On a pre-budget discussion of ETBFSI panel disucssion.

 https://www.youtube.com/watch?v=hKAv0qjN1oY

Spur a deposit boom: Economic Times 16th January 2024

 

I have the power: The difference between being successful and wielding power: Book Review in Financial Express 7th January 2024

 Power is something all of us like to have and exercise. It can be at home or in office. We also know that some do it very well while others do not, or cannot. This is where Jeffrey Pfeffer’s book Power comes in handy. He points out that if we want to learn anything about power, it is not an easy exercise and has to be learnt over time. It certainly cannot be from someone who has risen to the top, as they always make it sound simplistic with the usual clichés.

A revelation is that being successful does not guarantee one power and the converse also does not hold, which is that poor performance does not lead to loss of power. There are several cases of CEOs who did not quite perform in the conventional sense yet held on to power because they knew how to use it. Even at the lower echelon it is shown that job performance is not important when an appraisal is done, but the relationship one develops with the immediate supervisor. This is the power of power.

The author gives some very useful tips, like making sure one gets noticed. Often one can be self-effacing and think that making a noise is not right. But it is essential to keep creating a buzz because that is the only way one can get noticed and make an impression. Even after leaving an organisation one can always be called back in case the person made an impact, ensuring they are never out of the mind space. The more important thing is that one should never shy away from being noticed.

Related to being visible is to do things that matters to one’s boss for it is important for any upward movement in a career. Here the author goes on to say that it makes sense to make others feel better about themselves as it ensures that you are remembered. He does not also rule out flattery as a tool to remain visible to those in power. Here one cannot disagree with the author as we see in the corporate world that everyone loves flattery and there are myriad examples in some of the best run companies where the CEOs just love flattery, which can vary from showering of petals to open praise.

Based on his experiences as well as observations, Pfeffer lays down a playbook to be followed if one wants to establish a position of power in any field. These qualities are practical and doable and often one may do it unconsciously. There are seven personal qualities that he alludes to as essential to claim this position.

The first is ambition. One can say that all of us are ambitious and rarely does one not want to progress in their careers. We normally associate this with politics, but even when it comes to the corporate world, this becomes a prerequisite or else one will fall behind.

The second is energy. Being ambitious is one thing but one has to be working hard all the time and this requires uncompromising use of energy. Almost every tale of success is enveloped with hard work which involves long hours and grabbing every opportunity even if it means compromising on a personal life. There has to be endless energy for sure. Following this is ‘focus’, which means knowing what one wants and choosing the path ahead. Switching career lines may not work for all. He gives examples of leaders who stuck to their line which can be finance, pharma, etc. Further there has to be focus on a limited set of activities and not a diverse set, which can lead to diffusion of effort.

The third is self-knowledge. It is not a cliché that education never ends. One has to be up to date with everything that is happening in the industry as well as competitors so that there is thorough knowledge of the sector. Fourth, along with this knowledge goes confidence. While there are examples of CEOs who rise due to reverse gravity, the absence of confidence makes them unable to wield power and they end up being unsure of everything and suspicious of new ideas. Companies that have such leaders in power tend to lag behind.

Fifth, which is very critical, is empathy with others. Often successful leaders lose respect because of absence of empathy. They feel that they can do anything and get away due to market acceptance. The author cautions that to build one to a position of power, empathy should be shared with others, because at the end of the day one has to exercise power in a group which can be a team or company. This will automatically lead to the inculcation of the sixth quality, which is ability to manage conflict. Otherwise, it can lead to awkward situations, leading to opposition and ultimately resignations. Managing conflict is hence important.

The last quality required is intelligence that involves dealing with work and people. We need to accept that we cannot be knowing everything as that can lead to arrogance. Even knowing when to stop requires intelligence.

The author takes us through reasons why people lose power, which can be due to overconfidence, ignoring interests of others, trusting the wrong set of people, becoming impatient, getting out of touch with the changes taking place and so on. The reader can then match the seven qualities to the reasons for failure.

Power is a very good book for everyone pursuing a career as it helps one to seriously navigate the different steps in a career to reach the desired position. Admittedly the journey is long and challenging, but it is doable; and that is why there are several such success stories— not just leaders but also common people who are referred to in the book who have made considerable strides.

What does 2024 mean at the individual level? Free Press Journal 6th January 2024

 

A slightly rosier picture: Financial Express 6th January 2024

 The first advance estimates of the gross domestic product (GDP) for FY24 needs to be interpreted with caution. With nine months in the year having passed and official data existing for the months up to November, taking a call on the full year is based on extrapolations. In fact, since the value added numbers for some sectors like manufacturing are based on the first two quarters information, there also is the assumption of persistence of trends, which may not always hold. Therefore the growth rate of 7.3% for the year should be seen more as a forecast rather than an estimate.

The question then would be: Is there any value in bringing out such information? In fact, towards the end of February, the second advance estimates will be brought out by the government. This would be more data-driven than extrapolation, and could be different from what has been projected this time.

There would be information for two more months, taking it closer to the mark. The answer is that such an estimate is required not from the academic standpoint but for drawing up the Union Budget. Ever since the Budget has been moved to February 1, having some estimate of GDP in absolute terms has become imperative for the finance ministry.

The Budget is based on an assumption of growth in the GDP as all tax revenues are juxtaposed against this number. While a projection for FY25 can be based on the ministry’s conjecture—which normally tends to be conservative, the base for FY24 needs to be there. This is where this advance estimate fits in. It also means that the Budget is based on two GDP numbers in nominal terms which are forecasts rather than true numbers. Hence, even though this number will change, there is some value to this number as there has to be an indicative number.

Prima facie, one could have expected a high GDP growth number, and, hence, 7.3% does not come as a surprise as it is higher than the RBI forecast of 7%. This had to happen as the first two quarters registered growth of 7.8% and 7.6%, and any extrapolation would mean replication of the same—which, in turn, provides an upward bias to the estimate. It is also not surprising that most of the growth rates look healthy as they gel with the official numbers released for various sectors till November, which is the latest data available on most indicators.

Manufacturing is to grow by 6.5%, and, here, the bulk is accounted for the organised sector where profit-and-loss (P&L) accounts of companies are used. For the unorganised sector, the Index of Industrial Production (IIP) is used, which has also been high due to the base effect.

Mining has grown by 8.1% and electricity by 8.3%. Here, too, the core sector data—released on a monthly basis—have highlighted the same level of buoyancy. In case of construction, where steel and cement are the main proxies that are used, 10.7% growth looks very much on expected lines. If the government is less aggressive on spending towards the end of the year, there could be some correction here. But, projects in housing and roads have dominated this sector’s growth.

The trade, transport, communications, hotels, etc, segment has slowed down to 6.3%, which is more due to the high-base syndrome (its growth was 14% last year). This is one segment that still sees vestiges of the pent-up demand, with people spending a lot of money in all these segments.

Ideally, a higher number would have been expected as the buoyancy remains even today if one goes by the proxies used. The finance and real estate segment has grown by 8.9%, which is in line with the high growth in deposits and credit in the banking system. The government sector has shown stability, at 7.7%, which in alignment with the accounts released till November.

The only disappointment—and this bears out in the real world—is agriculture, which is to slow down to 1.8%. In fact, this was to grow by 3-3.5%, but the kharif output has disappointed and it does look like that rabi harvest would also be lower this year as the sowing in wheat and chana are lagging. This can be attributed to the less-than-normal monsoon and the low reservoir levels seen at present.

The investment scene, as indicated by the gross fixed capital formation rate, needs to also be looked at with caution as it has increased from 29.2% to 29.8%.

But other proxies such as growth in bank credit to large industry or bond issues (which are basically by finance companies) do not support the theory that investment is booming. It can be assumed that this has come out of higher government capex, with the states not fully supporting this trend. It is possible that there could be some moderation going forward.

As the GDP data is based on extrapolations, an interesting feature which emerges is that consumption in nominal terms has grown by 8.7%, which is less than the GST collections rate for first nine months that was in double digits (11.7%). This can see some upward movement when the final numbers are out as the two should move together once the economies of better compliance are exhausted.

On the whole, it does look like that there could be downward bias to the estimate and growth will tilt towards the 7% number. There is likely to be a slowdown in corporate profits growth and affect segments where these proxies are used. But this will be a good base for the government to use when planning the Budget and estimating the revenues to be garnered.

Opinion: What Lies Ahead For Economy In 2024? NDTV 3rd January 2024

 There is a definite air of optimism as we begin 2024; almost every economic parameter looks better than last year. It can be said with confidence that the economy is on a take-off mode in 2024, in the absence of any external or weather shock. Even if there is any external shock, the Indian economy has done well in the last two years and was buffered against two wars through the adept use of policy tools.

What lies ahead?

All attention will be on the national election and the outcome. Many believe the result is more or less known, but investors may like to wait before taking any fresh action. So, till May, when the elections are due, it will be business as usual. The government has indicated that there will be no surprises in the budget, which will be a vote on account. The full budget is like to be presented only around June, along with new policies. Going by the track record of the current dispensation - its commitment to fiscal prudence is known - there will be movement along the glide path already laid down.

Let us crystal gaze into what the numbers could look like in 2024-25. GDP growth is likely to be closer to 7%, after the 6.5-7% growth recorded for FY24. The conditions for sustained growth are in place. Two missing links that will warrant a change in direction are rural consumption and private investment. The former has slowed due to the unfavourable kharif crop and possibly lower rabi harvest this year. This should change.

Private investment has been concentrated largely in industries tuned to infrastructure and this may become broader in 2024. Companies are waiting for the elections to be over before taking a call, which is a habit now. This year will be exciting for private investment. In fact, the revival in rural demand will provide a push to capacity utilization in sectors such as two wheelers, FMCG, consumer durables and tractors, which should lead to higher investment. With a bit of luck the gross fixed capital formation rate, which is in the region of 29% of GDP, should be able to touch the 30% mark.

The second variable of interest is inflation. The RBI has already indicated that inflation will come down to 4% in July-September and then rise in October-December, but remain below 5%. This is significant because the industry is counting on repo rate cuts in the coming year. It looks like that the second quarter of the next fiscal or third of calendar 2024 will witness the start of the rate cuts. Here too, we must be moderate in expectations as there will probably be a cut of 50 basis points at most, assuming a normal monsoon. Decisions will be taken based on inflation numbers. What is certain is that the RBI will continue targeting 4% inflation and even 5% will be accepted only in the interim term.

Third, from the point of view of savers, the days of high interest rate on deposits will be over as any reduction in repo rate means lower deposit rates. Borrowers can be happy as almost 53-55% of borrowing is based on the external benchmark rate. Therefore, the balance will tilt towards the borrowers from deposit holders. This will pose a further challenge to banks as they compete with mutual funds for the savings wallet. The assets under management of AMCs has increased to closer to ₹ 50 lakh crore this year. As the Sensex has been moving relentlessly northwards and scaling new peaks, it is but natural for savers to become investors, especially when interest rates come down.

Fourth, the stock market has behaved in a remarkable manner with corporate profitability improving sharply this year. Now with the economy expected to do better in 2024, which will go along with the performance of companies, valuations will be healthy, leading to a further rise in the stock indices. This, incidentally, has been a more global phenomenon and not restricted to just India.

Fifth, the currency will be another variable to watch. We have seen that the two factors which drive the rupee have worked in favour of a stronger currency in the last month. The first is the weakening dollar. This will continue as the Fed keeps lowering rates and the dollar becomes weaker against the euro. Second, the external fundamentals will tend to improve for us as the current account deficit shrinks. This has already been seen in Q2 of this year. More importantly, capital flows are expected to be buoyant, with an expected boost coming from the inclusion of Indian bonds in the global bond index.  Therefore, a stable rupee in the range of ₹ 82-84 per dollar can be expected for the year.

2024 promises better economic tidings and more stability. This chain will also help to create more jobs, which has been the Achilles heel when it comes to consumption. If we do manage to cross the 7% level this year, at a time when the global economy takes a breather, India can be well set to move down the 8% path that will help accelerate the process of moving towards the $5 trillion economy.

On the cusp of takeoff: Indian Express 1st January 2023