It’s great to be back!

I’ve been plain lazy these last 3 months, and not blogged. Of course, during this time I changed jobs and was traveling overseas for a couple of weeks so I guess I have a half-decent excuse! But to be honest, I’d have to admit that sloth and lethargy did play a role too.

I am not presumptuous enough to assume that I was missed- although it would be nice to think I was.

In any case, a lot has happened over the past 3 months or so around the world and I shall now try and share my unrequited views on some of them.

India’s elections resulted in a perhaps unexpected win for the UPA. More importantly, a lot of the pre-election calculus about pre- and post-poll alliances was proved to be hype- or even irrelevant. The BJP and the Left were all but humiliated, while political stalwarts like  Lalu Prasad Yadav and Ram Vilas Paswan were made to eat humble pie.  As was only to be expected, post-election introspection has resulted in finger-pointing and dirty linen being washed in public.

India’s much-vaunted T20 cricket team made a hurried exit from the T20 World Cup in England. With the exception of Yuvraj Singh, none of our other cricketers made much impact. The younger players were found out by some good short-pitched bowling and the same frailty continued to be exploited by the West Indies quick bowlers on India’s tour of the Caribbean soon after the T20. Happily for us, rain intervened and we squeaked through with a 2-1 win, courtesy the Duckworth-Lewis rule.

Michael Jackson’s life came to a tragic- and sudden- end just weeks before a comeback tour in London. Undoubtedly, MJ was one of the biggest performers in the world of music and dance and the world will miss him. I just hope the media stops trying to generate TRPs from the sleazier details of his life and lets his family get on.

After a spurt in the BSE sensex over a 6 week period starting mid-May, the volatility has returned to the equity markets.

Worries about a truant monsoon are gathering strength. Several parts of India have made up for the delay (if some reports are to be believed) and what began as a 50-60% deficit has reduced to a 5-10% deficit. But several parts of north India continue to reel under a heat wave, with both electricity and water in short supply.

When will the global economic malaise end

It is now painfully clear that some parts of the world are in recession. Others, tom-tommed to be the “growth engines” of the world, have started sputtering, with growth estimates halving from what was considered a breze even 6 months ago.

Several nations including the US, UK, Germany and India have initiated “economic stimulus” or “bailout” packages. Interest rates have been cut to make credit available to companies. But there are no conclusive signs yet that we’ve turned the corner or that the worst is behind us. On the contrary, each day brings gloomier news about companies laying off people, announcing 50-100% fall in profits or simply filing for bankruptcy protection. Not surprisingly, the stock markets continue to be volatile, even as the real estate markets threaten to correct further.

Economic pundits around the world are stymied by two key questions:

1. What needs to be done to accelerate the global economy’s exit from this seemingly never-ending morass?
2. How long will it take for the global economy to get back on even keel and start growing again?

I certainly am not an economic pundit and nor do I claim to have the answers to the above questions. However, I think that the solution lies in everybody pulling their weight. While governments structure bailout or stimulus packages and regulators tighten regulatory frameworks to reduce fraud and implementation of investment decisions that go against accepted risk management norms, we as citizens of the countries we live in must play our role too. Pay your taxes on time, do not cut down spending altogether-although by all means, be more cautious and live within your means.And do not believe this mumbo jumbo about India’s economy being decoupled from the rest of the world. Of course, companies must also act responsibly- reduce costs, improve productivity, defer investments/capex without harming competitiveness (especially where such investments will increase the debt and hence interest burden).

And as far as timeframes go, let me add my naive guesstimate to the mix. I think most skletons will come out of the closet during 2009. By this time next year, the market will start believing that the worst is truly behind us. Then the process of rebuilding will start- with central banks walking a fine line betwen driving growth and curbing inflation. The joker in the pack, as always, will be geopolitical stability around the world and the consequent impact on oil prices.

Satyam: the best way forward

Once the new 10-member Board is in place, it will be time for debate and discussion on the future of Satyam. Does it make sense to run it as a going concern or is it likely to be better for shareholders and employees if the entire company or parts thereof are sold to various investors?

Fictitious balance sheet or not, let us not forget that till a month or so ago, when the spectacular fall from grace began with Ramalinga Raju’s Maytas merger misadventure, Satyam was seen as one of the top India-based IT services companies. Its client base included several blue chips around the world, with many of whom, Satyam has multi-year contracts. Of course, the UPAID litigation and the blacklisting by The World Bank did cause some damage to Satyam’s reputation and business prospects. But even so, it is probably attractive to someone like Anil Ambani or Sunil Bharti Mittal to consider acquiring Satyam. Doing so gives them a skilled employee base of 50,000 people, ongoing contracts, well-established processes and a global delivery footprint. All these are vital elements for any company aspiring to become a big player in the global IT services space.

Existing IT services players- especialy from India- would be happy to acquire specific business units- for instance, Tech Mahindra, which has a strong telecom practice, may benefit from taking over Satyam’s large Communications/ Media /Entertainment practice. An L&T Infotech, on the other hand, may prefer to acquire Satyam’s BFSI or Manufacturing business unit. Satyam’s strong SAP practice would be very attractive to IBM, Accenture,  or even Cognizant or Patni. And although HCL is burdened by the debt it took on to fund its recent acqusition of Axon, think of the phenomenal synergy it could derive in the ERP/SAP space by buying out that group from Satyam. Axon acts as the “front end”, while the Satyam SAP practice becomes the “back end” engine.

But I am sure this is exactly the kind of thinking that deal-makers from I-banks and advisory firms must be engaged in. To paraphrase Shakespeare’s Macbeth, “if it were done when ’tis done, then ’twere well it  were done quickly”. Speedy action alone will help alleviate at least some of the misery Satyam’s investors, employees and clients are facing.

Let me just sit back and see how this story plays out in the weeks and months ahead.

The Satyam saga

The season of bad news from 2008 seems to be continuing into the new year. Earlier in the week, Ramalinga Raju, Founder and CEO of Satyam Computer Services Limited, India’s 4th largest IT services company, declared that he had perpetrated a fraud by inflating the company’s balance sheet to the tune of over Rs7000 crores. Worse, he claimed that he had been systematically cooking the company’s books for the past several years.

There have been immediate ramifications in terms of investors and employees. Naturally, many of Satyam’s clients too are worried about the company’s ability to continue servicing them- and some may well take the decision to sever links with Satyam and partner other top tier vendors.  What is not so obvious (at least in terms of grabbing media attention) is the pain of the entire vendor ecosystem that Satyam has built- caterers, printers, car service providers, travel agents, builders, interior designers and many more. And what of the banks that may have extended them working capital loans or even long-term debt?

Several questions arise as a direct consequence of this shocking episode. Some may take weeks and months to answer; others may never be fully resolved. And there are several other angles that may be uncovered only in the fullness of time.

1. How could a fraud of this magnitude have been committed without several people in the company’s Accounts/Finance departments being involved? It is virtually impossible for the CFO (and possibly several senior Finance executives) to have been in the dark. If they were, it would raise even more fundamental questions about their professional competence, given the checks and balances that exist even in companies a tenth of Satyam’s size.
2. OK- so the entire Accounts & Finance department was somehow compromised. But what of the company’s internal auditors and statutory auditors? The science of auditing has evolved to such a degree that computer-based testing is today routine. And with ERP software being the repository of all enterprise financial data, could trained professionals have been so naive as to rely only on hard copies that, arguably, may have been forged?
3. Directors on the Board generally rely on information provided by the management (CEO/COO/CFO). Of what value is such information if there is a chance that it is falsified?
4. Investors and regulators around the world rely on audited financial statements- which often state that the auditors have relied on data provided by the management. Of what value is such data- and therefore, the audited accounts- and consequently, the valuations and other analyses performed on the basis of such data?

L’affaire Satyam will force regulators to impose tighter disclosure norms and more audits. But in a world of “Big 4″ auditors, isn’t it easy for them to get into a “you scratch my back, I’ll scratch yours” kind of arrangement? In other words, firm A okays the audit conducted by firm B, which okays work done by firm C, which in turn certifies work done by firm A. I know I am being very cynical- and perhaps unfair on the many professionals in the audit business whose competence, probity and integrity are above question. But in the light of the unraveling of Satyam (and several other previous corporate disasters like Enron, Worldcom, Global Trust Bank and so on), would you not be cynical and suspicious as well?

And who knows what long-term impact this entire episode may have on India’s IT and ITES industry in particular and on India Inc in general?

And as I sign off, think about this: what if more frauds come out as a result of the SEBI-mandated peer review audits on companies in the Sensex? What’s that I hear about the Indian stock market indices going back to 20K and higher in the next couple of years or so?

Tata says goodbye to West Bengal

It’s official. At least for now, the Tatas have decided to move the manufacturing of their low-cost car (Nano) out of Singur in West Bengal.  They are actively looking for another location; states like Karnataka, Andhra Pradesh and others are wooing the Tatas.

But what is not clear to me is who, if anyone, finally won?

• Not the Tatas, investors of Tata Motors or other stakeholders- for they collectively stand to lose more than Rs500 crores of investment, not to mention revenue loss caused by possible delays in the launch of the Nano.
• Not the farmers who were against offering the land for industrialization- they have effectively lost 2-3 cropping seasons and given the construction activity in the neighborhood, who knows how good the soil remains to support agriculture?
• Not the farmers who were willing to sell the land, for the entire issue has cast a shadow. Besides, if the compensation was indeed inadequate, they may have under-sold.
• Definitely on the state government. This entire incident only reinforces the perception that the Left is against progress and development (assuming that promotion of industrial activities is in fact, “progress” in the desired direction).
• Not Mamata Banerjee and the Trinamool Congress- after all, the constituency they supposedly represented- the farmers- have not won either.

So what could have been a win-win-win situation has been converted into a lose-lose-lose situation, thanks to the intransigence of the political forces involved. Perhaps the only “winner” will be some other Indian state.

Shame at Singur

The total investment at Singur that may be wiped out if the Tatas pull the plug on their Nano project there is reportedly more than the total FDI that has come into India in the past five years or so. Financial loss to the Tatas and their automotive ecosystem apart, Mamata Banerjee’s myopic intransigence will cost the state of West Bengal and the entire country far more in the future.

I agree that adequate and fair compensation should be paid to farmers; after all, we are a civilized democracy and not a medieval fiefdom or a banana republic ruled by a military junta. But compensation can also be in the form of agricultural land in other parts of the state. After all, what the farmers need is a means of livelihood. Also, if some farmers are willing to sell and others are not, redistribution of land in the same area could have been considered, so that the farmers do not have to move very far away from their homes; neither would the Tatas have to give up on the convenience of contiguous land.

The ongoing melee may well delay the launch of the Nano by a few months. But think of how badly India’s image has been tarnished. If we as a country cannot support one of our own top industrialists, what chance of support do foreign investors have? Perhaps India is not as attractive as it seems to be. Maybe terms such as deomcracy, stable government and resilient political system that are usualy associated with India are misplaced.

I have not been able to figure out what the Trinamool Congress thinks it is going to get as a political dividend. Neither have I understood why Amar Singh chose to go to Singur and show solidarity with Mamata. But then, there are many other things in life (and Indian politics) that I do not understand either.

The Indian IT industry’s Q1 results

All the top India-based IT services companies have announced their Q1 2008-09 results. And while they have all grown, the stock markets have hammered all stocks down. Perhaps that was to be expected, although I personally think the bearish sentiment is overdone. The US and European BFSI industry, unarguably the world’s oldest adopters of IT outsourcing, have been under severe duress for the last 9 months or so. Naturally, those IT companies that rely heavily on the BFSI sector for their business (e.g. Infosys and TCS and to a smaller extent, Wipro and Satyam) were affected by their clients’ decisions to go easy on new application development projects. And the cascading effect that tight credit has on other industries means that most other companies in the US, Europe and Japan too are tightening their IT spending belts.

It was expected that to counter risng costs, more American and European companies will outsource to India and India-based cmpanies. And as I have said in a previous blog, the outcome would depend on which trend is dominant. Clearly, the overall trend so far has been more towards cutting back on new projects altogether. So although the appreciation of the US Dollar vs the Indian Rupee in the last 3 months has certainly helped Indian exporters (IT companies included), the benevolent forex situation has not been able to fully counter the underlying business slowdown. Most companies are positioning themselves as “transformation” specialists- but in this environment, the notion of large-scale (and expensive) change may not go down well with most CEOs, COOs, CFOs and CIOs. So the Indian IT industry is not out of the woods yet- and the situation is another painful reminder of what globalization can do. That is not to say golobalization is bad- but one has to be ready for the down side as well.

Marketing tips for Indian IT services companies

As Indian IT services companies move up the value chain, so too must their marketing. In the current market scenario, there is pressure on both top-line and bottom-line. Budgets will inevitably be cut- and yet, it will be expected that the company’s brand grows from strength to strength, and its positioning protected. Prima facie, this seems to be a tall ask. However, it is possible for marketers to modify their channel mix and choice of vehicles to achieve these goals. Online (or “digital” or “new”) media must be deployed. Other below-the-line avenues like securing speaking slots at industry trade shows, extensive analyst briefings and proactively courting media to position company leaders as thought leaders (so that the journalists will check back for views- and offer the courtesy of a few soundbytes in the story) etc. are some other ways to maximize impact during these days of low marketing budgets.

Read more of my views on the subject at:

http://www.thehindubusinessline.com/catalyst/2008/06/12/stories/2008061250130300.htm

The Indian IT industry’s response to business slowdown

For the last few months, the Indian IT services industry has fretted and worried about the slowdown in the US economy and its impact on business. It has reacted on expected lines:

• predicting a slower growth in top and bottom lines
• going easy on hiring
• limiting salary hikes
• reducing bench strength and increasing utilization
• cutting down on discretionary spends

These are well and good; but what is needed is to use this time to change the rules of the game. Different (and differentiated) business strategies are needed. Companies should explore new models to break the linear relationship between revenues and number of bilable employees. “Build once, use many times” could be one possible approach, wherein a cmpany develops an application “platform” that can be sued for multiple clients. Naturally, adequate security measures will need to be in place, and more importantly, disparate clients must be convinced to standardize processes and not worry about ownership of IT assets so long as business service levels are met.

This may be a good time to target Africa both as a potential market as well as a location for a development center.

Rather than cut back on marketing, this is a good time to pick up desirable media slots at a relatively lower price and lock them down for the next two years or so. That way, 6 or 9 months from now, when the miasma in the marketplace is going, companies will be ready to hit the ground really hard.

This may also be a good time to look inwards and rationalize teams.

Rather than indulge in infructuous navel-gazing, this is the time for Indian IT services companies to differentiate themselves . At a time when clients are woried about costs, Indian companies should start taking the lead in demonstrating value that goes beyond being “body shops”.

Buy a Jag or Land Rover, get a Nano free!

After months of waiting (during which time, naturally, valuations, strategy discussions, turnaround plans were being formulated/refined), the Tata group has finally acquired Jaguar and Land Rover from the beleaguered Ford. This is indeed testimony to Ratan Tata’s vision and execution.

The $2.3+ B paid for the acquisition is no small amount, and only time will tell how well or to what degree the Tatas have been able to extract value. As I see it, they will probably do one or more of the following (in no particular order):

1. Use JLR technologies and people to design better cars (just as they did with their acquisition of Daewoo’s truck manufacturing) so that Tata’s cars become even better.
2. Use the overseas manufacturing facilities to make the Nano and sell locally.
3. Leverage the JLR dealer network to penetrate western markets like the US and UK.
4. Use the JLR stickers to raise expectations and hence, prices.
5. Pump in much needed resources to rev up Jaguar and Land Rover sales.

Look forward to someone else’s comments!

To grow or not to grow….

To stimulate growth or to rein in inflation. In the current global economic scenario, that is the question most Finance Ministers and Central Bankers are grappling with.

Take the example of India. Till a couple of months ago, a 9% GDP growth was very much on the cards. Inflation was fluctuating, no doubt, but was well under 5%. But now…? Inflation has inched up to almost 6%. It is clear that our GDP will not grow any more than 8.5 or 8.6%. To be sure, these are growth rates to die for, by most countries’ yardsticks today. It is close to triple India’s own historic “Hindu rate of growth”. But a less than 9% GDP growth rate upsets many calculations. Stock markets assumed that companies and indeed, entire sectors of the economy would grow fast enough to support an aggregate growth of 9%. But now that will likely not happen- at least for the next year. Sustained 9% growth for the next few years would mean that as a nation, we would start winning the war on poverty. Again, that won’t happen as quickly as many of us would like, because of a slowing growth rate.Is the growth rate in any one individual’s control? Clearly not- and even less so in a globally inter-connected world.

Growth needs capital to fuel it. And not everyone has enough of their own money (equity) to put into their business and grow it. Ergo, they rely on borrowings from friends, banks or even money-lenders (debt). But there’s a problem. Debt must be serviced regularly via interest payments and repayment of the principal. And as inflation rises, interest rates rise. Of course, inflation also increases the returns equity investors expect (so that their real rate of return is not adversely impactred). But unlike debt, equity investors take a bigger risk. They may not get to see dividends every quarter or indeed, each year. And there is no rule that says that the stock must appreciate by a certain percentage each quarter or year.

So there lies the nub of the trade-off. Should monetary policy be aimed at reining in inflation (so that credit does not become more expensive, in turn impeding growth)? Or should fiscal policy be used to provide tax breaks so that more money is put in the hands of consumers and hopefully, this money goes either into consumption (thus stimulating demand for goods and servcies) or goes into savings, and thus exerts downward pressure on rising cost of debt)?

I don’t know the answer…. if I did, I suppose I’d be a central banker or Finance Minister somewhere!

The lessons from Bear Stearns

Bear Stearns, one of Wall Street’s leading investment banks (it was ranked 5th in the US, I think), collapsed dramatically last week. This is so far the biggest corporate victim of the current financial crisis triggered by indiscreet lending, as it were (the so-called “sub prime crisis). Bear’s clients withdrew over $17B in two days, amid fears of a cash shortage. Bear was on the verge of declaring bankruptcy. The Fed intervened to prevent a larger, systemic collpase of the larger markets and virtually forced Bear to sell out. JP Morgan Chase, one of America’s largest banks (by assets) was the “white knight”, as it were, and agreed to buy Bear’s stocks.

Prima facie, it would appear that the “system” is working. So what’s all the fuss about? Several reasons, as I see the situation:

1. Should Bear not have warned the Fed and SEC earlier?
2. Should the Fed have loaned Bear enough to tide over the crisis (it seems to have agreed to loan money to JP Morgan Chase)?
3. Was it right to have given Bear just a day to find a buyer?
4. Was it right that JPMC was allowed to virtually annihilate Bear’s shareholder interests- they paid $2 per share, when the book value was closer to $80? To offer another data point, Bear stock was trading at $170/share just an year ago.

I think this situation is symptomatic of a bigger malaise. Although regulators and fiancial institutions around the world are talking more and more about “Governance, Risk Management & Compliance” (GRC), the “system” is still leaving a lot to chance. Some of it may be a case of looking the other side even as “financial engineers” come up with newer and newer “products” that are supposedly designed to offer investors a wider choice of risks and returns. But some of it is possibly because the underlying information systems in the financial services industry are not as “real time” as we think they are. Or perhaps executives responsible for GRC do not monitor their “dashboards” as often as they should.

Perhaps financial services companies should focus more on strengthening their GRC capabilities in the next few months, instead of spending money on “improving customer experience”. After all, no customer can experience anything more painful than being told that his/her investments are worth far less than the capital s/he had originally invested.

Just as importantly, regulators around the world should evolve a global GRC standard (before you say ‘Basel II’, let me point out that adherence of Basel II norms varies betwen Europe, America and yes, Asia). And then work hard at making sure people adhere to these standards.

Bangalore’s new airport- much ado about nothing

The chaos surrounding Bangalore’s new airport would have been amusing, but for the fact that I am a Bangalorean and have to suffer the consequences. With less than a couple of months to go before its scheduled inauguration, various people suddenly realized that the road connectivity to Devanahalli is inadequate and a lot of time would be wasted in travelling to and from the airport.  Oh really?!  After years of dilly-dallying, the location of the new airport was frozen several years ago. Construction has been on for over 3 years. And the so-called intelligentsia realizes just now that the new airport is not easily accessible? For God’s sake!

Not that the state government is innocent- for years, it has dragged its feet on improving road conectivity, knowing fully well that the airport is scheduled to “go live” in March/April 2008. And now, the road will be constructed in a hurry, with scant regard for quality. In less than 3 months, the carriageway will be pockmarked with potholes (a la the rest of Bangalore). So much for making Bangalore an international city.

Bangalore has grown so rapidly that the existing airport is not adequate to meet demand. Which is why the need for a new airport was felt in the first place. I agree that the move to a new airport will not be easy. We will all pay the price. Hundreds of thousands of litres of fuel will be wasted in travelling to & from Devanahalli. Thousands of productive person-hours will be irretrievably lost. Tempers will fly as vehicles jostle to reach the airport on time and even citizens who do not need to go to the new airport will be inconvenienced because of the traffic restrictions imposed.

But even with all these drawbacks, is it even worth debating whether the existing airport should continue- whether for short haul flights, domestic flights etc.? What about Bangalore’s aspirations (or should I say, pretensions?) of becoming a world-class city? Or is it that “world-class” should only start outside the airport? What about the legally binding agreements that the State & Central governments are signatories to? If BIAL decides to file a case, it could well win, for the time to think about “public interest” was before signing the agreements, and not weeks before the new airport is scheduled to open. And think of what the news of the government reneging on a concession agreement could do to future investments by the private sector- not just in Karnataka bu across the country? And would we be OK losing investments to Andhra Pradesh just because Hyderabad has a better airport? Should any of these happen, I can guarantee that these very same members of the intelligentsia will carp about Bangalore not living up to its expectations and the sad state of “infrastructure”. And may I point out that even though the HAL airport is closer to the city centre, during peak hours, it can take upto 1.5 hours to get to/from the airport to many parts of Bangalore.

The last few weeks have already seen discussions about a high-speed rail link, extension of the regular railway line, etc etc. I think the debate should focus on how best to improve connectivity to the new airport and force the government to act quickly. Bangalore needs an international airport quickly.

The strike, Standing Committee directive, cries by industry leaders to continue with the HAL airport- frankly, it’s all much ado about nothing.

PS: I do not own any real estate at or near Devanahalli!

Indian banks impacted by the US sub-prime crisis

In a globally integrated financial system, it had to happen, I suppose. I am referring to Indian banks being affected by the US sub-prime crisis. In the last day or two, news is trickling in that a few Indian banks have had exposures to US housing loans that have now gone bad. It is not that these banks have lent to borrowers who have become delinquent. What has happened is that the original lenders have parcelled off bundles of asset-backed loans into what are called “Collateralized Debt (or Mortgage) Obligations”. The cash flows and hence returns from these CDOs/CMOs are derived from the cash flows and returns generated by the underlying assets- which are the lender’s receivables against the loans. That is why these are derivatives. And almost always, lenders package a mix of loans into each CDO “package”- some good, some more risky, some of relatively short term, others of longer term etc. The trouble is that investors do not fully understand the associated risk- manifested either as creditworthiness of the borrower and/or quality of the asset used as collateral. The problem becomes compounded when the original loan is made, say, in Texas, and the investor in the CDO is a bank in India- due diligence is that much harder.

Some estimates of the sub-prime crisis suggest that well over $1 Trillion is at risk. So far, only about $100B of write-downs have happened. Do the math yourself ($1 Trillion is roughly the total market cap of India’s equity markets). And start worrying about where your mutual/hedge fund has made investments, given that it promised to take advantage of investment avenues in global markets to deliver “superior returns”.

Budget 2008- Chidambaram’s last hurrah?

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.