New Delhi, March 6
The results of the five assembly elections announced today are a negative for economic reforms and the markets, according to leading investment banking and securities firm Goldman Sachs.

With the Congress party gaining very little in the state elections, Goldman Sachs is of the view that the results will not provide the government the political space or the confidence to cary through unpopular reforms. “We think the best that can be hoped for is muddle-through policies by the government”, it said.

While the worst case scenario of a splintered mandate in Uttar Pradesh and months of political uncertainty has not materialized, Goldman added the best case scenario for markets of strong gains by the ruling Congress in UP and other states, which would emboldens it to pursue reforms aggressively, had also not happened.

Goldman felt while limited fiscal consolidation and some movement on infrastructure is possible, unpopular structural reforms would be tougher to implement. These include FDI in multibrand retail, passage of the Land Acquisition and Lokpal Bills and pension and insurance reforms.

The outcome of the assembly elections was keenly awaited by the markets, hoping it would lay the ground for economic reforms to move forward. However, the setback for the Congress has dampened the mood and stock markets have been falling in the last few days after the exit polls were announced.

After the results announcement today, the BSE Sensex fell by more than a per cent by 190 points to close at 17,173, its lowest close in more than five weeks. The gush of liquidity by FIIs that saw the Sensex surprisingly jump in January has slowly been climbing down as the election outcome became clearer.

While some of the reforms like a phaseout of oil subsidies are desired by the markets, they will be unpopular — at least in the short term. Others like FDI in retail are being opposed by traders. Given these concerns, analysts are skeptical about reforms gathering momentum.

Commenting on the election results, Assocham president, Rajkumar Dhoot said, “We hope the ruling UPA coalition will respond positively and constructively to the meet people’s aspirations and push ahead with second generation reforms”.

Beijing, March 6
As Apple Inc, the world's most valuable listed company, braces itself for a report into alleged poor working conditions among its army of low-cost suppliers in China, it could heed the lessons from another big-brand retailer that faced similar issues two decades ago.

"Apple is facing its 'Nike moment'," said Teresa Cheng, international campaign coordinator for United Students Against Sweatshops (USAS), referring to accusations in the 1990s that suppliers to sportswear retailer Nike Inc mistreated workers.

Such is the California-based iPad and iPhone maker's dominance of the technology sector that its response to the non-profit Fair Labor Association's (FLA) report — expected this week — could affect conditions across China's vast electronics supply chain.

Nike was battered in the media and by public opinion because its suppliers in Asia forced employees to work long hours without breaks, and paid them a pittance without benefits. The company's response — and what some say are the mistakes it made — could offer a roadmap for Apple, which has faced similar bad press following deaths and reports of suicides at its China supply firms.

Three workers at Foxconn Technology Co Ltd died in a blast last year when dust from polishing iPads ignited, and labour rights groups have said 18 workers at Foxconn sites killed themselves, or tried to, in 2010. The vast majority of Foxconn's 1.2 million employees are involved in assembling Apple products, according to media reports.

Apple hired teams from the FLA to interview 35,000 workers at three of Foxconn's sprawling factories, which put together iPads and iPhones as well as gadgets for other well-known brands.

The FLA's interim report into Apple's suppliers based on those anonymous interviews over the past three weeks could mirror a number of the issues that Nike faced.

"Trouble in your supply chain can really hurt your reputation globally, extremely rapidly," said Kenneth Lieberthal, director of the Brookings Institution's China center and author of Managing the China Challenge: How to Achieve Corporate Success in the People's Republic. "The wisdom in the industry from that (Nike) experience is that you have to do a lot of work to be sure you understand what is happening in your supply chain."

Apple stresses its partners are required to adhere to strict global standards. But if Nike's experience is any guide, Apple can expect close scrutiny for years to come. — Reuters

New Delhi/Mumbai, March 6
It's not all doom and gloom for India's embattled airline sector. IndiGo, a low-fare carrier launched in 2006, has climbed to second place in market share at the expense of Air India and Kingfisher Airlines and is the only one of India's six main carriers making a profit, for now at least.

While Kingfisher and market-leading Jet Airways have bought rivals, fly multiple plane models and have struggled to mix full-service and low-fare options, IndiGo offers one class of no-frills service on a single type of plane, the same strategy pioneered by US-based Southwest Airlines.

IndiGo also sells and leases back its planes, sparing its balance sheet and allowing itself to maintain a young fleet.

Kingfisher, headed by liquor tycoon Vijay Mallya, has never made a profit and has grounded more than half of its planes as it struggles to pay staff and creditors and scrambles to find investors. Tax authorities last month froze its bank accounts.

"Indigo has done everything right which Kingfisher has done wrong," said Rajan Mehra, executive director at the Asia Pacific Academy for Aviation and Hospitality.

Industry watchers say there is no great secret to IndiGo's success, which they attribute to rigid adherence to a disciplined business plan, a task that grows more complex as the 50-plane airline adds a new plane every month.

Still, IndiGo is not immune to the industry's myriad headaches that include fierce competition, a weak rupee, high taxes, rising airport fees and the high cost of oil.

"Indigo so far might have been doing better than the others, but they are facing the same operational costs, the same infrastructure constraints," Mehra said.

Airfares are low in India, where carriers compete with trains and buses for passengers. A one-way ticket for April 18 from Mumbai to Delhi, a distance of about 720 miles, starts at around Rs 3,935 on IndiGo, GoAir or Jet's JetLite subsidiary, according to a popular travel website.

Kingfisher and Jet have learned the hard way that travelers don't want to pay for frills on India's short domestic flights, forcing them to set up low-fare offshoots to compete with IndiGo and budget rivals SpiceJet and GoAir.

"What the customer wants is on-time performance, he wants good service onboard, he wants consistent on-ground and onboard services. He doesn't mind paying for the food," said Mehra.

LOW-COST, NOT LOW-QUALITY: IndiGo's rise mirrors that of Jet Airways in the 1990s, before it became a sprawling international carrier that has lost money in the last four fiscal quarters.

"Jet also came from nowhere, took on Indian Airlines (now part of Air India) and succeeded to become a big market share holder," said Mahantesh Sabarad, an aviation analyst with Fortune Equity Brokers. — Reuters

Chengalpattu, T.N., March 6
Ford Motor Co will focus on small, low-cost cars in India to make the country a manufacturing hub for Africa and the Asia-Pacific region, the head of its Indian operations said, as it races to catch up with global rivals in the fast-growing market.

Ford will launch a slew of new small cars in India over the next 3 years to target a market it has neglected and ramp up exports to other emerging economies as it doubles capacity in Asia's third-largest economy, where the small car is king.

"We haven't been a major player (in India) because we weren't positioning ourselves in the segment where 70 per cent of all cars are sold," Michael Boneham, president of Ford India, told Reuters.

"We were focused more on issues outside of India and sending cars that were force-feeding the Indian consumer. "That was a mistake and we've learned from that mistake and now have a very robust plan for the business...You can expect a heavy focus on small cars from Ford."

Ford India began operations in 1995. A year later, South Korea's Hyundai Motor entered the market and immediately began targeting the small car sector where formerly state-run Maruti Suzuki had a virtual monopoly.

As Ford struggled with sluggish sales of oversized, costly vehicles, Hyundai's compact cars drove the company to second place in the market within two years. Cheap, small models dominate India's car market, accounting for around 70% of sales. — Reuters