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It's a sense of deja vu as 2011 is closing at a low for India Inc like 2010 did. Many say that business confidence at the end of 2011 is even lower than it was during the upheaval of the Lehman crisis of 2008. It is ironical that the year was a washout for India Inc, just when India completed 20 years of economic reforms. Industry complained of a policy paralysis in the government, hit by multiple scams and agitations and pre-occupied with fire fighting. On the reforms front, the government was caught in a "damned-if-you-do and damned-if-you-don’t" situation. Several Bills were stuck in Parliament, oil sector reforms were opposed and the big setback came when the big ticket reform measure of allowing Foreign Direct Investment in multi-brand retail had to be put in abeyance given the political opposition to it in Parliament. India Inc was deeply disappointed and warned that investor and business sentiment, already quite low, would be hit further.
India’s most awaited head-hunting search ended with a surprise choice. Cyrus Mistry was chosen as the successor to Ratan Tata as head of the $ 83- billion Tata empire. Mistry is already on the board of Tata Sons and related to the Tata family. Mistry’s choice suggests continuity and ensured that an insider is at the helm of affairs for a long period of time. The humble chawanni or 25 paisa coin was phased out. It was only apt that it was discontinued in a year that saw almost double-digit inflation as there was almost nothing that a chawanni could buy! Corporates faced the collateral damage of the 2G telecom scam as for the first time senior and high-profile executives of Unitech, Reliance Communications, DB Realty were in prison for several months and other top honchos were called to the CBI headquarters. Airtel and Vodafone and Essar were also named in fresh FIRs by the Centreal Bureau of Investigation. BP’s acquisition of 30 per cent stake in Mukesh Ambani’s, Reliance Industries KG-D6 gas basin for almost $ 9 billion was the standout deal of the year but remained stuck for several months. The government’s stance on decision making became extra cautious in the light of assorted scams floating around and Vedanta’s multi-billion dollar acquisition of Cairn was also stuck. The Comptroller and Auditor-General’s (CAG) criticism of the Petroleum Ministry and the RIL for development of the gas basin has led to the government holding back future investment approvals. The government’s reluctance to take decisions, forget initiating new reforms, was a sore point with industry. Land acquisition was a thorny issue and the Yamuna Expressway in Uttar Pradesh and the Vedanta project in Orrisa faced local protests. If land was one flashpoint, labour trouble was a worry for Maruti Suzuki. The company faced a series of strikes at its Manesar plant in Haryana, causing losses of more than Rs 800 crore and hurting its market share as other car manufacturers like Honda, Toyota, Volkswagen, Hyundai gained. The hot trend of the year was "dieselisation" of cars as disparity between frequently increased petrol and static diesel prices touched Rs 25. As much as 80 per cent of all new cars sold are now diesel versions and there are discussions to increase excise duties on diesel cars to check this trend, which is a ticking time bomb for the oil economy. The year will also be remembered for one of India Inc’s leading lights, N.R Narayanmurthy retiring as chairman of Infosys after spending 30 years and creating one of the country’s most respected companies. Since the government was not doing much, industry leaders like Azim Premji, Deepak Parekh and others were regularly making noises that the governance drift and negative mood in the country was killing the India growth story. For India Inc, problems are only mounting as industrial growth, new investments, stock markets, fund raising and to add its woes, the rupee are at multi-month lows. Demand is weak with households hurt by inflation with auto and real estate bearing the brunt. Profits are under pressure and corporates want to preserve cash and are not investing as the business environment has become vitiated by a flurry of scams and nobody knows where the next one is coming from. In a world where protests and angst against politicians, big business, rich and powerful is on a high, corporates are lying low and hoping to ride out the storm. More than the lack of fresh reforms, it is the about-turn and lack of decision making on the existing policies by the government that is spooking business houses. Corporates are also on a weak wicket in times like these having been beneficiaries of what analysts politely call "regulatory arbitrage" or government largesse as seen in the Bellary mines scam and others. They, too, are facing charges of crony capitalism and calls of probity for big business by reducing government discretion are only getting strengthened.
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High crude prices and
huge debt tripped the bull run of the "King of Good Times"
— Vijay Mallya with Kingfisher Airlines grounding flights and facing
a huge debt burden. There was initially talk of a government bailout
which was retracted later owing to a huge outcry against doling out
taxpayer funds to a flamboyant business baron.
Tata group’s search for a successor ended with
43-year-old Cyrus Mistry being selected as the new head of the $83-billion Tata empire. He was already on the board of Tata Sons and is related to the Tata family. Cyrus is credited with scaling up and diversifying one of India’s most valuable private enterprises, the Shapoorji Pallonji Group.
The “King of Good Times” Vijay Mallya had a difficult year as his Kingfisher airline piled up huge losses and reeled under a mountain of debt. The airline is struggling to pay its fuel bills and staff salaries and even had to cancel several flights and suspended operations of its budget carrier Kingfisher Red.
It was a bull run for the yellow metal prices as these jumped from Rs 20,700 to over Rs 29,000 during the year, thereby making gold one of the most lucrative investments this year. With this, the commodity exchange turnover is likely to touch the Rs 175-lakh crore mark in 2011.