Anand Krishna’s musings

Hayden reportedly referred to Harbhajan an “obnoxious little weed” on a radio show. The Indian media is reporting this widely and doing its best to provoke sentiments, responses and so on. I think the best way is to ignore such comments; affording them media coverage only serves to keep the issue in the limelight for longer than it deserves.

Every person is entitled to his or her opinion and Hayden has his. Hayden calling Bhajji names does not make them stick- or true. I think all these on- and off-the field tactics are a clear sign that Ponting and his team are quite worried and are a way to distract the Australian public’s attention from a summer that has been far from easy sailing for the home team. Team India should savour its victory and focus on trying to beat Australia in the finals. Everything else is just noise that will soon attenuate.

Although we lost to Australia at Sydney yesterday, in my mind, it was a good game of cricket. The better team won, but it was by no means a cake-walk- especially given the terrici start Australia had both with bat and ball.

If Sachin, Sehwag, Rohit Sharma and Yuvraj had together scored 50 runs, we may well have won the match. I am sure Ponting and his team mates were not sure of a win till perhaps they saw the backs of Robin and Harbhajan in fairly quick succession.

Kudos to Lee for coming back at a difficult time and delivering. And kudos equally to Gambhir, Uthappa and Pathan, who, between them, very nearly caused what would have been a big dent in the Australian psyche.

After a terrific tour thus far, Sachin has started showing signs of being mortal and his immunity to the law of averages seems to be waning. The same is also true of Ponting, who has regained his touch and proved it with an aggressive ton.

In the final analysis, the diference between the two teams yesterday was the number of runs India gave away in the first 5 and the last 5 overs.

Ther’s something in the air at Sydney. Yet again, Symonds exchanged words with an Indian bowler- this time, it was Ishant Sharma and not Harbhajan Singh. Ishant was docked 15% of his match fees, but it does appear that he did not start the exchange. I hope the Match Referee also has a chat with the Australians.

The Union Budget to be presented by Finance Minister P C Chidambaram in a week or so will be his last as part of the current UPA government, assuming that the Lok Sabha elections are held on schedule.

Every year, the Budget is a huge event that shapes not just macro-economic and fiscal policies, but also sets the tone for how the stock markets are likely to behave. In fact, right from the first week of February, the stock market takes cues from second-guessing what the Finance Minister is likely to unveil.

In the last couple of budgets, the FM has acted on expanding the tax base. New services have been brought under the service tax net. However, agricultural income remains outside the income tax regime and this continues to benefit several large farmers. Excise duty cuts and sales tax rationalization hve also occurred over the past few years, and these are laudable. However, the introduction of levies like the FBT have raised more than a few hackles. Extending the tax breaks for India’s IT and ITES industries is something else that needs careful consideration. While the industry has matured and at least the large players no longer need fiscal breaks, it cannot be denied that these breaks attracted initial investment and these in turn helped create the ecosystem that is today India’s source of advantage via-a-vis some other destinations. The budget must also encourage Public-Private Partnerships to accelerate urban and rural infrastructure development. By “infrastructure”, I do not just mean roads, power and airports; I also mean schools, drinking water, sanitation and healthcare.

The FM has a great chance to use the budget to drive GDP growth past the magical 9% mark. But there will also be electoral compulsions to come out with a populist budget, so that the Congress can piggy-back on its “feel-good” wake and try to win the upcoming elections.

What choice the good Dr Singh and “PC” (Mr P C Chidambaram) make will be decisive in how fast India continues to grow. In the short term, the budget will also impact stock market sentiment, especially at a time when the dark clouds of US slowdown are looming large on the horizon.

Now that the brouhaha over how much each cricketer was auctioned for has died down, it is time to examine the impact that IPL may have on cricket- both Indian and elsewhere.

The pros:

1. If things pan out as planned, youngsters in India will get the opportunity to play with/against some of the world’s best cricketers
2. Overseas cricketers will get a better sense of playing conditions in India, which will help them when they tour India as part of their national teams (this won’t affect cricketers that have already retired or are close to retirement)
3. Infrastructure at grounds across the country will improve
4. It will give T20 cricket a well-defined structure in India and help identify talent

The cons:

1. Cricketers may prefer the IPL to playing for their countries- more money for a much less strenuous schedule, something that is sure to appeal to a lot of cricketers in the 30+ age group.
2. The IPL format is only T20, and thus youngsters may not develop the temperament and skills needed to succeed in test matches. “Wham bang, thank you mam” techniques will never yield consistent results in test cricket.
3. Players’ privacy is already impacted as the whole world now knows who got how much. This could well affect players’ inter-personal interactions, which may cary forward when they play for their county/state/national teams.

There is also the larger question of whether this capitalist orgy in cricket will be the last nail in the coffin for other sports like hockey and soccer. Let the games begin!

India beat Sri Lanka by 2 wickets with 5 balls to spare at Adelaide yesterday. Once again, our bowlers got the team off to a great start. Sri Lanka lost two quick wickets and within the first couple of overs, India’s destroyers-in-chief at Canberra, Jayasuriya and Dilshan, were back in the pavilion. But kudos to Sangakkara for yet again waging a lone battle. He eventually scored 128 runs and was Man of the Match. Yuvraj’s timely knock of 76 in 70 balls and a captain’s knock of 50 runs by Dhoni (which, I am told, did not include a single boundary!) saw India scrape through.

Dhoni seemed to have listened to various people saying that Uthappa shouldplay at No. 3. But sadly for the young Robin, he did not exactly cover himself with glory. Neither did Sachin, who, after a good tour Down Under so far, got a terrific delivery from Lasith  Malinga and was out for a duck.

The action now shifts to Sydney, where Australia take on Sri Lanka on Friday, with India playing the hosts on Sunday.

After defeating Australia at the MCG, the young Team India raised a billion hopes by getting Australia all out for 203 at Adelaide a couple of days ago. But sadly, a combination of inexperience, poor shot selection and aggressive cricket from Australia dashed all billion of those hopes. India now find itself in a familiar situation- do or die. Tomorrow’s ODI against Sri Lanka at Adelaide is technically not the “semi final”, as there are two more games whose outcomes could influence which two teams make it to the finals. However, given the vagaries of the weather (and the form of the opposition), India would be well advised to go for the win tomorrow - and seal it. If not, too many imponderables enter the equation, and Team India might well find itself on a flight back to India a couple of weeks ahead of what it will fancy.

When they work, Dhoni’s ideas are praised as “brilliant”, “innovative” and “Imaginative”. But a slip here and a miss there, and everyone is starting to ask questions such as why Pathan is being continued to ask to come in at the No. 3 spot. Why indeed, when Robin is fit and in the playing eleven? And why Munaf over Praveen Kumar?

Sri Lanka too are rebuilding their team and there are many youngsters. Lack of experience is perhaps evened out. What will matter tomorrow is which team holds its nerve long enough for the other to blink.

A tiger census in 2002 estimated that India had over 3500 tigers. Sadly, that number seems to have been over-estimated and a recent report suggests that only 40% of that number- a tad over 1400- may actually exist in the wild. Poachers continue to indiscriminately hunt down the majestic jungle cats in the wild. And if that is not enough, animals that come close to human habitats are also killed.

Would it not be a tragedy if our kids and grandkids had to rely only on photographs of the majestic tiger to get to know what they looked like?

Yuvraj continues to have a highly forgettable tour Down Under. His reputation has taken a severe beating- especially as he had a superb T20 World Cup outing and just before leaving for Australia, had scored a century against Pakistan. So far on the tour, Yuvi’s fielding has also not been to his usual high standards. And now that the triangular series has reached a stage where the result of one match might well determine whether India goes through to the finals or not, it is perhaps time to give Suresh Raina a chance to prove his mettle. Going by Yuvi’s scores in the past few innings, Raina can’t do much worse.

As I was watching people use their fancy mobile phones-with-cameras to take pictures of their friends in public places like malls and airports, it struck me that the very same cameras can easily be used by unscrupulous people to take pictures that can then be sold to sleazy web sites. Yikes! Another example of how technology can be misused with potentially devastating effects on our society. Hint: Raj Kapoor’s film “Ram Teri Ganga Maili” (”RTGM”) perhaps became a hit as much for the scenes showing the protagonist (played by Mandakini) breast-feeding a baby as for the core storyline. If you want another example, think back to the infamous MMS clip from a school in Delhi that spread like wildfire a couple of years ago. See what I mean? All I can say is “please be careful”.

The government has increased the price of petrol and diesel respectively by Rs2 and Re1/litre. The increase will kick in less than 2 hours from now. Petrol in Bangalore will cost almost Rs53/litre, which probably makes it the most expensive in the country. In fact, fuel prices in India are among the highest in the world. With supplies not increasing at the same rate as demand, price increases are only natural.

But how long can this go on? In a country like India, where LPG is a major source of fuel for domestic cooking and freight is hauled either by diesel powered trucks or diesel locomotives hauling goods trains, an increase in diesel prices will have an impact on almost all other prices in the economy. In other words, inflation will increase. This will put upward pressure on interest rates, while fears of slowing domestic growth will cuase bankers to revise interest downwards to ease credit. Which of these forces will have a greater effect depends on their relative strength. And higher interests can only mean a relatively depressed stock market.

Either way, hold on tight folks, for an economic roller coaster ride!

India lost to Sri Lanka at Canberra yesterday. While rain, and hence Messrs Duckworth and Lewis played a role, there can be no denying that Sanath Jayasuriya’s blitzkrieg at the start of the innings, complemented by a classy knock from Dilshan, who, though a middle order batsman, opened the innings yesterday, took the match away from India. Given that they had the wickets, even if the match had gone for 29 overs each, the result would have been the same.

Overall, it was a good game of cricket and the team that held its nerve won. In some ways, this loss will serve as a painful reminder that the win over Australia at Melbourne is history. At the highest level of international sport, no team can afford to take it easy. The Lankans had their back to the wall and they produced a terrific display. But now, the loss at Canberra is history too., and India must move on.

Rohit Sharma’s well-paced knock, Sachin’s continued form and Dhoni’s apparent return to form are all good signs for India in the days ahead. Yuvraj’s loss of form remains a worry (even if it is underplayed by Dhoni and others). Personally, I think Uthappa should come up the order. What is the point in having a top order batsman in the playing 11 if you are only going to make him foam at the bit by not giving him enough opportunities to bat. Then, when he does get the opportunity to bat, he will not have had enough time to get a feel of things and that will force him to make mistakes that cost him his wicket and the team the match.

Yesterday would also have been a valuable lesson for our bowlers. Hopefully, the lesson will have been learnt and we will see better bowling performances in the future.

Perhaps I am being churlish in describing India’s win against Australia in today’s ODI as a miracle. Fact of the matter is that our young bowlers set up the match beautifully for us. All that our batsmen needed to do was score 160 runs in 50 overs in glorious weather. But we did make heavy weather of the chase. And credit to Australia’s bowlers and fielders for not letting up on the pressure right through the end of the game. Today’s match included poor umpiring (Gilchrist and Sehwag may have been a tad unlucky to be declared lbw, and Sachin seemed distinctly lucky not to have been given out caught behind, ), but it would be a pity if that is all the game is remembered for. Sachin’s delectable strokes, (especially the boundaries off Lee), Rohit Sharma and Dhoni’s circumspection and of course, brilliant bowling by Ishant Sharma (he got Ponting yet again and when asked in a post-match conversation what he thought about Ponting, he impishly said “he’s my favourite”) were all important contributions to India’s victory at the MCG after 22 years. And to be honest, Hussey’s workmanlike innings was well, workmanlike! A pity for Australia he ran out of partners.

But half-way into the chase, I distinctly got the feeling that India became over-cautious and stopped fighting hard enough to go for the bonus point that could have been theirs if they had scored the 160 runs in less than 40 overs- something that I though was eminently do-able.

In any event, the loss will send Australia’s think-tank scampering back to the drawing board to figure out what they can do to get back their psychological advantage over India.Australia’s expectation of a bouncy track at the WACA boomeranged badly during the test match against India some weeks ago. Their next encounter at Perth (against Sri Lanka) should be even more interesting.

Today’s result also means that Sri Lanka must almost certainly win Tuesday’s match against India at Canberra. And after their comprehensive loss to Australia a couple of days ago, Sri Lankan morale might be low- but India should not be complacent. The Lankan Lions may be down, but they are most certainly not yet out!

For years, economists and politicians have waxed eloquent about the wondrous benefits of globalization. Countries like India, that had erected protective trade barriers for the first 50 years after independence, started a regime of dismantling such barriers and “integrating with the global economy”.

Western corporations had (finally) got access to emerging markets and CEOs were salivating at the prospect of selling a range of goods and services to a rapidly growing middle class in Brazil, Russia, India, China and elsewhere. All was hunky dory as long as the going was good. But now, the world is faced with a disquieting reality: when things go sour, the very economic inter-connectedness that votaries of globalization were rooting for, causes pain. And apparently, lots of it!

In the last decade, the world economy has seen the Asian melt-down of 1997-98, the dotcom bust, the US recession/slowdown of 2001 and most recently, the sub-prime crisis. In the 20+ year old film “Wall Street”, Michael Douglas epitomized the typical investment banker in his famous line “Greed is good”. And it is exactly this greed that has amplified the current global economic crisis.

In their quest to deliver “superior returns”, managers of hedge/mutual funds have created “structured products” that tend to obfuscate investors’ (and possibly the managers’ own) understanding of risk. But it is axiomatic that higher returns go hand in hand with higher risk. In their greed for higher returns, people (investors and fund managers) lost sight of the difference between “alpha risk” and “beta risk” and when the sub-prime loans started unravelling, so too did a plethora of other asset classes. In many instances, there is poor understanding of the underlying risks. Compounding the situation further is the fact that because of globalization (which facilitated cross-border investment flows), investors in country X are being exposed to risks associated with economy Y. Ergo, the global economy has begun to feel the pain.

This pain is also being felt in other quarters. The largest Wall Street financial supermarkets- the Citigroups, Merrill Lynches, Morgan Stanleys and their European peers/competitors- the UBSs and Societe Generales- are taking substantial P&L hits. To at least part-offset these losses, some are considering a trade sale of assets like their captive back-office operations in locations like India- which represent a source of competitive advantage to these companies. Such sales, if effected, will affect the equilibrium of both the outsourcing industry (which may acquire such assets) and the domestic talent market- after all, captive BPOs do employ 50K+ skilled employees in India alone.

How all this will finally play out is a trillion dollar question. But for everyone involved- and that includes average investors like you and I- the next 12 months or so will be crucial.

The PM has promised to use policy as a means of driving behavioural change. This is a welcome step. There is talk of a reduction in excise duty/import duties for cars that run onybrid fuel technology. This should also encourage domestic auto manufacturers to improve engine design so as to comply with ever-tightening emission norms.

But just as importantly, the government must act on existing old vehicles, that do not comply even with emissions norms of 10 years ago. Every city has several hundreds of cars, buses, trucks or autorickshaws that belch smoke. Unless policy is also changed to make sure that such vehicles are not issued roadworthiness certificates, much of the gains made by the tightening emission norms wil be lost.

And finally, the only sustainable solution really is to provide quality mass transit infrastructure that will enable people to travel quickly, comfortably, safely and conveniently across the towns and cities they live in.

India’s IT industry has enjoyed an amazing run over the last two decades, with only a brief pause to catch its breath in 2001. All good things, it is said, must come to an end. Clearly, as in other industries, the scope for “super-normal profits” is a thing of the past. What does the future hold for the IT services industry? Answering this question is not simple; in fact, there are several forces at work, and the outcome will depend on their complex interplay.

1. As the US economy heads into what may be a prolonged slowdown,  domestic spnding will dry up. Companies will go into cost-cutting overdrive and hence many companies will embrace higher levels of outsourcing.
2. With the dollar continuing to weaken against the Rupee, shrinking IT budgets will be able to buy only a smaller amount of services priced in Rupees. New projects aimed at enhancing competitive advantage may be put on the back-burner, and companies will only want to “keep the lights on”.
3. It’s election year in the US and anti-outsourcing rhetoric will reach a crescendo. Companies will defer their outsourcing program, for fear of being called unpatriotic or responsible for domestic job losses.
4. As other industries start competing for talent in India, the IT industry will be forced to raise wages- but because of the margin pinch, this increase will be lower than what other sunrise industries like Retail and Construction can offer. The supply constraint thus caused will further impede India’s outsouricng companies in their abilities to deliver more projects- and thus drag revenue and possibly, margins.

The next 12 months will be critical for the entire industry, which is at an inflection point. Companies that reinvent themeselves to be able to deliver superior value in terms of newer offerings that can deliver “non-linear growth” (revenue growth graph that is not parallel to the graph showing increase in employees),  more IP-based  services (such as  true management consulting) or move into new types of knowledge-based outsourcing (such as outsourcing of marketing servcies, analytics, equity research etc.) will come out on top. For the others, well- there’s always the option of being taken over!