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Indian Economy: News and Discussion
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Cabinet okays largest ever spectrum auction, to fetch Rs 64840 crore
This may help government reach its fiscal deficit target of 4.1 per cent of GDP.
This may help government reach its fiscal deficit target of 4.1 per cent of GDP.
LETHALFORCE
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Index of Industrial Production (IIP) for the month of November-14 grew at 3.8% versus (-) 4.2% in October-14.
November IIP beats estimates at 3.8%
November IIP beats estimates at 3.8%
Neo
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IBM likely to lay off 5,000 employees in India, economy in doldrums
BENGALURU: IBM is expected to lay off a few thousand people in India in the coming months as the company moves towards newer technologies such as cloud computing and mobile and as it seeks to deal with dropping revenues and growing margin pressures.
Multiple sources put the likely figure in India at about 5,000 employees, though they also said many of these could be replaced by contract staff. This will help margins, and facilitate just-in-time hiring in the current volatile market.
IBM did not respond to questions about this from TOI till late Tuesday evening.
On Monday, Forbes carried an article by Silicon Valley technology columnist Robert Cringely who said that IBM was planning a transformation project - code named Project Chrome -- that would reduce its global workforce by 26% or 1.12 lakh employees. IBM responded in an email to news agency Reuters that the company had "just taken a $600 million charge for workforce rebalancing" and this equated to job cuts of "several thousand employees, a small fraction of what's been reported (by Forbes)." Most analysts have also dismissed the possibility of a layoff on the scale reported by Cringely.
India accounts for about 1.3 lakh employees out of IBM's total workforce of over 4 lakh, and for that reason will likely to have to bear a significant burden of the layoffs. IBM spends over $150 million annually to hire contract IT staff. Contract hiring provides quick access to skilled technical resources and is a cost-effective alternative to supplement existing IT staff without incurring recruitment or training costs.
"There is a strong movement towards contract staffing based on future business dynamics. Companies want to hire project-based staff rather than have permanent employees on their rolls," said Ajit Isaac, chairman and MD of Ikya Global. Four big HR staffing firms -- Web Development Company (part of Manpower Group), Magna Infotech, Artech Infosystems and Collabera -- supply close to 7,000-8,000 people to IBM annually, said sources.
Over the past decade, IBM has hired frenetically in India, making it the company's largest operation, even as it has reduced its US headcount from 1. 33 lakh in 2005 to 83,000 last year. India is the company's core services delivery engine.
IBM's global revenues have dropped for eleven successive quarters. The $93-billion company is focusing on newer digital imperatives like cloud, mobility and analytics. "Previously there was higher tolerance towards mediocre skillsets. That's not something companies want to live with. They want employees to be flexible and take on lateral roles. Many companies hired aggressively in the past and now they are sitting on huge manpower that's not scalable or flexible," said Rituparna Chakraborty, co-founder of TeamLease.
http://timesofindia.indiatimes.com/t...w/46035434.cms
BENGALURU: IBM is expected to lay off a few thousand people in India in the coming months as the company moves towards newer technologies such as cloud computing and mobile and as it seeks to deal with dropping revenues and growing margin pressures.
Multiple sources put the likely figure in India at about 5,000 employees, though they also said many of these could be replaced by contract staff. This will help margins, and facilitate just-in-time hiring in the current volatile market.
IBM did not respond to questions about this from TOI till late Tuesday evening.
On Monday, Forbes carried an article by Silicon Valley technology columnist Robert Cringely who said that IBM was planning a transformation project - code named Project Chrome -- that would reduce its global workforce by 26% or 1.12 lakh employees. IBM responded in an email to news agency Reuters that the company had "just taken a $600 million charge for workforce rebalancing" and this equated to job cuts of "several thousand employees, a small fraction of what's been reported (by Forbes)." Most analysts have also dismissed the possibility of a layoff on the scale reported by Cringely.
India accounts for about 1.3 lakh employees out of IBM's total workforce of over 4 lakh, and for that reason will likely to have to bear a significant burden of the layoffs. IBM spends over $150 million annually to hire contract IT staff. Contract hiring provides quick access to skilled technical resources and is a cost-effective alternative to supplement existing IT staff without incurring recruitment or training costs.
"There is a strong movement towards contract staffing based on future business dynamics. Companies want to hire project-based staff rather than have permanent employees on their rolls," said Ajit Isaac, chairman and MD of Ikya Global. Four big HR staffing firms -- Web Development Company (part of Manpower Group), Magna Infotech, Artech Infosystems and Collabera -- supply close to 7,000-8,000 people to IBM annually, said sources.
Over the past decade, IBM has hired frenetically in India, making it the company's largest operation, even as it has reduced its US headcount from 1. 33 lakh in 2005 to 83,000 last year. India is the company's core services delivery engine.
IBM's global revenues have dropped for eleven successive quarters. The $93-billion company is focusing on newer digital imperatives like cloud, mobility and analytics. "Previously there was higher tolerance towards mediocre skillsets. That's not something companies want to live with. They want employees to be flexible and take on lateral roles. Many companies hired aggressively in the past and now they are sitting on huge manpower that's not scalable or flexible," said Rituparna Chakraborty, co-founder of TeamLease.
http://timesofindia.indiatimes.com/t...w/46035434.cms
Link no longer exists, perhaps yet another fake story.
Anyway, you should read what you post (and edit the headline of).
IBM is in doldrums, its I believe its the worst performing stock for the last couple of years.
IBM's Stock Is About To Hit An Embarrassing Milestone
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Telcos' payments banks eye Rs 14k cr of transaction fees
Telecom companies that have applied for payments bank licences are eyeing a sizable chunk of the additional revenue of Rs 14,000 crore from transaction fees, primarily from the remittances and cash-outs and cash-ins un-banked customers undertake on their payments bank accounts. They plan to draw customers in the remittances segment by charging lower fees compared to the current competition, including India Post, as well as informal channels.
Telcos say the additional revenue will be attractive, considering this is seven-eight per cent of the sector's annual revenue of about Rs 1,80,000 crore.
Telcos, including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Industries (which controls Reliance Jio), had applied for payments banking licences on Monday, some along with partners.
These companies say unlike banks, which make money on float (by arbitrage, as these lend money at higher interest than what they pay depositors) and don't charge on transaction services, telcos will charge for services, primarily cash-outs and cash-ins. But some telcos say to attract investors, they will pay high interest on deposits, 7.5-8 per cent, by passing on the entire interest they make on keeping the cash in government securities.
Payments banks, unlike scheduled banks, cannot use the cash to give loans.
Telcos say initially, they are looking at levying a transaction fee of two per cent (for one-way transfers such as remittances) to about three per cent (for two-way transfers) of the value. This, they add, will come down with a rise in transactions. However, the net fee, as percentage of the value of a transaction, will be lower, as such companies have to pay for the cost of cash management (the cost of making cash available at the last mile, for deposits and withdrawals in these accounts).
"Initially, the cost of cash management will be about two per cent if you do both ways (cash-in and cash-out) and one per cent one-way. So, for a telco, the net margin will be one per cent on transactions. As the bank has to fund all its variable costs and fixed costs with this one per cent, the scale becomes important to defray costs," said a senior executive of a telco that has applied for a licence. There are about 180 million un-banked households in India. Telcos estimate each household will put in about Rs 24,000 annually into their payments banks, which means a corpus of Rs 4,32,000 crore.
EARNING VIA TRANSFERS
But while working on their business models, telcos have assumed each of these households will spend about Rs 18,000 annually, an overall amount of Rs 324,000 a year. It is only on this money that telcos can charge transaction fees. Based on their plan to charge three per cent, their revenue will be stand at about Rs 10,000 crore.
Another area telcos will focus on is fee from remittances. They estimate this to be a Rs 200,000-crore market, half of which is in the informal sector and not being reflected in official numbers (on remittances through India Post, mobile wallets, etc) because of lack of clarity on the definition of migrants. Currently, the average ticket size of a remittance handled by a telco is about Rs 8,000 a year, usually in two transactions. With a two per cent fee on transactions, mobile companies are looking at annual revenue of about Rs 4,000 crore.
Some companies, however, might charge a flat fee of three per cent for both remittance and transactions on deposits, which will boost their revenues. Companies estimate this business will virtually double in the next three to five years.
Telcos say they cannot charge a transaction fee of more than three per cent, as Indian Post, for instance, charges five per cent on two-way transfers, while one of the nationalised banks charges two per cent on one-way transactions (0.5 per cent for in-house customers). "With India Post at five per cent and informal channels charging six per cent, we don't see anyone charging more than three per cent if it wants to build scale," said a senior bank executive.
But what gives telcos an edge in this segment is the sheer reach of mobile services. Telecom companies say as much as 60 per cent of the country's household is banked, and in rural areas, this percentage is only 54 per cent, adding the real number is lower, as 50 per cent of those who have bank accounts do not use those at all. But most of them have mobile phones.
For instance, Bharti Airtel, is present in 50 million villages across the country and cover 87 per cent of the total population.
Importantly, telcos have the cheapest cost of executing transactions, which a bank cannot match. That is because they have the technology and the infrastructure to handle billions of phone calls a year. For instance, a leading telco handles 52 billions transactions (calls) annually, but spends only Rs 1,000 crore on capital expenditure on information technology. This gives them an edge in a business in which transaction costs is key.
It helps telcos if their customers are loyal, especially amid the growing competition. "A consumer who uses voice alone is less sticky than one who also uses data. One who also uses our mobile payment bank services, apart from the other two, will be more loyal to the brand," says a senior executive of a telecom company.
My opinion:
This will have a major impact on our economy if successful, This is the logical next step after Modi's jan dhan yojana. This is part of the financial inclusion plan that country like ours needs. Many theories have been floated in this regard since 2008 but none have materialised. The advantages of this concept is that it is the precursor to the cashless society every country aspires to be. This concept is likely to put additional 70 billion USD annually in our banking system.
Telecom companies that have applied for payments bank licences are eyeing a sizable chunk of the additional revenue of Rs 14,000 crore from transaction fees, primarily from the remittances and cash-outs and cash-ins un-banked customers undertake on their payments bank accounts. They plan to draw customers in the remittances segment by charging lower fees compared to the current competition, including India Post, as well as informal channels.
Telcos say the additional revenue will be attractive, considering this is seven-eight per cent of the sector's annual revenue of about Rs 1,80,000 crore.
Telcos, including Bharti Airtel, Vodafone India, Idea Cellular and Reliance Industries (which controls Reliance Jio), had applied for payments banking licences on Monday, some along with partners.
These companies say unlike banks, which make money on float (by arbitrage, as these lend money at higher interest than what they pay depositors) and don't charge on transaction services, telcos will charge for services, primarily cash-outs and cash-ins. But some telcos say to attract investors, they will pay high interest on deposits, 7.5-8 per cent, by passing on the entire interest they make on keeping the cash in government securities.
Payments banks, unlike scheduled banks, cannot use the cash to give loans.
Telcos say initially, they are looking at levying a transaction fee of two per cent (for one-way transfers such as remittances) to about three per cent (for two-way transfers) of the value. This, they add, will come down with a rise in transactions. However, the net fee, as percentage of the value of a transaction, will be lower, as such companies have to pay for the cost of cash management (the cost of making cash available at the last mile, for deposits and withdrawals in these accounts).
"Initially, the cost of cash management will be about two per cent if you do both ways (cash-in and cash-out) and one per cent one-way. So, for a telco, the net margin will be one per cent on transactions. As the bank has to fund all its variable costs and fixed costs with this one per cent, the scale becomes important to defray costs," said a senior executive of a telco that has applied for a licence. There are about 180 million un-banked households in India. Telcos estimate each household will put in about Rs 24,000 annually into their payments banks, which means a corpus of Rs 4,32,000 crore.
EARNING VIA TRANSFERS
- Additional revenues: Likely to be 8% of telcos' current revenues
- Transaction fees: Telcos might initially charge 2% on one-way transactions such as remittances, and 3% on two-way ones such as cash-ins and cash-outs
- Interest rate: Likely to offer average interest of 7.5-8%
- Unbanked households: Estimated to be about 180 million at present
- Corpus: Telcos estimate each household to put in about Rs 24,000 in their payments bank accounts annually — a total of Rs 4,32,000 cr
- Spend by households: Likely to be about Rs 18,000 per household annually — a total of Rs 3,24,000 cr a year
- Revenue: Since the transaction fee telcos can charge is on the spending part, their revenue from two-way transfers at a 3% fee comes to a little under Rs 10,000 cr annually; additionally, the Rs 2,00,000-cr remittance market at 2% fee will fetch Rs 4,000 cr
- Remittance growth target: The market size is likely to double to Rs 4,00,000 cr in 3-5 years
But while working on their business models, telcos have assumed each of these households will spend about Rs 18,000 annually, an overall amount of Rs 324,000 a year. It is only on this money that telcos can charge transaction fees. Based on their plan to charge three per cent, their revenue will be stand at about Rs 10,000 crore.
Another area telcos will focus on is fee from remittances. They estimate this to be a Rs 200,000-crore market, half of which is in the informal sector and not being reflected in official numbers (on remittances through India Post, mobile wallets, etc) because of lack of clarity on the definition of migrants. Currently, the average ticket size of a remittance handled by a telco is about Rs 8,000 a year, usually in two transactions. With a two per cent fee on transactions, mobile companies are looking at annual revenue of about Rs 4,000 crore.
Some companies, however, might charge a flat fee of three per cent for both remittance and transactions on deposits, which will boost their revenues. Companies estimate this business will virtually double in the next three to five years.
Telcos say they cannot charge a transaction fee of more than three per cent, as Indian Post, for instance, charges five per cent on two-way transfers, while one of the nationalised banks charges two per cent on one-way transactions (0.5 per cent for in-house customers). "With India Post at five per cent and informal channels charging six per cent, we don't see anyone charging more than three per cent if it wants to build scale," said a senior bank executive.
But what gives telcos an edge in this segment is the sheer reach of mobile services. Telecom companies say as much as 60 per cent of the country's household is banked, and in rural areas, this percentage is only 54 per cent, adding the real number is lower, as 50 per cent of those who have bank accounts do not use those at all. But most of them have mobile phones.
For instance, Bharti Airtel, is present in 50 million villages across the country and cover 87 per cent of the total population.
Importantly, telcos have the cheapest cost of executing transactions, which a bank cannot match. That is because they have the technology and the infrastructure to handle billions of phone calls a year. For instance, a leading telco handles 52 billions transactions (calls) annually, but spends only Rs 1,000 crore on capital expenditure on information technology. This gives them an edge in a business in which transaction costs is key.
It helps telcos if their customers are loyal, especially amid the growing competition. "A consumer who uses voice alone is less sticky than one who also uses data. One who also uses our mobile payment bank services, apart from the other two, will be more loyal to the brand," says a senior executive of a telecom company.
My opinion:
This will have a major impact on our economy if successful, This is the logical next step after Modi's jan dhan yojana. This is part of the financial inclusion plan that country like ours needs. Many theories have been floated in this regard since 2008 but none have materialised. The advantages of this concept is that it is the precursor to the cashless society every country aspires to be. This concept is likely to put additional 70 billion USD annually in our banking system.
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Kay
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Now there was an ongoing discussion in a different thread about democratic socialism - its merits and demerits. Since the thread was going off-topic, I am posting my replies here as suggested by the moderator.
I have been called a "closet commie". Don't know what it means. Anyway, I do believe in the democratic process and not a single party state. I like in democratic socialism, which is explained in Wikipedia. And in free markets but not in crony capitalism.
This post is in reply to my conversation with @Mad Indian.
I appreciate you taking the time out to make such a detailed reply.
As you said, there is nothing wrong in hiring and firing. And I agree, that in a pure capitalistic world, that is what it should be. But, then, in a pure capitalistic world, as per your logic, government must not come in between employer and employee. This raises many questions: - Does this mean child employment is ok? Because child employment is a product of demand and supply. Also, is bonded workers agreeable. Persons sell themselves under duress and work forcibly. What about slavery?
India is now the world’s slave capital: Global Slavery Index 2014 - The Times of India
Also, as per your logic, if the government does not have to interfere in companies firing indiscriminately, why does the government have to interfere in acquiring land for businessmen. Sure industrialists can acquire land directly from farmers and landowners. You cannot have separate rules for different people. Also, if banks fail, why do governments have to prop them up with public money. Shouldn't they be allowed to perish.
My gripe is not not with free enterprise, but against crony capitalism. i.e. rich industrialists wielding inordinate influence in politics, lobbying and buying politicians and getting underhand deals in return. We villify the politicians, but they escape scrutiny - Radia Tapes, Ambani's KG Gas and 2G scams, Adnani's SBI Loan are forgotten. You guys (middle class educated guys) are afraid to point fingers at them because you think that will affect your chances to hitch your cart to theirs.
But the fact is, big industries produce a lot less jobs than Micro, Small and Medium Enterprises (MSMEs), which receive far less attention from the government than they should. Also, our education system does not imbue us with the spirit of innovation and entrepreneurship and most people simply wants jobs. Even today it is very difficult to set up new start-ups in our country and as a result people are more dependent on big industries whose actions go un-scrutinized. Imagine the hell you will face if you don't pay back your loans and compare with Vijay Mallya. Also, big industries care about profits - not about countries and people - they will move out and outsource to poorer countries the moment Indian wages become competitive. That is happening now.
Wipro opens outsourcing centre in Philippines - Livemint
Infosys Opens First Philippine BPO Branch With Collaboration Platform From Cisco | The Network
I have been called a "closet commie". Don't know what it means. Anyway, I do believe in the democratic process and not a single party state. I like in democratic socialism, which is explained in Wikipedia. And in free markets but not in crony capitalism.
This post is in reply to my conversation with @Mad Indian.
I appreciate you taking the time out to make such a detailed reply.
As you said, there is nothing wrong in hiring and firing. And I agree, that in a pure capitalistic world, that is what it should be. But, then, in a pure capitalistic world, as per your logic, government must not come in between employer and employee. This raises many questions: - Does this mean child employment is ok? Because child employment is a product of demand and supply. Also, is bonded workers agreeable. Persons sell themselves under duress and work forcibly. What about slavery?
India is now the world’s slave capital: Global Slavery Index 2014 - The Times of India
Also, as per your logic, if the government does not have to interfere in companies firing indiscriminately, why does the government have to interfere in acquiring land for businessmen. Sure industrialists can acquire land directly from farmers and landowners. You cannot have separate rules for different people. Also, if banks fail, why do governments have to prop them up with public money. Shouldn't they be allowed to perish.
My gripe is not not with free enterprise, but against crony capitalism. i.e. rich industrialists wielding inordinate influence in politics, lobbying and buying politicians and getting underhand deals in return. We villify the politicians, but they escape scrutiny - Radia Tapes, Ambani's KG Gas and 2G scams, Adnani's SBI Loan are forgotten. You guys (middle class educated guys) are afraid to point fingers at them because you think that will affect your chances to hitch your cart to theirs.
But the fact is, big industries produce a lot less jobs than Micro, Small and Medium Enterprises (MSMEs), which receive far less attention from the government than they should. Also, our education system does not imbue us with the spirit of innovation and entrepreneurship and most people simply wants jobs. Even today it is very difficult to set up new start-ups in our country and as a result people are more dependent on big industries whose actions go un-scrutinized. Imagine the hell you will face if you don't pay back your loans and compare with Vijay Mallya. Also, big industries care about profits - not about countries and people - they will move out and outsource to poorer countries the moment Indian wages become competitive. That is happening now.
Wipro opens outsourcing centre in Philippines - Livemint
Infosys Opens First Philippine BPO Branch With Collaboration Platform From Cisco | The Network
Last edited by a moderator:
Kay
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Also, we were discussing the Chinese growth model which you were criticizing. As you said, China started slowly and then accelerated. They put the early focus on health and education and reaped the benefit to this day. The video below explains how health and education is correlated to development.
Hans Rosling: Asia's rise -- how and when | Talk Subtitles and Transcript | TED.com
Actually, the Chinese model was more similar to the model advocated by Gandhi - local development first followed by industrialization. But we went for all out industrialization first without a strong foundation. This has been disastrous. It has created 300 million strong well educated middle class who read about the plight of 300 million undernourished and poor Indians in their smartphones.
This second figure is not going down anytime soon with policies of corporate appeasement. The congress government actually fudged numbers and changed the goalposts. Poverty line is today defined at Rs. 33/day. Try living with that. If anyone thinks realistically, we know more than 500 million Indians live in borderline poverty.This situation is bad for two reasons.
First, as the wealth gap rises, people lose faith in the Government. Then they take up arms and join opportunists like Naxal leaders. They are driven to a point where they have nothing to lose. This undermines our country and creates unstability.
The second drawback is more about economics. Since labor remains cheap, automation will be postponed as businessmen will not find the incentive to modernize. Our production capability will suffer.
Also, if people remain poor, innovation suffers.
Hans Rosling: Asia's rise -- how and when | Talk Subtitles and Transcript | TED.com
Actually, the Chinese model was more similar to the model advocated by Gandhi - local development first followed by industrialization. But we went for all out industrialization first without a strong foundation. This has been disastrous. It has created 300 million strong well educated middle class who read about the plight of 300 million undernourished and poor Indians in their smartphones.
This second figure is not going down anytime soon with policies of corporate appeasement. The congress government actually fudged numbers and changed the goalposts. Poverty line is today defined at Rs. 33/day. Try living with that. If anyone thinks realistically, we know more than 500 million Indians live in borderline poverty.This situation is bad for two reasons.
First, as the wealth gap rises, people lose faith in the Government. Then they take up arms and join opportunists like Naxal leaders. They are driven to a point where they have nothing to lose. This undermines our country and creates unstability.
The second drawback is more about economics. Since labor remains cheap, automation will be postponed as businessmen will not find the incentive to modernize. Our production capability will suffer.
Also, if people remain poor, innovation suffers.
Kay
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@Khagesh
I am sorry. This is from a different thread and I could not reply previously.
The reason growth rates become stagnant once countries reach a certain level of development is because wages increase and cheap labor becomes available elsewhere. This will happen when we develop as well.
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Khagesh
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Wages are an input cost to some other output value.
Nobody gives wages to somebody else unless the giver of wages gets a value greater than the wages. Actually it remains an equally potent argument that even the wager taker perceives greater value in selling his labour then in not selling it. These, to my mind implies, that value creation at two levels is net-net a wealth generation activity.
So how does growth stagnation due to high wages happen? What is the mechanics behind this new economy where people get paid wages but not enough wealth gets generated?
I am trying to understand the logic that is used to explain this phenomena.
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Kay
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@Khagesh
The rupee will gain. You cannot drive it down artificially without having other problems, as the Chinese are finding out. Wages for all types of jobs increase relative to world standard for the same output. The cost of most products produced in the country (including food items) goes up due to rupee's gain. Higher education standards means higher living standards. This means higher regulation standards (e.g. food regulations, packaging standards, everything). Most sectors will be more structured. Also, the wage gap decreases between high skilled and skilled jobs. The size of the domestic consumer market will also stabilize, which is increasing now. Indians companies will have to outsource jobs outside India to remain profitable because of higher wages. This will increase social spending. A developed nation has a stable population as parents spend more on fewer kids than trying to have multiple kids. This also leads to wage growths, but this is generally offset by immigration.
I think India can become a developed country only when the population stabilizes.
The rupee will gain. You cannot drive it down artificially without having other problems, as the Chinese are finding out. Wages for all types of jobs increase relative to world standard for the same output. The cost of most products produced in the country (including food items) goes up due to rupee's gain. Higher education standards means higher living standards. This means higher regulation standards (e.g. food regulations, packaging standards, everything). Most sectors will be more structured. Also, the wage gap decreases between high skilled and skilled jobs. The size of the domestic consumer market will also stabilize, which is increasing now. Indians companies will have to outsource jobs outside India to remain profitable because of higher wages. This will increase social spending. A developed nation has a stable population as parents spend more on fewer kids than trying to have multiple kids. This also leads to wage growths, but this is generally offset by immigration.
I think India can become a developed country only when the population stabilizes.
Last edited by a moderator:
