http://www.indianexpress.com/news/where-the-young-are/890132/0
Manish Sabharwal
Posted: Wed Dec 21 2011, 03:19 hrs

For years, social scientists believed that human beings were generally rational, but emotions like fear, hatred and affection could explain most departures from rationality. Until Daniel Kahneman got the Nobel Prize for tracing human errors to the design of the machinery of cognition rather than to the corruption of thought by emotion. As he points out in Thinking, Fast and Slow — one of the most interesting books of this year — human beings are blind to the obvious, but they are also blind to their own blindness. The debate on foreign direct investment (FDI) in retail recently joined labour law reform in reflecting this blindness.
There should have been six stakeholders at the table in the retail FDI debate — incumbent unorganised retail, current workers in unorganised retail, future workers in retail, consumers, foreign capital and producers. But one stakeholder — incumbent unorganised retail — positioned its self-interest as national interest and sabotaged reform. The deferral decision ignores — rather, attacks — the interests of current workers in unorganised retail (no PF, no ESI, no minimum wages and mostly, child labour), future workers in retail (part of our demographic dividend), consumers (currently reeling from inefficiencies and food inflation), foreign capital (willing to risk their money to create jobs), and producers (farmers and small enterprises who don’t get higher prices because of parasitic middlemen).

The fear of foreigners is surprising because of the high probability that the strong value proposition of unorganised retail — which has held up well against Indian-owned organised retail and forced shareholders to continue writing cheques to customers — will punish foreign organised retail in the same way.

The current FDI outcome would not surprise economist Mancur Olson; his work on interest groups showed how a small but vocal and organised minority can hijack the agenda in a democracy. His work brings us to India’s strongest interest group; organised labour. They are only 7 per cent of our labour force but have stalled any labour law reform by positioning job preservation as a form of job creation. Unorganised labour is a policy orphan and consequently, four labour market variables in 2011 are where they were in 1991; 12 per cent manufacturing employment, 58 per cent agriculture employment, 93 per cent informal employment and 50 per cent self-employment. Like the retail FDI outcome, the lack of labour law reform allows one small stakeholder — organised labour — to impose costs on four large stakeholders; current unorganised labour, current employers, future employers and India’s current youth.

In assessing the future impact of retail FDI or labour law reform, Kahneman would say that India has “relied on a limited number of useful heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations”. But he would also say these heuristics lead to a FDI and labour reform debate that has severe and systemic errors including confirmation bias (ignoring evidence that contradicts pre-conceived notions), anchoring (weighing one piece of information or one perspective too much in making a decision), loss aversion (valuing small potential losses more than large potential gains), affect heuristic (falling in love with the status quo and ignoring costs while exaggerating benefits), saliency (using a memorable but wrong analogy to influence opinion), and representativeness (insensitivity to prior probability of outcomes or sample size). We know that kirana shop owners are a much smaller population than the exploited kirana shop workers. We know that the self-interest of agricultural food supply chain intermediaries lies in lower transparency and efficiency for the farm to fork journey for food. We accept that creating new jobs is more important than preserving all the jobs we have. Yet, as a society, we have allowed massive lies and distortion in the retail FDI and labour law debate.

Kahneman’s intellectual partner the late Amos Tversky liked to tell traditional social scientists “You believe in artificial intelligence but I know about natural stupidity”. But despite the irrationality of human decision-making and challenges of democracy, policy making is about making choices. Unorganised retail and organised labour seem united by a fear of an unknown future. But their biggest fear is youth; a pipeline of young people and new organisations who view the future differently than they do. The 10 lakh kids who will join the labour force every month for the next 20 years are not midnight’s children, but reform babies. These kids have high expectations and don’t idealise or fear the West — they understand more than we did that that you don’t have to be Western to be modern. They don’t view employment as a lifetime relationship but a contract that is intense, intimate but short. In parallel, the pipeline of new company creation in India has substantially morphed since 1991. India is still a hostile habitat for entrepreneurship but most new companies outside of natural resources propose to succeed by the strength of their back, the courage in their heart and the sweat of their brow rather than regulatory arbitrage and government connections. These new organisations think about capital, employees, foreigners and the environment very differently from companies created before 1991. This thought world is an unfair advantage and terrifies incumbents.

India’s youth need lots of jobs — including in retail. India’s young and future companies need labour reform. Retail FDI and labour law reform are currently two sides of the same coin; a small minority imposing costs on a majority that needs and deserves a different future. Fear is human; many policy makers suggest that getting change in a democracy like India needs the winners to bribe the losers. But the price and privilege of leadership is hearing all sides of an argument before deciding in favour of what Jeremy Bentham called the “greatest good for the greatest number”. In India, this greatest good lies in choosing young people and young companies over unorganised retail and organised labour.

The writer is chairman, Teamlease Services

http://www.hindustantimes.com/business-news/Markets/The-anatomy-of-a-slowdown/Article1-780214.aspx

As the 30-share Bombay Stock Exchange (BSE)  Sensex continued its downward journey on Friday, having lost 664 points in just two trading sessions, analysts advise retail investors to stay away from the stock market.

However those in long term investment horizon can bet on large blue-chip stocks, they said.

“Retail investors should stay away from the stock market as currently there is no clarity on the euro zone crisis,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities. “Only once we get some clarity, retail investors should think of entering in the market,” he said.

The European Union leaders summit failed on Friday to secure the full backing of the 27 nations for treaty changes to help fight euro-zone debt crisis.

According to experts, investors should look at options such as gold and fixed income instruments.

“Retail investor investors should  not enter the market right now, but those having long term investment horizon can invest 10-20% of the investible amount in blue chip stocks and remaining in the gold and fixed income instruments,” said Sudip Bandyopadhyay, managing director and chief executive officer, Destimoney, Securities.
 
“Going forward we expect some more clarity from the European Union leaders for resolving Eurozone crisis,” he added. However marketwatchers assure that the long term growth story of India is intact.

Many clouds over North Block

Hiring down, may spread to more sectors

The uncertain economic environment and policy paralysis that have dampened consumer sentiment are affecting new job offers as corporations withhold expansion plans. HR consultants say companies have not cut headcounts, but new offers are being put on hold in view of the uncertainty in the short term.

It is feared that if the slowdown in the Indian economy continues, the malaise could spread to more sectors.

The hiring sentiment has been weakening over the last several months.

The sectors where new job creation has been adversely affected include FMCG, sales, customer service operations, insurance and telecom. Staffing firm TeamLease estimates between sales and customer services new job creation over the last six months has reduced by 15% from a year ago.

Manish Sabharwal, chairman TeamLease Services said if the  current trend continues automobiles and BPOs could be next in line to feel the heat on job creation.

And it is not just entry-level jobs but middle- and top-level executives are feeling heat as well. “Of late, hiring activity has weakened in senior level positions as well,” said Vikram Chhachhi, executive vice president at the global executive search firm DHR International.

Negative sentiments have only increased over the last 18 months due to stalled economic reforms, he felt. “...and thanks to the uncertainty, nobody knows what lies six months ahead,” he said.

Excise mop-up dips 6.5% in Nov

The government on Friday said excise duty collections has fallen by 6.5% in November compared to the same period last year, a strong sign of industrial deceleration crippled by costly borrowing, rising raw material cost and weakening consumer demand.

Excise duty collections during November stood at Rs 11,761 crore, down from Rs 12,574 crore collected during the same month of the previous year.

“Decline in central excise collection is a matter of concern and we are studying relevant aspects to identify the shortfall and will rectify it to achieve our target,” CBEC chairman SK Goel told reporters here on Friday.

In 2011-12, the government had budgeted to collect Rs 4,00,635 crore from indirect taxes — customs, excise and service tax — but meeting this appears increasingly difficult. Till November, government has collected Rs 2,52,544 crore as indirect taxes or 63% of the budgeted amount.


Brakes on expansion plans

With rising interest rates and inflation battering consumer sentiment in the country, Indian companies are busy redrawing targets and rethinking investments.

India’s second-largest carmaker Hyundai Motor India ltd has postponed plans to invest Rs 400 crore to set up a diesel engine factory citing sluggish demand for cars.

Market leader Maruti Suzuki India Ltd, which had announced a new factory in Gujarat, doubts whether it would go live as per schedule.

“This year we do not expect any growth as reaching last year’s level itself is a challenge,” said RC Bhargava, chairman, MSIL. “We make cars as per the demand in the market. So if it remains as sluggish, then our expansion would also need to be realigned accordingly.”

Consumer durable manufacturers are also hit. “We are keeping a close eye on the macro-economic situation. In the present scenario we will be cautious in investment plans,” the spokesperson of a Japanese durables manufacturer said.


Holes: telecom, disinvestment


A question mark loomed over the India’s ability to meet this year’s fiscal deficit targets with the government unsure about meeting its non-tax revenue targets from two primary sources — telecom spectrum sale and disinvestment in public sector undertakings (PSUs).

The government had estimated earnings of Rs 40,000 crore from disinvestment of PSU and another Rs 29,648 crore  from receipts on account of spectrum usage charges and auction of broadband wireless access (BWA) spectrum.

However, the department of telecommunications is yet to finalise plans for sale of 20mhz of broadband spectrum in most of the telecom circles.

“The Government is addressing these challenges so as to realise major portions of these estimated receipts,” the finance ministry’s mid-year analysis of the Indian economy tabled in Parliament on Friday said.


Support for farmers’ loans

Farmers who have been paying their loans on time are set to be rewarded by the government. The centre has decided to pay a part of their loans by raising the interest rate subsidy from the current 2% to 3%.

The department of expenditure is understood to be looking into the matter. The government in its mid-year review indicated that a cabinet note has also been prepared for finalising the details.

The move would encourage more farmers to get into the institutional credit mode. At present about 60% of farmers still avail loans from non-institutional sources like money lenders in a bid to avoid procedural complications.

Commercial banks, with a target of Rs 4,75,000 crore of agriculture credit for 2011-12, have also stepped up their direct lending operations to small and marginal farmers on a priority basis.