The Hindu Business Line : <I>Entering the business New Year </I>

A column of comment on current events faces an awkward choice. It can deal with one of two extremes of the human condition: The temporary and trivial or the tragically calamitous, with very little in between. One can write either about multi-million-dollar, exaggerated celebrity events and the World Cup cricket, on the one hand, or police firings, atrocities or farmer suicides. It surely must be a sign of our times. So this space has been deliberately silent on, for example, the utterly lacklustre Union Budget or the Caribbean capers that started this past week. It is worth noting nonetheless that, for most readers of this paper, the atmosphere this fortnight is closer to a year-end than the last week of December. We get reminders everyday of various taxes that must be paid either by the Ides of March or at the end of the month. This too is the official year-ending for nearly all businesses, bringing the managerial community into the throes of chasing year-end targets.

Budget and economy

So what is the spirit of the business world as the new fiscal year begins? The disappointment with the Finance Minister is slowly giving way to resignation; people believe that the economy is fundamentally strong. The dividend distribution tax, the tax on fringe benefits and stock options will be borne stoically. They know very well that no Budget is going to make a big difference to the quality of managing the economy. The crowning insult is by way of the educational cess, now increased by another per cent, which for some obscure reason has to be paid separately and accounted for because it is supposed to be spent on higher education!

There are some other absurdities that have not been fully examined in public, but I should like to leave the subject with just one example: The generous allocation to students of high schools for 100,000 scholarships at Rs 6,000 a year is a mere matter of Rs 60 crore a year, although the corpus to be kept aside is Rs 750 crore (from which presumably the interest will be drawn and spent on the scholarships and the administration of the scheme itself). As against this, just New Delhi and its environs will receive well over five times that annual figure for stadiums and other facilities.

What lies ahead?

What lies ahead, then, for industry and business as we move into the year? There is the ever-present danger of inflation, now officially exceeding 6.5 per cent but, as any housewife would confirm, is actually in double-digits in the bazaar. Opinion is gaining ground that a slowdown in the demand for many products is likely. It has already shown up in the last two quarters in the two-wheeler industry. Whether the next year will mark the first hiccup in what has been a five-year growth story is the recurring theme in managers' discussions.

My own advice to managers would clearly be to hasten slowly with any expansion in capacity and instead work towards managing costs better. Also, in every industry the period of trading on advantages of cost alone is almost over. Ahead lies a period of innovation and breakthrough changes in business models as well as the scale and scope of thinking. We would do well to remember that the economy need not dictate all our business imperatives, given the opportunities of the world market. Yet, in the worldwide arena, our small size is an insurance against swings in commodity and other markets which seem likely in the near future.

(Feedback can be sent to sr.chander@gmail.com)

S. Ramachander