Guest Lecture on Business Ethics by Mr. Folker Mittag

Today we had a guest lecture on business ethics by Mr. Folker Mittag, who is associated with the Caux Initiatives for Business. The guest lecture was organized as a discussion and there were ideas exchanged between the students and the guest, Mr. Folker Mittag. I will try to highlight the important points from this discussion in this blog post.

To do ethical business, we have to listen to our conscience, and identify the actions which are right by our conscience. A person who does not follow ethics in professional life will not be able to do so in their personal life as well. There are no short cuts in business and businesses that take short cuts close down sooner or later.

In order to inculcate a culture of ethical behavior, the top management has to set the role model for the employees of the organization.  If the top management is corrupt, you cannot expect the employees to follow ethical behavior in their business dealings. The values of the organization have to guide the behavior of the employees of the company. The mission statement for Toyota states - "Do that which is good for the community, do that which is good for the employees and do that which is good for the company. The profits have to be re-invested for future growth." A primary profit motive with efforts and funds dedicated for corporate social responsibility and a values driven organization could also be acceptable ethically. 

Whistle blowers have a first duty onto themselves to take necessary steps to curb unethical practices within the organization. They need to notify the top management and all stakeholders concerned within the organization and take all possible measures to stop the unethical practices before they go public with their disclosure of business malpractices.

Customers too should choose companies that deal ethically. They should not deal with companies known for malfeasance. Costs should not be reduced if that means doing unethical business. Even in ethical business, sometimes it may be right to charge a customer higher if they do not understand the true effort and time that goes into the product and make unreasonable demands from the producer. Cutting corners to deliver the product or service is termed unethical.

Where are the bottlenecks to growth in India right now?

So this is the question on my mind - given the situation that India is in right now, where should we be investing the limited funds available to us? The situation being that government budget is constrained by the fact that the fiscal deficit should not be more than 5% of GDP. With the Goods and Services Tax coming up next year, there will be revenue sharing between center and states and the budget of the Central Government will be constrained even further. At present the government is finding it hard to implement the recommendations of the 7th pay commission. The manufacturing sector is lagging as government is not undertaking major projects (such as new dams, nuclear reactors, smart grids, etc.) at this stage and this is showing in corporate earnings of the industrial companies. The economy is in a dismal state right now.

The Goods and Services tax is expected to be a friendlier tax regime than the present VAT which suffers from 2 important drawbacks: 1. Cascading taxation and 2. Inability to tax imports on par with the domestic production. With the states sharing the revenue from the single GST tax regime, the Center will have to delegate increasing responsibilities to states than done previously. This would also open up the opportunities for state level debt and state government bonds similar to the central government bonds. A constitutional amendment will be required to enable the states to collect the GST.

The Congress had brought the GST bill in Parliament in UPA2 regime but were not able to bring the states on consensus on a common tax rate and so the bill was stalled. Now the BJP has been able to bring the states to consensus on the GST tax rate and the Congress is blocking the GST bill in Rajya Sabha.

The second factor that can boost the economy is Foreign Direct Investment in critical sectors such as power (nuclear reactors, smart grids, etc.) and transportation (high speed rail). These are very attractive sectors commercially and corporations in Japan and USA provide debt financing at low interest rates for such environmentally friendly projects. For example, Japan has offered to finance the the first bullet train in India, having a cost of $15 billion, at a 1% interest rate.  There are a lot of opportunities in the nuclear power sector after the India and USA reached a joint agreement on development of civilian nuclear power (Link to September 2015 story).  GE-Hitachi had started discussions on building nuclear power plants in India (Link to February 2015 story).  These deals are stalled right now.

Generating more nuclear power will help reduce our dependence on coal imports for generation of electricity. This could potentially solve the persistent power deficit problem in this country and make power production immune to supply side shocks from high price of coal and natural gas when the Rupee depreciates.

The FDI regime in India can be changed from limited FDI (49-50% in most sectors) to 100% FDI with a caveat that the business has to support local jobs. This has been implemented in multi brand retail where we have seen Walmart set up stores in India and source large amounts of their merchandise locally. USA has similar FDI norms where car manufacturers have to manufacture at least half of their cars in USA. I believe this would make the FDI route more attractive for businesses and multi national corporations.

I think these factors can significantly improve the growth prospects of the Indian economy at this point of time.

On The Problems Facing Africa

Read this story in The Economist today discussing the problems faced by an industrializing Africa. I think the story has a few problems in its analysis. The problem that Africa is facing is one of skipping the industrial phase of development and moving to the services phase seen in developed economies with out moving enough people from rural to the urban centers. 

The story suggests the exchange rate fluctuations are not helping boost exports to support the industrialization of Africa. On the one hand, Africa is a commodities exporter and the commodity exports drive up the exchange rates. The story suggests such high exchange rates don't support manufacturing exports. 

I think there is a problem here. Strong currencies make input costs lower and all major industrialized economies in the world today, be it Germany, China or USA, are following a strong currency policy. No doubt, they are commodity importers net-net. Even for Africa, if they are exporting some commodities, they will be importing others they don't have, such as maybe oil or copper. 

A strong currency would thus make African economies much more competitive. Not only would that reduce the input costs, but also increase the domestic buying power and improve the quality of life. A stable currency such as a pegged currency would attract a lot of capital investments from manufacturing companies who benefit from the stable macroeconomics and low un-certainities. 

All in all, Africa could try a managed currency regime like China did over last 20 years with free investment environment, to attract large capital investments to benefit from the local abundance of commodities.

http://www.economist.com/news/middle-east-and-africa/21677633-there-long-road-ahead-africa-emulate-east-asia-more-marathon?cid1=cust/ednew/n/bl/n/2015115n/owned/n/n/nwl/n/n/n/n

A Design Of A Data Warehouse And Use Of Data Mining Techniques For Analysis Of Risk Factors Affecting Agriculture In India

We published a paper titled "A Design Of A Data Warehouse And Use Of Data Mining Techniques For Analysis Of Risk Factors Affecting Agriculture In India" in the IOSR Journal of Agricultural and Veterinary Sciences.

Here is the link to the published paper: A Design Of A Data Warehouse And Use Of Data Mining Techniques For Analysis Of Risk Factors Affecting Agriculture In India

The Journal issue can be found here: IOSR Journal of Agricultural and Veterinary Sciences Volume 8 Issue 10

Abstract: In this paper, data made available in public domain by the Government of India, under the Open Government Data Initiative is analysed using data warehouse design and data analysis techniques. A data model is developed to analyse risks in agriculture. Regression analysis and K-Means Clustering are used as analysis techniques to derive insights from the available data and identify potential risk factors.

The datasets used in this paper can be accessed here:

SOURCE DATASETS DOWNLOADED FROM DATA.GOV.IN    DOI: 10.13140/RG.2.1.1557.2566

SCHEMA TABLE DATASETS GENERATED BY TRANSFORMING THE INPUT DATA:  DOI: 10.13140/RG.2.1.3654.4087

SELECTED PIVOT CHARTS USED FOR FINAL ANALYSIS: DOI: 10.13140/RG.2.1.4178.6966

Impact Of Rupee Exchange Rate On Business Opportunities In India

We published a research paper titled "Impact Of Rupee Exchange Rate On Business Opportunities In India" in the IOSR Journal of Economics and Finance and the paper can be accessed here: Link to the journal

In this paper, we have presented the impact of Rupee exchange rate on business opportunities in India from a macro economic perspective considering the indicators such as Consumer Price Inflation, Gross Domestic Product and Index Of Industrial Production.

Abstract: In this paper, we present an analysis of the macro economy in India with respect to the exchange rate of the Rupee and de regulation of oil prices. These 2 factors have been critical in deciding the business competitiveness of the economy and their individual effects are studied. Various business competencies arising from strong and weak Rupee as well as de-regulated prices of oil are discussed. 

In continuation with the analysis expressed in this paper, we would like to share the following analysis:

The Rupee exchange rate in India is linked to the trade deficit (imports - exports). Higher trade deficits lead to a weaker Rupee. Considering an economy which has certain total imports x and certain total exports y, if the exports start dropping and imports (of consumer goods) start increasing, it might be a cause of concern (on the competitiveness of the economy). A currency depreciation might boost the exports in the short run, by making them cheaper. 

But consider the case of India. Here the primary imports are all in energy: oil, natural gas and coal. When the imports increase, we are importing more energy, and that is because the economy is doing well  and we are producing and selling more (domestically and internationally). In this case, should the Rupee depreciate with increased imports? Think about it.

(Petroleum accounts for 34% of India's imports. Data source at tradingeconomics.com)

On another note, Japan manages to import energy (oil) to meet 42% of its energy needs, but does not see any inflation even if the Yen depreciates from 75 to a US Dollar to 100 to a US Dollar. This is not the case with India. As is evident from the above research paper, a depreciation of the Rupee vs US Dollar will lead to higher inflation in the country (data from 2010 to 2014).

The below graph shows the energy imports in India as a percent of total (Data from: tradingeconomics.com)

source: tradingeconomics.com

Differential Snap-Shot Algorithms For Data Extraction From Data Sources And Updating A Centralized Data Warehouse

 A paper with the above title was published in the IOSR Journal of Engineering in their October 2015 issue.

Abstract: An in-depth review of existing techniques for loading a data warehouse using differential snapshot algorithms is presented. Further, certain performance bottlenecks have been identified and improvements to the existing state of the art are suggested.

The full paper can be downloaded here: IOSR Journal Of Engineering

The journal issue can be accessed here: IOSR Journal Of Engineering

Graph Based Verification And Identification Of Defects By Binary Search On A Graph

Here are the slides from the paper presented at the IEEE Conference on Computing, Communications and Automation organised by the Galgotias University, Gurgaon on 15 May 2014:




The full paper can be downloaded here on IEEE Xplore Digital Library