If more than 80% of India?s GDP originates from the manufacture and service sectors that are essentially run by the species called ?managers?, it?s also evident that the depth and width of their understanding will determine the growth trajectory of the nation and with it, the employment level, welfare and indeed poverty amelioration. Just as economics touches all walks of life, so does management. Nothing is alien to or disconnected from the all-pervasive ?management? science. Unfortunately, management courses rarely capture the analytical aspects of many important events such as macro-causes and macro-consequences. Let us take three examples: the new base rate regime, the freeing of oil prices, and the predicament in the Eurozone.

Most B-schools will tell their students that the prime lending rate (PLR) is now replaced with a ?base rate?, below which banks can?t lend, since much of the loans were being given below PLR, the ?spread? being recovered by charging a higher rate from others. What the B-school syllabi won?t capture is the fact that big corporate bullies, with stronger bargaining power, got cheaper funds, cross-subsidised by the smaller units which had to pay much higher interest rates. RBI intervention became necessary because of the injustice and lack of transparency in banks? lending operations. In fact, the regulator has only told banks to do good banking for their own benefit and also the economy?s, taking lessons from the US subprime lending mess. Also, inclusive growth being a priority issue of the Indian government, it?s necessary to ensure access to cheaper funds to the tiny sector which has the highest employment potential. The latest decision to give banking licences to post offices is a big step towards financial inclusion. The ?out of syllabus? lesson for B-school students is that the state will let private sector do what they want, and intervene only when the market mechanism is unable to play fair. We have seen the whole world sway between capitalism and communism, the words not in vogue now, but the new order will be one wherein market forces will be allowed to play out freely, but regulated to prevent possible economic crisis, mass deprivation and social injustice. This understanding will discipline management behaviour while inculcating ethicality.

That oil prices have only been allowed to find their rational level by withdrawing the subsidy regime is what most management students would learn. But few syllabi would explain that, one, achieving the desired revenue surplus is very difficult under the present subsidy burden, and the ever-rising government borrowing could put the country on the verge of a debt trap in bad times. Two, the price mechanism has a brilliant way of equating demand-supply. Higher prices will discourage wasteful oil consumption. Distorting the natural mechanism by keeping prices artificially low encourages people to use the scarce resource liberally, while the government picks the tab, and recovers it from the people. Higher oil prices would shift the production bias towards fuel-efficient vehicles. Three, oil companies, already in bad health, pay tax in cash, but receive their subsidy as not-so-liquid ?oil bonds?. I wonder if any B-school tells students that all subsidies, in principle, should be short-term, aimed at correcting market failures in providing economic justice, and must be withdrawn eventually by empowering the beneficiaries. The day the receivers of subsidies declare that they don?t depend on subsidies any longer will be the true ?independence day? for this nation and all Indians will join the celebration.

The ?PIGS??Portugal, Italy, Greece, Spain?are in a deep debt trap, with their debt being close to or higher than their GDPs. The better B-schools will tell their students the dilemma that if European Central Bank (ECB) bails out anyone of these, it will set a precedent and ECB cannot bailout all of them. If it doesn?t, the contagion will spread and the entire Eurozone will be sucked into a crisis with a few countries breaking away from the euro and devaluing their currencies. Most advanced countries, including the US, face debt problems. The lesson for the future manager, unfortunately not captured by B-school syllabi, is that just as government bailout of ailing firms only transforms corporate debt into sovereign debt, unsustainable foreign borrowing spreads the sovereign virus to other countries. Someone, somewhere, sometime will have to retire the debt, which can be done only by the real economy and not by highly leveraged sophisticated financial derivatives and swaps. And since the destiny of the real economy is in the hands of the breed called ?managers?, the understanding of these macro-implications of managerial actions will reduce future financial risks globally.

We may see a new evolving superstructure, with the real economy consisting of manufacture and agriculture in the driver?s seat, the service sector in the back seat navigating, supporting and facilitating the former. Free market forces will run the engine, with the state intervening only when required. Benevolent government support and bailouts shall not be expected, especially if the manager hasn?t ?behaved? himself. Clearly, every manager must have the macro-perspective and have possible side-effects of his actions always on his radar. Sheer understanding of the macro-environment will inculcate an ethical sense in the student?s susceptible mind. B-schools must give students this awareness by adding ?current events analysis? to the syllabus, the main reference material for it being business dailies and journals. This will render the ?pledge to ethicality? that some top foreign B-schools have started more meaningful.

The author is professor of economics at Sinhgad Business School, Pune. Email: shubhadasabade@hotmail.com