Indian Economy - News & Updates - Archive

[Bushroda]

Englishman's wealth of ideas helping India to milk its latest cash cow
Mark Souster
The Times, UK
February 22, 2008

It began with a gentlemanly chat over a cup of tea at Wimbledon eight months ago and this week turned into the most valuable start-up event in sporting history and a tournament worth possibly $3.5billion (about £1.8 billion) over the next decade. When Andrew Wildblood, a senior vice-president and corporate director for India at IMG, sat down at the All England Club last July with Lalit Modi, the vice-president of the BCCI, both men shared a vision. They wanted to re-energise Indian domestic cricket and to tap into the apparently insatiable demand for the sport in the country.

The constraints of the domestic calendar mean that there will not be any Englishmen actively involved in the inaugural DFL Indian Premier League that starts in April, but Wildblood will be there to see the fruition of his IMG team's work.

It is a concept that has gripped the imagination of the cricketing world, one that before a ball has been bowled appears to have brought together sport, showbiz and big business, with Bollywood stars and mega-rich tycoons and conglomerates vying for the prestige of owning a team.

The financial figures are mind- boggling, akin to a modern-day gold rush, not least for the players. Mukesh Ambani, one of India's richest men, paid more for the Bombay franchise than Randy Lerner did to buy Aston Villa, who came complete with £30million of Birmingham real estate. Mahendra Singh Dhoni is, temporarily at least, earning more per week than Cristiano Ronaldo. Television rights went for more than $1billion.

So how did it come about? “Initially, we kicked around a few ideas,” Wildblood said yesterday from India, which over the past months has become a second home as he and his team work ceaselessly to overcome the hurdles inherent in establishing such a tournament from scratch. It has been a huge undertaking with an array of processes that all had to be rigorously tested.

“For some time, Lalit had had a vision of what he wanted and in order to do that we agreed it had to be based upon a city to city format rather than state to state,” Wildblood said. “It was a broad vision with no meat on the bone. We also concurred that the model should be based on US-style franchises whereby the owners of the teams would also benefit from the properties that were sold as a consequence of the creation of the product, ie, television and sponsorship.”

Within a month the concept had taken shape. Eight city teams will play home and away, with 59 matches over 44 days taking place almost exclusively during prime-time television hours, using the Twenty20 format. A commercial structure was developed to wrap around the sporting model to create an investment vehicle that would prove attractive to owners.

“I knew it would be huge,” Wildblood, 50, who is married with two children and lives in London, said. “There is nothing else that has been launched as a start-up that comes anywhere near to it in sport. We got a little lucky when India won the inaugural Twenty20 World Cup, which transformed the perception of that type of cricket into the format which 76 per cent of the population now say is their favourite.

“It has been the project of a lifetime, one of the biggest single things that IMG has ever done. From a business context, it has been life-fulfilling.”

It has comes as a result of an incredible convergence of a number of things: the advent of Twenty20, the development of the Indian economy, the desire to regenerate the stadium infrastructure before the 2011 cricket World Cup that India will co-host and the demand for more entertainment opportunities in a maturing economy.

“IMG has done a pretty amazing job,” he said. “There have been bear traps all the way down the line, but we have managed to avoid them because we have been incredibly rigorous and determined that what we constructed was totally robust.”

Modi agreed. At the culmination of the auction of the world's best players on Tuesday, he paid the ultimate compliment to the company without which Modi said the IPL would have been stillborn. When the first ball is bowled on April 18, in the match between Bangalore and Kolkata, Wildblood will be entitled to feel satisfied at a job well done.

 

[Bushroda]

India ranks high among transformation States
V. Jayanth

Social disparities represent a serious burden: study

CHENNAI: India has climbed up in the rankings in a study of market economics and democracy in 125 transformation States published by an independent German foundation earlier this week.

The study places India at the 25th position in terms of development, just behind Singapore, Brazil and South Africa.

India has reached the 19th spot in an evaluation of the management performance of its political decision-makers, equivalent to an improvement of 13 places on the previous study in 2006.

The study was conducted by the Bertelsmann Foundation, and lauds India’s efforts “to achieve peaceful integration of ethnic minorities and its international cooperation with its regional partners, particularly Pakistan. However, continuing weaknesses include a cumbersome justice system and inadequate protection of civil rights in conflict regions.”

Josef Janning of the Bertelsmann Foundation said in a release: “The plans of the Indian government to shape the country to become a developed economy and a key player in international politics are now bearing fruit. India should also exploit this favourable situation to increase efforts to tackle its greatest problem: the continuingly pronounced inequalities in society, particularly in terms of education, health, social security, and earnings.

“The creation of a greater equilibrium between the regions and enabling as many people as possible to share in economic success should be central objectives of future policy.”

The foundation’s study has seen the national economies in the northern Asian landscape achieving the fastest international growth rates in recent decades.

“The peer group distinguished by excellent economic performance consists of China, Singapore, and most importantly, India, which has rapidly developed in about a decade to become a global economic power. With regard to social market economics, only Singapore has managed to reach the peak in a regional comparison with this trio, closely followed by South Korea and Taiwan. These are faced by large areas of southern Asia and important regions in South East Asia, which are dislocated from this dynamic economic growth.”

Another feature of the study relates to the democratic aspect of these economies, with the conclusion: “On the whole, no important successes in democratization can be determined for the investigation period. The stagnation already detected in 2006 continues to prevail.”

Concerns have been raised about the developments in Indonesia, Sri Lanka, Papua New Guinea, the Philippines, and Thailand. The German foundation is a non-profit organisation established in 1977 and this study, carried out every two years, analyses and evaluates the quality of democracy, market economics and political management in 125 developing and transformation countries.

 

[Bushroda]

As Venture Money Floods India, Two New England Firms Are Among Top Investors
Wade Roush
Xconomy, MA
2/21/08

A report from Dow Jones VentureSource shows that venture capital investment collected by entrepreneurs in India nearly tripled in 2007, totaling $928 million across 80 separate deals, as compared to just $349 million for 36 deals in 2006. It was “easily the highest total on record for the region,” according to the Dow Jones report, which was released today. Some 48 percent of the funding went to information technology companies, and two IT-focused New England firms, Waltham, MA-based Matrix Partners and Westport, CT-based Canaan Partners, were among the top 10 venture firms sending money to India, closing five deals between them.

Within India’s IT sector, Web-based information services companies captured the biggest chunk of venture cash, accounting for 22 deals worth almost $141 million. ItzCash, the Mumbai-based company behind a new form of pre-paid cash card, is a prime example. With a $10 million investment from Matrix Partners and Intel Capital, ItzCash has created a system that allows Indian consumers to load their cards with 100 to 10,000 rupees (about $2.50 to $250) and use the cards to pay in person, online, or via text messages for things like Internet access, online shopping, utility bills, railway tickets, insurance, and even donations to Hindu temples.

“Service-oriented companies in India….continue to attract investment and this is likely due to their low capital requirements as well as to the rapidly emerging nature of the broader Indian economy,” Jessica Canning, Dow Jones VentureSource’s director of global research, said in the company’s release today. “It takes relatively little money and little time for these kinds of companies to begin generating revenues and, because of this, Web-related and consumer and business services companies accounted for more than half of all the venture capital deals done in India in 2007.”

While U.S.-based venture firms still lead the way when it comes to investing in Indian entrepreneurs, investors from other countries are gaining interest. U.S.-headquartered VC firms led 52.5 percent of the Indian venture deals in 2007, compared to 64 percent in 2006 and 60 percent in 2005, Dow Jones reported.

 

[Bushroda]

Indian Banks Feeling Pressure To Cut Rates
Ruth David,
FORBES, NY
02.21.08, 11:49 AM ET

MUMBAI - As India’s government attempts to spur consumption with the help of reduced interest rates, the banking sector is feeling the heat. State-run banks led by India’s largest, the State Bank of India, cut interest rates this week, putting pressure on private sector lenders to follow suit.

On Wednesday the State Bank of India (other-otc: SBKFF - news - people ) and Canara Bank cut rates by 25 basis points each, while Union Bank of India and Bank of India reduced their rates by 50 basis points each. This is the State Bank's second 25-basis-point cut in its prime lending rate in less than 10 days. Some state-run banks said they were reviewing rates and could announce a cut after the union budget later this month. Larger private lenders like ICICI Bank (nyse: IBN - news - people ) and HDFC Bank (nyse: HDB - news - people ) haven't yet followed suit.

Earlier this month, Finance Minister Palaniappan Chidambaram said there was a feeling "adequate credit" was not being provided to the housing and consumer goods sectors, and he had asked banks to ensure credit to both sectors, which are drivers of the economy. Banks raised interest rates last year in response to the central bank’s policy of monetary tightening. The resultant high lending rates dampened demand in sectors like housing and automobiles, which are financed primarily by loans.

Loan growth for 2007 stood at about 22%, against 28% in the previous year.

India’s economic growth is forecast to be 8.7% for the financial year ending March 31, its lowest level in three years, as a slowdown in consumption hits industry. Last year, the economy grew 9.6%. As the country goes to polls next year, the pressure on banks to keep rates low is unlikely to end soon.

"The cost of borrowing hasn’t come down, so such cuts will result in pressure on margins. The banking sector will see a 10 to 15 basis point impact on net profitability margins this year [ending in March]," said Tarun Bhatia, head of corporate and finance ratings at Crisil, the Indian arm of Standard and Poor's. He said most banks are now at least re-evaluating whether they should reduce prime lending rates, which were hiked by an average of 150 basis points over the past 18 months. "This market is very competitive, and if the bigger banks reduce rates, others are likely to follow suit," Bhatia remarked.

Commercial lenders are also more comfortable with lowering rates now because they don't expect another rate hike from the central bank. The bank held rates steady at its last meeting in January.

 

[Bushroda]

Venture Capital Investment in India Reaches a Record $928 Million in 2007
Dow Jones VentureSource Shows Annual VC Investment Skyrockets 166%; Consumer/Business Services & Web-Related Companies Account for More than Half of All Deals

BANGALORE, Mumbai and NEW DELHI, Feb. 21 /PRNewswire/ -- Venture capitalists invested some $928 million in 80 deals for entrepreneurial companies in India during 2007, according to the Quarterly India Venture Capital Report published today by Dow Jones VentureSource. This was a whopping 166% increase over the $349 million invested in 36 deals in 2006 and easily the highest total on record for the region.

The report found nearly 48% of all venture financing deals in India were for Information Technology (IT) companies, as 38 rounds were completed, accounting for $384 million, more than India's entire 2006 venture investment total. The most popular recipients of venture capital in the IT industry were companies in the Web-heavy "information services" sector, which accounted for 22 deals and nearly $141 million in investment. Among the deals in this area was the $10 million second round for Bangalore-based Four Interactive, an online provider of local information on food, events, lifestyle, shopping and more.

"Service-oriented companies in India -- both in the technology fields and the non-technology areas of hotels, taxis and similar services -- continue to attract investment and this is likely due to their low capital requirements as well as to the rapidly emerging nature of the broader Indian economy," said Jessica Canning, Director of Global Research for Dow Jones VentureSource, "It takes relatively little money and little time for these kinds of companies to begin generating revenues and, because of this, Web-related and consumer and business services companies accounted for more than half of all the venture capital deals done in India in 2007."

According to the data, the overall business/consumer/retail industry saw 30 deals completed in 2007 and more than $346 million invested, a 92% jump over the $180 million invested in 16 deals in the industry in 2006. As said, the business/consumer service area accounted for the bulk of the interest in this industry, with 22 deals and $254 million invested.

India's health care industry, while still in its infancy, also saw increased investor interest in 2007 with seven completed deals and nearly $100 million invested, more than double the $41 million invested in the prior year.

"This is only the beginning for the venture capital market in India," said Ms. Canning. "In 2007, 79% of all deals in India were for seed and first rounds and a lot of these companies will continue raising venture capital as they progress toward profitability and liquidity. And because the majority of investment is going to early-stage companies, we aren't seeing ballooning deal sizes like those in the U.S. and Europe where investors are focused more on later-stage companies."

In fact, the median size of a venture capital round for companies India was $9 million in 2007, up slightly from $8.7 million in 2006 but well below the $18.8 million median seen in 2005. Of all the companies in India that received venture funding in 2007, nearly 73% were already generating revenues or profitable.

The Quarterly India Venture Capital Report covers venture capital investment specifically, which Dow Jones VentureSource defines as growth capital made available to entrepreneurial companies in exchange for ownership in the form of private securities. These investments are often seen as shorter-term and do not include private equity investments such as leveraged buyouts or mezzanine and debt financing.

The investment figures included in this release are based on aggregate findings of VentureSource's proprietary Indian research and are contained in VentureSource. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.

 

[Neo]

India to invest $2.5bn in SBI rights shares ​

NEW DELHI: The Indian cabinet on Thursday approved a government proposal to invest Rs 99.96 billion ($2.5 billion) in the rights share offering by State Bank of India , the country’s biggest lender, a spokeswoman said. SBI, 59.7 percent owned by the government, launched the rights share sale on February 18, hoping to raise $4.2 billion.

The spokeswoman said the government would issue special marketable securities, instead of an earlier commitment to issue bonds that would qualify for statutory liquidity reserves (SLR) of commercial banks. The cabinet also modified an earlier proposal to invest 100 billion rupees in the rights issue. Banks in India are required to hold at least 25 percent of their deposits in government securities under the SLR norm. SBI is offering one rights share at 1,590 rupees for every five held.

The sale is open for one month. “On receipt of the approval of cabinet, the transaction will be completed within this financial year,” the spokeswoman said. The funds will be used to meet rising loan demand in a fast-growing economy. Shares in the bank fell 1.2 percent on Thursday to 2,179.30 rupees in a Mumbai market that closed 0.7 percent higher. The government is estimated to receive 14.5 billion rupees in dividend and taxes from SBI in the fiscal year ending in March, the spokeswoman said. State-run firms in India that make profits are required to pay 20-30 percent dividend annually to the government. reuters

Daily Times - Leading News Resource of Pakistan

 

[Neo]

India okays $125m interest subsidy for exporters ​

NEW DELHI: The Indian cabinet on Thursday approved an extra spending of Rs 5 billion ($125 million) to subsidise interest rates on loans for exporters, a government spokeswoman said, to help soften the blow from a firmer rupee.

“The measure will ensure mitigation of the effect of rupee appreciation across the export sectors and will ... enable them to achieve export targets,” she said.

The move comes two days after India extended tax breaks to exporters to cover their transport and storage of goods.

The rupee had climbed more than 12 percent in 2007 against the dollar, squeezing the profit margins of export-led companies such textiles and marine products. Last year, India set aside 3 billion rupees for a scheme where government shared the burden of exporters by paying 2 percent of the interest on their bank loans. reuters

Daily Times - Leading News Resource of Pakistan

 

[Bushroda]

Renault and Nissan roar ahead with $1bn Indian plant after signing MoU
Gulf Times, Qatar
Saturday, 23 February, 2008, 01:27 AM Doha Time

PARIS/CHENNAI: France's Renault and Japan's Nissan yesterday signed an agreement for a $1bn car plant in southern India, forging ahead in the growing economy despite a local partner dropping out.

Renault has a 44% stake in Nissan and their alliance is the number three car grouping in the world after General Motors and Toyota Motor.

They signed a memorandum of understanding with the government of Tamil Nadu for a plant near Chennai.

Originally it was to be set up with local car maker Mahindra & Mahindra, but the latter withdrew from the project after the alliance's decision to make a car costing less than $3,000 with motorbike maker Bajaj in Pune.

Mahindra & Mahindra has been a partner for the no-frills Logan in India since May 2007, but the firm had more global and upmarket plans than the Chennai plans of the alliance.

Mahindra & Mahindra had been a bidder for the Ford Motor Co, Land Rover and Jaguar brands until Tata was picked as preferred buyer.

Tata also launched the Nano, a $2,500 car expected to roll out in October, which will take the concept of a no-frills car to a new level of low cost from the Logan.

The Tamil Nadu deal is for a 50/50 joint venture between the state and the two companies, which are committed to investing 780mn euros for an installed capacity of 400,000 vehicles a year within seven years, the statement said.

Production at the integrated greenfield automotive facility located in Oragadam, near Chennai, is due to start at the beginning of 2010.

The integrated facility will also include an engine and powertrain plant, also with a capacity of 400,000 units.

The 400,000-unit vehicle capacity will be divided almost equally between the two companies.

Nissan has four models in the pipeline for the plant and is developing an A-segment entry-level car, said Colin Dodge, senior vice president, general overseas market operations.

'Obviously, if you want to be in India you have to have a compact car,' Dodge said.

Small cars make up more than two-thirds of sales of passenger vehicles in India, which are expected to nearly double to 2mn units by 2010.

The unexpected pullout of Mahindra & Mahindra had led to a delay, said Patrick Pelata, executive vice president of Renault, but they were confident of making up for lost time.

'We expect that when the powertrain facility becomes operational, we will have about 80% of localisation. I won't be satisfied until we reach 90%,'* Pelata said.

Renault plans to make a range of vehicles at the Tamil Nadu plant for India and for export.

At the end of January, the Logan had a 12% market share in the so-called C segment, or medium-sized cars, with more than 20,000 vehicles sold.

On Monday, Carlos Ghosn, chief executive of both Nissan and Renault, said a deal between Renault and India's Bajaj to make a small car may materialise this year. This came amid speculation a decision was due in the coming weeks.

 

[Bushroda]

Online Education Takes Off in India
The business of distance learning on the subcontinent is becoming so big that foreign universities and venture capitalists are taking note

by Nandini Lakshman
Businessweek

It's a Sunday afternoon and class time for 39-year-old IT worker Seema Shetty. Her feet curled under her in a swivel chair, she sits in front of a computer monitor, adjusts a set of headphones, and scribbles in a notebook. Shetty, who works for consulting firm Mastek in Mumbai, is in a virtual classroom in the Vile Parle suburb, where a dozen computers link students to some of India's elite management institutions. Today's class is a three-hour general management lecture, part of the online education course conducted by the Xavier Labor Relations Institute in Jamshedpur, in the remote northern Indian state of Jharkhand.

A consultant for various industries from insurance to banking, Shetty signed up for an online certificate course to "learn more about my clients' business requirements," she says. By enrolling in the 14-month, six-hour-per-weekend online course, at a cost of $4,600, she can further her education without having to take a two-year career break to get an MBA. Learning online, says Shetty hopefully, "will definitely boost my job prospects."

Shetty is part of a growing tribe of working professionals and students in India who have enrolled for online education certification. While it's difficult to determine numbers of students, the online education market in India today generates about $200 million in revenue, and industry experts expect it to touch $1 billion by the end of the decade. The winning proposition: Getting knowledge from top-notch professionals without disrupting fast-track careers.

Slaking a Thirst for Knowledge

Mostly it's courses in engineering, management, finance, human resources, and mass communications available to individuals who feel they need some polish and a deeper understanding of their chosen subjects. Institutions, too, are big users—most are short of staff and overwhelmed by the demand from students who want to be equipped with the best possible education to further their job prospects in India's rapidly expanding economy.

Online education addresses some of India's shortcomings: a dismal education system, limited reach, and a severe paucity of faculty. "Even students from smaller engineering colleges feel they can now access the same courses our top students are exposed to," says Kanan Moudgaliya, head of the distance learning initiative at the Indian Institute of Technology (IIT) in Mumbai.

The efforts to boost graduate education have begun right at the top. India is booming, and as new industries such as retail, real estate, and infrastructure grow, the talent crunch grows, too. In 2003, New Delhi made education a priority, boosting spending from 3% of gross domestic product to 5%. Upgrading the quality of higher education was key to its agenda. That's when the IITs and the leading business schools went online with their courses. There's both Web-based education, which puts course material online for students to download, and there's virtual learning—the kind that Shetty is undertaking.

Foreign Universities Heed the Call

The biggest and most popular providers of online education are the IITs, leading business schools like the Indian Institutes of Management (IIMs), and private schools such as Sikkim Manipal University in northern India. In addition there are private online education services such as Educomp Solutions, Everonn Systems, and TutorVista. Last year, Rubin Das, 29, a midlevel restaurant manager at Mumbai's Grand Hyatt hotel, was one of the 120 students who enrolled for the online general management course for young managers at IIM-Calcutta.

The 52-week course, which will end later this month, has taught Das "revenue and marketing management, which I had no clue about." "It enhances my chances to be a department head sooner," he says.

This demand for online education in a hot market like India has also sparked the interest of foreign universities. In 2007, Carnegie Mellon University tied up with Shri Sivasubramaniya Nadar College of Engineering in Chennai, in southern India, to offer IT courses. The Massachusetts Institute of Technology is negotiating with the IITs. And Cornell University has struck a deal with South Indian service provider Easy Educate to offer courses in finance, management, and human resource to Indian students.

Here's how it works. Each IIT has 500 courses in all, but its distance-learning offering is 50 courses: a combination of Webcasts, live lectures, and prerecorded lectures. Courses range from the study of nanoelectronics to an introduction to biochemical engineering for both college and individual students. All the IITs are negotiating with Google (GOOG) video, which will help students download lectures for free.

Funding from Venture Capitalists

The IIT courses are also distributed to India's 1,500 state-run engineering colleges to spruce up their standards. This year, for instance, the College of Engineering in Pune, 200km from Mumbai, will host nine courses from IIT Mumbai, ranging from process instrumentation and control to software engineering, for 120 students. They are hugely popular. "These courses provide a quantum jump in the quality of our education for both staff and faculty," says Anil Sahasrabudhe, director of the college, who is on deputation from one of the IITs to boost education standards in the Pune institute. For instance, instead of developing many new courses, the institute can now pick and choose the courses taught by IIT professors.

The opportunity is so enormous that venture capitalists have begun to fund online education companies. In 2007, they invested more than $74 million in Indian education companies and say the sector will be among the hottest in 2008. Think about it: Although India has a large, young population, it is not the most productive. Boosting basic education with a current online education certificate helps make Indians more employable.

Education Companies' Shares Soaring

A 2005 McKinsey study on the Indian workforce concluded that just one-quarter of India's engineers and 15% of finance and accounting professionals had the skill sets to be able to work productively for multinational companies. K P Balaraj, a managing director at U.S. venture capital firm Sequoia Capital, has invested $2 million in TutorVista, an online tutorial company. "Employability is a big issue in India, and the immediate need is to cater to a very large job market that is not being met by school and college grads," he says.

Investors like Balaraj will do well. Despite the recent fall of the market, the share prices of some of the listed education companies have continued to soar. Shares of Educomp, India's largest education company, are up 340% over the past 12 months, while the Everonn scrip increased 61% since its listing in August, 2007. Brokerage firms Credit Suisse (CS) and First Global have also bestowed "outperform" ratings on three out of the four listed education companies.

 

[Bushroda]

Job creation set to continue in India
Vedior, Netherlands

The deputy chairman of India's Planning Commission, Dr Montek Singh Ahluwalia, has predicted that even in the absence of labour reforms the Indian economy is likely to generate increasing numbers of jobs in the coming years.

Dr Ahluwalia attributed this to the country's high economic growth, which has reached nine per cent over the past three years, the Statesman reported.

He also pointed to India's fast-improving infrastructure and the government's realisation that the labour force needs to be equipped with better skills through simple training programmes.

The chairman predicted that the country could sustain its growth rate, which - coupled with improved infrastructure and skills training - should translate into more and better job opportunities for the nation.

However, with employment currently estimated at eight per cent but the poverty level standing at 28 per cent, it is clear that employment generation alone will not be enough to dent poverty levels in India.

Australian newspaper the Age reported recently that India's economy is "surging" and may soon overtake China's as the fastest-growing in the world.

The services sector is widely seen as the being primary driver of the country's rapid economic growth over the past decade.

 

[Bushroda]

India rides growth wave into new age of tech globalization
Richard Wallace
EE Times
(02/22/2008 12:37 PM EST)

No longer simply an epicenter of outsourcing, India is riding a new wave of globalization as the economics of the technology business turn it into a regional design and development hub. The subcontinent is seeing an explosion of business and forging IT partnerships with neighbors as diverse and disparate as China, Egypt, Pakistan, Australia and Dubai, as these and other would-be technology players strive to usher in a new phase of tech-driven development to the region, which includes North Africa, the Middle East and the Gulf states.

This new geotechnology axis is destined to have a profound impact on the global IT and technology sectors, and its arrival marks a turning point in the shift of the industry's balance of power from West to East. "We are seeing a whole new age of globalization today," according to analysts at Bengaluru-based Prayag Consulting. "Three countries that are taking full advantage of this paradigm shift are Israel, China and India."

As India extends its connections throughout Asia, Australia, the Middle East and Africa, it will emerge not just as the region's business and technology leader, but as a more powerful player in the global IT sector. That will have a ripple effect on the entire market as next-generation semiconductor and system development--including embedded-systems design--follows trends that arise from the burgeoning domestic and regional economies.

This factor was topmost in the minds of the India Semiconductor Association as ISA convened its 2008 Vision Summit in Bengaluru recently. The organization expects that India will evolve from a design-oriented industry into a major electronics manufacturing hub before the end of the decade.

It was also the underlying theme at another recent event in Mumbai, as would-be regional tech players like Egypt, Australia and China vied for notice from India-based IT service and technology development companies at the India Leadership Forum.

Among the most revealing sessions at the Mumbai event were the "focused country sessions." These informational and networking meetings underscored the spillover effect of India's IT success, pointing to bright prospects for smaller regional players eager to ride India's coattails and become part of the new regional development axis.

Tiny Pakistan is already enjoying the knock-on effect of India's steady rise as a regional and global IT superstar. With a population of 160 million, Pakistan will be the first in the world to complete a nationwide deployment of WiMax wireless communications technology. This boost in infrastructure will help make its technical talent pool more competitive and will serve as another catalyst for regional economic development.

"It's a case of petrodollars at work," noted Shahid Azim, the Harvard-educated CEO of Braintree Group (Islamabad, Pakistan).

Like India, Pakistan has a large pool of well-educated engineering and IT professionals eager to participate in the global IT sector. With the Pakistan economy enjoying robust growth, Western companies are looking to India's neighbor as another source of technical IT talent.

"The idea is to set up R&D centers. It's just beginning," Azim said, projecting optimism that Pakistan will follow India's well-worn path to global significance.

With the aim of unlocking the technology potential of the Middle East, the Gulf and Africa, Egypt's General Authority for Investment (GAFI) also came to Mumbai in search of potential partnerships. Marshaling a 55-person delegation of Egyptian corporate executives and government officials, GAFI mounted an aggressive diplomatic and commercial initiative at the Leadership Forum designed to foster long-term relationships with its historic trading partner, India, and to position Egypt as a player in the evolving regional development hub.

With a GDP growing at 7.2 percent per year and a mobile-phone growth rate of 50 percent per year, Egypt also boasts one of the region's lowest IT outsourcing cost structures--lower than Eastern Europe's--including the world's lowest telecom costs. The nation is undergoing tax, customs and financial-sector reform, and has a talent pool consisting of 300,000 graduates with strong commercial, engineering and science backgrounds. Its unique multilingual heritage with English, French, German, Italian and Spanish language skills also works in Egypt's favor. Multinational investors active there include Mentor Graphics, Oracle, Vodaphone, IBM, Microsoft and Sun Microsystems.

Egypt is also poised to be a leader of regional infrastructure development, having pioneered its own "smart village" technology deployment concept, a model being copied throughout Africa for bringing connectivity, communications and economic prosperity to remote villages. One Indian executive, who recently completed a joint project with a team of Indian and Egyptian engineers, described the country as full of "energy and excitement and a receptivity to new ideas and change."

At the other end of the spectrum, China--already an electronics powerhouse in its own right--also came courting in Mumbai. In pitches to Indian and global IT players at the India Leadership Forum, Guan Rong Rong, secretary general of the Beijing Software Imports and Exports Committee, acknowledged that while "China leads in hardware and infrastructure, India is the global leader in software." That's why China's own software industry is seeking "equity partnerships" with India, she said, and hopes to form what she called "a hub of virtual collaborative networks" to serve the regional and global market.

Partnership feelers also came from the city of Wuxi, where the local government has made a massive investment in a new software park. "We are seeing the beginnings of cooperation and hope for great success with India," said Weize Yang, secretary of the Wuxi Committee of the Communist Party of China.

"We don't see it as China vs. India or either/or, but rather as a partnership," Yang noted, adding that as IT outsourcing becomes increasingly institutionalized in the United States, "it's only natural that companies will begin looking for a second source and a backup to spread the risk to two or three countries."

China needs India because by itself, it lacks the high-end domain expertise in information technology to serve external markets like Japan. "China has an army of programmers, but they do not have project-management experience," one industry observer said.

Then, too, India has a language advantage. Being a nation of English speakers gives it a huge edge over rival China in international markets.

"India sees that it has about 10 years more in the language advantage over China," John Studzinski, senior managing director for The Blackstone Group, said during a private meeting with business executives in Mumbai last week. After that, observers predict, China will begin to close the language gap as well as acquire its own IT skills, and the two countries will be more equally matched competitors.

India and China are two of the three countries poised to take the lead in the global electronics marketplace, according to analysts at Prayag Consulting, who cited Israel as the other.

"With the explosion of technologies, knowledge pools and people are connected as never before, and the rules of the game have changed irreversibly," Prayag analysts said in a research bulletin titled "21st Century Innovation Hubs" that was distributed at the India Leadership Forum. "The death of distance, a result of the wired world we now live in, has opened up possibilities for individuals, enterprises and nations."

Indians, many observers have noted, look to Israel's success in technology innovation with great respect, bordering on awe. Some theorize they may see in that beleaguered nation's success many of the same elements of adversity, and diversity, required for the unique alchemy that creates the necessary catalyst for successful innovation.

Smart city

From its new headquarters operation in Bengaluru, Cisco Systems Inc. is developing the network architecture for an $8 billion high-tech "smart city" project in Saudi Arabia as part of a contract it signed in January. According to Cisco, there are at least nine to 12 such smart-city deals in the pipeline. The flight from Bengaluru to Dubai takes just three hours, making India the ideal hub to serve this region.

Following in the footsteps of India pioneers such as Texas Instruments and Motorola, multinational companies like Cisco and IBM Corp. are finding India an ideal location not just as a source of low-cost labor, but as a place to drive their regional and global business and technology development plans. IBM alone employs 76,000 people in India, its second-largest employee base in the world.

Indeed, IBM has put India at the apex of its global IT strategy, Virginia Rometty, senior vice president of IBM Global Business Services, said during her keynote speech at the India Leadership Forum. As the business world moves to greater global integration, IBM's value proposition to its clients increasingly relies on the ability to deliver the best ideas and capabilities from anywhere to anywhere, she said.

"We achieve this by building globally integrated centers of excellence and networking them together," she said. "We do a great deal of asset development for our industry solutions in Bengaluru, jointly with IBM colleagues from software and research."

Industry watchers believe this trend will help propel India from a services-only model to an innovation, or intellectual property-driven, business model.

It doesn't hurt that India is feeling its own pressure from the appreciation of the rupee and a growing crunch of available talent to serve new outsource customers--factors conducive to a new wave of regional business and technology partnerships.

The Asian-Oceanian Computing In- dustry Organization (ASOCIO) IT trade association was formed in 1984 to represent this new, emerging Asian geographical region. Headed by Ashank Desai, ASOCIO has 20 members representing Japan, Australia, Bangladesh, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Mongolia, Myanmar, Nepal, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam. Seven guest members hail from the United States, the U.K., Canada, Spain, France, Russia and Kenya.

But India and its emerging network of regional partners are no longer just focused on serving overseas customers. For the first time, the domestic market is becoming a promising new source of business growth and development.

The spin-off from this new global technology axis is far-reaching. Hard-pressed to meet the surge in local and offshore demand, Wipro has begun setting up its own offshore centers, including a new Atlanta operation, while Infosys, TCS and Satyam already have development centers outside of India in places such as Hungary, Romania, China and Canada.

'Third wave'

With its eye on growing its IT industry from its current $30 billion into the $100 billion range over the next 10 years, India today reminds some observers of the historic three-wave model of the "Asian miracle," in which Japan, South Korea, Southeast Asia and now China have successfully moved up the value chain from basic component makers to system builders, to suppliers of locally branded, global brands.

It's this last step--or third wave--that is currently on the minds of India's business leaders. To get there, India's IT sector will have to concentrate on delivering "complete solutions," not just business process services, to its business partners, said Sudhakar Ram, chairman and managing director of Mastek Ltd., one of India's largest IT service providers. They will have to move beyond so-called "cost arbitrage" to "delivering strategic impact to their customers." And they will have to become providers and developers of intellectual property, he said.

To make this value-added leap, India's IT sector will have to concentrate not just on providing process services, but on developing and differentiating its customer solutions with its own intellectual property in the form of methodologies, frameworks, tools, platforms and packages--in other words, products, not just services. To do this, it will have to "build a cadre of domain experts in their target industries or develop strong partnerships with firms that can bring in that expertise," Ram said.

Finally, domestic IT companies will have to "make a move away from an India-centric approach to a truly global approach," meaning they will have to operate as a network across countries and by harnessing the full power of the global capabilities in serving every local customer better," he said.

It's an ambitious goal, and with China still focused on semiconductor and basic electronics manufacturing and mired in the first and second waves of technology development, it just might be the one that puts India ahead of its neighbor to the north in today's intensely competitive global market.

Nasscom, the premier trade body of the IT industry in India and organizer of the India Leadership Forum, recently announced the key findings of its "Strategic Review 2008."

The organization said that software and services exports are expected to exceed $40 billion and that the domestic market is expected to touch $23 billion in fiscal 2008. Positive market indicators and a strong track record support a target forecast of $60 billion in software and services exports and $73 billion to $75 billion in overall software and services revenue by fiscal 2010.

"The Indian IT industry has been rapidly evolving; growth is on track to achieve, if not exceed, the targets for 2010," said Nasscom president Som Mittal. "The trends are interesting, and findings indicate that the domestic market is poised for growth, with IT spending trending upward, particularly by the government. We also see an increasing level of specialization within the industry both in IT services and BPO [business process outsourcing] exhibiting signs of a rapidly maturing industry."

However, he said, "there are global macroeconomic challenges; talent, manpower and infrastructure issues will need to be addressed and resolved, collectively. The industry has shown resilience and has taken several steps to mitigate the impact."

 

[Bushroda]

Indian business empire eyes global role
By RAJESH MAHAPATRA
The Associated Press

MUMBAI, India - A dozen years ago, many believed that India's Tata Group - the country's oldest and largest conglomerate - was a bloated behemoth that would eventually go under.

Instead, it has become a powerhouse in the 21st century, focusing on core businesses like steel and automobiles and seizing opportunities, including the hugely profitable outsourcing business, that came with India's dramatic economic transformation.

A slew of recent acquisitions, including for Britain's Tetley Tea and Boston's Ritz Carlton Hotel, have thrust the Tata conglomerate - which comprises 98 companies and was largely unknown outside India until recently - into the global spotlight.

A year ago, Tata Steel Ltd. became the world's sixth-biggest steelmaker when it bought Britain-based Corus Group for $13 billion. Then in January, Tata Motors Ltd. grabbed the world's attention when it unveiled the planet's cheapest car: a $2,500 four-seater that could change the global auto industry.

Surprising naysayers, the company has also been named the preferred bidder for Ford Motor's Jaguar and Land Rover businesses.

"We have been thinking bigger than we have done in the past," said Chairman Ratan N. Tata, 70, in a rare interview at Bombay House, the group's headquarters since 1926. "We have been bolder ... and we have been more aggressive in the marketplace."

In five years through March 2007, annual group sales more than doubled to $29 billion, while market capitalization of its 27 listed companies increased six-fold, to $78 billion. The numbers do not include Corus, whose sales totaled $19 billion in 2006.

While recent rapid earnings growth at Tata Steel and Tata Motors has slowed, net profit at Tata Consultancy, India's biggest outsourcing company, continues to rise, climbing 21 percent in the October-December quarter.

The globalization strategy will only get bigger, said the barrel-chested Tata.

"We are at an early stage," he said. "We are still feeling our way."

The resurgence of the 140-year-old Tata brand is as much a story of the country's economic rise as it is about the success of the chairman, whose ascent to the top job in 1991 coincided with the beginning of India's shift from a socialist-style state to a market economy.

For decades after India's independence from Britain in 1947, the government fixed prices, imposed curbs on foreign goods and capital, brought draconian tax laws and set limits to what a company could produce. The restrictive regime stifled growth and bred corruption.

The Tata Group was hit harder than others because it strove to create a business culture that emphasized transparency and integrity. Tata executives are known for refusing to pay bribes, a widespread Indian practice, and their lifestyles are mostly modest.

Ratan Tata, a bachelor, lives in a beachfront Mumbai apartment and is driven to work in an inexpensive Tata sedan.

When Ratan took over the company from his gregarious uncle, J.R.D. Tata, India's economy was starting to open up, but the Tata group was almost falling apart. Sales were sluggish and government controls had limited new investments.

J.R.D.'s hands-off approach had led to inflated egos and squabbling among top executives at the group's many companies. All of the 1980s was marred with speculation about who would succeed the ailing J.R.D.

Author Gita Piramal describes the conglomerate that Rata inherited "a tangled legacy."

"India was changing, and changing rapidly, and outsiders had begun to describe the House of Tatas as a dinosaur," Piramal wrote in her best-seller Business Maharajas.

The company was founded in 1868 when Jamsetji N. Tata, a young trader from India's Parsi minority, set out to bring technology and money from around the world to establish India's first textile mill. The company went on to build the first steel plant, overcoming resistance of British colonial rulers, and later built the airline that eventually became the nation's flagship carrier - Air India - which is no longer part of the Tata group.

When Ratan became chairman, many heads of group companies had scant respect for him. He was a loner who had graduated from Cornell University with a bachelor's degree in architecture and had led a variety of Tata businesses far from the limelight.

Unlike his uncle, Ratan took charge from the start. It took him years to clean up the mess from the power struggles, pushing out a generation of executives and jettisoning several peripheral businesses.

At Tata Steel, tens of thousands of jobs were cut. Tata Motors built the first fully Indian-designed car, the Indica - a roomy hatchback rolled out in 1998.

Tata Consultancy Services meanwhile hired thousands to become a global power in outsourcing, doing back office work and software engineering for Western firms.

Just as the group's fortunes were reviving the Indian economy hit a slump, a slowdown aggravated in 2002 by new tensions with Pakistan. That's when it became compelling for Tata to look overseas.

The big change came five years ago at a company annual meeting, where the chairman "exhorted us to go treat the world as the market," recalls R. Gopalakrishnan, an executive director at Tata Sons, the group's holding company.

What followed was a massive push to acquire businesses abroad. Nearly 30 overseas buyouts have since helped the group's international revenues grow fourfold to $11 billion and contributed more than a third to its total sales last year.

Takeovers include the truck unit of South Korea's Daewoo Motors, Singapore's Natsteel and Thailand's Millennium Steel. The Indian giant is also snapping up mining rights in Africa and Asia.

For all that, Ratan Tata insists he hasn't traded off the group's long cherished values.

No Tata family members are among the country's growing list of billionaires because the family business is owned mostly by Tata-funded charitable trusts.

A substantial portion of the group's income is channeled into various philanthropies that have helped build some of the country's finest institutions, including India's first cancer hospital.

Tata companies are also known for offering worker benefits that are rare in India, including pension and child care allowances. Tata Steel hasn't seen a strike in the past 50 years.

"The one thing I had always felt is that I wanted to go to bed at night saying I had not succumbed to the temptation of giving up the values and the ethics, that the group had been built on, just for short-term gains," Tata said.

Some experts believe the group is still too bloated. Tata concedes that he has "not been very successful" at pruning the number of companies and downsizing staff, which currently totals about 290,000.

The big issue, however, is who will succeed Tata after he steps down.

"The Tatas have been producing many things successfully except children," said Dwijendra Tripathy, a business historian who predicts Ratan Tata may stay on at least five more years.

"It is only in the past two years that he has come into global limelight. It is human for him to be wanting to stay on for some more time, achieve some more milestones," he said.

Tata won't say when he plans to retire, but insists he is looking for a successor.

That person "doesn't have to be a Tata, doesn't have to be from within the organization."

Has he set his eyes on anyone?

"If that were so I assure you I would not be here today," Tata said, clearly irritated at the question. "If I had a successor I would have been gone."

 

[Bushroda]

India and China: Conflict, Competition, and Cooperation in the Age of Globalization
Dr. Aqueil Ahmad
STWR Contributing Writer
21st February 08

India and China are two of the world’s most ancient civilizations. For centuries they shared advanced ideas, inventions, religious and philosophical traditions. But their economies and societies stagnated during the colonial period. In the post-colonial era mutual relations suffered a setback due to political and boundary disputes. In contemporary times they have reemerged as leading techno-economic nations. It is high time for them to move beyond conflicts and start cooperating politically, economically, and technologically for mutual benefits.

Recent developments and exchanges indicate that the ball is already rolling in that direction. Globalization for common good requires coming together rather than falling apart, sharing resources and assets rather than wasting them in endless conflicts. In the context of currently shifting global political and economic power, no two nations are better equipped than India and China to show the world how the common concerns of humanity can be addressed through mutual respect, friendship, healthy competition, and sharing of resources.

Background

India and China are two of the world’s most ancient surviving civilizations. The Chinese built the 4000-mile Great Wall some 2000 years ago, about the time of the birth of Jesus Christ. As an awesome marvel of engineering, most of the wall still stands intact, the only man-made object visible from the outer space. They invented bureaucracy even earlier, thousands of years before Max Weber brought it eloquently to the attention of the western world (Gerth and Mills, 1958). There is not a single country anywhere that bureaucracies do not govern, manage or mismanage, corrupt and plunder, redeem or reform. The Terracotta Army built by Emperor Qin in the 3rd century BC is in almost perfect state of preservation to this day. Some of the greatest inventions that we live by even today came from China, including the gun powder – the most infamous of them all, the paper, paper money, printing, viaducts, dams, clocks, the compass, astronomical observatories, and countless other inventions (Needham, 1954).

As for India, R. K. Narayan, the famous Indian novelist tells the interesting story of his meeting with British philosopher and iconoclast, Sir Bertrand Russell. While extolling the contributions of ancient Chinese thinkers, Russell said to Narayan, “but you Indians created nothing.” Narayan vigorously protested this insulting remark. But Sir Russell kept on repeating, “You Indians created nothing, nothing, nothing.” Exasperated, Narayan got up and was about to walk out when Russell drew him near, looked him in the eye and said, “You Indians gave us the zero, which stands as the greatest contribution to the development of mathematics, and consequently, that of modern science.” Thereupon they embraced each other with delightful twinkle in their eyes.

Indian contributions to algebra, textile, chemistry, medicine, metallurgy, and astronomy in the Ancient and Medieval periods are legion. Sophisticated agricultural practices, architecture, and sewage systems were developed by the engineers in the Indus Valley civilizations of Harrappa and Mohanjadaro (Rahman, 1984; Habib, 1988). The wisdom of the Buddha flowed from India to China, while Confucius’ precepts of compassion, humility, and right conduct by merciful rulers influenced the behavior of emperor Ashoka in the 3 rd century B.C. who inscribed on his commemorative pillars, Satya amar jayte (Truth alone shall triumph).

India and China, along with the rest of the non-western world, lost their edge somewhere during the 16th and 17th centuries when the center of scientific and technological activity shifted to Europe, and later to North America for a set of complex cultural, political, and economic reasons (Needham, 1986). Contacts between these two great civilizations almost ceased during the colonial period because the new rulers of the world did not encourage such contacts. When the contacts were revived in more recent times between a democratic IndiaChina, they turned into conflict and hostility over rival territorial claims in the Himalayan region, the Chinese annexation of Tibet, and the Exile of Dalai Lama into (Dharamsala) India .

Recent Development History

India became a free country through peaceful transition of sovereignty from Britain in 1947. China had a proletarian revolution in 1949 led by Mao Zedong. Both democratic India and Communist China embarked upon ambitious science, technology, and economic development programs through centralized planning. Both emphasized self-reliance through local initiatives, restricting the flow of foreign capital and technology for nearly three decades. During this time, the Peoples Republic of China (PRC) controlled its economy and protected it from outside influences far more than did India. For at least 10-15 years since the revolution in 1949, the only source of foreign capital and technology for China was its ideological partner, the Soviet Union. That relationship began to crack in 1962 because of the USSR’s reluctance to transfer nuclear technology to the Peoples Republic. China continued its isolation and suffered serious stagnation for 20 or so more years, until after Mao’s death in 1976 (Ahmad, 1991).

During this period India also strictly regulated its economy, allowing only partial and highly restricted entry of foreign capital and technology. The Indian economy began to open its door a bit more widely by the middle of the 1980s, at about the same time as did China. By this time, the global economy had already taken hold of the national economies in North America, Europe, and the Pacific Rim. Post-Independence era regulations proved a mixed blessing for India. It missed 20 years of the information technology revolution that was sweeping the world and driving the global economy – remember how the IBM and Coca-Cola were kicked out of India in the middle of 1970s. The private sector stagnated under those regulations. The protected government sector thrived despite its magnificent mismanagement. India’s industrial development suffered. While these negative trends were the legacy of regulations, government policy of self-reliance helped built robust networks of techno-economic institutions and individuals that were ready to march forward when the global economy did finally reach India. Through regulations India was also able to protect its local industries and markets from unbridled speculation and exploitation by multinational corporations (Ahmad, 1998). Let me return to China for a minute.

Deng Xiaoping took command of China in 1979, three years after Mao’s death. With a massive shift of public policy, Deng opened the Chinese economy to foreign capital, technology, and competition. The scene that I witnessed in China when I went there for the first time in 1980 was a totally different scene than what is going on there today. Despite the open door policy, economic modernization remained laggard during the entire decade of the 1980s. Things began to change rapidly in the next decade. Since then, the Chinese economy has been growing at about 9-10% per year, surpassing any other country for a sustained growth at such a high rate. In terms of GDP per capita, modern China is the world’s 4th largest economy, and is likely to overtake Japan within the next 5-10 years. It is one of the world’s largest exporters of consumer items through retailers like Wal-Mart, Carrefour, Target, and Tesco. Even garlic in the United States is being imported from China. The American Wal-Mart is probably the biggest buyer of consumer goods made in China. “It bought $19 billion worth of Chinese goods in 2004, amounting to some 15% of China’s total exports to America in that year. (The Economist, September 23rd, 2006, p. 43)

Since 2000, China’s contribution to global GDP growth (in purchasing-power-parity terms) has been bigger than America’s, and more than half as big again as the combined contribution of India, Brazil and Russia, the three next largest emerging economies. China’s massive build-up of American Treasury bonds affects American interest rates and thus Americans’ willingness to spend. Its low-priced manufactures give western consumers more buying power. Its thirst for energy has helped push oil prices to record highs. Its entry to the World Trade Organization in 2001 has speeded up the opening of the world’s biggest market. (“A Survey of China,” The Economist, March 25th, 2006, p. 3)

India has finally left behind its “Hindu growth rate” of 3% to hit an annual growth rate of 8+%. Its technological capability is strong. It is the most preferred destination of IT outsourcing, now moving away from being the world’s call center to being a vital feeder to the global knowledge industry. India’s economic base is vast – 4th largest in the world in terms of purchasing power parity and 12th largest in terms of per capita GDP. It is projected to become one of the five largest economies in the world by 2050 along with China and Brazil. Its markets are huge, with the current consumer class estimated to be around 350 million, about the size of the entire European Community (Bhagwati, 2004).

The combined economies of India and China are already bigger than that of the EU countries put together. At the present rate of growth, the consumer class in the two countries will reach about a billion people within the next decade. But per capita incomes remain low and income disparities are wide in both countries in international comparisons. These developments have far-reaching implications for the two countries themselves and the world at large in the 21st century (Engardio, 2007).

Science, Technology, and Economy in India and China: Conflict, Competition, and/or Cooperation:

The West is becoming alarmist about what is happening in the world’s two most populous nations. In the United States, JapanChina bashing. China’s military machine is one of the most formidable in the world. But it is the Chinese economy that scares both the Indians and the Americans. Many Americans see both India and China stealing American jobs – China stealing manufacturing jobs (textile, shoes, furniture, hand tools, consumer electronics, Christmas ornaments, etc.); while India taking away IT jobs. Some in America have gone to the extent of suggesting that China is about to take over the United States’ economy by next year; as it was used to be said abut Japan in the 1980s and the 1990s. Of course, there is some truth in these morbid fears as Americans look back to the disappearance of their steel and consumer electronics industries through competition with Japan. And now here comes China, closely followed by India. Not to be left behind in IT outsourcing, China is rapidly developing its English and software development skills to compete with India in the American high-tech industry. Listen to what Tony Blair, the ex-British Prime Minister said in a major policy speech in Oxford, England:

But the international competition is intense and getting more so. Chinese R&D has been rising by 20% a year over the past five years. South Korean R&D has increased ten-fold since 1971. Indian R&D is even more astonishing - it has trebled in a decade. Indian engineers are flooding into the world's markets - 350,000 a year, forecast to 1.4m a year by 2015…. It is a warning to us that we have to remain world-leaders and that knowledge also needs to be transferred from the academy to the marketplace. (Speech at the Royal Society in Oxford, Nov. 3, 2006)

There is intense competition globally for R&D dollars. Technology and industry leaders understand that research and innovation are absolutely necessary for maintaining competitive advantage in their core competencies. Finding and hiring qualified scientists and engineers in the western countries is difficult and prohibitively expensive. “The truth is, China and India are increasingly attractive places for companies to do research and development.” (“Can Anyone Steer this Economy,” Cover Story, Business Week, Nov. 20, 2006, p. 62) India has an edge over China in attracting R&D investments due to the availability of more well-trained, English speaking scientists and engineers than in China. A high-tech company can hire an engineer in India at one-fourth the cost for a similar hire in North America, for example. Such investments will be growing rapidly in the coming years in both India and China, perhaps more so in India than in China.

Population in the western countries, excluding the USA, is declining. It is already below replacement levels in Russia and the Scandinavian countries. The current demographic balance between the West and the rest favors the latter: West = 1 billion; rest = 5.5 billion. It will continue to move in this direction. The same is true for the S&T human resources balance of power. Per capita production of scientists and engineers in the West (particularly the US) is still well ahead of the world average; but the total annual production in China and India surpass the US in about 4 to 1 ratio: US = 84,898; India = 103,000; China = 292,569 (India-China combined total = 395,569).

The American magazine Business Week organized its 10th annual CEO Forum in Beijing in early November (1-3) 2006. More than 700 global executives and government officials from many countries participated. Much of the discussion focused on competitiveness in ChinaIndia and the competition between them for world resources and markets. Is China with its command economy or India as world’s largest and most boisterous democracy better poised to utilize foreign domestic investment for sustained social and economic development, was one of the hotly debated topics. The experience so far suggests that without much public debate or dissension about its national plans and priorities, China has done much better than India in that respect. From the Indian point of view, the issue is that the values of individual freedoms, self reliance, and social development must not be sacrificed at the altar of economic development. These are indeed fine values to uphold in a democratic society, but the Indian policy planners need to look hard and fast how much they have or have not achieved by way of all-round social and economic progress and what needs to be done to correct the remaining gaps and imbalances.

The fact is both of these Asian giants have their own strengths and weaknesses, their own unique cultural traditions and political histories. They both are only half way home and a long way to go, as the saying goes, toward becoming advanced industrial societies. They have serious social and environmental problems to encounter – problems of poverty and disparity, the problem of rapidly deteriorating environments due to rapid industrialization, and a host of other problems like rural-urban disparity, and inadequate education, housing, health-care, and employment for their large populations. These are the areas where they can cooperate and learn from each other while they compete for world markets and resources. The CEO Forum in Beijing spent considerable time on the issue of global competition and rivalry between the two Asian superstars.

With the likes of China Mobile (with 300 million subscribers and a $177 billion market capitalization), telecom gear maker Huawei Technologies, and India’s Tata Steel on the prowl for acquisitions overseas, China and India are “reshaping the global economy.” Can these giants get along? Their rivalry is bound to intensify as India moves more into low-wage manufacturing, a Chinese specialty. Both must create 15 million new jobs every year just to keep their young people employed. (“The Dragon’s Way or the Tiger’s?” Business Week, Nov. 20, 2006, p. 55)

Increasing energy use in India and China due to industrialization and rising automobile ownership is also a source of worldwide concern as is the intense competition between them for global energy resources. The issue is how to satisfy their voracious appetite for oil. With 17% of the world’s population, only 0.8% oil reserves, and an economy growing at breakneck speed, China is naturally frantic about meeting its energy needs through imports. It is actively courting African leaders and investing in African development and oil exploration. During a recent (Nov. 3-5, 06) summit of top African leaders in Beijing, the latter were lavishly treated by the Chinese President, Hue JinTao. Despite some setbacks, the Chinese push for African raw materials and markets has been quite successful:

Chinese companies have been sucking up oil from Sudan, cutting down timber in Guinea and mining copper and zinc from the Congo. Beijing recently bought a major stake in South Africa’s Standard Bank to fund infrastructure projects throughout the continent. And the Chinese are far outpacing their Western rivals……Last year’s trade between Africa and China topped $50 billion. By 2010 it’s expected to reach $100 billion. (Newsweek, December 3, 2007, p. 46)

The huge Chinese oil conglomerate, CNOOC, is actively seeking to buy oil companies overseas, including a failed bid to buy American UNOCAL. It has since invested in oil interests in Russia and the Middle East. India is faced with a similar energy crunch having only meager oil resources of its own. It is competing with China for oil in world markets. But that is also an area where the two countries can effectively cooperate. Discussions on these lines have already taken place between CNOOC and India’s Oil and Natural Gas Commission. India’s ex-energy Minister Iyar came up with an interesting idea while discussing cooperative energy exploration and acquisition strategy with his Chinese counterpart sometime ago. He suggested that there should be a Consortium of Oil Importing Countries to negotiate the supply and price of crude oil for the benefit of heavy developing country oil importers. Such cooperative strategies have been mooted from time to time in other areas as well but their implementation remains problematic, perhaps due to unresolved boundary issues and suspicions about their geopolitical intentions.

The history of border disputes between India and China going back to the war of 1962 is well-known. That dispute is yet to be resolved and continues to be a source of friction and mistrust between them. The friction is exacerbated by China’s military and nuclear cooperation with archrival Pakistan. In its economic expansionist mode, China does want to increase its investment in India but feels resistance by the Indian government. It claims double standards by India in the matter of economic cooperation. For examples, the Indian government requires four bureaucratic levels of approval for Chinese FDI instead of only the Reserve Bank of India clearance for others. Prospective Chinese workers in Indian enterprises face similar bureaucratic hassles. One of the cases in point was visa problems faced by 1,800 engineers from the Chinese Petroleum hired by Reliance India to lay a gas pipeline sometimes ago. I wonder why Reliance could not find Indian engineers to do the job; and whether the visas were finally issued.

Despite these problems, cooperative science, technology, and trade have been steadily increasing between the two countries. Late Prime Minister Rajiv Gandhi of India signed an Indo-China inter-governmental science and technology agreement during his visit to Beijing in 1988. This led to a Joint S&T Committee to initiate broad-based cooperative programs. Specific joint projects are mooted at inter-agency levels in such diverse fields as meteorology, ocean science and technology, space science and technology, and biotechnology. As recently as September 2006, India’s Minister for Science and Technology, Kapil Sibal and his Chinese counterpart signed a Memorandum of Understanding (MoU) to further cement S&T cooperation between the two countries as part of the India-China Friendship Year 2006.

India-China trade is currently running at $20 billion from only $1.8 billion in 1989-90. A substantial share of India’s mobile-phone market is run by Hutchison Telecommunications of China. Huawei Technologies has a software center in Bangalore that employs 1,150 Indian and 50 Chinese engineers. I understand that most of the Diwali lanterns for 2006 celebrations came from China. The Chinese computer giant Lenovo has recently established its global marketing hub in Bangalore to be run and managed by Indians. China imports iron ore and other minerals from India. From the Indian side, an estimated 150 companies are currently doing business in China, although India claims these business ventures are with other foreign firms operating in China, not with the Chinese companies. (The Economist, October 28th, 2006, pp. 50-51; and Nov. 18th, 2006, pp.43-44) The trend, nonetheless, is definitely pointing in the direction of increasing bilateral trade and technology agreements.

Concluding Remarks

This brief discussion of India and China in the context of globalization suggests several things. Nobel Laureate Amartya Sen, reports his teacher Joan Robinson at Cambridge University once telling him, “The frustrating thing about India is that whatever you can rightly say about it, the opposite is also true.” Interestingly enough, you can say exactly the same thing about China. It combines capitalism with communism, poverty and disparity with fast economic growth, impressive industrial development with neglect of its environment, and a massive rural-urban divide. These contradictions exist in India as well, with the exception of the first one. But they are due largely to long-standing historical and social factors, not exclusively to globalization, as some tend to suggest.

Theoretically, globalization is about worldwide systemic interdependence, integration, mobilization, and redistribution of global resources that should lead to partial if not complete economic parity and equilibrium among the system members in due course of time. Generally speaking, all modern economies today are global in character. As Robert Reich (1991) said in his well-known book, The Work of Nations, there are no truly national economies any more. India and China are no exceptions. Economic globalization is driving and shaping national politics, economies, histories, social structures, environments, and international relations, and connecting them through interdependent networks as never before. A global power shift is indeed occurring that is still unseen and unrecognized by many among us. There are two major implications of this power shift. Ideology and politics are becoming the handmaidens of global economic forces, rather than the other way round, as the case used to be. The other development is unraveling of erstwhile hegemonies. The United States of America and Europe are no longer in the drivers’ seats. The balance of power is shifting from West to East, from North to South (Meredith, 2007). The recent demographic, economic, and political developments in China, India, Russia, Latin America, and the Middle East (barring some temporary setbacks here and there) all point in that direction (see endnotes). This shifting landscape strongly suggests that this century is poised to be an Asian century. And India and China, along with the Pacific Rim countries and Russia with her enormous natural resources, will be its biggest winners – unless the trend is reversed by unimaginative political and economic leadership in these countries, which is unlikely.

As mentioned above, perhaps the strongest factor causing this power shift is the worldwide distribution of qualified manpower that overwhelmingly favors both China and India. For example, there is intense competition globally for R&D dollars. China and India are increasingly attractive places for multinational corporations to conduct their R&D operations. India has an edge over China in R&D capacity due to the availability of more well-trained, English speaking scientists and engineers than in China. With increasing difficulty to recruit qualified scientists and engineers at affordable prices in the West, or at any price, for that matter, joint R&D projects involving Indian, Chinese, and third country scientists should soon be emerging within India, China, and some other more developed developing countries in such fields as biotechnology, alternative energy systems, pharmaceuticals, healthcare, environmental technologies, and perhaps even in space explorations. A recent report from Control Engineering, a free-lance think-tank, observes:

The vast majority of U.S. manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact on business and the ability of the country as a whole to compete in a global economy. This is the key finding of the "2005 Skills Gap Survey"…. by the National Association of Manufacturers…. The problem for U.S.India, China, and Russia, are graduating millions more students each year…than the United States. These…individuals are actively participating in the development of innovative new products without regard for historical barriers, such as geography— thanks to technologies such as broadband, inexpensive Internet-ready laptops, and collaborative tools. With such international talent readily available and significant shortages existing at home, it is clear that the future of U.S. manufacturers is that this challenge is not universal. Countries with rich educational heritages, such as manufacturing may now be at stake, the report suggests. Details behind the talent shortage reveal a stark reality. More than 80% of respondents indicated that they are experiencing a shortage of qualified workers overall—with 13% reporting severe shortages.

The surfeit of qualified manpower out of China and India is yet to be fully and gainfully employed in the global production of knowledge, goods, and public services. In addition to being the knowledge factory for the world, these large numbers, if tapped properly, can be a source of enormous mutual benefit to the two countries themselves in their quest for excellence and a rightful place in the community of nations.

In 2002 (precisely 40 years after the{1962}war, the then Chinese premier, Zhu Rongji, visited India and told his hosts: “You are the first in software, and we are the first in hardware. When we put these two together, we can become the world’s number one” (The Economist, The World in 2005, p. 49)

This forecast may not be too far off to come true.

Aqueil Ahmad is currently a full-time faculty in the School of Management at Walden University, Minneapolis, Minnesota.

Courtesy of Globalization, second special issue, December 2007

 

[Neo]

India awards $2.7bn road projects ​

Saturday, February 23, 2008

NEW DELHI: India awarded five road projects for Rs109.12 billion ($2.7 billion) on Friday to private companies, including Larsen & Toubro and aconsortia of Deutsche Bank and Malaysia’s IJM Corp Berhad, a senior government official said.

The projects are part of India’s Rs2.42 trillion national highway development programme, Bhram Dutt, a secretary at transport ministry told a news conference. India is seeking active private participation to build roads, airports and power plants as the government is unable to raise the funds needed to finance them on its own.

The National Highway Authority of India has awarded Larsen & Toubro, the country’s largest construction firm, a highway widening project in southern India for 4.19 billion rupees, Dutt said.

A joint venture in which Spanish firm Isolux Corsan owns 51 per cent, with India’s Soma Enterprise holding the remaining 49 per cent, won a road project in northern India for Rs27.5 billion, he said. Another joint venture that is 90 per cent owned by India’s IRB Infrastructure Developers, and 10 per cent held by Deutsche Bank got the contract to widen a highway in western India for Rs16.94 billion, Dutt said.

India awards $2.7bn road projects

 

[solid snake]

Tiny Pakistan is already enjoying the knock-on effect of India's steady rise as a regional and global IT superstar. With a population of 160 million, Pakistan will be the first in the world to complete a nationwide deployment of WiMax wireless communications technology. This boost in infrastructure will help make its technical talent pool more competitive and will serve as another catalyst for regional economic development.

Tiny Pakistan? Who is this guy?

Pakistan has the sixth highest population in the world and is the size of the UK and France put together in terms of area. Never heard anyone call France tiny

Pakistan is also larger than Spain, Italy, Germany, Turkey etc. By no means are we tiny.