CONVERGENCE 2012 - Enabling a better business environment

Today, the service sector contributes the most to the Indian GDP accounting for more than 50 per cent of it. The importance of services as a sector to the overall economic progress of nations is underlined by the fact that the sector has been among contributing very significantly to the global output and employing more people than any other sector today. 

In a bid to highlight this fact, IFIM business School, Bengaluru recently organized CONVERGENCE 2012, the 4th international conference on “Doing business in India: Opportunities and challenges in the service sector”. Held in Bengaluru, with Virginia CommonWealth University, U.S.A., and University of Applied Sciences, Lubeck as the academic partners, the conference was inaugurated by Padmavibhushan and National research professor, Dr. M S Valiathan. 

The two day event held on the 11th and 12th of January witnessed panel discussions by eminent speakers and paper presentation by academicians and research scholars across various verticals including retail, education, health care & medical tourism and financial services within the service sector. In total, 118 research papers were presented in all the tracks by delegates from India and abroad.

Concerns of a slowdown in growth, an extended phase of high inflation, impact of the global crisis, and proactive adjustments by regulators in the current scenario formed the basis of a panel discussion entitled “Management strategies in the financial services sector: A critical review”. An impressive array of speakers including Sunil Damania, Managing Editor, Dalal Street Investment Journal; Dr Prasanna Chandra, Director, Center for Financial Management; Deven Choksey, Managing Director, KR Choksey Integrated Financial Solutions; Muthu Kumar, Managing Director, Standard Chartered Bank; Ambareesh Baliga, COO, Way to Wealth; Natarajan,
CFO, Helion Ventures; and Anil Saxena, Group CFO, Religare enterprises were all part of the panel which considered several important issues with reference to the subject. Issues that the panel discussed ranged from financial literacy to having a super regulator and those concerning financial innovation to structured financial products available to consumers today. 

Financial Awareness

The consensus amongst panel members was about distinct need to spread financial awareness and literacy amongst investors. Ambareesh Baliga opined that financial literacy has to be done collectively as no one single organisation can do this job single handedly. A lack of understanding of the equity markets and lower maturity levels pervasive across the board irrespective of the size and nature of investors is something that needs to be addressed on an urgent basis. Participants in the discussion were unanimously aligned to this thought. A very good example of this is the fact that while the historic return on investment in the equity market is around 15.5 per cent, more than Rs 10000 crore have been invested in the low yielding NHAI bonds. So, investors need to realize that equities are a better asset class if you remain invested for the long run. Unfortunately, the television media keeps urging investors to buy equity based on short term trends, which are frequently unreliable.  

Certain panellists opined that courses on financial literacy must be introduced in the curriculum at the school level itself. 

Super Financial Regulator

Another significant point of debate was whether to have a single super regulator in the financial services space. The conflict in the dual roles that the Reserve Bank of India is discharging presently was succinctly summarized by Dr Chandra. According to him this dualism dilutes its effectiveness in managing the economy. However, he also added that it was premature for India to push for one super regulator as such a body requires enormous technical and managerial capabilities. Anil Saxena on the other hand highlighted the ease of doing business with one super regulator. Deven Choksey also pitched in by mentioning that there was a felt need to have a super regulator in India but this requires a smooth transition. 

Financial Innovations

Is there enough of financial innovation happening in the Indian context? In current times, financial innovation is the need of the hour to
increase financial depth and lure more retail investors to the capital markets. Financial intermediaries act as the bridge between the issuers and investors. In the present structure of intermediation, it is the issuers who remunerate the services of intermediaries and as such the process of intermediation is skewed towards protecting the vital interests of the capital issuers. This skewness acts as a dampener on financial innovation. This situation needs to be corrected and financial intermediaries must act as advisors to the large sections of retail investors. Once this correction is done, financial innovation will happen on a large scale opined Choksey. 

Derivatives 

Structured financial products are packaged financial products based on derivatives. These products are used to customize investment strategies to address the portfolio needs of retail investors. There is an explosive scope for financial innovation and customization in the Indian financial markets if these products are extensively used by the intermediaries. Muthu Kumar regretted the fear psychosis of investors to derivative products and was of the opinion that it needs to be dispelled. Derivatives are innovative products that have to be handled with due diligence and understanding.

FDI In Retail

Another significant discussion held was about “FDI in Retail and its Impact on Indian Economy”. Moderated by Biju Kurien, President, Reliance retail it resulted in a discussion on infrastructure, understanding the Indian customer and culture as well as the location influence and the role of transit terminals in retail. The Role of medical tourism, ethics and cost effectiveness of treatment in India was discussed in a panel discussion on “Health care beyond borders and emergence of medical tourism”. Dr Nanda Rajaneesh, Gastrointestinal Oncosurgery - Nova Medical Center moderated this discussion. The panel experts strongly pitched for India as a favourable destination in spite of competition and the need to moderate over the counter drug sales. 

“Challenges and opportunities ahead in Education sector” formed a part of another important panel discussion at the event. With eminent academicians as a part of the panel the track was moderated by Prof R S Nirjar, Executive Chairman, IFIM Business School. The panellists expressed their concern over quality education in India and also expressed their views in favour of Public Private Partnership model to bring in a meaningful development of the sector. 

In an absorbing and intellectually stimulating discussion active participation of the audience that included the press, eminent personalities from the service sector, faculty, delegates from across the globe and students of IFIM added verve and vibrancy to the panel discussion. 

The whole idea behind such a conference is to generate new ideas and disseminate knowledge. Both these goals were adequately served as demonstrated by the high quality of research papers, involvement of the audience in the proceedings and stimulating panel discussions held over the two day period.