The BRIC acronym was coined by Goldman Sachs economist Jim O’Neill in 2001. On December 24^th, 2010, South Africa officially joined the group thus renaming it to BRICS. Together, these five emerging nations (Brazil, Russia, India, China and South Africa) account for around 20% of the world economy. The past decade belonged to the BRICS in terms of economic growth. With US battering a bad recession and the Euro-zone fighting instability and insolvency; the BRICS provided the momentum to the world GDP growth past decade.

On Thursday, the 29^th of March, 2012, India held the fourth annual BRICS summit here in New Delhi. While many positive signals have been sent out, some serious differences did come out as well. Key issues focussed upon were the following:

ü  Launching of a BRICS joint development Bank

ü  Collective Co-operation and trade ties amongst the BRICS

BRICS Joint Development Bank

The Summit discussed the proposal for a BRICS Joint Development Bank in order to protect these emerging economies from the world economic turmoil – rising oil prices, currency volatility, etc. The bank is to be set up in the lines of the World Bank and the Asian Development Bank. The objective is to fund the infrastructural and economic sustainability requirements of the BRICS nations. The World Bank welcomed the idea and expressed its willingness and support towards such a set-up.

However, things could not proceed smoothly as the four other members and especially India feared that China will marginalize them. The view was that China will be the biggest beneficiary of such a development and will look at it as a way to legitimize the Chinese Yuan (Renminbi) overseas. While, China will definitely be the major sponsor for this bank as none of the other four members have enough muscle to fuel it; whether China will have try diverting funds of the bank towards regions it is strategically interested in (e.g. Africa for natural resources) remains a concern. Moreover, Brazil which is already funding the Latin American Bank is not quite excited by the idea. As of now, no agreement has been reached and the Finance Ministers have been asked to do a feasibility study for setting up such an institution. The idea is balanced in the following manner:

-             Brazil                                   Not Supporting     (Already funding the Latin American Bank)

-             Russia                                  Supporting           (A message to the west that it can do without them)

-             India                                    Not Supporting     (Fear that China will be the biggest beneficiary)

-             China                                    Supporting           (Would enjoy a significant clout)

-             South Africa                         Supporting

-            World Bank                           Supporting

Collective Co-operation and Trade Ties

A master agreement has been signed to extend credits in local currencies under the BRICS Interbank Co-operation Mechanism with the goal to strengthen and increase trade ties within the group as now transaction costs will reduce. Thus an Indian Buyer can now pay to a Russian Supplier in Russian Ruble rather than first converting Rupee to Dollar and then getting it re-converted back to Ruble. The West is looking at it as a move towards ending the dollar hegemony.

A confirmation facility pact was also signed which confirms lines of credit on the receipt of request from the exporter, the exporter’s bank or the importer’s bank.

Besides these, the nations expressed their willingness to contribute in the Syrian Peace Process; in creating fairer global governance and voiced its support towards Iran’s right to peaceful usage of nuclear energy. They also criticized the West for creating excessive liquidity (“a monetary Tsunami” as called by the Brazilian President) and urged the West to initiate measures that would check excessive volatility.

The summit still came across as a superficial one where many important issues were touched upon and discussed but final decisions were not taken. The Summit even failed to reach a consensus and provide a name for the next chief of the World Bank. Though there was a concrete development in creating stronger trade ties; many other issues were left hanging e.g. the BRICS Development Bank. If these nations are striving to create a strong and united non-West Group; in their next Summit in South Africa, they must look forward to certain final decisions and not only big words. 

As I sit down to write this blog, I am still feeling dazed with respect to the disturbing phone call from one of my Batch-mates of IIM Ahmedabad that woke me up in the morning.

He along with another batch-mate of ours started his own e-commerce venture a couple of years back. Owing to a strong business model and a committed team, they were able to gather a lot of traffic and transactions on their portal. Now, expansion seemed like the next logical step as the team was in place and the business-model was beta-tested and had received an overwhelming response from the market.

As the case with almost every start-up, they were not able to have sufficient internal accrual of funds to fund their expansion plans. Nevertheless, the projected future earnings of the business coupled with the performance so far presented a strong case for approaching investors. Fortunately for them, a certain PE fund agreed to invest in their start-up. The agreement was to sell 120 shares of the firm to the PE fund at a 110% premium over the book-value of Rs. 25 a share.  However, with a new proposal in the Union Budget, 2012, they are now in a fix!!

The proposal if becomes a law will require such start-ups to pay income tax on the premium they have charged over their fair market value while selling shares (not equity convertible instruments) to unregistered investors, including PE funds. Moreover, the way in which the fair market value will be calculated is still not clear. Currently it is aligned with the book-value. However, in the new proposal, if the fair market value is taken to be the book value, then it would create huge problems for start-ups seeking new investments. What could also happen is that, the fair market value will be decided contingent to the satisfaction of the tax assessing officer.

Similar is the case for angel investments. As per the new proposal, all individual investments (which includes genuine angel investments) in a company will fall under “income from other sources” and hence will be taxable @30%. The government presents this move as a move against black money laundering. Thus for promising start-ups that follow a DCF valuation or valuations based on the future cash-flows to raise funds, the situation is even more challenging.

Nevertheless, here at 365businessdays, we have always believed in the fact that every problem has a solution and so does this one. We give below certain ways that start-ups can raise funds for themselves without getting unfairly taxed for it:

•  - Tax-Free Money can be raised from Individual Investors through equity convertible instruments
•  - If one can approach any Angel Investor(s) outside India, Tax-Free money can be raised
•  - Going for a professional seed fund – This is advantageous for the start-up as well because in the process of cracking a seed-fund investment, the start-up will rethink, refine and make its business model quite sound thus making the road ahead much more easy and clear
•  - Tax-Free Money can also be provided by Registered Venture Capital Companies/ Funds  

Though, one may feel relatively relieved by looking at the above solutions or ways around; it is a very sad situation for a developing and populous country like India. Our Government must reckon the fact that it cannot provide free employment and free food to its countrymen and therefore, needs to create a facilitating environment and a regulatory structure that fosters entrepreneurship.

It is a funny situation that on one hand the government brings out schemes like the NREGA and the Food Security Bill (which can be presumed are short-term solutions as they are not sustainable in the long run) while on the other hand, it is providing disincentives for people opting to be entrepreneurs and thus provide employment and livelihood security to people of this country (which in the long term has the potential to emerge as the panacea to the problems of poverty, unemployment and hunger).

The story of India is the story of millions serving as minions of an inhuman state controlled by a few hundred. While homeless people are dying on the street due to lack of adequate shelter, the billionaires of our country are mourning over the erosion in the value of their holdings. Economically speaking, these 60 (and now 40) billionaires are the “VIPs of India”, as a 38% fall in their net monetary worth has led to a 27% fall in the country’s market capitalisation. Thus the Indian Government is relentlessly devising policies and norms that would help the big business houses of the country to bounce back, attract foreign investments and joint ventures thereby improving the market cap of the nation. The unfortunate part is that the benefits and returns of these efforts will be largely enjoyed by a very small group of people. The value of the stock holdings for the billionaires and few-hundred-millionaires will go up. However, the majority of the country’s population will still remain where they are, undeveloped and without adequate attention and support from the government.

One cannot argue that the current Government efforts are unnecessary. They are necessary but not enough for the rightful development of the country. The problem with our Governments (irrespective of whether UPA or NDA) has been lack of a long term vision. Most of the legendary bills and policies are passed as a kneejerk reaction to the then current state of affairs. Efforts are necessary that would bridge the gap between the lower and upper levels of the economic strata in the long run so that the country can enjoy in the true sense of the terms “diversity” and “a young population”. Quoting Mr. Nandan Nilekani here, “The Demographic Dividend that the country enjoys is only as good as the investment made into nurturing this human capital”.

Short-term solutions like providing 7Kgs of rice a month at Rs. 3 per Kg is not a solution that will make that happen; neither will a scheme like NREGA which is just about menial work and not mental work make any impact in the long run. The former has already put pressure on subsidies which eat up Rs. 1.44 lakh crore annually.  Rs. 63,000 crore is the estimated burden due to this bill which is sure to shoot up due to factors like our poor Public Distribution System (PDS), corruption, etc. It will not be far-fetched to say that subsidy being one of the most politically sensitive topics; the current Government has used it as a means to rectify its own reputation rather than as a true ailment to the current food crisis. Besides the fact, that the country already faces a challenge to control its fiscal deficit, it is quite possible that even after spending so much, the street children and homeless people will still die of hunger.

Talking of the NREGA scheme which “enhances the livelihood security of people in the rural areas by guaranteeing 100-days of wage employment in a financial year to a rural household whose adult members volunteer to do unskilled manual work” has restricted the employment options to digging earth, breaking stones and the like. Such policies are more harmful than otherwise because inherent to these policies is sheer disrespect of the ability of a poor Indian to earn his bread by doing creative and meaningful work. Additionally, such policies will create a huge dependent mass of people in the long term. Many people in the rural areas will stop engaging in their traditional occupation which may be as a farmer or as an artisan and instead rely on schemes like NREGA and the food security bill to fill their stomachs. Such a scenario will be disastrous for the country.

These short-term solutions can at best be used to augment long-term plans to eradicate poverty, create literacy and employment and make people of India earn their livelihood with dignity. First of all the Government needs to reckon the fact that India has too large a population and a brisk population growth rate which makes it almost impossible to meet demands of the people through subsidies, free food and tax-exemptions and guaranteed employment. Such initiatives are not sustainable in a country like India. What is required is supporting people to become self-dependent.

This needs a two-pronged approach. First invest in developing the young human capital in the country. This means invest in providing education, shelters to the homeless, adequate health facilities and infrastructural support. The fruits of such investment in terms of prosperity, better per-capita income figures, reducing inequity in the society will take a generation to show its results which means say about twenty to thirty years. If the State wishes to intervene to eradicate poverty, these are the appropriate mechanisms. Finding employment and earning livelihood is something that should be left to the people themselves. These are the basic ingredients for survival today, and if we try to create a society which gets these on a platter, it will lead to an inherently weak and vulnerable society.

On the other hand, the need is to invest in Ideas that are generated in the under-developed or isolated parts of the country. These areas due to lack of resources and attention from the government and our big business houses have become the bedrock of many innovative ideas. The speciality about these ideas is they are cost-effective and have a direct impact on the ease and convenience with which people live their lives in a limited set of resources. Thus the route to prosperity for many such areas is already present. If these ideas are facilitated with cheap source of finance, professional training, direct market access, the area is bound to develop. The government will have an additional role to monitor that the actual creator or idea generator gets the maximum benefit, both monetarily and otherwise.

To let the above long-term efforts materialize, the country should pool in the best minds form the best institutes like IITs and IIMs to usher this development. This may quite possible mean working in a PPP mode, easing the boundaries between states and localizing governance. There needs to be a collective effort between the central and the state governments, between the educational institutions, between the public and the private sector and between the parallel societies. I would like to conclude with a question to the reader: “If you know that you cannot support your children through their entire lifetime, would you rather spend your resources in buying them candies or invest in making them self-dependent?”

It is often said that a week is a long time in politics. Two years must be like an eternity then. In this day and age when information moves faster than the blink of an eye and situations change every second like the position of the sun, it has been our political establishment that has not been able to keep pace. For the Congress-led UPA 2 government, besieged by scams and struck by paralysis in governance, the euphoria of the stunning victory in 2009 must seem very distant. The UPA 1’s performance was considered to be so good that voters chose to even unshackle the Congress from the chains of the Left parties which had constrained the UPA1. There couldn’t possibly have been a better mandate to govern decisively.

UPA 2, on the contrary, has turned out to be a major disappointment. It is even possible to argue that UPA 2 is paying, with interest, for the sins committed during the UPA 1. The 2G spectrum allocation scam (A. Raja), Common Wealth Games scam (Suresh Kalmadi), Adarsh society scam, Cash-for-vote scam – were all executed in the term of the UPA 1. Had the Government chosen to respond swiftly, there would have been some damage control possible. The pillar of the Congress and one of the greatest assets of UPA is the Prime Minister Manmohan Singh - said to be a man of impeccable integrity. Instead of acting against the corrupt, he has chosen to hide behind the compulsions of coalition politics, and caved in to the pressures from the party high-command which is Sonia Gandhi.

As if the battering by the united Opposition and hauling over the coals by civil society over corruption was not enough, there came another embarrassment for the government: the controversial affidavit of the Planning Commission that claimed that persons consuming items worth more than Rs. 32 per day in urban areas, and Rs. 26 in rural areas, are not poor.

Meanwhile, we have another issue brewing in Jammu and Kashmir where the National Conference is embroiled in the custodial death of Syed Yousuf, an Abdullah family loyalist. The circumstances of his death, along with the statements of eyewitness and the accused, have made things very difficult for the Abdullah family.

The party has lost face and credibility in Telangana, and doesn’t have a leader strong enough to lead the party in the other parts of Andhra Pradesh. Meanwhile, issues are piling up in Rajasthan. Over and above this the “Anna cap” has a following and can cause immense damage in the months to come.

The continued absence of Mrs. Gandhi from the public domain has taken a serious toll on the UPA Government. Add to it the blundering response of the party to the Anna Hazare’s fast soon after Mrs. Gandhi had left the country to be treated for an unknown ailment was ample confirmation of the party’s rudderless second-rung leadership.

In its first year of re-election which is often considered to be the honeymoon period, the Government chose to remain inactive and sat on its haunches and lost its opportunity. And in the second year, it lost its plot in the midst of the scams and scandals being unearthed every quarter.

At a time when the Government and its top brass should have been engaged in waging a rearguard action in the “all hands on deck” spirit, Pranab Mukherjee and P Chidambaram, two of its most politically experienced and astute ministers seem to be engaged in their own dogfight over the controversial ‘note’ which could have, as some parties feel, averted the entire 2G scam in the first place. Clearly the UPA is not guided by the spirit of standing by each other through thick and then.

Add to it, there is a very distinct possibility of mid-term polls and several issues can combine to make this a reality over the next two months. The coalition mess in the UPA 2 and internal warfare in the BJP for the top-spot has shifted attention to the states. There doesn’t seem to be anyone in either party who can influence the election result in any state, however, in this age of coalition politics, even a two-three percent swing in either direction can make or break a government.

In the end, it just seems that the battered Government has lost the will to govern and what remains to be seen is whether the UPA 2 is able to kick start its engine or continue to remain in the stalled mode.

A gold rush is described as a period of feverish migration of workers into the areas of dramatic discovery of gold – the yellow metal.

In the mid-1930s Gold was $35 an ounce and was fixed in price against the dollar upto the late 1960s. However, to finance the Vietnam War USA had to issue a lot of new dollars and could no longer afford to offer an ounce of Gold for just $35. In the 30 year period, the value of dollar had fallen down due to inflation, but Gold remained under-valued against its inflation-adjusted price. This phenomenon was repeated again for the 30 year cycle till 1990 when Gold again became undervalued. The supply of dollars was increased once again, as it was no longer mandatory to settle your trade balance bills with Gold.

Cut to 2011, the interest rates are very low. Hence, there is little opportunity cost for holding Gold as compared to the negative short-term interest rate as compared to the inflation. Spot gold is trading at its highest levels in history. Now what exactly are the reasons which are driving the recent rallies?

Safe haven status:

The spot market selling price for gold is a direct measure for the mining company’s profit margins. Depending on the quality of the ore and other regional factors, gold in the USA is produced at an average cost of $400 to $600 per ounce. Rising debt concerns and uncertainty in the equity markets has made investors switch to safer investment tools like gold, silver and other precious metals. The massive demand for gold pushed prices above $1,900 recently as the open interest for gold options climbed to a record 1.26 million contracts on August 18.

Strong fundamentals:

There will be a near-term decline in the gold prices because of the effect on the trade volumes of increases in the margin trading cost. However, in the long run, the fundamentals for gold remain strong and investors will continue to invest in the precious metal until they rediscover the confidence to invest in the equity markets.

India and China, the largest consumers of gold, look set to continue to drive the demand. The domestic demand in India is seen robust in the near term and the Chinese government continues to increase its gold reserves. Meanwhile, the domestic demand in China for gold and silver continues to grow along with the increasing middle class incomes in the country.

Festive season:

Although, the yellow metal has rallied in the past few months, historically the demand picks up at the end of August. At the second half of the year, the demand is driven by the holiday seasons. The Indian New Year comes around October boosting the domestic purchase of gold. Around year end during Christmas, the demand for gold jumps as well, which is followed by the Chinese New Year in February.

So in all probabilities, it looks like the current Gold Rush is here to stay for a slightly longer time. And it is to no one’s surprise that the soaring gold prices are just a predictor for the collapse of paper money currencies with the Euro and the Dollar facing huge challenges. Globally, the central banks have started buying gold to strengthen their reserves. If the global financial situation continues to remain grim, gold holdings by central banks will increase which, in turn, will push up prices further.

With the amount of airtime that was dedicated by news channels over the past couple of months to cover the story about the authenticity of an organization by the name of Speak Asia - a survey based online job provider – it is evident that the number of people affected by it is too big to be ignored. Speak Asia practices multi-level marketing or networked marketing as a strategy to generate revenues for it. Through this blog, we will try and first understand what multi-level marketing is and then try and gauge how ethical or legal an organization utilizing multi-level marketing is.

As per the Wikipedia definition, Multi-Level Marketing is a strategy in which the sales force is compensated not only for the sales they personally generate, but also for the sales of others they recruit, creating a down line of distributors and a hierarchy of multiple levels of compensation.

The setup of a Multi-Level Marketing company ranges from being fairly simple to insanely complex. However, it follows the basic structure of having independent, unsalaried salespeople (distributors, or associates, or sales consultants) who represent the company that produces or provides the services that they sell. They are awarded a commission based upon the volume of product sold through their own sales efforts as well as that of their down-line organization.

According to plenty of surveys conducted in the Western world on the Multi-Level Marketing firms, it has been observed that only 1% to 10% of the agents make any substantial money from the activities. And the rest are the rest 90% to 99% are the people who have paid hard-earned money to enter the scheme (network), and it is their money that is ultimately being transferred to the top-end of the hierarchy.

For any company, the management of supply & demand and a keen insight into realistic market penetration and saturation is crucial to its business, irrespective of the product or service offered by it. A failure to ‘hit the target’ of supply and demand can ruin the company if the market is over-saturated. With Multi-Level Marketing, the basic business model doesn’t pay any attention to this ‘target’ which may or may not be reached and exceeded without anyone noticing or caring. Producing any amount greater than this would be of no use as the market would have reached saturation and all further distributors will lose from here on. And since no one is paying attention, it is not possible to effectively figure out at what position we pass that level of hierarchy in the distribution network. Thus, Multi-Level Marketing is essentially like a train with no brakes and no engineer headed full-throttle towards a terminal.

Another question that strikes the mind is that if the product or service is indeed as great as promised, then what is the need to rely on a special marketing scheme like MLM where you don’t need to be experienced to reap the benefits? If a company chooses to continue this strategy, it will someday hire (with ‘no base pay’ and ‘charging to join’) far too many people which will eventually lead to inevitable losses.

Despite all the flaws in the strategy, every year thousands of people get duped by such companies. When you try and explain the fault to them, they point out the fact that not everyone will succeed in hiring more distributors, and hence, the market will never saturate. So it essentially boils down to the simple question of whether we are hiring winners to build a real business or planning by design to profit off losers who buy into our confidence?

Some of the recent MLM companies attempt to address this problem by limiting the number of people you can sponsor to ‘x’. But the geometric progression and market saturation problem still exists.

The question then arises, that if it is such a fraud then why does it still exist? The answer is simple yet striking. The MLM’s have survived by spending millions of rupees to protect, lobby and insulate themselves. Just like any other form of organized crime. And crime also pays, albeit temporarily. The people at the lower end of the distributorship hierarchy are the ones who defend the very organization that is robbing them, hoping that some day in the future; they would get their chance to make ‘big money’.

MLM has evolved into a "niche": it can be used to sell products that could not be sold any other way. An MLM is a way to get undue credibility by exploiting people's personal friendships and relationships via "networking." More often than not members of such marketing strategies end up being stuck in the relationship, and have to rely on trying to engage more such members to try and recover their money back. Thus, legally, even though it may not be on the wrong, it is ethically almost always unviable to enter into a Multi-Level Marketing dealership. The basic wealth generation for a business should come from business activities and not from perpetual membership enrolment. And history has shown whenever there is an enormous pressure from the subscribers to withdraw from the system, the funds dry out and the system collapses. And besides the fear of a collapse of the system, such a failure has led to many a friendship and relationship break, due to breaking of trust between the dealing parties. Lifelong friends become ‘prospects’ and the neighbourhood becomes the ‘market’. And sooner or later we will need to stop blaming the particular Multi-Level Marketing companies and admit that the Multi-Level Marketing technique itself is fundamentally flawed, even in theory.

Ever since the conference by Apple’s WWDC (World-Wide Developer’s conference) there has been a huge media coverage surrounding it. Apple’s iCloud has focussed on consumer-centric entertainment storage and access features. But clearly, it also represents potentially path-breaking possibilities for business users and business services as well.

Firstly, let us have a look at the competitors.

BlackBerry was the market leader in Smartphones for a long time. But like typical firms, it got complacent, and had no major innovation/feature added to it, since the revolutionary BlackBerry Messenger or the BBM as it is affectionately know. Its sole competitive advantage seems to be lost with the introduction of iMessage for the Apple users. Microsoft tried its best by securing a partnership with Nokia, but if current sales figures are anything to go by, Nokia is on a free-fall in the Smartphone market with no innovations in hardware or software.

The only real competition iOS does have is in the form of Android. However, one important point is, while Android is the most sold OS today; it is done through a large number of handset manufacturers. On the other hand, iOS5 enjoys the privilege of being proprietary with Apple products only, which leads to better integration and hence, a better user-experience.

It has been widely acknowledged by most Android fans, or Fandroids, as they are known, that most of the features of iOS5 are copied or inspired from the Android OS. Then, what is it that Apple does right? Apple is the biggest brand in the world. And it has reached there through effective marketing. And this is exactly what Apple has done right with iOS. It treats phones as a tool to be used by everyone and not as a toy to be played around and tweaked with, as is the case with Android. Apple takes an idea, redesigns it, and refines the entire user-experience thus making it very intuitive and user-friendly. This results in them being leader in the Smartphone category.

We talked about iMessage taking away the competitive advantage of BlackBerry. What it also will effectively do is take away a huge stream of revenue from the Telecom Service Providers. SMS & MMS have been the cash cows for them since time immemorial, and now with the iMessage which effectively acts as a SMS & MMS tool, only difference being, it uses a data connection, there will be hardly any requirement by the customer to go for the heftily charged SMS plans, and instead they can use their existing data (2G or 3G or 4G) plans for the same at practically no extra cost.

There’s another chunk of industry which will be widely affected by the newly-announced features of the iOS5 viz. the developers of applications (apps) for the iOS. The features like ‘sync’ have made apps such as “DropBox’ redundant. However, some of the app developers have taken it in a positive manner. They insist, that Apple will be providing the users with only a basic-level integrate app. However, to extract the full functionality they’ll have to use the third-party app, and now their job of marketing it would become easier because of existence of a similar service. At the same time, there are some developers who are not too excited with the announcement of the iOS5 as it would mean that they would have to develop upgrades to their already existing apps so as to support them with the newer OS. Also, others are already starting to look at developing apps for other platforms like Android which offer far more flexibility.

Lastly, the seeming winner of new developments at Apple is ‘Twitter’. It has been deeply integrated with the iOS5 thus pretty much making it the default Social Network for all Apple devices. Many see this as an answer to FaceBook’s growing popularity and that being a looming threat to Apple, even though it is an indirect threat for now.

Whatever the end result may be, Apple’s WWDC has created huge media hype as it does every single year, and has invited endless debates about the same.

India has more than 2.61 crores registered and unregistered Micro, Small and Medium Enterprises which are expected to contribute 22 % of the GDP by 2012 up from 17 % at present. The sector accounts for about 45 % of India’s industrial output, 40 % of its exports and employs 4.2 crores people with 0.1 crores jobs created every year and thus forms a vital component in propelling our country to the next level of growth and development. Proper guidance and access to the right support resources would be vital if the pace of growth is to be made sustainable. How can it be ensured?

Many a times, a business leader of a Small or Medium Enterprise has to play multiple roles – he has to wear the hat of a director, a salesman, a marketer,  an HR and office administrator and an accounts & compliance officer etc. all at the same time and also has to deal with decision-making activities crucial to the business operations. However, unlike managers in larger firms who are backed by staff members who study & analyze the environment and have access to extensive information, a business leader of a Small or Medium enterprise usually takes his decision in the face of incomplete or inaccurate information. Secondly, the business environment is more dynamic and complex for smaller enterprises.  Although this also applies to larger firms, the effects of dynamism and complexity have a stronger influence on smaller firms. Large firms get more opportunities to make similar types of decisions and hence often develop decision-making routines that simplify the decision-making process for managers. Decision-makers generally are not looking for the best or optimal solution to a decision problem but one that addresses all aspects of the problem in its totality.

Most Small and Medium enterprises do not have an experience of engaging professional business advisory services to support them in their operational or strategic business decisions making. However, these enterprises do engage consultants in the form of Chartered Accountants, Web Developers and System Administrators etc for specialized tasks in which they has little or no competencies. Business decisions are usually taken in consultation with “experts” from the social eco system of friends, relatives and acquaintances, and in most cases by the business leader himself who understands his business best. This arrangement works fairly well for enterprises which are not aggressively looking at growth. However, for enterprises pursuing growth aggressively, professional business and knowledge inputs could bring a paradigm shift in the way they take decisions. But still business leaders of small and medium enterprises are reluctant in employing professional business advisory and support services primarily due to the following reasons:
•    No clarity with respect to the utility and relevance of the service. Most enterprises perceive consulting services to be relevant for end to end project implementations only, and do not see them as a day to day operational & decision support tool. For an SME, a good percentage of their time is spent on handling operational issues for which they do not see the necessity of engaging with external consultants. At the same time, most conventional consulting firms do not offer day to day support services for operational issues but offer business process transformation which aims to streamline your operations. These are usually irrelevant from the context of a small organization, more long term in their implementation and are costlier.
•    Most business owners feel they have the business and domain expertise needed for running their business and do not see an external consultant adding much value.
•    Perception of these services to be extremely costly. This is not unfounded because conventional consulting firms providing offline consulting/ advisory services, unfortunately charge “sky-high” prices which make them unaffordable.

Thus there is clearly a need for good quality and affordable business advisory and support services. If India has to go to the next level of growth and development, business process efficiency of the smaller enterprises has to be improved. This can only be done through making knowledge and skill based business expertise available to these enterprises at affordable rates. Moreover, the perception around non engagement with external advisory services for day to day operational issues has to be changed. The advantages could be seen through a simple calculation - Research shows that a business leader of a Small or Medium business generally works for 10*6 = 60 hrs a week. Now by taking the help of an external business support service, he will free nearly 20% of his time, which would translate to 48 hours of work/week for the business leader. Of the remaining he can spend 3 hours with the consulting team, as process of continuous improvement and rest 4 hours on his business development. This would translate to ~ 7.5 %( 4*100/60%) more growth.  Now the balance 5 hours can be spent by him on improving the quality of life. Moreover, accessibility to well researched, relevant and important information would remove the uncertainty in which decisions are taken and thus improve the quality of his decisions.

Government of India has warned airlines against any further hike in airfare. The airlines in India have come out with the proposal to increase the prices after they were asked to submit their planned price bands. As per the proposal sent to the aviation ministry and the DGCA (Directorate General of Civil Aviation), the airfares might see a hike up to 300% from the current level. According to the new proposal by the airlines, the distance upto 750 KM could cost upto Rs. 18,500, Rs. 19,500 for the distance between 750 KM – 1000 KM and for above 14000 KM the fares could go up to Rs. 40,000. This makes it cheaper to fly to London or Paris from Delhi than to fly to Mumbai. The main reason which has been attributed to this step is that airlines are taking advantage of the massive demand supply crunch in the aviation sector.

Before the proposal submission in December 2010, the fares of some of the airlines went upto 25% during Diwali season in November 2010 and government wants to make sure that this does not happen during the Christmas season again. On the other hand airlines contend that there was a huge drop in flight and seat availability during the year 2008 and 2009. The domestic airlines were flying abroad at the cost of cutting their number of domestic flights because of the shortages of aircrafts. This happened as during the recession times, the airlines could not borrow the aircrafts. The Aviation Turbine Fuel (ATF) prices also increased during the recession period which worsened the profit figures of the airlines. The key players in the industry such as Air India, Kingfisher Airlines and Jet Airways suffered huge losses during the FY 2009-10. Air India reported a loss of Rs 5,551 crore in 2009-10, whereas Kingfisher and Jet has registered losses of Rs.419 crore and Rs.406.7 crore respectively for the second quarter of the 2009-2010 .Now when the recession period is over, airlines are covering up the losses incurred by increasing the airfares. The way to cover the losses differs from airline to airline. Some airlines are in real hurry to cover up the losses by increasing the prices rapidly and are charging more that what the other carriers are charging. While other airlines charge high fares for last minute bookings.

DGCA along with aviation ministry rejected the proposal for a massive hike in the airfares and warned them that the strict action will be taken against them. Besides the warning, government has also proposed to establish a Civil Aviation Economic Advisory Council, to advice DGCA on financial and economic issues in the aviation sector and also to safeguard the interest of the passengers. The proposed council will include ministry of aviation, DGCA, top executives of airlines, bodies like FICCI and CII. Additionally, airlines have been asked to present a transparent and clear picture of the level of fares which are being charged on particular day and to intimate the same to the passengers (in advance) as well.

As a response to the notice by the aviation ministry and DGCA to airlines, airlines reduced the prices of the last minute booking from 18^th November. Since Diwali (November 5) till November 17^th, when airlines got the warning, the fares on the routes like Delhi, Mumbai, Kolkata, Ahmedabad, Bangalore etc. were almost 10 times higher than the actual rates. But after the warning, the last minute booking charges for a Delhi – Mumbai flight was available in the range of Rs 5,386 to Rs 8,269, while a Mumbai-Kolkata seat was going for Rs 6,266.

DGCA has provided strict guidelines to the airlines last month. One, the airlines have to declare their fares publically on websites and newspapers. Secondly, any change in the fares will be intimated within 24 hours of changing them and lastly to furnish a copy of the route wise tariff to the DGCA at the beginning of every month. After the declaration, all airlines have moved swiftly to reduce their fares of the domestic flights. In future, it might be possible that airlines will increase the prices in small amount, and thus it is advisable for the customers to always check the price list on the airlines website before booking a ticket.

With the launch of Tata Nano in March 2009, it was evident that the Nano will be future of small cars in India. At a price of INR 1, 00,000 Tata presented “People’s Car” with features like good fuel efficiency, rear positioned engine, eco-friendly, stylish look etc. The car received quick recognition from Indian families who could not afford a four wheeler earlier. By May, 2009 approximately 203,000 people had placed orders for a Nano. But in 2010, the sale of the car has seen a sequential fall. In July2010, Tata motors sold 9000 units of Nano, which fell to 8,103 units in August, 5,520 units in September and only 3,065 units in October. In November, which is a festival month and when it is considered auspicious to buy new and big ticket items, the sale of Nano came down to just 509 units, even when the  overall sales for Indian auto sector rose by 45% in October 2010. This resulted in the Tata motor’s overall domestic sales in the passenger vehicle segment fell by 25% to 15,340 units from 20,706 units in the previous year. Even high segment cars like Mercedes sold more than 500 units in the festive month.

The main reasons attributed to the consistent fall in the sales of Nano Cars are multiple fire incidents across India, increasing prices of the car and difficulty in obtaining the loan from the banks. Right from the launch of the Nano, there have been various cases of Nano catching fire. The number of such incidents rose to six in August 2010. Experts are blaming it on faulty cabling system which results in short circuit and smoke. Besides the fire incidents, lack of financing options available for Nano customers is also causing a dip in the sales. Banks are not willing to lend to the low-income customers with a concern that they might default. As per the statistics nine out of ten buyers of Nano apply for loan. Also the rate of interest which banks are charging for Nano is around 20-22% as compared to 13-14% for other cars. Tata has also increased the price of Nano, after which it is no longer a 1 Lakh Rupee car. Earlier this year company increased the price by Rs. 5000 due to BS IV emission norms and by Rs. 30,000 after few months due to increased input cost.

 After having taken cognizance of the issues which led to the sales decline, TATA has taken various steps to rectify the situation. Keeping in mind the fire incidents, company will provide free safety upgrades. Additional safety features are proposed to be added in exhaust and electrical system of the car. Company has launched an exchange scheme under which customers can swap their two-wheeler for a Nano, by paying the differential amount. Company is also taking initiative to provide finance for Nano with the help of its financing arm Tata Motors Finance Ltd, by tying up with nationalized and cooperative banks etc. Company has improved interaction with customers and dealers to take their feedback in a bid to improve the product. There are various kiosks set up across the country to target the rural market, where people have neither driven a car nor visited a showroom. Also steps have been taken to reduce the lead time for the vehicle and to change the perception that there are still long booking queues for Nano.

 Along with addressing the current concerns and issues coming up with product, Tata is planning to bring the electric and hybrid variant of Nano. Company is now looking at evolution of the vehicle including upgrades. The various variants of Nano, which are planned to be launched in coming years include Tata Nano diesel, a Tata Nano Convertible, Tata Nano Station Wagon, Tata Nano Electric and Tata Nano Hybrid. There is high probability that the higher end models will be targeted at the International market. The prospective countries for launch are Brazil, Indonesia, China and Russia.

In the month of October, when the sale of Tata Nano was down by 85%, its rival Maruti had a record break sales with an increase of 50.32% compared to last year. The most sold models were Alto, Wagon R and Swift. Another competitor Hyundai with its winning cars like i10, i20 and Santro, recorded a growth of 22.70 per cent in the domestic market as compared to last year. But with the new initiatives and actions to provide additional protection to customer with easy availability of loans, Tata is hopeful that there will be renewed demand of Nano very soon.