FDI: To be or not to be??

Times of India, Feb 12, 2009: With the Government decision to ease the entry modes of FDI into the country, a great leap is expected in the areas of the already hyped retail sector, telecom, insurance etc. Earlier when a company invested in a company in India, it had to enter into a joint venture with an Indian partner. Suppose the contribution of the Foreign partner in this JV (Joint Venture) was 49% and that of the India Partner was 51%, and this JV started its own subsidiary in India, this subsidiary was supposed to be constituted of 49% FDI.

Now, with the cabinet decision on wednesday, a subsidiary from the above example would be considered as a 100% Indian entity.

It seems India has started changing much of its tactics, keeping in mind the fact that most of the past stock trends have been affected due to FII's instability.

India now seems to be locking horns with China, which has less FDI restrictions, but has more restrictions over the equity market. As a result, FII's find it very hard to enter China.

FDI entry and exit is a very difficult affair. First of all, there are the limitations which a foreign company can't exceed. Exit is also difficult, as Industrial laws mention that diluting a company employing more than 100 companies needs prior Government approval.

Now that the entry has been made easy, Indian's can expect more increase in FOREX levels. But there are also problems associated with this. Remember my earlier blog on Mao's cookie crumbling (http://fingertipfinance.blogspot.com/2009/02/renminbi.html)? Well, India could loose its cookie too, as more FDI in makes the value of Indian Rupee appreciate against the US dollar. This happens because the supply starts exceeding the demand. Imagine a shopkeeper holding excess of a particular product which he has to sell before it reaches the expiry. What does he do?? He lowers the rate of the item. That's what will happen with the dollar. 1$ that I used to get at Rs. 50 will now be available say at Rs. 42. So an American can now only get Rs. 42 of work done out of me for his 1$. Now he has to look for cheaper substitutes. That's where India looses.

Also, Indian goods could loose out their competitive value. Interest rates start coming down.

So even I am puzzled....Should we or shouldnt we....the choice is yours.

Your comments on this article are invited. Do participate.

The New Curriculum

MBA aspirants joining this year & in the future may get to read a lot about the Satyam Scam & the fallen IT Czar Ramalinga Raju.

The question now being debated is whether fresh MBA grads ought to have their attention focussed on such a topic. There are some who feel that MBA's should know a thing or two about business ethics, and keeping that in mind is much more important than earning profits. Others say that such cases should be left to students doing CA courses and law firms as they are more involved directly in such cases.

According to me, a businessman needs to be aware of all his surroundings. People would think twice before they do something foolish or the other.

An MBA grad should know what has to be followed. There are many ways a company can earn its profits. Proper management happens when you take the right path of earning this profit. India is already dependent on FDI's & FII's on maintaining its stock market movement. Any similar mishap can make such investors loose their confidence in the Indian business environment, ultimately leading to more disaster.

Let us hope that there wont be another 'Enron' or 'Satyam' for us to study.

New Satyam CEO A S Murty says 'Yes! We Can'

TOI: Employees of Satyam, on Thursday welcomed the appointment of global delivery head AS Murty as the new CEO by the government appointed board of the crisis-hit company.

The move went down well with Satyam employees, who see him as a neutral executive and one who is not part of disgraced Satyam founder, Ramalinga Raju's coterie.

These employees earlier expressed dissent when Ram Mynampati took charge as interim CEO of Satyam, following Raju's confession of perpetrating a Rs 7,000 crore fraud.

Following his appointment as CEO, Mr Murty addressed tens of thousands of Satyam employees at different locations through a web cast that lasted over half an hour. The speech was aimed at motivating and reassuring employees, who have had to cope with social stigma and insecurity after news of the Satyam fraud came out last month.

"If an internal person, has to head Satyam, Murty is the best. He has good knowledge of delivery, HR and associates(employees). I would say that of the over 50,000 Satyam employees, Murty would be familiar with at least 10,000. I am sure he would know the top 500 leaders by name," said a long-time employee of Satyam, who did not wish to be named.

About Murty's association with Raju, the same employee said, "Raju did not accord him any special place or promotion. He is like the Pranab Mukherjee of Satyam, an effective troubleshooter, who can keep the employees together."

Top 10 Global Financial Brands 2009

The latest Global Banking 500 list points to the magnitude of the blood bath in the global financial markets. There is a steep drop in the Top 500's overall brand value by a whopping $ 218.1-billion (down 32% from 2007) and $3.9 trillion (down 51%) shaved from their market capitalisation during 2008!

As many as 209 brands present in 2007 league table have dropped out of the new list. Notable exits include the bailed Fannie Mae and the bust Lehman Brothers whilst the salvaged Merrill Lynch and Wachovia tumbled in the ranking table by as many as 30 and 59 places respectively.

HSBC, though able to hold on to the numero uno position in the Global 500, saw its brand value erode by a around 28% to $25.4-billion in 2009.

The beleaguered Citibank which was edged out from its No 2 rank in 2007 to No 7 in 2008, saw a massive $ 18-billion in brand value erosion last year.

Here are the Top 10 Global Financial Brands of 2009-

1. HSBC
2. Bank of America
3. Wells Fargo
4. Santander
5. IND & COMM BK OF CHINA
6. American Express
7. Citi
8. BNP Paribas
9. China Construction Bank
10. Chase

Courtesy: Times of India