TAPMI Pratibimb Nov 2011

Pratibimb | November 2011 | 1

A Students’ Initiative

The Reflection of Management

FINANCE | GENERAL MANAGEMENT | HUMAN RESOURCE | MARKETING | HEALTHCARE | OPERATIONS | SYSTEMS

Volume II, Issue V November 2011 A Monthly e-Magazine

A Student’s Initiative


Mission

T.A. Pai Management Institute (TAPMI) is a premier management institute situated in

Manipal and is well known for its academic rigor & faculty-student interaction. The

Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th

in the South Zone by The Week Magazine.

Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much

needed impetus to the task of building professional management capability in the

country. In the process, it has also played a role in strengthening the existing

educational and health infrastructure of Manipal.

We are committed to excellence in post-graduate management education, research,

and practice by nurturing and developing global wealth creators and leaders. We

shall continually benchmark ourselves against the best in class institutions. We shall

foster continuous learning and reflection, achievement-orientation, creative

interdependence and respect for diversity with a holistic concern for ethics,

environment, and society.

About TAPMI

TAPMI has been conferred with Best Academic Input (Syllabus) in Finance

among B-Schools across India. The award will be presented at the 19th Dewang Mehta

Business School Award, Mumbai. The Award is supported by Ms. Shaila Mehta-

Director, Onward Foundation for Dewang Mehta awards. The Chairman of the Jury is

Dr. Prasad Medury, Partner, Amrop International and the Patron is Mr. Harish Mehta,

Chairman & Managing Director, Onward Technologies Ltd.

Recent Update

T. A. Pai Management Institute Manipal, Karnataka


About Pratibimb

Pratibimb – The TAPMI’s e-Magazine - is the conglomeration of the various spe-

cializations in MBA (Marketing, Finance, HR, Systems and Operations). It is pri-

marily intended to provide insights into the plethora of knowledge that relate to the

various departments of Management and to give an opportunity to the students of

TAPMI and the best brains across country to exhibit their creative cells. The maga-

zine also strives to bring expert inputs from industries, thereby bringing the aca-

demia and industry together.

Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The is-

sue comprised of an interview of denoted writer Ms. Rashmi Bansal along with a

series of articles by students and industry experts like MadhuSudan Rao (AVP-

Delivery, Mahindra Satyam) & Ed Cohen who is a global leader and chief learning

officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank

globally for learning & development . It also included a hugely successful and en-

grossing game for finance geeks called “Beat the Market” to bring out the applica-

tion based knowledge of students by providing them the platform where they were

expected to predict the stock prices of two selected stocks on a future date. The

magazine is primarily intended for the development of all around management

knowledge by providing unbiased critical insights into the modern developments.

TAPMI believes that learning is a continuous process and is not limited to the four

walls of the classroom. This viewpoint is further enhanced through Pratibimb

wherein students manage and contribute to create a refreshing learning environ-

ment outside the classrooms which eventually leads to a holistic development pro-

cess. The magazine provides a competitive platform and opportunity to the stu-

dents where they can compete with the best brains of the country. The magazine

also provides a platform for prominent industry stalwarts to communicate their

views and learning about and from the recent developments from their respective

fields of business which in turn helps to create a collaborative learning base for its

readers.

Pratibimb is committed in continuing this initiative by bringing in continuous im-

provement in the magazine by including quality articles related to various manage-

ment issues and eventually creating a more engaging relationship with its readers

by providing them a platform to showcase their talent.

We invite all the best brains across country to be part of this initiative and help us

take this to the next level.


I am pleased to state that the team members of PRATIBIMB have continued their sincere efforts to bring out this seventh issue in November 2011. The previous six issues had a number of management articles written by students of various B-Schools and also from students and faculty of TAPMI. This student magazine is also accessed and appreciated by our alumni and industry and business readers. The magazine provides a platform for our students to use their creativity, imagination and language skills to reflect upon various management areas i.e. operations, marketing, system, HR, finance and entrepreneurship as well as in areas of their interest. It also fosters research culture among students. Research orientation and sharpening analytical mind are crucial for their academic orientation. Generally literary work, research article writing and publication should become part of students’ learning goals while they are in the campus. This would perhaps sow seeds for pursuit for academic career by a few management students after their initial experience in industry and business. It has been observed that on comparison with fast developing country i.e., China in Asia, the focus on research and publishing from Indian students and faculty in management journals and pursuit of Ph.D. programme in leading universities has been moderate in recent past. This situation needs to be improved. To this extent our students and faculty can best express themselves about their creative thoughts, opinions, knowledge and interests by contributing to PRATIBIMB. Let PRATIBIMB grow in content and variety with thoughtful articles in months to come. I congratulate the persistence and continued efforts put in by the team members of PRATIBIMB for timely publishing this volume. I wish them higher performance, joy and success in their endeavor.

Dr. A. S. Vasudev Rao

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editor’s corner Rohit Kumar, Chief-Editor

Ramanuj Vidyanta, Editor-Branding

Sarvesh Joshi, Editor-Creative Designer

Sub-Editors

Abhishek Anupam

Abhishek Dubey

Bijoy Alokkan

Kapil Saraswat

Manish Mishra

Pranaynehru T

Shivesh Sinha

Sriparna Neogi

Sushmit Sinha

Vandana Soni

Faculty Advisors

Prof. Chowdari Prasad,

Dean (Planning & Development), TAPMI

Dr. Jaba M. Gupta,

Associate Professor and Chairperson - eGPX, TAPMI

Special Thanks

Mr. Benny Augustine

Director - Human Resources, Unisys India

Prof. Vrishali N Bhat, TAPMI

Prof. Vinod Madhavan, TAPMI

Alumni Affairs Committee, TAPMI

Dear Readers,

We are pleased to release November issue of

Pratibimb.

The highlight of this issue is the interview with Mr.

Benny Augustine, Director - Human Resources,

Unisys India who shared his views on HR related

issues with us.

We are thankful to all the students from various

colleges who put in great efforts in writing articles on

various issues/topics and worked hard to send entries

for “Beat The Market” and “Route To Market”. The

articles have been selected by the Editorial Team

whereas “Beat The Market” has been judged by Prof.

Vrishali N Bhat and “Route To Market” has been

judged by Prof. Vinod Madhavan. We thank judges

for their precious time.

We also thank all those who helped us in improving

Pratibimb through their feedbacks. We would like to

take this opportunity to extend our gratitude to all

faculties and students at TAPMI for their continued

support, guidance, motivation and inspiration to take

Pratibimb to the next level.

Please continue to send in your valuable suggestions /

feedbacks at [email protected] so that we

can make improvements in the coming issues.

Happy Reading!!

Rohit Kumar

mailto:[email protected]


contents

Are Indian Stock Markets held to ransom by Foreign Investors? 7

Akash Jauhari | Karan Verma, IMT-Ghaziabad

European Debt Crisis: The Current Situation, its consequences & the way ahead 10

Deepak Panwar, FMS Delhi

Implementation Issues in Infrastructure Sector In India 13

Jigyasa Nabh | Yukti Gupta, NMIMS

Interview with Mr. Benny Augustine 16

Director, Human Resources — Unisys India

Is Africa the new market for the future? 19

Shaikh Ashfaque Kasim, JBIMS Mumbai

Social Networking: Adding new dimension to HRM 23

Sauvik Sarkhel, XIM Bhubaneswar

World of Stealth Advertising! 25

Sumedha Sobti, IIM Kozhikode

Global Financial Instability 28

Nishaat Farheen | Pooja Lunia, TAPMI Manipal


Are Indian Stock Markets held to ransom by Foreign Investors?

Introduction

On October 18th 2010, the Indian investors and

analysts witnessed the issue of an IPO, which

defied all existing parameters of the Indian Stock

Market. It was the IPO of the state owned

enterprise -

Coal India ltd. which got subscribed over 15

times, raising a capital to the tune of Rs 150

billion, through aggressive applications from both

institutional and non institutional investors. The

startling reality that came to the fore was that out

of 770 applicants in the institutional segment, 600

were Foreign Institutional Investors (FIIs), which

would mean that after allotment of shares, FIIs

would be sitting on a whopping cash balance of $

26 billion. The sheer volume of FIIs stake which

not only gave sleepless nights to brokers across

the nation, but also stamped the authority of

foreign investors in contemporary security

markets.

This is the tale of the Indian Stock Markets, which

see-saw between quantifiable fundamentals and

volatile sentiments, and tread on a tight rope

stretched between the very opportunistic FIIs at

one end and the ever cautious yet so vulnerable

domestic investors on the other. The great Indian

growth story has always been an eye-candy for the

foreign investors. The 1991 Liberalisation was the

first step, and the subsequent relaxation of cap on

foreign investments in 2005 set the floodgates

open. In no time, the FIIs transformed into a major

player accounting for over 21% share of the

markets.

FIIs inducing instability to Stock Markets

Many experts consider FIIs to be "Fair Weather

Friends", who come in hordes when there is

money to be made and leave abruptly at the first

sign of impending trouble in the host country,

thereby inducing undesirable risk and uncertainty

into markets. This is evident from FII behaviour in

the last eighteen months. Better fundamentals of

Indian economy as compared to the western

economies, attracted and prompted FIIs to invest

aggressively here, raising the total to a

astronomical figure of $ 20 billion. This almost

singlehandedly took the Sensex to the 20,000

mark again. However, in November 2010, few

local factors like inflation, lower IIP and internal

politics resulted in a major square off of FII

positions in no time, thereby pushing the market

into a sluggish and corrective mode.

There are other disturbing instances when the FIIs

by Akash Jauhari | Karan Verma, IMT-Ghaziabad


triggered a blood bath at Dalal Street. On 16th

Oct, 2007 Finance Minister Mr. P. Chidambaram

made a statement expressing his apprehensions

over the usage of offshore derivative instrument:

P-notes, through which FIIs made about 60% of

their investment in India. Little did the market

analysts or the Finance Minister realise that this

seemingly ordinary statement would have the

potential to inflict a deadly free fall of the market

indices. The markets crashed by a staggering 9%

within few hours, registering one of the biggest

absolute fall in Indian stock market history. The

consequences were so severe that the markets had

to be closed down for an hour and Mr.

Chidambaram had to call a press conference to

rephrase his statements. It was yet

another rude shock to the domestic

investors that woke them up to the rising

dominance and influence of the FIIs on

Indian Stock Markets.

The Alternate View

There is another set of experts who

believe that FIIs are life blood for an

emerging economy like

India. They augment domestic saving

without increasing foreign debt, provide

vital liquidity to Indian companies to

sustain growth, reduce cost of equity

capital and help reduce deficit of

Balance of payments (BOP). Also these

experts believe that FIIs, like any other

investors buy or sell according to

prevailing sentiments in the market,

rather than creating any sentiments that drive the

markets.

Hence there lies a conflict between the pros and

cons of FIIs and the all important question

regarding the role of FIIs in deciding the fate of

our stock markets.

Research Objective

Through this research we make an effort to

substantiate the influence of FII’s in inducing or

causing volatility to Indian stock markets. The

alternate hypothesis is that the FIIs simply react to

existing situation in stock markets, possibly

exacerbating it, rather than causing it. In simple

words, this study is to test whether FIIs drive the

Indian stock markets, or like other domestic

investors, are just driven by it.

The research is exploratory and causal in nature.

A time frame of seventy eight months i.e. from

Jan 2005 to Jun 2011 is considered. BSE 500

monthly average closing index value is taken as a

proxy for stock markets in India and net FII flows

to BSE for corresponding period is taken as

representative for FII investment activities. Data

sources include BSE India, SEBI and RBI

websites. Granger Causality test is employed to

attain the conclusion.

Data analysis & Statistics

From the above charts it is clear that net FII

investments at BSE show a similar pattern to the

BSE 500 index monthly average closings. The

correlation coefficient between net FII inflow to

BSE and change in BSE 500 index is 0.59, which

shows a positive relation of moderate strength.


However, a positive correlation, in itself, does not

imply causality. As both directions of causality are

equally possible, auto regressions are run to test

Granger test of causality between the two

estimated variables.

The estimated variables for further analysis are

taken as – change in net FIIs over previous month

figure (Y), and change in BSE 500 monthly

average closings (X). The regression coefficient

between Y and X is found out to be 0.37, and

those between X & X lag, and Y & Y lag also

being positive, 0.05 and 0.14 respectively. This

brings us to second step of Granger causality

analysis, which has two tests in itself.

Test-I

Ho: Monthly BSE 500 index change does not

Granger causes monthly net FII’s flows to the

Stock

Net FII flows to BSE

[In this autoregressive analysis, net FII flows are

the dependent variable with its own lagged terms

and lagged values of BSE 500 Index returns as the

two independent variables in unrestricted

equation].

Test-II

Ho: Monthly Net FII’s flow does not Granger

Cause monthly returns of BSE 500 index.

[Here, BSE 500 Index return is the dependent

variable with its own lagged terms and lagged

values of net FII flow as the two independent

variables in unrestricted equation].

Test II hypothesis that FIIs do not drive BSE 500

index is rejected both at 5% and 1% level of

significance. Test I hypothesis, on other hand, is

rejected only at 5% significance. However,

comparison of the test results suggests that there is

a stronger support for causality running from FII

net flows to index returns and a milder evidence of

reverse causality. Thus the study indicate that FII

flows are more of a cause than an effect of stock

market returns and fluctuations for the given time

period.

Conclusion and Recommendations

The empirical study conducted for the time frame

from Jan 2005 to Jun 2011, supports the “FII

inducing volatility and driving the market indices”

theory to a substantial level. Compared to security

markets in developed economies, Indian markets

being narrower and shallower, allows foreign

investors with access to significant funds, to

become the dominant player in determining the

course of markets. Because of their over sensitive

investment behaviour and herding nature, FIIs are

capable of causing severe capital out flight

abruptly, tumbling share prices in no time and

making stock markets unstable and unpredictable.

In the process, more often than not, the domestic

individual investors are on the receiving end,

losing their precious savings in such speculative

trading.

India as an emerging economic power needs

formidable Domestic Institutional Investors which

can pump in liquidity even during cash crunch

circumstances thereby fuelling the development.

With savings to the tune of roughly 35% of GDP,

India can use this to its strength by formulating

policies which ensure that domestic funds like

Pension Funds, Provident Funds and other Large

Corpus Funds have a greater exposure to the

equity market. The foreign investment in India

should be encouraged, but only from a strategic

long term perspective. Derivative instruments

which facilitate long term foreign investment with

specified lock in periods should be introduced.

Sustained long term foreign investments would

not only contribute to India's growth but also help

in curbing volatility, maintaining currency

stability and creating environment for inclusive

economic development.


European Debt Crisis: The Current Situation, its consequences & the way ahead

European Sovereign Debt Crisis is the current

economic situation in which the entire Eurozone

will not be able to pay its debt obligation, if the

economic situation does not improve in the future.

The issue regarding the Europe crisis talks about

the 17 European countries which have common

currency ‘Euro’. The seeds of Europe debt crisis

which the world is facing today were sown way

back in 1999 when the proposal for common

currency ‘Euro’ for the trade benefit and inclusive

economic growth of the entire Europe was

implemented. Greece entered the Euro zone in

October 2000 based on its economic compatible

condition although even then Greece had a high

budget deficit and it is still blamed for under

reporting its critical figures in order to get in the

Euro zone. In late 2000 due to financial crisis the

Greece largest industries, tourism and shipping,

were badly affected. The Greece had joined the

group knowing that it would be easier for it to get

the debt with a globally strong currency Euro. The

Greeks continued lavish spending (events like

Athens Olympic which are reported to cost Greece

several times more than the estimated cost, public

care) combined with long following trade deficits

and large tax evading population lead the Greece

budget deficit and public debt to rise to

insurmountable amount. And now the deficit

percentage and the debt to GDP ratio for the

Greece are highest among all the European States.

Adversaries like housing bubble in Spain and

speculation by traders in Portugal leads to similar

situations in these countries as well. These

European peripheral countries (PIIGS) borrowed

by Deepak Panwar, FMS Delhi


enormous amount of debt in Euros and hence have

huge sovereign debt obligations.

For example, Greece has a total debt of $540

billion dollars, 125% of its GDP (Fig3). In order to

raise money to pay its debt obligations, the Greece

increased the interest rate on its bonds to 15%

(Fig2).But because of the already piled up huge

debt obligation, there is huge risk involved in

investing in Greece sovereign bonds as they might

default, therefore nobody is buying Greek bonds.

Greece’s ten year bonds have been reduced to junk

status by Moody’s which downgraded them to CA

rating, just one rating above default. Other PIIGS

economies are facing the similar problem .The

markets expressed concerns over PIIGS ability to

repay its debt which it has taken from stronger

economies like Germany, France, UK, US and

others. This creates another problem ‘the

contagion effect’.

Fig. 3 shows the Debt/GDP ratio of PIIGS

CONSEQUENCES: WORST CASE

SCENARIOS IF GREECE DEFAULTS

The world around: All the major countries have

provided enormous debt to Greece .If Greece

defaults on its debt; this will have cascading

effects on other economies. Most probably then

other PIIGS economies will also default. The

banks of those countries which have provided the

debt to PIIGS will face tremendous liquidity

crunch and the people will face huge credit crunch

where they would not be able to borrow money.

This would lead to low production, less

development, reduced trade and a situation leading

to global economic depression.

INDIA: India’s developing economy is dependent

on FDI and FII. If Greece defaults on its debt all

the liquidity in the region would vanish. All the

companies and banks that have invested in these

bonds would be in severe need of liquidity. In

order to raise money, they will liquidate their

stocks and securities in which they have invested

in India and other markets around the world. All

the stock markets would suffer heavily and the

markets of the developing countries like us may

crash. Indian companies that were seeking to raise

money in foreign markets due to rise in interest

rates in India will not be able to find any lender in

international markets.

THE WAY AHEAD

Bailout: Though for now the Greece has been


temporarily saved from defaulting through a

bailout package of 109 Billion Euros or $155

Billion by EU and the IMF. They have provided

them the soft loans at the relatively very low rate

of 3.5% and with a term period of 15-30 years.

But it is still not a permanent solution, Greece

needs continuous flow of surplus funds to pay its

debt obligations and EU members themselves are

suffering from the contagion effect. Therefore,

expectation of bailout funds from them does not

seem to be a plausible solution.

China: With a tremendous foreign reserve of $3.2

trillion, China may come into picture as its trade

exports cover very large part of EU. And if the

euro depreciates then it would affect the profit

margins of China. China with its enormous foreign

reserve can help Greece to pay its debt obligation

and can get long term returns at high interest.

Greece opting out of Euro zone: One of the most

advised opinions for Greece is to opt out of EU

and restart with its older domestic currency

‘Drachma’. With this it would be able to devalue

its currency and start doing the business with the

other countries providing the products and

services at cheap value because of its undervalued

or depreciated currency. The sustained trade

surplus and increased domestic consumption are

the only plausible ways through which it can pay

its debt obligation.

Definitely, Greece carries only a part of the

Europe debt and solving the Greece debt crisis

will not be the answer for the entire Europe. But

Greece has the highest debt to GDP ratio and is

closest to default. Therefore solving the Greek

Domino Effect would definitely bring confidence

in the European economies and the way ahead for

the Eurozone to look out for.

Well, whatever the case may be and whatever the

situation may arise in future, one can say with

certainty that if EU occurs to exist, stricter

regulations and better transparency will be placed

and the stability norms will never be flouted.

Beat the Market

As Jim Cramer, a former hedge fund manager, and a best-selling author put it, “As long as you enjoy

investing, you'll be willing to do the homework and stay in the game… I mean I'm not smarter than the

market, but I can recognize a good tape and a bad tape. I recognize when it's right and when it's wrong and that's what my

strength is.”

Stock markets have never been predictable, you may apply the best of logic and reasoning, but there could be a possibility that

you may falter if the emotions of the investors take control.

Beat the Market is a game designed to prove your mettle in stock market analysis. This time onwards, we will provide you the

name of one listed company from NSE. You need to analyze stock movements of this company till 4th Nov, 2011. On the basis of

fundamental and technical analysis you need to give us your share price estimate of this stock as on 21st Nov, 2011. Fundamental

& Technical analysis will carry 70% weight while 30 % weight will be given to Accuracy of the estimated prices in the final score.

The winning entry will receive a letter of appreciation and prize money of Rs. 1000 /-

Rules:

Company to be analyzed is JUBLFOOD

You may analyze in a team of not more than 2 members

The file should not be more than 7 pages long including cover page, the cover page should contain the team name, team

members name, Institute name, contact number

File name should be BTM_<TEAM_NAME>_<INSTITUTE_NAME>

Upload entries at http://www.tapmi.edu.in/student-life/pratibimb/participants-submission by 8:59 am, 10th Nov, 2011

The winning entry of ‘Beat the Market’, October 2011 edition is of Shivaram Kulkarni from TAPMI, Manipal !!

Congratulations!! We thank all the participants for their effort. The entries of this contest have been judged by Prof. Vrishali N

Bhat, TAPMI.

http://www.tapmi.edu.in/student-life/pratibimb/participants-submission






As suggested by Prime Minister’s Economic

Advisory Council, Indian economy is to grow at

8.6% in 2010-11. With the recent expansion in

industry, commerce and per-capita income has led

to spiraling demand for infrastructure services

which is yet to be matched by a proportionate

increase in supply of such services. The economic

cost of insufficient infrastructure is enormous.

Traditionally, government owned enterprises have

provided infrastructure services which have been

disappointing: with limited increase in coverage,

deficient quality of service and low operational

efficiency. To avoid

all this, private

sector has shown

participation to a

huge extent. The

contribution of the

private sector in

total infrastructure

investment is

expected to rise to

36% by the end of

11th plan (2007-2012).

A lot of issues hamper the infrastructure sector

right from development, construction to the

operation stage of the project. Big problem is the

very nature of the infrastructure projects which

take years to start paying the benefits. The large

gestation period opens enormous gateways for

issues like inflation, bureaucracy, government

intervention, and change in technology. More

implementation issues are discussed as follows.

SELECTION OF CONTRACTORS

The results of improper planning and monitoring

may lead to execution delays, increasing project

costs and even result in renegotiation. It also

remains an essential duty of the government to

award contracts to the eligible contractors. Proper

evaluation of contractors on basis of full technical

and financial analysis through submission of

documents like

request for

qualification,

request for

proposal and

project

information

memorandum

should be done.

For example: As

in the case of

Chennai’s solid

waste management, at the end of the first

concession period, a private consultant re-

tendered the contract and awarded the concession

to a different firm. However, this transition

process was not planned or monitored well

enough and resulted in a period of time where

neither firm claimed responsibility for processing

Fig. 1 Growth in April 2011 (Source: Dept of Economic Affairs)

Implementation Issues In Infrastructure Projects

by Jigyasa Nabh | Yukti Gupta, NMIMS Mumbai.


the city’s waste, which in turn led to a piling up of

garbage along the streets.

COMMUNITY PARTICIPATION

Social issues like displacement of poor people,

inequitable jobs and incomes and environmental

degradation can result in implementation

problems. Positive community participation plays

a very important role especially in production of

electricity through biogas plants. Also, there may

be cases where intended users may resist tariff

increases as a result of privatization.

For Example: In the case of Coimbatore bypass

road, the government of Tamil Nadu has decided

to toll a neighboring bridge and include the toll

revenues as part of the financial equation for the

bypass road project. However, users of the bridge

were upset at a toll being charged for a facility

that they had used for free previously, and refused

to pay.

VIABILITY GAP FUNDING

Lack of viability gap funding for infrastructure

projects, which are socially and economically

viable but either carry a high risk or inadequate

IRR, could terminate projects. According to the

policy, upto 20% of financing needs of projects

with high economic rate of return could be met

with VGFs.

For Example: The 22.5Km long proposed

Mumbai Trans Harbor Link, costing over $1

billion is not feasible without at least 30 percent

VGF. Similar is the case with large sections of

national and state highways.

ENVIRONMENTAL CLEARANCE

Clearance by Ministry of Environment and

Forests is required for submission of Environment

Impact Assessment report by the EPC contractor.

For example: In the ports sector, Rs 3600 crore

container terminal project at Chennai; coal

terminal and iron ore exports at Marmagao Port;

Rs 1000 crore project at Kandla port are awaiting

environmental clearances.

LAND ACQUISITION

The provisions of National Land Acquisition and

Rehabilitation and Resettlement Bill, offers more

benefits to Project Affected Parties in the form of

mandatory employment provisions, subsistence

and annuity based allowances etc. thus resulting

in more complexities for the successful

completion of projects.

For Example: Multi-modal International Hub

Airport at Nagpur, envisaged as an international

cargo and passenger airport in a multi-product

special economic zone (SEZ), has not taken off

yet due to issues related to compensation and

funding of the PAPs.

DEBT FINANCING

The corporate debt market is highly undeveloped

in India. Stringent regulatory norms and illiquid

bond market forces the sponsors to turn to banks

for funding. The tenor of available funds from the

domestic market is typically short term of

approximately 2-3 years whilst the funding is

needed for a much larger duration resulting in

Asset-Liability mismatch for the banks. Also,

unavailability of long term funding can lead to

larger repayments during initial years which

adversely affect affordability of services.

Infrastructure projects also pose risks in form of

information asymmetry to project financers.

For Example: In the case of Delhi Noida Toll

Bridge project (1997), the initial traffic

projections did not materialize leading to the debt

re-structuring. Shortfalls in the returns from the

project resulted in a corresponding increase in

project cost. As a result, the initial capital cost of

Rs. 408 crore, as determined by the

concessionaire, had risen to Rs. 953 crore as on

March 31, 2006.


FOREIGN EXCHANGE RISK

Internal or external macroeconomic shocks such

as the sharp devaluations in Mexico in 1994,

Brazil in 1999, and Argentina in 2001—

significantly undermined the financial equilibrium

of firms that were borrowing money from US.

Since revenue is collected in local currency but

investments equity, and debt are usually in foreign

currency such as U.S. dollars, it poses a threat to

the financial viability.

For example: Delhi-Gurgaon expressway’s

finance was arranged by SREI International

Finance Ltd. at an estimated costof Rs10bn.

SREI's shareholders include the International

Finance Corporation, Washington, (a World Bank

Group Company), FMO (owned by the

government of Netherlands) and DEG (owned by

the German government.

BUREAUCRACY AND CHANGE OF

GOVERNMENT

Public Sector always has an upper hand when it

comes to evaluating the performance of Private

contractor in a PPP. The private sector is often

reluctant to engage with the public sector due to

the fear that after the end of the ruling party’s

term, a new government could renege on the

contract, and that dispute resolution mechanisms

are excessively bureaucratic and biased.

For example, in a recent toll bridge project in

Karur in Tamil Nadu, the new government

cancelled the concession agreement on a flimsy

pretext of a damaged approach road without

compensating the concessionaire.

SUPPLY OF RESOURCES

One major operating risk in the power sector is

the fuel supply risk. Hence, it is in best interest of

the producer to negotiate satisfactory fuel supply

agreements, which would also help in getting easy

finance for its projects.

For Example: The Mundra UMPP granted to Tata

Power, is based on imported coal, of which a

significant portion is likely to be sourced from

Indonesian coal producers. The company is likely

to allocate only a portion of the coal from those

fields for Mundra, while the remaining coal is

slated to come from similar deals that the firm is

scouting for in Australia and South Africa to

diversify the fuel risk.

Besides above mentioned issues, there are a few

more issues like obsolete technology, financial

burden from the past, renegotiation, unreliable

demand estimates, price cap regulation causing

problems in achieving financial closures, lack of

Government support during change in goal post

etc. which can impede the implementation of the

project. These implementation issues if dealt with

proper monitoring and control can give a boom to

the GDP of the country as it enters a high growth

phase. Looking at the current scenario and future

growth potential, we expect Indian Infrastructure

Sector to outperform the trends in long term

thereby providing excellent investment

opportunities in the sector.


In this issue, we talk to Mr. Benny Augustine,

Director - Human Resources, Unisys India. Mr.

Benny Augustine has over 18 years of experience

in leading Human resource function.

During his interaction with Pratibimb, he shared

his views and experiences on HR related issues

with us. We are extremely thankful to him for his

precious time. Mr. Benny Augustine in

conversation with Pratibimb:

Q1. How do you manage to retain the best

employees given the high rate of attrition in the

Indian IT sector?

Ans: Employees leave the company for 3 major

reasons:

Compensation

Growth

Relationship with immediate supervisor or

manager

If the employee is assured of personal growth he

would not leave the organisation. If the employee

grows in the organization his salary increases

automatically. But some employees may still leave

due to other external factors such as relocating due

to personal reasons like marriage or some choose

to discontinue their job and choose an alternative

career. Nonetheless so long as the job offers

growth the employees will definitely continue

with the company.

Q2. Some companies have come up with a new

policy where they are allowed to bring their

personal laptops and flash drives to work.

What is your take on this?

Ans: Consumer technology has vastly changed the

way we communicate and access information,

allowing us to do it anywhere, anytime.

Inevitably, we now expect this flexibility to extend

to our work. Employees want to use the same

powerful devices and applications in their

professional and personal lives to stay connected

and productive.

The use of consumer-style technology in the

workplace is increasing rapidly. This

Consumerization of IT is more than simply

allowing employees to use smartphones in the

workplace or to bring their own personally-

purchased PCs and devices to work, also known as

“bring your own technology” (BYOT).

Consumerisation also includes the use of

applications such as Facebook, Twitter, wikis,

blogs and other social media with consumer roots

in the workplace for communicating and

collaborating with colleagues, partners, citizens

and customers.

The Unisys Consumerization of IT study,

conducted by IDC, looked at the trend from the

point of view of both employees and employers

from large organizations (94% with more than

1000 employees globally). It is based on two

separate but related surveys across nine countries.

An Interview with

Mr. Benny Augustine

Director – Human Resources, Unisys India


One surveyed more than 2600 employees and the

other polled more than 560 executives and

managers.

The study found that employers recognize the

potential of consumerization. However, they are

aware also of the risks of allowing consumer-style

technologies into their IT infrastructure but many

are yet to take steps to proactively manage the

phenomenon in their workplace.

The use of consumer-style devices and

applications in the enterprise can result in

increased security risks if they are not managed

appropriately. Enterprise IT departments need to

pick up the pace in deployment and support for the

new technologies, harness the power of

applications, and do so with the same safeguards

and reliability required for their existing mission-

critical systems.

If organizations are not aware of the technologies

being used in their workplace and how their IT

infrastructure is being used, they risk not having

adequate security measures in place and not being

able to provide adequate IT support for

employees. There may also be legal issues created

concerning employers’ rights to access business

data on employee-owned devices and HR issues

created concerning employees’ appropriate use of

these technologies.

It is important that employers get a lay of the land

– find out what technologies are being used, and

what employees want to use in order to be more

productive. Evaluate those from both the

technology and people perspectives. Then, go on

to determine what technology would make the

different roles in the workforce more productive.

Work out how the organization can support the

usage of the technology – the wider the range of

technologies requiring support, the greater the

strain on the IT department.

From the people perspective, it is important to

ensure that corporate policies cover warranties and

insurance for employee-owned devices, company

expectations with regards to access to and sharing

of company data, and IT security requirements.

Finally, educate employees to make sure they

understand what is expected from them in terms of

the use of the technologies and their behaviour.

Q3. What are the kind of flexibilities provided

to employees in Unisys in terms of job timing

and durations?

Ans: Unisys supports employees and facilitates

work-from-home schemes and even provides part-

time job opportunities. This is done such that the

goals of the organisation and the needs of the

employees are both met. Some employees are

allowed to work 2-3 days a week and some work

for fewer hours a day. Many of these are handled

on a case to case basis depending on the job

requirement and the employees’ comfort. But most

of the jobs in Unisys are still done on a full time

basis.

Q4. When employees work from home, how do

you motivate such workforce and make them

believe that they are a part of the organisation?

Ans: From a monthly update from the MD’s desk

to department level newsletters, we have plenty of

organizational communication directed at

employees to keep them motivated and feel

connected to the organisation. We have conference

calls and managers contacting home-based

employees on a regular basis. This helps the

organisation in taking stock of the progress made

and to resolve any existing issues. Add to that

these employees are always welcome to come to

office on a weekly basis and seek help if need be.

Q5. You have had the experience of co-

ordinating teams in Germany and Singapore.

Did you find any difficulty in handling these

teams when you were based out of India?

Ans: Apart from some cultural shift there was not

much change in the outlook of the employees

towards work. We used to keep in touch with all

the employees using telephone and video

conferencing. So long as you are connected and

provide support there is little that can go wrong.

Q6. What is the one major challenge HRs in


Indian IT industry faces?

Ans: The one main challenge the IT industry faces

is getting the people with the right skills and

retaining them.

Q7. How do you encourage and nurture

innovation in your organisation?

Ans: The organisation as a whole has an open

mind towards receiving and implanting innovative

ideas. All suggestions are accepted and

acknowledged. This nature has been woven into

the company culture and anybody is welcome to

share his/her opinion and ideas with their

superiors. Employees can send a mail or can even

go personally and talk to their managers. In fact,

we have a dedicated portal where employees can

officially submit their ideas about anything at all –

from facility improvement suggestions to business

best practices.

Q8. How do you ensure increased participation

of employees in the organisation?

Ans: This is an inherent part of the culture of an

organisation. In Unisys, we have a recognition

based culture where commitment is richly

awarded. No culture can be built overnight.

Providing learning opportunities and chalking out

well defined goals for the employees help in

improving employee participation in the growth of

the company.

Q9. There is a belief that increasing diversity in

companies, by improving gender ratio, will help

improve the functional effectiveness of the

companies. What are your thoughts on this?

Ans: Diversity is critical to bring in more

creativity and innovation. Diversity is not

restricted to just gender, having people with

different backgrounds and point of views help

improve the organisational thought process. Just as

a salad with an assortment of vegetables looks and

tastes more appealing, an organisation with rich

diversity works with greater effectiveness.

Q10. How do you instil ethical beliefs in your

organisation?

Ans: We have a strong ethics programme in our

organisation. A mandatory online ethics training

programme is implemented in Unisys. All new

employees undergo this training programme

during their induction phase and all employees are

expected to take a refresher every year. In addition

to all this, senior managers in Unisys always walk

the talk. This brings in clarity and makes all the

processes transparent. This instils the right attitude

amongst employee towards work and nurtures

healthy competition.

Q11. What do you believe, will help a fresh

MBA graduate to make it in the world of

business?

Ans: His/her understanding of the fundamentals

should be sound and he/she should have the right

attitude towards work. He/she should be flexible

and should have an inclination towards learning

and facing new challenges. He/she should be

ready to take charge and be able to eventually lead

a team.


This is not the first time that Africa has been in the

eye of the storm. The world once witnessed the

wild scramble for colonial domination of Africa,

by Europeans. Once they realized the immense

opportunities offered by the vast resources (in the

form of natural resources and manpower) available

in Africa, it was viewed as a potential gold mine

waiting for Europeans to tap into. History seems to

repeat itself.

Most people would frown at the idea of investing

money on a business venture in Africa (excluding

maybe South Africa and Egypt). The continent is

riddled with problems that can break the back of

anyone who has the audacity to enter this arena.

UN High Commissioner for Human Rights Navi

Pillay tells of her experiences of whole

communities being annihilated by hatred. At other

times it is in the avatar of a demon called inflation.

Businessmen are waiting for Africa to be in an

economic situation where there is sufficient

number of economically viable consumers, when

the economic situation of the country is conducive

to new business development, when sufficient

infrastructure support is provided by the state, etc.

Countries like Egypt and South Africa are already

at this stage and more are on their way to that

position. But a large part of Africa is still a long

way away from that stage. We can see the

opportunities that are open to us presently in the

development of Africa. We can sustainably

cultivate our business goal simultaneously with the

improvement of the African states.

Any development in Africa can only be built on a

foundation of political stability. That is a difficult

task in itself, with the region facing abysmal social

and economic divide, dysfunctional governance,

and rampant corruption at both administrative and

political levels and alienation of one indigenous

tribe by another. The UN is the sole entity which

is perfectly suited to lead this task by promoting

human rights, development, peace and security by

activities like setting up of democracy and an

impartial legislative system. This task can be

assisted to a large extent by private enterprises.

For example, supply of voting machines, election

management, infrastructure, development related

consultancy and construction expertise, provision

of education, etc are prime sectors which offer

opportunities in sustainable development. The

keyword here is “sustainability”. These tasks

should not be just about making money but also to

uplift the entire society as a whole by the

provision of employment opportunities to the local

community. Basically what you need to do is to

align your business goal with the betterment of the

society.

Is Africa the new market for the future?

by Shaikh Ashfaque Kasim, JBIMS Mumbai


Mother Nature has endowed Africa with an

abundance of natural resources in the form of

forests, wildlife, minerals and manpower. Access

to these resources through partnerships with the

African states supported by sustainable business

models will significantly reduce the financial

insecurity that most of the countries in Africa

encounter today. But some countries in Africa

have already gone down this road, for example,

through extraction of crude oil. But their state has

not improved much. This is due to the fact that

those countries do not have any policy for

mobilization of domestic and external financial

resources to direct them towards domestic

investments like infrastructure, education, etc and

in turn build productive capacity. Other policy

issues include dependence on a single source of

income. This might be enough for short term

growth, but economic diversification of the

sources of growth and income should be the

mantra for sustainable growth. This will help them

to absorb the impact of shocks on their fiscal

performance from external or internal factors. This

will in turn open up more opportunities for

business enterprises to pursue and also help the

local population to earn a living across

generations.

Some of the other potential avenues for economic

diversification are as following:

• Infrastructure construction - The

government should reach out to the populace with

the delivery of basic services such as health care,

rural connectivity, drinking water supply, etc. The

idea is to connect the people with the state. Once

this happens there will be active community

participation in the development process. This will

provide opportunities to private construction

companies provide employment to the local

population and additionally reduce the lack of

market access and supply side constraints which

are limiting Africa’s export growth potential.

• Tourism –The core issue here is the lack of

a dedicated body with adequate monetary

resources combined with poor infrastructure and

under qualified staff. The direct and indirect labor-

intensive nature of tourism should be used as a

tool to address the problem of unemployment. The

governments should bring in private sector

involvement to bring in the necessary expertise

and investments to effectively exploit this sector.

• Agriculture – Majority of the poorest

people in Africa live in rural areas. They depend

on agriculture and related activities for their

livelihood. Agencies like the UN International

Fund for Agricultural Development (IFAD) are

already helping this sector by financing

agricultural development projects. But the

involvement of private enterprises in growing,

processing, packaging and transport will

strengthen this sector even further. But control

needs to be maintained by the governments to

satisfy the domestic demand before exporting to

foreign markets. Businesses like edible oil

manufacture offer huge prospects in Africa. For

example, India imports eight million tons of

vegetable oils a year with crude palm oil alone

making 6 million tons. This shows that there is a

huge scope in markets like India. Multinationals

have already shown big interest in this business.

But Africa, I feel can be competitive in this sector

having the advantage of its lower economics. But

initial investment will be required to set up the

necessary infrastructure

• Energy – One of the core ingredients for

any economy to grow is the availability of energy

sources. But the investment requirement to boost

energy infrastructure is so enormous and beyond

the financing capacity of most African economies.

This can be solved by regulation of the energy

sector and encouraging private sector participation

in the energy sector. African countries, blessed

with sunlight all year round, can tap into solar

power based free and clean energy to light up

remote and isolated homes that have no link to

their national electricity grid. This again opens up

opportunities of promoting sustainable

technologies in rural India to eradicate poverty

through ventures along the lines of Selco in India

by Dr. Harish Hande, Magsaysay Award (2011)

Winner with the support of appropriate financing

support.


• Education - Education has the power to

transform society in a single generation. It

provides the children with the protection that they

need from poverty, exploitation and disease and

give them the knowledge and skills and

confidence to reach their full potential. Agencies

like UNESCO and other private NGOs are running

education programmes across Africa. Private

Institutions can enhance this effort by supporting

the state in setting up the required infrastructure. If

private players are able to do a good job, there is

no reason why the effort doesn’t get funded by

the local government, humanitarian agencies or

NGOs.

But the question still remains why decades of

Western aid have done little to ease the suffering

in Africa? As I see the situation, financial aid has

never been the problem. It is the mismanagement

of the funds and the non-inclusion of the

sustainability factor who are the culprits.

African countries should collaborate for a

coordinated approach to monitoring based on

mutual accountability between African countries,

with the funds being distributed from a central

committee of African nations. Multiple private

players should be given the opportunity to

compete with each other to win the contract for

implementing the development projects based on a

fair basis. Private players are much more suitably

poised to effectively implement the project with its

domain specific resources and expertise.

Much work needs to be done to replicate an India

or China in Africa. All the ingredients are there.

All it now requires is the an effort in the right

direction.

Inviting Articles

We are inviting articles from all the B-schools of India. The articles can be on any field of business

from Marketing, Finance, Operations, HR to Systems.

You can send us articles on:

Recent developments or trends in any of these fields

Articles covering latest trends, innovative practices, strategies, etc. in the global perspective

We also invite articles on management thinker similar to the current section

Apart from above, creative works in relation to any of the fields will be equally appreciated

The best entry will receive a letter of appreciation and a cash prize of Rs 1000/-. The format of the file

should be MS Word doc/docx. Articles should not be more than 2500 words.

The last date of receiving all entries is 10th November, 2011. Please upload entries at http://

www.tapmi.edu.in/student-life/pratibimb/participants-submission with file name as BAC_<ARTICLE

NAME>_<INSTITUTE> by 10th November, 2011.

Best Article: Deepak Panwar, FMS Delhi

Congratulations!! The winner will receive a cash prize of Rs. 1000 & a letter of appreciation.








Mr. Jacob Jacob (PGDM 1994-1996)

Alumnus of the Month – November 2011 The Alumni Affairs Committee (AAC) is pleased to announce Mr. Jacob Jacob (PGDM 1994-96) as

the Alumnus of the Month (AoM) for November 2011.

Mr. Jacob is a seasoned HR professional with over 15 years of experience and his experience is varied

across HR Consulting, International HR & Start Up HR. His core strengths lie in the areas of Change

Management, Performance Management, Competency mapping & its applications, HR strategy &

Organizational Design. He currently serves Apollo Hospitals Enterprises Ltd as their Chief People

Officer.

At Apollo Hospitals Enterprises Ltd.,

Mr. Jacob is striving to create a

mechanism of robust service delivery

in Healthcare through innovative and

robust HR initiatives. Mr. Jacob has

also worked with organizations such

as Feedback Ventures, Emirates

Airline in Dubai & Oberoi Realty. He

has had good exposure in various

areas within the domain of HR which

include HR Strategy & Design,

Organization Culture assessment &

design of effective HR systems,

Development & implementation of a

Performance Management System, 360 Degree feedback design & implementation etc.

Mr. Jacob holds a Bachelors degree in Business Management with specialization in personnel

management from SDM College, Mangalore, prior to his PGDM at TAPMI. He has specialized in HR

from TAPMI and joined Core Healthcare, Ahmadabad through campus placement.

Mr. Jacob has spoken at various conferences and has presented various papers on topics such as

connecting people & performance. He was recently recognized as one amongst the most powerful HR

professionals in India by the World HR Congress and has also received the HR Leadership Award at the

Asia Pacific Summit.

On the personal front, Mr. Jacob likes travelling, watching movies and reading.

Mr. Jacob fondly recalls a lot of kaleidoscopic memories of TAPMI which include the spot quizzes in

QT which was never a favorite with him and the stress that it used to create and of course the wonderful

hostel life. He recollects how active the hostel would become after 10 pm every night.

The Alumni Affairs Committee wishes Mr. Jacob Jacob all the very best for his future endeavors.

by Alumni Affairs Committee


The advent of the social networking sites revolu-

tionized the way the youth connected themselves

with the whole world. These sites started with

making their place in the world by making a place

in the lives of the youngsters. But today they have

come a long way and are not just restricted to

providing a platform for the youngsters to make

friends, share similar interests, or any such other

activity, but they have also stated impinging with

the employers across the globe. They are increas-

ingly being used by HR managers for fulfilling

several professional purposes such as recruitment,

maintaining relationship with employees, and

sharing knowledge etc.

The use of social networking sites have become an

integral part of the recruitment procedure by many

HR managers.

The employers make great use of these social net-

working sites for selecting the suitable candidate

for their organization. The social networking sites

provide a large number of options to chose from

and also make the process easier and better. The

companies predominately depend upon these so-

cial networking sites to hire IT/ITES profession-

als. They help them to find the right candidate/s

based on their requirement of the skills as well as

location. Many HR managers affirm the fact that

these sites are extremely helpful when they are

seeking for the talent outside their own country. It

is a difficult task for an organization to find a can-

didate with a specific skill set for their office

based in some other country, but the social net-

working sites work wonders for the employers in

such situations by providing a platform to locate,

judge and select the right candidate for the organi-

zation. The social networking sites are also helpful

for the employers in reaching the people working

at the middle and senior management level who

have acquired a niche of skill set and are extreme-

ly proficient in their profession.

Some employers might not be using the social

networking sites considerably for the recruitment

purpose, but they are using these sites to check

the credibility of the candidates. They may con-

firm the basic things about the candidate through

his profiles on such sites.

Maintaining employee relationship

The social networking sites enable the HR manag-

er in developing a healthy relationship between

the employees and the organization. The social

networking sites work as a platform where em-

ployees can actively discuss about their experience

with the organization. They may also talk about

their expectations and/or grievances. The frequent

feedback from the employees enables the HR

Social Networking: Adding new dimension to HRM

by Sauvik Sarkhel, XIMB Bhubaneswar


managers to discuss and mutually sort out many

employee related issues.

Sharing the knowledge

The social networking sites not only help the HR

managers to manage the functions inside their or-

ganization, but they also provide them a platform

to interact with their counterparts across the globe.

The HR managers actively participate in such dis-

cussions to share their knowledge as well as expe-

rience in their field of expertise. These sites are

increasingly becoming popular among the HR

managers to discuss the current events, trends, and

innovations in the HR industry. The social net-

working sites are therefore, helping the HR indus-

try to take a new shape by gaining contributions

from the HR professionals across the globe.

The other side of the coin

Although the social networking sites are doing

wonders for the HR industry but as there are two

sides of a coin, there are certain drawbacks as well

of using this medium for the vital functions of the

HR professionals. The biggest challenge for the

HR managers lies in dealing with fake profiles

which might mislead them and make the hiring

procedure much more difficult. Sometimes em-

ployer may reject a potential candidate because of

his profile which the candidate have made for

maintaining personal relation but not profession-

al. It is important for the employers to be careful

while making use of the social networking sites for

the recruitment purposes.

What lies in the future?

Social networking sites are keen on corporate

world penetration and seem to be getting success-

ful as well. The transformation is not happening

with a great pace but the trend of usage of the so-

cial network media by the HR professionals is def-

initely going to stay and progress further because

of the number of benefits it provides.

Route to Market

The market has always been unpredictable for the companies. This holds more significance in the case of

international brands trying to enter new emerging markets. Every brand wants to be recognized globally so

that they can tap the new markets easily. The role of marketing managers in this age of globalization

becomes more important in providing the companies with correct strategy to enter new market. We give

our readers a platform to experience this challenge through “Route To Market”.

The primary objective that the participant is expected to fulfill is to provide a “Market entry strategy” for an

international brand/product into the Indian market. The overall strategy would be divided into three

stages:

Rules:

Brand for which entry strategy needs to be crafted is “V8 Natural Fruit Juice ”

Document size should not exceed 4 pages & a maximum of 2 members are allowed in a team

The participant is expected to justify his stand – point in each deliverable

Each stage should be clearly mentioned under sub – heading

Upload entries with file name as “RTM_<TEAM NAME>_<INSTITUTE NAME>” at http://

www.tapmi.edu.in/student-life/pratibimb/participants-submission by 11:59 pm, 10th Nov, 2011

The winner will receive a cash prize of Rs.1000 /-

Winning Entry of October Edition: “Team BIZWIZ” from ISB Hyderabad whose members

are Piyush Bhandari and Gautam Gulati.

Congratulations !! We thank all the participants for their effort. The entries for this contest have been

judged by Prof. Vinod Madhavan, TAPMI.








David Ogilvy rightly stated, “A good advertise-

ment is one which sells the product without

drawing attention to itself.”

Every day a zillion commercials flash across our

grey nodules, from advertisements to bill boards.

Did you ever realize that you actually drink, eat,

breathe advertisements while watching your favor-

ite movie or playing your favorite game online!

Let’s see what I mean with that. Well, when an

advertisement takes a masquerading form of im-

plicit/explicit representation of a brand name, log-

os or other trademark within media vehicles in or-

der to increase consumer interest and instant

recognition at the point of purchase, it is called

product placement or stealth advertising.

Clever marketing techniques come into picture

when the marketers make sure viewers don’t

switch channels during the long commercials. So

the trick is to contextually fit the product seamless-

ly in the scene yet not making it the focus of atten-

tion. It is smoothly woven into the viewing experi-

ence. This predominantly means adding a sense of

realism.

The buzz that product placements create for

consumers.

Many reasons make product placement a better fit

as compared to the usual long advertisements.

No interruptions make the viewing easy for

viewers as they needn’t switch channels dur-

ing their favorite TV soaps or during cricket

matches. The product pragmatically blends

in with the context most of the times.

Sense of celebrity endorsement gives the

viewers a sense of indulgence and involve-

ment while casually watching the product. It

also increases brand awareness if not brand

liking. So the next time consumers step in a

Rayban store to purchase a pair of glares,

they might want to try Predator sunglasses

adorned by Will Smith in ‘Men in Black’.

Subconsciously the product message seeps in

and it is not filtered or weeded out by the

viewer’s brain as in the case of usual adver-

tisements which seem to be defensive as the

viewer’s constantly change channel as and

when advertisements crop up.

Product placement fitting in the context of ad-

vertisements.

Video games like Crazy taxi have locations like

KFC and Pizza Hut to drive to. Series like How I

Met Your Mother show brand endorsements like

Gucci and Louis Vuitton. Rolex, Seiko and Omega

are the main watches sported in the James Bond

movies. Logos of life insurance policies get dis-

played during the cricket matches. Various prod-

ucts ranging from electronics like mobile phones

to laptops, from FMCG products to sportswear and

the medium changes from video games to songs,

reality shows to sport events, but TV programs and

movies top the charts in product placement where

there is interminable parade of designer label fash-

ions.

Consumer behavior and Semiotics

Long advertisements are becoming extremely per-

vasive; consumers tend to block them out due to

boredom. The subliminal perception affects the

mind with stimulus that product placements create.

by Sumedha Sobti, IIM Kozhikode

World of Stealth Advertising!


Marketers work on the concept of Semiotics in

order to create symbolic linkages from reel-life

characters and products to real-life characters (i.e.

consumers) and products.

Implicit: The attributes of the product are not explicitly described. E.g. The movie ‘You’ve Got Mail’

shows Tom Hanks and Meg Ryan using Apple Powerbook to exchange mails. The movie Superman dis-

plays a Marlboro van in a backdrop.

Explicit: The attributes of the product are explicitly described. E.g. Oreo, America's Favorite Cookie

would be shown in the popular TV show ‘Friends’ elaborating snacking-experience with friends.

With product placement, the traditional on-your-face-advertisements are being replaced by feel-good-

factor. One of the theories of product placement is Von Restorff effect/ Isolation effect which proposes

that the more a particular product is seen, the more likely a consumer is to recall the product or brand

while making purchases.

Sensory Stimulus Sensory Receptors Exposure Attention Interpretation

Implicit v/s Explicit product placement


Well, I don't know about you, but each time while watching a movie, I see a Jimmy Choo pair, I hear my

subliminal state saying 'Oh! My God!' So the next time you’re watching a movie, playing a game on X-

Box tilt sensor or you happen switch on your television to watch your favorite series, remember that lat-

er you might purchase what you see, and that my friend, thanks to product placement, could be attribut-

ed to ‘subliminal effect for impulse purchase!’


Global Financial Instability

Fears of a double dip recession are felt by

everyone, even those who are not even aware of

the reason behind the recession. Stock Markets of

most of the countries have become more volatile

indicating heightened awareness for global events.

News papers show signs of global distress. But

why is this happening?

The US

The subprime crisis which was a result of low

regulation and uncontrolled authority given to

banks to raise subprime house loans had send not

only the US but the entire world into a gloomy

recession.

With the failure of Lehman Brothers on 15th

September 2008, the concept of “too big to fail” is

no more held true and the fear of default has gone

deep within the minds of the people.

In 2008, the US had bailed out financial

institutions; which resulted in its total debt

reaching its debt ceiling. But US needs debt to

meet its fiscal deficit which has been increasing at

an alarming rate because of its ongoing wars, high

military expenses, high medical expenses etc. Had

US not been able to take more debt to support its

economy, the whole world’s economy would have

slowed down. So in 2011 the US had increased its

debt ceiling much to the relief of the global

markets. As can be seen from Table1 below, the

total debt as a percentage of GDP is around 93.2

% which is quite high.

Amidst all these, the stock markets have been

going up and down. The stock market even went

down when the US announced “The Operation

Twist” which was a measure to boost the economy

by reducing the fiscal deficit. By conducting

operation twist, the Fed wanted to reduce the long

term interest rates so that it can reduce its interest

expenses. But the short term rates were not

increased because the US had already committed

to keep it near zero. So, in effect the term structure

was becoming flat. This will make it even harder

for banks to make money.

Recently, banks like Bank of America, Citigroup

and Wells Fargo were downgraded because of

increased risks and lower contagion effect.

All these point to the fact that financial markets in

the US are unstable and have lost confidence in

the system.

The European Countries

The world had not even recovered, from the

aftermath of the US Lehman Brothers crisis of

2008, that it was faced with yet another financial

Global Financial Instability

by Nishaat Farheen | Pooja Lunia, TAPMI, Manipal


turbulence of European debt. While the US was

going through its own set of problems like

ballooned debt, high unemployment and low

growth rate, some European countries were on the

verge of complete bankruptcy.

Greece, Iceland, Spain, Portugal are some of the

European countries which have huge sovereign

debt which may lead to a default. Greece is on the

verge of defaulting as it cannot take more debt to

service its existing debt. So, to save Greece EU is

formulating a financial package. Also, there is

immense care taken so that other Euro zone

countries do not fall apart and the EURO

currency is sustainable.

As can be seen from the table below, the debt as a

percentage of the GDP is 142.8 % for Greece and

as high as 220.3% for Japan. Japan has taken

large debt to support reconstruction following the

earthquakes.

The Emerging Market Economies

The emerging market economies are not

insulated from these phenomena.

Countries like India and China depend to

a great extent on the US and the Europe

for their imports and exports. Also, the

economies of these countries are so

interconnected, thanks to globalization,

that a slowdown in one country can affect

other countries as well. From the past few

years data of World International Growth (refer to

figure2), it can be seen that GDPs of all countries

are closely correlated. Thus, if US or any

European country suffers a crisis then the effect

also gets transmitted to the emerging nations. But

owing to the stronger growth prospects, growth

rates of EMEs even after dipping will be higher

than that of the developed economies and thus

would continue to support the world’s GDP

growth rate. Despite the slowdown in their

economies, emerging markets would keep

attracting funds from FIIs as they would be able

Debt as a %

of GDP 2000 2007 2008 2009 2010 2011

US 57.3 64.4 69.4 84.2 93.2 93.2

Japan 142.1 187.7 195 216.3 220.3 220.3

Italy 109.2 103.6 106.3 116.1 119 119

Greece 103.4 105.4 110.7 127.1 142.8 142.8

Spain 59.3 36.1 39.8 53.2 60.1 60.1

Iceland 41 28.5 70.5 87.8 - 87.8

Table 1 : Debt as a percentage of GDP for various countries

Source: Trading Economics.com


to generate higher returns on investments in such

markets as compared to the developed markets.

But EMEs are facing some new challenges like

strong domestic demand, increased credit growth,

high inflation and sudden capital outflows. Like

many other countries, they are also exposed to the

risk of high oil prices which add to their worries.

In the present scenario, though EMEs are better

off than their developed counterparts, but

nonetheless they cannot run away from facing the

same problems like developed nations in the

future if the overheating continues in their

systems.

Financial Instability

Because of the above stated situations, we can say

that the global financial markets are faceing

tremendous pressure as the fear of defaulting runs

high .

What was before just a private phenomenon has

now become public with the rising need of bail out

governments. As reported by IMF in its report of

Global Financial Instability, September 2011, the

credit risk from high-spread countries is estimated

to have had a direct impact of about €300 billion

on banks in the European Union since the

outbreak of the sovereign debt crisis in 2010.

These risks got amplified due to interconnection

between different markets. The banks are not able

to raise funds even from other markets.

Investors’ sentiments have been hurt worldwide.

Capital investments has slowed down. Banks have

become more skeptical about creditworthiness of

borrowers because of uncertain economic

conditions. So, even

potential borrowers face

difficulty in getting loans.

Thus, the intermediation

link between issuer and

investor has weakened. All

these have led to high

global financial market

instability as the market is

not being able to perform its

role of intermediary.

This will hamper the

economic growth of

countries and thus the entire

world. Proper

intermediation leads to

multiplying effect on the

economy leading to economic development. When

crisis occurs, financial intermediaries especially

banks fail to do their job.

Stabilization of Global Financial Markets

To stabilize the financial markets around the

world, the problems in US and Europe must be

resolved. In order to do that, steps should be taken

to reduce the debt level of these nations as well as

to service the existing debt. Following are some of

the recommended strategies that could help in

stabilization of the financial markets worldwide.

Fiscal Consolidation

High fiscal deficit has been observed as a common

characteristic of all the economies under crisis.

Interest payment towards the existing debt forms a

major portion of Government expenditure for debt

ridden countries. This can be seen from the data of

Fiscal Deficit (as percentage of GDP) over the

past few years.

Fiscal consolidation refers to the cut down in

government expenditures so that at least it can pay

the interests on time and thus avoid any further

Fig. 2: Source: World economic outlook, 2011 of IMF


credit downgrading of itself.

Integrated Solution

As mentioned before that the countries are highly

inter linked, there arises the need for integrated

solution which can perform actions in coherence

and stabilize the whole financial system.

A probable step for solving this problem can be

formation of independent international regulatory

body. It should be free from the political biases. It

should reduce regulatory arbitrage and bring in

better transparency. It should introduce uniform

standards for different Rating Agencies. It should

be authorized to regulate inflows and outflows

across the globe and take necessary steps to avoid

crisis as and when required.

Enhancing Robustness of banks

Banks are the most important inter linkage

between the issuers and investors who perform the

channeling of funds in appropriate manner. Banks

are the first to get hit by any crisis as majority of

them are exposed to different fund markets. Thus

if a bank fails the whole economy poses the threat

of slowdown. So, steps should be taken to isolate

commercial banking from investment banking so

as to protect the depositors’ money. Another step

could be to put stringent regulations for

maintaining apt capital adequacy ratio. This would

include assigning proper risk weights to the assets

by the regulators.

Conclusion

If suitable measures are not taken immediately, the

world might get into another deep recession. And

moreover, further destabilization of the whole

global financial structure may take place. As per

the IMF report on Global Financial Stability for

Sep 2011, time is running out to tackle

weaknesses in the global financial system.

Source: Trading Economics.com

Fiscal Balance 2007-11


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TAPMI Pratibimb Nov 2011