Thou Shall Not Quit

Try I will, I may not succeed

One step ahead, with each attempt

The fruit of success is all so sweet

The upshots of failure are not that bitter

Fight I will, till the battle is won

Strive I will, be it day or dawn

Moving mountains, with my Labour

Waking myself, from years of slumber

It’s how you define success, which is all that matters

Some say its money, some say its fame

I say it’s being happy in whatever you are doing

As when you are happy, the rest will keep flowing

In the end, when the curtains fall

All my dreams turned to ashes, all my tangibles reduced to dust

No matter how many would miss me, no matter how many would have cried

I want the world to say, there lived a man who tried

Written by Nishant Mathur, PGPM 2018, Great Lakes Institute of Management, Chennai 

(Image courtesy –

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The Argentina Dilemma and threats of systematic failure By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

In 1869 the law relating to bankruptcy was introduced with the provision of limited liability. This ensures that the shareholders of a bankrupt company will be able to walk away from their creditors without paying the full debt. The shareholder wealth is never affected because of this limited liability. In the case of a country, if it borrows in local currency and is not able to repay, it can inflate its debt away. India is currently following this policy. While the real inflation rate is in double digits, thanks to deficit financing to support all social objectives, the government has massively reduced the purchasing power of rupee over time. For example, a kilo of rice sold for Rs. 20 a few years back is selling at 55 Rs. But the problem becomes different when the borrowing is done in a foreign currency.

Currently economically weak country issues bonds in foreign currency which foreigners do buy because of the risk compensating high yield as compared to the US government bonds. In the case of Argentina, the spread over the US government bonds was well over 300 basis points. So the creditor is already compensated somewhat adequately for the risk of default.

Now comes the real story. Thanks to real mismanagement Argentina is on the verge of bankruptcy. Its loans need to be restructured. This involves paying the creditors less than 100 cents on a dollar.

The owners of these bonds fall in the two categories.

(A)those who are willing to accept reduced debt with a deeply reduced face value. For example, a 100 US dollar face value bond is revised to 90 US dollar.

(B)those who hold outs insisting on full payment.

Recently the US courts decided that Argentina should make full payment to the defaulted claim to both A and B if it decides to make any payment on the restructured loans. This idea of giving equal treatments to both A and B is very tough. If all of them turn out to become hold outs, then payment is not going to be possible. On the other hand if all the creditors accept reduced payments then restructuring is possible.

The final outcome of Argentina’s debt problem has far reaching implications to all the debted countries and the creditors as a whole. Long court cases with inordinate delays and frustrating discriminatory judgment unfavorable to them. Countries which are planning to borrow overseas may find this judgment difficult to do so. We in India have an external commercial borrowing of US $ 225 and a foreign reserve of $ 310 bln. The lender will think twice before lending any more money to India and if did it will ask a very high premium. The situation transpiring in Argentina is a major threat to the financial market. The New York court’s decision must be honored. If not, what is really in danger here is the public trust in financial securities market as well as in law enforcement. The conflict between the bond holders and the government must be settled through negotiations which is only the best interest of both parties. If they fail it will set a precedence for other countries to disobey the court’s judgment and then the international finance transaction may become a cause for the total financial breakdown.

Finally, the global financial system is full of cracks waiting to collapse any time. Every country’s duty is to uphold the system which means respecting the court’s decision.

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Is the Indian economy running out of stream? A reality check By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

It is often said that “the data speaks for itself”. In the case of Indian economy and its future growth, it is applicable admirably. The politicians often refuse to see the true picture and instead claim that the economy has bottomed out and now is rearing to take off. Is it? On what basis are these claims made? Why then is the data released by the Indian CSO tells a contradicting story. Here is a reality check and how it is in variance with what these politicians say.

Reality Check 1: Whether we like it or not, the global economy is either in recession or in deflation safe for a few countries. The euro zone countries, which is about one third of the global economy has entered into a major recession with a best growth possibility of sub 1 percent. The Japanese economy would love to have this 1 percent growth with persistent slowdown and deflationary tendencies, it is in no position to support the global economic growth. The US economy which is approximately one quarter of the world economy has just announced 0.1 percent growth for Q1 2014. In this global environment if Indian economy were to achieve a 5 percent growth after growth rates below 5 percent for the last 2 years, we should have a celebration. Unfortunately it will be difficult for it to happen. In this regard current Chinese economy is also facing its own asset disinflation and is trying to avoid a sub-prime crisis similar to the one that took place in the US in 2008.

Reality Check 2: The Brent crude and WTI oil prices are hitting new highs. Thanks to the Sunnis insurgency in Iraq. Currently there is no disruption both in production and distribution but the price of Brent crude per barrel has touched $ 115. Only 2 years ago it was around $ 90 per barrel. If the civil war spreads damaging the production and distribution capabilities of Iraq, then the price could soar to touch the old highs of $ 146 per barrel. India’s export bill is around $ 160 billion dollars. Every $ 1 increase per barrel costs our exchequer thousands of crores. The diesel price which is currently subsidized will have to increase or alternatively the cost will be passed on to the consumer which means higher inflation.

Reality Check 3: The non-performing assets of banks, especially the PSU banks, are at an all-time high. The loan defaulters whether intentionally or unintentionally have decided not to return the loans. The lendable funds with the banks have shrunk and besides many banks will need capital to recapitalize to meet the Basel 3 requirements. The first priority of the government will be to set the banks books straight even at the cost of growth.

Reality Check 4: In the last budget, Mr. Chidambaram predicted the budget borrowing to be about 30 percent. This itself is outrageous. Unless drastic action is taken by Mr. Modi’s government the borrowing could go even higher. Selling the public sector undertakings may generate some money but in the last 2 budgets the efforts yielded marginally. Non availability of resources will be a major deterrent to growth.

Reality Check 5: With the CPI inflation edging slowly towards double digit and the monsoon playing truant with 40 percent deficiency up to now, there is hardly only chance for the food prices to come down. On the contrary the prices of fruits, vegetables and cereals are shooting up. Given the present trend I am afraid that we may be ending up with a very low economic growth and high inflation. Honestly speaking, only a miracle can save the Indian economy.

Reality Check 6: This in fact is the most favorable possibility and can change the picture completely. Borrowing huge amounts of money from China and Japan and attracting FDI in large amounts would certainly help in the current scenario. This is our best bet as it stands today. The recent Argentine crisis with a possible credit default and the disobeyance of court order. Countries which have surplus funds will think twice before lending any money and if they did will come with all conditions.

Reality Check 7: The savings rate in our economy is falling rapidly. There are two aspects to it. One part of the saving is going into gold. A large number of Indian citizens are convinced that the only way to ensure future security is to divert the funds to gold. The interest rate provided by the banks for the deposits is abysmal and below the inflation rate which gets worse after taxes. Besides, gross capital formation is moving towards new lows. This will be a major dent to the economy.

Finally, the new government’s hands are tied and will stay clueless. The UPA government has literally driven the economy into a hell hole with huge debts. Their subsidy program, a largely welfare scheme has cost our country’s growth horrendously. But in the end, who cares. At least the bottom of the pyramid benefited but unfortunately they became disloyal to the UPA in the last election. Every government honestly wants to do good things to its people. Support the poor and give them hope but economic reality dents this aspiration.

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Reviving the Indian Economy: PM Modi’s Challenge By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

We are only 10 days away from the budget. The last 10 years of UPA government had committed so much to welfare and subsidies that it will take a great leader like Modi to stand up and say we cannot afford this luxury anymore. Let us look at some facts.

  1. Start with food subsidy provided

FY 2012 – 2013                     85000 crores

FY 2013 – 2014(RE)              92000 crores

FY 2015 (Interim Budget)     115000 crores

Can Mr. Modi bring down the subsidy? Possibly not; People receiving are used to who are currently beneficiary will protest.

  1. Let us now look at under recovery (Government pays on behalf of consumer).

Kerosene Rs. 32.87 per litre

Gas Rs. 432 per cylinder

Fertilizer subsidy Rs. 67970 crore

All the subsidies added up to 10% of the total budget including the NREGA. Mr. Modi will have to reduce the under recovery to reduce the budget deficit. Will he bite the bullet and do it? Let us see.

  1. Let us look at the budget borrowing

It is approximately 30% of the budget. If our household is run like the government, we would have become bankrupt long ago. Reducing the borrowing it will be a herculean task. In the short-run Mr. Modi possibly cannot.

  1. Let us look at the taxes

Marginal relief for tax payers is currently around Rs. 2 lakhs. Mr. Modi has no money to increase it even though some are asking for the limit to increase to 5 lakhs. Let them continue to dream.

  1. Regarding Corporate taxes

Exemptions amounts to 68000 crores which is the amount foregone in FY 2012 – 2013. Can this be sustained? Remains to be seen.


  1. Mr. Modi’s hands are tied. He has to find additional source of money. He can try to sell more of the PSUs. Otherwise the deficit will increase even further. Currently it is around Rs. 5 trillion out of a budget of 16.5 trillion Rs.
  2. Both the failing monsoon and the spiraling oil prices are going to affect his budget. Being a strong leader, he should not play to the gallery but must act in a determined way to get the economy back on track. He should tell the people “no free lunch”. It was almost like the parents telling a child who is asking for an extra allowance. PM Modi must be transparent regarding the true finance of the country and advise them to lower their expectation.
  3. Mr. Modi should not get swayed by popular opinion but instead take the harsh measures necessary to put the economy back on track. However in the last 1 month he has already back tracked on the railway budget and the sugar support price.
  4. Continuing to be people friendly by offering freebies will not be the hallmark of a good leader. Tough measures are needed even if it makes the growth to come down temporarily.
  5. Inflation is our worst economy. He should address this problem immediately. Study the supply chain carefully. Threatening the commodity market will not yield the result.

The entire population of India is watching him to hand over goodies to them. If he did then he may win a few more supporters but the country will become much poorer for that. Sir, you mean good. Put a lid on the budget, people will understand. If you don’t do it, nobody in future can do it because you have a comfortable majority which is rare in the Indian politics.

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Deficient monsoon and Commodity Prices By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

This is an ongoing conversation between the student and the professor.

Student: I know you teach trading in commodities. Please tell me the impact of monsoon on the commodity prices.

Professor: Monsoon is a massive see breeze blowing in from the sea. In India, we call it South West Monsoon. The breeze is from the high pressure area to an area of low pressure and is formed over land due to intense heat. Recently, extended winter in North India interfered not only with the heating of land but also the gradient. What do we have now? According to the news, the month of June passes with a rainfall deficiency of about 40 percent. The EI nino is blamed for this deficiency. Monsoon impacts the plantings. Currently Kharif plantings have been severely impacted by this deficient rainfall across the country. The worst affected are cotton and oil seeds. As a commodity trader, you will notice that the prices of these are moving up. A trader would buy these contracts hoping that this misery persists.

Student: Professor, I want to learn how to speculate in commodities. Can you give me a rough idea of how to go about?

Professor: I understand that you have no time to attend my classes. Anyway let me try. Currently the Kharif crops involve the following commodities planting. Historically the amount of land under cultivation should be as follows (measured in hectares).

Sl. No Commodities Amount of land under cultivation (in lakh hectares)
1 Rice 35.44
2 Course grains

(a)   Sawar

(b)   Bajra

(c)    Maize






3 Pulses

(a)   Tur

(b)   Urad

(c)    Moong





4 Oil seeds

(a)   Ground Nut

(b)   Soya bean

(c)    Sesamum

(d)   Sunflower






5 Cotton 35.86
6 Sugarcane 44.52
7 Jute and Mesta 8.18


A speculator like you would want to watch the developments of the monsoon and read the reports of the various commodity houses to know which commodity you should bet on. The monsoon is supposed to have set in Kerala on June 1. This year it got delayed by 5 days. After a good start it slowed down and the amount of rain required is not available. Unless the monsoon revives in the near term, we can see the prices of specific commodities moving up because the farmers may decide not to sow them enough. This creates scarcity and so the prices move up.

Student: Are you saying that I can speculate on the price and if I am correct the price appreciation enjoy a handsome profit.

Professor: Why not? That’s how the commodity market works. The worst thing is when the future prices moves up, the retail prices will also move up which means, the inflation rate will move higher. It is a tough time for Modi and his team to keep a lid on prices. They will definitely try to intervene in the commodity markets to stabilize the prices. Will they succeed? Let us see.

Student: What else should I understand?

Professor: You must know that the global commodity market work in sync and so price appreciation in one market will push in the others also. Well, this is not the appropriate time for us to discuss this in loose terms. Take my course. You will learn all about how to take advantage of the price volatility.

Student: Thanks Professor. Let me think about it.

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Oil Prices and Futures Market By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

This is an ongoing conversation between the student and the professor.

Student: Professor, I read in the papers that the price of Brent Crude oil has touched 115 dollars a barrel. Will it hurt India?

Professor: Of course it will. The main reason for this price hike is because of the civil insurgency in Iraq. The price of crude oil went up 4.5 percent ($5 a barrel) in just one week. The Sunny insurgents (ISIS) have already taken over Mosul, the second largest city in Iraq. The Baiji refinery that provides diesel and gasoline to Iraq is also under siege. A scarcity is in the making.

Student: Will there be a ceasefire soon?

Professor: Very unlikely. You see the Sunnis want to carve a separate state. (They call it Caliphate) where all the Sunnis could live and practice their Shariat law. This is their dream similar to that of Martin Luther King of US who wanted the black and the white to live and work together in harmony and Nelson Mandela of South Africa who wanted the abolition of apartheid. The Shia’s are providing the opposition and willing to fight to death to kill their dreams. So there is a blood bath going on.

Student: Professor, every time a crisis develops of this nature, the oil prices go up. Why?

Professor: For 2 reasons. (1) The production of oil could be hampered by the war and so an artificial scarcity is created which will push up the oil prices. (2) The oil futures market where hedgers and speculators are there to seek protection and to profit respectively from the volatile market. The hedgers for example may be importers of oil and they buy the oil futures to ensure availability of oil and at a price they are comfortable with. The speculators on the other hand want to push the price sky high to reap speculative profits. These 1000 barrel Brent crude and WTI contracts are traded in the ICE and CME markets in the US. The volume of trade is very huge revealing the intensions of the traders and speculators.

Student: Why should the retail market be affected?

Professor: When the traders see the prices moving up in the futures market they know that the price will eventually move up in the retail market. It is this expectation that results in the price changes in the retail market.

Student: Can anyone prevent the prices of oil from moving up?

Professor: That is why you should study macroeconomics. For example, in the case of oil you will know who are the producers and consumers in the world and how political and economic events play a big role in the price movement. For example in the last Iraq war, the oil pipeline going through the Kurds territory was blown and this caused the price of crude oil to spiral up. The speculation took the price to $ 146 a barrel before the bubble burst.

Student: Now let me ask you a question about India. Will the events in the middle-east affect us?

Professor: You bet your last dollar it will affect us seriously. We import large quantities of oil from Iraq. If there is an interruption in supply, the price will shoot up. Also all flows through the gulf of Hormuz will stop creating scarcity. If the insurgency spreads through Iran, the gulf-shipping will be affected badly. With every dollar of price hike per barrel our oil bill jumps up by several thousand crores. To protect the consumer, if the subsidy in increased, then the budget deficit will increase significantly. On the other hand, if the cost is passed on to the ultimate consumer, prices at the petrol pump will jump higher and so this will push the inflation rate higher.

Student: What really can government do?

Professor: They can perhaps hedge. Hedging costs are sometimes quite prohibitive and this discourages them from hedging. Look, when things are not in your control what can the government do.

Student: Professor I will go and read up about oil and oil future. Thanks for the conversation.

Professor: Let me caution you. When you read some of these reports, check who has written it. Some really wish the price could go higher. It is a zero sum game. For example, Russia and Saudi Arabia will be celebrating because they are the big exporters of crude oil and also will want the price to go up. Countries like India are major importers and so we have to pray to the lord almighty that the civil war should end soon and that the prices revert back to its normalcy. But you see we don’t have a choice. As they say “Beggars cannot be chosers. Take it or leave it”.

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Malaysia @ Greatlakes, an interesting student interaction

What makes a B School truly global is the exposure it provides to its students to understand their foreign counterparts, opportunities to understand cross-cultural diversity and ways to connect with the future managers at a global level. On July 17, Great Lakes Institute of Management hosted a group of Business students from the MARA University of Technology who had come all the way from Malaysia accompanied by their professors and family.


Universiti Teknologi MARA (UiTM) is the largest university in Malaysia in terms of size and student enrollment. Great Lakes is considered as one of the reputed institutes globally by UiTM because of its unique curriculum and international exposure provided to its students. It is with this fair outlook that they chose to visit Great Lakes during their visit to India. Students from UiTM gave presentations that revolved primarily around globalization and its Asian impacts, and compared the growth of Malaysia with India. Several aspects were discussed including the studies showing that Malaysia being able to reduce their poverty level from 40% to nearly 2% within a span of 30 years. Later, audience asked some queries on the Malaysian growth model and its various possibilities of implementation in India.

We, Great Lakers were curious to find out what image the Malaysian students had on India. When we questioned them what comes to their mind hearing the word “India”, we got some really interesting replies. The list included Tajmahal, spices and even Rajnikanth. The Malaysian students happily acknowledged that their perception about India changed after feeling the real essence of India.

Discussion moved to comparing global B Schools, especially Ui-TM and Great Lakes. Dr. Hj Yeop Hussin, Associate Professor at UiTM, Bidin said, “We already have exposure to Malaysian, Chinese, and Vietnamese B schools. Great Lakes is definitely comparable to most B-Schools in various aspects and very much a Global B School. That’s why we never had any doubts while choosing Chennai and Great Lakes as our destination.”

Dr. Asry Yusoff, Associate Professor at Ui-TM remarked that Great Lakes infrastructure and hospitality itself are clear differentiators. “Great Lakes founder and Dean Dr. Bala V Balachandran has done true wonders for Great Lakes to emerge as a front runner among the B schools”, he added.

The seeds for a long lasting relationship between Great Lakes and UiTM have been planted and would certainly flourish over the years to come. The changing business scenarios along with the new business education trends are making such B-school interactions an absolute necessity for polishing the global leaders of tomorrow.

Jyothish Jayan V (PGPM 2015)

Great Lakes Institute of Management



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