COVER STORY

Global Internet Majors: A Passage to India

- - Amit Singh Sisodiya and Kavitha Putta

When Yahoo!, one of the global Internet media giants, together with venture capital firm Cannan Partners, announced its investment of $8.6 mn in Bharatmatrimony.com, an Indian online matrimonial site, it heralded a new phase in Indias evolving Internet space. Yahoo!s investment decision comes close on the heels of its top brass, which includes co-founder Jerry Yang and CEO Terry Semel, recent visit to India. But Yahoo! is not the only global media portal to chase the India dream. A host of other biggies that include Google (the search engine giant) and MSN (Microsofts flag bearer in the cyberspace) have evinced keen interest to play on the Indian cyberturf. Recently, MSN announced that it would launch its AdCenter, similar to Adwords of Google, in India by mid-2007. Google has already launched its Adwords service in the country, early this year. However, much before India was spotted on the radar screen of Yahoo! and Google, the US-based online auction giant eBay had already developed a strong base in India by acquiring bazee.com in 2004.

© 2006 IUP . All Rights Reserved

INTERNATIONAL FINANCE

FXMarketSpace : A New Space for Forex

- - D Satish and Smitha Deshpande

Chicago Mercantile Exchange (CME), the worlds largest and most diverse financial exchange, and Reuters, the global information company renowned for its strong information network, are coming together in a 50-50 joint venture to create FXMarketSpace, a new platform for global forex trading. This venture has marked some firsts for both companies. For CME, it is the first move towards any spot market. And for Reuters, this would be the first time it owns a clearing business. FXMarketSpace, which is still subject to regulatory approval, combines CMEs central counterparty model and clearing function with the distribution and straight-through processing capabilities of Reuters to create the worlds first centrally-cleared Over-The-Counter Foreign Exchange (OTC FX) market place. Industry experts see the potential in it to transform the institutional and wholesale FX market and, thus, herald a new era for the global FX market.

© 2006 IUP . All Rights Reserved

INTERNATIONAL FINANCE

NYSE-Euronext: A Transatlantic Bourse in the Making

- - D Satish and Y Bala Bharathi

Nothing exemplifies the perseverance of Thain, CEO of NYSE Group, than his triumph in reviving the oldest and largest fledgling behemoth of the US in a short span of time and his further endeavors to gear it up to create the worlds first transatlantic stock exchange. His vision to transform NYSE into a truly global marketplace could soon become a reality after the completion of the merger between NYSE and Euronext. On June 2, 2006, NYSE inked a formal pact to acquire pan-European stock exchange "Euronext" for around $10 bn. The combined market capitalization of the merged entity accounts for around $20 bn, which is far more than that of the next four biggest stock exchanges combined figure. The proposed transatlantic merger reinforces the growing interest among stock exchanges in the global consolidation drive.

© 2006 IUP . All Rights Reserved

INTERNATIONAL FINANCE

Pan-European Securities Trading: Towards a Unified Market

- - D Satish and Smitha Deshpande

After being a successful monetary union, EU is moving towards being a financial union. As a step in that direction, authorities in the European Union are keen to remove all the hurdles in creating a seamless securities trading environment across the continent. Cross-border share transactions in Europe remain complex and fragmented resulting in inefficiencies and huge costs. According to experts, costs involved in cross-border clearing and settlement are six times higher compared to domestic clearing and settlement, placing cross-border investments at a disadvantage to domestic investments. Also, Europes financial exchanges follow a multitude of models for clearing and settlement, making cross-border securities trading even more cumbersome. Given the public focus on trading system consolidation, it was also recognized that settlement system consolidation would result in vastly greater savings in trading costs and, therefore, cost of equity capital to European firms.

© 2006 IUP . All Rights Reserved

INTERNATIONAL FINANCE

Dollar vs. Oil Prices: The Changing Equations

- - N Janardhan Rao and Lingisetti Venu

The global oil markets have seen structural changes in the recent past with soaring oil prices hitting record highs. Some experts have attributed it to the China factor, as its imports constitute one of the key issues for the price hike in the world oil market. However, beyond the China factor, the dollar devaluation has created several problems for the global oil industry as it is the currency of choice in global crude oil trade. On the supply front, the depreciation of the dollar had an impact on the activities upstream in the form of increased costs, higher inflation rates and lower purchasing power followed by lower RoI. On the demand side, it increases the oil demand by appreciating other currencies and the consequent rise in their purchasing power. Going by the current devaluation of the dollar, analysts expect that oil prices will stay on the higher side in the days to come. 

© 2006 IUP . All Rights Reserved

PERSPECTIVE

Corporate Philanthropy: Business with a Cause

- - Amit Singh Sisodiya and Rajendra Dash

Recently, Warren Buffett, the worlds second richest person, estimated to own $44 bn, announced to donate 85% of his wealth to the Bill & Melinda Gates Foundation. Buoyed by this gesture, Bill Gates said that this money will help the foundation to "both deepen and accelerate" its work. The Bill & Melinda Gates Foundation "works to reduce inequities and improve lives around the world. In developing countries, it focuses on improving health, reducing extreme poverty, and increasing access to technology in public libraries." With 270 employees and an endowment of $29.2 bn, 70% of the Foundations grants generally go towards global welfare. No wonder then, the sincerity of their work has inspired Buffett to donate so handsomely to the Foundation. It is worth noting that Buffett also runs a foundation of his own for charity work. Both Gates and Buffett proclaim, their goal is to "return the money to society". Google Inc. has created a $12 bn philanthropic arm to "make the world a better place".

© 2006 IUP . All Rights Reserved

INDUSTRY

FDI in Single Brand Retailing: A Big Small Step Forward

- - D Satish and Naina Joshi

The Government of India has taken a significant step towards opeing up the retail sector to foreign investment. The recent decision of the Central Government to allow FDI in "single brand" retailing, with 51% investment from the foreign collaborator and 49% from the Indian counterpart, is a much-awaited initial step before opening up the retail sector completely in the near future. The brand-conscious modern Indian, who has no qualms spending a fortune on overhauling his wardrobe, will now have an opportunity to add more foreign brands.

© 2006 IUP . All Rights Reserved

ROUND TABLE

Global Internet Majors : A Passage to India

- - Kavitha Putta

In the recent years, the Indian Internet market has grown tremendously in user base, e-commerce and online business and is expected to grow massively in the next few years. In this backdrop The Analyst invited eminent experts to share their perceptions.

© 2006 IUP . All Rights Reserved

AGRI BUSINESS

Agricultural Exports: Sowing the Seeds of Competition

- - N Janardhan Rao with inputs from Ravi Babu Adusumilli

Being an agrarian economy, the performance of the agricultural sector is very important; its significant not only from the point of view of economic growth but also for the well-being of the Indian population. The rapid development of primary products can lead to economic development. In the process, the sector has made considerable progress in terms of output, yields, and area under many crops. Today, India is the largest producer of milk, fruits, cashew nuts, coconuts, and tea in the world. It is the second largest producer of wheat, vegetables, sugar, fish and the third largest producer of tobacco and rice. The bulk of the countrys exports consist of agricultural commodities and agro-based products; the primary sector plays a vital role in the development of the Indian economy.

© 2006 IUP . All Rights Reserved

AGRI BUSINESS

Indian Agriculture: Moving Up the Value Chain

- - Uttam Gupta

Given the compulsions of feeding the growing population and maintaining food security, agriculture has unmistakably occupied a pivotal position on the radar screen of our policy makers, planners and administrators. However, it is also a stark fact that, in reality, it has received very little attention. The governments direct intervention in improving the facilities is hardly evidentbe it investment in the agriculture sector, availability of credit, transfer of technology to the farmers, building rural infrastructure, availability of agricultural inputs, providing crop insurance cover, etc.

© 2006 IUP . All Rights Reserved

AGRI BUSINESS

Organic Farming : Solution to Starvation?

- - C S Murty

This article presents a rather skeptical view of the role that organic farming can play as a solution to Indias food problem. There is no doubt organic farming holds certain promises, but it can hardly contribute to mitigating starvation in a milieu characterized by a huge population which is still growing. The upshot of the analysis here is that biotechnology may score over organic farming as a possible prescription towards ensuring food security now and in the future. It is argued that while both biotechnology and organic farming can effect marked improvements in the quality of food, the former holds a greater promise in bringing about a sustainable increase in physical yields at a lower cost than the latter.

© 2006 IUP . All Rights Reserved

AGRI BUSINESS

Organic Farming : Empowering Farmers

- - N Janardhan Rao

To meet the increasing demand for food, the farming community has been resorting to intensive cultivation practices with the help of fertilizers, pesticides and other external means to enhance food production. Though these have helped to increase farm output to some extent, they are more than responsible for the contamination of soil, water, and the environment in general. In the process, the farming community has been witnessing a slow degradation of healthy soil and this finally led to a decrease in the yield. On the other hand, the increasing awareness of health hazards caused by agrochemicals has brought a major shift in consumer preferences, especially in developed countries. They are increasingly shifting towards organic food, which is considered secure and hazard-free. Moreover, there are environmental concerns like the need to sustain farm production and improve soil fertility. Against this background, organic farming has become an increasingly important segment of the agriculture sector of many countries.

© 2006 IUP . All Rights Reserved

CORPORATE STRATEGY

Amuls Infighting : No Taste of India

- - Amit Singh Sisodiya and Sanghamitra Dhara

For several years Amul has been one of the most talked about success stories from India, winning millions of hearts, minds and market share. According to The Economic Times, Brand Equitys annual survey of Indias Most Trusted Brands, Amul is the 12th Most Trusted Brand among consumer product brands of Indian origin. However, given the present "conflicts" between the federation and its members, which have dealt a severe blow to its image, Amul must resolve to get out of this mess fast.

© 2006 IUP . All Rights Reserved

CORPORATE STRATEGY

Samsung: High-end Trouble

- - Amit Singh Sisodiya and Madhuparna Chakraborty

For Samsung, the high priest of "high-end" technology, which made a name for itself in the global electronics arena, these are tough times. The company, which has had rivals on their toes and has won consumers hearts across the globe, by being Koreas electronics major in bringing out innovative models, is slowly realizing that this very strategy may not always be rewarding, or so, its latest quarterly performance suggests. During the second quarter, the company recorded a fall in its operating and net profits on both sequential as well as year-on-year basis. On a segment-basis, except LCD, all the key segments saw a decline in operating profits, both sequentially and annually. The company was hit by lower sales in segments like telecom and appliances, which account for more than one-third of its overall sales. The companys lackluster performance during the quarter, however, cannot be brushed aside as a one-off event. In fact, a look at the fourth quarter results for the last fiscal, i.e., FY 2005, tells that the Korean innovation warrior is indeed feeling the heat as sales plateau and operating profits take a hit; the firm reported that FY05 reported 33% decline in the operating profits with flat sales.

© 2006 IUP . All Rights Reserved

CORPORATE STRATEGY

Tribunes Tussle: Bad News

- - Amit Singh Sisodiya and Madhuparna Chakraborty

After Time Warner, Viacom, Vivendi, and Disney, it is now the turn of the Tribune, one of the premier media groups in the US, to feel the heat as it struggles to cope with the task of restructuring itself amidst the changing industry dynamics; even though problems facing Tribune are more internal than external. Like many of its traditional media industry peers, the Tribune group, which owns 11 dailies, including the Los Angeles Times (LA Times) and the Chicago Tribune, along with a host of other properties that include 26 television stations, cable and radio businesses, too is feeling increasingly threatened as readers shift to online sites. The media group has seen its newspapers circulation numbers fall drastically in recent times.

© 2006 IUP . All Rights Reserved

CORPORATE STRATEGY

SBI: Surprisingly! Its a Make-over Time!

- - Amit Singh Sisodiya and Ankur Gupta

True to its new-found hallmark, SBI never fails to surprise. When the countrys largest commercial bank turned 200 in June, this year, the news took many by surprise. However, an even bigger surprise was in store for SBI and its millions of customers, when the countrys apex bank, RBI, recently announced that it would transfer its 59.73% stake in SBI to the government of India soon: the government also surprised the bank when it turned down its plea to make a foray into Bangladesh. The news about the change in ownership comes at a time when the banking juggernaut, which for long has been the banking face of the country and at times acts as guarantor to the government (remember 1991 financial crisis that forced India to pledge its gold to the UK) is faced with mounting challenges

© 2006 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Nearshoring : India Catching Up?

- - D Satish and Y Bala Bharathi

Over the past few years, India has become one of the most favorite global outsourcing hubs. However, a report from Gartner, Inc., a market research firm, cautioned that labor shortage and wage inflation would eat away as much as 45% of Indias outsourcing market share by 2007. This clearly signals that India may lose its hold on the global outsourcing market if it doesnt address these issues soon. One of the ways to maintain its pace, while addressing these country-specific issues, is to explore new business opportunities in countries other than India.

© 2006 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Thanda Cola: Anything but the Right Choice, Baby!

- - Amit Singh Sisodiya and Reshma George

The pesticide controversy and the subsequent bans by several state governments has come as a bolt from the blue for the two Cola giants who are already struggling to cope with sluggish sales in the country. And the reactions by PepsiCo and Coca-Cola to the recent pesticide controversy have been nothing short of an anticlimax to the fierce yet festive Cola wars in India. The full page ads in national dailies defending their stance in spite of the controversy, could have a far more damaging impact than anyone can imagine, if proper steps are not taken to enforce stricter safety standards and instill confidence in consumers minds. However, a significant issue that has been obscured amidst the chaos is whether ethics have been abandoned by the corporates, given the growing number of controversies regarding safety standards in food products, across the globe.

© 2006 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

GMO in China: Raising Concerns?

- - N Janardhan Rao and Indu Prasad

The proclamation of the Chinese government to commercialize food grains, especially rice, developed by the technique of Genetically Modified Organisms (GMOs) has raised serious debate in the economic circles of the world. This is because China is the worlds largest producer and consumer of rice, which is the staple food for billions of people in the world; and in this scenario any decision taken by China will have an effect on other nations including India. The production of GM crops has always been a contentious issue ever since they were invented in the mid-1970s. While on the one hand, the supporters of GM foods believe that they can help combat falling food production and save the population from hunger, on the other hand, environmental activists, religious organizations and public interest groups have raised serious concerns over environmental hazards and human health risks. They have also raised economic concerns and have called these so-called GM foods as "Franken foods".

© 2006 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Electronic Waste: The Bug Starts Here

- - Amit Singh Sisodiya and Sanjoy De

Electronic waste or e-waste has emerged as a new worry to environmentalists across the globe, as it threatens to cause serious damage to the environment. According to the Organization for Economic Cooperation and Development (OECD), any appliance using an electronic power supply on reaching its end-of-life would come under Waste Electrical and Electronic Equipment (WEEE). e-Waste refers to old, unwanted electric or electronic appliances such as computers, laptops, TVs, DVDs, mobile phones, MP3 players, microwave ovens, etc. which are no longer in use. These discarded gadgets are potential threats to both human beings and the environment, as many of their components contain toxic elements such as lead, mercury, cadmium, etc. which contaminate the soil and ground water.

© 2006 IUP . All Rights Reserved

ARTS AND ARTISTS

The Reserve Bank of India: The Inside Story

- - Jayshree Bose

This makes it necessary to keep two things in mind. One is to break up the flow of the documentation process into different periods, not only to bring out the differences between one milieu and another very sharply, but also to highlight the evolution of the institution in terms of its own philosophy and outlook. This approach also brings out the contribution of the institution to the nation during different periods of time, as also the challenges it faced during each of these periods. The other approach is to distance the documentation process sufficiently from the period covered so that the authors can adopt a proper historical perspective.

© 2006 IUP . All Rights Reserved

ARTS AND ARTISTS

Art: The Craft of the "Beautiful"

- - GRK Murty

Man, it is often said, cannot live with food alone. It doesnt, however mean that he can live without food. Similarly, he cannot live with "thinking" alone. Nor can he live without "thinking". If a man lives only with thinking, he could at the most evolve into a "rationalistic-analyst". But he cannot acquire rasanubhuti - the art of experiencing the beauty of artifacts. It means, if a man had only "intellect and knowledge", his ability to experience ananda - "bliss" - remains dormant. He, therefore, remains "incomplete". It is only when the ability to "think logically" and the ability to "experience beauty" are in equilibrium that the mans living becomes samagra - "full".

© 2006 IUP . All Rights Reserved

APOLITICAL

Commodity Futures Trading: Are We to Stop it?

- - grk

"Sonia wants commodities futures trading stopped", so screamed one of the headlines of The Economic Times of 2nd August. The anxiety behind these comments is quite palpable, for the politicians cannot remain silent when aam aadmi is exposed to a price spiral. The inflation has risen to 4.82% of which the contribution of primary articles is said to be 32% plus. The robust domestic demand for agricultural commodities accompanied by erratic monsoon has only added fuel to the fire. All this cumulatively reflected on the rise in prices of food grains, pulses and other essential commodities. The net result is: Congress chief ministers, as press reports indicate, accused futures trading as the key cause for the current rise in wheat prices, while the Left parties demanded total ban on futures trading.

© 2006 IUP . All Rights Reserved