Thursday December 25, 02:48 AM

Source: Indian Express Finance

'The cost of borrowing is an area of concern in India'

Christopher Doyle, country manager (India), Economics Intelligence Unit, has about 18 years of experience in India and Asia, in industries as diverse as consumer products, hospitality and information technology. The IIM-C graduate has held positions as sales and marketing head, as well as business head with leading multinational companies. In an interview with fe s Abhay Rao, he offers a refreshing take on corporate India, the economy and the current financial conditions as well as future prospects. Excerpts: Business intelligence covers a large number of services. What kind of services will you be providing to Indian companies? I d like to differentiate business intelligence from the market intelligence that Indian companies traditionally seek. Business intelligence has three key components: business environment analysis, risk analysis and forecasting. There are three levels of service in business intelligence: raw data, macro analysis and microanalysis. The Economist Intelligence Unit provides reliable data but our core competence is objective and reliable macro and microanalysis along with forecasting services. We offer services like environment analysis, risk analysis, scenario forecasting and macroeconomic and specific forecasts. Since business intelligence is often sought for special purposes, how do you plan to maintain business sustainability? Business intelligence is an integral part of strategy development and is required whenever strategy is being developed. It can be for an acquisition, expansion in new or existing markets, launch of new products, or coping with a downturn. Indian companies are beginning to recognise the importance of business intelligence. However, most companies face challenges in data collection: data is either not available or fragmented, or simply unreliable. It is also difficult to source objective and reliable analysis backed by credible expertise. Forecasting is a specialised exercise requiring expertise, rigorous forecasting models and experience, and reliable and accurate forecasting is difficult to come by for Indian companies. What are the business intelligence services most sought after by Indian companies? Different services are sought out by organisations depending on their specific business objectives. MNCs entering India are interested in forecasting and business environment analysis. Indian and MNCs in the domestic market are interested in geographical opportunity mapping, forecasting and business environment analysis. Indian firms expanding overseas are interested in geographical opportunity mapping, risk analysis and forecasting. And, at some point of time, all of them need comprehensive risk analysis to build contingency plans into their strategies. What changes would you like to see in India to strengthen economic growth? The cost of borrowing remains an area of concern. Despite RBI reducing key policy rates, the cost of capital hasn t really come down for borrowers. The government needs to use both fiscal and monetary measures to cushion the impact on the ongoing cyclical downturn. Unfortunately, the government has limited options. The aggressive 100-basis-point moves on interest rates highlight the government s limited scope for fiscal pump-priming. In the first half of fiscal 2008-09 the government s fiscal deficit stood at 4.5% of GDP, much higher than the 2.5% target it had set for the whole year. If it rises further, India risks downgrades of its sovereign-debt ratings. When do you see the global financial situation stabilising? Despite the massive rescue packages for the global financial system, key indicators of risk aversion remain at an exceptionally high level. Although this could mean that the measures are insufficient, it seems more likely that it will take some time for the markets to unlock. However, there are a number of further triggers for renewed turmoil. The impact of the credit crisis is increasingly feeding through to the real economy in the US, which should lead to rising defaults on many types of loans, but this has not been fully discounted by financial institutions. Defaults of major non-financial companies could also cause a new panic. The weakening of countries other than the US, including emerging markets, could also send new shock waves through the international financial system. Our central forecast assumes that any new shocks will lead to only temporary flare-ups rather than a further worsening of financial conditions on a global scale. We do not, however, see a full normalisation of financial conditions until 2010 at the earliest. How will India fare while coming out of the global financial turmoil? As far as India is concerned, a combination of the global financial crisis and slower domestic demand growth will lead to real GDP growth of around 6% in 2008-09, down from 9% in 2007-08. Global deleveraging and moves to reduce risk exposure will hit India hard, especially in terms of the availability of financing for investment and consumption, while the slump in world trade growth will feed through even to India s domestically oriented economy. The slowdown was initially restricted to the industrial sector, but now it is spreading to the services sector as well.