. Fixed asset investment was up 21.2 percent in the first two months of the year. In addition, exports in February were up 21.8 percent from a year earlier, even though there were four fewer working days in February this year than last. Imports actually declined in February, raising concerns that domestic demand is lagging.

China's new premier, Li Keqiang, made a surprisingly candid speech about what is needed for China to move forward. He said that he wants to reduce the power of the Chinese government and increase the role of the private sector in the economy. According to Li, “It's about cutting power, it's a self-imposed revolution. It will be very painful and even feel like cutting one's wrist.” 2 He backed up his statements by appointing an economic policy team composed of respected and experienced reformers. Li also made a strong statement about dealing with pollution: “We shouldn't pursue economic growth at the expense of the environment such growth won't satisfy the people.”3 At a time when smog in Beijing and elsewhere is seen as a significant threat to public health, Li's statement was welcome.

India:

Indian economy is operating in a difficult macroeconomic environment, part of which is due to a prolonged period of weakness in the global economy. Moreover, a host of domestic factors caused an economic deceleration. As a result, the Indian economy is experiencing one of its slowest periods of growth in nearly a decade. India's GDP grew just 5.5 percent and 5.3 percent in the first two

quarters of the 2012-2013 fiscal year, prompting the Central Statistical Organization to lower its growth estimate to a meager 5.0 percent for the year as a whole. While the Ministry of Finance's and Reserve Bank of India's estimates for GDP growth are slightly higher, the bottom line is that the Indian economy will slow down considerably from a growth rates of 9.3 percent and 6.2 percent achieved during 2010-2011 and 2011-2012, respectively.

So far, the RBI has adopted a cautious monetary stance in an attempt to maintain a balance between containing inflation and managing liquidity requirements to support growth. The RBI's stance was also considered necessary amid deteriorating fiscal conditions and an uncertain global macroeconomic environment. However, a moderation in wholesale prices and the possibility of an improvement in the government's fiscal situation give the central bank some flexibility to reduce interest rates in the near future. While the choice may not be easy, the RBI will certainly weigh the costs of slower growth against the possibility of an uptick in inflation

India's once-agrarian economy suddenly turned to the services sector in its pursuit of an ample growth engine. While its transition from agriculture to services led to high economic growth, it also left the manufacturing sector underdeveloped. More than half of India's population engages in agriculture, and the high-productivity services sector is not creating enough jobs for a growing workforce. Currently, India has an opportunity to move a large proportion of its workforce from low productivity sectors such as agriculture to high-productivity sectors like manufacturing, and enhance agricultural productivity while reducing the number of people dependent on agriculture. In a recent economic survey, RBI Governor, Raghuram Rajan, highlighted that creation of productive jobs will be crucial for India's long-term growth. Investments in education, skill building, and infrastructure, coupled with business-friendly regulations and labor laws, are levers that could potentially create an enabling environment that propels the Indian economy to higher growth.

The Indian economy is showing early signs of a recovery, suggesting that the worst may be over. The purchasing manager's index indicates an expansion, WPI inflation is on a downward trend, and the buoyancy of equity markets and portfolio investments underscore the return of investor confidence. Furthermore, the government hopes that its recent push for reforms will help trigger investments and jumpstart the economy. Overall, the Indian economy is expected to perform better in the coming year, which is a positive sign amid a host of macroeconomic challenges. If the global economic recovery surprises on the upside, India's growth forecasts will likely be revised upward

-Mr. Krishna Chaitanya K. V.Branch Sales Head (West),

Mondelez Intl. (Cadbury India Ltd.)

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The Greek Crisis: Exploring a Grexit


reece officially defaulted on its sovereign debt obligations on G th8 March 2012, following the exchange of €206bn in Greek Government bonds which construed a structured default engineered in conjunction with the ECB, the IMF & the World Bank or the Troika as they have been come to known, on debt held by the Private Sector (which led to the term PSI). Greece received a bail-out package from the Troika of c. €50bn which has been used to recapitalize its severely stressed banking sector, subject to strict conditions of implementing an austerity program to reduce government deficit. Despite the deep involvement of the members of the EU & IMF in the bail-out program, uncertainty prevails over Greece as the government deficit is not yet under control and the economy continues to shrink at 3.8% as at end 2Q13 which will translate into another default in 2014 on debt to the tune of €24bn, an exercise which would certainly involve the Official Sector Involvement (OSI). The ECB is known to be vehemently opposed to the idea of writing off any debts held by them and the IMF's involvement in the project is limited to 2016. Without further aid Greece would inevitably face the ignominy of leaving the European Union but such an eventuality would have far reaching effects not only on both, Greece and the EU but the ripple effects could push global economy in a deep recession. It is thus worthwhile to explore and understand the factors that feed a Grexit scenario and the potential after effects that such an eventuality holds.

Factors feeding the Grexit bubble:

Weak fiscal trends in Greece despite the austerity measures and the reluctance on part of the Greeks, to implement the austerity measures in a spirit acceptable to Troika sensibilities. Uncertain political alliance in power which weakens the government's ability and resolve to clamp down and implement some difficult policy changes to reign in government expenditure. The government's inability to augment revenues through privatization of non-key public sector companies. The PSI ensured that the exposure of other EU countries had reduced significantly. This has been leading to a consensus view that the contagion risk from an unstructured Greek default has been significantly ring-fenced. The EFSF (European Financial Stability Fund, a shore of funding to aid ailing European Banks), the ESM (European Stability Mechanism, to aid ailing states) and the OMT (Open Market Transactions, a mechanism through which the ECB is committed to unlimited buying of sovereign bonds in the secondary debt markets), are being viewed as a further buffer to contagion risk arising from the Grexit.

So what does a Grexit imply?

There would be a run on deposits as individuals look to liquidate their savings, not only in Greece but also in Spain & Italy. French

banks would also find themselves in trouble given their large involvement to rescue their Greek loans during the PSI. Savings would be frozen as liquidity becomes tight in Greece, businesses would go bankrupt, cost of essential imports would skyrocket to unsustainable levels. Greek default would be seen as a weakness of the ECB and negativity to Spain & Italy would increase. The two economies together account for 28% of the EU economy and the whole region would end up in a downward spiral since a bailout of these economies is currently impossible given the EU bailout funds' limited balances. The Euro would be dissolved with each country going back to their individual currencies. Rapid drachma currency devaluations would mark a deep recession. This may also prompt a European presidency tasked with a massive round of bank rescues, government guarantees and growth-stimulating infrastructure investment. Grexit would lead to businesses scaling back operations and an overall decline in spending pushing the EU into deep recession. If the Euro survives, it would be severely devalued and the ripple effects could see a deep global recession.

Is a Grexit realistically possible? No. Why?

Despite the EFSF, the ESM and the OMT, the fear of a massive run on banks in Italy & Spain, remains. The uncertainty surrounding the magnitude of losses arising from the ripple effects of a Grexit are a major deterrent to politicians & economists alike. The cost of another disorderly default could be constrained to €150bn but a disorderly default alongwith the ripple effects, could be anywhere between €500bn to €1tn. A debilitating impact on the banking sector with a loss of depositor confidence accompanied with a liquidity freeze is a doomsday scenario. Redenomination of a new currency would cause losses to depositors and disruptions in the payment system. The break-up of the Euro would spell disaster for the entire EU region and would imply a political and economic disaster that all EU members would be keen to avoid.

The Way Forward for Greece:

Continued pursual of the Troika path but significant hurdles remain in what is already a tightrope:

Cutting down on 150,000 public sector jobs as per the MoU agreed with the Troika, will increase unemployment further even as the recession deepens. Greeks have been subject to some of the lowest taxation regimes in the world. One of the focal points of the MoU has been to increase taxation. This though, has been viewed negatively by the middle class which believes that it is footing the bill while the upper class

-Mr. Bikram Snehi

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Economic Turmoil And The Silver Lining


remains shielded and has led to a fair deal of social unrest & protests in Greece. Incomes for the masses on the other hand, are likely to reduce further as the Greek minimum wage structure is likely to see a revamp with incomes declining by about 22%, while public sector employees have seen their wages tumble by up to 50%.

The short-term implications are a bitter pill to swallow for Greeks who see their system being overhauled with more pain than benefit. This has already been exacerbated in Greece by political agenda, which led to a hung parliament after the first round of elections pushing Greece to a second election in a matter of weeks. The current government too, is a coalition and enjoys only a slender majority. Greece remains a minefield but happily enough, at least half of it has been dismantled successfully. A period of political and

social calm has already translated into modest growth in the first half of 2013 when GDP grew by 0.2% in the second quarter. Although this is unlikely to lead to positive GDP figures for FY13, it is a start and a significant step in containing the fiscal deficit in Greece. Continued austerity coupled with an amicable solution to the Greek sovereign debt crisis that is likely to rear its head in 2014, should ensure that the region navigates safely through the worst of the crisis. The sovereign debt crisis has not been tackled yet, but with Chancellor Merkel's reelection in Germany, the Grexit certainly seems to have been and with a continued pursual of the policies currently in place, the signs are positive

-Mr. Bikram SnehiSenior Analyst,

Financial Institutions Risk Management,Citi Bank

lobal Economy encompasses the economies of all countries in Gthis world with population mare than 7 billion, GDP of US $ 1.83 trillion and its growth rate presently around 3%. Countries are ranked every year on the basis of several parameters as GDP growth rate, per capita income, per capita energy consumption and unemployment ratio.

Since few years, we all have become very familiar with the term called recession. Everywhere we are listening about the shrinking employment opportunities and management of several organizations making unhappy noise about possible job cuts causing considerable stress and demotivation to the existing workforce. Global economy continues to reel under the fallout of 2008-2009 caused by failure of financial regulation and reckless risk taking by banks and financial institutions in USA. Many developing nations are struggling to keep their GDP growth rate afloat above the tolerable level of 4 % while many European countries witnessing a depressing sub-zero figure. The same scenario is expected to prevail for the rest of 2013.

The impact upon the Indian economy appears to be deeper than predicted with stock markets being the worst hit and the industries like IT, BPOs and Realty facing the heat. Stemming the inflation and downslide of Indian rupees remains the major challenges of finance ministry and RBI. Is the worst over or its still impending? Everyone is left wondering.

India is still battling against the inertia of the slow growth rate and high inflation. The situation refuses to improve due to poor decision making and policy paralysis due to central government giving preference to populist measures over development imperatives. Though FDI has been opened up to more than 50% in many sectors it is failing to attract the foreign investors due to endless number of scams and the lack of prudence from the government. As election looms, the central government is once again looking desperate to tantalize the voters. The recent Food Security Bill passed in haste is already being frowned upon by many economists as it can be a heavy drain upon the exchequer.

With the proper logistics and distribution system still not at its place, the haste in implementing the scheme will surely spell disasters. The recent Land Acquisition bill is going to impede the process of acquiring the land for industrial infrastructures. The bad debts of some public sector banks are increasing as many farmers have started defaulting with a belief that their loan may be waived by the government to woo them.

In these turbulent conditions, the newly appointed governor of Reserve bank of India, Prof Raghuram Rajan has done an applaudable task of infusing some positivity into the investors and the stock market which behave diabolically to the positive or negative signs. The Indian rupee which was threatening to touch the $ 70 mark climbed back to $ 60.

Raghuram Rajan has to do a perfect balancing act between stemming the inflation and stimulating the growth rate. With the rise of Repo rate to 7.50% for maintaining the reasonable liquidity is sending mixed signals to the Indian industries. Many companies are concerned that the policy rate hikes may have the adverse impact upon the sentiment of the investors.

To kick-start the growth, there are certain feasible measures as reducing the ill targeted subsidies and finding more effective ways to narrow down the current account deficit and ease the financing. As the value of rupee remains low it is a great opportunity for earning through exports. Software and Pharma companies with less interest burden will gain more as Infosys and Wipro is witnessing an increase in their revenue through overseas operations. The other important measures to be taken as avoiding short term bets upon the currency, avoiding the use of rupee while buying assets abroad and curbing the purchase of gold.

Tides will surely change as nothing is permanent not even our troubles

-Mr. Ujwal ChaudharyPGDM I, KIAMS

-Mr.Ujwal Chaudhary

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Quantitative Easing - Should countries embrace during crisis?


hat is Quantitative Easing?WQE or Quantitative easing was a unconventional policy introduced by the US Federal Reserve (Simply called Fed) which is the Central Bank of USA.

Essentially QE implies the policy of the Fed to buy bonds in the open market to essentially ease out liquidity that is to push more money into the market and system. At its latest version i.e. QE3 the Fed was pushing nearly $85 Billion into the market every month through these purchases.

How does QE help? Or what is its main purpose?

QE was a result of the great depression of 2008, by which investor sentiment was much muted globally and especially in the US. Due to the bust (depression) investor sentiment was very low as well as people were not investing in markets, nor taking loans for housing, as well as unemployment was spreading.

To counter this initially the Fed lowered all sorts of rates to bring interest rates down (similar to RBI reducing CRR, SLR, Repo rate etc to reduce interest rate of loans in India). However even after reducing these to the minimum the Fed felt that the investor sentiment was not pushing up and loans were still expensive. So it decided to push money into the hands of the market for use. So basically the Fed hoped to drive up the supply of money available for loans, driving down long-term interest rates so more people would buy and build homes and invest in businesses.

Wouldn't that extra money result in Inflation?

Technically yes. But practically no. It is true that now there is way more money in the system chasing the same products and so would technically lead to inflation. But we also have to consider the fact that the USD (US Dollar) is a hard currency and freely convertible around the world, and in much demand as it is considered as a stable investment (US is the world's biggest economy after all). But, instead of all the money staying in the US and in the US market, most of it made its way around the globe to the other economies and countries, one of which was also India.

The people with all the money in US realised that they could not earn much by keeping their money in US Banks or stock market since returns are very low, so why not invest this around the globe in different emerging market stock markets to earn better returns. This resulted in free flow of all the extra money to global markets one of which was India. India's Sensex and Nifty had been giving very good returns for quite some time and so we saw an influx of FII investment. This helped us not only sustain a larger Current Account Deficit but also made the INR (Indian Rupee) appreciate with

respect to the USD. A similar event was occurring in nearly all emerging economies around the globe. This appreciation made exports uncompetitive, thus leading to what is termed as Currency Wars.

What was Currency Wars?

Brazilian Finance Minister Guido Mantega, claimed that competitive devaluation was being done by various countries, whereby countries who were competing against each other to achieve a relatively low exchange rate for their own currency, to help exports from their domestic industries.

Thus he said that countries were not playing fair, but were cunningly using a pegged exchange rate mechanism rather than market determined exchange rate mechanism.

It must be mentioned that India was not a part of this Currency War and was a vocal critic of the same in the G-20 Meet.

Why all the alarm about QE now?

Some time back the Fed saw that the US economy has finally begun to pick up, and that unemployment is going down with more jobs being added every month, thus it saw its QE programme beginning to have effect.

Since the Fed is the Central Bank of the US and not of the world, it concentrates only on the US economy. Thus ignoring the fact that the US economy in a way dictates global economy.

How does that impact India?

Since a lot of the funds of QE were flowing into India, the news of the QE being phased out drove investors to think that since the Indian Economy is slowly failing it would be safer to invest in the rising interest rates and stock market back home. Thus they started withdrawing from the Indian stock markets. Since most of this money was in form of FII's, we can't make it stay (hence called Hot Money) and it exited Indian Stock Market, resulting in Stock Markets Crash.

Further since now there are less dollars available in the country due to all the FII's taking back their investments in USD, a dearth of dollars is felt, thus resulting in depreciation of INR w.r.t. USD. Hence it suddenly went from $1=Rs. 55 to 69.

Also since India's Imports are much greater than our Exports, we were dependent on this FII investment to cover our import deficit, that is our Current Account Deficit, however since FII are not coming easily now, or are still leaving the government is concerned about how it will make Balance of Payments = 0 (Zero) that is

-Mr. Mufaddal Dahodwala

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finance Current Account Deficit.Thus the government is trying to curb imports of unimportant items. However the coming of Raghuram Rajan has been seen by the market as a positive for the failing Indian growth story and hence as per reports there is once again a slow influx of FII.

thOn September 18 the Fed announced that it would not be tapering off the QE yet, this further gave impetus to FII and market sentiment.

Their vulnerability to future interest rate changes in the developed world and exchange rate volatility will increase. Such inflows put upward pressure on exchange rates, stimulate credit expansion, and cause inflationary pressures, which pose a major challenge to policy-makers in the developing world.

Most of the capital inflows are in the nature of portfolio investments, which are prone to sudden and volatile movement and puts emerging economies at greater risk. The volatility one has witnessed in the Indian stock market is a case in point. In general, we may conclude that the overall impact of these capital flows is expansionary and distortionary.

There has been considerable criticism of the G4's unconventional monetary policies from the emerging economies, including the BRICS (Brazil, Russia, India, China and South Africa).

The magnitude of QE has had unintended consequences beyond the borders of the G4, especially because their currencies are not only fully convertible but, together, constitute the pillars of the global financial system.

The U.S. dollar is the world's leading reserve currency, and the euro, the British pound and the Japanese yen together constitute the basket of currencies the International Monetary Fund (IMF) uses to value its Special Drawing Rights. Thus, the nature of the G4 currencies and their significant role in the global financial market ensures that QE undertaken by them has a global impact on economies across our globalised and interconnected world.

It is necessary, therefore, for the G4 to act with great responsibility and to work together with the emerging economies, to minimise the adverse effects of their QE policies. It would be particularly important to forge a consensus on how to handle the potential

financial turmoil and disruption that may afflict developing economies once the QE is sought to be retired and interest rates once again become positive in the G4. The sudden and large-scale reversal of capital flows is a likely scenario that would need to be anticipated and managed.

The Asian financial crisis of 1997/98 was, in part, triggered by an earlier version of QE pursued by Japan in the aftermath of the bursting of its property and asset bubble in the early 1990s. Then, too, the large inflow of low-cost yen loans led to the asset price bubbles, inflationary pressures and currency instability in the Asian economies. They paid a heavy price in the bargain.A larger, more pervasive crisis may await the emerging and developing economies unless there is a much more coordinated and careful handling of the risks that are already building up. The G20 had also this issue at the top of its agenda.

Future?

The future states that sooner or later Fed will erase off QE and we must be prepared now to see a depreciation in rupee once again. To counter this we need to strengthen India's economic fundamentals further, push for big-ticket reforms, and revive investor and entrepreneur confidence in the economy and the government apparatus.

We cannot be dependent on FII's forever, rather we need to focus on turning FII into FDI which is more stable. Also we need to drive up our exports especially manufacturing based exports to not be at the mercy of FII for our CAD, rather aim to turn it to CAS (Current Account Surplus) like that of Germany and China, which is based on manufacturing exports

-Mr. Mufaddal Dahodwala,Jamnalal Bajaj Institute of Management Studies, Mumbai

References:

The Times of India and Business Standard daily reading http://www.usatoday.com/story/money/business/2013/09/18/federal-reserve-

quantitative-easing/2831097/ http://en.wikipedia.org/wiki/Quantitative_easing http://en.wikipedia.org/wiki/Currency_war

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“Our view is that economic isolationism is the wrong way to go. Vibrant, successful growing economies that

advance the interests of their citizens engage the global economy.

And, we're committed to engaging the global economy.”

- John W. Snow, Former U.S. Secretary of the Treasury

Effects of quantitative easing on the US real economy


Abstract: This paper attempts to gauge the effect that quantitative easing (QE) has had on the real sector of the US-

in particular GDP and unemployment. Several countries including England and Japan have resorted to different versions of quantitative easing and even RBI is considering its own version for reviving the economy. But the Federal Reserve's programme is the largest and the best known and a close analysis of the effects that it has had will help other countries understand if QE is actually helpful in reviving growth during periods of crisis A short list of effects that QE programmes have had on emerging economies is mentioned since negative externalities of these programmes should also be studied.

Quantitative EasingFirstly, let us look at the data before trying to formulate theories regarding whether or not QE is effective enough in the real sector- in particular to reduce unemployment, increase GDP and also boost investor sentiment, which is measured here by S&P 500.

1. Stock MarketsThe stock markets clearly got a boost due to QE. Firstly, due to lowering of long term G-Sec yields by their large scale purchase, investors were forced to move on to riskier assets as the risk-free rate was a bit too low for comfort. [11] This also meant that the savings rate of individuals, which is generally very high during recessions, did not climb so much as individuals invested in stock markets seeing higher returns and having more cash with them, since QE pumps in more money into the economy. Also, due to higher inflation rates, individuals were forced to invest than hold to cash in savings accounts.

The lowering of 10 year bond yields by QE is clear from this graph from the Economist:

Here we see the lowering of yields during QE2, which gives support to the stock market, which does not fall by much during Qe2:

So what does it say about the real sector if S&P climbs? It means that investors feel c o n f i d e n t a b o u t t h e economy. Although higher investment in the secondary market has no direct impact on the GDP, it is an indication

of improvement in investor sentiment which is an important factor in driving up the GDP. It is often hard to predict how the GDP would have grown without the use of QE, but by analysing the change in factors (such as investment) which affect the GDP, one can come to conclusions regarding the same.

2. GDPUS GDP growth has come back on track to near pre-crisis levels. Whether or not the GDP will be stable when QE is stopped is another issue. However, there is no question about the positive impacts of infusing liquidity into an economy in recession and relatively low inflation. [7] The liquidity can be reduced later if inflation becomes too high.

According to Bernanke, Chairman of the Fed, the main reason for the GDP to bounce back is the rallying stock markets, which improve sentiments. Secondly, the change of expectations of investors: that of higher liquidity in the future also boosts spending and investment. He claims that the US GDP was pushed up by around 3% by the Fed's programmes [8] although the figure is probably exaggerated. One other important factor is the rise in exports relative to imports, which was caused by the depreciating dollar, which in turn was due to QE.

Note that inflation is not mandatory during QE. If there is a genuine shortage of money in the system (due to shortage of investor confidence, resulting in low savings in banks and more at home), addition of more money by QE will not cause inflation but will spur growth. But in the present scenario, there is no liquidity trap and hence inflation is sure to rise. Some experts such as Nobel laureate Krugman say that a higher target of 3-4% might be better since high inflation further gives impetus for investment and hence helps GDP grow in real terms as well. It must also be noted as mentioned earlier that a direct relation cannot be drawn since a lot of other variables are involved. The following graphic is for informative purposes and cannot be used to draw conclusions r e g a r d i n g t h e effect on GDP.

T h i s g r a p h i c s h o w s t h e movement of GDP and S&P through Q E 1 , 2 a n d Operation Twist:

3. UnemploymentUnemployment did not change much after QE1 and QE2, although the increasing in unemployment reduced slightly and remained somewhat constant though still above the natural rate which the Fed suggests is nearer to 5 or 6%. Whether QE is the cause is not clear. Official Fed chart showing relation of S&P with unemployment is interesting and shows lower unemployment when S&P rallies:

- Mr. Sarath K Lal &Ms. Srimaitri Yalamarthi

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The effect of QE on unemployment is not as clear as that of QE on stock markets. The unemployment rate has clearly decreased and stabilised but whether it is correlation implying causation is questionable. One point to note is that unemployment rate reduction alone is not always good news since it might be because of lower wage rates which in turn might be due to cyclical factors and not QE. When equilibrium wage rates have lowered, more companies are

w i l l i n g t o h i r e workers- at a lower pay. This does not n e c e s s a r i l y m e a n higher GDP as the net effect might be zero or even negative.

An empirical Okun's l a w i s s o m e w h a t accurate. Data for 24

years with predictions follow:The law says: Change in unemployment = -0.125 (GDP growth potential GDP growth).

Thus similar to stock markets, GDP also tends to drive up employment levels. However, since GDP and stock markets rise may not be due to QE and even if so, possibly temporarily, the effect on unemployment is even more questionable. But given that GDP has grown due to QE, an employment rise of about 30-45 basis point rise can be expected, which comes to 700000 jobs.

Federal Reserve Bank of Boston uses models including the one mentioned above to calculate the effect of 600 billion $ worth bond purchase:Risks and disadvantages:The major risks of QE are summarised thus:

The Fed ba lance sheet is now at 3 trillion$ and expected to further increase a trillion within a year. Heavy b a l a n c e s h e e t s a r e n o t preferred by central banks and represent higher interest rate risks. [13]

Asset bubbles may be formed due to heavy purchase of assets and instruments such

as MBSs may be overpriced. They might drastically fall in the future. [12]

Inflation may shoot up to uncomfortable levels. However, even 3-4% inflation should be safe and would only promote growth.

Banks need not invest the extra money in the US. Also it need not lend the extra money at all and may instead prefer to use it to trade in financial sectors thus giving little to the real sector.

It has caused depreciation of the dollar which has sparked 'currency wars' where countries compete to devalue currencies to get an edge in exports. This could however be a positive sum game. [11]

Causes inflation in countries with currency pegged to USD. They do not reap the rewards in the real sector even if the US gets it.

The major risk is that even if the Fed's target is achieved, QE cannot be suddenly stopped as it would drag down the economy. Thus a well-planned exit strategy is required.

Possible exit strategies:Selling off bonds too quickly can cause interest rates to peak and cause another recession while continuing with QE even after the targets on 6.5% unemployment and 2.5% inflation have reached will cause inflation and cause reduction in real g r o w t h . F e d h a s signalled starting of an e x i t p o s t 2 0 1 5 . Allowing bonds to mature and “roll off” the balance sheet is a possible idea since only about 500 billion out of 3 tril l ion $ balance sheet wil l mature from now till 2017 due to operation twist extending maturities.Another possibility is the Fed executing a swap of long-term bonds with short term bills to speed up this process. Also, it can tighten money supply in the future by reducing interest on reserves or going for repurchasing operations while increasing the federal funds target rate. But timing will be the key.

Impact on emerging economiesA policy meant for the welfare of US citizens, ironically has more implications for the world as a whole than the US alone, thanks to the huge size of the US economy as well as the enormous magnitude of the programme. The Fed announcement triggered sell-offs in most markets across the world and its long term implications are not yet clear. Raising of interest rates after periods of loose monetary policy by the Fed contributed majorly to the Latin American debt crisis in the 1980s as well as the Southeast Asian crisis in the 1990s. In both cases, higher interest rates in the US caused investors to quickly pull out funds which were earlier flowing into these emerging countries and this caused sudden depreciation of their local currencies- the shock was too much for these fragile economies which faced many problems including difficulty in repayment of debt and reduced growth because of lower liquidity.

Although there were inflationary tendencies and possibly slightly higher growth in emerging economies when QE has been on, now that there are signs of tapering, the local currencies have depreciated and capital has fled from these markets towards the US where the bond yields have spiked due to withdrawal of QE. The effects were much largely pronounced in countries with large Current account and Fiscal deficits. In short, the following points indicate the main effects and the most affected countries' economic state.

Thus the main effects of QE withdrawal are thus Asset sell offs Depreciation of currency Higher interest rates and the most affected countries have High CAD High foreign debt High FII inflows during QE and low capital controls Low forex reserves Inelastic imports and exports

- Mr. Sarath K Lal & Ms. Srimaitri YalamarthiSymbiosis Institute of Business Management, Pune

References: http://www.auburn.edu/~johnspm/gloss/open_market_operations http://www.economist.com/node/14649284

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Are Emerging Economies fading away?


f the well-recognized emerging economies named Brazil, India, OIndonesia, Turkey, and South Africa are being considered to be the "brittle five" economies under current scenario. They share some common characteristics in all to see: All had taken excessive short-term international financial inflows, which had enticed them into accepting excessive current-account deficits in their books which may hurt them in coming years. High economic growth has made these governments complacent, even as rising exchange rates has undermined their competitiveness and testing there metals in controlling the inflation, liquidity and the continuity of growth. Now their growth rates and exchange rates are falling.

It's well known fact that US plays a major role in world economy and thereby Federal Reserve Chairman Ben S. Bernanke's May 22 talk about "tapering" quantitative easing and prospect of a rise in US interest rates ,acted as catalyst for the improvement and revival of current market scenario in terms of capital market overall. Since then, the US 10-year Treasury yield has surged by more than 100 basis points and continues to rise, even though the Fed hasn't begun to reduce the pace of its securities purchases.

Bond yields of vulnerable emerging economies have risen faster. Investors had always known that the zero US interest rates would eventually normalize. Given that the Fed inflation target is 2 percent, and a real 10-year bond yield of 3 percent used to be the average, it is reasonable to expect the bond yield to rise to about 5 percent.

Emerging economies are facing turbulence because the credit and commodity booms that brought high rates of economic growth are unsustainable due to the impact of recession and the uncontrollable, unstoppable European crisis which is going in deep grave yard. Many of these economies have received large volumes of fluid international capital in the form of, Hedge Fund Promissory notes, etc. In case, If their exchange rates fall rapidly, large volumes of money will flow out and thereby inflation may surge. If they defend their exchange rates with reserves, those will shrink fast. In either case, emerging economies may have to cope with the sudden end of international financing and also to face the heat arising of this global turmoil

Going by the current scenario, it can be taken that the global investment is bound to decline significantly as real interest rates rise. In recent years, China has accounted for a large share of global investment, and in 2009, fiscal stimulus pushed its investment ratio to an extreme level of 48 percent of GDP, from an already high rate of 35 percent in 2000. That isn't sustainable in the longer term. The Chinese investment needs to get readjusted in the form of going downward and thereby bringing global investment rate down.

Similar trends were visible at the beginning of Latin America's lost decade, in the early 1980s. As then, the world is now approaching a downward turn of two long cycles, the 15- to 20-year long financial cycle and the even longer commodity cycle. Emerging markets benefited from both the credit and commodity cycles that have now peaked and begun a long-term decline of a decade .The only possibility that can bring in the changes is the improvement of situation in developed market along with increase or rise in demand for the commodities with steady growth in investment.

The macroeconomic situation of today's emerging economies is far better than it was in some of the Latin American countries in the 1980s. Argentina, Brazil and Peru had large budget deficits and pegged exchange rates, leading to hyperinflation and default. Today, major

emerging economies have low inflation, limited budget deficits, mostly floating exchange rates and large international reserves. It's worth recalling that the same was said about the United States and Europe before the recent recession.

Demand for commodities is bound to decline with less investment. In recent years, China has accounted for about 40 percent of global consumption of major commodities. The long commodity cycle peaked in 1980, and it reached a new peak in 2008. After the oil shock of the 1970s, oil prices were very high from 1973 until 1980. But from 1981 until 1986, they fell steadily as energy consumption declined.

We are in a similar situation today. Global commodity prices rose sharply from 2003 until 2008, and they maintained a high level until 2012 because of the very loose global monetary policy, which encouraged both investment and speculative positions in commodities. In the early 1980s, the world experienced similar critical trends: rising global interest rates (both nominal and real), declining investment ratios, and lower commodity prices. Poorly managed emerging economies were battered then, and they are likely to be affected again.

Emerging economies with large current-account deficits, foreign indebtedness, budget deficits, and public debts would be the first to suffer. The turmoil could then spread to large commodity exporters, such as Russia, Brazil, and South Africa. China, by contrast, would benefit from lower commodity prices, but it appears over leveraged, with a huge bank credit that amounts to twice GDP.

Global trends don't change very often, but when they do change, they do so sharply. From 2000 to 2012, emerging economies grew 5.9 percent a year on average; US growth was 1.8 percent. This led many people to declare the victory of the emerging economies over the West. But the high levels of emerging-market growth were artificial, caused by the global credit boom and then huge credit transfers from the West.

The pre-boom period, i.e., 1980-2000, may be more representative of a normal period. During this period emerging economies grew at an average of 3.7 percent a year, significantly faster than the United States, at 3.2 percent a year. That meant increasing economic divergence, because the United States increased its advantage given the far lower staring level of the emerging economies. As a consequence of these global developments, in the early 1980s, the United States experienced large currency inflows that drove up the trade-weighted US dollar exchange rate by 40 percent from 1980 to 1985, and lifted stock and bond prices. This is likely to happen again. Global economic growth will probably moderate with de leveraging and financial turbulence in the emerging economies, while the United States will proceed with a normal growth rate of 2.5 percent to 3.5 percent a year.

Many emerging economies that ignored necessary structural reforms during the boom could experience low growth for a prolonged period. They have allowed state and crony capitalism to thrive, locking themselves into a middle-income trap. Those that carried out sound reforms - Central and Eastern Europe, Chile, Mexico, Colombia, and South Korea - are likely to do well.

The next round of reform will be hard, too, but change is the only way forward

-Mr. Pankaj Bothra,PGDM II, KIAMS

-Mr. Pankaj Bothra

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Web of shutdown and debt ceiling on US economy


US partial shutdown is hogging the lime light worldwide as it's ndrelated to the world's largest economy, super power and 2

largest democratic country. It is the first US shutdown, in 17 years.

Constitutionally, the US has two chambers in Congress- The 'House of Representatives' and the 'Senate'. The House has majority of Republican Party (Opposition party) and Senate which has majority of Democratic Party (Ruling party) needs to mutually agree upon the budget and then send to the President for signature or veto. Since Democratic Party does not have majority in both chambers, so there is no way out to pass the 'Fiscal Federal Budget' without the consent of Republicans.

The U.S. government operates on a yearly budget that runs from Oct st th th1 to Sept 30 , and if the budget didn't get passed before Sept 30 , it

results in partial shutdown. This is what is the situation currently perusing in US, for which the government has given the congress a

thdeadline till 17 Oct to overcome the issue.

The Bone of contention is Mr. Barack Obama's ambitious project, the 'Affordable Care Act', also known as 'Obama care', which will reduce the cost of healthcare for its ageing population who are currently 32% of the total population and are expected to increase by 36.3% by 2030.

More than 2 million, out of 8 million employees of Federal government are on furloughed, which means 'unpaid leaves'. Around 1 million who are continuing their work in priority sector are payed late.

Historically, this hasn't shown much affect on the economy of the country, as it got resolved in due time. But there were exceptions like the 1979 technical difficulties, which defaulted the nation with $122 million. But the climax is different this time; Mr. Obama is surrounded by debt ceiling as well as US shutdown, which has added more fuel to the fire. Time has arrived to increase the ceiling of debt

thlimit by 17 October. Else, the world's largest economy may have to default on its debt payment.

The phrase “debt ceiling” sounds severe and alarming, as it intends to keep a check on the government's expenditure. But in U.S, national debt ceiling means exactly opposite, which makes the scenario easier for Washington to borrow money.

Presently, the debt ceiling stands at $16.7 trillion, not enough to surface its bonds that will come due as early as mid-October. According to the Treasury data, about half of the U.S. debt is held by foreign governments, central banks and other overseas investors. China is the largest holder of U.S. Treasuries, with $1.3 trillion followed by Japan with $1.1 trillion and concerned governments have already raised their voice to safe guard their interest. Treasury has obligation to pay $120 billion of short-term bonds which is due on Oct. 17. 2013. Also an additional $93 billion of T- bills mature on Oct. 24. On the last day of the month, $150 billion needs to be paid back, including two-year and five-year notes that mature. In a nutshell, a total of $417 billion is expected to get piled up in between

th thOct. 17 to Nov. 7 .

According to Jacob J. Lew, the treasury Secretary Government will have only $30 billion in cash left by Oct.17 to meet its commitments, which looks very unlikely to meet the above mentioned debt.

A congressional battle over the debt ceiling in 2011 led the Standard & Poor's credit rating company to downgrade U.S. debt for the first time. However Fitch has n e g a t i v e o u t l o o k towards the US credit ra t ing whereas the rating agencies like Standard & Poor's and Moody have positive outlook towards the same.

US economy is incurring a loss of $400 million each day, which leaves a loss in the economic output by $400 million every day.

Currently, US shutdown doesn't matter much till the time it starts to prolong. A decision on US debt ceiling may not be bothering markets for now as it is likely to be raised.

Impact on Global Economy if the shutdown prolonged further:

It would affect the GDP and also foreign exchange market in the long run which would have had a great impact on the emerging markets.

The new recruitments which are already on hold would have got delayed much more, resulting in increased unemployment rate.

It could be a possible hurdle to Fed policy on growth which may increase the time table of tapering Quantitative easing and may eventually lead to deprecation of US Dollar.

Lack of confidence in US for not being able to pay back what it owes, viz. US default would have sent a shockwave around the world and dripping US in the grip of the recession.

Investors, who are afraid to put money in the market, will remain out of the market, which will make it is easy for stock to sell. As a result, stock prices would have crashed all across the globe.

Finally it would be no surprise, if we could see a possible credit downgrade from rating agency as how it has already happened in 2011. This has indeed damaged the US credibility

-Mr. Prasun ChandraPGDM II, KIAMS

References: Huff-puff politics Bloomberg CNBC

-Mr. Prasun Chandra

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The World Trade Organization


lobalization has been on an expanding spree since yesteryears. GIt is the need of the hour today and would be indispensable tomorrow. One of the most important components of globalization is international trade. The scope for international trade has become so huge without which growth, whether it is of an economy, country, industry or that of an organization, remains stagnant. It is more of a compulsion. Internal transfer of goods and services can be regulated by the respective Government of the countries. But it turns into chaos and conflicts when transfer of goods and services takes place between two countries. It involves different types of economies, culture, currency, tastes, mentalities, skills, etc. This would lead to a dampening of trade and hence reduction in growth.

Liberalization of trade, hence, becomes important. This consists of reduction of barriers to free exchange of goods and services between nations. Some nations are not willing enough to exercise liberalization mainly to protect the domestic production and various other reasons. But for the nations who are willing to exercise free-trade, they could be a member of the World Trade Organization (WTO).

WTO officially commenced on the first of January, 1995, its predecessor being the General Agreement on Tariffs and Trade (GATT), established during the world war. At present the functions of the world trade organization can be categorized into the following:

Trade negotiations The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They include individual countries' commitments to lower customs tariffs and other trade barriers, and to open and keep open services markets. They set procedures for settling disputes. These agreements are not static; they are renegotiated from time to time and new agreements can be added to the package. Many are now being negotiated under the Doha Development Agenda, launched by WTO trade ministers in Doha, Qatar, in November 2001.

Implementation and monitoringWTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented. All WTO members must undergo periodic scrutiny of their trade policies and practices, each review containing reports by the country concerned and the WTO Secretariat.

Dispute settlement The WTO's procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgements by specially appointed independent experts are based on interpretations of the agreements and

individual countries' commitments.

Building trade capacity WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards. The WTO organizes hundreds of technical cooperation missions to developing countries annually. It also holds numerous courses each year in Geneva for government officials. 'Aid for Trade' aims to help developing countries develop the skills and infrastructure needed to expand their trade.

Outreach The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

India played an important part in establishment of GATT and then in the establishment of WTO. In 1947, it became the member of GATT and started to play its part in GATT. Now India is an active member of WTO and it has had a positive impact on Indian economy as it has led to the increase in export earnings. It has also led to merchandise and service exports. India's stance at the WTO has undergone a sea change since the beginning of the Uruguay Round. By focussing on three specific areas of negotiations, namely agriculture, services and TRIPS, India's stance at the WTO has evolved over time and whether it reflects any paradigm shift.

The recent developments in the WTO would be the forthcoming Bali meeting which is said to be about deliverables which consists of three areas on which they have zeroed in on to bridge the gaps. These are trade facilitation, food security and the development dimension. Agriculture remaining the centre for discussion, there is much hope from this particular meeting which were not fruitful in the previous meeting in Doha. A new leadership under Mr. Roberto Azevedo has induced an optimistic thinking towards an early conclusion of these trade negotiations. This proposal is critical as countries like India, China and Philippines support this view and have food security problems for the poor.

Hence, though there are a few negative impacts, World Trade Organization has brought about various positive changes leading to growth in the developed and developing economies

-Ms. Lakshmi Warrier,PGDM II, KIAMS

References: http://www.wto.org http://www.jnu.ac.in/SIS/CITD/WTO http://www.unescap.org

th An article from the Economic Times dated 7 October 2013

-Ms. Lakshmi Warrier

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Depreciating Indian Rupee: The portrait of Indian economy to the world.


To large extent the economic conditions of a particular economy can be derived out of its

currency fluctuation, so is the case with the Indian economy. Our rupee is image of our economy to the foreign investors be it FII's, FDI's or be it money lenders to the government of India l ike International Monetary Fund (IMF), world bank, etc. Rupee has seen almost 40% depreciation since 2011 up to the second quarter of the financial year 2013-14 of which 27% was in April itself, and the stability is still not achieved. It has broken all the past records and reached to life time low level of 68.80 in September 2013. There has been tremendous pressure not only on the BOP (Balance of Payment) but also on the Debt payments to be made by Indian companies. The reason is simple - high demand of Dollar against rupee and low supply of dollar. The reasons for such extensive demand are as follows:

1. Current Account deficit (CAD): Current account of a growing economy like India normally remains negative, which means deficit. In case of India, it was because our imports bill rose, of which Oil is the major stakeholder. It accounts for up to 70% of the imports bill which is due to the rise in price of crude oil (primary reason was war threat of U.S with Syria). The other reason for widening of CAD was increased demand of Gold. As gold is imported its payment was also done in terms of dollar, which

stincreased its demand in turn increasing the CAD. At the end of 1 quarter the CAD was 4% of the GDP, and the growth stood at 4.7%. In addition to it Ms. Sonia Gandhi lead UPA government has passed the Food security bill which is expected to enhance CAD by Rs30,000 crores. Although the results for trade deficit at the end of second quarter has changed, there has been 11% rise in exports and 18% fall in imports, the currency still stands at the level of Rs61- 62 against dollar.

2. Growth slowdown: The growth of Indian economy (GDP) fell to a decade low of 4.8% from 5.25%. As per the latest listing by International Monetary Fund (IMF) India's growth rate lowered from 5.7% to 3.75%. This is the reason which is forcing the foreign investors to pull out money from Indian market and generate more demand for dollar in Indian economy.

3. Foreign exchange Reserves: Have reduced to a level of $247,925 million by the end of the second quarter, which could only cover seven months import bill. This gives a clear indication of a weak economy, thereby resulting in more demand for rupee and thus rising prices.

4. Inefficient policy making: The inefficient policies made not only by the government but also by the Reserve Bank of India, added fuel to the depreciation. Government on one hand created a body to regulate the oil & gas prices but did not want to increase prices of diesel as it is being used by farmers, who are the major vote banks. Policy inaction, perception of lack of clarity on the policy front is also fanning speculative demand wherein the RBI on one day said it will tighten liquidity and on yet another said it will inject $1 billion in the market.

5. Dependence on foreign money: India has relaxed FII norms which helped Indian companies to raise money from the foreign market and now they are dependent on them to a large extent. This dependency not only shakes the stock markets but also has a major effect on rupee. In August itself FII's made a net sale of equities of about Rs.6200

crores and Rs.8659 crores of debts and bonds. India's CAD was largely financed by foreign money since many years. Withdrawal of money by overseas investors is also leading to the weakness in the rupee. 6. Recovery of US economy: The U.S economy is still considered to be the world's best economy. Moreover the economy recovery of US along with the implementation of the “Quantitative Easing” has also brought down the unemployment rate to a six year low. All this gives us a clear sign of improvement of the economy, forcing the investors not only from US but all around the world to pull out money from emerging markets like India and invest the same in US. On the whole we can say that slow but steady recovery in the US is making the greenback stronger against the other currencies.

7. Capital controls: The decision by the Reserve Bank and the government to impose temporary restrictions on capital flows has not gone down well with the markets, as it will not only discourage Indian companies from investing abroad, but also foreign firms from pumping money into India.

8. Speculative trading: Speculative trading in the currency markets is putting further pressure on Indian rupee. Due to high demand for dollar not only in India but around the world there are a lot of speculations emerging through arbitrage which is creating enormous amount of pressure on the rupee.

9. Stimulus withdrawal: Indication that US may withdraw or ease the fiscal stimulus package could potentially act as barriers for funds to developing economies.

10. Trends in the other foreign markets: Globally there has been downwards trend of currencies in respect to dollar which can be majorly seen in the countries of Brazil, Indonesia, Russia and South Africa. India is not an exception in restraining itself from getting affected by these shocks

- Mr. Vikas Kalani PGDM II, KIAMS

References: http://www.rbi.org.in/scripts/WSSViewDetail.aspx?TYPE=Section&PARAM1=2 http://www.firstpost.com/economy/decoder-why-rupee-crossed-65-against- dollar-1038125.html http://www.dollars2rupees.com/Charts http://www.moneycontrol.com/currency/mcx-usdinr-price.html#29OCT2013 Corporate India Magazine Dalal Street

-Mr. Vikas Kalani

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Impact Interview


'Swaradhar' aims to rehabilitate musically talented beggars who currently perform on trains by organizing them into a professionally trained orchestra. They identify such performers, get professional musicians to mentor them and manage the shows.

Hemlata has an MA in Marathi Literature, and has assumed numerous leadership roles while in college. After completing her degree she worked with Kotak Education Trust teaching Spoken English to school kids in slums, which is when she realized the joy of working on issues at the grass root level.

'SWARADHAR’

1. What is 'Swaradhar' all about?t all started last September. The idea came to me 3 years back but Iat that time I was doing my B.Com so I couldn't go for it. But last

year when we started, we spotted some of the beggars. One of them played flute very beautifully at the Dadar Railway Station. We went to them and told them about 'Swaradhar'. Subsequently we got to know of their interest in music. They have been doing it since long. Initially they were hesitant, so it took time for us to gain their trust.

2. What motivated you to get into the field of social work?It is my idea to give them recognition. Initially it was only work but then it became my passion and I had to do it. So I approached many people around me to help me out.

3. What are the challenges that you face? How did you overcome them?The biggest challenge is to gain the trust of these beneficiaries. There are many who are begging from the age of 1. So you need to communicate on daily basis to gain their trust. Talk to them about their family problems, and then they feel themselves close to you.We started last year from 'Ganpati Pandal'. We went to 50-60 pandals and only one said yes. That was our first stage performance. There we performed as a professional orchestra.

4. How did you manage to train them?We have appointed a person who is helping us voluntarily. His name is 'Mr. Datta'. He used to give weekly training to these beggars. We have got our own local nearby where they practice.

5. How do you raise funds?Basically 'Swaradhar' has never taken any fund from outside. All

what we did is mine and my friends contribution for finding the artists i.e. travelling, food and paying the instructor. And the instruments were brought by the artists themselves. After their performance in the 'pandals' these beggars are nominally paid. Till now they have performed in 15-20 shows all over in Mumbai.

6. What are your achievements in this field?As recognition you get lot of attention from media. 'Swaradhar' has been covered in 'Maharastra Times' and 'Samana'. We were also covered by the 'Times of India'. 'Times of India' has also selected us for 'I need India' campaign. We were also covered in Delhi based newspaper like 'Sunday Guardian'. Also 'ABP news' and 'ABP Majha'(Marathi news channel). Other than these there is an organization named 'Parmika' which had an event called 'Maharastra Utsav' that is a college fest where they appreciated 'Swaradhar'.

7. Rewards (If any).We have an artist named as 'Rama Kale' who has been awarded by 'Maharastra Sangeet Bhavan' for his vocal talent. Others are happy to get the attention as they are telecasted on TV also.

8. What social message would you like to convey to our readers?The message is very simple, “We can make our society a better place to live for everyone. Don't hesitate in trying new things. Do something for the lower class and consider them also to be a part of the society, for a better and prosperous world.”

- As told to Ms. Pulkit Tiwari,PGDM II, KIAMS

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Bangkok Dreams


t was a fine evening when Prof. Jha called me and said that the Ipaper which I've co-authored has been selected for ICMIS. It was a stupefying feeling when those words were ringing through my ears. It was a proud moment to Co-Author a Full Fledged Paper at the age of 23. Going back a few months, I was in the process of writing a paper for another event and went to Prof. Bidyanand Jha to consult for some valuable inputs. It was the same day during offline interactions, that he had told me that he is working on a consumer behaviour paper and wanted me to help and present it in Bangkok for International Conference on Management and Information Systems. We started working together, floated the questionnaire and the whole paper came out really good. The confirmation mail then came from ICMIS saying any one of the authors to come and present

nd thit on 22 Sept- 24 Sept 2013. Prof. Jha, without a second thought, gave me this opportunity to go and present it with him over there. It was a real paparazzi moment for me at that time as it was the first time I had co-authored a paper and was presenting it internationally.

The paper was on the factors that influence purchase intentions on mobile shopping websites in India. The purpose of this paper was to explore a conceptual model for analysing customer's perceptions of using mobile commerce services for online shopping. This paper provides insights into consumer behaviour, and the results have important implications on designers, managers, marketers, and system providers of mobile shopping (m-shopping) web sites. While the studies and data collection was done by Prof. Bidyanand Jha and Prof. KVA Balaji (SJM Institute, Mysore), my area of contribution was the analysis. We floated the questionnaire electronically and through paper. 369 respondents had been shortlisted which consisted of Undergrads, Post grads, Personnel's from Marketing, Sales, Engineering, Finance, R&D and Accounts & Services. Fortunately the recovery rate was more than 90% which was a real good rate. The paper was finally ready by early June. We submitted the paper and all the formalities were done and we waited for the confirmation mail. Finally it had come and we were in.

The least I could do is write this tiny report about my experience there, so that it may both motivate bright students to never give up on

their ideas and encourage other institutions and professors to actually support them. I've successfully had my first ever paper presentation at the International Conference on Management and Information Systems(ICMIS-13) organized by International Forum of Management Scholars (INFOMS), American University in the Emirates and Chitkara University held in Bangkok on 22-24 Sept 2013.

I don't think it was easy for me to stand in front of all the super minds. I've always looked up to and expound the insight I had into our field. I actually turned to some of them before my presentation, unspoken yearning for their attention and help in plucking up enough courage to get on the stage, and their kind words have always been prompt. My biggest fear was that of uttering the obvious.So after following my fellow countrymen's (who was a Strategic Management Professor at a college in Andhra Pradesh and also a participant) breathing and relaxation instructions, after hearing my caring mentor Prof. Bidyanand Jha's inputs, who trusted and accompanied me all the way, incite me with a “Go already!” and “Good luck!” wish echoing in my mind, there we were, finally on the stage... And it went super smooth! Everything changed in a matter of seconds. There I was, surprisingly comfortable, at ease, enjoying the moment.

Although we lost the first three best paper awards, we were awarded by an idol by the conference team. For me I didn't work for the awards or rewards, it's the satisfaction and value addition I needed as a beginner, and yes I've found it and achieved it.

Even though it was hard work, the conference was great fun and I enjoyed and learned a lot from it. ICMIS in general is a great way to meet people from all around the world, discuss international papers and skills. Furthermore, it is great addition on your CV. I recommend it to everyone who is interested in having a fun, hectic and challenging experience

-Mr. Ravi RajivPGDM II, KIAMS

-Mr. Ravi Rajiv

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· "I find that because of modern technological evolution and our global economy,

and as a result of the great increase in population, our world has greatly changed:

it has become much smaller. However, our perceptions have not evolved at the same pace;

we continue to cling to old national demarcations and the old feelings of 'us' and 'them'.”

- Dalai Lama

Crossroads


ecision making is a process which is part of our daily lives. DSome can change how our day continues and some our life.

Being the student of final year MBA, I soon will be making decisions that will be life changing. This decision is that of the first job. It may seem very easy to some people and to some it's very complicated. Possessing very little insight in to the market conditions and about the opportunities in various sectors of the business world, this will not be an easy task.

One morning I received a mail from the college administration about a career counseling program, at last a ray of hope. Every student would get an opportunity to interact with people from various sectors and specializations.

Few days prior to the program, we were informed that there would be six people from the industry who would be arriving. The program was scheduled for two days, for me this was the icing on the cake. As in two days time I would be able to gain enough vision just to see the beginning of my path if not the whole way.

On the day one of the program, all the members gave us a short introduction about them and hope that the current market scenario is c h a n g i n g f o r g o o d . A m o n g t h e m e m b e r s w e h a d ,1) Mr. Pradeep Kumar Director, Elysium Business Consultants 2) Mr. Madanmohan VP HR & EHS, Grasim Industries3) Mr. Rajesh Kumar Regional sales manager, Bosch & Siemens home appliances4) Mr. Nirmal Kumar Regional sales manager, Whirlpool Appliances5) Mr. Salil Damle Asst. manager, BHY Mellon Corporate Trust6) Mr. Anshul Chaturvedi Brand Head, Wrangler India.

All the members have vast experiences in their respective fields. Every student was asked to enter the room with their CV at the allotted time slot. The time slot given to me was in the evening, again a long wait. While I was patiently waiting for my turn, I could see the faces of my batch mates who went in confused and came out satisfied, clear and more optimistic than before. That made me more excited and eager. But as the chain of events unfolded, the day had come to an end just before it was my turn to enter the room. Sadly as

I turned away from the door of the room, my friend who was in charge of the scheduling informed me that all the students who did not get a chance today will be given the first slot tomorrow. Well some good news after a huge disappointment. Since the members were staying in the college, many students had an informal interaction with the members post dinner. They shared some more of their experiences and students got to ask more questions regarding the future path they may take. The members were more than happy to guide the students and clarify their confusions.

On the day two, another member had joined the panel to guide the students Mr. N. Janakiraman, who has a vast experience in various fields. From being in the Indian defense forces to being a President of a company, he had done it all in his career spanning 30 years. Time was allocated for a formal question answer session not only for the second year batch but also for the first years. More number of questions came from the first years, though they had ample time to think and decide their career paths as they wanted to start their planning early on. Nearing the end of the question answer session the last question was asked by our director sir, which was from the perspective of the institute.

At last, my wait was finally over. The best part was looking at my name first on the second day schedule. As I entered the room, I was greeted with a warm hello. One of the panel members took a brief look at my CV and asked me the reason for taking up HR as my specialization and went on asking how I am planning to make a career. I was prepared with a few questions which would give me a little clarity on taking up my first job and how should I be proceeding further. Few questions later I was beginning to see things building up and finally a little clarity. I now understood the reason for the smiles and sense of achievement on the faces of my batch mates on the previous day. Happy and satisfied I took leave from the room. This was more than I expected.

I am really grateful to the management for conducting this program which helped many confused students such as myself who were standing on the cross roads

-Mr. Vivek Kapate PGDM II, KIAMS

-Mr.Vivek Kapate

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"I think there's a lot of merit in an international economy and global markets,

but they're not sufficient because markets don't look after social needs."

- George Soros, Chairman, Soros Fund Management .

MDP : A lifetime experience

DUSSEHRA


ne fine morning I received a mail from one of our faculty stating Othat we have an opportunity to work with him as a supporting team for conducting MDP. This was the first time I had got a chance like this. As any normal student, at first I was bit hesitant about my competencies as a supporting team member. But then I felt that I shouldn't let down the trust my faculty had on me. So I made up my mind and started working on my basics. Once when I gained confidence, I never looked back. The kind of exposure and networking I got in the MDP is an enriching lifetime experience.

Management Development Program (MDP) is a short training program for middle level managers facilitating them with managerial aspects in different fields like Finance, Human Resources, Strategic Management, Information Technology, etc. The main objective of this MDP is to introduce the managers of Kirloskar Pneumatic Company Limited (KPCL) to an entirely new subject of Information Technology. Around 30 managers participated in this two day training program

th thwhich was conducted on the 16 and 17 of September 2013 at The President Hotel in Pune.

On the first day, it was a pleasant experience to view an august gathering entering into a large hall in The President Hotel. The program started at 9:30 a.m. with a formal presentation by Prof. Syed Nazimuddeen on 'business process improvement software' and its implementations, with 'Bonitasoft' being our primary software in focus. Post this presentation was a sumptuous & delicious lunch, which was an add-on to our pleasure. It's said that “LEARNING IS SOMETHING THAT NEVER ENDS”. I witnessed it for the first time when I saw the managers at the age of 45-50 who exhibited great deal of enthusiasm in learning the applications of this software. It was great fun helping and assisting them while they were going through this practical session that afternoon.

Post the practical session, we had an informal chat with all the managers

and professors where I had an opportunity to discuss few case studies and the problems associated with the working of various corporate houses. This discussion made me come across the newly introduced 'Tracking system for inventory management in KPCL'. All this added to my learning and provided me a huge scope for lateral thinking.

The second day had much more to offer for both the managers and to us. Today the sessions was led by Prof. Vinay Bhushan. It was a highly interactive session as managers kept requesting for different software tools that could be helpful and reduce their day-to-day workload. All the requests were successfully dealt with. The managers were at ease applying all the software tools and the recently learnt concepts while working practically. It ensured them that their workload is going to get reduced drastically in days to come. Post lunch sessions, was a dialogue on live case studies which aimed at reducing the manual work load of the employees of KPCL by the usage of advanced IT tools. Just as we approached the fag end of the two-day MDP program, a feedback session was conducted which proved to be an extremely motivating factor for the team.

Before I wrap it up, I would like to share an interesting facet of this visit. One of the managers invited us to visit KPCL in order to study their ERP (Enterprise Resource Planning) system and get an insight into the real-life application of this concept. From a student's perspective, this MDP experience is a huge learning curve in my MBA career as on how we can be industry ready, technically skilled and practically proficient. I would like to thank Prof. Syed & Prof. Vinay Bhushan for giving me an opportunity to meet many industry experts and improve my knowledge and corporate networking.

It was truly an Experience for Lifetime

-Mr. K.V.N. RajuPGDM II, KIAMS

avratri and Dussehra come once every year and bring so much of Njoy for every Indian. What better example could possible exist to depict the triumph of good over evil? During Navratri, the energy aspect of the universal mother i.e. Durga is evoked. Nine days and nine nights are divided into three equal parts to adore the different forms of Goddess Durga. The first three days are spent worshipping Maa Durga followed by Maa Lakshmi and then finally Maa Saraswati.

India, a country known for its tradition, religion and functions- all diverse and unique in nature, Navratri is indeed one of the most significant festivals. Navratri and Dussehra are celebrated all across the country by various names, garba and dandiya performed in Gujarat, Durga puja in Bengal and Vijay Dashami/ Dussehra in Southern India.For Batch-15 of KIAMS it was their last Dussehra in campus while on the other hand for Batch-16 it is their first Dussehra in campus! Dussehra is a very colourful affair here at KIAMS and the Cultural and Gulmohar Representatives provide the set up for this. Preparations began well in advance for the nine day long puja that was to be done.

thCeremonies began at 9:00 am sharp on the 5 of Oct'2013 when the first day puja took place. The surprise element introduced this year was the 'GOLU/KOLLU' setup. Golu is a doll keeping ceremony primarily done by South Indian women by setting up dolls on stairs during Navratri.

Since a South Indian tradition was never introduced so it was indeed a treat to create a NEW TRADITION for KIAMS.

Also this year, Garba was organised every night unlike just one night. This kept the dance, music, joy and energy in constant flow throughout

ththe Navrati season. By the 10 of Oct, the Raavan began to take shape. Raavan Dehan is also an important tradition at KIAMS that was initiated just a year back. Batch-16 stayed well rooted to tradition and every aspect was taken utmost care of. Raavan Dehan is taking place just as I'm writing this and it looks like everything is free of all evils and is now blessed. The smile says it all. Everyone is missing being at home especially on an occasion like this, but I hope this 'home away from home' brought joy and peace to every heart.

Since KIAMS imbibes most of the Indian culture and has student from various religious backgrounds it is only fair that all the traditional values are followed and celebrated. The beaming smiles tell the stories of this year's successful Durga puja celebration. Navratri brought in colour, joy, fun and frolic for KIAMS and I hope everyone felt blessed.Waiting for the next Navratri, here at KIAMS

-Ms. Asha UpadhyaPGDM I, KIAMS

-Ms. Asha Upadhya

-Mr. K.V.N Raju

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Onam at KIAMS


he day Onam metamorphosed from being a festival of Keralites Tto a national festival.

Onam , the Hindu festival celebrated by the people of Kerala is also termed as a harvest festival to mark the agrarian past of mythical king Mahabali. It falls during the Malayalam month of Chingam(August September) and marks the commemoration of Vamana avatar of Vishnu and the subsequent homecoming of King Mahabali. It is celebrated in Kerala with great pomp and splendor with a number of cultural elements such as pookala(flower carpet),vallam kalli(snake boat race),vadam vali(tug of war), o n a t t h a p p a n , p u l i k a l l i ( h u n t e r - t i g e r d a n c e ) , t h u m b i hullal,kazhchakkula etc.

It celebrates King Mahabali's annual visit from Patala (underworld) and in honor of this visit Onam is celebrated every year. The deity Vamana is also revered during this time by installing a clay figure (Onatthappan) next to the floral carpet.

The true spirit of Keralites is bought out during this festival as people of all religions, castes and communities celebrate the festival with great joy and verve.

The Onam Sadhya(Onam feast) is yet another indispensable part of Onam. It is served on plantain leaves with more than 14-15 curries, along with traditional pickles, pappads and a sweet called payasam.Traditional dance forms that include thiruvathira, kummattikali, pulikali, thayyam etc. adds extra charm to the festival.

Traditional dresses adorned by Keralites for Onam are Kasavu Mundu(white dhothi) by the men and set saree or set mundu(off white saree with golden borders) by women and this spirit was reflected by the students of KIAMS. The boys were seen running around to purchase white mundus and the girls were busy borrowing set sarees to adorn.

Preparations for Onam celebrations at KIAMS started well in advance with our cultural reps and Gulmohars planning the events and festivities for that day. They were seen finalizing the design of the pookalam, making arrangements for the events. Girls were busy practicing thiruvathira, preparing the flowers for the pookalam and

boys were equally busy in designing the same and practicing traditional onam songs.

Preparing the pookalam started early afternoon in Rotunda. Boys and girls took great joy in filling up the pookalam with flowers according to the set design. By around 5 in the evening the whole of rotunda looked reminiscent covered by a massive quilt of flowers. Students and faculty were found posing next to the massive flower carpet for photographs. By 7 pm, the Onam festivities were scheduled to begin. All of the faculty members and the students gathered in the triangle to commence the festivities. We inaugurated the function by invoking the presence of the Almighty with the lamp lighting ceremony. Mrs.Sheela Krishnan, Ms.Rachana Sharma and Mr.Bidyanand Jha , our faculty members, were invited to light the lamp. The lamp lighting ceremony was followed by an enlightening speech by Merlin Honey Thomas of PGDM-1 regarding the essence of celebrating Onam. Following that the girls of b-16 namely Garima, Neha, Hina, Asha and Gayathry put their feet together for a beautiful thiruvathira performance. Soon after, the Malayalee community of b-16 Vinay, Shajeer, Rahul, Merlin, Johnson, Antony, Anoj, Stenin and Gayathry sang 'Maveli Naadu' , 'Thithi Thaara Thithi Thei' and few other Onam songs which the crowd really enjoyed. Once the events came to an end everyone dispersed for the dining halls in order to enjoy some sumptuous Onam sadhya. The day of Onam in KIAMS is the only day when the anna's of the mess, who cook our meals and serve us sit down first for their meals and we, the students serve them. The annas and the faculty members eat first and after we serve them, our beloved seniors, that is b-15 is served by us. It is only after they have had their fill that we as a batch sit down and enjoy the sadhya. After indulging ourselves in some luscious food, we once again assembled in the triangle for a small dance party. Some loud music and students grooving in tune to the music was indeed the best ending to the fun filled festivities of Onam 2013.

It was a completely enlightening and refreshing experience that I will remember forever. Looking forward to Onam next year!

-Mr. Antony G.K.PGDM I, KIAMS

-Mr. Antony G.K

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· "A successful economic development strategy must focus on improving the skills of

the area's workforce, reducing the cost of doing business and making available the resources business needs to compete and thrive in today's global economy."

- Rod Blagojevich, Former Illinois Governor and Convicted Felon .

Trip To HAMPI : A well deserved break….


ALL WORK AND NO PLAY MAKES JACK A DULL BOY”. “And it was all work for the students of KIAMS, Harihar, lately. We badly needed a break from the voluminous books and hectic classes. We had reached the saturation point. The time was ripe and opportune when the management decided to arrange a picnic, for one day, of course. A day off was what we were looking for, as we wanted to break free from the shackles of boredom and monotony. Schedules were completely packed- Presentations, assignments, internals, externals, tasks, duties, responsibilities and what not. At times, few of us lost it badly. But this was our chance to abandon our books, temporarily though, and enjoy the beauty of Mother Nature and the creations of our ancestors. We were going to HAMPI.

Hampi is a village in northern Karnataka state, India. It is located within the ruins of Vijayanagara and is the former capital of the Vijayanagara Empire. Pre-dating the city of Vijayanagara, it continues to be an important religious centre, housing the Virupaksha Temple, as well as several other monuments belonging to the old city. The ruins are a UNESCO World Heritage Site, listed as the Group of Monuments at Hampi.

Few of our friends had already been to Hampi and they had given us a fair picture of what the city stood for. Excitement caught hold of us the day before the trip. We had already started picturing ourselves in HAMPI our imagination was on the run.

We were informed to wake up at the break of dawn, get dressed and report at the gate. To my utter surprise, as I was approaching the gate, the turnout was unbelievable. All the students of KIAMS were tagging along, for a change from their routine. The excitement was mounting. We had all the arrangements in place. Food was packed for breakfast and lunch. And as planned, dinner was a surprise. None of us knew where we would dine which put us in a quandary (Veg or non-veg). The management had given us the benefit of doubt. It was our first official trip and the fact that the seniors were accompanying us made it all more exciting. It was an opportunity for us to learn more about them.

There were three buses lined up for us. We boarded the bus and embarked on our journey to Hampi. Our first pit stop was for breakfast, which we enjoyed thoroughly. After 4 hours of continuous fun, we entered the great city of HAMPI. As we alighted from the bus, we could not believe our eyes. It was a “Beauty in ruins”. Every stone you look at makes you think of that one person, who would have placed it there, centuries ago. You would be awe struck witnessing the gigantic boulders, structures, sculptures, carvings and artistically and archeologically rich temples. Words fall short to express the true essence of the experience one would have beholding the beauty of the kingdom.

After some quality time in Hampi, we took off to Tungabhadra Dam. It was indeed an awe inspiring sight, seeing the water fiercely flowing along our way to the dam. Water is undoubtedly the most intimidating element of Mother Nature. Our buses were restricted to a certain point from where we had to walk. Few of us were informed about a 'Light House' on the top. Without a second thought, we

started off. We could feel that rush of adrenaline, when we were climbing those 200-300 odd steps. I was lucky enough to be a part of that thrill. Once we reached the apex, we felt heavenly. Everyone then started taking photographs. All of us were happy, in a state of bliss, enjoying the moment to the fullest. We fell in love with the place and the thought of bidding goodbye, disheartened us. But, we knew we had to. As always, time was scarce. It could not wait for us. Feeling low, we walked back to the bus. The thought that we were going back put us off.

Very little did we know that there was another surprise in store for us. Dinner was the only motivation left, and that too we did not know where we would have it. This time, in the bus, the ambience was a little off. Everyone was tired and they preferred to catch some Z's. We knew that there was only one more pit stop and that would be the restaurant. Suddenly the bus came to a halt. We were asked to alight from the bus.

We could see structures resembling a tent or a hut. But we could not figure it out from a distance. The name said “CHOKHI DHANI”. Today, the name of Chokhi Dhani is synonymous with Rajasthani culture throughout the country. Spread over 2 acres of beautifully landscaped area for a rustic look, it is dotted with machaans & platforms where different folk artists perform concurrently. Live dance and music performance all through the evenings was one of the major attractions at Chokhi Dhani Village. The magic show, the puppet show, acrobatics on a bamboo without the protection of a safety net beneath, the astrologer, the fortune teller parrot, horse riding and camel riding all made the visitors spellbound.

And believe you me; it was a jaw-dropping moment, simply mind-blowing. We were all well taken care off. But we were skeptical about the food. There was a dining hall depicting the villagers' lifestyle, which had the renowned mouth watering and typical Rajasthani food. The food had the charm of surprising everyone's palate equally. We were delighted. It is a place where you will enjoy going and detest coming back... where you will get rid of your worries and you will drown with Rajasthani art, culture and hospitality. We felt satiated after a long time. Our hearts were craving for more. Dinner was indeed a surprise, a lovely one…

We knew it was about to end. We were asked to approach our respective buses. They bid us goodbye with lovely songs. We boarded the bus and bounced back to our college. After 3 hours of journey, we reached college. We were dead tired. All of us bid goodnight and parted ways.

A break was needed for us. And we got a beautiful one, which we could remember and cherish for the rest of our lives. All thanks to the management. We were able to draw motivation from the trip. At the end of the day, that's what matters. We knew we had to start afresh the next day, but we also knew that this was just a beginning…..

-Mr. Shajeer ShamsudeenPGDM I, KIAMS

-Mr. Shajeer Shamsudeen

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Submit to life


When my existence, I tried to measure; Life replied to me, I'm an invaluable treasure

Take time to recognize me That alone imparts eternal pleasure.

Thinking about the time to comeWill only make heart gloom

You'll never know where life will bloomIt'll find its way, just give it some room.

If in an instant, all your dreams it will kill,Then in a moment, all your desires it will fulfill.

All its wound, itself it will healWeary chapters, itself it will seal

Come what may, it won't ever reelBefore it everyone has to kneel.

Time outshines everythingWhatever great in life is done

Above us all, shines the same sunUnder it we all have to burn

From your roots; you cannot runTo it, sooner or later reality of life,

Will make you return.

You toil in life will never go in vainIn return, your true self you will regain.

Since the dawn of timePure aroma of wet soil has remain unchangedIn nothing else, have my senses so intensely

drenchedTo the simplicity of life eternally,

Let your soul be clenched.

Life is a divine blessing given to us and is only oneMake most of it, now for none, life shall ever

return.

All the way, faithful to us, only reminds lifeMiracles and hope in it are rife, so respect life.

Don't lose yourself in mundane strifeSimply submit to life. -Ms. Jaya Nidhi

PGDM I, KIAMS

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BIZ QUEST


Q.1.) Japanese businessman Hiroshi Yamauchi has died aged 85. Which business did he transform?

Q.2.) Manchester United has reported record revenues for the 12 months to June 2013. What was their turnover?

Q.3.) UK inflation fell to what annual rate in August 2013?

Q.4.) The privatisation of which business has begun after the UK Government sold a 6% stake?

Q.5.) What is Blackberry rumoured to be planning in order to significantly reduce costs?

Q.6.) What year was the International Monetary Fund officially signed into existence?

Q.7.) Which of these countries' central banks, like the U.S. Federal Reserve has the lowest main lending rate now?

Q.8.) Which of the countries have the lowest unemployment news right now?

Q.9.) Which is the Tata Group's oldest surviving brand?

Q.10.) Who was independent India's first finance minister?

Q.11.) Which was the first Indian company to list its Global depository receipts (GDR) in the Singapore Stock Exchange?

Q.12.) This son of a school teacher, started a multibillion dollar company in 1981. He was once detained by Bulgarian Police for talking about capitalism. Who is he?

Q.13.) Which company designed the first smartphone?

Q.14.) Who succeeded Bill Gates as Microsoft chairman?

Q.15.) Which economist is the new head for the federal reserve in the US?

Q.16.) Which country has just knocked US from its top spot as the world's biggest net importer of oil?

Q.17.) Cadbury's have had an attempt to trademark something blocked. What can't they trademark?

Q.18.) World economic forum publishes Human Capital Index. India is ranked 78th out of 122 countries. Which country is no 1 on this list?

Q.19.) A "click-and-collect" scheme is being piloted by the e-commerce giant eBay and which UK retailer?

Q.20.) Which healthcare venture is funded by Azim Premji in his personal capacity ?

Q.21.) Which brand has replaced Thums Up as the largest selling soft drink in India ?

Q.22.) After China which country stands No 2 as a.shoemaker of the world ?

Q.23.) In economics, what do we call someone who consumes more than a fair share of limited resources or shoulders too little cost?

Q.24.) With whom has Archaelogical survey of India tied up to offer 360 deg virtual view of India's 100 monuments?

Q.25.) Which country is No 1 on global remittances for 2012 as per World Bank?

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Brand Updates


Acer launches Liquid S2; World's First 4K Recording Smartphone

ndAcer on 2 Sep'13 launched a new smart phone called the Liquid S2, the world's first 4K recording smart phone which is four times the resolution of current full HD. 4K video will be shot using the phone's 13 megapixel rear camera and the power of a quad-core Qualcomm Snapdragon 800 processor which is clocked at a stunning 2.2GHz.

The smartphone Liquid S2 has a full HD 6-inch screen with IPS technology at 368 pixels per inch. The rear camera boasts a 28mm lens, a BSI sensor and an LED ring flash, offering up to 27-megapixels in a s ingle picture. This is paired with a 2-megapixel wide-angle f r o n t - f a c i n g c a m e r a , allowing users to capture

moments with an 88-degree wide viewing angle.The Liquid S2 has a 6-inch 1920x1080 resolution full HD 1080p touchscreen, a quad-core 2.2GHz Qualcomm Snapdragon 800 processor and Google's Android 4.2.2 Jelly Bean mobile operating system, as well as 2GB of RAM.

Tata Motors launches Nano CNG, an attempt to revive its micro-car market

In a bid to revive its micro-car Nano's flagging sales, Tata Motors, thIndia's largest automotive company by revenue launched on 8

Oct'13 the CNG version of the car called Nano CNG emax at Rs 2.52 lakh to Rs 2.77 lakh ex-showroom Mumbai. Powered by a fuel efficient, state-of-the-art engine, with CNG and Petrol bi-fuel system options, the Tata Nano CNG emax boasts of having the lowest carbon footprint and the most fuel efficient car in India with a mileage of 36 km/kg*.

Amway India launches new products for men

Direct selling FMGC major Amway India Enterprises launched a new brand men's grooming product 'Dynamite' and a new line of festive range colors cosmetics under the brand 'Attitude' in Bihar on

th19 Sep'13.The company introduced two new products - Dynamite Whitening cream and Dynamite Face wash - exclusively for men.The entire Dynamite range includes face wash, whitening cream, shave foam, after shave splash, deodorant, hair cream, shaving cream and disposable razors. They are competitively priced between Rs 45 and RS 360.

Kamani oils launches its new lite product

With the public attention focused on health, food manufacturers are looking for healthy alternatives. Keeping in these parameters in mind the R&D team at Kamani Oils manufactured a 3 in 1 culinary oil 'Foodlite', which can be used for frying and cooking while at the same time not compromising on the health quotient

-Mr. Kesav SatishPGDM I, KIAMS

-Mr. Kesav Satish

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Across

1. Financial market stress in Europe remains at manageable levels despite the crisis in ____________ .3. Brazil, India, Indonesia, Turkey, and South Africa are being considered to be the ___________ economies under current scenario.4. The Brazilian Prime Minister is ____________8. ___________ replaced Thums Up as the largest selling soft drink in India.10. ___________ was the newly appointed Governor of RBI.

Down

2. US shutdown took place after_________ years.5. Reason for widening of CAD was increased demand of _________6. ________, is the world's largest retailer.7. Amway's men's grooming product, 'Dynamite', was first introduced in this state ____________9. In recent years, __________ accounted for a large share of global investment.

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CROSSWORD

Biz News


Chief Economic Adviser, Raghuram Govind Rajan, was appointed as the Governor of the Reserve Bank of India (RBI) for three years. He took over from D.Subbarao, who has demitted office

thon 4 September, 2013.

At 50, by far one of the youngest to become RBI Governor, Dr. Rajan, who is credited to have correctly predicted the 2008 financial crisis, is set to take over the mantle of the central bank at a time when the economy is faced with a multi-pronged crisis of high consumer price inflation, industrial slowdown, a free fall of the rupee and a widening current account deficit (CAD).

Dr. Rajan said in a statement after his appointment that the RBI had a tradition of integrity, independence and professionalism. “These are challenging times for the Indian economy, and the RBI and the government will work together…We don't have a magic wand to make the problems disappear. But absolutely we will deal with them.”

ToyotaKirloskar Motor said that it will hike prices of its key models by up to 24,000 with effect from September 21, to partly offset higher cost of raw materials and rupee depreciation. The company said the prices of Etios, EtiosLiva, Innova and Corolla Altis models will be increased by up to 1.50%. The company said Innova will be costlier by 7,000 to 11,000.

A new global corruption risk index has ranked India as the 69th most graft-prone nation out of 197 countries, calling it an extremely risky place to do business, second only to Russia among BRICS. Warning global investors that they remain exposed to reputational damage as well as legal risks under laws like the US Foreign Corrupt Practices Act and the UK Bribery Act, the index compiled by UK-based global risk analytics firm Maplecroft ranks even countries like Mozambique and Liberia as less corrupt than India.

A high-level panel headed by Economic Affairs Secretary, Arvind Mayaram will finalize by the month end, its report on the definition of FDI and FII, aimed at removing ambiguity on the two types of foreign investment. “The Committee is likely to meet after October 15 to give a final shape to the definition of FDI and FII. The report is expected to be finalized by month end,” a government official said. The government set up a four-member committee headed by Economic Affairs Secretary Arvind Mayaram to define foreign direct investment (FDI) and foreign institutional investment (FIIs) and remove the ambiguity between them.

Walmart Stores Inc., the world's largest retailer, said it is in talks with Indian partner Bharati Enterprises on its future business plan and aims to reach an agreement in the next few weeks.While the nation changed laws in September last year to allow

foreign retailers to own majority stakes in multi-brand retail chains, no global retailers have sought such licence yet. The government also loosened rules covering sourcing, infrastructure investment and store location in August, in an effort to woo Walmart, Tesco Plc and other global chains to open retail stores in Asia's third-biggest economy.

Under the recently amended rules, foreign-owned retailers will have to buy 30 percent of manufactured products from small-and medium-sized local firms with less than $2 million invested in factories and machinery.

Sebi clears way to make foreign investors feel at home. FII, QFI classes merge into FPI (Foreign Portfolio Investment), which won't have to register with Sebi directly. The new regulations are meant to simplify procedure and improve investment climate.

Foreign portfolio investment routes FII and QFI to be merged. The new investor class will be called as the Foreign Portfolio Investors (FPI), which is to be registered with the DDPs instead of Sebi.

A Barclays compilation shows that the UK, along with Singapore (11% each), has been the origin of the second largest FDI inflow of $132 billion into India since 2009. Mauritius topped with 36%, but that was largely due to favourable tax treaties that saw capital from other nations, including the UK, being routed through the island.

Since 2009, Barclays added that the UK has had a 31% share of inbound merger & acquisition activity pegged at $75 billion—and just behind the US's 34%. This could be seen as a signal that both nations would be sharing the top slot as the largest buyers of Indian assets.

Investors in India have pushed stocks higher in recent weeks on renewed optimism that the U.S. Federal Reserve will keep the money supply flowing over the near term. The Fed's $85-billion-per-month stimulus program has kept global markets awash with liquidity. This cheap money has helped support Indian stocks, as investors bet on getting a higher return from the emerging country over developed markets.

Back in August, the Indian market had been in sell-off mode -- losing 11% over the course of a few weeks -- as investors worried that the Fed would start reigning in its stimulus measures

-Mr. Sourav SoniPGDM I, KIAMS

-Mr.Sourav Soni

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The Chanakya Inter Bschool Contest

ANSWERS OF BIZ QUEST


Winner :

Mufaddal Dahodwala - JBIMS, Mumbai

Other Contributiors:

Sarath K Lal & Srimaitri Yalamarthi - SIBM, Pune

Janardhan Samba Murthy & Sai Krishna Mouli - Hyderabad Business School, Hyderabad

Gautam Malhotra & Surojeet Mukherjee - GLIM, Chennai

Chandan Khanduja & Varun Kathuria - GLIM, Chennai

Suruchi Popli & Nainpriya Gupta - IIM, Kozhikode

Vibhuti Khatwani - ITM University, Raipur

Nishtha Mukerjee - ITM University, Raipur

Kritee Priya & Sheetal Chawala - National Institute of Agricultural Extension Management, Hyderabad

Pradeep C Hiremath - Purdue University, West Lafayette, Indiana.

Aditya Gandhi - SIMSREE, Mumbai

Shashank Sambre - SIMSREE, Mumbai

Zafeer Rais - SIMSREE, Mumbai

Pankesh Kumar Betala - XLRI, Jamshedpur

Saee Jadhav and Shilpa Saraogi - SIBM, Pune

Congratulations to the winner and to all the other participants from Team Chanakya.

Answers to Biz Quest:

1.) Nintendo

2.) £363m

3.) 2.7%

4.) Lloyds Banking Group

5.) Cutting 40% of the workforce

6.) 1945

7.) Japan

8.) China

9.) The Taj Palace and Tower

10.) R K Shanmukham Chetty

11.) Uttam Galva Steels

12.) N R Narayana Murthy

13.) IBM

14.) Steve Anthony Ballmer

15.) Janet Yellen

16.) China

17.) Use of the color purple in Dairy Milk.

18.) Switzerland

19.) Argos

20.) Health Care Global

21.) Sprite

22.) Vietnam

23.) Freerider

24.) Google

25.) India with 70 bn $

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Campus News

We invite you to send in your feedback to help us bring out the best in 'The Chanakya'.

[email protected]@gmail.com

26

Student Editorial Team

Mr. Kesav Satish,

Ms. Nivedita Snehi,

Ms. Himanshi Jain,

Ms. Ishani Ray (PGDM - I)

Ms. Pulkit Tiwari,

Ms. Bhaswati Chakraborty

Mr. Bharathwaj S.

Mr. Saurabh Jadhav (PGDM-II)

Faculty Advisor

Prof. Sunaina Kuknor

The Chanakya, November 2013

th th As a part of the Industry Readiness Program, Career counseling program was conducted for Batch 15 on the 14 and 15 of September which was graced by eminent personalities from the industry with the likes of Mr. Pradeep Kumar Director, Elysium Business Consultants; Mr. Madanmohan VP HR & EHS, Grasim Industries; Mr. Rajesh Kumar Regional sales manager, Bosch & Siemens home appliances; Mr. Nirmal Kumar Regional sales manager, Whirlpool Appliances; Mr. Salil Damle Asst. manager, BHY Mellon Corporate Trust and Mr. Anshul Chaturvedi Brand Head, Wrangler India.

th th Also a grooming session was held for Batch 15 on 16 September (Pune) and 17 September (Harihar) which was conducted by Ms. Bhavya Chawla of Perfect 10 Image Consulting.

th th A MDP program was conducted on 16 and 17 September at The President Hotel in Pune for the managers of 'Kirloskar Pneumatic Company Limited (KPCL)'.

th 'Onam' was celebrated with great pomp and splendor on 16 September and traditional dinner was served that increased the merriness in the students of KIAMS.

th A fun filled trip to Hampi was organized by the college for Batch 15 and Batch 16 on 18 September.

th th 'KPL-8', the intra-college cricket tournament took place between 28 September to 8 October and team 'Mutants' emerged as the winners.

Alumnus Mr. Sameer Kidwai (B11), Marketing Head at Toy Triangle and Mr. Basharat Abbas (B12), Founder, Enthusionz th(Advertising) visited the campus on 28 September with the objective of recruiting students for Summer Internship Program

and also imparted knowledge on marketing and entrepreneurship skills.

th 'Dusshera' and 'Vijay Dashami' were celebrated on 14 October with a feeling of gaiety.

th th The Management Forum event 'Operacy' was organized on 19 and 20 October with much passion and enthusiasm by the students of KIAMS.

th With crackers lighting the sky and a traditional puja, 'Diwali', the festival of lights was celebrated on 26 October at KIAMS.

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Cover Page design: Mr. Rahul Raju, PGDM-I, KIAMS.

Special thanks to Mr. Sourav Soni, PGDM-I, KIAMS

for his contribution.

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The Chanakya November 2013

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