Anything that moves

Why the current economic slowdown is worse than the one during Manmohan Singh’s second term

The deceleration that began in 2010 was part of a global downturn, the current one is happening during a global economic upswing.

The bimonthly statement of the Reserve Bank’s Monetary Policy Committee, released on Wednesday afternoon is upbeat about the strength of economic recovery among the world’s wealthiest nations:

“Since the MPC’s [Monetary Policy Committee] meeting in August 2017, global economic activity has strengthened further and become broad-based. Among advanced economies (AEs), the US has continued to expand with revised Q2 GDP [gross domestic product] growing at its strongest pace in more than two years, supported by robust consumer spending and business fixed investment.

“In the Euro area, the economic recovery gained further traction and spread, underpinned by domestic demand. While private consumption benefited from employment gains, investment rose on the back of favourable financing conditions. The Euro area purchasing managers’ index (PMI) for manufacturing soared to its highest reading in more than six years. The Japanese economy continued on a path of healthy expansion…”

The Monetary Policy Committee statement points to similar buoyancy within the cohort of nations frequently grouped with India:

“Among the major emerging market economies (EMEs), strong growth in Q2 in China was powered by retail sales, and imports grew at a rapid pace, suggesting robust domestic demand; investment activity, however, slowed down. The Brazilian economy expanded for two consecutive quarters in Q2 on improving terms of trade, even as the impact of recession persists on the labour market. Economic activity in Russia recovered further, supported by strengthening global demand, firming up of oil prices and accommodative monetary policy.”

When it comes to a reading of India’s economy, though, relatively little seems to be going right:

“On the domestic front, real gross value added (GVA) growth slowed significantly in Q1 of 2017-18…GVA growth in agriculture and allied activities slackened quarter-on-quarter in the usual first quarter moderation, partly reflecting deceleration in the growth of livestock products, forestry and fisheries. Industrial sector GVA growth fell sequentially as well as on a y-o-y [year-on-year] basis. The manufacturing sector – the dominant component of industrial GVA – grew by 1.2 per cent, the lowest in the last 20 quarters. The mining sector, which showed signs of improvement in the second half of 2016-17, entered into contraction mode again in Q1 of 2017-18, on account of a decline in coal production and subdued crude oil production…

“The uneven spatial distribution of the monsoon was reflected in the first advance estimates of kharif production by the Ministry of Agriculture, which were below the level of the previous year…

“India’s export growth continued to be lower than that of other emerging economies such as Brazil, Indonesia, South Korea, Turkey and Vietnam, some of which have benefited from the global commodity price rebound. Import growth remained in double-digits for the eighth successive month in August and was fairly broad-based…Consumer confidence of households polled in the Reserve Bank’s survey has weakened in terms of the outlook on employment, income, prices faced and spending incurred.”

This is a terrible catalogue of problems, and represents the first true crisis for the Narendra Modi government. Over the past weeks, it has endured an unprecedented torrent of questions and doubts expressed not only by ideological opponents and disgruntled party members, but by neutral analysts and concerned supporters. Thus far, it has stuck to its policy of never admitting lapses or failures. But unless things get better quickly, it might find itself on a slippery slope similar to the one faced by Manmohan Singh’s administration in 2010. That’s when the last sharp slowdown in India’s growth commenced as, having weathered the most serious global financial crisis in generations, the economy unexpectedly slackened. “Policy paralysis” became a popular descriptor of the state of a government beset by corruption scandals, unable to rein in runaway deficits and persistently high inflation. The Congress-led United Progressive Alliance administration was, no doubt, culpable on a number of grounds. However, it is worth remembering that all its peers faced a significant slowdown in that period. An article in The Economist in 2013 catalogued the widespread downturn:

“The emerging economies’ share of output is no longer rising as fast as it did in the 2000s. In 2009 the year-on-year increase in that share was almost one and a half percentage points. Now it is back below one percentage point. This tallies with a striking slowdown in BRIC growth rates. In 2007 China’s economy expanded by an eye-popping 14.2%. India managed 10.1% growth, Russia 8.5%, and Brazil 6.1%. The IMF [International Monetary Fund] now reckons China will grow by just 7.8% in 2013, India by 5.6%, and Russia and Brazil by 2.5%.”

This time round, there is divergence rather than congruence between India and its peers, an unusual state in which India is doing worse even as the world does better. Ruchir Sharma of Morgan Stanley, among the experts to have continually highlighted the global corollaries of national accelerations and decelerations, published a blunt article in the Times of India on Wednesday morning underlining this fact:

“The global economy is enjoying its best year of the decade, with a worldwide pick up in GDP [gross domestic product] and jobs growth, and very few economies have been left behind. India is one of the outliers, with GDP growth slowing and unemployment rising.”

Having considered high interest rates and an overvalued rupee as possible explanations for India’s underperformance, Sharma concluded that these have been less important than the two signature initiatives of the government: demonetisation and the Goods and Services Tax.

Farce followed by tragedy

After the farce of the note swap, the government needed to do everything in its power to prevent the GST rollout from turning into a tragedy. Demonetisation was a one-off hit, but the compliance burden of GST is a chronic condition.

Standing in long ATM queues was bad, but filling in cumbersome forms each week for years must count as worse. The government should have understood, based on the experience of countries that have instituted a Goods and Services Tax, that its benefits would accrue disproportionately to large firms, while the compliance burden would be borne disproportionately by small businesses. This study of GST in Australia, which implemented its tax reform in 2000, calculated that, “As well as internal costs in terms of time and distraction, small businesses are outlaying on average an additional $2,433 each year for bookkeepers and accountants to help them administer the compliance costs of tax.” The study concluded that, for small businesses, the costs of compliance with GST outweigh benefits.

Australia, like India, has a revenue threshold above which it becomes mandatory for businesses to register for GST and file regular returns. But Australia has a single GST rate of 10% for taxable goods and services. India, with a population far less educated and technologically savvy, has saddled businesses with an incredibly complex mix of rates and exemptions.

Reports in document how hard the introduction of GST has hurt livelihoods of people in industries as diverse as paper products and sari weaving. But if the small business owner is under dreadful stress, it is not as if big businesses are happy. Shankar Raman, Chief Financial Officer of Larsen & Toubro, delivered an unusually frank assessment of the GST rollout in an interview. He said:

“I remember the government saying that it was ready but the private sector wasn’t. But today, the government is not ready. The systems are not ready. It is extending the time for filing returns. Things are still being done manually. Today, we are paying GST after computing it ourselves, instead of the government architecture telling us how much to pay based on our purchases and sales.

“As and when the system configures this and starts coming out with the figure, god knows how different that would be to the figure we have arrived at. Then there will be a whole host of issues in reconciling the two numbers and the first reaction of the government will be that private sector is cheating.”

It is possible, as the government maintains, that these are teething pains, but it seems equally likely that the architecture of GST is fundamentally flawed, placing too high a compliance burden on small businesses for perpetuity. If the latter proves to be the case, it will serve as a lesson that policy paralysis, with all its drawbacks, is preferable to policy dementia.

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What hospitals can do to drive entrepreneurship and enhance patient experience

Hospitals can perform better by partnering with entrepreneurs and encouraging a culture of intrapreneurship focused on customer centricity.

At the Emory University Hospital in Atlanta, visitors don’t have to worry about navigating their way across the complex hospital premises. All they need to do is download wayfinding tools from the installed digital signage onto their smartphone and get step by step directions. Other hospitals have digital signage in surgical waiting rooms that share surgery updates with the anxious families waiting outside, or offer general information to visitors in waiting rooms. Many others use digital registration tools to reduce check-in time or have Smart TVs in patient rooms that serve educational and anxiety alleviating content.

Most of these tech enabled solutions have emerged as hospitals look for better ways to enhance patient experience – one of the top criteria in evaluating hospital performance. Patient experience accounts for 25% of a hospital’s Value-Based Purchasing (VBP) score as per the US government’s Centres for Medicare and Mediaid Services (CMS) programme. As a Mckinsey report says, hospitals need to break down a patient’s journey into various aspects, clinical and non-clinical, and seek ways of improving every touch point in the journey. As hospitals also need to focus on delivering quality healthcare, they are increasingly collaborating with entrepreneurs who offer such patient centric solutions or encouraging innovative intrapreneurship within the organization.

At the Hospital Leadership Summit hosted by Abbott, some of the speakers from diverse industry backgrounds brought up the role of entrepreneurship in order to deliver on patient experience.

Getting the best from collaborations

Speakers such as Dr Naresh Trehan, Chairman and Managing Director - Medanta Hospitals, and Meena Ganesh, CEO and MD - Portea Medical, who spoke at the panel discussion on “Are we fit for the world of new consumers?”, highlighted the importance of collaborating with entrepreneurs to fill the gaps in the patient experience eco system. As Dr Trehan says, “As healthcare service providers we are too steeped in our own work. So even though we may realize there are gaps in customer experience delivery, we don’t want to get distracted from our core job, which is healthcare delivery. We would rather leave the job of filling those gaps to an outsider who can do it well.”

Meena Ganesh shares a similar view when she says that entrepreneurs offer an outsider’s fresh perspective on the existing gaps in healthcare. They are therefore better equipped to offer disruptive technology solutions that put the customer right at the center. Her own venture, Portea Medical, was born out of a need in the hitherto unaddressed area of patient experience – quality home care.

There are enough examples of hospitals that have gained significantly by partnering with or investing in such ventures. For example, the Children’s Medical Centre in Dallas actively invests in tech startups to offer better care to its patients. One such startup produces sensors smaller than a grain of sand, that can be embedded in pills to alert caregivers if a medication has been taken or not. Another app delivers care givers at customers’ door step for check-ups. Providence St Joseph’s Health, that has medical centres across the U.S., has invested in a range of startups that address different patient needs – from patient feedback and wearable monitoring devices to remote video interpretation and surgical blood loss monitoring. UNC Hospital in North Carolina uses a change management platform developed by a startup in order to improve patient experience at its Emergency and Dermatology departments. The platform essentially comes with a friendly and non-intrusive way to gather patient feedback.

When intrapreneurship can lead to patient centric innovation

Hospitals can also encourage a culture of intrapreneurship within the organization. According to Meena Ganesh, this would mean building a ‘listening organization’ because as she says, listening and being open to new ideas leads to innovation. Santosh Desai, MD& CEO - Future Brands Ltd, who was also part of the panel discussion, feels that most innovations are a result of looking at “large cultural shifts, outside the frame of narrow business”. So hospitals will need to encourage enterprising professionals in the organization to observe behavior trends as part of the ideation process. Also, as Dr Ram Narain, Executive Director, Kokilaben Dhirubhai Ambani Hospital, points out, they will need to tell the employees who have the potential to drive innovative initiatives, “Do not fail, but if you fail, we still back you.” Innovative companies such as Google actively follow this practice, allowing employees to pick projects they are passionate about and work on them to deliver fresh solutions.

Realizing the need to encourage new ideas among employees to enhance patient experience, many healthcare enterprises are instituting innovative strategies. Henry Ford System, for example, began a system of rewarding great employee ideas. One internal contest was around clinical applications for wearable technology. The incentive was particularly attractive – a cash prize of $ 10,000 to the winners. Not surprisingly, the employees came up with some very innovative ideas that included: a system to record mobility of acute care patients through wearable trackers, health reminder system for elderly patients and mobile game interface with activity trackers to encourage children towards exercising. The employees admitted later that the exercise was so interesting that they would have participated in it even without a cash prize incentive.

Another example is Penn Medicine in Philadelphia which launched an ‘innovation tournament’ across the organization as part of its efforts to improve patient care. Participants worked with professors from Wharton Business School to prepare for the ideas challenge. More than 1,750 ideas were submitted by 1,400 participants, out of which 10 were selected. The focus was on getting ideas around the front end and some of the submitted ideas included:

  • Check-out management: Exclusive waiting rooms with TV, Internet and other facilities for patients waiting to be discharged so as to reduce space congestion and make their waiting time more comfortable.
  • Space for emotional privacy: An exclusive and friendly space for individuals and families to mourn the loss of dear ones in private.
  • Online patient organizer: A web based app that helps first time patients prepare better for their appointment by providing check lists for documents, medicines, etc to be carried and giving information regarding the hospital navigation, the consulting doctor etc.
  • Help for non-English speakers: Iconography cards to help non-English speaking patients express themselves and seek help in case of emergencies or other situations.

As Arlen Meyers, MD, President and CEO of the Society of Physician Entrepreneurs, says in a report, although many good ideas come from the front line, physicians must also be encouraged to think innovatively about patient experience. An academic study also builds a strong case to encourage intrapreneurship among nurses. Given they comprise a large part of the front-line staff for healthcare delivery, nurses should also be given the freedom to create and design innovative systems for improving patient experience.

According to a Harvard Business Review article quoted in a university study, employees who have the potential to be intrapreneurs, show some marked characteristics. These include a sense of ownership, perseverance, emotional intelligence and the ability to look at the big picture along with the desire, and ideas, to improve it. But trust and support of the management is essential to bringing out and taking the ideas forward.

Creating an environment conducive to innovation is the first step to bringing about innovation-driven outcomes. These were just some of the insights on healthcare management gleaned from the Hospital Leadership Summit hosted by Abbott. In over 150 countries, Abbott, which is among the top 100 global innovator companies, is working with hospitals and healthcare professionals to improve the quality of health services.

To read more content on best practices for hospital leaders, visit Abbott’s Bringing Health to Life portal here.

This article was produced on behalf of Abbott by the marketing team and not by the editorial staff.