Faculty

The-Economics-of-Innovation

The Economics of Innovation

Faculty, ,

Innovation has become key buzzword for the economy around the world. There are reasons for that.  The recent research shows that a major part of the rise of productivity in developed economies comes through innovation. Innovation in technology and management practices has raised productivity all across industries. This has increased the size of GDP and also per capita income. The good part Innovation led growth is that it requires improvement in quality of education and health and also human rights and democracy. They all contribute to this factor.

The role of  innovation in economy was recognized by famous economist Schumpeter, calling it necessary condition for economic growth through the process of ‘creative destruction” where new firms come up and old firms die out and in the process the overall economy and society get benefitted.

Economic growth depends on two ways in modern economy.  The one way is to increase inputs as land, capital and labour and the output increases. The accumulation of capital leads to the increase in output .But there is limit to this economic growth.  A low per capita income economy can rise to middle level economy. After that if the country does not start focusing on the research and innovation, the economic growth stagnates. The middle income trap sets in.

There is another way to increase the output by improving the productivity through improvement in technology and management of existing resources. It is also about finding cheaper alternative which increases productivity and lowers cost. Over the last few decades, the economic growth in developed economies has been spurred by that innovation. The computer, IT, telecom, Internet, Bio-tech revolutions have done stellar role in that.  New materials which are used in cars, airplanes, glass buildings, mobile phones and other gadgets make products better, cheaper and more effective. Innovations in medical equipment and diagnostic will make more effective .

Some of the innovations have done wonders to Indian economy. The best one is High Yield Variety  seeds which led to increase in production of food grains in India ,making it self sufficient in that. The productivity per hectare also increased, farm incomes in Punjab, Haryana and western UP also increased. Overall economic condition improved.

But to make innovation happen, one needs an eco system. The eco system includes Universities, R&D laboratories, interdisciplinary research, private companies spending on research and also sponsoring research in universities, culture of experimentation, investment in education, the facility of incubators, accelerators for start ups, the  private equity  firms and venture capitalists and Angel investors, robust  Intellectual property  and patent laws,  a start- up culture where student are encouraged to come up with new ideas and allowed to set up companies.

It is a tall order but a few shoots of this Innovation culture is springing up in India lately. Companies like Flipkart, Paytm, Snapdeal and Ola ,musigma, Inmobi, and many others have tried to become successful in recent days. There are thousands of small companies which are trying very hard.

The other part of startup eco system is focus on high growth small companies. The higher growth comes from scaling up and going beyond their home market.

India needs innovation because we are capital scarce country with huge population and high level of inequality.   The quality of innovations will determine the growth in economy and the quality of life in India.  How do we create schools where fees are very low but quality of teaching very high? How do we create hospitals where quality of health care is very high but charges very affordable? Two sectors have done this kind of innovation; one is telecom service providers and second is Delhi Metro- they provide best class services at cheapest cost possible while making reasonable amount of profit. Ola and Uber have shown how innovations can make public transport smooth, standardized and profitable for everyone.

Society which will try to solve global problems through innovation will become richer and better.  That’s why governments across the world are scrambling to get on board of this bandwagon of innovation, but it requires whole range of co-ordinated and yet independent institutions and also culture of tinkering and experimentation.  This is really hard to achieve.

~ Professor Rahul Mishra
IILM Lodhi Road Campus

Ideation , Innovation & Creativity in Business

Faculty, General Blog, , , , , , , , , , , , , , , ,

If you want to study business, launch your own startup or manage your family business, IILM is the place for you !

Requirements in the job market are dynamic and change constantly.  At IILM we have introduced an exceptional programme to incorporate the trend of startups and entrepreneurship. We have collaborated with the SBS Swiss Business School to bring to our students the change to earn a BBA in Entrepreneurship. The degree is awarded by the Swiss Business School and teaches modules that are aimed to equip students with the skills need to start their own ventures ,take on the responsibilities of entrepreneurship or manage their family business..

The programme spans over 3 years or 6 semesters and covers a variety of topics starting from the basics and moving up in difficulty. The initial semesters have introductory modules that introduce students to concepts of Accounting, Marketing, Management, Information Systems, Economics, Finance, Statistics and Law. These basics are aimed at bringing all students on the same platform as we have students from varied backgrounds applying to this course. Similarly, Foreign Language is also offered to students over the 3 years in order to diversify their knowledge base and give them an edge in the job market.

After the basics students study modules like Small Business Field Studies, Venture Capital and Private Equity, Entrepreneurship Case Studies and Mergers and Acquisitions – topics related to managing real world situations. These modules as well as the others offered are not only case study based but also incorporate learning through simulations in order to effectively instill the theories involved.Case studies used are from the Harvard Business School so that our students have access to the very best resources.

Experiential learning is also encouraged through Company Visits as a module students visit various companies belonging to various industries and interact with staff and department representatives to gain understanding of the working of the companies and respective departments. In tandem with the aim of experiential learning is the module of Internships. Students are attached to a company for a month long internship during their breaks and learn what it is like to be on the job in real life from experts.

Mentoring is a unique aspect of student life at IILM. Faculty and industry mentors are assigned to the students to guide them through the course of the programme. They advise the students so that effective decisions are taken with regards to modules, internships and careers. Students gain a lot from their expertise and experience.

Our programme is exceptional because of the unique mix of theory and practical application. We have understood the need for dynamism in curriculum and have molded our modules based on the requirements of the time. Our students study with the best resources, the best faculty and the best industry mentors, making them a cut above the rest when it comes to taking on the roles of an entrepreneur or top management of their family business.

Learn more about our exceptional programme at www.ubs.iilm.edu

Ms. Lekha Mukherjee

A Broad Liberal Business Education Is A Must

Faculty, General Blog

All across the world,business education has quite a narrow focus. The application oriented subjects which have got practical value are being taught to students. This serves well when the pace of technological, economic and social change is slow and managers mostly have to act with functional knowledge. When the pace of change quickens, managers must wear leader’s hat and think broadly beyond their functional knowledge.

The best B-schools of the world claim to educate leaders who are going to make a difference in the world. To make this happen, B-schools need to look at the curriculum more closely and bring in the broad liberal education component which can make students think and act like leaders whose action will have impact on society at large. The broad liberal education should include subjects like political science, sociology, literature, study of classics , history, business history, philosophy and ethics and evolution of science and technology. The broad liberal management education will stretch imagination of management student beyond functional knowledge.  Writing and public speaking skills should also be taught to make the offering complete.

Creating authentic, ethical and visionary business leaders should  be the main aim of business school. These leaders can act as entrepreneurs and can also don the hat of  a manager for day to day functioning if required. But they essentially remain a leader with broad social , economic and technological vision. They make ethical choices in their decision making. Without these kind of leaders , organizations will not thrive. In fact, companies like Enron  and Satyam  lost enormous value because of lack of those kind of authentic leaders.

Leaders with broad and general education have done pretty well. Anand Mahindra is one example who pursed film making and liberal arts education . Steve Jobs quest for calligraphy ,spiritualism and Zen Buddhism’s simplicity and aesthetics had enormous influence on business decisions he took . To get the glimpse of Bill Gate’s mind , one has to look at his wide and varied reading list. Leaders always look beyond immediate environment . Broad liberal education will help him doing that.

–  Mr Rahul K.Mishra
Professor- Strategy and International Business, IILM. 

Guest lecture on Raising Capital in Foreign Markets

Events, Faculty

A guest lecture was organized as part of the State and Society course for PG I students. The session was taken by Mr. Ashish Sharma , an alumni of IILM Graduate School of Management, batch 2008 – 2010.
Mr.Sharma is currently associated with Ernst and Young. Prior to this, he has worked with brands like, Copal Partners and Religare Financials.

The session started by analysing the need for raising capital. The two major reasons of raising capital : Personal and Business was discussed. The different avenues such as Establishment, Growth, CSR activities which are important for an organisation and require a lot of capital investment were thought as the major reasons for raising capital. The process of raising the capital which starts at Sourcing of Funds and ends at Implementation was discussed at length with the students. Mr. Ashish also discussed about the different sources of raising funds such as: IPO, FPO, Venture Capitalists, Private Equity, Bank loans, Family and friends and Crowd Funding etc. The role of various stakeholders in raising funds was also given emphasis. The role of government in maintaining stakeholder satisfaction and the importance of stakeholder satisfaction was also discussed. The students were also made to understand the difference between shareholders and stake holders. Ashish also spoke to the students about the legal formalities and how the funds that have been raised need to be utilised in the various domains.

A case study of Archcoal was also taken up in the session to make the students understand how stake holders interest was important and how an organisation could benefit from the stake holders. The case laid emphasis on restructuring the organisation as they filed for Bankruptcy. The organisation chose to involve various stakeholders like: Employees, Customers, Suppliers, Society, Government, Investors etc. to recover from bankruptcy.

The session was highly interactive and very informative. Mr.Sharma has expressed his interest in helping / guiding the students with their preparation in Final Placements and also to mentor our students. He has been very active in the past and has made significant contribution to IILM.

Mr. Arun Jaitley’s Fine Balancing Act | Annual Budget 2016-17

Faculty, General Blog

Finance minister Arun Jaitley’s  has pressed all the right buttons  while presenting Annual Budget for financial year 2016-17. There are few misses too. The salient features of the budget are –

  1.  Finance Minister’s best act is to stick to the target of fiscal deficit of 3.5 percent of GDP. By reducing fiscal deficit from almost 4.8% of GDP in 2014 to 3.5%  GDP 2016 -17, he has demonstrated commitment to fiscal prudence. India looks far stronger economy in the world right now. Because of this the government outgo on interest payment has come down. Fiscal prudence has also eased pressure of  inflation and in turn high interest rate and high cost of capital for businesses. It is almost certain given the lower fiscal deficit and low inflation, Reserve Bank of India (RBI) is going to lower  interest rate in near future, fuelling the demand and economic growth.  Higher fiscal deficit leads to crowding out private investment which is so required at this point in time .Fiscal prudence is the base for future economic expansion and development. This is also best insurance against slowing global economic growth.
  2. The Government’s second important gamble is to give more money to agricultural development. The government has taken comprehensive view on this. There are initiatives and allocations to irrigation, organic farming,  effective crop insurance scheme,  FDI in food processing, creating a single market for agri produce and focus on the production fruits vegetables, dairy, fisheries, and poultry products, They all generate additional income for farm families. . . This is the right step but agriculture requires more action on sustained basis. Raising MSP ( Minimum support prices) of most of the agri- products particularly Dal and making investment in the warehousing  and supply chain will help ease the problems of lack of incentives for farmers to go beyond production of cereals How acute is this problem, one must read The Economic survey on this.. Indian farmers need to move beyond the production of paddy and wheat while demand for proteins is through Dal, dairy and poultry products going up .  The diversified portfolio of agricultural production will lead to higher income of farmers. Though there are questions  on Government claims on doubling of   income of farmers by 2022. The government has not given any roadmap of  15 percent annual growth in farmer’s income in every year for next five years. But focus on irrigation by raising allocation to 20000 crores , if implemented, will lead to all round development of agriculture . This could possibly a game changer  for farmers..
  3. The third right button which  Mr.Jaitley has pressed is investment in infrastructure. All along roughly One lac crore is going to be put in road construction for next year. The increased road construction activity  is the highlights of Modi government along with increased outlay of pradhan Mantri Gram Sadak Yojna which will have positive impact on rural infrastructure. The whopping roughly one lac crore for development of Railways and other infrastructural projects will have cascading effect. The challenge is in execution .With the investment in power generation and rural electrification, the thrust on infrastructure development is complete. This is where the budget is bang on right.  If India’s infrastructure is taken care of , the economic growth rate will accelerate. With increased allocation to Panchayats and Municipalities will mostly go into more investment in improving local hard and soft infrastructure  need, plugging the last mile of  requirement of  development
  4. Initiatives like giving LPG connections to 5 crore poor family households , automation of PDS outlets using Aadhar cards, a nationwide deployment of micro atms in post offices and a digital depository for degree certificates will also lead to improvement, efficiency and transparency in economy. The budget is forward looking in that sense

But there are areas which finance minister could have done more .  The finance minister could have given more policy clarification on disinvestment about loss making PSUs like Air India to  give more allocation to  social sectors in education and health , research and innovation and also more money to stat  .

The efforts in recapitalization of banks could have been more in the budget.. Public sector banks need money, autonomy, technology to survive and to remain relevant.

He could  have spend more on mid day meal and  give more money to create model secondary schools on the line of Kendriya Vidalayas. He should have given money roughly to 350 state level universities and struggling private universities for improving quality of research and teaching. More sops could have been given to promote research and innovation in companies.

The allocation of health and modernization of district hospitals in all 700 district hospitals of India could have been done with more allocation. These hospitals can be in a limited way be the hub for the block level hospitals

The glaring avoidance not tackling the issue of subsidies to non poor which has been mentioned in the economic survey is too cautious approach. A few more bold steps could have given this budget shine. Mr. Jaitley wants to sail steadily against adverse global headwinds of slowing down economic growth. Probably not rocking the boat too much is the only sensible proposition for India right now. In that sense the budget is a fine balancing act between good politics and  economics.

The Economic Survey 2016 – Key Issues for Business

Faculty, General Blog

At the outset, one must congratulate Chief Economic Advisor Mr. Arvind Subramanian and his team for writing a brilliant Economic Survey 2016.  This is possibly the best document for anyone who wants study problems and challenges affecting Indian Economy. I strongly recommend students of management, economics and public policy to download and  read the document.  Reading this document, you will know more about economy and public policy in Indian context than from any other source..

I pick up three topics in this survey which are of importance to managers and companies . The first one  is the problem of Twin Balance Sheet. The twin balance sheet is affecting private investment and also increasing  the cost of capital..

To quote Economic Survey on this critical problem “One of the most critical short-term challenges confronting the Indian economy is the twin balance sheet (TBS) problem—the impaired financial positions of the Public Sector Banks (PSBs) and some large corporate houses—what we have hitherto characterized as the ‘Balance Sheet Syndrome with Indian characteristics’. By now,  it is clear that the TBS problem is the major impediment to private investment, and thereby to a full-fledged economic recovery. The problems in the banking system have been growing for some time. Stressed assets (nonperforming loans plus restructured assets) have been rising ever since 2010, impinging on capital positions, even as the strictures of Basel III loom ever closer on the horizon. Banks have responded by limiting the flow of credit to the real economy so as to conserve capital, while investors have responded by pushing down bank valuations, especially over the past year. The shares of many banks now trade well below their book value. This balance sheet vulnerability is in some ways a mirror and derivative of similar frailties in the corporate sector, especially the large business houses that borrowed heavily during the boom years to invest in infrastructure and commodity-related businesses, such as steel. Corporate profits are low while debts are rising, forcing firms to cut investment to preserve cash flow.

Despite efforts from the government, the private investment is not taking off and which is going to  impact creation of quality jobs on big scale. The over capacity and lack of demand for companies products  weakened the financial health of companies which in turn created higher NPA for Public sector banks, leading to weaknesses in banking system.This is huge issue. The government has tried in a limited way to recapitalize the Public sector banks and also create more demand in the economy so that the financial health of companies start improving.

The second issue which Mr. Subramanian has flagged is “ The chakarvyuh  challenge of Indian economy “  from socialism of restricted entry to “marketism “ with restricted exist  The chapter refers to license –quota Raj which restricted industrial development and no before 1980s  and now  the restrictions imposed on the firms from closing down even if they cease to add value in the economy. This restriction is underutilization of limited economic resources.

To quote the Economic survey “The Charkravyuha legend from the Mahabharata describes the ability to enter but not exit, with seriously adverse consequences. It is a metaphor for the workings of the Indian economy in the 21st century, the legacy of several decades of economic policy making. A market economy requires unrestricted entry of new firms, new ideas, and new technologies so that the forces of competition can guide capital and labour resources to their most productive and dynamic uses. But it also requires exit so that resources are forced or enticed away from inefficient and unsustainable uses.  Joseph Schumpeter recognized the vital role of exit, via “the gale of creative destruction,” in the efficient workings of a market economy “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

The chapter goes in lot of details of the economic and political costs involved of not allowing firms to close down quickly and DRT taking over the assets and selling it off to recover whatever value that is left in that for future fresh investment. As the pace of technological and economic change is going to be very high, not allowing firms to quickly exit will have huge cost for job creation. There are bills like bankruptcy bills and others  pending in the parliament, once they go through, that will be easier for firms to set up and also exit if they don’t create any value on the capital.. But flagging this issue in the economic survey makes it important reading for public policy and managerial perspective

The third important issue which The Survey has raised is “Industrial, corporate and infrastructural  performance “. The chapter sums up the initiatives taken by the government to improve performance of companies and institutions performing in industrial  sector.The government has launched several programmes/initiatives such as ease of doing business, Make in India, Invest India, and e-biz Mission Mode Project under the National e-Governance Plan. Further, the Government of India is also building a pentagon of corridors across the country to boost manufacturing and to project India as a global manufacturing destination. The National Investment and Infrastructure Fund (NIIF) have been approved to extend equity support to infrastructure Non-Bank Financial Companies (NBFC). Issue of tax-free infrastructure bonds has been allowed for rail, roads and irrigation programmes. The Ministry of Environment, Forest and Climate Change has completed the process for online submission and clearance of applications for environment, coastal regulation zone and forest clearances. The system for coal block auctions has been streamlined so that these are now granted in a transparent framework. In order to improve the financial viability of the State Electricity Distribution Companies, a comprehensive financial restructuring of these bodies has been taken up through the Ujwal DISCOM Assurance Yojana (UDAY) programme. The scheme envisages reduction of interest burden and cost of power and AT&C (Aggregate Technical and Commercial) losses incurred by discoms that have entered into tripartite agreements with the Government of India and the respective state governments..

With these initiatives, Indian industry has been given a boost leading to an improved business environment and larger FDI inflows and these have also improved India’s global outlook. In the World Bank’s Ease of Doing Business report 2016, India’s position has improved to 130 in 2016 from 142 in 2015.

The economic survey 2016 is one document which gives both micro and macro picture. It provides an insight into government’s take on different issues. Some of the issues flagged in the survey have been taken up the finance minister Arun Jaitley in his budget speech. This is brilliant document to know cutting edge analysis of all aspects on Indian economy. The document also refers to academic writing to give an intellectual  base for economic analysis for deeper  understanding of issues.

Guest Lecture on Networking and Stock Markets

Faculty

A guest lecture was organized as part of the Placement Week and Global Macroeconomics, for PG I students. The session was taken by Mr. Deepak V Mohan, an alumni of IILM Graduate School of Management, batch 2011- 2013.

Mr. Mohan is the Co-Founder of Fintrust Financial Services. Prior to this, he has worked with brands like, Ernst and Young and Heidrick and Struggles.

The session for the Placement Week was focused on Networking. Mr. Mohan spoke to the students about the importance of Networking, the do’s and dont’s of Networking, Whom to network with and the various networking platforms. He also emphasised on how to leverage from the contacts in your network and also ways to expand your professional network. Mr. Deepak also shared about his work experience in Ernst and Young and how he was able to crack the deal for “Whatsapp” in Ernst and Young. Mr. Mohan also discussed about the skills that are required to make a career in the Market Research domain. He also discussed about the various challenges faced by him during the initial period of the establishment of the firm – Fintrust Financial Services.

The second session revolved around the Stock Markets. The session was a part of the Global Macroeconomics course. Mr. Mohan discussed about the volatility of the stock market, and how stock markets are effected by the various external forces.

The sessions were highly interactive and very informative. Mr. Mohan has expressed his interest in helping / guiding the students with their business ideas. He is keen to devote time with the students to help them become future Entrepreneurs.