Outlook for 2023 = Positive or Negative ?

As we draw to the end of 2022, one can only say what a volatile and topsy-turvy year it has been. The year started with lots of hope as everybody was coming out of the Covid fear. Unfortunately, the Russia – Ukraine conflict led to a crisis again in the world with the resulting spike in energy prices, inflation, interest hikes, and recessionary conditions.

The world`s largest economy – the USA faced a peculiar situation of a strong job market as well as rising inflation leading to interest rate hikes spooking the global economy. Europe has been majorly hit by the gas shortage, from the Russian conflict, and is supposedly in a deep recession. China saw lockdowns from Covid and when things were going right, it has seen a sudden wave of Covid emergence again. Global bond markets outlook portends weakness as we move to 2023.

However, everything is not all that gloomy.

1. India has been a bright spot in the global economy thanks to strong consumer spending as well as infrastructure spending.
2. The world cup football tournament was held very successfully in Qatar despite all the negativity to start off with. An African nation -Morocco, made it to the semi-finals of the world cup for the first time ever and globally people shed tears of joy as Lionel Messi lifted the football world cup at the fag end of his career.
   
3. Thanks to the fossil energy crisis, the world has fully realized the potential of renewables which is a great omen for the future.
   
4. Russian President Vladimir Putin has given indications of ending the war.  

As we enter 2023, I am personally inclined to look at the positive trends. Let’s hope that we all have a better year in 2023 and that prosperity and peace prevail.

Merry Xmas and Happy New Year 2023!!

Cheers
#2023, #worldeconomy ,#peace

“Human Resources Supply Chain” – another crisis facing corporates

 “Thanks, Ram for your recognition but after a long thought I have decided to quit my job”. That was one of my brightest team members- 23 years old Darryl, throwing the dreaded “resignation” bomb on me after I handed him his letter for a special recognition, retention bonus letter and extension of work from home facility for him. His reasoning was that he and his family didn’t like Mumbai and he never wants to work in Mumbai in the future! Secondly, he felt that if he had to grow professionally, he had to work in the same corporate office with his bosses and not in a sales office like we had in Bengaluru. Hence, he wanted to work in a corporate in Bengaluru and quit from our Mumbai-based India`s leading conglomerate!!

Even though somebody like me, who came to Mumbai as a student and made my career here, found this reasoning difficult to fathom, the truth is different today with the latest generation workforces!

Recent Trends in Human Resources space

The last couple of years have seen some interesting trends in the Human Resources (HR) space:

ü  Mass resignation wave

ü  1) Debate between work from home (wfh) vs work from office,

ü  2) Challenges in yanking people from wfh to come back to office

ü  3) Hot topic today – moonlighting.

Post Covid and the Ukraine crisis, firms across the world have been grappling with the “Supply Chain Crisis” as supplies of key inputs like semiconductors, oil, gas, etc have been affected which has affected the business dynamics. However, businesses must now face the other elephant in the room “Human Resources supply chain” crisis!!

With a high bit of certainty, never has the HR space faced such a challenging situation and importantly this situation is probably once in a lifetime opportunity for HR professionals to redefine and place on a higher pedestal the value brought to the business by HR teams!!

What`s the soft thread behind the new workforce trends like mass resignation and moonlighting?

Mass resignation wave was triggered by people realizing the benefits of working remotely, and hence preferred jobs with remote working options. Also, the toll on mental health during the pandemic, triggered the need for people to shake off the negative effects of their existing jobs and look for other greener pastures outside leading to the wave.

Moonlighting is a hot topic being debated across India especially in IT companies and has thrown up many interesting issues. Many IT honchos like Rishad Premji of Wipro have spoken openly against moonlighting and have labelled it as cheating! However, the softer thread was that people were essentially looking at a side hustle to diversify their work, create more options in their careers and of course earn some money in the process.

Hybrid workplace is the way to go …

Indian Prime Minister Narendra Modi has made a strong pitch for hybrid work for the future. As per him, India missed the previous industrial revolutions due to lack of proper ecosystems and mindset. Hence the country should take full advantage of the present revolution in digital technology to leap ahead in the global arena and hybrid working is a part of it. He also says that women workforce participation, which is at a low 25% for India as compared to 48.5%[1] globally, will increase if Indian corporates and organizations adopt hybrid working.

By encouraging hybrid working, companies can save huge amounts of money due to lesser administration costs like lesser office space, etc. Secondly, in major cities, which face severe traffic congestion and pollution issues like Mumbai, New Delhi, Shanghai, etc, remote working can help reduce traffic congestion as well as reduce carbon footprint as lesser number of people will travel to work.

While remote working has its own advantages, physical workplace has the benefits of human interaction and informal discussions that promote innovation as well as forge greater workforce bonding. Hybrid working, combines the benefits of both remote and physical workplaces, and hence as per the Indian PM is the way for the future.  

Once the covid pandemic situation was brought under control, many firms opened their offices on a hybrid basis and subsequently to a full time (5days / 9AM- 5PM basis). Employees, who got used to remote working, didn’t want to go back to full time office basis and hence left jobs in companies not offering flexibility on work times.

“Ethical moonlighting” is a new workforce trend ...

The new generation of employees think that gone are the days when employees must work 24/7 / 365 days for their full-time jobs and prefer to have side hustles like consulting start-ups, work parttime in another job, etc. This has been branded negatively as “moonlighting”. The counter argument by employees is that firms, when faced with a downturn, don’t think twice before downsizing, cutting jobs and salaries. By doing “ethical moonlighting” – wherein employees don’t have a conflict of interest with their present jobs, if employees are taking care of themselves what wrong with it? Anyway, many CEO`s, Vice Presidents of top companies are on the board of other companies and government committees and if this is ethical, why should “ethical moonlighting’ be termed as cheating?

Hence some Indian IT companies like Tech Mahindra and Infosys have been forced to come out with “moonlighting “policies but many companies in the core sector like manufacturing, banking, etc are still yet to take such initiatives and hence lose out on good talent.  

“HR supply chain crisis” is the moment to convert HR function to a value-added firm from a support function….

HR function is normally seen as a cost centre and a support activity - to recruit personnel, conduct annual appraisals and training programs, etc. I sincerely believe that the present “HR – supply chain crisis” is a great opportunity for CEO`s and CHRO`s to convert the HR function from a “support activity” to a “value adding” activity.

·       HR professionals in corporates should build a culture with a DNA imbibing “flexibility at work” and “work life balance” as key pillars. Using the same thread, trends like Hybrid working and ethical moonlighting should be a part of every HR team`s dictionary. If productivity of work is maintained through digital tools and there is no conflict of interest in moonlighting, employees should be free to pursue their interests. Many people would remember that IT companies, like Infosys and Wipro in India, became the preferred workplaces, due to the various employee related benefits that they offered like ESOP`s, workplace culture, etc

 

·   Just like companies’ flash CSR scorecards, share of women employees, etc in their media releases, HR teams should focus on highlighting share of employees working in a hybrid manner which will reflect the flexible working policies of the company. Not very far in the future, a firm’s brand image as well as market valuation can be influenced by the share of hybrid working employees in the total workforce.

 

·  Governments and local authorities should encourage hybrid working through regulations and tax breaks due to various benefits to the society like reduced pollution, lower carbon footprint, etc.

 

The “Human Resources – Supply Chain crisis” gives a huge opportunity to firms to extract greater value from the HR functions by adopting a flexible approach to workplace. This will help firms in keeping with the latest workplace trends as well as create greater business value for the organization. Will we see a “HR revolution” coming up very soon?? Hopefully yes!!

References:

· https://www.business-standard.com/article/current-affairs/pm-modi-bats-for-remote-work-flexible-work-hours-calls-it-the-future-122082501288_1.html

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Weaponization of assets - What are India`s options from Russia`s example?

 Weaponization of assets – Gas and Oil assets by Russia

An interesting article by one of my favorite authors– Swaminathan Iyer (Swaminomics) alluding to “Weaponization of key assets”.

https://economictimes.indiatimes.com/opinion/et-commentary/whos-sanctioning-whom-how-the-ukraine-screenplay-has-been-reversed/articleshow/94035863.cms

Russia, which was expected to be on the defensive after the western sanctions has skillfully played on the “weaponization of gas and oil supplies” to survive during this war-

a) By supplying oil at high discounts to its allies like India and China, Russia has kept its oil revenues flowing

b) By throttling gas supplies to Europe, Europe has slipped into a recession due to high energy costs and struggling! In fact it was Russia that was expected to be in a major recession!!

“Weaponization” might sound like a very strong, aggressive, and sometimes unethical term but viewed from a different perspective it is actually “Playing to core strengths”.

"Weaponization” is used in different forms in both corporate as well as geopolitics for individual benefits.

1) Amazon uses its massive IT and distribution reach to throttle its small
competitors

2) Reliance used its strong balance sheet / financial muscle from its core
business to play the tariff war in the Indian telecom space which led to a market consolidation/market exits

3) US government recently barred Nvidia from selling artificial intelligence chips to China to impede technological development in China

From India`s perspective, are there any assets that it can weaponize?

a) Well recently, India banned wheat exports when there was a food shortage but tweaked it to strategic supplies to needy countries to garner “brownie points”.

b) India played its oil imports card to get heavily discounted oil from Russia

c) India`s other major asset is its “human soft power/skills” -  Indian managers, software engineers, and even laborers to middle east countries. However, weaponizing “soft power” will be possible only if there are sufficient jobs available in the country. Else there will be a massive unemployment problem.

Moot points - are there any other assets that India and Indian companies can “Weaponize” for its benefit?

Look forward to replies/comments!!

#weaponization, #russianaggression , #energy , #wheat , #india , #softpower, #business , #europe ,#oilgas, #swaminomics

India as 5th largest economy - Subtle facts

India has done itself proud by becoming the world`s 5th largest economy ~ $3.8trn . A long way from $274bn GDP (as per IMF data) in 1991 when economic reforms were unleashed. Many pundits are hailing India having reached an exalted level on the economic front.

However, these pundits should look at the other 2 main critical indicators for an economy -

1. GDP per capita - Shows prosperity per person in the country. 
2. Gini coefficient - Indicates the level of inequality in economic development. Between the rich and poor / haves and have not!

India`s GDP per capita of $3,100 / person, as per IMF data, ranks it a lowly 140 rank. Gini coefficient score of 43.3, as per Worldeconomics.com, ranks it a very low ranking amongst its peers!

While we can celebrate the 5th ranking milestone but the real story of development and the way forward needs to be highlighted and worked upon. India needs to chart a completely different growth story as compared to its peers in the top 5 club !!

How Green is your Personal EBIDTA ?

World Environment Day was celebrated recently on 5^th June amidst much fanfare with the usual pledges by governments and corporate firms. Usual buzz words in the business and economic space, like climate change, global warming, greenhouse emissions, net-zero carbon, etc. were extensively discussed.

However, at the ground level, the magnitude of the climate change problem has reached huge proportions as exemplified by the heatwave across many countries, including in my own country India. Heatwaves have led to various destructive patterns like destruction of crops, scarcity of water, etc. The intense heatwave across India has led to such a huge surge in power demand, that the government has been forced to import additional coal to meet the demand!

Food scarcity already exacerbated by the Ukraine war has been further intensified with the heatwaves severely affecting food crop yields across the world. India, one of the world’s largest wheat producers, has been forced to ban wheat exports as crop yields have been affected due to the recent heat wave.

Green activists are having a field day now with their targets being mainly governments and corporates. Business firms globally, are under scrutiny and pressure from critical stakeholders like government agencies, financiers, and the public to focus on reducing their “Carbon Footprint” or in other words focus on their “GREEN EBIDTA”. Undoubtedly, corporates and governments have a large role to play in this endeavor. Top global firms like BP, Shell, etc. have taken a pledge to move to zero carbon emissions by 2040.

However, in this fight against climate change, it's time to target the segment which is most affected and whose consumption and behavioral patterns play a key role in the actions of corporates and governments – people like you and me – consumers, mass public- who pay the taxes finally !! After all, if we all demand carbon-free goods, corporates will take heed. If we vote for public leaders who are serious about climate change, then we can get the right policies being implemented. If we buy shares, despite paying a premium, of firms that are serious about sustainability then publicly traded firms will be forced to pay attention. Fossil fuel companies like BP, Shell, Exxon, etc. were forced to modify their business strategies as they feared a backlash from the investors’ community as well as damage to their brand image.

Consumers, however, can also play a major role, in this fight by paying heed to their personal lifestyles also and the carbon footprint left by their consumption patterns. It’s time that the public also starts measuring their “Carbon Footprint” and make their lifestyles “Greener”!!!

An interesting article was published, in Economic Times, on the same topic by Arijit Burman titled “Is your Is your EBITDA black, grey, blue or green?”. In this article, the author emphasizes the need for the public to pay heed to their consumption patterns and throws perspectives at the carbon footprints left behind by our day-to-day consumption patterns.

The recent World Economic Forum at Davos had climate change as one of the major topics of discussion. An article on the World Economic Forum platform published by Maciej Kolaczkowski titled “What can consumers do to help solve the climate change crisis”  states some interesting facts-

• Consumers are responsible for 60-70% of global emissions. After all,  consumption by consumers will lead to corporates making products leaving a  carbon footprint!
• Majority of the household carbon footprint comes from transportation, housing, and food choices.
• High-income households naturally consume more and hence higher carbon footprint. More money you have, more is your luxury consumption as compared to your basic needs consumption.
• Luxury consumption, as reflected by increased demand for goods and services, leads to a higher carbon footprint.
• Education plays a vital role in optimizing the carbon footprint of households. Probably many people are still unaware of the trails of their consumption patterns and need to be shown a mirror of their actions.

What can consumers and mass public do to control the increased carbon footprint?

Like corporates, consumers too will have to take carbon footprint reduction targets and modify their lifestyles. Some major areas can be:

Use public transport systems: Globally most of the major cities have very efficient public transport systems like London, Singapore, New Delhi, etc. Local authorities want people to travel more by public transport systems and lesser by private vehicles as it achieves the double purpose of a lesser carbon footprint as well as reducing pressure on the roads. In Singapore, due to high local taxes, it is very expensive to own a private vehicle, and hence people prefer to use the public transport system. In fact, I ‘am personally looking forward to the full-fledged rollout of the metro system in my city of Mumbai!

Reduce luxury spending and consumption: This recommendation may sound odd given that it looks to be against the capitalist theories especially as the world is facing recessionary trends. Today if people spend as per their needs its sustainable, however an excess of spending above basic needs leads to additional consumption which in turn leads to additional usage of natural resources. 

Clothing usage patterns are an interesting example. Fashion trends keep on changing and consumers are inclined to buy more in keeping up with the trends. The additional spending however lies unutilized after some time but has left behind a carbon footprint that is irreversible. 

An interesting graphic I saw recently in the Times of India, indicates that having a well-defined wardrobe means reducing new clothes purchases by 75%! Having a sustainable wardrobe means ditching fast fashion, embracing slow fashion, and importantly being a part of a clothes exchange ecosystem.

Embrace recycled products: Footprint of products already produced and lying in a heap across the world, like plastic waste, needs to be addressed. Products made from plastic waste are great examples. Segregation of household waste and proper disposal for efficient recycling is the order of the day. An India-based start-up - Recharkha (https://www.recharkha.org/), dealing with plastic waste products, has shown the way in this endeavor by upgrading plastic waste to various consumer products like bags, purses, etc.

The global problem of climate change that we are facing needs to be addressed on a war footing, as the world did with the Covid pandemic. Today corporates have started reporting the share of their earnings that is from sustainable resources- “Green EBIDTA”.

Consumers like you and I also need to shoulder responsibility and play our part and not leave the fight only to governments and corporates. Hence it's time that everyone like you and me measure our “Personal Green EBIDTA”!

Invite critical views !!

References:

1) “Is your Is your EBITDA black, grey, blue or green?”

(https://economictimes.indiatimes.com/opinion/et-commentary/view-is-your-ebitda-black-grey-blue-or-green/articleshow/90785853.cms?frm=mailtofriend&intenttarget=no).

2) What can consumers do to help solve the climate change crisis”  (https://www.weforum.org/agenda/2021/02/consumers-help-solve-climate-change/)

India`s wheat export ban - Is it in right direction?

Having built up 3 major global marketing bases from India in chemicals, metals, and telecom cables businesses, one of the questions that I was constantly asked was whether Indian companies will prove to be reliable and consistent suppliers over a long term in the international markets.

In all products that I dealt with, due to import duty benefits in India, profitability from the domestic market was higher than the international markets.

Secondly, with the Indian market size growing normally every year, allocation to international markets was always under pressure every year.

Thankfully, all the businesses that I built up have sustained over the last many years.

The Indian government has been highlighting India`s exports crossing $400bn in the last fiscal year. If India has to sustain this performance consistently, Indian companies will have to prove themselves to be reliable and consistent suppliers over a long term.

In this background, the Indian government`s decision to ban wheat exports isn’t in the right direction. This move by the Indian government to curb exports will have the following repercussions-

1. Construed as a bad signal for India`s global market ambitions. True, it was done to ease inflation, but a phased movement to curb exports would have been better.
2. Detrimental to its ambitions as a global superpower and playing an influential role in global politics.
3. Indian Government could have used these high export prices to push through the contentious “Farm Laws” with the farmers' unions, as Indian farmers were earning more by selling to private exporters, which was exactly the basic motive of the farm laws.

Indonesia, a global major in the palm oil business, should be taken as a cue. It had banned exports for a short period of time but reversed the ban as prices cooled off and she was earning a bad reputation in the global market.

I sincerely hope that the wheat exports ban is revoked by the Indian government in a short time as prices cool off in Indian markets. Hopefully, good monsoons will provide the much-needed boost to wheat production.

I also hope that structural reforms are ushered in the agriculture sector to make India a global major in the international food supply chain.

Invite critical views and thoughts.