The Hindu Business Line : The many faces of finance

It is a truism that everyone is in need of finance — at the basic level to make both ends meet and on higher planes to keep going in whatever undertaking or avocation one chooses to engage in. Thus, it plays many roles as a prime mover, sustainer, lubricant, path breaker and facilitator almost throughout one’s life. It will not be an exaggeration to say that it, in short, makes the earth spin.

The advent of information and communications technologies has bestowed on all those roles a new and unprecedented momentum. Trillions of all currencies, especially the universally acceptable one such as the US dollar, circulate round the globe eight times a single second, fuelling investment, promoting ventures, launching enterprises and creating wealth.

The rub is that finance is not self-propelled, it has to be sought and secured by putting in the needed efforts. To be really productive, it should fulfil a few vital criteria. First, it should be available at the right time in the right measure.

The prospect of availability of a thousand rupees but a week later is of little worth when it is essential to have ten thousand rupees today which is the cut-off date, say, to place an order for an important item of machinery.

The second condition is that it should be accessible and within reach. And, third, it should be affordable, in respect of the cost incurred to get it in terms of interest and other conditionalities.

For all these reasons, mobilisation of financial resources has been honed to the status of a fine art in countries such as the US. There is a special category of go-getters there called fund-raisers with their own repertoire of persuasive skills and winning techniques.

Their services are eagerly sought after by not only the academic establishments, civil society set-ups and the like for carrying on their activities but also political parties and candidates for election, of course, within the four corners of legislation governing campaign financing.

Distinct characteristics

It is pointless to raise funds without developing the capacity to put them to optimum use. Otherwise, it is like throwing that much of money into the garbage bin. Will people really do such a stupid thing? Well, they do. What else is the cost overrun plaguing many projects? In India, by 2006-07, cost overrun in comparison with the original estimate came to a staggering Rs 46,000 crores. In other words, it is not just availability, adequacy, accessibility and affordability alone that determine the productivity of finance, but the mode and efficiency of application too helps get a lot of mileage from it.

Again, finance assumes distinct characteristics in relation to the broad spectra of activities to which it is applied. For instance, the premium in marketing of goods and services will have to be on giving value for money and customer satisfaction. Finance in this field should help maintain the speed, quality, volume and delivery schedules.

When it comes to human resources of an organisation, the emphasis will have to be on channelling finance to areas such as skills development-cum-enhancement, training and retention of personnel. Its unremitting focus will be on building human capital.

Information Technology, to cite a third example, will have in it a greater proportion of components pertaining to research orientation, programmatic content, venture capital, risk management and long gestation periods before returns can show up. Flow of funds will have to be fine-tuned to meet these requirements.

A good corporate entity should be able to induct its financial managers into the art-cum-science aspects of the different dimensions of financial planning conducive to timely and adequate mobilisation, effective and prudent utilisation, sizeable net worth accretion and continued wealth creation.

B. S. RAGHAVAN

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