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How`s Business (Aug 20 - 27) - By M K Venu
By M K Venu, Zee News Business Editor
Jobless growth?
Large-scale layoffs have become a reality in the Indian industry over the past few years as the recession deepens in many key sectors that drive growth. A quick survey shows that the top thirty to forty corporates have laid off over 50,000 people in recent years.
Many companies in the auto and engineering sectors are running fewer shifts as production has been scaled down. In many cases employees have been asked to go on leave temporarily.
The figures in the public sector are even more scary. PSUs have voluntarily retired over 3,00,000 employees in the past three to four years. This is expected to touch 5,00,000 by 2003, according to one estimate. The only problem is while companies are downsizing, alternative employment is difficult to come by. The Economic Survey clearly shows that the number of employed in the organized public and private sector has actually fallen since 1997.
The number of employed stood at 282 lakh persons in 1997, and this came down to 281.66 in 1998. This figure dipped further to 281.13 laks persons in 1999.
A latest Planning Commission study also confirms that employment growth in the organized sector has been negative in recent years. All this inspite of the much touted 6 per cent average GDP growth in the 1990s.
Are we then witnessing the phenomenon of jobless growth in the post-reforms period.
Indian banks: Squeezed Out
The Indian banking sector could soon face a crisis of sorts. In the absence of demand for credit from the industry, banks are buying government securities well in excess of the average SLR requirement of 25 per cent of outstanding deposits.
In fact, banks have 35 per cent of their deposits in government securities. This is Rs.1,00,000 crore in excess of the statutory requirement. So banks who might otherwise have lent Rs.1,00,000 crore to the industry, have actually chosen to put the money in government bonds.
But the real problem is that these government securities do no offer more than 8.5 per cent to banks upto a tenure of ten years. This is because yields have dramatically dropped in the last two years as the RBI consciously followed an easy interest rate regime.
While the banks get about 8.5 per cent on their investment in government securities, their average cost of borrowing is 7.5 per cent. Thus their margins are getting increasingly squeezed - Indian banks need at least 2 per cent over and above the borrowing cost to maintain their overheads, including salaries and other running costs. No wonder several public sector banks have voluntarily retired over 10,000 employees so far. Limited mobility first to rural areas
Communications Minister Ram Vilas Paswan was recently cornered by members of a Parliamentary Consultative Committee in regard to the controversial licenses given to the private sector to operate WLL technology based limited mobile phones. Technically, the Wireless in Local Loop (WLL) technology has been allowed to be used by fixed operators.
When members asked whether private companies like Reliance will use the WLL technology to eat into the existing fixed telephone market of MTNL and BSNL in the lucrative urban centers, Paswan went on the defensive and said the WLL technology is basically meant for the rural poor and the private companies will be first asked to set up operations in rural areas.
Only after that will the private companies be allowed to invade the urban market. This should be music to the ears of the cellular operators who feel that the government has unjustifiably allowed the use of WLL based mobile phones for basic telephony services. If Paswan carries out his promise, then the cellular operators, as well as MTNL and BSNL, will get some breathing space, even if for a limited period.
Dot coming or dot bombed in India?
The prominent Silicon Valley venture capitalist Kanwal Rekhi who was in India last week is extremely pessimistic about consolidation in the Dot Com space in India. He believes that most of the investments in Dot Coms have turned bad, and there is no way that anyone can even think of consolidating them into a firm business model. “Aggregation of eyeballs is passé. It won’t work. Even abroad, only some Dot Coms like e-bay are doing well”, he says.
He doesn’t think that even Amazon.com will survive.
He says the experience in the last two years shows that no Dot Com with a business model involving the logistical exercise of shipping commodities across borders will survive. Only those B2Bs that provide localized services such as ticketing etc have a chance to make profits.
He however says the Indian IT sector will mature in another 10 years when the skilled manpower pool will expand to a couple of million with an average experience of 10 to 15 years. The Indian software professionals will have arrived by then.
What happens to the billions of rupees poured into Dot Coms so far in India? Rekhi says that is the price you have to pay to learn and play with ideas in a capitalist system.
Illustrations by Sharad Sharma
Author`s e-mail ID is venumk@zeenetwork.com
Jobless growth?
Large-scale layoffs have become a reality in the Indian industry over the past few years as the recession deepens in many key sectors that drive growth. A quick survey shows that the top thirty to forty corporates have laid off over 50,000 people in recent years.
Many companies in the auto and engineering sectors are running fewer shifts as production has been scaled down. In many cases employees have been asked to go on leave temporarily.
The figures in the public sector are even more scary. PSUs have voluntarily retired over 3,00,000 employees in the past three to four years. This is expected to touch 5,00,000 by 2003, according to one estimate. The only problem is while companies are downsizing, alternative employment is difficult to come by. The Economic Survey clearly shows that the number of employed in the organized public and private sector has actually fallen since 1997.
The number of employed stood at 282 lakh persons in 1997, and this came down to 281.66 in 1998. This figure dipped further to 281.13 laks persons in 1999.
A latest Planning Commission study also confirms that employment growth in the organized sector has been negative in recent years. All this inspite of the much touted 6 per cent average GDP growth in the 1990s.
Are we then witnessing the phenomenon of jobless growth in the post-reforms period.
Indian banks: Squeezed Out
The Indian banking sector could soon face a crisis of sorts. In the absence of demand for credit from the industry, banks are buying government securities well in excess of the average SLR requirement of 25 per cent of outstanding deposits.
In fact, banks have 35 per cent of their deposits in government securities. This is Rs.1,00,000 crore in excess of the statutory requirement. So banks who might otherwise have lent Rs.1,00,000 crore to the industry, have actually chosen to put the money in government bonds.
But the real problem is that these government securities do no offer more than 8.5 per cent to banks upto a tenure of ten years. This is because yields have dramatically dropped in the last two years as the RBI consciously followed an easy interest rate regime.
While the banks get about 8.5 per cent on their investment in government securities, their average cost of borrowing is 7.5 per cent. Thus their margins are getting increasingly squeezed - Indian banks need at least 2 per cent over and above the borrowing cost to maintain their overheads, including salaries and other running costs. No wonder several public sector banks have voluntarily retired over 10,000 employees so far. Limited mobility first to rural areas
Communications Minister Ram Vilas Paswan was recently cornered by members of a Parliamentary Consultative Committee in regard to the controversial licenses given to the private sector to operate WLL technology based limited mobile phones. Technically, the Wireless in Local Loop (WLL) technology has been allowed to be used by fixed operators.
When members asked whether private companies like Reliance will use the WLL technology to eat into the existing fixed telephone market of MTNL and BSNL in the lucrative urban centers, Paswan went on the defensive and said the WLL technology is basically meant for the rural poor and the private companies will be first asked to set up operations in rural areas.
Only after that will the private companies be allowed to invade the urban market. This should be music to the ears of the cellular operators who feel that the government has unjustifiably allowed the use of WLL based mobile phones for basic telephony services. If Paswan carries out his promise, then the cellular operators, as well as MTNL and BSNL, will get some breathing space, even if for a limited period.
Dot coming or dot bombed in India?
The prominent Silicon Valley venture capitalist Kanwal Rekhi who was in India last week is extremely pessimistic about consolidation in the Dot Com space in India. He believes that most of the investments in Dot Coms have turned bad, and there is no way that anyone can even think of consolidating them into a firm business model. “Aggregation of eyeballs is passé. It won’t work. Even abroad, only some Dot Coms like e-bay are doing well”, he says.
He doesn’t think that even Amazon.com will survive.
He says the experience in the last two years shows that no Dot Com with a business model involving the logistical exercise of shipping commodities across borders will survive. Only those B2Bs that provide localized services such as ticketing etc have a chance to make profits.
He however says the Indian IT sector will mature in another 10 years when the skilled manpower pool will expand to a couple of million with an average experience of 10 to 15 years. The Indian software professionals will have arrived by then.
What happens to the billions of rupees poured into Dot Coms so far in India? Rekhi says that is the price you have to pay to learn and play with ideas in a capitalist system.
Illustrations by Sharad Sharma
Author`s e-mail ID is venumk@zeenetwork.com