FINANCIAL WORLD'S ANSWER TO MAHATMA

INDIA'S richest man is often seen in photos wearing a suit.

But that's because the photos in the public domain are often taken during official functions.

Mr Mukesh Ambani, the head of Reliance Industries, prefers a white short-sleeved shirt, black trousers and black shoes.

He thinks big.

He is building the world's biggest refinery and the world's most expensive home - a 27-storey structure in Mumbai.

So it comes as a surprise, that the New York Times (NYT) recently compared the 51-year-old shrewd businessman to India's founding father, Mahatma Gandhi.

'In the last century, Mahatma Gandhi was the most famous and powerful private citizen in India. Today, Ambani is widely regarded as playing that role, though in a very different way,' the newspaper's correspondent wrote.

Mahatma Gandhi and Mr Ambani are from Gujarat and from the same bania caste. Both are teetotalers and vegetarians.

But while the Mahatma was an ascetic and a champion of the village, MrAmbani is 'an oligarch, a champion of the city, a burier of the past and a man who deftly - and, some critics say, ruthlessly - wields financial power'.

Mr Ambani is upbeat about a resurgent India. He told NYT: 'Can we really banish abject poverty in this country? Yes, in 10, 15 years we can say we would have done that substantially. Can we make sure that we create a social structure where we remove untouchability? We're fast moving to a new India where you don't think about this caste and that caste,' he added.

He envisions Reliance, with US$39 billion ($53b) in revenue, as providing incomes to 12 million to 30 million Indians within the next five years by buying from farmers and employing new workers in its stores.

LEGENDARY APPETITE

He is known for his legendary appetite, but his tastes are simple.

The NYT reported that he has been known to walk out of fancy restaurants in search of thosais sold by the roadside.

'Personally, I still have to eat my dal, roti, chaval,' he said, using the Hindi words for lentil soup, flatbread and rice. 'I just have not developed those tastes.'

The Stanford-educated Mr Ambani recalls 'a lot of emulation' of Western ways surrounding him as a child.

'My view was: 'What the hell, man! We can do what we feel like.' I think what has changed now, and it is changing in multiple generations, is this self-confidence and self-belief.'

Said one of his admirers, MrNandan Nilekani, co-chairman of Infosys Technologies, a leading outsourcing company in India: 'If you look at his interests, they're very rooted in India. He's not trying to impress anyone else.'

MrAmbani's wealth is relatively new. His father, MrDhirubhai Ambani, started the company in 1958 in a tiny office in Mumbai, first exporting spices to Yemen, then entering the yarn trade.

As the eldest son, he helped oversee the company's diversification into petrochemicals, then energy, then cellphones.

His father made him a board member at the age of 17 or 18, he said. And because he was involved with Reliance when it was 'just a textile company', he said he has always felt that he built it with his father, rather than simply inherited it.

'My big advantage was to have my father accept me as first-generation,' he said. 'He treated me like a partner, saying, 'Okay, let's go do this.' And more than that, he gave me the full freedom, the ability to bet the house.'

After his father's death six years ago, he fell out with younger brother Anil.

The company was divided. MrMukesh Ambani kept the oil, gas and petrochemicals businesses of the group flagship Reliance Industries. The younger brother got Reliance Energy, one of India's biggest power utility firms, the phone company and finance arm Reliance Capital.

MrMukesh Ambani's vision is to turn India's weakness on its head.

If manufacturing remains small-scale and fragmented, let it stay that way, he said.

'The next big thing is how do you create manufacturing with decentralised employment,' he said. 'The Chinese have got very disciplined top-down systems. We have our bottom-up creative systems.

'How do you really bring about, in a country of a billion people, the individuality of every single individual?

'How do you make sure that you create systems that empower everybody and bring them to their true potential? This is what actually Gandhi taught us.'

He added: 'The optimistic part to me is that now these goals look achievable.'

IIP @ 7%: Has RBI dumped growth to contain inflation?

April Index of Industrial Production data has come out at 7% versus 11.3% YoY. March IIP numbers have been revised to 3.9% vs 3% earlier. CNBC-TV18 poll predicted the IIP number at 6.4%. The April manufacturing growth came at 7.5% vs 12.4% YoY.

After IIP growth numbers were released, experts were positive on the numbers but don't see growth moving up. Shubhada Rao of Yes Bank is not optimistic about the continuation of growth. On the other hand, David Carr, Standard Chartered Bank feels that the government is focusing more on inflation control rather than growth.

Although Rao is slightly optimistic on the IIP front. She said, “We were at about 6.5% on the forecast ourselves, so anything above that is clearly a pleasant surprise.” She sees FY09 GDP growth at 7.5-8%.

Expectations were getting anchored aggressively because of the repo rate hike. It also gave a clue that perhaps growth wasn’t all too bad that was being broadly expected. She said, “Our 8% forecast although may look for a somewhat downward revision, but the initial cues are fairly encouraging if you look at not just IIP but overall services growth. Rail freight has been growing at 21% as well as transport and communication. So all said done, auto sales are good in May they have been even better than April, so as of now there is no visible evidence that the growth momentum is on a complete slowdown."

On GDP numbers, Soumendra K Dash of CARE feels that 8% is fairly possible because though RBI has taken a lot of a monetary stance which has really curtailed that money supply growth. The rate of interest is increasing and money is becoming expensive, GDP will touch 8% and if not then 9.5%, he added.

HDFC Bank does not rule out CRR hike if July liquidity goes up. The view is that there is no crisis in growth and RBI is giving priority to inflation.

ICICI Securities view on this is that the momentum in economy is stronger than anticipated. Further move by RBI before July-end is unlikely. On the other hand, BNP Paribas sees 25 bps CRR hike before RBI july policy.

Naval Bir Kumar, MD of IDFC Asset Management said, “It is definitely better than the 3.9% revised number for March. But having said that, it is still significantly lower than last April's growth numbers. Somewhere towards 2003-end, we saw an increasing trend of growth and over the last eight months, we are visibly seeing a slowing trend of growth.”

According to Bir Kumar, inflation has been a concern in India for the last few months, but the indication from RBI so far was that they are trying to balance growth with inflation. Hence, RBI targeted liquidity management rather than tampering with interest rates in the economy. The increasing interest rates seem to indicate that they are now biased more towards inflation and that’s become a worry for them, rather than trying to also manage growth at the same time, he added.

This has been a trend, for not only India, but one will see a rate hike every time one sees high inflation and rising interest rate environments. Fed has also indicated that the next move may be up. Bir Kumar does expect GDP growth numbers to be under stress with higher interest rates.

Bir Kumar explains that the government has said that nearly two-thirds of infrastructure spending will be done by the public sector. Therefore, in a deteriorating fiscal situation for the Government of India, which seems to be very visible in 2009, same level of infrastructure spending will not be there. This increases the cost to the economy and reduces demand in the economy because investment spending comes down. Therefore, according to him, these are all domino effects that will happen. He said an analysis of the data over the next few months will be done.

Looking forward...

Dash of CARE senses smugness in the envelope of the corporate world. He feels that IIP may grow at 7% probably because of the lower base year effect. If you see that in April and March 2007, there is a drastic fall in the index by slightly above 15% but the momentum may not continue in future, he added.

Rao believes that the overall macro-economic environment is not exactly conducive to be extremely optimistic that this growth momentum will continue going forward. We do see dips and impacts of a repo rate hike and the money supply still at 22.5%. She said, “We can’t say that we are done with monetary tightening; we still possibly have some more in store for us. It all boils down towards oil and the way we take our inflationary expectations. We are yet to see a full blow out of the second order impact of current inflationary pressures. The RBI has pre-empted on that point of view also. So, growth possibly can get moderated going a little bit ahead.”

Petrol up by Rs 5; diesel up by Rs 3

Petroleum Minister Murli Deora has announced that excise duty on HSD and petrol has been reduced by Re 1 (current rate Rs 14.35 for petrol - Rs 4.60 for diesel).

Petrol prices have been hiked by Rs 5 and diesel by Rs 3.

Customs duty on crude has been reduced to nil from 5%. The duty cuts would amount to Rs 22,660 crore in revenue loss, the Revenue Secretary said.

The Cabinet has decidedly approved the fuel price hike, said Murli Deora, Petroleum Minister.

In a broker poll conducted by CNBC-TV18, all respondents expect a Rs 3-5 hike in petrol prices and Rs 2-3 hike in diesel prices. While 70% feel markets would react positively to the over Rs 5 hike in petrol prices. And 30% see neutral to negative impact in case of over Rs 5 hike in petrol.