Bajaj Hindusthan

India is going through a difficult transitional phase. And business in
 India, and the Indian macro-economy itself are struggling to find their
 feet in the treacherously churning quicksands of the global economy.
 
 During the 80s and the 90s, Indian economy and the business were
 consistently trying to speed up the process of Indias integration with
 the world economy. China had begun its programme of liberalization way
 back in the 70s. We in India were therefore constantly reminding
 ourselves that we were a decade too late in commencing our programme of
 liberalization and economic reforms.  Therefore, we were constantly
 exhorting ourselves to step on the pedal even harder.
 
 Ironically, now we seem to have come full circle. If, towards the end
 of the 20th century we were constantly asking ourselves how fast we
 were becoming a part of the mainstream of the global economy and
 business, as we are getting into the thick of the 21st century we are
 asking ourselves what are the strategically important areas where we
 are still effectively de-coupled and insulated from the global economy.
 We are seeking to find out which are these strategically autonomous
 areas of our economy which are immune to the global tsunami.  As
 controls are being progressively dismantled, we are understandably
 curious to find out how much exposure we have to American financial
 institutions and investment banks, and therefore how vulnerable are we
 to the western and global economic meltdown. We are restlessly eager to
 find out the quantum of dollar or euro-securities that underlie our
 commercial paper, and how safely segregated are the rest.
 
 The question on everyones lips is, what is the risk that India too
 will get sucked into a global recession or an American depression?
 
 On another front, we see a repeat of the same dilemma.  From the late
 1990s many prominent thinkers have penned elegies on the demise of
 state socialism and communism. The breaking down of the German wall in
 1989 was of great historical and symbolic significance.  The collapse
 of the erstwhile Soviet Socialist Republics was another significant
 straw in the wind.
 
 But if thinkers and commentators sang a dirge to communism as the 20th
 century was winding down, the tables have turned again now and the boot
 is on the other leg. The ultimate bastion of free market capitalism,
 the United States of America, is now singing paeans of praise to the
 state. After the crumbling down of two American mega investment banks,
 Lehman Brothers and AIG, the American State has now intervened to throw
 a lifeline to help the phoenix-like resurrection of these institutions.
 Even the United States of America now openly concedes that the
 invisible hand of the market can not guide the economy. Benevolent
 state power is needed to tether the fluttering festoons of capitalism.
 
 Adam Smith postulated that the market guided the economy and business
 like an invisible hand by foresightedly channelising scarce economic
 resources to fulfill existing and emerging market needs. The liberal
 world has tacitly assumed that markets rise up quickly to meet every
 consumer need. But in practice, the markets do not seem to be endowed
 with any such foresight. As the Nobel Prize winning economist Joseph
 Stiglitz points out, many government activities arise because markets
 have failed to provide essential services. Even today, even in the
 worlds most advanced country, the US, you can not get an annuity that
 will ensure you against inflation. And one of the most important
 reasons for the US Government to set up the Federal National Mortgage
 Association (Fannie Mae) was that the market did not provide mortgages
 at reasonable term to the middle and lower classes.
 
 Industry in India has been going through its own versions of these
 dilemmas. Earlier we were all for the removal of all controls and
 curbs. But now we have once again begun to cautiously welcome the
 guiding hands of the state. We feel that we cannot blindly trust market
 forces entirely and that a benevolent government hand should be a
 beacon to guide our collective social destiny.  Which is a more
 reliable guide, the market or the state? Is state power and state
 control good, or we better off allowing ourselves to be buffeted around
 by market forces?
 
 It is difficult to say. There is nothing either good or bad, it is
 thinking makes it so, said William Shakespeare.  Ultimately we have to
 find our place and our bearings in the rough and tumble of the global
 economy.
 
 We have to realize that the rules of the game have changed completely.
 Today the discerning consumer is also increasingly an aware voter with
 a mind of his own.  A large number of consumers are also shareholders.
 And today it doesnt matter if you are in the boondocks. You can be
 accessed from anywhere on your e-mail id. The contours of our market
 have also undergone a revolutionary change in todays world.
 
 It is to this new paradigm that Bajaj Hindusthan Limited is honing its
 operations. The wood-substitute Medium Density Fibre (MDF) boards and
 particle boards, that our subsidiary Bajaj Eco-tec Products Limited is
 manufacturing from sugarcane bagasse, constitute precisely such a
 futuristic product tailor-made for a necessarily environmentally
 hypersensitive tomorrow in which wood will become a scarce natural
 resource. The manufacture of ethanol is another such product line for
 the compulsorily greener earth of the future. Our co-generation
 facilities are also similarly foresightedly planned.
 
                                                     Warm regards,
 
                                                    Shishir Bajaj
                                     Chairman & Managing Director