NEWS
INTERVIEW
SPECIALS
CHAT
ARCHIVES

Business Commentary/Mahesh Nair

Recession? What recession?

Two months ago when Shelly Lazarus, CEO of O&M Worldwide, was in town I asked her what she thought of the recession facing Indian industry and how did it affect the advertising business. "What recession?" Lazarus asked cheerfully, "You chaps are so used to growing between 30 to 35 per cent annually that when you grow between 15 to 18 per cent you call it a recession!"

So is there a recession out here? Popular opinion would suggest so. Businessmen and industrialists these days can't stop complaining how bad The Market is. If you were to attend any business meeting, like the recently concluded World Economic Forum, this is what you will hear from Indian CEOs:

* This year is worse than last year;
* Demand is slowing down;
* Inventories are piling up;
* Consumers have the money but they are not spending;
* Low inflation is strangling economic growth;
* Sales are down;
* Profits are negative;
* Government is not spending;
* Corporate growth is being stifled by government inaction;
* Moan. Gasp. Sigh. Shelly Lazarus should stick to eating hot dogs in Manhattan.

Really?

The Industrial Credit and Investment Corporation of India, one of the leading financial investor in Indian companies, doesn't think so. Its recent study of 151 top firms shows that consolidated profit (after tax) rose by 25 per cent in the first half of 1997-98 over the corresponding period in the previous year. In plain language, this means that the majority of these companies, and their owners, have made more profit in the first six months of this year than over the same period last year.

If you think these profit figures are like bikinis --- that they hide more than they reveal -- hold on. Net sales of these 151 companies rose by an impressive 15.4 per cent in the first half of 1997-98. Aha, cynics will jump to point out that this figure is less than the growth rate of 28.4 per cent in net sales in the previous year. True. But then again in layman's terms what this reveals is that net sales growth is less this first half than over the same period year. Not that net sales have not grown. Remember what Shelly Lazarus said? Is a net sales growth of 15.4 per cent recession?

Sure, there are sectors and industries which are doing worse than last year. But their sorry state has nothing to do with recession. It has to do with the cyclical nature of business, competition from both domestic and international firms, and most importantly bad management strategy. Industries such as cement, steel, white goods, and automobiles took a beating. Software, soaps and detergents fertilisers, power, tea and pharmaceuticals had a cheerful run. And even in the former list, in the automobile sector for instance, companies like Mahindra & Mahindra and Hero Honda have done extremely well.

As for consumers not spending, recent data contradicts. This is what a Business Standard study of the half-yearly performance of 1,411 corporates found out: domestic appliances including televisions and video recorders have witnessed a growth of 18.4 per cent, cotton textiles 10.9 per cent, and soaps, detergents and cosmetics registered a growth of 64.5 per cent increase over the corresponding period of last year. What was all that talk about consumers not spending?

So why is it that we are complaining of a recession and gloomy days in corporate India? The first reason is because it is fashionable to do so. By saying things are bad, you can often build an alibi to hide your own inefficiencies. The second reason is that bad news travels faster and louder than good news. Thirdly, some puritans mistakenly believe that it is a sin to talk about profits when colleagues are making losses.

So what should be done? Anil Sachdev, CEO of Eicher Consultancy Services, has a suggestion. "We tend to take good news for granted. Instead of trying to see how we can learn and benefit from bad news and situations, we tend to let it dominate us. Just as people scream out the bad news, so should we shout out the good news."

That's not a bad idea. Can you imagine what would happen if when Rahul Bajaj of Bajaj Automobiles complains loudly of how badly his business is hit, Hero Honda's B M Munjal walks up smiling and says, "Oh, but Rahul, I've had a most wonderful year!''

Or can you imagine the faces of Messrs K K Birla, Vijaypat Singhania, H S Singhania, L M Thapar, Hrishikesh Mafatlal or V K Modi if Anand Mahindra were to tell them, "Hey, guys why don't you just concentrate on your core competencies and streamline your operations?"

The one positive thing about all this talk of slowdown is that it indicates that our expectations are, thankfully, much more than our performance. As former finance minister Dr Manmohan Singh remarked in a magazine interview, "Six per cent growth is now considered a recession. That is an indication of the changed mindset."

The next time you hear somebody complain business is bad, remember he must be one of the following:

a. Inefficient,
b. Lying,
c. Modest.

Mahesh Nair