As we enter another new year today, many may wish to forget the one that has just gone by. Perhaps no other year in recent memory would have started with so much optimism as 2008 did, and perhaps no other year in recent memory would have finished with so much anxiety as 2008 did.
For India, though, 2008 should be seen as a year that must always be remembered if only to remind that fundamentals of business life (and political life) do not really change over time. Politically, India deluded itself into believing that its myriad social and economic challenges can be just wished away while the elected representatives in the state legislatures and Parliament spend their time and energy perfecting the art of political survival and sacrificing prudent policy and decisive action at the altar of expediency of the worst kind. The vote-of-confidence exercise in July 2008 was probably the nadir of Indian parliamentary democracy, and if for no other reason, 2008 must be remembered so that a similar situation may be prevented.
Business-wise, the excesses committed by some of the largest Indian business houses in the euphoria of the last four years came to surface in 2008 with near-complete unraveling of business strategy that entailed extraordinary levels of imprudence in financial leveraging while chasing unfettered dreams and magnificent delusions. For sector after sector (banking & financial services, real estate, automobile, aviation, steel, petrochemicals, cement, base metals, media, retail et al), 2008 was the year of denouement. It is important, therefore, to remember 2008 as the year where just about every Indian business was forced to do a reality check and many would have already discovered the many cardinal mistakes they made in their irrational exuberance.
However, having learnt from 2008, the leitmotif for 2009 should be to “get back to work” rather than twiddle thumbs, so to say, and pass time while waiting for the current political and economic turmoil to pass. India, and most Indians, would have probably already accepted the reality that many of us have slipped back a few years in time due to the various events of 2008. We have a lot to catch up with, and hence there is no time to lose.
It is a real tragedy that even after mustering the vote of confidence in Parliament in July 2008, the ruling party remains paralysed and just cannot muster the vision or the courage to take up bold policy reforms all around that could at least partially undo the damage of this particular UPA coalition, and create the foundation for the next round of social and economic growth for the country. One can only hope that in its very last months of existence, our Prime Minister and his cabinet will finally rise to the need of the moment and go out in some glory rather than cowering irrelevance in the so-called dustbin of history.
For businesses, cost cutting and reduction of capacity can be only part of the overall business strategy. Presumably, most such steps would have already been undertaken (or set in motion) by most companies. From January 2009 itself, business leadership must engage itself in the more important task of developing the business itself. Cost cutting beyond a certain point cannot yield substantial bottomlines. Only sustained growth in the top line can finally deliver healthier bottom lines. In recent months, far too many companies in India have been focusing on preserving or improving operating margins, giving demand expansion activity short shrift. Further, demand expansion efforts should not be forsaken under the excuse of slowdown in the economy. If consumer and business-to-business demand growth slackens, so would the overall GDP growth thereby setting in motion a vicious circle. Therefore, consumer product companies must come out with new products and promotions aligned with the current overall consumer spending power and sentiment to encourage spending. The real estate sector can only come out of the self-created rut when it accepts the reality of exorbitant pricing and atrociously unfriendly consumer/business practices (read: delayed projects and deliveries, blatant cheating of the customer by selling super-areas that may include even the air space, near lack of basic amenities such as clear access and convenient parking etc). Urgent, mega-scale infrastructural spending is the only sure way to create sustainable demand for metals, cement, glass and steel. Hence, these sectors should move away from just seeking sops and creating import barriers, and instead, lobby with the government to speed up implementation on the many infrastructural projects already in the pipeline. The hospitality and aviation industries should enforce a bolder, more transparent and dynamic pricing policy to fill up empty airline seats and hotel beds while keeping in mind that they only killed demand by their own greed in raising prices way beyond affordability.
In short, all of us have to get back to (harder and smarter) work immediately in 2009. There is still much to look forward to as far as India is concerned, and for most Indians, 2009 can still be a wonderful New Year!
