The Economic Times Financial Management Summit: The Buoyancy Factor

Mumbai, Delhi, Kolkata: The financial sector in India has somewhat learnt to live with fiscal challenges and is tackling this new norm of uncertainty, rather well.

In today’s challenging economic condition, Indian business leaders are at crossroads. While they hope to take advantage of the growing local demand-led markets, uncertainties in regulations and policies, cost pressures, increasing competition from other low-cost destinations and macro-economic environments, are keeping them tied down. In addition, the overall global slowdown is hampering the investment flow in this developing market. The second edition of the Economic Times Financial Management Summit, which was held in Mumbai recently, tried to address the issues that the sector is facing today. The summit provided a platform for many finance leaders to share insights, debates and outline key priorities, riding on the theme of managing uncertainties and leveraging opportunities.

L to R - Hemendra Aran, Bodhisatva Ganguli, Anand Sinha, Dr Rana Kapoor.

Speaking about how one can create some optimism and see opportunities in adversities, the summit chairperson, Dr Rana Kapoor, founder, managing director and CEO, Yes Bank said, “The new uncertainty has become so persistent that all we can say is that, in these turbulent times, the only certainty is uncertainty. At such times, the principles of VUCA followed by the US Army hold true. VUCA stands for volatility, uncertainty, complexity and ambiguity, an acronym used by the army to provide a perspective that there can be challenges even in peaceful times,” he added. He further mentioned that the financial sector in India has learnt to live with these challenges and is tackling this new norm of uncertainty, rather well. “While on the domestic front, there are growing concerns of the overall GDP slowdown, inflation has still not reached comfortable levels as warranted by policies, the RBI at least in our assessment, has been extremely prudent in ensuring that we are not over leveraging the monetary levers, the policy levers available to the RBI are fairly well tackling the dual concerns of growth and inflation. I think the RBI has articulated quite distinctly and frequently, that the solution lies in de-bottlenecking the supply side constraints faced by the Indian economy through expeditious policy intervention and more prudential fiscal management,” he explained.

Similarly, Anand Sinha, deputy governor, Reserve Bank of India, pointed out that apart from the miseries that the global crisis brought with it, there has been a positive dimension to it as well, that is the intellectual learning of handling risks with a paradigm shift also in the notion of monetary policy and financial stability.

Aranca, the knowledge partner for the summit, conducted The Economic Times - Aranca ‘India CFO Survey’ 2012 across ET 500 list of companies, where senior CFOs were asked on the challenges that corporate India is facing. The company also released a white paper in this summit. Hemendra Aran, CEO and founder, Aranca, said, “There was a delay in decision making at the corporate level, at the CXO level and at the mid and the low level in the 2007-08 time frame, however today, people are used to making decisions while uncertainties have significantly increased. That mindset is very encouraging where people are realising that no matter what; they have to take decisions at the macro-level or the micro-level.” Sharing the insights of the survey, he added, “The total market capitalisation of companies that have participated in the survey was around Rs 6,00,000 crores belonging to diverse sectors, including banking; technology; manufacturing; FMCG; telecom; construction; among others. You cannot get away from volatility, you just have to model your business so that you can hedge whenever required and keep exposures open when it seems acceptable. Today, it is very important for a CFO to make certain choices because there are limited resources in terms of money and people. Hence, it boils down to decision making on how to put them to best use, given the heightened risk situation,” he shared.

In his welcome address, Bodhisatva Ganguli, deputy executive editor, The Economic Times, said that the role of the central bank had become increasingly important in the world economy. He elaborated, “In the wake of the policy paralysis in different parts of the world, be it the US or the EU, it is the central bank which has been doing the heavy lifting. The chances of the break-up of the euro-zone has diminished somewhat with the politicians in Europe getting their act together very similar to those in our country,” he said. For a long time it was the ECB which had been preventing a collapse in Europe through various innovative measures, which are controversial - unlimited bond buying. Similarly, in the US because of the political grid-lock, the measures introduced by the US Federal Reserve have helped in damage control.

The broader point remains that central banks have become important because coincidently, India is not the only place to be affected by the political grid-lock and there are other places that are affected by the same.

Hemendra Aran
CEO & Founder

You cannot get away from volatility, you just have to model your business so that you can hedge whenever required and keep exposures open when it seems acceptable. Today, it is very important for a CFO to make certain choices because there are limited resources in terms of money and people. Hence, it boils down to decision making on how to put them to best use, given the heightened risk situation.

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The Economic Times Financial Management Summit - Mumbai

The Economic Times Financial Management Summit - Delhi

The Economic Times Financial Management Summit - Kolkata