India on the Move - A tech revolution, a new middle class, a sizzling economy
4 November 2005, Fortune magazine, By Clay Chandler

Vijay Mallya has made UB second only to Diageo, the world's largest liquor company, by volume. The secret of his success, he muses, swirling a goblet of red wine, is that he understands the aspirations of the modern Indian consumer. The pitch is simple: "You only live once, so live the good times."

There is no question that these days many of his countrymen are living better than they were. Buoyed by rising exports, economists expect the Indian economy to perform at least as well in the current year, despite the jump in global oil prices. A rash of glitzy shopping malls rising on the outskirts of Bangalore and New Delhi attests to India's growing middle class. Suddenly analysts and investors are talking of India in the same breath as Asia's other emerging colossus. A recent report by brokerage CLSA lumps the two giants together into a single economy, "Chindia," and says that by 2020 the combined entity will consume half the planet's natural resources and serve as both factory and back office to the world.

The new vigor of India's economy has won New Delhi respect in Washington. The Bush administration, eyeing markets for U.S. exports and a regional counterweight to China, has launched a full-on charm offensive, removing a decades-old ban on the sale of civilian nuclear technology to India. Foreign investors, led by the Japanese, have snapped up Indian shares, helping to drive the Sensex past the 8,500 mark, a record high. Blue-chip private equity firms such as Warburg Pincus, Blackstone, and Carlyle are pouring billions into Indian ventures. In June, Posco, South Korea's largest steelmaker, announced plans to spend $12 billion on a plant in Orissa. General Electric, which led the charge into India in the early 1990s — has 23,000 local employees and sales of $2 billion. GE India CEO Scott Bayman sees opportunities in markets for everything from water-treatment facilities to advanced plastics and financial services. "We've done a lot of homework, and we're sure we've got it right this time," says Bayman, who describes India as "China ten years ago."

But China exports almost six times as much each year ($600 billion vs. $105 billion). Finance Minister P. Chidambaram responds "We are a democracy. We have a free press. We can only move at a certain pace, which may seem slow compared with China. To get anything done, I must carry my coalition partners"

India excels at the impossible, turning out hundreds of thousands of brilliant engineers a year. India has world-class business leaders and, unlike China, solvent banks. India’s software houses manage complex data across thousands of miles of undersea cable for the world's most sophisticated clients. From their origins in code-writing and call centers, India's leading services firms are climbing the value chain, competing with the likes of IBM and EDS for contracts to perform more complex—and more profitable—functions such as data management, market analysis, consulting, and computer-aided design. India's annual software exports have gone from nonexistent to $15 billion in barely a decade. Consultants at McKinsey predict India's IT revenue will reach $87 billion by 2008.

At Bharat Forge, CEO Kalyani says when his business hit a wall in 1996, the solution was to revamp the production model, abandoning Bharat's reliance on large numbers of low-cost laborers and switching to a system that used an elite cadre of highly skilled engineers to operate a factory filled with smarter machines. By offering buyouts of up to seven years' salary, he coaxed 600 of his 1,800 workforce into early retirement. Then he set about recruiting college graduates with engineering degrees and spent heavily on computers and software. A decade later Kalyani's payroll is back up to 1,800, but 80% of his employees are degree-holding engineers, and his operation is four times more productive. "In India, our competitive advantage does not lie in cheap labor," he says. "It lies in cheap brain power."

Across town at Bajaj Automotive, the story is much the same. Bajaj is India's second-largest motorcycle maker, commanding a 30% share of the domestic market. But it has encountered competition from rivals in Japan, South Korea, and, increasingly, China. Executive director Sanjiv Bajaj, who is leading the export drive, says the goal is to sell cycles vastly superior to those made in China for about 20% less than those made in Japan. But to do that Bajaj, too, is reinventing its production model. In the early 1990s, Bajaj built one million vehicles with 24,000 workers. Now it builds 2.4 million with 10,500 workers. To break the grip of recalcitrant labor unions at its plant in Pune, Bajaj has curtailed investment there and built a gleaming new factory in Chakan, 25 miles away. The Pune plant is old India: Four thousand workers, few with college degrees, build low-cost scooters at a rate of 1,500 a day—though actual productivity is lower, because the plant runs only five days a week. The Chakan facility looks as if it has been transported whole from Japan, complete with Fanuc robots. Nine hundred employees, 90% of them college-educated engineers, turn out 2,600 motorcycles a day. All of them eat at the same canteen. There are no uniforms—engineers flank the assembly line in dress slacks and short-sleeved white shirts.

But where will the jobs for the masses come from? Deregulation is one answer. India's civil aviation and telecommunications industries demonstrate what can happen when the state makes way for new market players. Until the early 1990s, Indian travelers were limited to choosing between two cosseted state-owned carriers, Indian Airlines and Air India. The government has since granted licenses to a spate of newcomers, including SpiceJet, Deccan Airlines, and Kingfisher Airlines. The big success is Jet Airways, which now flies 51 planes. CEO Wolfgang Prock-Schauer, lured away from a top post at Austrian Airlines, says Jet's goal is to achieve "the service of Singapore Airlines with the operations efficiency of Lufthansa." It's getting there. Flights leave on time, crews are unfailingly polite. Many Indian business travelers say they won't fly anything else.

Many of those politicians in Delhi profess affinity for the elephant—huge and plodding, but capable of movements that shake the earth. If reformists have their way over India’s Left parties, the tiger—fearless and quick, the mascot of choice in Asia's other economies — may soon be making a comeback.

India and China Take On the World and Each Other
8 November 2005, New York Times, By Howard W. French

For years, the rapid growth of China and India has been based on business with the developed world, and has often meant taking business away from Western industries. Now, companies in the two largest emerging economies in the world are beginning to hunt intensively for business in each other's markets. India-China trade had already been growing at a phenomenal rate, reaching $13.6 billion last year - a sevenfold increase from 1998. Companies have said their new investments are critical strategic moves aimed at profiting from the other country's rapid rise. The strengths of each are remarkably different: China is an industrial powerhouse in the making, while India has placed its bets more heavily on services.

Nowhere can this trend be seen more clearly than in information technology, where India is already perceived as a global leader. Infosys Technologies, the software and information services giant in India, for example, recently announced plans to invest $65 million to expand its business in China. Infosys plans to hire 2,000 computer specialists over the next two years and to construct corporate campuses in Shanghai and Hangzhou to accommodate even more workers. Infosys, based in Bangalore, the capital of India's computer services industry, has risen from obscurity in the last few years to become one of the world's top computer outsourcing companies, mostly by providing software services to large corporations in the United States and elsewhere in the West.

China produces 400,000 engineering graduates each year, many of them in computer studies, and expansion by Indian companies into China is aimed, in part, at wooing them. Infosys's plans to expand in China have been mirrored by those of several other big Indian companies that also specialize in computer services and outsourcing, like Tata Consulting, Wipro and Satyam Computer Services. This year, Satyam announced its plans to build a major campus in Beijing. Another Indian company, NIIT, has recently expanded in China, creating more than 125 centers around the country where it teaches programming and other computing skills.

On the Chinese side, the drive to explore the Indian market is being led by corporate giants, like Huawei Technologies, a networking equipment manufacturer that competes with Cisco Systems of San Jose, Calif. "Since we are a company whose business is based largely on globalization, we felt we had to be in India," said Huang Ji, the chief executive of Huawei's operations in India; Huawei has recently hired 700 Indian software specialists. "In recent years, Chinese companies have been doing research on software on a small scale, and things are still not very standardized. In India, lots of companies have reached a very high level already, and we would like to learn from them."

The Chinese government still plays an important role in the creation of companies, and as the value of the computer services and software sectors rises, Chinese officials have been searching for training and investment opportunities in India. As a result, Infosys, for example, recently accepted 100 interns from China at a corporate campus in Mysore, India. The Chinese province of Jiangsu also recently announced plans to recruit as many as 400 software engineers from India to help it start a provincial information technology industry. "Chinese companies are not really used to business-process outsourcing," said James Lin, chief executive of Infosys China. "It's going to take a little more time. We tell them that if you want to be a truly globalized business, we can help you."

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India to be toast of Frankfurt Book Fair 2006
4 November 2005, Silicon India magazine

The Union Cabinet today gave its nod for the participation of India as the 'Guest of Honor' country in next year's Frankfurt Book Fair, the biggest book event in the world. It would cost the public exchequer around $6.81 million to project India's image through a multifaceted display of books, art, culture and academic achievements, the government said. The state-run publisher National Book Trust of India (NBT) has been designated as the nodal agency for organizing the Indian participation. A large delegation of NBT officials and publishers were in Frankfurt last month for this year's book fair.

A theme pavilion, exhibition of books, readings by authors and even screening of Bollywood films would boost the ‘Guest of Honor’ status. Indian food and alternative medicine, which have spawned an industry abroad, will be aplenty at the fair. There will be an exhibition on Ayurveda as well as food festivals. An exhibition of paintings, sculpture and handicrafts from the country will also be mounted at the fair venue.

India and China Take On the World and Each Other 8 November 2005, New York Times, By Howard W. French

India and China Take On the World and Each Other
8 November 2005, New York Times, By Howard W. French