INDIA & GLOBALISATION FINANCIAL TIMES SPECIAL REPORT | Friday January 30 2009 www.ft.com/indiaglobalisation2009 Ambitions dimmed but not abandoned The country is at a saves time,” says Genda Lal Baisla, owner of one of the larger critical juncture as it farms. faces the prospect of These same farmers are suppli- ers to a company listed in Lon- global recession and a don that has its origins in Johan- tightlyfought general nesburg and has global opera- tions that stretch from Milwau- election, writes kee to Moscow. Although few of James Lamont the farmers openly admit to drinking beer themselves, they T he small farmers of are part of SABMiller's global Bansur village in eastern drinks supply chain. Their barley Rajasthan overwhelm- finds its way into beer distrib- ingly agree that life has uted across northern India to changed for the better over the cheer the country’s claim to be past 10 years. The reason is the fastest-growing beer market India’s greater engagement with in Asia. the world economy. One of the most often quoted Many still plough their tidy figures to illustrate the promise fields with camels. Between of the Indian economy is the about 100 of them, they share number of new mobile telephone Talking promise: the number of new mobile telephone subscribers in India has reached a staggering 10m a month as operators compete and drive growth Reuters only three tractors. They are users who sign up each month. troubled by the rising price of This raised eyebrows when it pitches the ruling Congress party drained swiftly from the emerg- when only in July government food, particularly of wheat, was 5m a month. But now the against the Hindu nationalist ing market. officials and business organisa- Inside this issue More on FT.COM pulses and edible oils. They have figure has reached a staggering opposition Bharatiya Janata Many top business leaders tions felt double-digit growth to Ethical rules pose challenge Charity is not the answer also noticed that weather pat- 10m a month as mobile operators party. The battleground will be were soon appealing for deep rival China was within reach. Retailers must negotiate labour Amy Yee looks at growing terns are changing. The summers drive growth by offering call the economy. interest rate cuts and emergency As nerves jangled in New Delhi codes, says Alan Beattie Page 2 philanthropy and how business are hotter, and the monsoon rates for less than Rs1 a minute. The international financial cri- support from the government. and Mumbai, a closed economy is seen as a model for efficiency rains a little less heavy. The rampant growth in this sis has had a worse impact on Exports fell rapidly, iron ore and suddenly looked appealing again. Law firms fuel demand On the upside, the men feel sector has become the talisman India than policymakers and rice contracts were defaulted on Sonia Gandhi, president of the The lure of India’s outourcing Wanted: 1,500 universities more connected among them- that many turn to as reassurance businesspeople had initially rec- and mass job losses loomed. Congress party, invoked the pru- services is growing, writes Overstretched selves and a world outside their that India’s domestic consump- ognised. The expectation was Shares of some of India’s leading dence of her mother-in-law Indira Amy Kazmin Page 2 institutions are village. What has revolutionised tion is alive and well. that, with exports representing companies in sectors such as in closing the Indian economy. unable to meet their lives is the mobile tele- But as global companies only 17 per cent of gross domes- property, pharmaceuticals and IT But her praise for the nationali- Scandal raises questions the demands of phone – almost all of them pos- increasingly change the lives of tic product, India would be insu- outsourcing fell sharply. Even sation of banks in the late 1960s After Satyam, all eyes jobcreation, says sess one. They receive weather India’s 1.2bn people, the past six lated from troubles elsewhere, the heady days of the country’s sounded a hollow note with a are on regulators, says James Lamont reports, discuss market prices for months have been testing for most particularly the US. The domestic airline boom appeared cadre of increasingly foreign-ori- Joe Leahy Page 3 their crops and coordinate better India and its engagement with Sensex, the benchmark index on numbered. entated business leaders eager to Imagining India among themselves. They even the forces of globalisation. The the Bombay Stock Exchange, lost The shine speedily came off expand beyond India's shores. Bollywood boost James Lamont find spouses for their children country is at a critical juncture more than half its value in the India's ambitions as corporate Amid the financial turbulence, Movies are embracing reviews Nandan new tastes, says Amy Nilekani’s book this way. as it faces the prospect of global second half of last year, the valuations seemed terribly over- there was worse to come for Kazmin Page 4 of ideas “Before we would have to recession and a tightly-fought liquidity crunch was felt widely blown. Growth projections were travel, but now we just talk. It general election in April that and foreign portfolio investment revised down to about 7 per cent, Continued on Page 2 2 ★ FINANCIAL TIMES FRIDAY JANUARY 30 2009 India & Globalisation Hopes dimmed Ethical rules impose perverse incentives amid the GLOBAL SUPPLY CHAIN shoppers. The pressures of business, he says, thanks to and power-intensive technol- their manufactured goods in like the Global Social Com- working – employees, often such ethical sourcing, how- access to cheaper fabric and ogy, India, with its unrelia- poor countries, particularly pliance Programme and the women, doing handwork Sourcing is a big ever, run the risk of exclud- duty-free access to the EU ble and expensive electricity, Asia, are under continual Supplier Ethical Data such as embroidery at home factor for retailers ing some of the poorest market, India has managed struggles to compete against pressure to adhere to high Exchange (Sedex), systems – because they are harder to storm after cheap labour, says Alan Beattie workers from the benefits of the global economy. The garment export indus- to hold its own in some more sophisticated products. But several factors go China. Its garment manufac- turers thus have difficulty when taking on China’s labour standards. At a time when consumers are feeling the pinch, the tension of sharing information about auditing and compliance pro- cedures which should help monitor. Mr Sahni says: “The audits are an incentive to do everything inside the try is a good example of against it. An obvious one is huge and hyper-efficient between driving down costs prevent one company being factory and to use machin- Continued from Page 1 India’s strengths and weak- geographical isolation from and holding up standards undercut by low standards ery. It is a headache to do For a country with a vast nesses and challenges that the lucrative export markets only becomes more acute. in another. “There is plenty anything outside.” This source of cheap labour, India lie ahead. Among its advan- of the EU and the US. It is ‘There are over Terry Babbs, Tesco’s inter- of room for confusion and means that production for investors. In the closing has often been a somewhat tages in the global supply unable to build up the short- 1,000 labour codes national trading law and duplication, which is why export is increasingly domi- days of last year, India suf- late participant in the global chain for clothing are rela- distance quick-response sec- technical director, says: “At Tesco has put so much effort nated by male, full-time fered one of its worst corpo- supply chains that snake tively low labour costs and a tor serving the high-fashion in existence, and it the top of our customers’ into initiatives like GSCP employees, not by poorer rate scandals in one of the sectors leading its globalisa- around the globe. Even in clothing, one of its tradition- tradition of skilled workers, particularly in handiwork part of the European and American retail sector that would help if there minds are price and availa- bility, particularly in tough and Sedex,” Mr Babbs says. “There are more than a women, and is often mecha- nised, reducing the benefit tion drive. Satyam, the coun- ally strong areas, some of such as embroidery. countries such as Turkey was a single code’ economic times, but they thousand labour codes in to the very poorest. try’s fourth largest IT out- the disadvantages that have Rajan Sahni, owner of and Mexico have estab- also expect us to take care of existence, and it would help Mr Babbs says: “Our pri- sourcing company, was dealt prevented its challenging Panorama Exports, a gar- lished. Orders from Euro- the ethical dimension on greatly if there was a single mary suppliers employ 1.8m a devastating blow when B. China for supremacy in ment factory in Haryana pean retailers to India have mass-production clothing their behalf.” code.” people, which is a significant Ramalinga Raju, its chair- international manufacturing near Delhi, says that the a lead time of 60-90 days. industry, especially the mar- There is a bewildering Yet aside from managerial footprint in the developing man, handed in a letter to continue to hold it back. industry managed to defy Other problems are some- ket in artificial fabrics, variety of different ethical considerations are the poten- world and means a lot of regulators confessing to a And like all other low-cost predictions of doom when a what of India’s making. despite higher wages. codes covering labour prac- tially perverse incentives people’s livelihoods are $1bn fraud. The company’s producers, it is also facing global system of textile quo- Clothing industries tend to And as they target the rich tices, environmental sustain- that such initiatives can pro- being improved by produc- share price collapsed, Mr the increasing challenge of tas was finally abolished in be most efficient when they markets of Europe, consider- ability, human rights and so duce. The prohibitions on ing goods for Tesco.” But Raju was taken into custody ensuring that the goods it 2005, allowing China a free have a cheap and convenient ations of ethical sourcing forth. Tesco, along with illegal child labour mean some of the pressure that and his board dismissed. produces are not just cheap run at the world market. source of fabric. But because increasingly come to the some other big retailers, has that companies shy away retailers are under may The shockwaves were felt but also satisfy the ethical While low-cost Bangladesh textiles, as opposed to gar- fore. The big retailers such tried to bring them all from using traditional forms mean that relatively few by investors across the considerations of western has taken a lot of the denim ments, tend to be a capital- as Tesco that buy many of together through initiatives of sourcing such as home- workers end up benefiting. world who view the IT out- sourcing industry as a pow- erful driver of services-led economic growth. Satyam Law firms fuel had been one of the first Indian companies to list on the New York Stock Exchange. The fraud dimmed the Indian dream. Mr Raju’s per- sonal journey as the son of a grape farmer in rural And- hra Pradesh, growing up the demand for offshore services without electricity, to study at Ohio University in the US and then become the chair- man of an IT company was a textbook case of the opportu- nity globalisation could bring. OUTSOURCING $23bn a year, according to the India’s openness has also National Association of Software attracted other enemies. The Western companies are and Service Companies, while the Mumbai terror attacks in November were a strike looking for help in a country earns another $11bn for handling back-office work, like against global capital and widening array of areas, responding to customer queries India’s prosperity. Quite dif- ferent from earlier bombs in says Amy Kazmin and complaints and chasing debt defaulters, for western companies. marketplaces, the Pakistan- By contrast, India’s legal proc- trained gunmen targeted A few months ago, Ayetree Gogoi, ess outsourcing industry – focus- hotels frequented by Indian 28, was practising law in a provin- ing on such areas as patent and international business cial court in India’s remote tea- research, contract management people and a Jewish centre. growing state of Assam, litigating and litigation support – generated In manufacturing the civil matters. revenues of just $225m in 2007, going was tough too. A year Today, Ms Gogoi is part of a according to ValueNotes, an ago, the Nano car project to team of 75 Indian lawyers and Indian-based research company. build the world’s cheapest medical professionals combing Yet that revenue grew an esti- car – to be sold for Rs100,000 millions of pages of internal mated 40 per cent in 2008, and is pre tax – was held up as the e-mails, annual reports, clinical projected to reach at least $640m spirit of the era. However, trial data, and medical publicity in 2010. “There is a sustainable its main production plant in material belonging to GE, as the ecosystem that has come out,” Singur, West Bengal, became US-based company prepares its says Aradhana Kolhatkar, a mired in a land dispute that defence for a high-profile pharma- Value-Notes analyst. “There is a highlighted the tensions sur- ceutical product liability lawsuit. kind of momentum that has built rounding industrialisation. The task of Ms Gogoi and her up.” As Ratan Tata, Tata’s colleagues – all employees of Many analysts believe the push chairman and one of the UnitedLex, a three-year-old New to offshore will intensify, helped country’s most respected Delhi-based legal process out- by India’s solid IT skills, and dec- businesspeople, struggled to sourcing company – is to identify ade-long experience handling keep momentum behind the documents relevant to the case. other corporate back-office work. project, further afield, his “If I was still in Assam arguing Som Mittal, president of Nass- group’s acquisition of Jaguar in a provincial court, I would not com, argues that Indian firms are and Land Rover, the British have got this exposure,” she says taking the lead in trying to woo car marques from Ford, was in UnitedLex’s ultra-modern office new types of businesses. “Until attracting strong criticism as in Gurgaon, just outside the now, people have moved to India a vainglorious enterprise. Indian capital. “Here we are part what they thought could be “We analysts in the west of a big product liability litigation moved,” says Mr Mittal. “In the are all looking at financial that will impact the world.” next 10 years, rather than a fol- quarters and halves. But you As well as handling litigation lower role, as we have played, have to give Ratan Tata Expanding role: New Delhi is extending the reach of naval operations outside UN peacekeeping missions AP support for GE, UnitedLex has Indian companies will help their credit for looking 20 years lawyers overhauling contract tem- customers, or their parents, drive Craving greater inf luence ahead with this acquisition,” plates and handling patent work, this transformation.” says Xavier Gunner, head of and is also developing a practice The path to growth is not with- research at London-based to help leading companies license out obstacles. While India churns Arbuthnot Securities and an their intellectual property. out graduates in fields such as expert on the auto sector. The start-up is still small, with law, engineering and medicine India’s believers are doing revenues of just $10m in 2008, up every year, most of them still fall the same. Higher growth, from $2m in 2007. But UnitedLex far short of the minimum stand- the ambitions of its corpo- FOREIGN POLICY nates with many Indian leaders, nomic crisis today. If nations look warming relationship with the is in the process of doubling its ards expected by western clients. rate leaders, trade’s rising but they acknowledge that if they only inwards and imagine they US. This had already begun in headcount, from 500 professionals “Our education system produces share of GDP, and a high- Alignments are shifting achieved only one or two of the can solve all their problems on spheres such as education and IT to 1,000 by the middle of the year, trainable people,” says Mr Mittal. quality, low-cost workforce are all spurring India to as the country projects more modest goals over the com- ing year they would be doing their own, they will fail,” he says emphatically. outsourcing. But it took a civil nuclear agreement, signed with amid surging demand for its services from crisis-hit western “We believe it needs to produce employable people.” interact with the world as itself on the world stage, well. Mr Singh has presided over one the outgoing Bush administration, companies trying to cut costs. The scandal at Satyam, India’s never before. The trials of the past year writes James Lamont India’s leadership craves a greater role in the world’s multi- of the biggest shifts in India’s international alignment since the to lift sanctions imposed in 1970s and unlock the potential of India’s “Cost pressure is really pushing CEOs, and giving the legal out- fourth-largest IT outsourcing com- panies, could also erode some have been met by the gov- lateral organisations whether as a end of British rule in 1947. relationship with the US, thought sourcing industry a leg up,” says companies’ willingness to entrust M ernment with equanimity. ost aspiring world permanent member of the United The world’s largest democracy unimaginable a decade ago. Anup Bhasin, the chief operating highly sensitive jobs, or data, to Prime Minister Manmohan powers are reaching Nations Security Council or guid- has traditionally behaved as a “The new relationship rests on officer. “Given that outsourcing is Indian firms. “Once trust is dam- Singh's sober assessment is into the policy ing the global financial system at leading non-aligned country, and a convergence of US and Indian already proven in IT and cus- aged or broken, it takes a long encouraging. “Our problems drawer for a checklist the G20. They are also aware that national interests, and never in tomer service, people are asking, time to repair,” says Soumitra will not be over in the cur- to navigate the global politics of a India plays a pivotal role in the our history have they been so ‘Why not legal services?’” Dutta, professor of business and rent year. The difficult downturn. None more so than success of the World Trade Organ- ‘The relationship rests closely aligned,” reports an Asia Other high-end services are technology at Insead, the Paris- period will continue into India. isation’s global trade talks and on a convergence of Society taskforce led by Frank attracting attention. With western based business school. “It’s not 2009-10,” he said. “The The global financial crisis has initiatives to combat climate Wisner, a former US ambassador companies under pressure to pare just a short-term hit. It’s a medi- important point is that, hit the country at an inconven- change. US and Indian interests, to New Delhi. costs, they are looking to compa- um-term hit that will affect the although growth is lower, it is still much higher than ient time, as it reaches out politi- cally and economically to the Growing influence, however, is not confined to the negotiating and never have they Since the nuclear deal’s passage through the US Congress, India’s nies in India to take on an array of jobs – from market research to development of the sector.” Yet Bhaskar Bagchi, country most other countries.” western world. The sliding mar- table. India is fast modernising its been so closely aligned’ foreign outlook has changed dra- product design, engineering serv- head in India of CPA Global, a UK So long as that is the case, kets and liquidity squeeze have armed forces, already among the matically, not only because of the ices, legal support, and content legal support services company, investment bankers in Lon- shown India and China far from largest in the world. The deploy- global financial crisis, but also development for publications. says he sees no sign of a slow- don and New York, along- “decoupled” from US and Euro- ment of Indian naval vessels in always been regarded as a good because of a devastating terrorist For now, the off-shoring of down. “There is now a very clear side barley farmers in Rajas- pean economies. “The Indian cen- the Gulf of Aden to protect ship- partner to have on single issues strike on its financial capital. these so-called “knowledge proc- economic reason for both corpo- than, will be happy to hurry tury”, as some like to imagine it, ping from pirates at the end of but difficult to engage across a Since the Mumbai terror esses” remains small when com- rates and law firms to look for India’s globalisation along. has hit an early global obstacle. last year was a sign that New range. Increasingly, as it projects attacks last November, India and pared to India’s massive IT offshoring,” he says. “India has “The credit crisis has delivered Delhi was prepared to expand the itself more forcefully on the world its neighbour Pakistan have been exports and its business process- proven that they can deliver the the first major external economic reach of its operations outside of stage, it is having to develop a engaged in a frustrating diplo- ing outsourcing industry. same quality, if not better quality, shock of India’s meteoric 21st cen- UN peacekeeping missions. broader, more consistent stance matic exchange over who was India’s software and IT service from what they got when they did Contributors tury rise,” says Peter Mandelson, In Manmohan Singh, the econo- befitting one of the world’s fastest responsible and whether they will exports generate revenues of the work onshore.” James Lamont the UK’s minister for business. mist turned prime minister, growing large economies. be brought to justice. India’s for- South Asia Bureau Chief “India is less dependent on export India’s allies have had a partner In this regard, India’s single eign policy has quickly, though demand than China or other parts hitting all the right notes. greatest recent foreign policy temporarily, narrowed to focus on Profile: Omar Abdullah Alan Beattie of Asia, but the pressures on “Our century will be shaped by transformation, of which Mr the instability of South Asia and a World Trade Editor developed world investment can, how we respond to the global eco- Singh is the architect, is its fast familiar stand-off with Islamabad, Four days after he was sworn in better public services, have and are, having the same impact with whom India has fought three as chief minister of Jammu and created hope. Amy Kazmin on growth in India, China and the wars in the past six decades. Kashmir, Omar Abdullah, the In a country where most top South Asia Correspondent other emerging economies.” Some commentators, such as 38yearold scion of a political politicians are in their 70s and Mr Mandelson, on a visit to India Gurcharan Das, the former chair- dynasty, unexpectedly visited a 80s, he has stirred hopes among Joe Leahy Economic summary projections 2008 2009 Mumbai Correspondent New Delhi this month, outlined man of Procter & Gamble in India, maternity hospital in Srinagar. many young Indians about the back-of-the-envelope steps for Total GDP (Rs bn) 53,355.1 61,253.3 are critical of what they call a What he found were filthy potential for generational change James FontanellaKhan India, urging it to stay on its glo- return to the hostilities of the walls, a broken heating system, to reinvigorate sluggish, corrupt India Editor, FT.com Total GDP ($bn) 1,237.4 1,350.3 balising path. He proposed: past. Rising Chinese and Indian water shortages, problems at the government. ● keeping trade flowing and the Real GDP Growth (annual % change) 7.8 6.3 economic development are higher “fair price” pharmacy – and both Yet trying times lay ahead. Amy Yee economy open; priorities than a public row with the hospital chief and his deputy Kashmir is the centre of a FT Contributor GDP per head $ (PPP) 2,786.6 2,984.7 ● signing the European Union- Pakistan, he says. absent. Mr Abdullah replaced dispute between India and Inflation (annual % change in CPI, EU harmonised) 7.9 6.7 Gavin O’Toole India free trade agreement; Vishnu Prakash, one of the gov- them and ordered an overhaul. Pakistan, and its people have Commissioining Editor ● using the optimism surround- Current account balance ($bn) -34.6 -41.5 ernment’s chief foreign policy Mr Abdullah has since made been subjected to serious human Steven Bird ing Barack Obama’s presidency in Population (m) 1,186.2 1,203.2 spokesmen, insists that one similar surprise visits to a power rights abuses both by insurgents Designer the US to strike a Doha trade advantage of his country’s large station, a police station and other and Indian forces. How he Andy Mears Foreign exchange reserves ($bn) 248.9 248.4 talks deal later this year; civil service is that India will government facilities, creating confronts these problems will be Picture Editor ● using the downturn to shift Exports of goods ($bn) 173.0 171.5 never be a “one issue” country. anxiety among state officials. the true test of Mr Abdullah’s into low-carbon technology; Imports of goods ($bn) 296.5 279.0 With so much hanging on India’s Yet among Kashmir’s weary mettle. For advertising details, ● and helping the Group of 20 participation in global debates population – reeling from 20 Full profile at: www.ft. contact: Angela Mackay Industrial production (annual % change) 4.5 4.2 nations, which meets in London over financial infrastructure, cli- years of separatist insurgency com/indiaglobalisation2009 +852 2905 5552 in April, achieve a shift in inter- Exchange rate, average (Rs per $) 43.1 45.4 mate, trade and terror, the inter- – the young minister’s activities, email@example.com or national politics to a new agenda. national community will want to with their implicit promise of Amy Kazmin your usual representative Sources: IMF; EIU Mr Mandelson's checklist reso- believe him. FINANCIAL TIMES FRIDAY JANUARY 30 2009 ★ 3 India & Globalisation Foreigners battle for Profile: Abhinav Bindra India discovered a new hero on nuclear power stake August 11 last year when an unknown 25yearold won the country’s first individual gold medal at the Beijing Olympics by taking the men’s 10metre airrifle title. Abhinav Bindra has been ENERGY nuclear establishment is ambiva- lowed swiftly by top British hailed as the “Golden Child” lent about foreign involvement – nuclear energy experts, led by and “Jewel of the Nation”. In a Western companies and apparently determined to Peter Mandelson, the UK’s minis- country obsessed with cricket, see opportunities, but ensure the state is not upstaged. “If you have been under sanc- ter for business. Yet profiting from India’s his gold medal reminded India of its potential in other sports. New Delhi is nervous, tions for 30 years, you have a thirst for power looks set to be “When he hit the bull’s eye writes Amy Kazmin certain mindset, saying ‘Okay, we’ll do this on our own’,” an arduous process, especially for private US firms. “The hype with his final shot, the country rediscovered its selfbelief, so Arundhati Ghose, former Indian on the deal that it is going to to speak,” wrote Ayaz Memon, F or decades, India’s ambassador to the United open up tens of billions of dollars editor of Mumbai’s Daily News nuclear establishment Nations, says. of business to the US was just and Analysis. worked in almost total Chronically short of power, that – hype,” says Brahma Chel- However, his triumph also isolation, the result of and heavily dependent on lany, director of the New Delhi- highlighted the enormous US-led international sanctions imported oil, India wants to mas- based Centre for Policy Research. infrastructural deficiencies India intended to punish the country sively expand its nuclear power India’s Atomic Energy Act now faces in its race to be for refusing to relinquish its restricts ownership and opera- recognised as a superpower. nuclear weapons programme. tion of nuclear power plants to The 2010 Commonwealth Barred from obtaining nuclear ‘The hype on the government-owned companies – Games, which will be hosted by fuel or technology from abroad, deal that it is going and any amendment that opens New Delhi, could be the best the state-owned Nuclear Power the sector to even limited foreign Nuclear future: a worker checks controls at the Kalpakkam reactor south of Madras AP opportunity for India to fill the Corporation of India, working to open up tens of ownership is likely to trigger infrastructural gap. with private firms, installed a mere 4,000 megawatts of nuclear billions of dollars of heated parliamentary battles. US firms are also unwilling to Export to build two new 1,000MW reactors – projects that predate intellectual property disputes, with foreign companies claiming would limit foreign companies to selling technology, supplies and Mr Bindra said: “The Commonwealth Games is a power capacity, with another business to the US conduct any nuclear commerce the sanctions – and the Russian Indian technology as their own. services and prohibit foreign fine opportunity to build a 2,600MW under construction. with India until New Delhi agency is to help build another “The motto of self-reliance is equity stakes in any nuclear sports culture in the country But when New Delhi was was just that – hype’ adopts internationally binding two reactors at the site. The not just a slogan,” he says. “It is power plant. and generate interest in sports finally accepted last year as a de legislation to limit private liabil- NPCI also has an agreement to an important element of our That would be a significant outside cricket.” However, he facto member of the global output to improve its long-term ity in case of a nuclear accident, acquire technology from France’s technological march and our brake on India’s development, said funds should not be used nuclear club – as part of a deal energy security and meet surging potentially another highly con- state-controlled company Areva. ambition to lead the world,” he given the state’s limited to build sport facilities only in with the US – India became an demand. India’s national energy tentious political issue. But while the NPCI wants for- says. “We must conduct business resources for such expensive the capital. accepted partner for the interna- plan calls for 30,000MW of “India has been very accus- eign collaboration to help it rap- in a manner that does not con- projects. “It won’t be possible for In one of his many talks with tional civil nuclear trade. nuclear power by 2020, 63,000MW tomed to doing these through its idly expand energy production, strain us from getting into a top the government of India to find youngsters, Mr Bindra stressed Since then, western energy by 2030 and 250,000MW by 2050. state-owned companies or deal- India’s nuclear research estab- position, otherwise we simply the resources on its own, which that sport was an “integral” companies have been beating a Western companies see oppor- ing with foreign state-owned lishment – obsessed with ideas of become the so-called fabricators means international finance will part of developing the country. path to New Delhi. Yet even as tunities. In January, executives companies,” says Ted Jones, a achieving technological suprem- or service providers – fabricating be required – and a lot of that is “I dream of seeing India they tout their wares, New Delhi from 30 US companies, including director of the US-India Business acy – appears anxious. something for x’s orders, y’s going to be equity,” says V. become a sporting is still grappling with sensitive GE, Westinghouse, Bechtel, Bab- Council. “To induce the partici- Last year, Anil Kakodkar, the orders, or z’s orders.” Raghuraman, a Confederation of superpower,” he told them. questions of how much foreign cock & Wilcox, and Shaw Power, pation of private companies, they Atomic Energy Commission India’s Congress-led govern- Indian Industry adviser. “We’ll Full profile at: www.ft.com/ involvement to permit. visited India for discussions with need to. . . create an enabling chairman, publicly cautioned ment has yet to unveil publicly a have to really see what comes indiaglobalisation2009 After decades of self-reliance – government officials and the framework.” that foreign co-operation should proposed legal framework for out and how it gets legislated. and little outside scrutiny of its NPCI on meeting India’s power The NPCI is working with Rus- not erode India’s technological nuclear commerce. But local There are many questions that James FontanellaKhan operations, India’s powerful needs. The US delegation was fol- sia’s state-owned AtomStroy capacity, and warned of potential newspapers say a current draft have to be answered.” Showmanship at the WTO that plays well with the poor Mr Nath face an uncertain Pradesh would remove Mr while some countries along with Celso Amorim, a force for liberalisation. lower bindings [ceilings] on over international promises PROFILE time. While he refused to Nath from the WTO circuit. expressed frustration, Mr for the developing world in Ashok Gulati, co-author of a agricultural tariffs.” and liberalising trade. KAMAL NATH discuss it directly, Mr Nath, In early December, as the Nath insisted that a bad putting their interests book on WTO negotiations That seems unlikely with If Congress does lose the Alan Beattie weighs a Congress MP, was one of votes were being counted, deal for the developing upfront in the WTO . . . and agriculture, says India Mr Nath in charge. Defying elections, whoever takes the leading candidates to the director-general of the world was worse than none. Sharp, witty, pragmatic and has less to protect than it a promise by the G20 over from Mr Nath is up the approach of become chief minister in WTO faced a difficult India has traditionally astute, Kamal is sure to claims. “We should be less leading economies to take unlikely to have the same the country’s adroit Madhya Pradesh. But the decision about whether to been one of the more continue his meteoric rise defensive,” he says. “We no new protectionist showmanship or political ruling BJP easily held on to call ministers to a meeting recalcitrant of the big in India and the echelons of would be in a better actions, he raised soya skills. But the pressure any trade minister the state. that could either have countries in global trade world leaders.” position to demand tariffs in November. new minister will face – to And if, as most assume, achieved an outline deal or talks. But under Mr Nath, Yet some within India concessions from developed Placating soyabean farmers, avoid being seen to sell out Kamal Nath rarely misses the ruling Congress-led ended in another failure. its influence has increased. want to see the country be countries if we agreed to it appears, takes precedence India’s poor – will remain. the opportunity to make a coalition in New Delhi fails Many officials and Along with Brazil, the EU point. When India’s to retain power in the observers identified Mr and the US, India has been influential trade minister forthcoming general Nath as the main influence part of the core negotiating took time out from the election, which must be on that decision. group at the heart of Doha. international policy circuit held by May, Mr Nath could Christopher Wenk, senior And while Celso Amorim, to campaign in November’s face a spell in the political director of international Brazil’s foreign minister, state election in Madhya backwaters. policy at the US Chamber plays an influential role, it Pradesh, he was the first to It is not a position to of Commerce, said at the is overshadowed by India’s admit that questions about which he is accustomed. time: “In reality, the biggest rallying of other developing the World Trade Unlike many of his calculation . . . on whether nations to demand deeper Organisation were not a technocratic colleagues, Mr or not to have another go cuts in US farm subsidies staple concern of voters. Nath revels in the spotlight. at a ministerial in and more leeway for poor But still, he claimed time His orchestration of other December, is whether economies to protect their and again that the developing countries in the Kamal Nath, and India, will farmers with import tariffs. uncompromising stance he Doha round, especially in actually be willing to For those who want a took in the so-called “Doha opposition to the US, evokes negotiate or is he more louder voice for the round” of global trade talks admiration from his willing to run out the clock developing world within the stood him in good stead as supporters and frustration on 2009 and the end of the WTO, Mr Nath is good a champion of India’s poor. from his opponents. Bush administration.” news. Pradeep Mehta of the “They know I stand up for More than a few officials In the event, Pascal Consumer Unity and Trust them,” he said. “That’s why and observers in Lamy, the WTO Society, a think-tank based they support me.” Washington were hoping director-general, decided in Jaipur, says: “He has Both the Doha round and that a victory in Madhya against taking the risk. And been the rallying point, Scandal raises questions about disclosure regime CORPORATE GOVERNANCE least in the Indian context,” fell in line with the market. trolling shareholders to said IIFL, the institutional The Maytas deal was an reveal their share pledges. The Satyam affair research division of the secu- attempt to cover up the The move was welcomed focuses attention rities house, India Infoline. “Symbolically, it is akin to fraud at Satyam. By January 7, the game was up. The by the market but experts called it “too little, too late”. on the regulator, the high-profile frauds perpe- lenders had sold almost all Professor Sandeep P. says Joe Leahy trated by Enron, Worldcom or Parmalat, all of which of the Raju family’s shares. The question for analysts Parekh, visiting associate faculty at the Indian Insti- had overstated profits and now is whether Satyam is an tute of Management, Early in the New Year, an the value of assets on exception. Ahmedabad and former otherwise unremarkable books.” The scandal has prompted executive director of Sebi, software industry executive India’s stock market has calls for the government to said during his time at the shocked India and the world. borne the brunt of the reve- tidy up loose corporate dis- regulator he spent three B. Ramalinga Raju, the lations. Since December 17, closure requirements. The years developing new disclo- chairman of Satyam Compu- when the first signs emerged most prominent need is to sure standards that have yet ter Services, India’s fourth that all was not right at force controlling sharehold- to be fully implemented. largest information technol- Satyam, the Bombay Stock ers to reveal if they have Common complaints about ogy group by revenue, sent a Exchange’s benchmark pledged shares to lenders. India’s disclosure regime letter to his board confessing Sensex Index, has fallen 13 include the absence of a to a crime so spectacular in per cent to 8.674.35 points as requirement on companies its scale that many could of January 23. ‘Symbolically, to file full balance sheets hardly believe it. Part of the reason the it is akin to the along with quarterly results. Apparently, Satyam’s bal- Satyam fraud was such a The other problem is ance sheet as of September shock was that it occurred highprofile frauds enforcement. In the queue of was an elaborate work of fic- tion in which everything in India’s multi-billion dollar information technology out- perpetrated by government agencies wait- ing to interrogate Mr Raju, from revenue and profits to sourcing business, regarded Enron, Worldcom Sebi seemed to be last in most of its cash balance of as one of the most progres- line. Rs53.61bn was an invention. sive industries in the coun- or Parmalat’ And almost no serious The fraud was carried out try’s corporate sector. white collar criminal in over a number of years, Mr The episode began when In a market in which more India has ever served time Raju’s letter said, raising Mr Raju on December 16 pro- than half of the key constitu- after sentencing. questions over how the com- posed that Satyam acquire ents of the Sensex are con- India’s corporate govern- pany’s auditor, PwC, and the Maytas property and trolled by families, this is a ance system is still regarded stock market regulators infrastructure companies sensitive issue. But the as among the best in emerg- failed to spot it. belonging to his family in a secretive pledging of shares ing markets. But the Satyam In one step, he under- deal worth $1.6bn. to lenders is a key risk for episode shows there is mined the confidence of The deal was approved by unsuspecting minority inves- plenty to be done by regula- India’s once unerringly self- Satyam’s independent direc- tors. Once a stock that has tors and policymakers. assured business commu- tors. But within hours, insti- been pledged hits a certain “Corporate crime in India nity, tutional investors launched point, it will trigger a mar- can’t be addressed by more “There has rarely been a an unprecedented rebellion. gin call, forcing the lender in laws or indeed more govern- case of a bull market not Unbeknown to these inves- question to begin selling. ance,” says Krishnamurthy having left a few fraudulent tors, Mr Raju was sitting on This can collapse the price. Vijayan, executive chairman residues, but the suo motu a timebomb. He had pledged Two weeks after the con- of JP Morgan Asset Manage- disclosure . . . by Ramalinga his family’s 8 per cent stake fession letter was released, ment in Mumbai. “I suspect Raju, the chairman of in the company to lenders, the Securities and Exchange that rapid and forceful Satyam. . . must be catego- who had started selling off Board of India, the regulator, action against the perpetra- rised as the mother of all, at the shares as Satyam’s stock made it mandatory for con- tors is the main answer.” 4 ★ FINANCIAL TIMES FRIDAY JANUARY 30 2009 India & Globalisation Mobile operators scramble to dial up vast rural market TELECOMS tion had analysts scratching Mumbai-based brokerage Prabhu- pares with $10.80 in China and The government is still target- yielded rich dividends,” Mr Mit- ulation, remains enticing, opera- their heads – the $1.1bn acquisi- das Lilladher. $52.50 in the US. Call rates per ing 650m subscribers for mobile tal says. tors will need to overcome barri- A rapid growth in users tion of 60 per cent of Unitech This growth is regarded as one minute are just one US cent. and fixed-line telephony by 2012. The number two operator, Reli- ers such as tight competition, the offers big opportunities, Wireless by Norway’s Telenor. “Faced with a saturated mar- of the showcase achievements of economic liberalisation that Minutes of usage are among the highest in India at 448 per But this will be possible only if the government stimulates devel- ance Communications, however, reported slightly weaker than cost of setting up base stations, a lack of organised retail outlets reports Joe Leahy ket in the developed countries of began in the early 1990s. It is also subscriber per month, second opment of untapped rural areas. expected results as it rolls out a and low population density. the world, the Indian market rep- regularly held up as an example only to the US with 812. There are signs that the cost of new network based on the popu- If the pursuit of rural subscrib- If the world was slow to wake up resents one of the last remaining of how quickly India can develop growing in rural areas, which lar global system for mobile com- ers becomes too costly, many to the importance of India’s pockets of growth for global oper- its infrastructure given the right requires huge capital expendi- munications standard. operators, particularly potential mobile telephony industry, any ators,” says a report by consul- incentives. ‘The Indian market ture, is beginning to weigh on GSM is used by Bharti and new foreign entrants, may hope doubts over how it views the sec- tancy Cap Gemini. Analysts attribute this rapid represents one of the operators. most of Reliance’s other rivals, for a boost by participating in the tor now were put to rest in 2008. Last year, India overtook progress to the government’s Industry leader Bharti Airtel is including Vodafone of the UK, country’s planned 3G auction. In November, Japan’s NTT China as the country adding the early moves to throw open the last remaining pockets still doing well. In its third quar- whose unit Vodafone Essar is Entry into 3G could enable DoCoMo paid $2.7bn for 26 per cent of Tata Teleservices, India’s most subscribers to its networks every month. Operators regularly sector to private competition in tandem with the establishment of of growth for global ter ending December, it reported stronger-than-expected net profit India’s number three operator by subscriber numbers. operators to relieve congestion in existing networks using the sixth largest mobile operator, in exceeded a net subscriber addi- a strong regulator. operators’ and added a record number of Reliance is hoping to increase standard’s higher bandwidth a deal whose price shocked the tion of 10m a month. Private-sector operators and subscribers to bring its total to its subscriber base to 100m from while migrating their premium industry. It could only mean one In spite of the global economic equipment vendors have pro- 85.7m in December. Chairman 61.4m at the end of December. users to the new “data-rich” serv- thing – NTT felt it had to have a malaise, the total subscriber base vided innovative tariff structures However, analysts are ques- Sunil Mittal says this was largely Vodafone, meanwhile, is looking ices enabled by the medium. presence in the world’s fastest- in India last year rose by 48.5 per and attractively-priced handsets. tioning how long the market can through targeting villages, with this year to take the second rank- For India’s department of tele- growing mobile market at any cent to 346.9m. These measures have enabled sustain this growth. Penetration Bharti’s network now covering ing from Reliance. communications, 3G could be a cost. “The slowdown in the overall Indian consumers to enjoy the in the most lucrative urban mar- 400,000 villages across India. But while the potential of moneyspinner as well, with offi- The takeover of Tata Teleserv- economy is yet to impact the sub- lowest prices in the world. kets, the metropolises of Mum- “Bharti’s strategy of extensive India’s rural population, which cials claiming it could raise ices followed another deal two scriber net additions,” says India’s average revenue per bai, New Delhi and others, is rollout ahead of competition, accounts for more than two- Rs1,000bn along with an auction weeks earlier whose hefty valua- Nishna Biyani, analyst with user, at $8.60 per month, com- already approaching 80 per cent. especially in new villages, has thirds of the country’s 1.1bn pop- of other forms of mobile licence. ‘Slumdog’ challenges a comfortable tradition BOLLYWOOD heart of India’s film industry but it’s not an Indian film.” sequences, melodramatic in – the success of Slumdog Jag Mundra, an independ- their acting style, and often But melodramatic Millionaire has generated ent filmmaker who has reflective of conservative ‘masala movies’ both excitement and angst over Bollywood’s relation- directed several “issues- based” films, such as Pro- Indian social and family val- ues. While they are circu- remain popular, ship with global audiences. voked and Shoot on Site, lated abroad by niche dis- finds Amy Kazmin To some industry players, the film’s Indian theme will believes Slumdog Millionaire – with its cast of relatively tributors, to areas with large South Asian populations, help give national cinema unknown actors – could not these “masala movies” are W ith its gritty greater international credi- yet be made in today’s Bolly- otherwise thought to have depiction of bility and distribution, just wood, which remains little international appeal. M u m b a i ’ s as Crouching Tiger, Hidden obsessed with “bankable Simultaneously, movies underbelly – Dragon demonstrated to Hol- stars” rather than a gripping such as Deepa Mehta’s tril- and an unlikely rags-to- lywood distributors the ogy of Fire, Earth, and riches tale of resilience and potential appeal of Chinese Water, and Mira Nair’s Slumdog Millionaire’s success has enthused many urban Indians, although it is not an Indian production hope, the film Slumdog Mil- films in the west. ‘There is so much Salaam Bombay and Mon- lionaire has gained critical “More people in western chaos. People soon Wedding, which tackle produced, directed and opener,” says Mr Bhargava. global film, without aban- 1950s,” Mr Lulla said. “Peo- acclaim and box office suc- offices will now be willing to socially challenging subjects starred in a film about a boy “People are looking for con- doning its domestic market,” ple wanted to get out and cess round the world, plus 10 look at and listen to things want escapist with more naturalistic act- suffering from dyslexia. A tent.” says Mr Khanna. watch happy-go-lucky, larg- Oscar nominations. Despite the film’s pedigree coming out of India,” says famed Indian producer, cinema. That’s ing (and far fewer songs), have found critical and box Wednesday, starring two classical but not bankable All this suggests that as Indian tastes change and the Yet in the meantime, Kishore Lulla, chief execu- er-than-life escapist cinema. “Today too, they want to as a British production, its Ramesh Sippy, whose what Bollywood is office success on the art actors, was also a surprise market segments, there will tive of Eros International, a forget their worries. We international success has Warner Brothers-backed house circuit abroad, but hit on the Indian multiplex be a greater focus on script, film company, thinks inter- have recession, we have war enthused many urban Indi- film, Chandni Chowk to all about’ had only limited audiences circuit, with its taut story of ideas, content and urban national demand for – there is so much chaos. ans, now embracing it as a China, has failed to shine in in India. a vigilante against terror – themes. “masala” films is growing. People want escapist cin- triumph of India’s cinema its first week according to story, and reluctant to stray Yet Sandeep Bhargava of and not a single song. “The next stage for India “Bollywood is where Hol- ema. That’s what Bollywood industry, which generates Box Office Mojo. from idiosyncratic yet com- The Indian Film Company, “2008 has been an eye- is a film which will become a lywood was in the 1940s and is all about.” about 900 films a year. Yet others have felt fortable formulas that have says changing Indian tastes In Indian media inter- anguished that it has taken for decades found favour in – especially among urban views, Danny Boyle, the a British production to suc- the domestic market. youth and the development British director, has insisted cessfully interpret India for Globally, Indian films have of more multiplex screens in his work is a mainstream a western audience. been seen by distributors as urban areas – are giving Bol- Indian “feel-good” film, “It’s not an Indian film,” either suitable for Indian lywood fresh impetus to given its romantic love story says Amit Khanna, a former tastes, or the international experiment more with and underdog hero who songwriter and media pro- market, but rarely for both. socially and thematically overcomes tremendous ducer who is now chairman Movies catering to India’s challenging (and shorter) adversity to secure triumph of Reliance Entertainment. mass audience are tradition- films that target more and, of course, the girl. “We are trying to appropri- ally around three hours sophisticated, audiences. Yet, among directors and ate it, but the vision is west- long; punctuated by numer- B o l l y w o o d s t a r A a mi r producers in Mumbai – the ern. It’s a film about India, ous song and dance Khan, for example, last year Diaspora suffers ambivalence CITIZENSHIP ing jobs in public sector to 549,000 a year in 2005, in private firms, especially institutions, such as univer- according to government sta- in the IT industry. Officialdom is wary sities, research laboratories tistics. The result of decades But Indian officialdom still of those who have and state enterprises – the areas most desperately in of brain drain are evident. According to the US cen- looks warily at the overseas community. New Delhi has made a life abroad, need of training and experi- sus, people of Indian origin in recent years started issu- says Amy Kazmin ence gleaned from abroad. “India has severely under- are the best-educated, most affluent ethnic group in the ing “Overseas Citizens of India” cards to people of leveraged its diaspora,” says country, with higher median Indian origin. Cardholders Despite India’s rapid growth Devesh Kapur, director of family incomes and more say it is more like a life-time and his undergraduate the University of Pennsylva- advanced degrees than any multiple entry visa than gen- degree in bio-technology, nia’s Center for the other community. “The uine citizenship, as it does Deepak Jakhar, a 23-year-old Advanced Study of India. Indian diaspora is the most not permit holders to vote or aspiring cancer researcher, “You would think that we exceptional migrant group take public sector jobs. sees few career prospects in would be tremendously wel- ever in American history Part of the problem today’s India. coming of talent. In fact, we besides the German Jews of appears to be protectionism The job offers he received are not.” the 1930s,” says Mr Kapur. against the threat of compe- to sell pharmaceutical prod- In the early years after India also has large, affluent tition for jobs from overseas. ucts had little appeal. An independence, many Indians communities in the UK, Can- Yet non-resident Indians internship in a government went abroad on government ada, Australia and the Mid- suggest that policymaking laboratory taught him that scholarships to acquire skills dle East. towards the diaspora is also dilapidated state research such as engineering and sci- Private companies have clouded by questions over facilities offer little scope for ence on condition that they long recognised the benefits definitions of who actually is professional growth. returned to help to build the of tapping this vast overseas “Indian”, given the partition That’s why Mr Jakhar, nation. Today, in a perverse Indian talent pool. Since of the Indian subcontinent at who has never travelled inversion, western compa- India’s economic liberalisa- independence in 1947. abroad, is now spending nies plunder graduates of tion began in 1991, many for- “The breakup of India is a Rs2m on a two-year graduate India’s most elite institu- eign companies have sent thorn in the side of the coun- programme – the second tions – who have been edu- overseas Indians, or their try’s ability to think strategi- year of which will take place cated at taxpayer expense. foreign-born children, to cally about what to do with at the UK’s Cranfield Univer- Even during the recent start operations, investment its people because it doesn’t sity. After he finishes his years of economic growth, funds, banks and other know how to define it’s peo- degree in clinical research, the number of Indians going enterprises in India. Many ple,’” says Anand Shah, his aim is to work in the UK abroad as unskilled or semi- Indian professionals living founder of Indicorps, which for several years and then killed labourers has surged overseas have also returned brings people of Indian ori- come home. from 199,000 a year in 1999, to start companies, or work gin, mostly from the US, to With a “UK-returned” internships in India. label, he feels he will easily India does seek to lure land a good job in what by Profile: Chanda Kochhar capital from its diaspora, then will be a large Indian granting them a variety of drug trial business. “Condi- Chanda Kochhar joined She joins a growing special investment privi- tions in India are improving ICICI Bank, India’s largest number of women at the leges. Non-resident Indians, day by day, but we can’t private sector institution, as top of India’s financial for example, are permitted to wait,” he says. a management trainee, and industry. hold foreign currency In seeking out better cut her teeth building its Others include Naina Lal accounts in India, which are opportunities, Mr Jakhar, then fledgling retail division. Kidwai, chief executive earn higher interest rates the son of a small business- This part of the bank later officer of HSBC in India; than they could earn at bank man from the northern town became its growth engine. Meera Sanyal, chief accounts at home. of Rotak, is following a path Now Ms Kochhar, 47, executive of ABN Amro; But Mr Shah says many trodden by tens of millions who was named as ICICI’s Kalpana Morparia, who people of Indian origin of Indians. chief executive in December, heads JPMorgan; and would like to do more to Since the British colonial faces the challenge of her Manisha Girotra, the help India tackle its chal- period – accelerating since life. Banks are in the grip of chairperson of UBS. lenges. independence – Indians have the downturn. JPMorgan’s head of “If the government made a streamed abroad in search of “The times are a bit more investment banking is serious effort to recognise education, jobs and opportu- challenging,” Ms Kochhar Vedika Bhandarkar, and that there are people that nities unavailable at home, said. “You need to Kotak Mahindra Bank’s have some sort of affinity to creating one of the world’s continuously monitor each head of investment banking India who would love the largest diasporas. and every part of your is Falguni Nayar. opportunity to share their Yet New Delhi retains an portfolio and keep Full profile at: www.ft.com expertise, or if they created ambivalent attitude towards calibrating actions to /indiaglobalisation2009 structured ways for people its massive diaspora. It pro- respond to the to contribute, you’d see a lot hibits dual citizenship, and environment.” Joe Leahy of people jump at the oppor- bars non-citizens from hold- tunity,” he says.
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