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[Bushroda]

Indian cellular service market to exceed US$ 25 billion by 2011, says Gartner
Gartner, Inc. - July 26, 2007

Gartner reports that Indian cellular services revenues were US$ 8.95 billion in 2006 and are projected to grow at a compound annual growth rate (CAGR) of 18.4 percent from 2007 to 2011 to reach US$ 25.617 billion. Data revenues will outpace growth of voice revenues and contribute 22 percent of revenue in 2011 from 9.6 percent in 2006, according to this latest Gartner forecast.

India will continue to be the fastest growing country in APAC in terms of mobile telephony after China and promises to become more dynamic with the entry of Vodafone.

"With more marginal users forming the bulk of the addressable market, low service costs and inexpensive handsets will help to unlock the inertia and facilitate adoption of mobile services," said Madhu Gupta, a senior research analyst at Gartner. "Call rates have reduced significantly to about 2.6 cents per minute. However, this remains high compared with fixed-line rates at 0.9 cents per minute. Gartner expects prices to drop in order to become more competitive with fixed-line rates, further lowering the barrier to entry. This trend, coupled with the emerging-market handset initiative by vendors and operators, will boost adoption of mobile services in India's semi urban and rural provinces."

Mobile Penetration in India

Mobile penetration in the rural market is low at 2 percent, but this represents an immense opportunity for the cellular service providers. Handset manufacturers are therefore concentrating on launching sub US $25 mobile handsets.

Businesses are expanding into India's smaller towns and cities where fixed-line connectivity is limited and often nonexistent. Enterprises will use mobile services for intra-company, as well as inter-company, communications. Gartner expects enterprise service plans offered by mobile services players to become distance independent. This will be a big incentive for companies to use mobile phones, not only because call rates are comparable to fixed-line rates, but also because of the benefit that mobility gives their employees, especially while travelling or in remote locations.

With these factors, cellular market penetration is projected to increase from 12.7 percent in 2006 to 38.6 percent in 2011. This overall penetration will primarily be driven by an increased focus on the rural market, aggressive promotions by the players and handset bundle offers. By 2011, Gartner expects 58 percent of the rural population and 95 percent of the urban population to be covered with mobile connections.

Connections – prepaid driving growth

Mobile connection growth in the Indian market is on an upward trajectory, and robust growth will continue until 2011. The market is forecast to grow 23 percent CAGR during the five-year forecast period, growing to more than 462 million connections.

The Indian market is driven by prepaid connections, which accounted for more than 84 percent in 2006 and expected to grow to more than 93 percent of the connection base by 2011. Therefore the voluntary churn rate in India is 30.6 percent (2006), and despite a maturing market the ratio is expected to go up to 41 percent in 2011.

Voice revenues versus data revenues

The revenues from data services will significantly contribute to the growth of overall cellular services revenues in India, with a CAGR of 36.8 percent in the forecast period.

Prepaid subscribers are expected to adopt data services faster than the post-paid segment. Data revenues for the prepaid segment are projected to grow at 46 percent CAGR during the forecast period as compared to 22 percent for the post-paid subscribers during the same period.

The bulk of the revenues will continue to come from voice services. However, with the increased growth in data services, the percentage of revenues coming from voice will reduce from 90 percent in 2006 to almost 78 percent in 2011.

Market and operator strategies

Large players will have an advantage as they expand their presence and take advantage of economies of scale. But they will face tremendous challenges in finding the right balance between yield and market share. Customers with low disposable incomes will form a significant proportion of the base. As a result, ARPUs (Average Revenue Per User)/Year will continue to decline through the forecast period. In 2006 the average ARPUs/Year of players was USD 82.1, which will further reduce to USD 59.5 by 2011.

"Operators will have to look beyond revenue growth to stem erosion of their bottom lines. They will need to adopt measures to optimize cost associated with business operations and network management. More operators are likely to collaborate in terms of infrastructure sharing and outsourcing their network management to equipment vendors and, possibly, system integrators," said Mr. Gupta.

In India spectrum remains a scarce resource and is tightly controlled. This could have an impact on expansion plans and the quality of service because of inadequate investment in or upgrading of the networks. Existing license conditions, such as a high revenue share, take away significant resources that could be used for investing in networks and market development activities.

"With the intensifying competition, the release of 3G spectrum will help in bridging the gap generated because of lower voice tariffs and handset subsidies. The release of 3G will be essential to sustain the growth in the cellular services market," concluded Mr.Gupta.

 

[genmirajborgza786]

Story Think flat, think fast
RC Acharya, RC Acharya
Posted online: Thursday , July 26, 2007 at 1030 hrs

Information Technology, as a sector, appears to lend itself readily to slogans that incorporate the word “think”. The Big Blue itself, IBM, popularly had “Think”. Its sprightly challenger, Apple Computer, had “Think different”. Now Infosys, with some inspiration from a bestselling book by Thomas Friedman, has come up with “Think flat”. It appears on the cover of the company’s annual report for 2006-07.

Coming from a vast powerhouse of grey matter, with over 75,000 top-of-their-field men and women working away to maintain its predominance in the field of information technology, this is a conceptual mode of thought that deserves some solid thought from more than just Infosys’ shareholders.

This is a company that has to think hard and fast all the time. Consider the operational complexity. While its 87-acre facility at Bangalore with about 17,000 trained personnel has to operate in synchrony to retain its position as the command post that orchestrates the combined efforts of its 40 odd centres across the world, its much larger 250-acre campus at Mysore is busy churning out trained manpower for projected growth and expansion tomorrow. At any given moment, about 2,500 highly qualified professionals are going through the paces here so that Infosys is never short of hands to sustain its motto—“Powered by Intellect, Driven by Values”.

This workforce generates revenue at a typical hourly rate of about $60-70 for run-of-the-mill tasks such as system design and writing software code, rising to about $100 for consultancy and other higher-level inputs. For the 75,000 whizkids on Infosys’s payroll, this translates into quite a tidy sum: a sum of Rs 12,156 crore, to be exact, for FY07. This is almost 16% of India’s total IT and ITeS exports.

No wonder, the IT/ITeS sector alone was reported to have paid for the country’s entire oil import bill in 2003. All thanks to the initiative taken by some of the industry’s visionaries: NR Narayana Murthy of Infosys, Azim Premji of Wipro and, of course, Ratan Tata of TCS, more than a decade ago.

With a vast pool of 3.1 million university and college graduates, including around 500,000 engineering and diploma holders, being churned out every year within the country, the Indian software industry has scope for relentless expansion. Add to this technical competence their proficiency in English, which is not only the medium of instruction in almost all institutions of higher learning but also spoken increasingly in urban homes. This last factor is thought to have given the Indian software industry a unique edge in the international arena over other rival emerging export powerhouses such as China, which must apply almost all its software output to domestic purposes. Sans language barriers, Indian IT professionals—and even humble call centre operators—can understand exactly what the client wants, a significant part of the task for most of them.

Satellites and telecom infrastructure have crunched the distance between clients and suppliers, and so a coder in Bangalore has an equal opportunity to meet specifications. It’s a “flat world” now.

However, it is a flat world for others on the planet as well. At the current pace of globalisation, India’s language advantage may last for only about a couple of decades more, until an English-fluent generation of Chinese emerges to join the game. Today, they think in Chinese and translate it to English. Tomorrow, they will also think in English, which will imply a totally different level of flatness.

Infosys, presumably, will not let any link weaken. Maintaining communication channels open with clients on a 24X7 basis is a vital factor in keeping the vast army of personnel earning top dollars, day in and day out. A vast control centre, with scores of large wall displays, monitors each and every link with overseas clients, flashing warning signals whenever a problem surfaces so that corrective action can be initiated in a matter of seconds. The backbone for this, of course, is an undersea optical fibre cable connecting Bangalore to New York that carries vast volumes of broadband traffic between Infosys and its clients across North America.

The company’s system of operations is impressive in both the scale of operations and the manner in which even larger aims are being pursued with due dedication and planning. A visitor to the spanking new facility at Bangalore is told the story of Infosys at the Experience hall, and then given an audiovisual presentation in the Management Council hall, named after JRD Tata, who was a bold dreamer in his time in the manner that Narayana Murthy is now. This is also indicative of the mutually inspirational relationship which the big three—Infosys, Wipro and TCS—share amongst themselves. Compete yes, but poach no.

However, Infosys measures its success not simply in terms of getting new clients, but retaining them for years on end, based on a relationship built on efficiency, on-time delivery and that most important element in the wide world of business—trust!

—RC Acharya is a former member of the Railway Board and an observer of operational efficiency in the corporate world. These are his personal views0-0000.

http://www.financialexpress.com/printer/news/206793/

 

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Comparitive advantages and jobs
Nagesh Kumar
Posted online: Friday , April 20, 2007 at 0000 hrs

The past few years have seen a gradual shift in the way India looks at international trade. In the heydays of the import-substitution regime, we tried to substitute imports as much as possible and looked at exports as a way to earn foreign exchange to pay for the imports that could not be substituted (such as crude oil). The current mindset, as articulated by the commerce & industry minister, Kamal Nath, while presenting his annual supplement of National Foreign Trade Policy, reflects a refreshing change. We have at last begun to see exports as an ‘engine’ of ‘growth and employment generation’. Even imports are seen in positive light now, recognising their contribution to industrial growth and competitiveness.

Several countries, especially those in East Asia, have created millions of jobs by developing export-oriented manufacturing industries. In the context of India’s shrinking employment in the organised sector despite acceleration in GDP growth, the importance of job creation through export-oriented production cannot be overemphasised. An RIS study, ‘Towards an Employment-Oriented Export Strategy’, prepared for the ministry in 2006, made an attempt at examining the employment generation potential of exports. It found the merchandise export target of $150 billion by 2009-10, set by the UPA government in 2004, to have a potential to generate 81.57 lakh direct new jobs. However, an employment-oriented thrust to India’s export strategy could help create 124.44 lakh new direct jobs by 2009-10 with exports crossing $165 billion. Including indirect employment, export activity could support 210 lakh new jobs by 2009-10. In view of the robust growth of exports over the past few years, the overall export target for 2008-09 has been set at $200 billion.

So, what is ‘an employment-oriented export strategy’? It involves consolidating current exports while moving up the value chain in labour intensive products such as agricultural products, textiles and garments, leather products, and gems and jewellery. In these products, despite our traditional comparative advantage, India’s share of the global market is only 3% compared to China’s 18%. What is required is the consolidation of fragmented production structures, an emphasis on brand building, and greater focus on design, quality control and compliance with global standards. All this could be supported by taking stakes in global marketing chains and forging global tie-ups.

The latest policy supplement continues the ministry’s employment-oriented thrust to India’s export strategy. For instance, steps have been announced to strengthen exports of agricultural and rural industry output, handicrafts, gems and jewellery, apart from cottage industry products, that could spell new jobs while earning foreign exchange and making growth more inclusive.

The development of clusters of small-scale industries—assisted by common facilities, infrastructure and information/marketing facilities for export expansion—is crucial to the effort.


The emphasis on promotion of exports of labour-intensive goods is a well-deserved priority, but we should not overlook India’s potential in skill-intensive sectors

The emphasis on promotion of exports of labour-intensive goods is a well-deserved priority. But we should not overlook India’s potential of emerging as a global manufacturing hub for technology or skill-intensive goods that can generate a high value-addition per unit of exports. India can become competitive in some of these industries, given our pool of trained human resources. While India has developed a niche in pharmaceuticals, chemicals, auto parts and some segments of automobiles, opportunities have been grossly missed in toys, consumer electronics and ICT hardware that are labour-intensive. The supplement has attempted to induce an export culture by introducing incentives based on incremental exports for producers of high-tech items.

Boosting exports in technology-intensive industries requires a different combination of policies aimed at achieving global excellence. Another RIS study, ‘International competitiveness of knowledge-based industries in India’, found a wide variation in enterprise-level export performance within industries, despite similarities in policy environment and opportunities. Inherent enterprise dynamism has an obvious role to play. But policies could help in nurturing world-class enterprises in select sectors. These champions could be given official assistance to reach world scale and compete with peers worldwide. They could be assisted in several ways—by financial institutions, for example, offering preferential access to funds for overseas takeovers, major expansion of production capacity and so on. Brand-building, R&D and market development projects could be assisted, too, with support from diplomatic missions abroad in terms of market information and investment opportunities.

A number of Indian enterprises have begun to achieve global scale, and are looking to strengthen their strategic assets through international acquisitions. Such strategies could bring rich rewards in terms of their enhanced international competitiveness and future export possibilities. Access to global markets and technology through acquisitions, combined with local cost production bases in India, could turn Indian companies such as Tata Steel, Hindalco or Ranbaxy, among others, much more competitive and resourceful as international players.

To conclude, the time has come to turn India into a manufacturing hub for the world that would deliver jobs, incomes and foreign exchange for India’s teeming millions.

—The author is director general, Research and Information System (RIS) for developing countries. These are his personal views

http://www.financialexpress.com/printer/news/197112/

 

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Print Story Central Bank IPO fully subscribed on first day

Posted online: Tuesday , July 24, 2007 at 1436 hrs

Mumbai, July 24:The initial public offer (IPO) of Central Bank of India, expected to raise up to Rs 816 crore, has received good response from investors and got fully subscribed on the first day.

As per the data available on the bourses, the IPO of the public sector lender has received 13.61 crore bids for the eight crore shares on offer.

The price band for the issue, which opened and closes on July 27, has been fixed at Rs 85-102 per equity share. The bank has reserved four million shares for employees.

Post-issue, the governments shareholding in the bank would come down to 80.2 per cent. The issue would constitute 24.68 per cent of the pre-issue and 19.8 per cent of the post-issue paid-up equity capital of the bank.

The issue proceeds would be utilised for technology upgradation and to augment the capital base to meet future capital requirements arising out of the implementation of Basel-II standards.

The bank has hired ICICI Securities, Citigroup Global Markets India, ENAM Financial Consultants, IDBI Capital Market Services and Kotak Mahindra Capital Company as its lead manager
http://www.financialexpress.com/news/Central-Bank-IPO-fully-subscribed-on-first-day/206603/#

 

[Bushroda]

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[Bushroda]

Indian Mutiny
THE TIMES
27 July 2007

Delhi must ignore local and international ideologues

However noble the intentions and pressing the need, a leader who cannot persuade party colleagues to back his or her proposals for reform is rarely able to achieve much. Manmohan Singh, the Indian Prime Minister, has made little secret of his determination to make his country more responsive to global markets since taking the first tentative steps as Finance Minister to reform a sclerotic, inward-looking economy in 1991. As Prime Minister he has tried to continue the reforms. But he has found himself frustrated by the hostility of left-wing ideologues within his coalition, by the vociferous complaints of those allegedly bypassed by India’s prosperity and by armchair socialists in the West who delight in denouncing the iniquities of the market.

Since 2003, India’s economy has grown by more than 8 per cent a year. This is by far the most impressive growth that the country has enjoyed since independence. In less than a decade, India’s fortunes have been utterly transformed. A country that only 50 years ago could barely feed itself is now a global leader in high technology and a significant industrial power, and is becoming an acquisitive and aggressive investor in developed Western economies. Millions of Indians each year are joining the emerging middle class. Millions more who once had no way of escape from humiliation and abject poverty are able to save enough to educate their children and secure a rung for them on the ladder upwards.

The whingeing of Western bien pensants who want India to remain wedded to a Gandhian philosophy of village socialism is not only outdated; it is deeply destructive and racist. By citing the growing gap between India’s very rich and very poor, it gives spurious legitimacy to the claim that the market has only exacerbated disparities, while ignoring the extraordinary advances made possible for millions of poor in India, China, Vietnam and other countries that have embraced the opportunities presented by economic reform.

This politics of envy, unfortunately, also has a strong grip within India. Opportunist politicians are quick to exploit the discontent in villages and slums, which, thanks to the rapid spread of tele-vision, communications and education, have seen how a tiny minority of the super-rich live. The opposition Bharatiya Janata Party – which disastrously went into the last election, proud of its free-market achievements, with the slogan “India shining” – has turned against foreign investment and liberal market reforms. It has made much of farmers’ protests against the setting up of Chinese-style special economic zones. Other regional parties and splinter groups attack the coalition led by the Congress party for not doing enough to spread prosperity to their states and regions.

These pressures on Dr Singh will grow after Congress’s loss of control of Goa, the small southwestern state that has been a mainstay of the tourist boom. The party’s leaders will take fright at this fourth election defeat in a year and could draw precisely the wrong conclusions. They will argue that they must do more to maintain subsidies for the rural poor by diverting more funds to agriculture, fixing prices and trammelling India’s dynamic new industries in regulation and red tape. Recent budgets have seen a partial retreat from reform. Dr Singh must defy the ideologues at home and abroad and liberate those market forces that have already transformed India.

 

[Bushroda]

Clean up our class act
T.V. Mohandas Pai
Friday, July 27, 2007

Infotech will generate 10 million Indian jobs in three years. We need to educate enough candidates

The Indian IT industry has never been in a better position to meet the global information technology challenge. Armed with a young working population and a cumulative average growth rate of 28 per cent in the last five years, the industry’s contribution to India’s GDP is expected to rise to 7 per cent this year, generating over 10 million jobs, in the next three years. While growth in the industry has been fuelled by the availability of skilled talent on a large scale, a heavy dependency on people also threatens to slow down long-term growth in the IT industry if demand for talent continues to outweigh supply. India’s universities as the chief suppliers of such talent are struggling to meet the nation’s current and future skilled resource requirements.

About 11 million students are enrolled in over 18,000 colleges and 350 universities in India — 70 per cent of the nation’s graduates being from the “arts” faculty. In their current state, our universities are not in a position to meet the industry’s skilled resource requirements. Education policies, set in the 1960s, are unsuitable for today’s India, and that of the future. Because the scale is so enormous and given the inadequate investment in education over the last 15 years, graduates often require extra training at the time of employment. The industry has to bear this burden.

India’s IT industry is responsible for creating an education market. It has shown the aspiring middle class that it pays to invest in a child’s education and it has created the demand for educated people. It has also raised salaries all around for the educated class and given it greater bargaining power in terms of compensation.

Many companies today also invest heavily in training new recruits to make up for the deficiencies in the education system. These efforts, however, are nominal compared to the large scale initiatives required of the government, which as the biggest agent of reform needs to take several immediate measures to improve the educational landscape.

The first of these is to provide autonomy to institutions, especially institutions of higher education. In every aspect of the administration of universities, governmental control needs to be relaxed. Today, educational institutions cannot change their courses at will, nor are they in a position to invest in infrastructure or pay their faculty better. That is why almost 30 per cent of faculty positions remain vacant. Many educational institutions are impoverished because they cannot charge higher fees. The relatively well-off and educated middle class reaps the unnecessary benefits of subsidised education while the poor are left behind. Universities must be empowered to charge fees to those who can afford to pay them, and those who cannot should have the benefit of scholarships. A national scholarship scheme would ensure that no young person of merit is deprived of a higher education. It is true that education loans have become easier to get but they are inadequate and the meritorious poor need additional financial support. The government cannot shirk its responsibilities; measures to liberate institutions would go a long way in helping them charter their own mission, raise funds to build capacity, and compete for the best faculty and students.

Over 400,000 students strive for limited IIT and IIM seats annually. Last year, over 50 per cent of the 6,000 IIT seats were reportedly filled by students who had enrolled in expensive coaching classes. This reality has demoralised a lot of bright, young people. It is only when capacity is expanded that education will become accessible to all. Our gross enrolment rate in the age group of 18 to 24 is 11 per cent. If growth is to be sustained, India needs to drive this number up to 25 per cent in the next five years. The investments in capacity building have to come from the taxes that we pay and from fees collected from students who can afford to pay for an education. Universities deprived of funding cannot produce the quality nor the quantity of talent needed to sustain growth in sectors like ours. Some positive changes have been seen in uplifting the quality of primary and secondary education but not as much has been done in higher education, where skill-building becomes most crucial as the youth prepare to enter the job market. This is especially important at a time when companies the world over are entertaining higher expectations from the Indian IT industry in terms of new service offerings and technical expertise. Our competitive advantage can only be sustained if we are producing highly skilled and readily employable graduates.

Today, we are losing almost 1,60,000 Indians to foreign universities and students enrolled in these universities are paying almost $3 billion in fees and costs. It is imperative for the Indian government to strive to retain some of this talent in India, especially those students who are leaving on account of lost opportunities in India. Retaining such students will only be possible if we are giving them access to the same educational resources as those outside the country. Many outstanding foreign universities have expressed interest in establishing branches in India recently. The government must have an open policy towards global universities coming to India to train and educate our students. I do not see why it should object to this, as it benefits young Indians in their own country. We also need to move away from a wrong notion about education belonging to the public sector — foreign universities, accredited private institutions, funded by “edupreneurs”, should also be allowed to come up and compete to attract the best students and faculty.

It is said that for every job that is created in the IT sector in India, four jobs are created in the rest of the economy. Education plays a key role in ensuring an adequate supply of skilled talent. For this momentum to be sustained, active efforts on the part of the government would be required to reform education.

 

[Bushroda]

How Wipro boss is winning the race against himself
By Mark Kleinman, Asia Business Editor
Telegraph, UK
27/07/2007

Azim Premji, the multi-billionaire Indian businessman, is a man who could reasonably lay a claim to his own version of the Midas touch. After taking over the modest family business at the tender age of 21, the chairman of Wipro decided that the business of producing cooking fat might not always be for him.

Instead, he reasoned, there was a nascent demand forming for services to help companies benefit from the coming revolution in information technology. Fourteen years later hydrogenated oil found itself outsourced in favour of hardware and R&D. Wipro, the Bangalore-based computer services giant, had been born.

That was back in 1980, and the decision has proved a wise one, both for chairman Premji and for Wipro's shareholders. A business that turned over $3bn (£1.47bn) annually now boasts revenues of over $4bn and is valued by the stock market at $26bn. In its core operations of IT, professional, engineering and infrastructure services, it counts a large chunk of the Fortune 500 among its client base. Wipro is now one of the largest companies in its industry in the world, rubbing shoulders with the likes of CapGemini and IBM and compatriots Infosys Technologies and Tata Consultancy Services.

Worth more than £8bn according to The Sunday Times Rich List, it is hardly surprising that Premji is often referred to as India's Bill Gates. In some respects, the comparison is apt, although "Bangalore Bill" seems a flippant soubriquet for a serious man who names Mother Teresa and Muhammad Yunus, the Nobel Peace Prize-winning Bangladeshi microfinance pioneer, among the people he has most admired.

advertisementRegardless of Premji's obvious success, 41 years is a long time for any one man to remain at the helm of a company. So it seems fair to ask whether he is still as driven as he was back in the 1960s, when, at his first Wipro annual meeting as the company's boss (following the untimely death of his predecessor, his father), one investor suggested he ditch his shareholding and hand over the reins to someone better qualified?

The answer, snapped back an instant after being levelled at the 62-year-old, leaves little room for doubt. "At the end of the day it is a race with yourself. Can you do better tomorrow than you did today and are you doing better today than you did yesterday? I am just as motivated now because the challenges are so much larger than they were then."

Among the biggest of those challenges right now is one over which Premji has no control, but which loomed large over Wipro's first-quarter earnings figures last week: the strength of the Indian rupee. The pace of India's economic growth has taken its toll on major exporters like Wipro.

Premji is unaccustomed to seeing his company's share price fall in the aftermath of results announcements, but he is optimistic about the future and comfortable with Wipro's three-pillar structure, focusing on IT services to Asian and global clients, as well as the smaller units offering professional and infrastructure services.

The numbers are still healthy. First-quarter revenues were up 34pc year-on year and net profit increased by 16pc. Premji insists of Wipro: "There are no plans for further diversification."

The same might not be applicable to him. Premji is spending an increasing amount of his time building the eponymous charitable foundation that is helping to educate thousands of young people in some of the poorest rural areas of India. "I do see myself directing more of my energies towards social services such as my foundation," he said.

Philanthropy, like the instinct for revolutionising technology services, may be a preoccupation that Premji shares with Gates, but in other ways, they appear to represent chalk and cheese. The Wipro boss's holidays are spent walking in the desolate hills near the company's Bangalore base, and he famously continues to fly economy and drive a Ford Escort.

During his recent hiking break, Premji might well have been pondering the trail marked "acquisitions". Hunting targets in Britain and elsewhere, he believes that India's approach to going global through overseas mergers is an inevitable, and laudable, trend. But don't expect to see him announcing any transformational deals. While Infosys is linked as a prospective buyer of CapGemini, the Paris-headquartered IT consultancy firm, Wipro is staying resolutely in the camp of finding smaller, bolt-on purchases.

"Our strategy is a string-of-pearls one. The problem with the services business is that most of what you are buying is people, and integration is a huge challenge," Premji said. "Too many global companies in software and BPOs [business process outsourcers] are running business models which are drastically in need of change. If we were buying one of them we would be buying yesterday."

But it is on the rush of foreign direct investment into India - as elsewhere, a political hot potato - that Premji is at his most vociferous. While Tesco and others wait for a long-promised government relaxation of laws on multi-brand retailing, and Vodafone shrugs off protests from rivals over its entry into the Indian mobile telecoms market, Indian companies have found it relatively easy, finances permitting, to acquire overseas competitors (Corus and Whyte & Mackay in Britain, and the aluminium producer Novelis in Canada, being obvious examples).

Premji believes that, if anything, the balance of power has shifted too far in favour of overseas enterprise wanting a share of the spending power of hundreds of millions of young Indians.

"The direction is towards liberalisation and we seem to have done more than our share of it in strategic areas that some of our Western friends have not," he said. "If you take China as an example, it gives with one hand and takes away with two, whereas India sometimes gives with two hands and takes away with one. We could be doing a better job in negotiating quid pro quos for our country."

India's other overwhelming challenges, according to Premji, remain providing social, economic and transport infrastructures worthy of a country destined to become one of the 21st century's powerhouse economies. Boldly, he claims that within two years "you will see world-class airports in every major city in India".

The slew of money from global investment banks and private equity firms being poured in that direction is a source of foreign capital more likely to be welcomed than confronted with an icy stare.

One day, inevitably, these will be somebody else's challenges to muse over in the hills around Bangalore. Premji's elder son, Rishad, recently joined Wipro as a business development manager. If he ever takes the mantle from his father - and that's by no means certain, Premji senior said this week - selling vegetable oil won't be high on his agenda.

 

[Bushroda]

Mittal to build two plants in India
Taipei Times

STEEL DEAL: In addition to its previously announced plans for a factory in Orissa state, tycoon Lakshmi Mittal will set up another facility in Jharkhand state

AFP, NEW DELHI
Friday, Jul 27, 2007, Page 10
Global magnate Lakshmi Mittal is looking to build two steel plants in India for about US$18 billion, which would be the largest ever foreign investment in the country, reports said yesterday.

The investment by ArcelorMittal would eclipse the US$12 billion steel plant South Korean rival POSCO plans to build in eastern Orissa state, the newspaper reports said.

The plans were announced after a meeting yesterday between Mittal and Indian Steel Minister Ram Vilas Paswan in New Dehli, the Press Trust of India said.

However, Mittal was quoted as saying after the meeting that "we have to have raw material linkages, land and other things in place" for the projects to go ahead.

Last December, ArcelorMittal, the world's biggest steelmaker, signed an US$8.7 billion project with the Orissa government to build a 12 tonne capacity steel plant in the resource-rich eastern state.

Now, ArcelorMittal, which has no manufacturing facilities in India, says it will also build a plant in eastern Jharkhand state, the reports said.

The two plants would have combined capacity of 24 million tonnes, the Press Trust of India said.

Executives from ArcelorMittal have been in touch with state officials in Orissa and Jharkhand over the past year, said the Mint business daily.

ArcelorMittal, which controls 10 percent of global steel production, has asked the government to speed up allocation of captive mines for its projects.

Mittal's plans highlights the race among global steel giants to secure the supply of key materials, such as iron ore, to feed a growing world economy.

India's Tata Steel Ltd, which earlier this year bought British steelmaker Corus, is also expanding operations domestically, and plans to increase its domestic production to about 20 million tonnes by 2015.

Paswan said the governments of Orissa and Jharkhand should expedite allocation of mining leases and assured Mittal his ministry would do all it could.

"The matter is now being dealt at the highest level," Paswan said, adding Indian Prime Minister Manmohan Singh was involved.

Promising a level-playing field in the country, Paswan said of the 200 million tonnes of steel production targeted by 2020, only one-third would be produced by public sector steel firms and the rest by private manufacturers.

India currently produces about 35 million tonnes of steel a year.

Orissa, which has a quarter of India's iron ore reserves, has witnessed a rush by Indian and international players to invest in large steel plants there. But the road for some has been bumpy, with POSCO's huge project dogged by farmers' protests. POSCO now aims to complete the plant by 2016.

 

[Bushroda]

India in currency swap talk
Charlotte Cooper, The Brunei Times
MUMBAI
27-Jul-07

THE Asian Development Bank (ADB) is in talks with India about a currency swap that would help fund infrastructure projects without adding to the inflows that are complicating monetary policy, senior officials said yesterday.

Officials from the Manila-based ADB told Reuters on a visit to Mumbai a dollar-rupee currency swap could help fund India's infrastructure development needs, now estimated at US$475 billion over five years, without currency risk to the end-user. India's strong rate of economic growth and soaring stock market is attracting billions of dollars in direct and portfolio foreign investment, pushing up the rupee and causing a monetary policy headache for the Reserve Bank of India (RBI).

"We are exploring the possibility of currency swaps which we believe could meet the needs of the Reserve Bank of India in managing its monetary policy," said Liqun Jin, ADB vice-president, operations. "We can also help the private-sector business finance their activities without foreign exchange risk. For the end-user, he just borrows rupees and pays back rupees."

ADB officials said India's finance ministry supported the idea, and indications were that RBI officials were also interested. India's banking system is awash with potentially inflationary excess cash due to central bank rupee sales for dollars to keep the exchange rate down.

 

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Outsourcing professional support to India
Asian Investor, Hong Kong
By Sameera Anand | 27 July 2007

Integreon explains why leading investment banks, corporations and law firms, such as Clifford Chance and DLA Piper, are sending their work offshore.

Chris Niccolls is senior vice president at Integreon, a knowledge process outsourcing company. He used to be a managing director at Bear Stearns in New York, and was a client of Integreon's. Here he discusses why knowledge process outsourcing is taking off in India.

Why is knowledge process outsourcing (KPO) in India growing so fast?

Chris Niccolls: India is a country with thousands of years of history as a leader in education, innovation and even genius, especially in science and mathematics. However, because of a comparatively few years when India was labelled a “Third World Country”, the West only saw the inadequate infrastructure and forgot about the amazing people. And there are a billion people in India.

History and politics held back the vast intellectual capital of its people, and kept it out of the global marketplace. Think about that for just a second. Einstein, Shakespeare, Mozart, DaVinci, Socrates, the people who come to mind when a Westerner hears the word “genius”, came out of countries that were tiny compared to India.

How many geniuses have been born in India over the past few decades, but never made it to university? How many never found an outlet for their genius in India’s old economy?

While everyone on our staff is amazingly qualified, they’re not geniuses. Well, actually some of them are come to think of it. But they are all part of a talented pool of Indians ready to show the rest of the world how good they are.

Now that the world has seen this, and has had some years to digest this message, there is a tidal wave of work coming to India. It’s the right place, the right time and absolutely the right people.

Is KPO in India vulnerable to cannibalisation from other geographies?

The issue is commoditisation. If more or less the same task is being performed by rooms full of people, it’s a matter of time before it moves to the lowest cost producer, or is taken over by a computer.

At Integreon, we don’t call highly repetitive work KPO, just because an expensive person is used to do it. Answering a phone is largely the same task for someone who is paid $50,000 or $5,000,000.

We look for work that is true KPO, work that involves education, brainpower and decision-making. Still, after a while someone may come along and realise that what was thought to be complex decision-making really isn’t.

A benefit of our method of KPO is that we analyse and measure how work is performed. There are often better ways to work and unnecessary steps that can be eliminated. We find that some tasks that used to take years to learn, take much less time in a structured environment, where we test training, measuring the impact on the quality and the quantity of work.

We’re not concerned that KPO work will be cannibalized by cheaper labour markets. That’s not to say we won’t set up shop in other countries. We’re already doing that in the Philippines. What we’re not doing is looking for countries that are cheaper than India. We’re looking for locations that have a unique value proposition, such as excellence in a specialty area, or that allow us to further expand access to the best and brightest workers.

What is your firm's area of specialisation within KPO?

Overall our area of specialisation is in the support of “professionals” - lawyers, accountants, investment bankers and other highly educated individuals who work in large corporations and are paid at the top-end of the pay scale.

We see an opportunity in freeing up domestic intellectual capital by letting people do what they were trained and hired for. Just let lawyers be lawyers, and we’ll take care of all of the minutia that they want off of their plate so that they can earn money for their firm.

What is your strategy to win business?

It all comes down to trust. We want to be the most trusted KPO in the world. When we go to see a client and ask then to turn over important and critical work to us, they need to trust us.

Of course we have to be competent and live up to our promises. If we don’t, our clients will not recommend us to future clients. Integreon has never lost a client - I’m pretty sure that we’re the only KPO that can say that. So, we want to be the most trusted. It’s what we aspire to.

How do you ensure Integreon employees adhere to regulatory requirements?

There’s no one answer to that question. Basically, it’s hard work which never ends. There’s never any “finish line” for security and integrity. Integreon constantly compares ourselves to our clients and seeks the best practices for security. There are always shortcuts but you can’t take them.

And when you create a culture of security, and enforce it constantly, one of your best safety nets becomes your people. They know how important security is and want to ensure we follow the process because they know that the future of the firm could be terribly damaged by just one small breach. It helps the overall process when you’ve got 2,000 pairs of eyes to keep everyone honest.

What kind of clients do you work for?

We’d love to tell you about our amazingly A-grade client list but most of our clients want to keep their names confidential. On our client list, we have some of the top law firms, investment banks and corporations in the world including Clifford Chance and DLA Piper – two of the three largest law firms in the world.

In the professional industries that we mentioned, we are the dominant KPO. We perform a variety of tasks from lower end tasks in document editing to high end task in financial modelling. We do legal review of documents and a variety of litigation support functions. We have lawyers supporting other lawyers, who are fully capable of doing all the work that 1st and 2nd year lawyers do in a law firm.

We expect to see the same trajectory in KPO as we saw earlier in business process outsourcing (BPO). Over time, the complexity of the work that clients send offshore will increase. We have the talent and the capabilities to move as deeply into the support of a client’s work as they wish.

 

[Bushroda]

'Investment a two-way process'
27 Jul, 2007, 0211 hrs IST,Sudeshna Sen, TNN

LONDON: Inflation, bank rates, floods and housing issues may dominate the local media, but Britain’s new chancellor of the exchequer Alistair Darling’s first speech after taking over as the country’s finance minister was dominated by India, China and globalisation — and how to respond to the challenges of it.

Taking off from where Prime Minister Gordon Brown left off, the Right Hon Alistair Darling said, “Countries like us have a simple choice: to retreat behind national borders, hope we can keep the tide of globalisation at bay, or have confidence in our ability to face it head on and make globalisation a force for good for all our people here and across the world.”

“You only need to travel to countries such as China and India, as I have in the past few months, to appreciate it. China’s economy has doubled in size in the past six years; India in eight. And when you visit these countries and realise that they too want to compete with the best and importantly be the best, it is easy to be daunted by the challenges globalisation poses,” he said.

Mr Darling also told the gathering that Britain will not stand in the way of foreign state-owned funds buying into UK companies, as long as they play by the rules — his comment came in the wake of dark rumblings from Germany and EU, given that Chinese & Singaporean sovereign funds have just bought into Barclays, and a Qatari government-owned fund is bidding for British icon Sainsbury. “It would be wrong for any government to say in respect to any particular investment proposal, for example ...the Chinese Development Bank and Barclays, for the government to step in and say you can’t do this,” Mr Darling said.

However, while he said that Britain ‘is open for business’ underlining an increasing divide with the EU on openness to foreign investment, he called for reciprocity from the emerging economies and a “two-way process.” “Across the world, investment needs to be a two-way process. So just as we welcome investment here, there needs to be a level-playing field for British investment overseas. Openness should be a commitment by all,” he said. Britain’s highly-advanced financial and legal services sector has long been waiting for financial sector reforms in India.

Saying that the biggest challenges facing the world today are fierce global economic competition, rapidly expanding global trade and climate change, Mr Darling said, “We must not allow globalisation to shape us to our disadvantage. Indeed if we do, people will understandably react against it. They will doubt its opportunities because they won’t see them.” On Britain’s future prosperity, he said, “Hundreds of thousands of jobs in all parts of Britain depend on increasing trade and investment.”

While Mr Darling also pointed out that the need for international cooperation has grown more acute, and “To be fully effective, we need the international system to reflect the realities of the changing global economy. That is why we have supported broadening the G7 and G8 dialogue to China, India and other emerging economies. A wealthier China and India will become bigger markets for the high-value added goods and services in which we are already world leaders.”

He pointed out that Britain’s history is defined by the its global outlook, and its wealth is built on it, and the key is to shape responses to the challenges of the future. Britain is investing as much in the intangible assets that are essential to equip ourselves for change in the new global economy — in innovation and intellectual property, software and skills — as it is in more traditional physical assets. “Indeed, it suggests Britain is investing up to a quarter of its income in its future,” he said. The government’s key planks to preparing Britain for the future would be to maintain the stability that has been the foundation for its current economic success, to continue reforms (especially in the EU) to help meet competitive challenges from other countries; and to co-operate with other countries on collective challenges to everyone’s prosperity.

 

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Rlys to raise Rs 72,800 cr ($18 bln) for capex
26 Jul, 2007, 0459 hrs IST, TNN

KOLKATA: The Indian Railways intends to raise Rs 72,800 crore($18 bln) from the overseas and domestic markets to part-finance its Rs 2,51,000-crore ($62.3 bln) capex plans for the next five years. It is considering possibilities of raising a portion of the requisite funds through external commercial borrowings and from multilateral funding agencies. “The money will go into creating the proposed freight corridors, doubling of lines, electrification, gauge conversion and rolling stocks. We have recently submitted the proposal to the Planning Commission,” VN Mathur, member traffic, Railway Board, said.

Mr Mathur added, “Of the Rs 2,51,000 crore, about Rs 90,000 crore will be Railways’ internal generation. We intend to raise about Rs 72,800 from the markets and this may also include ECBs. The Railway Board has also decided to approach multilateral agencies like the Japan Bank for International Co-operation to raise a portion of the funds.” On the Delhi-Mumbai freight corridor, he said the railways has decided to set up logistics hubs and warehouses on the corridor to enable easy movement of goods.

This is also expected to attract banks to these locations.”

 

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American Tower chasing telecoms tie ups in India
Tue Jul 24, 2007 4:45PM IST

NEW DELHI (Reuters) - Telecoms infrastructure firm American Tower Corp. said on Tuesday it was in talks with major Indian telecom operators for possible alliances.

Telecoms firms in India are looking to share infrastructure such as mobile towers to keep costs down and boost profits amid intense price competition and a surge in low-income subscribers.

Chief Executive James Taiclet said American Tower saw India as a high growth market, where a soaring subscriber base is driving demand for ever greater infrastructure.

"We've got plenty of financial capacity. We have substantial resources we can put into the country," he said at a press conference, without giving further details.

"We are initiating conversations, serious ones, with the carriers in the country ... to help create a commercial collocation passive infrastructure business," Taiclet said.

American Tower, which operates broadcast and wireless communications towers in North America and Brazil, might own or enter into joint venture or management partnerships with Indian firms, he said: "We are going to be flexible."

India is the world's fastest-growing mobile services market, with more than 6 million subscribers signing up each month, lured by tariffs as low as one U.S. cent a minute and the extension of networks to rural areas.

Taiclet said American Tower has the capacity and appetite for significant investments in the Asia-Pacific region. The company will open its regional headquarters in New Delhi and will name a regional president shortly.

"We already know who that is going to be and we are very pleased with the choice," he said.

 

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35 greenfield airports in India by 2010
Monsters and Critics, UK
Jul 25, 2007, 11:15 GMT

New Delhi, July 25 (IANS) India will have 35 greenfield airports by 2010 to keep up with the growth of the civil aviation sector, a senior official said here Wednesday.

'We expect 35 greenfield airports in the country to be operational by 2010,' Civil Aviation Secretary Ashok Chawla told reporters.

'We are investing over $35 billion in developing airports across the country given the fast growing civil aviation market in the country,' he said.

Earlier, inaugurating a seminar on 'Developing World Class Airport Infrastructure: Challenges and Opportunities', organised by the Foundation for Aviation and Sustainable Tourism (FAST), Chawla said that renovating and upgrading existing airports and developing greenfield airports were the only solution to meeting the current demand arising out of the fast growing aviation market.

FAST secretary general Gurcharan Bhatura said that India needed airports with world-class infrastructure according to the benchmarks laid down by the International Civil Aviation Organisation (ICAO).

'That is irrespective of the number of aircraft and their size, all departing passengers should be able to complete their normal departure formalities in 60 minutes,' he said. 'It includes luggage X-ray, airline checking, immigration, customs and security checks.'

On arrival, passengers should be able to complete all formalities within 45 minutes and leave the airport, he said.

'The moot point is not the size of the airport or its capability to handle new generation aircraft like A380 or Boeing 777. Rather, it is with regard to its safety, security and efficient handling of passengers, freight and aircraft operations by providing adequate runway, taxiway and terminal capacities and quality service by friendly staff,' he said.

V.P. Agarwal, member (planning) of the Airports Authority of India (AAI), said the average passenger air traffic growth in India in 2006-07 was 29 percent while in cargo it was nine percent.

He called for more low-fare airlines to boost the market further.

'Induction of low-cost airlines and cheaper airfares will encourage and attract road and rail passengers to adopt air as a transport mode,' he said.

Stating that AAI manages 133 airports including 14 international ones and two joint ventures, he said, 'AAI will invest Rs.40,000 crore (Rs.400 billion or about $10 billion) in the next five years on developing airport infrastructure.'

He also mentioned that rapid vacation of runways and interconnecting all major airports with city centres by metro trains were being planned.

Addressing the gathering, Shailesh Pathak of the Infrastructure Development Financing Corporation highlighted the opportunities existing in public-private participation in airport development.

Representatives of various airlines, aviation training schools, government and other stakeholders participated in the seminar.