Challenges faced by Businesses

ChallengesIndia has attained the status of fastest growing economy in the world. Implementation of GST from 1st July, 2017 is expected to lend further momentum to the growth trajectory. Despite several favorable factors, such as, low level of inflation, subdued global energy price scenario, strong fiscal consolidation of central government finances, low current account deficit, higher agricultural output, growing FDI, and higher wages in rural areas, certain sticky constraints arresting Indian growth story refuse to abate.

The most worrisome of these developments is the declining trend in gross saving and investment. The gross savings as percentage of GDP has fallen from 34.7 in 2011-12 to 29.8 in 2016-17. During the same period, gross investment has shrunk from 38.9 percent of GDP to 31.3 percent. These trends have significant implications for capacity of Indian economy to create fresh jobs in rural and urban India. They also create a wedge between the real and financial economy. Within this overall scenario, the decline in private sector investment is critical and needs strategic intervention. It has also severely affected the credit growth of banking sector, as corporate India refused to take investment calls and the growth of credit in the world’s fastest growing large economy was just 9.4% during 2016-17, a 53-year low.

The state of balance sheet of corporate sector, their declining bottom line and falling credit appetite have serious implications for the profitability of banks and (falling) prices of banking stocks. Put together, these developments shape the investment climate. Analyzing these developments, Financial Stability Report of RBI released on 30th June, 2017, concludes as follows:

“Weak investment demand, partly emanating from the twin balance sheet problem (a leveraged corporate sector alongside a stressed banking sector) is a major challenge. Retrenchment of credit by public sector banks is partly offset by NBFCs, mutual funds and the capital market but they cannot fully substitute for banks in a bankbased financial system like ours. Hence, steps to restore the health of the banks assume urgency.”

The concerted movement by the Government and RBI to fight black money, fake currency and terror financing, although laudable objectives, produce certain unintended consequences. Banks are still fighting with the adverse effects of demonetization on demand generation, credit delivery system, supply chain management, and logistics.

In addition to this, there are legitimate concerns about how markets would react, given uncertainties in the global economy, weaker exports, and the possibility of capital outflows.

India has experienced several highs and lows in the last year. Businesses faced several impediments in the form of excess capacity, regulatory and policy challenges, and rising corporate debts resulting in the slow growth.  Private sector firms are also facing several internal problems such as leadership issues, IT sector downsizing etc. Startups are functioning on weak business model.  On the other hand many other sectors– like Steel, Telecom, and Aviation are facing huge losses because of excess capacity, cut throat competition resulting in outright losses or low operating margins.

Government and RBI seem to be having different perspectives on various issues like interest rate, agricultural loan waivers and measures to stimulate demand and private investment. While Ministry of finance seems to be looking for a reduction in Bank Rate to stimulate investment, RBI is according higher priority to hold rate of interest for the present to contain inflationary expectations

 RBI Governor has opined that loan waivers engender moral hazard. A debt waiver solution to farmers only provides short-term relief generally not to distressed and small farmers but large farmers who have cornered disproportionate gains of green and white revolution.  It also leads to a bad credit culture, besides exerting pressure on state finances.

India now stands at a critical juncture and progress is required on many fronts. Many studies undertaken by international bodies have concluded that Indian economy is expected to emerge as one of the leading economies in the world and likely to become a $5 trillion economy by 2025. We have to marshal all possible resources and ignite the proverbial animal spirit of our entrepreneurial class to make it happen.

Prof S.C.Sharma, Director, IBS Gurgaon

Are you a Pied Piper?

As a child when I read Robert Browning’s ‘The Pied Piper of Hamelin”, it was a simple, but delightful piece of poetry. The rhythm, the rhymes, the simple story line told in a racy way was what appealed to me.

When I grew older and reflected on the poem, it had acquired sinister overtones. A stranger luring children into a subterranean cave in revenge for not being paid for rendering a service – there was something chilling about it and it could have come straight out of a horror movie.


However, leaving the macabre aside, I think we can draw on other messages from the story of the Pied Piper. Books on leadership and management principles, all talk about motivating, leading by example, advising, mentoring etc. It all seems like a lot of hard work. To my mind, leading should be like what the Pied Piper did – fascinating them into following you. People should follow you because they just want to. People should follow you because they think you are going to reveal something wondrous to them. There is no analysis or cold logic here about leadership qualities. Like the Nike slogan they just want to ‘do it’.

Let me give you some examples. I have always wondered how the so-called ‘holy men’, ‘holy women’, swamis and babas are able to attract crowds of people with very little trouble. What they offer is not specified. They will offer vague assurances like – ‘freedom from all your troubles,’ ‘all your love issues solved,’ ‘prosperity for ever’ and so on. These things are just hinted at but somehow it gives a lot of people a promise that wonderful things are ahead for them.

In the poem one of the children, who was unable to follow the others into the cave due to a lame leg, laments later,

It’s dull in our town since my playmates left!

I can’t forget that I’m bereft

Of all the pleasant sights they see,

Which the Piper also promised me.

For he led us, he said, to a joyous land,


Think of Prince Siddhartha Gautama, who became the Buddha. Do you think he stood on a dais like a politician, thundering and exhorting people to follow the middle path, which would lead them to Nirvana? He practised what he believed in and his following grew. Actually if you come to think of it, religious leaders are the ones who are most akin to the Pied Piper. Their appeal is subtle. It speaks to the emotions rather than to reason. That is why their teachings are still followed centuries after they are dead. What a leader has to offer should be implied.

Think of the difference between Jawaharlal Nehru and Mohandas Karamchand Gandhi. Nehru was a perfect politician and had an intellectual bent. He stirred up the patriotic fervour of the revolutionaries with his speeches. His leadership qualities cannot be doubted but Gandhi was more popular with a wider mass appeal. Gandhi made very few public speeches as such (the one before the salt satyagraha being the most famous), but he managed to touch the hearts of the common people. When crowds listened to him, they did so with their hearts. He roused their emotions.

As the Piper you have to charm the people around you. You have to cast a spell on them, if you know what I mean.

I’ll give you another example drawn from my personal experience. I once had a boss, who was one of the most unassuming persons I’ve ever seen. He rarely raised his voice in office, and even out of it. He had a fine sense of humour but his chief quality was that he would never tell or order anyone to do anything. He would always ask – ‘do you think you could do this by 4 pm please?” If we did as he asked he was, of course, most grateful and would show it too.  If, for some reason, we were unable to do it, he would never take us to task. He would just look concerned, ask us if we were busy and offer to help us in completing the work. Sometimes he wouldn’t say anything at all but just go away, making it clear however that we had let him down in some way.

Are you a Pied Piper?

I don’t think any of us ever disregarded his requests if we could help it. If we failed to do our task, we felt guilty and ashamed of ourselves. He was held in high esteem and affection by all of us and indeed was a respected editor. All of us would swear by him. His presence in office was a comforting one, even if we did not interact with him directly. He was one of those managers who never presumed to advise; he would throw out suggestions, which we were free to take or reject. He approached everyone, even the most junior member of the team with a certain degree of faith in their abilities.

Look at some of the prominent dictatorial figures in history, such as Hitler, Stalin, Mussolini. They brought a lot of misery to the countries they led and we are often left wondering why people ever followed them. The emotional attraction or pull of these leaders was so great that people could not help going along with them. Like the Pied Piper, they had a ‘secret charm’ which drew the people to them. They could exert some kind of an influence on ordinary people, who were willing to suspend their rational thinking and obey them blindly.

So, are you ready with your pipes and charm?

Contributed by Janaki Krishnan, an entrepreneur in the education and skills sector. Prior to this she was a business journalist. Writing continues to be her abiding passion

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