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News
Updates - 28 February 2006
India on every business agenda - Forbes magazine
Cashing in on India's banking boom - Business Week
Global reverb of India and China - Business Week
India: on Every
Business Agenda
13 Feb 2006,
Forbes magazine, By
Caspar W. Weinberger
Forbes Columnist and famed British historian Paul Johnson
in September urged that we devote far more time and effort to "forging close
and durable links with
India." While
Europe
will always be important to us, the road to our economic and strategic
success in mid-century will run straight through India. Demographic trends
show that by 2050 the GNP of the U.S. will be three times larger than that
of Europe. Currently all large U.S. corporations have extensive business
trips to Europe on their agendas, but in the future they will need to pay
far more attention to building major business relationships with India.
Trade between the
U.S. and India increased
from $5.5 billion in 1990 to $18 billion in 2003, with the U.S. becoming
India's largest trading partner. Among India's imports are petroleum,
chemicals, fertilizers, industrial machinery and gemstones. Among its
exports are chemicals, cotton textiles and clothing, cut diamonds and
jewelry, iron ore and tea. It is also a large supplier of outsourcing
manpower for U.S. and other foreign companies.
With every indicator showing the importance of a strong
U.S. relationship
with India, the obvious question is: Why has it not always been the case?
There were many years when India was thought of as an automatic enemy.
Congress party governments under the leadership of the Gandhi family were
largely Socialist and maintained close ties with Russia during the Cold War.
In March 1998 a coalition led by the Bharatiya Janata party (BJP) came to
power, and Atal Bihari Vajpayee became prime minister. In May India
proceeded with nuclear weapons tests and declared itself capable of using
and producing such weapons. Perversely, this provided an opportunity for
strengthening relations between the U.S. and India.
The climate for business has continued to improve.
India has many assets to
recommend it to American and European businesses looking for a base in which
to anchor their expansions into Asia. It has an educated, well-trained
workforce, a generally strong infrastructure and good communications and
informational networks. Because of its years under British rule, it has a
long tradition of familiarity with English and of upholding the rule of law.
As mentioned, India also has substantial outsourcing experience. It has
joined China in becoming a magnet for economic growth.
The Open Skies aviation agreement of 2005 opened up many
direct flights between cities in the
U.S. and India,
facilitating trade and travel between our two countries. Political relations
have strengthened along with our business ties. The U.S. and India now enjoy
a stronger security relationship and engage in regular joint military
exercises. India is a natural partner for the U.S. in this volatile part of
the world. Its economic progress still requires nurturing. We must manage
this relationship carefully.
Top of
the page
Cashing
in on India's Banking Boom
23 Feb 2006,
Business Week, By Isabelle Sender
Global players are rushing to increase their presence on the subcontinent.
An annual survey of
India's
best banks places a local bank, Mumbai-based HDFC Bank, as the country's No.
1 pick in the large-bank category. "India
is a bastion of growth where financial-services firms are looking to
leverage and allocate capital," says U.S.-based S&P equity analyst Mark
Hebeka, noting he expects expansion in dynamic emerging markets in general
in 2006 and beyond.
Hebeka views the rapid development of businesses in India as offering strong
potential for commercial lending, as well as a large retail base with
growing wealth and buying power. Some banks can't expand fast enough.
JPMorgan, which admitted it was strapped for human resources in India, said
it plans to expand in India by hiring 4,500 employees on the subcontinent
over the next two years.
Half
of India's population of roughly 1.2 billion is under the age of 25. So for
at least the next 20 years, India will have a growing population of people
in their prime working years -- unlike emerging-market rival, China, which
has a rapidly aging population. Many businesses appear likely to benefit
from the boom, including financial services. There were close to 300
foreign, public-sector, and regional banks -- up from about 60 in 1997 --
doing business in India last year. Not surprisingly, it was a year in which
total bank loans alone grew about 30%, and consumer lending grew 8%.
India's
low interest-rate environment is spurring a borrowing boom among the
nation's consumers. As a result, Indians are buying homes, cars, and other
products at rates never before seen on the subcontinent.
India,
which bills itself as the world's fastest-growing democracy, has a growing
consumer base -- the latest estimates place its middle class between 250
million and 300 million strong. That's an eye-catching number for
growth-minded global banks. According to a 2004 report by Merrill Lynch.
Indian household debt was a mere 4% of gross domestic product -- the lowest
among a group of south Asian countries including South Korea and Taiwan,
each of which reported household debt exceeding 60% of GDP, and Malaysia and
Thailand, with 25% each.
The
size of the Indian credit-card market is estimated to be about $4 billion
and growing at 35% yearly, according to GE Money, which was formed when GE
Capital, the finance arm of conglomerate General Electric partnered in 1998
with State Bank of India, provider of a quarter of all loans in India. GE
Money states that it has experienced double-digit growth since then. In
January, the company reached a big milestone, signing its 2-millionth
cardholder.
India
is the second-largest new-growth market for private banking -- after China
-- in terms of the number of wealthy households. Boston Consulting Group
projects that growth in Asian offshore private banking will be fueled by
those two countries for at least another five years. India's wealthy
families have an estimated $560 billion in assets, and China's wealthiest
have more than $700 billion. Investors seeking to expose their portfolio to
these families can consider Asia's biggest private banks, which, according
to the Financial Times,
include Citigroup, HSBC, and UBS. With household wealth growing at slower
levels elsewhere in the world, the rising riches on the subcontinent
represent an opportunity that the big global players simply can't ignore.
Top of
the page
The Global Reverb of
China
and India
9 Feb 2006,
Business Week, By David Cohen
The
waves from the Asian giants are being felt everywhere, from remaking the
trade map to helping keep inflation contained. Call it a global twofer.
Financial markets have lately recognized that the emerging economies of
China and India are boosting global growth, while at the same time helping
keep inflation contained in economies around the world. Globalization,
through growing imports and outsourcing, is seen as one factor behind
inflation and wage growth remaining low in places such as the U.S. As former
Federal Reserve Chairman Alan Greenspan once observed, the integration of
China and India (along with the former Soviet Union) into world markets
would "approximately double the overall supply of labor."
A
second, related dimension of this phenomenon has become apparent. The
"pass-through" to core inflation around the globe from the run-up in global
energy prices has been limited -- in stark contrast to the effects of
earlier spikes in crude-oil and natural gas prices. Of course, we shouldn't
forget another side to the equation: demand. The surging demand from China
and India has contributed to the jump in energy and other commodity prices.
There's no mistaking the growing presence of China and India on the world
scene, together contributing just over a third of total global GDP growth in
the past couple of years.
India
has been able to take advantage of telecommunications advances and its
citizens' proficiency in English, to play a bigger role in the outsourcing
of services. In both countries, the impressive growth in output is being
driven by productivity, helped by a combination of absorbing world
technology, along with market reforms and the shift from traditionally rural
regions to newly industrializing urban locations.
Further contributing to the growth in average productivity has been the
ongoing migration from rural regions to the more-industrialized urban
locations. In India, where per-capita GDP growth averaged 3.6% annually
during 1980-2001, much of it during the second decade. According to the 2001
census, the ratio of urban-to-rural per-capita income has remained around
1.5 to 1.6 since the 1980s, with the urban population share rising from 23%
in 1981 to 28% in 2001.
The
discussion is hardly complete without acknowledging the other side of the
coin -- growth in
China
and India is also generating increasing demand on global markets, in
particular for commodities. These two economies helped boost world economic
growth to 5% in 2004 -- its fastest pace in decades, according to the IMF.
Our estimate is of 4.6% growth in 2005 and 2006, tying the third highest
reading in data back to 1984. Thus, it's no coincidence that world commodity
prices have risen. Prices for metals such as copper, lead, and zinc are all
hitting record highs.
Most
notably, crude-oil and coal prices soared in 2005, as China has emerged as
the world's second-largest consumer of oil after the U.S. In 2004, it was
the third-largest oil importer (after only becoming a net importer in 1994),
while India was the sixth-largest consumer and ninth-largest importer. This
level has accounted for 40% of the global increase in demand.
Considering sustainability, it appears that the underlying growth process
has more than a few years left to play out -- even if the true trajectory is
likely to be far more bumpy than the remarkably smooth growth suggested by
the available Chinese data.
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