BUSINESS

2008: All about rescuing the feel good factor

By Subir Roy
December 24, 2008 09:59 IST

There is a feel good factor about the yearend in normal times. Most traders are out of harm's way, gone on leave seeking to make use of their bonuses, leaving the markets in peaceful semi-slumber.

The world goes on a shopping spree and urbanised Indians simply set out to have a good time. But there is bleakness in the air this yearend, marked not so much by muted shopping as the foreboding that the next year will be worse than the terrible one just gone by.

Most forecasts see recession deepening in 2009 and the few willing to wager on an eventual upturn do not see that coming until well into the second half of the year.

Hence, the key yearend exercise must be to look back, learn a few lessons and devise a survival kit or agenda for action for the bleakest times that are round the corner.

The first lesson is that it is better to be at the periphery than at the centre.

The euphoric mood in which India began 2008, with stock indices reaching a peak and money to go shopping abroad for India Inc there for the asking, went with the notion that India had arrived.

Or maybe, with the subprime crisis having already hit the US and the property bubble collapsing in Western Europe too, the centre of the world had moved a little to the east.

Or at the least the east had decoupled from the metropolitan global centre. Today, as the gloom settles on India and China as well, it is clear that as the centre get shaken up, the ripples will reach the periphery too.

The second lesson is that since globalization is an irreversible process gone too far to turn back, it is imperative to make the global economy function smoothly by properly setting the rules of the game.

At a time when the Doha round is being more or less given up for good, the writing on the wall is it must be made to succeed.

Better rules are needed for global trade so that its inequities are reduced, if not removed, and it benefits us all. If China contemplates social unrest as exporting factories close down one by one, if textile, auto parts and gems and jewellery workers in India pack up and get ready to go back to their villages, everybody has a stake in smooth and growing global trade.

When Leftists are gloating over the crisis of capitalism, it is necessary to assert that globalization is here to stay.

The third lesson flows from the fact that it is not trade but toxic capital assets that did the world in, migrating the bird flu of financial crisis from  one geography to another.

So not only must national financial markets be put back on their feet again so that credit is restored, the new financial architecture which was much talked about in the nineties but never happened must now be made to arrive.

To bring order and sanity to a multi-polar world in the post-Iraq era, there must be a new Bretton Woods, the multilateral institutions must be made to reflect the new trade and income realities in the world and rules formulated so that contagion does not spread and countries in distress get succour.

For the fourth lesson we must turn inwards. If the feel good factor can go away so easily, if three percentage points can get lopped off GDP growth, and if the Tatas who had bought Corus and JLR in such celebratory mood have to go to European governments for succour, then maybe we need a somewhat different type of growth.

The clue may lie in the fact that the auto, real estate and financial sectors may be down but the FMCG firms are doing fine.

If you want to build an economy and a high growth rate which is at least partially business cycle-proof, then have at its foundations structures that cater to the bottom of the pyramid.

I have just sat in on a lecture by C K Prahalad who reiterated yet again that the poor represent a business opportunity.

And to tie up this concept with technology he showed a picture of polling officials going for duty on an elephant carrying electronic voting machines! India has redefined how to run wireless phone companies, not on the basis of ARPU but profitability per minute of talk time.

The business models to study are Airtel, Aravind Eye Hospital and the $100 laptop.

Then he unveiled to his five-star audience the rural stove, which can run on biomass pellets or LPG, which took all of nine people to develop over three years by listening to rural folks and matching the specs they needed with technology.

Already 300,000 of these stoves, prices at $ 20, have been sold.

The target is 20 million sales by 2020.

He sees a new social compact emerging -- between NGOs and business - as the former use the rural community to market and support this innovation.

He wants a virtuous cycle to emerge which will democratise commerce through markets. Gandhiji's talisman is redefined -- when you reengineer business ask what it will do to the person at the bottom of the pyramid.

If this be the takeaway, then 2008 will not have been wasted.

Subir Roy
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