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CS Rachana Bairagra

”Strategy without action is a day-dream; action without strategy is a nightmare"- old Japanese proverb

Employees who find themselves out of job as a consequence of the current turmoil in the industry need to consider ‘reinventing’ themselves.

THESE are challenging times. Mergers, takeovers, closing down of entire company divisions, golden handshakes and relocation of corporate headquarters, all lead to retrenchments, and serious concerns for the affected staff about their financial future. Many of the affected are at an age where they are still of an ‘employable’ age, yet others are at an age where they may have had highly successful careers, but find themselves out of job as a consequence of the current turmoil in the industry.

There may be several affected managers, who still have all it takes to succeed - but have found them shortchanged by the current dismal job situation. They possibly may not have achieved the success they deserved in their corporate lifetime. For such people, it would make sound sense to do some serious thinking and take an inventory of their strength’s and weaknesses, to arrive at their future course of action.

Remember, there is a world of opportunity out there; all it takes is to be keenly on the lookout for the appropriate one. For example, the insurance industry is booming and a number of MNC insurance companies are setting up offices in India. These companies have discovered that medical representatives make great insurance salesmen because just as in insurance, medical selling also requires direct or personal selling.

Other opportunities could be in the several MLM (Multi Level Marketing) outfits such as Amway, which require very little investment - but loads of determination. There is also an opportunity open in the area of pharma journalism - with the drug industry given the status of the IT industry, there is bound to be a lot of activity in the journalistic arena, to cover pharma industry news - keep your ears open for opportunities arising in this area!

Another possible area could be, offering consultancy in your areas of specialization. But beware; the term ‘consultant’ can draw smirks and sniggers from many insensitive people in the industry, for in the past, many unemployed people, to protect their self-esteem, passed themselves off as consultants. Treat these smirkers with the contempt they deserve, and tap your network of colleagues and friends in the industry to explore opportunities.

Consultancy can be offered in many areas such as sales, marketing, training, distribution and manufacturing. Initially, disappointments will be many and the going may appear tough, but perseverance and a positive attitude are of great help! Several more companies could well be exploring the strategy of outsourcing key business processes but not advertising it. Look out for such opportunities. Talking of encashing an opportunity, one heard this story of a very senior person from the postal department, who after retirement had set up a very successful courier agency. Talk of building on one’s professional strengths!

So take inspiration from the way the three S’s of Indian cricket; Sandeep (Patil), Sanjay (Manjrekar), Sidhu (Navjot) and many others in different fields, who have reinvented themselves and created new niches in their new self-invented worlds!

Do not be disheartened with your situation, since, ‘‘Nobody travels on the road to success without a puncture or two.’’ Remember, ‘‘One who does not throw dice, can never expect to score a six.’’ And if initially, people do not respond to your plans, do not give up heart, because, ‘‘A revolutionary idea is usually one with its sleeves rolled up.’’ Although textile exports have shown a negative growth but textile players are upbeat and exploring avenues for diversification to beat the slowdown.

"The recent financial bailout stimulus package announced by the government is quite inadequate and negligible compared to what the competing nations have been offered to overcome recession. Going forward, we have high hopes from the government on this front."

India is perhaps best known for its dynamic outsourcing sector, well-regarded software development, and emerging conglomerates such as Tata, Reliance, and Birla. Yet India has also long been the world's biggest center for processing uncut diamonds imported from African mines, primarily in South Africa, Botswana, Congo, and Angola.

The question whether growth is related to interest rate and inflation has always been one of interest for policymakers. Through an empirically study, it has been found out that when interest rate goes up, growth could indeed slow down. Also, the lack of evidence of growth-inflation trade-off points to the irrelevance of inflation targeting at this point in time.

Of late, there appears to be increasing interest in Monetary Policy announcements and its quarterly review if one goes by the number of articles in financial dailies, especially about the `expectations' of market on the eve of pronouncements. These expectations are said to be based on the economic data of the most recent period, the economic developments in countries with which India has close links, the prices of commodities such as crude oil and metals, the geo-political situation and the general outlook of the domestic and international economies.

Market expectations need not converge with policy decisions, but the dominant consensus on an issue does matter.

Inflation targeting, however, is serious business for it entails enormous preparation in terms of studies on trade-offs between growth and inflation and processes and institutions that have to be put in place for the central bank's exercise to be accountable. Some also contended that the interest rate hike would correct the recent depreciation of the rupee vis-à-vis the dollar.

Sceptics have, however, cautioned that growth could well decelerate on account of the interest rate hike. According to them, the loan rates would rise and slow bank credit. Consumer spending would also decline. As a result, the profitability of firms which depend not merely on price increases but also on the volume of sales would fall and lead to deferment of investment projects.

Some say that the relationship between inflation and interest rates is uncertain. This is tantamount to saying that an increase in interest rates would hardly have an effect on inflation.

What exactly is the relationship among inflation, interest rate and growth? Is the official action that coincided with the market expectations appropriate? Let us view these questions from both analytical and empirical prisms.

Analytically speaking, it is necessary to recognise that the current high economic growth with relatively low inflation is fostered to no small extent by faster growth in productivity, which would normally mean high (and equilibrium) real interest rate in the long run. Such growth would lead to higher profits, prompting firms to bid for larger financing, pushing up real rates in the process. High real rates of interest brought about by productivity would get a further boost if fiscal deficits are high and business confidence and consumer demand go up.

This is an interesting result. For, it is possible that a change in the interest rates in the banking sector leads to similar directional changes in the interest rates in the non-banking sectors as well. The all-round changes in interest rates would not only affect the profitability of firms but also the competitiveness of the economy.

Yet another implication is that bank financing is not a growth-trigger. Possibly, market financing should be reckoned along with bank financing to have impact on growth.

However, the question of the level at which interest rates would not affect growth still remains undetermined. And this has now assumed a complex hue in view of the many uncertainties on the international and domestic fiscal fronts. A challenging area, indeed, for policymakers.

According to an eminent commentator, one of the factors that will determine whether the current slowdown in the Indian economy develops into a full-fledged recession will be its impact on employment. If employers react to the current slowdown by drastically slashing jobs, there will be dramatic reduction in demand, which in turn would herald a full-blown recession. But this link between a slowdown and a loss of jobs is, at least in India, not as automatic as economic textbooks would suggest. And the many factors that intervene between a slowdown and a rampant growth in unemployment provide several opportunities for the Government to stave off a recession.

This is not to suggest that all the traditional factors that prevented a slowdown leading to an immediate loss of jobs in India are as effective as before. At least one factor that was critical in the pre-reform years has become very much less so.

Globalisation has eroded much of this dominance of unions. And it has done so primarily by increasing the options for workers. Rather than merely concentrating on protecting current jobs, globalisation has given workers the option of exploring new ones. And most workers in the organised sectors have revealed a preference for exploring new options. Not only have they been more willing to shift jobs but they have, in some cases, even opted for a VRS when there was clear option available.

The vacuum created by the declining relevance of unions may suggest that there is nothing to prevent employers from now moving quickly to slash jobs. But the emergence of options for workers presents fresh challenges to employers as well. Those who are more eager to let skilled employees go in a slowdown may find it much more difficult to get employees with similar skills when the recovery occurs.

These factors could force Indian companies, particularly those that rely on skilled labour, to go slow on slashing the number of their employees. But there will still be a limit beyond which Indian companies cannot hold on to labour. It will lead to a full blown recession. And with there being no real signs of a recovery as yet, this point of retrenchment may not be too far away.

It is, therefore, essential that the Government intervene to ensure that the current slowdown does not lead to a cascading decline in demand. And the populist way to achieve this goal would be to resort to pump-priming. With inflation rates low, the government will be tempted to just put more money into the economy in order to boost demand. But merely boosting demand may not be enough. In the current liberalised environment a part of this increased demand will be met by imports. The jobs created by such increased imports will be outside the country. Since workers abroad are hardly likely to demand Indian goods, there will be little secondary demand created. And if this leakage is substantial, it could seriously limit the impact of pump-priming on domestic demand.

What is needed then is pump-priming that is targeted at increasing employment at home. One way of achieving this objective would be to increase the purchasing power of sections of the population that would spend much of their increased income on domestically produced goods. An obvious target group for such an exercise would be those below the poverty line. Their purchasing power could be enhanced either by providing an effective food-for-work scheme or by providing food at highly subsidised rates. Though such schemes exist, they have to be substantially reworked, with enhanced central government subsidy, to make them meaningful. Once their basic food requirements are met through domestically produced grain, these groups will use their meagre resources to demand other products. And even if these schemes end up benefiting the not-so-poor, it will still enable the beneficiaries to demand non-food products.

A second point of intervention, with the benefit of pump-priming would be in infrastructure. The current strategy to develop infrastructure focuses on the source of funds rather than the cost of funds. As a result, there have been attempts to attract private capital, both domestic and foreign, even when these projects raise the cost of infrastructure. This high-priced infrastructure is bound to alienate foreign investors looking for cheaper options. In order to attract employment generating investment, it is necessary to invest heavily in low cost, even subsidised, infrastructure. The pump-priming exercise could provide the resources for such subsidised infrastructure.

Without such effective intervention the current slowdown could be transformed into a serious crisis, the commentator asserts.

The current global economic slowdown gives excellent opportunities for quality management and quality improvements for organisations.

According to the experts, contrary to general expectations, the current global difficult challenge is blessing in disguise as it has offered organisations a unique chance to do several things that they do not tend to do when they are busy keeping up with growth. These include reviewing the current policies and strategies, and exploring new markets or segments.
Dynamic leaders should not see the present slowdown as a problem but they need to see this as an opportunity to harness full potential of the organization.

Inspiring Notions

"Ours is the age that is proud of machines that think and suspicious of men who try to." -H. Mumford Jones

"Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  A. Einstein

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  - Margaret Mead




Published by

CS Rachana Bairagra
(Company Secretary)
Category Others   Report

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