Broken Wings

Neglected by the parent party and let down by a lacklustre leadership, Congress front organisations are in total disarray

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FAR CRY: Protests by youth activists are a thing of the past

In the Rajiv and Sanjay Gandhi eras, the Youth Congress was an influential force. Sanjay used it as a launch pad for himself. During the Emergency it was the youth wing that stole the party's thunder. Later Rajiv was given charge of the Youth Congress as AICC general secretary. Leaders like Ghulam Nabi Azad, Digvijay Singh, Kamal Nath, Ambika Soni, P.R. Dasmunshi, Ahmed Patel and B.K. Hariprasad have come up from the youth Congress. Today none of the front organisations is being used as a training ground to groom new leadership. The one name that is symbolic of the youth Congress now is that of Natwar Singh's son Jagat Singh, a former IYC general secretary, best known for his involvement in the Iraq oil-for-food scam.

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PURELY CEREMONIAL: Seva Dal is now a shadow of its former self

Both the IYC and the Seva Dal complain of a feeling of neglect. As has been the tradition, they want a Gandhi to give them new lifeblood. The leadership of both these organisations has asked for Rahul Gandhi to play a more active role. "We do feel bad and left out even though we work so hard," says Seva Dal chief Prahlad Yadav, recalling how in 1985 when Rajiv was general secretary in charge of front organisations, he got every mp below 50 to wear shorts and do physical training at Seva Dal camps. Today, these camps are no longer a haute destination. Four years ago Sonia attended a three-day Seva Dal training camp in Jaipur while Rahul is still to undergo formal Seva Dal training. "The worker feels that if I don't wear my Seva Dal cap, I am a neta. If I wear it, I will be sent to fetch a glass of water," says Yadav candidly, adding, "If Rahul takes an active interest then people would ask about us and not the other way round." In 2005 at an AICC meet at the Talkatora stadium in Delhi, the Seva Dal made Rahul wear the Gandhi topi. Soon, the rest of the CWC was seen in Seva Dal caps as well.

"We do feel bad that we are neglected and left out even though we work so hard" PRAHLAD YADAV SEVA DAL "If they need to mobilise women, they ask us. We work hard. Why can't we share the rewards?" SHOBHNA SHAH MAHILA CONGRESS "We are trying to change the image of networkers by encouraging educated youth from the grassroots" ASHOK TANWAR INDIAN YOUTH CONGRESS

Set up in 1923, Seva Dal was originally meant to look after the families of jailed freedom fighters. Later, Jawaharlal Nehru turned it into a counter-force to the RSS. In the last decade it has been reduced to a ceremonial guard despite its proclaimed membership of over five lakh. The caps are neatly tucked away in the dashboards of their Tata Safaris and only pulled out at party functions.

Of the party's five front organisations, the student wing, the NSUI seems to have the greatest success rate, winning the last four elections in the capital. Each win is followed by a tea party at 10 Janpath, which forms a chunk of their interaction with the party leadership. Most Congressmen are unsure of exactly where the Indian National Trade Union Congress (INTUC) is headed. This is the fifth front organisation and the most chaotic. As a party official observed, it keeps itself busy by attending global seminars instead of taking up domestic labour issues. party leaders have thrown up their hands rather than deal with the maverick Sanjeeva Reddy, who heads it.

The Mahila Congress claims that the kitty club tag is unfair. Says Shobhna Shah, general secretary Mahila Congress, "Since Ritaji has taken over, our culture has changed, we have become work oriented." H.N. Bahuguna's daughter took over as the chief three years ago. Since then Shah claims the Mahila Congress has been raising women related issues. But, her own party leaders point out the medium of protest tends to be pamphlets rather than rallies. The women's wing had campaigned extensively for 33 per cent reservation for women. Their male colleagues say that once they got this they became the chief beneficiaries, claiming bank directorships to positions in Congress committees. "Why not?" says Shah. "When they need to mobilise women for demonstrations, they ask us for crowds. We work hard. Why can't we share the rewards?"

Since January, these organisations were handled by Oscar Fernandes. He gave direction but lacked the stature of a Gandhi to catch the imagination of the cadre. Tanwar is trying to reverse the cultural change that had crept into the IYC since the 1990s but lacks stature to be effective. Tanwar's predecessor, Maneesh Tewari had initiated the process of change in 1998. At that time, the size of an average state committee was over 300 people, with the Madhya Pradesh unit stretching to 550. In the '80s, the average was 30 members. Tanwar is trying to carry forward the reforms. A small victory is that he persuaded Charan Singh Sapra, an overage Mumbai youth Congress chief who had been holding the post since 1995 to step down. "We have our limitations but we do our best," says Tanwar.

Congress leader Motilal Vora says, "We have a government at the Centre and in 14 states. The Youth Congress cannot protest against its own government." But even during the NDA's rule there were very few dharnas unlike the '70s when Sanjay galvanised the Youth Congress against the Janata government. Or when Rajiv used the youth brigade to counter the Bofors allegations. Now it seems they're stuck in limbo, waiting for Rahul Gandhi to make his move.

However, Indians are not just driving in style. Cellular phone services company Bharti Airtel too has seen record increase in connections in a single quarter at 41.1 lakh. The company had over 2.86 crore subscribers as on September 30, 2006, an increase in the total customer base of 90 per cent, over the corresponding period last year. Commenting on the company's stellar results Sunil Bharti Mittal, chairman & managing director, Bharti Airtel, says: "This quarter, for the first time ever, India's mobile net additions surpassed those of China. Wireless services continue to drive the growth of telecom services across the country with over 126 million subscribers."

On the back of such stellar growth in manufacturing and services, stock market analysts have revised earnings expectations from Sensex companies from 20 per cent to 23 per cent as a number of other sectors are riding the wave of growing consumer demand. Typically, consumer companies clock good returns in the quarter after the festive season when people spend, but this year has been an exception of sorts. Benefiting from this boom are the banks today, which are not only funding consumer credit but are also financing massive capital expenditure plans of companies to expand capacity. India Inc is committed to Rs 1,00,000 crore capital expenditure over the next year and this figure is likely to touch Rs 2,50,000 crore by 2009. So if you have invested in banking stocks, hold on for the good times to roll as "banks are clocking a healthy 30 per cent increase in retail credit," says Jigar Shah, director, broking firm KR Choksey.

Along with strong domestic demand, global factors too have contributed to India Inc's good health. Stable interest rates in the US and stabilisation of oil prices have benefited both the tech and oil sectors, respectively. Spending on the information and technology sector in the US is up, easing margins pressure on eight technology companies, which have reported a 59.2 per cent rise in net profit to Rs 3,534.32 crore during the quarter. The acquisition spree that India Inc has been on is also contributing to the healthy bottomlines. Fiscal 2006 closed with $100 billion (Rs 4,50,000 crore) in exports. And now the government has set a target of achieving $150 billion (Rs 6,75,000 crore) in exports, including commodities, by 2008-09 and doubling India's share of global trade to 1.5 per cent from 0.8 per cent at present.

While India Inc is making the most of the wave of consumption, profitability is under severe pressure due to rising interest and raw material costs along with higher depreciation. The current fiscal has seen interest burden of companies rise by 11.8 per cent. While they have added significant capacities in recent years, infrastructure bottlenecks and high transportation costs will begin to tell in the coming quarters. All these factors have contributed to profitability going down even though toplines (revenues from sales) are skyrocketing. Harinder Kumar, research head at ICICI Direct, believes this is a volume-driven story: "Growth in revenues will help companies absorb pressures on profitability."

In the past, topline and bottomline growth used to be aligned. For instance, in 2004-05, sales of S&P CNX Nifty grew at 16.5 per cent and profit after tax grew by 11.5 per cent, signaling that profit growth was in tandem with sales. However, this gap between profits and sales is increasing. While a majority of Sensex companies in this season have garnered 30 per cent growth in sales, profits are up only by 22 per cent and profit margins are down by 175 basis points, says Kumar. The sectors that will be maximum hit by rising costs of commodities like aluminium, copper and rubber are auto, consumer durables and fast moving consumer goods.

This season's good news still beats the blues as a number of factors have come together, thus pushing up the earnings of leading indices. Earnings of 17 Sensex heavyweights have clocked a 30 per cent growth over the previous year. Joining the earnings party, after a fairly long time, are former laggards-pharma, banking and cement companies-all of which have seen double digit growth rates this quarter. Cement, for instance, has grown at 141 per cent in the first half of the current quarter compared to its 8 per cent growth in fiscal 2006. Clearly the construction boom is here to stay.

Unlike the earning seasons of the past, markets are witnessing a secular growth. In 2004-05, they were dominated by commodity-led growth and this season several sectors have seen positive factors with both the global and domestic contributing to their growth story. Of these, the most positive has been the recovery of oil companies. Party-poopers in the previous two quarters, oil PSUs have turned around, thanks to the oil bonds issued by the government and a one-time payment made by ONGC. HPCL turned in a profit of Rs 1,222 crore against a loss of Rs 22.14 crore in the corresponding quarter, while ongc reported a meagre 0.86 per cent rise in net profit to Rs 4,173.98 crore. Reliance's profits grew marginally by 9.2 per cent to Rs 2,709 crore. Says Sandeep Nanda, research head at Sharekhan: "Oil companies have driven the growth of the Sensex earnings this quarter as they have clocked profits after losses in the previous quarters. Expected earnings of Sensex firms in 2007 have, thus, been revised from 20 per cent to 22 per cent."

Policy level changes too have impacted the growth of sectors like media and entertainment. With the government opening direct-to-home services, entertainment and content companies are slated to consolidate their position.

While the large caps have hogged all the limelight this season, the mid caps are quietly coming back into the reckoning with higher profits on equally higher sales. Even as Sensex companies will see volumes-led growth, the BSE 500 companies show that they have clocked 31 per cent growth year on year. Net profit has grown by 34 per cent, clearly showing better growth rates than the blue chips. Punters expect the Sensex to close above the 14,000 mark by the year-end as it's set to grow by 22 per cent with an earnings per share of Rs 738, compared to Rs 603 in 2006. All this is good news for the stock markets, which are priced at over 17 times earnings (PE 17.5) and that is fair valuation, say most analysts.

However, if you are looking for investment direction, "bulk of the growth will come from oil, capital goods, auto and telecom companies", says Anup Maheshwari, fund manager at DSP Merrill Lynch Fund Managers. It's evident that the party is set to continue in times to come as Indian companies invest more in building capacities and consumers spend more. But this year's earnings are just the beginning; 2008-09 will be a landmark year for the industry and markets as heavyweight Tata Steel doubles capacity and the Reliance Retail juggernaut rolls. There are lots more to come.

India Inc has for the past three years beaten the street and odds in sales and profit growth. If there is an IF it is in the domain of politics and of course the crimping effect of poor infrastructure that adds to costs. If the government delivers on its promise of better infrastructure, corporate India could well be propelled into a higher orbit of growth.

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