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    India now-vol-1-issue-02-june-july-2010 India now-vol-1-issue-02-june-july-2010 Document Transcript

    • EDITORIAL VOLUME 01 | ISSUE 02 | JUNE-JULY 2010 www.ibef.org EDITORIAL Editor: Anuradha Das Mathur Consulting Editor: Hemant KumarWinds of Change Managing Editor: Mahesh Ravi Copy Editor: Rohini BanerjeeA determined new breed of DESIGN Sr. Creative Director: Jayan K Narayananentrepreneurs leads Art Director: Binesh Sreedharan Associate Art Director: Anil VKthe charge. Manager Design: Chander Shekhar Sr. Visualisers: PC Anoop, Santosh Kushwaha Sr. Designers: Prasanth TR, Anil T & Suresh KumarT he manufacturing numbers of any economy are among the clearest indicators of its health. Manufacturing in India is showing the robust-ness it has so painstakingly built over the years. Chief Photographer: Subhojit Paul Photographer: Jiten Gandhi SALES & MARKETING From a little-known producer of semi-finished items many decades ago, VP Sales & Marketing: Naveen Chand SinghIndia has emerged as a serious manufacturer of high quality and globally National Manager-Events & Special Projects: Mahantesh Godicompetitive products. Industrial heavyweights from all over the world are Regional Manager (South): Vinodh Kmoving into India, setting up manufacturing hubs here to not only service Regional Manager (North): Lalit Arunthe sizable domestic market, but also the entire world. Indian companies Regional Manager (West): Sachin Mhashilkarare aggressively modernising and advancing in research and development, PRODUCTION & LOGISTICSbagging the prestigious Deming Awards, year after year. Sr. GM. Operations: Shivshankar M Hiremath Fifty years ago, India’s burgeoning population was seen as its heaviest Production Executive: Vilas Mhatreburden. Today, it has come to be understood as its greatest asset, whether as Logistics: MP Singh, Mohd. Ansari, Shashi Shekhar Singha high-power, youthful resource, or an ocean of a market for products and INDIA BRAND EQUITY FOUNDATIONservices. People make the difference – educated, inspired and enterprising. CEO: Aparna Dutt SharmaIf the last decade has been one of prolific growth, then the next one prom- Project Manager: Priya Sahai Shiraliises to be even more rewarding. More importantly, the growth is moving in step with prudent, sustain-able eco-consciousness. Entrepreneurs are saying: each of us affects theenvironment a little; each of us, therefore, must help keep it clean. A youngentrepreneur from Bangalore nurtured a dream and scaled mountains ofstruggle to give the world the all-green, world-renowned, commerciallysuccessful REVA. Rag pickers climb smoking hills of discarded plastic atDelhi’s landfills, and out comes a brand new material for European fash- India Now—Business and Economy is a bi-monthly magazine published andion’s high street. That’s recycling at its sustainable best. printed by India Brand Equity Foundation (IBEF), Gurgaon. It is published at 249- F, Sector-18, Udyog Vihar, Phase- IV, Gurgaon – 122015, Haryana and Admittedly, these are just local trickles, but not far from becoming a glob- printed at Silverpoint Press Pvt Ltd, D-107, TTC Industrial Area, Nerul, Navi Mumbai – 400706. The magazine is edited by Anuradha Das Mathur, Nine Dotal stream – the clear, gurgling stream of collective consciousness – more Nine Mediaworx Pvt Ltd., B-118 Sector 2 Noida – 201301, Uttar Pradesh. India Now—Business and Economy is for private circulation only. Material in thispowerful than the strongest wave ever recorded. publication may not be reproduced in any form without the written permission of IBEF. Editorial opinions expressed in the magazine are not necessarily those of IBEF and IBEF does not take responsibility for the advertising content, content obtained from third parties and views expressed by any independent author/ contributor. (India Brand Equity Foundation, c/o Confederation of Indian Industry, 249-F, Sector 18, Udyog Vihar Phase IV, Gurgaon 122 015, Haryana, India; Tel: 91-124-4014060-67; Fax: 91-124-4013873/75; Email:aparnadutt.sharma@ibef.org). Opinions expressed herein are of the authors and do not necessarily reflect any opinion of Nine Dot Nine Mediaworx Pvt Ltd., B-118 Sector 2 Noida – 201301, Uttar Pradesh, India; Tel: 91-120-4010-999; Fax: 91-120-4010-911; Email: info@9dot9.in HEMANT KUMAR www.ibef.org JUNE-JULY 2010 1
    • CONTENTS VOLUME 01 | ISSUE 02 J U N E - J U LY 2 0 1 0COV E R D E S I G N: SA M E E R K I S H O R 12 COVER STORY MNC WATCH 12 | Manufacturing A resurgent 10 | IN THE DRIVERS SEAT: HONDA INDIA Well-timed entry into the market economy, strong domestic demand with a bevy of world-class cars and greater investor confidence mean helps the Japanese auto giant move into cruise gear on India is poised to be one of the greatest Indian roads. manufacturing nations in the world. ARTS & CULTURE 42 | SCULPTURE: METALLIC SHEEN Delhi- based master sculptor Sumedh COPYRIGHT Published & printed by India Brand Equity Foundation (IBEF), 249- F, Sector-18, Udyog Vihar, Phase- IV, Gurgaon–122015, Haryana. India Rajendran transforms ordinary Please Recycle Now–Business and Economy is for private circulation only. Material in this scraps of metal, wood and tile This Magazine publication may not be reproduced in any form without the written permission And Remove Inserts Before of IBEF. into grand works of art. Recycling 2 JUNE-JULY 2010 www.ibef.org
    • 39 INDIA 21 39 | ELECTRIC GREEN A bright young Indian entrepreneurs electric car REVA is an idea whose time has come as Europeans take to it with zeal and commitment. INNOVATION CORNER 36 | THE NEW LIFE OF PI MIT alumnus Vishal Mehta of Ahmedabad develops an affordable new e-reader that rivals the best in the market. Now download and read e-books in a wide 12 20 range of Indian languages, from Assamese to Telugu.EMERGING ENTREPRENEURS REGULARS20 | Seeding Green 01 | EDITORIALInnovation is the buzzword for the new 04 |  ATIONAL ROUND-UP NIndian entrepreneur—the driving force 38 |  ICROFINANCE M 44 |  OURISM UPDATE Tbehind the country’s march to greener 46 |  OOKSHELF Bpastures. 48 |  URAL UPDATE RSECTORAL UPDATE 48 48 4824 | IT: 27 | TELECOM: 31 | BANKING: 34 | AVIATION:UPLOADED The second STRONG SIGNAL Brand GOOD BOOKS Clear CLEAR SKIES Steadywave of success is coming, and new technologies like 3G and focus and astute financial growth and rising investmentthe sector is gearing up for the ever-rising demand bode well planning help keep the Indian make India one of the worldschallenges and opportunities. for the Indian telecom sector. banking sector in robust health. fastest growing aviation markets. www.ibef.org JUNE-JULY 2010 3
    • VOICE OF A VISIONARY Unique number will be the foundation through which a citizenNational can claim her rightsROUND-UPA Smooth Takeoff. Some of India’s airports DATA BRIEFINGmake a big mark in the global aviation map asthe Airport Council International rates them.DELHIS INDIRA Gandhi International Airport has beenadjudged the “best improved airport” in the Asia-Pacif-ic region and has been rated the worlds fourth best the Baltimore airport in the US topped the list. Hyder- abad’s Rajiv Gandhi International Airport (RGIA) has been rated the worlds No 1 airport in the 1.5 10% GROWTH RATE PERairport in the 2.5 crore passengers (approx) category. crore passengers (approx) category. The Hyderabad Awards were announced recently by the Airport airport has also been voted as the fifth-best airport ANNUM WILLCouncil International, the apex body, which has 575 worldwide. RGIA is the second public-private partner- BE SEEN INmembers operating over 1,633 airports in 179 coun- ship venture among Indian airports, after the Cochin THE INDIANtries. The Council rated airports on 36 parameters International Airport. With one of the country’s lon- AVIATIONrelated to passenger amenities and infrastructure. gest runways (4,260 metres), the airport is designed to INDUSTRY INThe Indira Gandhi International Airport received the handle 1.2 crore passengers, more than 100,000 met- THE NEXT 20fourth-best airport award in the category of airports ric tonnes of cargo and 90,000 air traffic movementshandling 2.5 crore passenger traffic per annum while (ATM) per annum in the initial phase. YEARS.4 JUNE-JULY 2010 www.ibef.org
    • NAT I O NAL RO U N D - U P THEY DR. D. SAID IT SUBBARAO The Reserve Bank of India (RBI) Governor, D. Sub- barao, speaking at a recent conference held in Zurich, Switzerland, admitted that among components of capi- tal flows, India preferred long-term flows, to short-term ones, and non-debt flows to debt flows. “Our policy on equity flows has been quite liberal, and in sharp contrast to other EMEs (emerging market economies), which liberalised More power, roads. The country and then reversed the expects to add 20,359MW of power liberalisation when flows generation capacity in this fiscal. became volatile, our policy has THE PLANNING Commission has set targets to boost the countrys infrastructure been quite stable.” in this financial year, including adding 20,359 megawatt (MW) of power genera- —Dr. D. Subbarao, Governor, tion capacity and 2,500km of highways, deputy chairman Montek Singh Ahluwalia Reserve Bank of India was quoted as saying in the media. The Plan panel had set a 14,507MW target in 2009-10, while addition was 9,585MW. Similarly, the target for highways in the last fiscal was 3,165 km, while 2,008km was completed. India has an installed power capacity of about 160,000MW. The investment target for roads has been pegged at INR 35,680 crore (US$ 7.6 billion) in 2010-11, higher than INR 29,934 crore (US$ 6.4 billion) in the last fiscal, according to a report by the country’s premier news agency Press Trust of India. The actual investment that came into the sector in the last fiscal was INR 11,608 crore (US$ 2.5 billion). The country expects to increase its infrastructure spending in the next five-year plan (2012-17) to $500 billion. By 2007, it is supposed to be doubled again, to $1 trillion. Indias economy is expected to grow 8.5 per cent in the fiscal year that began April 1, after expanding 7.2 per cent in 2009 (provisional figure) making it the worlds second-fastest growing major economy, after China. UPDATE ON RESEARCH Greener Indian companies. India’s Tata Con- sultancy Services, Bharti Airtel and Suzlon En- ergy are among the global firms with high sus- tainable development standards, a report by Swiss lender Bank Sarasin showed. The study, conducted among 360 emerging market com-PHOTO: PHOTOS.COM panies, found that a third of these firms have a high rating in terms of sustainability. www.ibef.org JUNE-JULY 2010 5
    • NAT I O NAL RO U N D - U P SOUND BITES "Bench- mark- ing on a global scale is the only way to com- pete internationally. And to achieve this, Indian companies must have an export orientation."PHOTO: PHOTOS.COM -N.R. Narayana Murthy, Chief Men- tor, Infosys Technologies Limited IL&FS plans ‘long’ bonds. The "We have instrument will be similar to the US’ to be pre- Treasury Bond. pared for a three-digit increase. INFRASTRUCTURE Leasing & raise long-term fund through vide enough liquidity and an Financial Services will launch an instrument on the line of the exit route to the investors. These Crude oil prices are “long bonds” with a maturity period of 25 years, a move that US long bond for those projects which have residual conces- market makers will give two- ways quote for the instrument well above the $70- will set a new trend in the sion period of 25 years, IL&FS that will be listed on Indian mark… the petro- corporate bond market, said a chairman Ravi Parthasarthy was bourses. IL&FS will also be one report in the Economic Times. quoted as saying in the report. of the market makers. chemical industry The instrument will be simi- Long-term securities, such as Since there is no corporate will have to keep lar to the US’ Treasury Bonds long bonds with 25-year maturi- bond market in the country, the or long bond ties, are often company is looking at introduc- reinventing itself." with a maturity tough to sell. ing such instruments under the -Mukesh Ambani, Chairman, from 20-25 years and coupon IL&FS will Unlike the short- er-dated securi- prevailing guidelines, which will have enough liquidity so Reliance Industries Limited payment every raise INR ties, a bond with that investors even with short- six months like short duration 5 crore maturity period of 25 years or term funds can participate, the chairman was quoted as saying. "Talent treasury bonds. through this more appeals to IL&FS will raise around INR acquisi- The instrument, which will be route. It is a much smaller group of buyers 500 crores (US$ 107 billion) through this route. The com- tion, trans- rated by credit in talks with as it needs long- pany has already started discus- formation and rating agencies, will work on the investment term investors’ commitment, it sions with investment bankers, the report said. “The company management are model of the bankers. said. will appoint four investment critical anchors for erstwhile US-64 However, bankers including three foreign of the Unit Trust IL&FS is plan- banks and one domestic for the the growth of an of India, said the report in the ning to appoint at least two or proposed issue,” another com- Economic Times. even three market makers for pany official involved in the dis- industry." The company is planning to the instruments, who will pro- cussion was quoted as saying. -Nandan Nilekani, Chairman, UIDAI 6 JUNE-JULY 2010 www.ibef.org
    • NAT I O NAL RO U N D - U P UPDATES IT SERVICESINDUSTRYUPDATE Paris-based IT services and consulting firm Capgemini plans to hireIndia, US reach agreement. New Delhi more than 4,000 peoplecan tax 17.5 per cent of the profits earned by for its India operations PHOTO: PHOTOS.COM in this quarter. Its IndiaIndian units of the US companies in 2004-05. headcount stood at 23,353 INDIA has settled a disagreement over organisation. TP rules check an MNC at the end of March,taxing profits of captive Information from shifting profits out of India. The making India one of itsTechnology services units and research report added that Article 27 of the tax largest centres; its India Its Raining Jobs: French firmarms of US firms, bolstering New treaty between India and the US provides headcount grew by over Capgemini will be on the that a firm, which has suffered from a lookout for 4000 new facesDelhi’s position as a preferred destina- 5 per cent in January- for its India operations.tion of such investments, said a report potential double taxation, can seek relief March.in the Economic Times. through the competent authority under According to the report, the negotiated the mutual agreement procedure (MAP). The finance ministry planssettlement between the tax “Most multinationals to form a core group of tax 30%authorities of the two coun- view transfer pricing astries allows India to tax 17.5 a tug of war between tax officials for rolling outper cent of the profits earned authorities and a MAPby Indian subsidiaries of the OF PROFITS FROM resolution ensures that the GST by April next year.US companies in 2004-05. taxpayer does not sufferIndia had sought to tax 25 CAPTIVE IT SERVICE economic double taxation,”to 30 per cent of the profits. UNITS WOULD Vijay Iyer, partner at con- BOOK PREVIEW“This is a significant develop- sulting firm Ernst & Young, BE CUT FROM USment,” the daily quoted an was quoted as saying by the AWAKENINGofficial with the income-tax SUBSIDIARIES newspaper. GIANTS: FEETdepartment as saying. The Several multinational OF CLAYgovernment could gain about INR 400- companies have set up their IT and500 crore (US$ 107 million) in revenues, research facilities in the country Pranab Bardhan’s book focus-the report said. Though the transfer pric- thanks to the availability of high- es on the economic develop-ing (TP) settlement is binding only for quality technical manpower and low ment of India and China in term institutional and politi-transactions in 2004-05, this would serve labour costs. American companies the past quarter century. It cal-economic issues in theseas a reference point in future disputes, such as GE, IBM, Dell, Accenture, JP investigates the two coun- fast-growing economies.it added. TP refers to the valuation of Morgan and American Express have tries’ economic reforms and India release not announced.contributions by way of assets, services, large establishments in India, said composition of growth. It also PRINCETON UNIVERSITYand funds changing hands within an the report. puts the spotlight on long- PRESSSHARE TRACKER years entails a total invest- tions have been accepted byRoad regulator expects ment of INR 8 lakh crore (US$174 billion), of which the Centre, has also given its nod to NHAIs plan to awardto be debt-free. The market borrowings will be projects of 37,000 km. Theauthority plans to mobilise INR INR 1.2 lakh crore (US$25 bil- plans will be executed in five-40 billion in the current fiscal. lion), the Business Standard reported. NHAI chairman ing: “The government has six years." It quoted Dash as say-THE NATIONAL H i g h w a y s infrastructure bonds, term Brijeshwar Singh said the already given in-principle ing that NHAI expected toAuthority of India is plan- loans, and loans from mul- estimated size of borrowing clearance to the investment be debt-free by 2030-31 andning to use multiple instru- tilateral agencies, banks and would be INR 100-200 bil- plan. However, NHAI will added the authority, raisedments to raise funds. Plans financial institutions, said a lion annually for the next 15 have to seek its approval on about INR 14 billion (US$ 300include capital gains tax report. The planned construc- years. Nihar Ranjan Dash, a case to case basis. Besides, million) in 2009-10 throughexemption bonds, external tion of another 37,000km chief general manager, was the BK Chaturvedi Commit- capital gains tax exemptioncommercial borrowings, of roads over the next four quoted by the daily as say- tee, whose recommenda- bonds. www.ibef.org JUNE-JULY 2010 7
    • INDIA $ 14.2WATCH billion revenues from India’s 3G auction Area Population Male Female Population Density Urban Population 3,287,590 sq km 1.133 bn 600884425 523601762 359.14 340 millionKey performance ECONOMIC PROSPECTS FOR 2010indicators of the India’s Economic Outlook ProjectionIndian economy, with Fiscal Year 2007 2008 2009 2010patterns, trends and GDP Growth  CPI 9.40% 6.40% 7.30% 9.30% 5.40% 5.50% 7.20% 4.90%forecasts Source: Data taken on 7th May,2010 from RBI website Mean Probability Pattern of Real GDP Growth Forecasts45% For the year 2009-10, the40% forecast for agriculture has 2010-1135% been revised downwards from 3 per cent to 2.5 2009-1030% per cent. For the industry and services sectors,25% the forecasts have been20% revised upwards from 4.1 per cent to 4.8 per cent15% and from 7.5 per cent to 8.3 per cent, respectively Source: RBI10%5%0% Below 3 to 3.5 to 4 to 4.5 to 5 to 5.5 to 6 to 6.5 to 7 to 7.5 to 8 to 8.5 to 9 to 9.5 to 10 to 10.5 to 11% or 3% 3.4% 3.9% 4.4% 4.9% 5.4% 5.9% 6.4% 6.9% 7.4% 7.9% 8.4% 8.9% 9.4% 9.9% 10.4% 10.9% More Chart 1: Year-on-Year Growth IIP Chart 2: Year-on-Year Growth in Sectoral Indices20% 20%18%16% 15%14%12% 10%10% 8% 5% 6% Source: CSO Source: CSO 4% 2% 0% 0%-2% -5% 6 7 8 9 6 7 8 9 06 06 09 09 06 06 09 09 08 08 07 07 08 07 07 08 r-0 r-0 r-0 r-0 r-0 r-0 r-0 r-0 g- c- g- c- g- c- g- c- g- g- g- c- c- g- c- c- Ap Ap Ap Ap Ap Ap Ap Ap De De De De Au Au Au Au Au Au De De De De Au Au Mining Manufacturing Electricity8 JUNE-JULY 2010 www.ibef.org
    • I N D I A WATC HChart 3: Contribution to IIP Growth 4500 Chart 4: FDI & FII Inflowsin March 2010 400014% 350012% 3000 Electricity Non-Durables, 0.6% 0.8% 250010% Durables, 2000 FII8% 2.5% 15006% Manufacturing Intermediate 1000 FDI 12.1% 3.1% 5004% Source: CSO Capital, Source: RBI 0 4.2%2% 9 9 9 9 9 0 09 9 10 500 9 09 00 00 00 00 00 01 00 Mining 00 Basic, -20 -20 -20 y-2 g-2 p-2 v-2 c-2 b-2 t-2 r-2 0.8% 2.9% Jun Jan Jul0% Oc Ap Ma No De Au Se Fe Cash Reserve Ratio RBI Policy Rates 6 65.8 55.6 Cash Reserve 4 Repo Rate5.4 Ratio 3 Reverse5.2 Repo Rate 5 24.8 14.6 0 Source: RBI Source: RBI May-2009 June-2009 July-2009 Aug-2009 Sept-2009 Oct-2009 Nov-2009 Dec-2009 Jan-2010 Feb-2010 Mar-2010 April-2010 7, May-2010 May 2009 June 2009 July 2009 Aug 2009 Sept 2009 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 April 2010 7,May 2010 20 Manufactured Products Fuel Power Light & LubricantsMonthly trends in 15Wholesale Price Primary articlesIndex- monthly 10 All Commoditiesaverage (% change) 5 0 Source: RBI -5 Jan Feb Jan Feb 2008 - 09 2009 - 10STOCK MARKET CURRENCY EXCHANGE RATE Date BSE Sensex % Change S&P CNX NIFTY %Change Date INR/USD INR/GBP INR/JPY INR/EUR 1.12.09 17198 11.6 5122 12.2 Sep 09 48.82 79.73 53.39 71.03 4.01.10 17558 2.1 5232 2.1 Nov 09 46.74 77.54 52.40 69.64 Jan 10 46.18 74.60 50.55 65.96 1.02.10 16356 -6.8 4900 -6.4 Source: RBI Source: RBI Mar 10 45.50 68.53 50.25 61.80 2.03.10 16772 2.5 5017 2.3 May 10 45.08 68.09 48.23 58.75 www.ibef.org JUNE-JULY 2010 9
    • M N C WATC H HONDA SI E L CARS I ND IA LTD COMPANY DASHBOARD FIRST CAR IN INDIA: Honda City ESTABLISHED (IN INDIA): Dec 1995 EMPLOYEE STRENGTH: 3,394 associates SALES VOLUME: 61,185 (April 2009 to March 2010) MANUFACTURING UNITS: Greater Noida, UP, and Tapukara, RajasthanDRIVEN TOSUCCEEDThe journey so far has been smooth and Hondaknows that the road ahead is even better—consis-tent growth has led the company to invest more,and expand its service network. As the firm readiesto launch its first world-class concept car in India,its confidence shows. BY SHREYASI SINGH10 JUNE-JULY 2010 www.ibef.org
    • HONDA SI E L CARS I ND IA LTD M N C WATC HGG LOBAL AUTO giant Honda couldn’t have better of the Year. The model has won awards for its engine performance, timed its entry strategy to India. It’s an advantage they reliability and design.  have profitably leveraged, as the company is now the car Honda knows that the Indian car market will continue to grow. manufacturer of choice across several automobile seg- Right now, only eight in every 1,000 Indians own cars, as against 800ments. “The Indian automobile industry was at a growing stage when in every 1,000 Americans. While the numbers are good for compari-Honda entered India. We anticipated the growth prospects of the son, they also suggest that the American market is saturated, andindustry when there were not too many international brands available the potential for the growth of the Indian market is tremendous.for the Indian customer,” says Jnaneswar The cost competencies in India also makeSen, vice president (marketing), Honda Siel it a better investment option for companies.Cars India. “In fact, India has emerged as an automo- Honda Siel Cars India Limited (HSCI) tive hub and favourite investment destina-was incorporated in December 1995 as a tion for global automobile manufacturers,”joint venture between Honda Motor Com- says Sen. pany Limited, Japan, and Siel Limited, a The Indian market is also considered toSiddharth Shriram Group company, with be more stable than most parts of the world,a commitment to providing Honda’s latest showing profits, growth in figures and ris-passenger car models and technologies to ing sales even during the slowdown.Indian customers. Over the past decade- HSCI says this indicates that the funda-and-a-half, the company has made an mentals of their business are in shape here. investment of INR 2,4000 crore (US$527 Their journey has been a positive casemillion) in India. “Consistent growth has study for several companies who have simi-made us invest more, extend our product larly forayed into India.offering, and expand our service network Several European and American car man-here in India,” adds Sen.  ufacturers have followed Honda’s instinct HSCI set up its first unit at Greater Noida, INDIAN about the Indian market.UP, in 1997. Spread over 150 acres, the green-field AUTOMOBILE For them, Sen has some useful advice. “Indian customers are smart buyers andproject has a capacity of 100,000 cars. Itssecond plant at Tapukara, Rajasthan, went INDUSTRY WAS are aware of the new products and tech- nologies. We were able to capture theonline two years ago. Occupying 600 acre AT A GROWING mindset of evolving and discerning Indianof land, it has a capacity of 60,000 cars. Thecombined investment in the two projects STAGE WHEN customers and responded by offering our latest global products at regular intervalsexceeds INR 24,000 crore (US$5.2 billion).  Rising sales are driving the investment. HONDA to suit their requirements. We are com- mitted to introducing the latest technol-Last year, Honda sold nearly 62,000 cars, 18 ENTERED. WE ogy products for our Indian customers,per cent more than the previous year. Thecompany has a strong sales and distribu- ANTICIPATED and we take their feedback regularly to improve our customer-service levels.” tion network across 70 cities. From the newsmall car, Jazz, to the popular City, and THE GROWTH In fact, HSCI unveiled its new Small Concept Car at the Tenth Auto Expo in Newluxury sedans Civic and Accord, Honda has PROSPECTS OF Delhi, earlier this year. a car for every segment.    “We have introduced some of our best THE INDUSTRY Still being developed, the new car is the concept model of a small-sized vehicle,global products in the Indian market. Weentered the market with the Honda City, WHEN THERE especially for India and other emerg- ing nations. It is pegged to be a "truewhich became the best-selling sedan,” says WERE NOT Honda"—running on a futuristic designSen, adding that the sedan has definedthe company’s journey in India. Since its MANY CHOICES. with maximum cabin space. It is for the first time that Honda has chosen India forlaunch in 1998, the Honda City has main- —Jnaneswar Sen, the world premiere of a "concept car", intained its bestseller position in the premi- Vice President, Marketing, what is a clear indication of its continuingum car segment. It was 2009’s Indian Car Honda Siel Cars Limited confidence in the Indian market. www.ibef.org JUNE-JULY 2010 11
    • COVE R S TO RYThinkBigThinkSmart I Placing the ndia is one of the top 20 global powerhouses of manufacturing. It is easy to see why. customer first, Indian The right products and processes; an environment that promotes capital engineering; long history of manufacturing; a solid higher education sys- manufacturers are tem, and cheap and skilled manpower. Having grown at nearly seven per cent annually over the last decade,redefining processes, Indias manufacturing sector is now the 13th largest in the world, accord- harnessing their ing to a recent CII-BCG report. What’s more, the report predicts that India can jump to fourth place, if its assets grow, exports rise and the produc-workforce, and making tivity of labour increases in the next 15 years. By 2025, India’s assets would need to rise by almost INR 80 lakh crore (US$ 1.7 trillion) and exports, by India attractive for nearly 20 per cent, the report adds. It is easy to gauge why manufacturing is so integral to the Indian econo- global manufacturers my—half of all exports come from this sector that employs 12 per cent of the total workforce, and contributes 15 per cent to the nation’s GDP. and investors. The government has said that it will announce a national manufacturing BY DEBASIS SEN policy by August, this year. The right policy measures and the private sector’s credit growth can help the GDP rise by 9.5 per cent this year itself. This would mean producing many more manufacturing champions – increasing the number of companies and raising annual revenue. But the news is good so far. Indian manufacturers have been in an innova- tion mode—to raise operational efficiency, add new features and meet con- sumer needs. They have raised the quality bar for goods. Ravi Kant, Vice Chairman, Tata Motors, explains, “By lowering interest rates and improving the efficiency of capital markets, the government has turned www.ibef.org JUNE-JULY 2010 13
    • COVE R S TO RYIndia into an attractive business destination.Then, there are young entrepreneurs witha global vision and a growing middle-classwith more money to spend.” A LARGE AND GROWING DOMESTIC MARKET O ver 300 million Indians (63 million households) are expected to have a householdFrom local to global income of over $6,000 by 2015. India is experiencing a rapid growth in consumerOnce considered its weakness, India’s spending. The economic reforms since the early nineties have unleashed a newburgeoning population is now transform- entrepreneurial spirit, creating a vibrant economy supported by rising per capita income.ing into one of its greatest strengths. As The average Indian can adapt to global trends, thanks to rapidly-growing disposablea result, investors are eyeing India for its incomes and easily available consumer finance. This has created one of the world’sdemographic dividend. It is estimated that largest markets for manufactured goods and services.its employable population will rise by 70 per Growth in key sectors like infrastructure, services and manufacturing continues atcent by 2030, the highest such rise in the about 10-12 per cent per annum.world. More than 2.5 million graduates join The market for basic goods such as groceries and textiles is already large, driven byits workforce every year. By 2015, the num- the demands of an enormous population. Markets for other products are equally large,ber will touch 70 million, accelerating the and growing rapidly.transition from teeming millions to ready Over 225 million telephone subscribers, growing at more than 75 million per annum.resource. O  ver 8 million TV sets and 4 million refrigerators are sold annually and expected to An Investment Commission of India grow at 20 per cent per annum.report talks about a set of industries that will T  otal production of vehicles crossed 14 million (and more) in 2009-10, up from 2.3collectively boost growth and expand invest- million in 1998-99.ment opportunities by earning more than India has been ranked first by AT Kearney in a Global Retail Development Index180 billion dollars. The industries are: steel of 30 developing countries.and aluminium, textiles and garments, elec- —SOURCE: INVESTMENT COMMISSION OF INDIAtronic hardware, chemicals, automobiles,auto components, and gems and jewellery. Dilip Chenoy, CEO and MD, National pilgrimage to India is powered by the rise Today, it exports nearly 300,000 cars eachSkill Development Corporation, NSDC, of the Indian middle-class and the grow- year. Suzukis plant at Manesar, near Delhisays: “The time is ripe for us to become a ing economy. serves as its global hub for small cars. Nokiamanufacturing destination.” The stagnating auto markets of the US, uses its plant at Sriperumbudur in Tamil Global manufacturing giants like Nokia, Europe and Japan, have only accelerated the Nadu, to export mobile handsets to 50 coun-LG, Motorola, Samsung, Hyundai, Ford, pull. The preference is expected to continue, tries, though the MNC has nine factoriesSuzuki, GM, JCB and Caterpillar, ABB, Sch- as more companies taste success. Global located in Brazil and South Korea, too.neider, Honeywell and Siemens, have set up consultancy firm, Deloitte, says that by Recently, the chairperson and CEO of GE,shop here. Though they began with the idea 2020, at least one Indian company will be Jeffrey Immelt, announced the companysof servicing the local market, most found among the world’s top-six car makers. intention to enter the Indian market—bothfacilities strong enough to support and serve Hyundai Motors entered the India market for local consumption and export. “Notthe overseas markets. in 1996. It set up a plant near Chennai for surprising,” says NSDC’s Chenoy. “Indian In the automobile sector, the investors small cars. manufacturing will grow through a combi- nation of domestic demand and skill-driven A Credit Suisse export competitiveness,” he explains. If the trend continues, Americans may Group study predicts soon buy an SUV designed and built in India. Mahindra spent $120 million to that consumption design the Scorpio. The company now plans will continue to grow to launch a version of the four-cylinder, diesel-powered vehicle in the US, via a by 16 per cent for the partnership with Global Vehicles, USA. The company says that more than 300 dealers next two years, have already signed up to sell the vehicle. fuelled by the $1 The impetus will come from other quar- ters, too. Reliance Industries’ three-year trillion construction old Jamnagar complex combines a petro- leum refinery and petrochemical plants. It projects, nation-wide. manufactures a range of fuel from simple14 JUNE-JULY 2010 www.ibef.org
    • COVE R S TO RYpetrol to high-purity Aviation Turbine Fuel. up the demand for steel. A Credit Suisse already proved their mettle, and KanpurThe complex also produces plastics and Group study predicts that consumption will leads the charge. Though Kanpur is farfibre intermediates. continue to grow by 16 per cent for the next from any car making factory, a cluster of In the late seventies, Reliance began with two years, fuelled by the $1 trillion construc- 30 companies in that city manufacturestextiles. Over the years, it has pursued a tion projects, nation-wide. high-value and critical automobile compo-strategy of backward vertical integration Japanese tyremaker Bridgestone Corpora- nents for giants like GM, Toyota, Ford andin polyester, fibre intermediates, plastics, tion plans to invest nearly $37 million at Volkswagen, for their North American andpetrochemicals, petroleum refining, and its Indore manufacturing unit to produce European markets.oil and gas exploration and production. It is truck and bus radial products. Ford India’s “Earlier, even to make a dye we wouldnow a fully-integrated company, along the Chennai plant is meant to be “Ford’s global travel to Taiwan or South Korea. Now, entre-materials and energy value chain. low displacement engine” hub. The facility preneurs are making their own dye here,” “In the past six years, firms have restruc- will produce both petrol and diesel engines says R.K. Agrawal, Managing Director, Net-tured their manufacturing operations that will initially go into its small car—Figo. plast, one of the Kanpur cluster companies.and implemented world-class practices,” With an investment of $500 million, the Agrawal, a senior technical executive whoremarks Arindam Bhattacharya, Manag- plant would produce 200,000 cars and has worked in China and India, believes iting Director, Boston Consulting Group in 250,000 engines. Swiss company Holcim is all about “advantage India”. “The intel-India. “They have started building a globally plans to invest $1 billion in setting up three ligence, even at a workers level, is superior.competitive manufacturing base in phar- greenfield manufacturing plants in India in Democracy and economic liberalisationmaceuticals, auto components, cars and the next five years. have left their impact.”motorcycles.” Srithai Superware Pcl, Thailand, the Indias engagement with quality manu- Besides auto parts, telecom equipment world’s largest brand in melamine-ware, facturing began in the early nineties, afterand pharmaceuticals, India has the poten- plans to invest in four manufacturing the government did away with licences fortial to compete in skill-intensive industries. plants. Each will have a 3,000-tonne capac- producing goods and services. The liber-Think fabricated metal products, high-end ity and will require an investment of $8 alisation of the Indian economy after 1991chemicals, consumer electronics and com- million. opened more windows. The Confederationputer hardware. The fulcrum of manufac- The first plant would go online next year. of Indian Industry (CII) began to trainturing, however, is the engineering industry, With 10,000 designs and 3,000 shapes, auto-part vendors in quality management.standing at nearly $28 billion, five years ago. Srithai aims to capture a fifth of the INR Companies took the next step of inviting 1,200 crore (US$256 million) organised Japanese “quality gurus” to build processesBuilding capacity tableware market in India. in manufacturing units. Slowly, the just-in-Benefits of large capacities, which bring in time production method became a norm, aseconomies of scale, have caught the atten- Made in India companies saw its benefits.tion of Indian companies across categories. Indian auto parts manufacturers have The acceptance of international prac-Today, the automobile industry accounts for tices raised quality, and productivity. As a20 per cent of all goods manufactured. result, 30 Indian companies have received Indian auto Several home-grown manufacturers the Deming Award, often called thehave achieved global status. Hero Honda is Oscars of manufacturing. Interestingly,the world’s biggest maker of motorcycles;Moser Baer the second-largest maker of component many of these manufacturers are based in and around Chennai.optical discs in the world; United Spiritsnumber two manufacturer of alcoholic industry is Such “localisation of components” has reduced costs, especially of cars, being soldspirits and Tata Motors is the world’s fourth expected here. Grooming multiple vendors helped to doublelargest manufacturer of trucks. the industry bounce back after the recent Britannia recently increased its capacity global downturn. its currentby 60 per cent, implemented a long-term “Each of the half-a-million cars that Indiadistribution-manufacturing strategy and will export this year, is a high-quality vehicleput into place a continuous replenishmentsupply efficiency system. Improved supply income to built to exacting standards with more than 95 per cent components made in India,”chain management means stocks are nowrefilled within 24 hours, nearly doubling $40 billion says Surinder Kapur, Chairperson and Managing Director, Sona-Koyo, a maker oftheir nation-wide availability. Britanniaclaims that the strategy has saved the com- by 2015 steering assemblies. India is on its way to becoming the fourth-largest car exporterpany nearly $30 million. Rising demand in the automobile, white (ACMA). in Asia, overtaking China. Recently, Del- phi Automotive, operating in India for 14goods and infrastructure sectors is pushing years, invested over $200 million in a bid to www.ibef.org JUNE-JULY 2010 15
    • COVE R S TO RY 80%expand its range of localised products for The crispy chipthe local market. The semiconductor industry is also prim- The Indian auto component industry is ing up for growth. The government hasexpecting to double its current income to cleared 12 proposals under its $33 billionnearly $40 billion by 2015. According to the Special Incentive Package Scheme (SIPS)Automobile Component Manufacturers for the industry.Association (ACMA) of India, this signals The states are chipping in, too. Karnatakaan annual growth rate of almost 11 per cent has announced a comprehensive semicon-between 2008 and 2015. ductor policy, promising financial aid toInnovation drive of FDI companies in the electronics systems and semiconductor space. The policy aims toR&D and innovation have gained the between help start-up semiconductor units engaged 2000 & 2003respect they deserve. “We question every- in design and embedded software.thing, nothing is sacred,” says the opera- Semiconductor sales in India are mainly went to sixtional head of an auto-component manu- driven by telecom, automotive, industrialfacturing company based in Faridabad. electronics and consumer electronics.Continuous innovation has helped to pro-duce better goods and add features without states and one Solar and renewable energy and auto- mated healthcare services sectors, too, areraising the price substantially. Recently, Maruti Suzuki asked its 200-odd union territory. beginning to push demand and growth for semiconductor products. Utilisation ofvendors to cut component costs by three per fabrication units, less than 50 per cent acent, across the board. These vendors were is-the-limit attitude paid off. few months ago, has picked up. One of thesupplying nearly 80 per cent of the compo- Far-sighted companies utilised India’s biggest consumers of the chips, the wirelessnents to the company. The reduction saved pool of scientific talent that helped to de- handset market, is growing. The automotiveMaruti INR 700 crore (US$ 150 million) and automate, and locally design and procure sector is also showing an increased appetiteevery car buyer, nearly INR 7,000 (US$ 150). some of the more expensive aspects of for chips.Everyone is a winner. auto parts manufacturing. A BCG report This sector could also earn handsomely So far, the CII Institute of Quality has con- stated that such process engineering cut from the government’s decision to moder-ducted 10 batches of Six Sigma Black Belt capital costs of component plants by 40 to nise its armed forces and from WiMax, 3G,certification programmes, for more than 60 per cent. The ripple effect touched sev- DTH, medical electronics, photovoltaics and100 organisations. Companies are proactive eral multinationals. nanotechnology.about delighting customers and maintaining Today, India is a destination for global The Centre for Railway Informationmarket share. Last year, Britannia removed R&D investments. Close to 225 Fortune Systems is also planning to use a micro-8,500 tonnes of transfat from its biscuits, 500 companies have R&D centres in controller based chip technology, developedwithout any regulatory compulsion—the India, besides a host of government and by NXP Semiconductors, for its Automaticonly biscuit manufacturer in India to have privately-funded organisations. A Thom- Ticket Vending Machines.taken such a step. It also fortified half of its son Reuters study, “Global Research According to the India Semiconductorproducts with vitamins and micro-nutrients. Report: India” released last October, fore- Market Update, this sector will earn nearly Continuous technological upgrade is casts that within eight years, the countrys $8 billion this year, up from $6 billion, twobecoming quite the culture in the cement research productivity would be compa- years ago. The update is compiled by theindustry. Nearly 93 per cent of all the rable to most G8 nations. India Semiconductor Association and Frostcement is produced with the eco-friendly Sun Pharmaceuticals, one of India’s big- & Sullivan.dry-process technology. gest drug company by market capitalisation, Constant innovation and thrust on R&D will spend $70.24 million in R&D of low- Fast-track growthideally should enhance global competitive- cost versions of original drugs to be sold in According to a recent KPMG report on theness of the Indian manufacturing sector, the domestic and global markets. manufacturing sector, India is one of thebelieves Dayanidhi Maran, Union Minister Apollo Tyres is all set to make Chennai fastest-growing large economies in theof Textiles. its hub for manufacturing and R&D. It is world, representing an economic opportu- setting up a $432 million manufacturing nity on a massive scale.Brain power facility. India is one large part of a still largerAfter 1991, competition forced companies Larsen & Toubro reached a milestone in Asian story. The world’s economic centreto dump the culture of import-substitution the Indian power sector by establishing the of gravity is shifting-away from the estab-of products. A generation of savvy entrepre- country’s largest transmission line research lished, wealthy economies of Europe,neurs emerged, who looked at the future and testing centre at Kanchipuram (near Japan, and North America and towards thewithout the baggage of the past. Their sky- Chennai). emerging economies of China, India, and16 JUNE-JULY 2010 www.ibef.org
    • COVE R S TO RYthe states of South East Asia. This shiftis probably unstoppable. The establishedeconomies are high in costs, especially man- Maharashtraufacturing costs, and poor in population has attracted the largestresources. Great improvements in physicaland communication infrastructures and the amount ofdismantling of barriers to investment andtrade mean that economies like India andChina can now leverage their mobile andlow-cost labour pools on a global scale, says foreign directthe report. The result is Asian growth rates that are investmentnow and are anticipated to remain wellabove the global average. China has been among states.growing at 10 percent or more since thebeginning of the decade. India has grownat over five percent, expanding at over eight that India attracts. “If you are looking at and Mexico. “Top level skills are still cheappercent this year, and most likely the next. high volume and relatively low technology compared to their equivalents in Europe –Compare that to the European growth of manufacturing, China tends to be more and that includes managers with real inter-less than two per cent on a 10-year average, competitive,” says Khushoo. “But in lower- national experience,” says Suhas Kadlaskarand U.S. growth of around three per cent. volume manufacturing where technology of DaimlerChrysler. Kuldip Khushoo ofOn these trends China and India are antici- use is more intensive, then India is better,” Honeywell agrees, saying, “I have recentlypated to be the world’s two biggest econo- he says. Another foreign manufacturer with been involved in setting up high tech pro-mies by mid-century, the report adds. many decades’ experience in India agrees: duction lines in India, and it is really quite India is very competitive at low volume, cheap to get engineers in India, and theyAdvantage India high specification engineering work, which are good engineers – they still cost maybeMaking a comparison between India and is why businessmen are now talking about a half or a third of what they would inChina, the report quotes many commenta- using India as a global source point for Europe.”tors as saying they assume that China will these products.eventually be the world’s largest economy. Remuneration costs are also at the low Six states of successThis is not assured: half a century is a long end of the emerging economy scale, says According to the World Bank Investmentrace, and India has some advantages that the report. India is marginally more costly Climate Report 2004, a large part of theChina lacks. than China for most senior managers, recent foreign direct investment (FDI) India has changed, and fast. “If you had such as directors of HR and manufactur- in India has gone to the following statesasked me 15 years ago I would have said ing, and CFOs. But costs are significantly and one union territory: Delhi, Maharash-there was no hope for India, economically,” less in emerging economies, such as Brazil tra, Karnataka, Tamil Nadu, Gujarat, andthe report quotes Kuldip Khushoo, head of Andhra Pradesh and the union territory ofmanufacturing at Honeywell Automation Chandigarh. World Bank’s Investment Cli-India, as saying. “There were so many regu-lations and restrictions. But now there has “In lower volume mate Report 2004 said that over 80 per cent of FDI in 2000-2003 went to those states.been a sea change, a real opening up of theeconomy.” manufacturing, As the political hub of India, Delhi attracts representative offices from a wide range Will it be India or China to win the raceto dominate the world economy in the sec- where of businesses, although many have their main production plants elsewhere. Localond half of this century? Many assume it is technology industrial policy is to develop that trend: the use isChina, the economy that has been growing Delhi State Industrial Development Corpo-and drawing in manufacturing investment ration seeks to encourage more small–scaleat an astonishing pace for the last twodecades. But this is a long race, and India intensive, India investments to the territory, and does not usually approve large–scale investments.has several long-term advantages. Accord-ing to the CII, the average return on invest- is better.” High value-added small–scale manufactur- ing with a small environmental footprint isment in India is over 19 per cent, compared preferred. Delhi scores very highly on mostwith just over 14 per cent for China. That —Kuldip Khushoo, ease of doing business measures.higher return is a reflection of the higher Head of manufacturing, Gujarat is a relatively wealthy state andvalue-added manufacturing investment Honeywell Automation, India scores well on corporate perceptions of www.ibef.org JUNE-JULY 2010 17
    • COVE R S TO RYlabour regulation and on perceptions ofinfrastructure. It is seen by some corpora-tions as an attractive base that is close to THE NUMBERS LOOK GOOD IMumbai, the commercial centre of India, ndia has an advantage. Its working-age population will grow for the next 20but with significantly lower costs than years at least, while China’s is now declining. Demographics drive growth: overMaharashtra. the last century, the relationship between youthful populations and economic Maharashtra has attracted the largest growth has been clearly established. Population may put Indian growth well aheadamount of foreign investment by any state of China by mid-century, says a Goldman Sachs report. This exciting potential isin India since 1991, benefiting particularly closely linked to India’s remarkable demographic advantage. By 2020, India willfrom the historic status of its capital Mum- create the equivalent of the combined working population of France, Germany,bai as the country’s commercial hub with a Italy and the UK. Writing for BBC News, Kaushik Basu, Professor of economics,rich reserve of management, legal and tech- Cornell University, USA, had said many years ago, that by 2020, the average agenology services. Maharashtra is easily the of an Indian will be 29 years, compared to 37 for China and 48 for Japan. By 2030,most industrialised state in India, and the Indias dependency ratio should be just over 0.4, meaning there will be more peo-most urbanised and corporate perceptions ple in the 15 to 64 years working age group, than outside it.of labour regulation and infrastructuralobstacles are fair. State policy is to developtechnology industries in Mumbai—large- scores among the top six ‘high FDI’ states. to buying vehicles. India currently has onescale heavy manufacturing companies are It scores moderately well in terms of corpo- of the world’s lowest per capita passengeroften attracted to smaller cities such as rate perception on infrastructure and labour car ownership rates, with less than six carsPune, where capital grants and tax incen- regulation. Foreign investors have located per 1,000 people in 2004. The next 10 yearstives are higher, although Mumbai is the chemicals, textiles, and auto production in are likely to see the market grow dramati-biggest port city. Tamil Nadu—Hyundai and Ford, for exam- cally as consumers upgrade rapidly, accord- Karnataka’s capital, Bengaluru, is the ple, are now significant auto exporters from ing to the report.capital of India’s IT revolution. The state is their production plants in Chennai. Foreign manufacturers began a seriousan important educational centre in India And Nokia recently announced plans to move towards India in the 1990s, and many(with over 70 higher educational institutions set up a new manufacturing plant in the now operate as wholly owned subsidiar-devoted to technology, Karnataka produces a state. State policy is to build on these invest- ies, although many are joint ventures—forlarge proportion of engineering graduates). ments, with 10 per cent asset investment example, the biggest manufacturer of pas-However, infrastructure is under increasing subsidies available for particular industries, senger cars by market share (by volume),strain in Karnataka’s cities, especially Ben- including auto parts and pharmaceuticals. Maruti Udyog, is now wholly controlled bygaluru. The concentration of talent and the former JV partner Suzuki of Japan. Maruti,attraction of culture and climate in Bengal- Auto pilot with around 51 per cent of the market, isuru draw new investors to the city. The KPMG report clearly states that India followed by South Korea’s Hyundai (18 per Chandigarh is a geographically small is now the world’s fastest-growing large cent) and India’s Tata Motors (16 per cent).‘capital territory’ of less than a million market for passenger cars. India’s automo- The seven companies in the top 10 by mar-inhabitants, serving as the capital city of tive industry is in some ways typical of the ket share each have less than 3 percent ofPunjab and Haryana. It owes its position country’s industrial development. Automak- the market; only one, Hindustan Motors,in the list of ‘high FDI’ states to its attrac- ing has a long history in the country, longer is Indian (the others are Ford, Honda, Fiat,tiveness to service companies, especially than in many emerging economy competi- GM’s Opel, Toyota, and Skoda). However,financial institutions seeking to serve the tors—General Motors began assembling in commercial vehicles Indian companiesnorth-western states. Local industrial policy Chevrolets in India in 1928. The turning dominate: Toyota is the only foreign manu-is focused on attracting IT investment. point was the government’s decision in facturer that has a significant market share Andhra Pradesh scores relatively highly 2002 to lift all equity caps for foreign inves- in light commercial vehicles, while the truckin terms of investment attractiveness, tors in the sector. Other barriers to foreign market is overwhelmingly dominated byattracting a wide range of industrial invest- manufacturers have also fallen. “There are India’s Tata, adds the report.ments. The reason is that investors report hardly any important non-tax barriers now,” There are around 400 auto componentthat easier labour regulation and fewer says Suhas Kadlaskar of DaimlerChrysler. manufacturers, and a large proportioninfrastructure constraints make the state “Product certification for example is no lon- of them (some 40 per cent) are joint ven-investment friendly. Andhra Pradesh has ger much of a problem.” tures with foreign manufacturers. (Bosch,also benefited from a structured and tar- Disposable income is rising fast and, Ford, General Motors and a large range ofgeted investment policy, with capital subsi- according to research on consumption pat- Japanese manufacturers have joint venturedies and long-term indirect tax holidays for terns by Deutsche Bank, Indian consumers presences in India.) Indranil Chowdhury ofincoming industries. are more strongly predisposed than other Volvo believes that the component supplier Tamil Nadu, with an eastern seaboard, Asian consumers to commit rising incomes network is now well developed. “Whether18 JUNE-JULY 2010 www.ibef.org
    • COVE R S TO RYyou use it depends on your volume,” he invested in China promises a terrific return, approval mechanisms. Each zone will havesays. “We import a lot of components, but it is still only a promise. Investing in a combination of production units, publicbecause it is expensive to develop local part- India is justified in terms of a solid histori- utilities, logistics, environment protectionners for a low volume of components. But cal business case.” mechanisms, residential areas and adminis-the availability is there. The technology is tered services.there. It’s just a question of volume.” Government participation In April this year, while releasing the Auto components are increasingly export- The gradual removal of import licensing, "Strategy Paper on the Growth of Engi-ed from India by manufacturers, says Daim- reduced tariffs and liberalised exchange neering Exports" (commissioned by EEPClerChrysler. The company says, “We don’t rates have all contributed to a sustained India—a central department set up by theexport cars, but we do export components domestic consumption-led boom. The ministry of commerce—and carried out byback to Europe, and we have about a 15 per- focus on increasing manufacturing growth Ernst & Young) Union Minister of Com-cent cost advantage over European sourced through SEZs, private participation in ports merce and Industry Anand Sharma saidcomponents.” and massive investments in roads, is paying that engineering exports from India have The market overall is increasingly com- dividends. The growth of Indian manufac- grown considerably in the past few yearspetitive. turing has been driven primarily by domes- with a growth rate that has been higher than The biggest maker of passenger cars, tic consumption. While the services sector the world average. Sharma stated that theMaruti, has had to share the market in has grown at a rapid pace, the share of the paper has set a target of US$ 110 billion forrecent years with newer entrants. Indian manufacturing sector in the country’s GDP total engineering exports, to be met by 2014.competitors are offering a strong challenge has stagnated at 15 per cent. The govern- “This is a robust target. If the engineeringto foreign manufacturers: Tata, for example, ment proposes to create National Manufac- sector is able to maintain its share of nearlyhas developed a small car to be priced at turing and Investment Zones (NMIZ). 22 per cent in total exports by 2014, India’sINR 100,000 (US$ 2,136) less than half-the- They will provide infrastructure, a pro- total exports should be in the range of US$cost of the lowest-priced passenger car now gressive exit policy, structures to support 500 billion," he added.on the market. The auto sector is already clean and green technologies, appropriate “The global recession is likely to leave itsone of the most significant attractors of FDI investment incentives and business-friendly mark for some time more, particularly inin India, and competition is making it one the developed world, and hence it is impor-of the most fiercely contested markets, the tant that our exporters concentrate on tworeport adds. critical ingredients for growth: remain com- Says Indranil Chowdhury of Volvo: “The petitive and maintain quality, and secondlyauto industry in India has really matured. diversify into new markets. The strategyWe are very upbeat about India, because we paper, I hope, has enough inputs that mem-have been growing fast and we think we will bers of EEPC India can productively deploygo on growing fast.” and benefit from," Sharma added. In conclusion, the report says that over Sharma believes that the next decade isthe last 15 years India has changed much crucial for India’s future, as over half-a-faster than many predicted. billion young people will leverage its demo- The door to foreign investment is now graphic dividend. To emerge as the world’s The Delhiopen, and the ambition to make invest- leading manufacturing centre, focus willments work is tangible. have to be on attracting new technologies Mumbai The task of building an efficient economy such as green manufacturing and develop-remains an enormous one, but companies ing skills.agree that, whatever the faults in execution,India’s policymakers are moving in the Industrial Take the Delhi Mumbai Industrial Cor- ridor Development Project for instance—itright direction. “There is no problem withindustrial policy,” says Khuldip Khushoo of Corridor will generate significant economic activity along the dedicated rail freight corridorHoneywell. “Look at what the latest policydocuments say—they say we will dismantle Development between Delhi and Mumbai. It aims to dou- ble employment potential in seven years,the regulatory system, we will bring in tech- Project is treble industrial output and quadruple estimatednology, we will upgrade Indian industry." exports in nine years. “What has the invested dollar returned to In India, the tide is set to change withus in India, compared to say China?” asksPradipta Sen of Emerson India. “We have to cost $90 global players opting for the country as a destination for their manufacturing activi-been in India for 25 years, and 17 years inChina. Every dollar we have put into India billion. ties. And with stagnation in the US and European markets, any growth story cannothas earned a very good return. Every dollar be but linked with India’s story. www.ibef.org JUNE-JULY 2010 19
    • PHOTO: PHOTOS.COM E ME RGI NG E NTRE PRE NE URS GREEN BUSINESSES SEEDING Green Innovation is the buzzword for the new Indian entrepreneur— the driving force behind the country’s march to greener pastures. BY SHREYASI SINGH 20 JUNE-JULY 2010 www.ibef.org
    • GREEN BUSINESSES E ME RGING E NTRE PRE NE URS Probably in two more years, this field will mature and show profitability. Similarly, things are moving well in wind energy. The success of these industries also shows there is much more scope in industriesBy 2020, industry experts say that renewable that manufacture and supply to them. Backward integration is taking significant steps ahead,” explains Garg.  She adds thatenergy will be a nearly US$10 billion business in the government can help growth by initia-India. The size of the energy efficiency market is tives like instituting a body similar to the Technology Development Board, dedicatedsaid to be many times that number. to nurturing green technologies. Other industry observers agree, sayingAt a recent conference, Ajay Mathur, director- that the money coming into India is at thegeneral of the Bureau of Energy Efficiency, said deployment stage. They believe the huge untapped R&D potential will move afterIndias energy efficiency market was worth about the new technologies start getting traction with consumers.US$15 billion. “What’s also great is that from a clean tech perspective, this entrepreneurialThese numbers suggest India will be a five companies. In fact, the fund has already energy is a pan-India movement, thoughmajor player in green businesses, and exited from one of its portfolio companies, each industry does have its clusters. ForIndian companies will have to lead the eco- Luminous, with an unprecedented 42 per instance, there are more hydro projectsbrigade. The Bureau of Energy Efficiency cent return in the first year. Luminous man- in the north, and more innovations in biosays to deliver a sustained economic growth ufactures power inverters, solar inverters gas in central India,” continues Gupta.rate of 8 per cent to 9 per cent in the next and several packaged power products. Investors face another big challenge - to20 years and to meet lifetime energy needs “In the last two years, both consumers justly capture good ideas. There is a lot ofof  all citizens, India needs to treble, even and businesses have shown awareness of innovativeness in the rural areas, especiallyquadruple, its primary energy supply and being environmentally conscious,” says in off grid sectors, but reaching these is notincrease its power generation capacity by six Karan Gupta, Director, Breathe India Ven- always easy.times.   tures, a new $30 million venture capital But, with the grit and ingenuity many of Undoubtedly, India needs careful plan- fund for seeding green businesses. our green entrepreneurs have shown, it’llning and creativity to successfully execute “Workshops, conferences and investor be wise to expect even more phenomenalgreen business projects. Analysts say the events have doubled and tripled in the last growth in this powerful, emerging field.country has definite leadership potential in year. We have already processed 150 entre- We look at a few companies who symbol-greening the cement, paper, building and preneurs,” adds Gupta. He is especially ise this spirit.renewable energy sectors. This confidence bullish on small hydro electric projects andflows from the incredible entrepreneurial other off-grid energy generation ideas. Conserve Indiabuzz in this sector. Clever new ideas have “There is a bigger market for proven tech- It’s an unusual proposition but one thatmushroomed across industries like clean nologies rather than new ones. Earlier, defines global inter-connectedness. At a fac-technology, eco-tourism, green building these technologies probably did not man- tory in a crowded, industrial neighbourhoodmaterials, recycle/reuse technologies, age to mainstream themselves for lack of of Delhi, Shalabh and his wife, Anita Ahujasustainable agriculture, renewable energy support. Now, a strong government push craft a stylish range of clothes, carpets, foot-and water management.  “Every day, we get and availability of commercial capital have wear, bags and jewellery for a foreign clientelethree to four proposals,” says Poonam Garg, ensured there is a huge potential in the from a material they call “HRP” or HandmadeAssistant General Manager at IFCI Venture, off-grid sector.” Recycled Plastic.which launched the Green India Venture Niche areas are emerging, too, like fuel Shalabh and Anita’s company, ConserveFund in 2008 with a corpus of INR 330 cell technologies, off-petrol products and India, has developed an alternative recycling orcrore (US$ 70 million). “I have worked with eco-tourism. But investors believe the sun up-cycling process that converts discarded plas-IFCI Ventures for more than 15 years. But, has just risen. The Green India Venture tic bags into HRP. Conserve supports a moti-in the last year, that I have been focused on Fund says entrepreneurs were earlier cau- vated and well-trained team of rag pickers whothe Green India Venture Fund, I have seen tious about inviting investments, but in scour overflowing land fill sites for the refuse.great, great growth,” adds Garg.  the last six months specifically, there has The bags are then processed into recycled Since its launch, the fund has disbursed been a great thrust.  “For example, the sheets, using a process that is more energynearly INR 180 crore (US$ 38 million) to solar sector has received a lot of attention. efficient and ecofriendly than the conven- www.ibef.org JUNE-JULY 2010 21
    • E ME RGI NG E NTRE PRE NE URS GREEN BUSINESSES Company exemplifies recyclingtional recycling methods. spirit by They convert used polythene bags into"renewed" innovative material with sig- convertingnificantly different properties and greatvisual appeal, without using any colour or trash intodye. Founded in 1998 as a social mission treasure,to work in energy efficiency and wastemanagement, Conserve started making combatsHRP in 2002.  Products made out of HRP now grace waste andhigh street shelves across Europe, often poverty.retailing for as much as US$400. It’s a suc-cessful business model that delivers bothhigh fashion and life-giving opportunities. American, and Australasian markets.  sible. People do want to make the statementThe firm employs over 1000 people across This was partly a pragmatic choice. Sell- that they care about the environment.” Indiathree slums in Delhi using the ubiquitous ing abroad meant that we were in higher will soon be the third largest consumer ofplastic bag as an unlikely resource for value markets and could earn more from plastics in the world, and Conserve will keepincome generation. It uses its profits to our products,” say the co-founders. Sales weaving threads of success.run welfare projects in education, health abroad have validated this profitable gutand training of workers.    with a clear trend indicating that a “right- Ecomantra Conserve products sell in 2,500 retail fit” clientele is willing to pay more for fair- Ecomantra is a sustainable tourism venturestores in Europe, USA and Australia and the trade articles, thus delivering large profits promoting eco-friendly, activity-orientedfirm is also a New Ventures India portfolio for a low-cost process.   eco-holidays. company, which says, “the company exem- International buyers already demand a It was founded in 2001 by a group ofplifies the recycling spirit by converting higher volume of their existing products, and nature lovers and members of the Bombaytrash to treasure". NVI believes Conserves their product line can grow to other items Natural History Society.true value lies in the fact that by tackling the such as shower curtains and floor tiles.   They began with promoting eco-friendlydual problems of waste and poverty, it man- Conserve is also preparing to launch its home stays near Mumbai and Pune and con-ages to attract a captive audience of those first store in Delhi, staffed by many workers ducting eco-workshops in Mumbai. But soon,who buy "fashion with a conscience".   who started out as rag pickers. “Attitudes are Ecomantra was running an eco-camp, The “When we started the business side of starting to change in India. There is now an River Trails, in Kolad, Maharashtra where itConserve India we decided that our prod- understanding of the importance of preserv- conducts programmes on proactive learning.ucts would be a better fit in European, ing as much of the worlds resources as pos- Ecomantra has partnered with the local22 JUNE-JULY 2010 www.ibef.org
    • GREEN BUSINESSES E ME RGING E NTRE PRE NE URScommunity in Kolad to build, manage and with a German scientist to make solar meal demand will.” The company employs 75run the camp. “In fact, the idea for the camp makers won Solkar the Best Small Scale people and reported a combined turnovercame about in 2004 when we were invited Industry Award in 1996.  Such meal makers of a little more than INR 6 crore (US$ 1.3by a villager who owned a small piece of are only made in India. million), last year. They have manufacturedland,”  recalls Mahrukh Goel, a former  Solkar, however, has specialised in light- an affordable, innovative solar lamp namedadvertising professional who forms the ing, spanning a wide range of portable, Wonderlite. Solkar has partnered withnucleus of the firm along with her partner, indoor and outdoor products. In 2007, they ExNoRa, a Chennai-based NGO, for LightRavi. “Mahesh used to run a small boating launched a revolutionary LED Street Light, A Home, a programme that aims to donateoperation in the river next to his land, a priced at INR 10,000 (US$ 213). They also one million solar lamps to the poor.stunningly located 1.5 acre plot. But, he was sell all-solar fans, mobile phone chargers ExNoRas campaign aims to replace therunning into debt which is why he asked and  torch lights through more than 100 ageing and polluting kerosene lamps acrossus to take over his land and do something. dealers across India. Tamil Nadu.What emerged was a community tourism  An excited Raghunaathan says: “The mar-  “We need to create greater awareness,project,” adds Mahrukh. She says the camp ket has picked up only last year. Consumers funding solar pilot projects at schools andwas entirely constructed by local residents, are aware, the need is high and people can engineering colleges,” adds Raghunaathan.rendering a rustic look, and ensuring the afford it. I can finally see it taking off. Whatproject was low-impact and participative. It subsidy couldn’t all do those years, public Attero Recyclingis also Maharashtra’s first and only commu- Nitin and Rohan Gupta see business innity-owned campsite. waste. Founders of Attero Recycling, an inte- The adventure trail and customised itin- grated end-to-end electronic waste recyclingeraries for travellers, generate a turnover company, the Guptas have an eco-friendlyupwards of INR 1 crore ($10 million) for solution to e-waste.  Attero means waste inEcomantra.  “The mass tourist is not our Latin. The idea germinated three years ago,target audience. We only aim at the well when the brothers were struggling with try-educated, upper middle class. As a genu- ing to dispose of an old laptop. “We figuredinely eco-company, we can demand higher it was not only an environmental issue, buttariffs,” Mahrukh says. a viable business opportunity, too,” says Plans are afoot to grow to multiple sites, Nitin Gupta, an IIT Delhi graduate.and Ecomantra is looking to attract suitable  At Attero, e-waste is an importantequity partners to chart this growth. The resource. “E-Waste is a rich and cheaperfounders admit that raising funds is not source for metals. It contains precious met-going to be easy. Investors aren’t showing als like platinum, gold, palladium and silverthe same zeal for the business, but the capi- “e-Waste is a rich and base metals like copper, lead, tin, etc.tal should eventually trickle in. “Eco-tourismis growing rapidly, worldwide, but it is new source for metals, We extract all the precious and base met- als that we source from across the country,in India. The potential is very, very large.” such as platinum, and sell them in the commodities market at multi commodity exchange (MCX) rates,”Solkar gold, palladium and say the Guptas.  K.E. Raghunaathan personifies the spirit ofbrave entrepreneurship. He set up Solkar silver, and base  Now, Attero is the first e-waste recycler to be registered with the Central PollutionSolar Industry Ltd, in 1985, a time whenterms like renewable energy and green metals like copper, Control Board (CPCB) under the Ministry of Environment and Forests.business weren’t even coined. An engineer, and tin, which we Within months of setting up, Attero Raghunaathan has stayed true to what hecalls his passion. source, extract raised equity financing of nearly INR 25 crore (US$ 5.3 million) from Draper Fisher His company’s mission statement under-lines his belief: “to bring the sun closer to and sell at Jurvetson  and NEA-IUV.  Since computers carry hard drives andthe common man.” commodities drives carry data, Attero helps its clients  “Nobody would dare enter this industrythen,” says Raghunaathan. His journey market at MCX retrieve the files for security and privacy. India generated close to 440,000 tonnes ofbegan with manufacturing industrial solarwater heating systems. The first company rate.” e-waste in 2008. The volume of e-waste is rising at 20 per cent in India. This is mainlywith an ISI certification for this product, —Rohan Gupta, COO, because more people are buying electronicSolkar has installed nearly 45,000 sq feet of Attero Recycling goods, and are discarding them far soonersolar collectors, nationwide. Collaborating than before, adds Nitin. www.ibef.org JUNE-JULY 2010 23
    • FEATURES INSIDE Telecom: Booming business is ushering in a new digital mapping era Pg 27 SECTORAL Banking: Sector ushers inUPDATE a more liberalised time of transactions Pg 31 Aviation: Industry takes off to a strong start Pg 34 T he year 1996 had all the mak- ings of a grand success story. A few technology companies set up shop where the best talent was available to serve the best paying markets. It mattered not that the delivery centres were situated in India and the clients were thousands of miles away. The medium of delivery, the internet, had come of age, facilitating fast and reli- able data transfers. Infosys, Tata Consultan- cy Services and Wipro tasted success. Aditya Nath Jha, head of global branding, Infosys Technologies Ltd, observes, “Global delivery model sepa- “Small busi- rated talent nesses are centres from the markets seeing IT as without any a business loss of qual- ity in ser- driver.” vices, giving Ditarup Chakraborti, the Indian Principal Reaserch Assistant, IT industry Gartner an unmis-IT SECTOR takable edge.” The boom progressed unfet- tered until the economic meltdown of 2008.IT in India: Poised Fortunately, the slowdown turned out to be no more than a speed bump for India’s IT and ITeS sector. Governments in countriesfor take-off the sector across the globe moved fast to contain the impact of the recession, and before long, it was back to business for these industries.New and better reasons why IT @ Homeis feeling happy about its prospects. In the near future, the key opportunities in the domestic market lie in applicationBY CHARU BAHRI services, IT infrastructure management ser- vices, and IT consulting services. According24 JUNE-JULY 2010 www.ibef.org
    • IT S E C TO R AL U PDAT Eto Gartner, these services will benefit fromgreater IT spending by retail and utility The IT market in India, includingfirms and the government. The government and state-owned bod- computer hardware, software, ITies are outsourcing IT to improve internalefficiency. Government IT investments, services and telecom, will rise to aboutestimated at INR 15,000 crore (US$ 3.2 bil-lion) last year, are expected to touch INR $89 billion in 2013, posting a25,000 crore (US$ 5.3 billion) next year. TheNational e-Governance Plan is expected to compounded annual growth rate (CAGR)generate business opportunities worth astaggering US$9 billion. of 11 per cent from 2009. Significant opportunities are also envi-sioned in the small and medium business analytics and cloud computing, respectively) tion outsourcing. The spotlight is now on(SMB) sector where PC adoption is grow- into the market,” adds Chakraborti. business transformation and intelligenting at more than 30 per cent rate. Diptarup outsourcing. But the brightest star on theChakraborti, principal research analyst, Advantage ITeS horizon is possibly the domestic BPO mar-Gartner, observes, “Medium-sized busi- The Indian ITeS sector is coming of age. ket. It has grown at 35 per cent over the lastnesses made major investments in IT in the Low cost, favourable business environ- three years and is expected to open up anpast couple of years. And now it is the turn ment, an eager government and employable additional US$15 billion opportunity.of small businesses, which are increasingly English-speaking graduates have made “Till a few years ago, the domestic BPOseeing IT as a business driver instead of an India a "most preferred" off-shoring desti- was seen as a poor cousin of its offshoreoverhead expense. They are adopting tech- nation. But the industry would truly come counterpart. Not any more, as the globalnology in a big way, in a move to improve of age when its employees progress beyond meltdown and growing domestic markettheir productivity to compete with the local taking calls and performing data-entry jobs. have led to a significant paradigm shift.and increasingly global competition.” And that time is now. The Indian business Opportunities are emerging in retail, health- The Gartner Hype Cycle for information processing outsourcing (BPO) industry is care, automobiles, financial services andand communication technology (ICT) in also expanding its voice and data processing telecom. It’s because MNCs are planningIndia 2009 forecasts that the SMB sec- units. expansion in India without compromisingtor will lead a new wave of investment in The ITeS sector is expanding on multiple on quality, and Indian companies are eagerenterprise resources planning (ERP). The fronts. Companies are now moving from to provide the local consumer a global expe-GHC evaluates technologies and trends that performing repetitive jobs to decision- rience,” notes Vaidya.IT leaders should consider as they develop making tasks. This movement up the valueemerging-technology portfolios. chain has spawned offshoot industries Prevailing in the long run Looking for tactical cost saving and out- employing higher calibre engineers, lawyers Expansion in the scope of services of theput raising measures, companies will push and business graduates. ITeS industry is healthy. However, operat-green IT-solutions that lower energy loads Ashutosh Vaidya, head, Wipro BPO, calls ing an outsourcing centre in the metrosand improve IT infrastructure utilisation. this the "third wave" in outsourcing. While is rapidly becoming costlier. Also, East“At the same time, business intelligence the first two waves focussed on standardi- European and South Asian nations aresolutions and Software as a Service, may sation, labour arbitrage, and process and waking up to the lure of the BPO, raisinggain momentum if vendors push newer operational excellence, the third wave marks pertinent questions about the sustainedand better versions of these tools (advanced the shift from process outsourcing to func- growth of these centres of success. Essen- tially, what would it take India to retain its first-mover advantage? To get a sense of how high the stakes are, Nasscom forecasts that if India maintains its current share of DOMESTIC DATASHEET the market, IT-ITeS exports from India will Domestic IT services market in India Estimated CAGR of key sectors in the exceed US$330 billion by 2020. Currently, Estimated to grow to $12.8 billion in 2013 domestic IT market (2008 to 2013) exports stand at US$47 billion. To reduce from $5.7 billion in 2008-09, representing a its dependence on the US market alone, the Applications services – 19.6 per cent. compound annual growth rate (CAGR) of sector is attracting clients in Australia and T infrastructure management I the Middle East. But that is not enough. If 18.6 per cent from 2008 to 2013 services – 18.1 per cent. the sector is to prevail, it must improve its (Springboard Research-200) IT consulting services – 16.4 per cent. cost competitiveness and productivity. Real estate prices in and around IT hubs in the www.ibef.org JUNE-JULY 2010 25
    • metros are touching the roof. The indus- SHINING BRIGHTIT Global Power try, therefore, must look beyond the cities. Frontrunner ITeS sectors According to Mohammad Saif, deputy  omestic BPO market growing at 33.3 per cent D director (consulting-ICT practice), Frost (IDC India)US$ 60 Billion Industry &Sullivan (South Asia and Middle East), Animation industry growing at 30 per cent “India’s immediate focus should be estab-2 Million People lishing and running BPOs in its Tier-2 and Engineering services outsourcing sector likely to275 Fortune 500 Clients grow at 26 per cent Tier-3 cities, to gain from the lower costs of real estate and employment.” According to Raju Bhatnagar, vice president, government ITeS sector needs to focus on making the relations, Nasscom the move to such cities internal ecosystem employable and produc- will significantly lower wages and attrition tive,” adds Saif. rates and bring more loyal employees. In Simultaneously, “India Inc. needs to fact, he goes so far as to suggest that BPOs breakdown barriers restricting the sourcing in the smaller cities may emerge as the next of talent and expertise,” says Rajesh Nam- big thing on the ITeS landscape, with the biar, general manager, IBM (global delivery). governments support. “There is no doubt that India has superior IT capability in its talented professionals Developing a talent pool and cutting edge skills. But, we will only be Training is expensive. Why? Because the able to keep up the momentum if we accept industry is still a bit disconnected from the the fact that global integration paves the educational institutions. “It may sound way forward. This means having a global clichéd, but to retain its competitive advan- footprint for talent and expertise and sourc- tage, India needs to produce more and ing it from where it makes most sense,” he more committed doctorates of high calibre,” explains. observes Bhatnagar. He also says that both the industry and the government need to Government initiatives invest in relevant education. "IT companies As two of the fastest growing industries, IT engaged in R&D need individuals of high and ITeS have immense potential to take calibre focused on innovation. They should the Indian economy to the next level. The have a design mindset as opposed to a pro- government has responded keenly with a cess driven, mechanical outlook,” says L. number of helpful measures. There is no Ravichandran, COO, Tech Mahindra. “The excise or customs duty on specified capital goods and raw materials for electronics and IT companies IT hardware. The government has allowed 100 per cent foreign direct investment (FDI) engaged in in data processing, software development and computer consultancy services, software R&D need supply services, business and manage- ment consultancy services, market research individuals of services, and technical testing and analysis services. Is it enough? Bhatnagar sees more high calibre room for measures to simplify the tax admin- istration procedures. “The direct tax code focused on is a step in this direction, but the approach, on some aspects of it, needs to be reviewed. innovation. The time is also ripe to revisit archaic labour laws about hiring women for shift duties,” They should he adds. “Special economic zones (SEZs) are have the design still not within the reach of smaller compa- nies,” says Ravichandran. He’d also like the mindset to be software technology parks of India (STPI) benefit to be extended beyond March 2011 better. and more tax concessions to those who set up R & D laboratories and suites.
    • TELECOM S E C TO R AL U PDAT EGood tidings sector and healthcare and as geographies domestic IT-ITeS market will grow at a rateIT continues to be one of the sunshine sectors including Brazil, Russia, China and Japan opt of 15 per cent in 2010, to achieve a revenueof the Indian economy, showing rapid growth for greater outsourcing. worth US$ 26.4 billion, compared to US$23and promise. And the outlook is good, in fact, The revenue from the domestic software billion last year. Indians have been using ITquite promising, for the years to come, too. and services market is estimated to have services for more than 20 years. According to a McKinsey report prepared grown from US$ 2.6 billion in 2001-02 to A lot has changed during this time andfor Nasscom, the exports component of the US$ 12.4 billion in 2008-09, according to the market has gradually transformed fromindustry will reach US$ 175 billion in revenue the Department of Information Technology. facility management services to a process-by 2020. The report is entitled "Perspective According to Nasscoms strategic review, oriented delivery model.2020: Transform Business, Transform India". the domestic IT-BPO revenues are expected After the initial delivery of onsite man-The domestic component, too, will contribute to grow at almost 8.5 per cent to reach US$ aged services, the market started to trans-US$ 50 billion in revenue by 2020. Together, 42.3 billion this year. Market intelligence form to a hybrid of offsite services deliverythe export and domestic markets are likely to firm IDC Indias "Domestic ICT Market- either through Remote Infrastructure Man-bring in US$ 225 billion in revenue, as new Top Predictions 2010" report released in agement (RIM), or a combination of RIMopportunities emerge in areas such as public January this year, states that the combined services and onsite delivery. TELECOM SECTOR Strong signals from the telecom sector Business communication is slowly but steadily pick- ing up in the Subcontinent. BY AMAN SHUKLAI ndia will soon be Asia Pacific military and Indian Railways. Most region’s third-largest pro- such manufacturers are in the pub- ducer of telecom equipment, lic sector. after giants China and South The Indian telecommunications Korea. A Gartner research industry is one of the fastest grow-survey states that India has a 5.7 per ing in the world and India is pro-cent share of the region’s market. jected to become the second-largestLast year’s revenue was US$180 bil- telecom market, globally. Onelion, placing the country fourth in gets a sense of how the industry isthe list. But by 2014, the revenue will growing, by leaps and bounds, by IMAGING: SURESH KUMARtouch US$300 billion, pushing India studying the following figures fromup to third place, with a market share the Telecom Regulatory Authorityof 8.5 per cent. of India (TRAI): in just one month, While growing, the industry will from November to December 2009,consume twice the quantity of semi- the number of telecom subscribersconductors between now and 2014, in the country increased by moresays the report. Indian manufac- than 1.9 crore.turers of telecom equipment currently use semiconductors worth The telecom industry notched up US$ 8.56 billion in revenuesUS$2.6 billion. The jump in the consumption will be the highest in during the quarter that ended on December 31, 2009, helped by athe Apac region, adds the report. recovery in earnings from both mobile and landline services. A large share of the Indian production relates to assembling According to Business Monitor International, India is currentlyimported devices and producing standard equipment for the adding 0.1 crore mobile subscribers every month. It is estimated www.ibef.org JUNE-JULY 2010 27
    • S E C TO R AL U PDAT E TELECOMthat by mid 2012, around half the countryspopulation will own a mobile phone. Thiswould translate into 6.12 crore mobile sub- “By the end of 2010, there willscribers, accounting for a tele-density ofaround 51 per cent by 2012. According to a be three million devices thatstudy conducted by Nokia, the communica- will have Navteq application intions sector is expected to emerge as the singlelargest component of the countrys gross India.”domestic product with 15.4 per cent by 2014. —Richard E. Shuman, Senior Vice President, Navteq The Indian equipment market was esti-mated at US$ 24 billion in FY09. Nokia isthe market leader, with over US$3.4 billion Indian market and their maps are already part, receive only soft loans at low interestrevenues in 2008-09, followed by Ericsson at available in Nokia, Samsung and LG mobile rates. According to research, indigenousUS$2.11 billion. phone sets. manufacturing and R&D is limited, because With the availability of the 3G spectrum, "By end of 2010, there will be three mil- R&D cost is also limited.about 2.75 crore Indian subscribers will use lion (and more) devices that will have But to change this, the Centre set up a3G-enabled services, and the number of Navteq applications in India,” confirmed committee, headed by K. Sridhara, a former3G-enabled handsets will reach close to 3.95 Richard E. Shuman, senior vice president member (technology) of the telecom com-crore by 2013-end, estimates a recent report (sales-Asia Pacific), Navteq. He added that mission. The committee gave macro-levelby Evalueserve (a knowledge processing the number was slated to grow. Currently, guidelines to the DoT to enhance indigenouscentre). the company has a manufacturing and R&D manufacturing and R&D capabilities in June unit in Mumbai that employs around 1,300 2009. DoT secretary P.J. Thomas formedIndian consumers take the people. It plans to increase its head count to another committee in September 2009 thatdigi-map route 1,600 by 2010 end. Recently, the company made recommendations enhancing theSmartphones account for only 4 per cent also announced a “2010 NAVTEQ Global manufacturing base and R&D, developingof the nearly 10 crore mobile phones sold LBS Challenge” aimed at selecting location- interception and monitoring technologies.in India, each year. These are GPS-enabled based applications—the company received Another new panel, headed by DoT advisersets that support digital maps. Still, four 500-odd applications based around fitness (technology), D.K. Agarwal, also submitted amillion smartphones is not a small number, and tracking services, enterprise solutions, report to Thomas in April 2010.and that is why multinational GPS compa- location-based advertising and mobile Some of the recommendations by thenies are now entering India’s coordinates couponing, social networking, navigation, panel and internal committee are as followsinto their travel and business itineraries. search and news services. DoT will forward latest report to cabinetMore Indians are travelling and driving secretariat, from where it will be discussedcars, pushing the market for mobile GPS DoT boost for telecom within the government before becoming adevices and maps. Recognising the current changes, the policy. Earlier, the industry—characterised by department of telecommunications (DoT) DoT would seek opinion from the Tele-strict norms and security concerns, and is taking action—it has recommended the com Regulatory Authority of India on pro-plagued by a general lack of public aware- rationalisation of taxes, creation of specific posals before they become law.ness—was in a poor state. Now, growing manufacturing zones and a corpus of INR DoT’s internal committee recommends 0%consumer demands have made 5,000 crore (US$ 1.1 billion) that taxes on core telecom equipment (madethe phone vertical into one of the to boost manufacturing and in India) should be 5 per cent less than inmost aggressive markets. While research (R&D). According competing economiesin the US, the auto sector drove to DoT estimates, the global The panel has also suggested a 5 per centthe digital navigation market, in telecom equipment industry tax reimbursement to service providers whoIndia, mobile phones are doing INTEREST IS CHARGED is estimated at US$200 bil- buy equipment from Indian manufacturers.the trick. Though digital map- ON LOANS GRANTED lion per annum. Of which the As for the INR 5,000 crore (US$ 1.1ping is at its infancy here, in a requirement in India alone is billion)corpus, the panel has suggested BY THE CHINESEfew years it is slated to change slated to reach INR 5 lakh crore creating it by levying a 2 per cent R&D andthe manner in which India GOVERNMENT (US$ 107 billion) mark by 2015. manufacturing cess on the adjusted grossnavigates. Case in point; sale However, there is more that may revenue (AGR) of telecom service provid-of MapmyIndia navigators has be done for the sector. Chinese ers which would be borne by the users.increased exponentially—figures companies are backed by their The corpus would provide a line of credit toare expected to hit the 100,000-unit mark by government. They receive loans at zero per equipment makers at a 5 per cent interest tothe end of 2010. cent interest and support in terms of dealer- be repaid in four installments starting from Navteq is slated to make its foray into the supplier networks. Indian firms, on their the third year.28 JUNE-JULY 2010 www.ibef.org
    • TELECOM S E C TO R AL U PDAT E Another recommendation from DoT plans to push greener features across its the same amount of money, though theiris the creation of telecom manufacturing product line in the next two years. Ericsson administrative costs have gone up thanks tozones equipped with infrastructure and has launched its wind-powered radio base the “growth paradox in telecom”. The focusfacilities initially owned by the government station (RBS) site solution in India, offering is on breaking through the constant level ofand given on lease. It can have the option construction and maintenance costs. Idea is 400 minutes per user, as operators wrestleof buying the facility from the government using bio-diesel in some of its base stations with fast-changing technology and explosiveafter 10 years at the market price. on a pilot basis. Aircel Cellular has already scale of growth in network connectivity. The The panel suggested that these firms deployed solutions, which include solar sys- next step: rural expansion.should not be subjected to existing labour tems, micro-wind turbines, adoption of free Manoranjan Mohapatra, CEO, Comviva,laws, except those concerning health and cooling methods and energy audit. believes that India will be the pioneer insafety and provident fund rules so that mak- telecom managed services. It can even growers treat their staff like any other contract- Future of managed services to be a US$400 million business by 2014.based employee. In recent years in India, managed services Mohapatra predicts a bright future for man- It also suggested introducing a mecha- have turned into a fast-growing, US$16- aged services as operators seek to drive rev-nism of skill certification and developing an billion industry attracting operators from enues and expand customer base, breakingIndian standard for telecom equipment. across the world and providing services, the paradox of falling per user revenue. And finally, to extend credit to foreign cus- such as network build—including planning Now, companies and executives aretomers if they buy equipment from Indian and design—field operations, network oper- intending to adopt managed service model,manufacturers by requesting the central ation centre (NOC) operations, application rather than strategic outsourcing. Profes-bank of India, Reserve Bank of India (RBI), and service development, and billing. sionals believe that it will be convenient toto frame guidelines for banks. According to research conducted by For- use managed services, as by doing so, they rester, managed services industry in India will have access to the best of services with-Telecom turns green will be an US$8.7-billion industry by 2013, out losing IT control.Telecoms firms are increasingly looking at with a total CAGR of 19 per cent. A latest The market for enterprise networkingenergy-efficient and recyclable products in industry report also states that almost 40 per equipment in India is estimated to growIndia, as companies try to save on energy cent of Indian businesses outsource their from US$1 billion (2008) to US$1.7 bil-costs, and consumers check labels for infrastructure managed services. lion by 2012, according to a Springboardenvironmental credentials. By going green, In the past two years, customers may Research study—"Epicenter of Growth-companies aim to reduce costs and create have doubled (from 300 million to 600 Indian Enterprise Networking Equipmenta sustainable environment. In addition to million), but average revenue per user has Market Report". The Centre is planning tothis, emergence of tariff wars has dented halved from Rs 280 (US$ 6) to Rs 140 (US$ connect the villages in a big way, too. In thethe profitability of the mightiest. It has gen- 3). Now, telecom operators are making next two years, it will add nearly 160 millionerated a wave reducing costs and improving connections in the villages, taking rural tele-financials. Efficient power management density to 40 per cent.holds the key to improving financials, since A Department of Telecom communiqueenergy expenses constitutes nearly 25 per recently spoke of taking high-speed fibrecent of the total network operating costs. connections to a quarter-of-a-million villagesEquipment vendors such as Ericsson, tower by 2012.companies including Bharti Infratel andnetwork services provider, GTL, are invest- More M&As in 2010ing in bringing out green products and solu- In 2010, experts predict that the sector willtions to cut operators’ expenditures. witness quite a few mergers and acquisitions Anup Changaroth, director, Nortel Net- (M&As) that will permanently change marketworks, says that initiatives towards energy dynamics especially the service delivery, cov-efficiency make sense due to the impact of erage, pace of roll out and tariffs sectors.climbing oil prices. “Typically, commercial Banking, financial Though 2009 witnessed an addition ofbenefits that result from producing energy-efficient equipment supersede the costs services and insurance new subscribers and lower tariffs, the com- petition affected the financial health of thethat go into it,” Changaroth explains, add-ing that his company’s chips are 30 to 40 (BFSI) firms are the majority of telecom companies, such as RCOM, Airtel, Idea, MTNL and Tata. Also,per cent more efficient than those from theprevious generation. biggest contributers telecom stocks did not perform as well as expected. Sony Ericsson unveiled two models thatuse less packaging, more recycled materials to the managed As a result, it affected the confidence of both institutional and retail investors. Thisand consume less energy. The company has services market. compelled TRAI to revise its M&A guide- www.ibef.org JUNE-JULY 2010 29
    • lines. The body is considering waiving 3G: A new dawnof the three-year restriction imposed on India is gearing up for the launch of the 3G,mergers since April 2008. Thus, the num- or “Third Generation” technology. Auctionsber of operators, expected to rise from 8 have seen nine operators vie for 22 circlesper circle in 2008, could either revert to the available—with cities like Mumbai and Neworiginal number or shrink further, depend- Delhi, and states such as Karnataka anding on the M&A norms that TRAI eventu- Maharashtra, being the most sought after.ally supports. After 23 rounds of auctions, the Centre is 10% It is expected that some of the already richer by approximatelyfore-runners, such as Loop, Data- INR 60,000 crore (US$ 12.8 bil-com, Swan or Etisalat, Unitech or lion).Telenor and STel, that have global The technology possessesranking as well, could be soft tar- the potential of keeping people OF ALL NETWORKgets, since they currently occupy a connected at all times. It offerslow market share. USERS IN NORTH enhanced multimedia applica- However, pan-India incum- AMERICA AVAIL tions and internet at a minimumbents, expected to play a predatory speed of 2Mbps (a bandwith 3G NETWORKrole, could do less than what is measurement) and a maximumexpected of them. SERVICES, SAYS of 14.4Mbps. Video conferenc- One of the key features of CDMA ing and live TV are thrown in,Indian telecom operators is that too.all large player are multi-product and multi- The next launch would be of the 4G andservice companies, though the revenue is a WiMax technology, with the Centre alreadymajor contributor in their top line. The only announcing plans for 4G auctions.exception is Bharti Airtel—for which the tele- If we take a look at 3Gs acceptance in othercom sector is the core offering. parts of the world, it has not been “strongly” Seeing the market dynamics, it is expected successful. Even in Europe, 2G remains a pre-that there will be more acquisitions and ferred medium.takeovers, than mergers, since some entities According to code division multiplepost-merger have not done as well as hoped. accesss (CDMA) Development Group- 2009 report, North America has around 135-million users, and only 10 per cent of 3G network users avail the service. ThisThe country is is after nine years of implementation.gearing up for the The reason behind the cautious use of 3G technology could be high tariff rates.launch of the In India, the trial launch of 3G by BSNL in 2009 saw 700,000 customers in eight3G, or “Third months. Indias majority remains cost conscious—and this is where 3G mightGeneration” face its biggest challenge. The cost doesnt end with its licence alone. The infrastruc-technology ture expense is higher, resulting in higher tariff and internet rates. Users also need toThe technology upgrade phones. Even with 2.5G technology, GPRS andpossesses MMS were not entirely successful. Benefits were better voice quality and emergencythe potential of net access.keeping people MMS was welcomed, but it lost its advan- tage after a while. For the time being, theconnected at all service does not seem suitable for all income groups. And for those who can actuallytimes. afford it, will they prefer to wait for the better technology?
    • BANKING S E C TO R AL U PDAT E BANKING & FINANCE Infra finance firms get a leg-up RBI encourges non-banking financial companies to boost infrastructure spending. BY ULLEKH NP bank. Rajiv Lall, chief executive officer and managing director at IDFC, was quoted as saying in the Indian Express newspa- per: “There will be a lot of interest from infrastructure companies following RBI’s modification in terms of ECBs. We will also be taking the ECB route to raise funds in the next few months. This step will help us lengthen the maturity profile and also diver- sify our base.” Under existing ECB norms, funds can be raised in overseas markets at a maximum rate of the global benchmark interest rate—Libor plus 200 bps (basis points) if loan is for three years, up to 300 bps if debt is for five years and 500 bps if it is above five years. The central bank said that all the other aspects of ECB policy such as US$500 million limit per company per financial year under the automatic route, eligibleI borrower, recognised lender, end-use, aver- n a bid to enhance the flow of funds into the core, the central age maturity period, prepayment, refinancing of existing ECB and bank of the country, Reserve Bank of India (RBI), has allowed reporting arrangements would remain unchanged. non-banking financial companies (NBFCs), categorised as The infrastructure segment includes power, telecom, railways, infrastructure finance companies (IFCs), to raise money from roads, bridges, sea ports and airports, industrial parks, urban infra- overseas through the automatic route. structure (water supply, sanitation and sewage projects), mining, IFCs in the country can now raise external commercial borrow- exploration and refining. In March, the central bank allowed compa-ings (ECBs) up to 50 per cent of their owned funds automatically. So nies setting up cold-storage facilities to raise funds abroad, therebyfar, they could do so only under the approval route. “As a measure giving such projects infrastructure status.of liberalisation of the existing procedures, it has been decided to RBI had, in its April monetary policy, relaxed some norms forpermit the IFCs to avail of ECBs, including the outstanding ECBs, infrastructure lending to meet the growing need for more funds.up to 50 per cent of their owned funds under the automatic route, It had noted that rights, licences and authorisations of borrowers,subject to their compliance with the prudential guidelines already in charged to banks as collateral in project loans, including infrastruc-place. ECBs by IFCs above 50 per cent of their owned funds would ture loans, were eligible to be recognised as tangible securities.require the approval of RBI and will, therefore, be considered under However, since toll collection rights and annuities offer some mate-the approval route,” RBI said in a recent notification. rial benefits to lenders, the bank had proposed that such annuities The RBI move is significant as the country aims to double its under the build-operate-transfer model be treated as tangible securi-infrastructure spending to US$1 trillion during the 12th Plan (2012- ties subject to the banks’ right to receive them.17) period from the current Plan level. For safeguards such as escrow accounts with regard to infra- Infrastructure companies have welcomed this move by the central structure lending, RBI had also proposed that infrastructure loan www.ibef.org JUNE-JULY 2010 31
    • S E C TO R AL U PDAT E BANKINGaccounts classified as substandard wouldattract provisioning of 15 per cent instead of There has been a lot of interest from20 per cent. However, this would be subjectto banks having an appropriate mechanism infrastructure companies following RBIsto escrow the cash flows as well as a clearand legal first claim on such cash flows, it modification in terms of ECBs. RBI ishad said. taking the ECB route to raise funds. ThisGreek crisis won’t hurt much,but RBI cautious step will help lengthen the maturity profileMonetary stimulus measures in India won’tend anytime soon, due to the debt crisis in and also diversify RBI base.Greece and other parts of Europe. The RBI has indicated that it won’t exitthe easy monetary stance in the wake of short-run, so there is a risk of short-term vul- Greek crisis is much smaller in scale andthe crisis in Greece which, experts fear, nerability of capital outflows,” Gokarn said. magnitude to what the world has seen in themay spread to other European countries, The Business Standard newspaper also last one-and-a-half years,” Chawla added.besides triggering short-term volatility in quoted him as saying that the market isIndian markets. somewhat nervous as no one is certain Financial inclusion: SBI RBI, in its annual policy statement about which country would get mired in announces plansreleased in April, had hiked its key two poli- a debt crisis after Greece. It is well known State Bank of India (SBI) wants to extendcy rates—the repo rate and the reverse repo that there are similar debt-related concerns its footprint to 11,943 unbanked villagesrate—and in the cash reserve ratio, as part about Portugal and Spain. with a population of at least 2,000 thisof its move to gradually withdraw monetary He said that the longer-term impact of financial year, according to a report. Thestimulus measures it had put in place over the Greece debt crisis will not be as severe country’s largest lender recently submit-the past two years to help companies ride as the global financial turmoil. “We are ted its plan to RBI.out the bad times. getting more and more comfort from the RBI had asked all Indian banks to submit “With the uncertainty in the market, RBI global economy, notwithstanding Greece,” their plans on financial inclusion, dulymay not prefer to withdraw the support at he added. approved by their respective boards. Thethis stage. The calibrated withdrawal of the Gokarn added that the central bank did central bank also wanted to know the cover-stimulus may be reviewed,” Abhijit Sen, not expect any pressure on liquidity in age plan for unbanked villages, said a reportChief Financial Officer, Citibank, was quot- the April-September period despite high in the Business Standard.ed as saying by the Press Trust of India. government borrowings. “We are watching Out of 6,00,000 villages in the country, However, the long-term impact of the the developments very closely and manage about 64,000 villages with a population ofcrisis may not be severe, Reserve Bank of liquidity in a non-disruptive manner.” more than 2,000 are deprived of a formalIndia’s deputy governor Subir Gokarn has When asked if capital outflows could lead banking channel.said. While there could be capital outflows to the strengthening of the dollar, Gokarn The proposed target for SBI shouldn’t befrom emerging markets, India as a rela- said, “There could be a strengthening of the difficult as the bank has already extendedtively stronger market, may not face severe dollar against all other currencies.” banking facilities to 1,00,000 villages, thateffects, he said. European policymakers have unveiled a were unbanked before, said the report. “Though India is in a stronger position loan package worth almost US$1 trillion to It added that, according to the plan sub-among the emerging markets, we cannot contain the Greek debt crisis. “It will be rea- mitted to the central bank, SBI will openrule out net capital outflows,” Gokarn said. sonable to say the long-term impact is not branches in 512 villages, while the rest will“We might see some volatility. Every time going to be severe, as some solution will be be covered by business correspondentsthere is some development somewhere, the found out,” Gokarn added. (BCs). The state-owned lender will startimmediate reaction of the investors is to On his part, finance secretary Ashok charging customers who are accessingmove to safe havens,” he said. Chawla was far more optimistic about the banking facilities in the unbanked villages In the last week of April, Standard & impact of the debt crisis in Greece. “As far through the BC model, a senior officialPoor’s cut Greece’s credit rating to junk as India is concerned, the impact on us will from the bank was quoted as saying.status, and reduced Portugal’s rating, too, be minimal. In fact, in the short run, that is, RBI has allowed banks to charge suchwhich led to a plunge in stock markets purely in the short run, it might help us in customers.across the world. terms of India being regarded as a relatively The report in the daily also said that other “There may be some nervousness among safe haven,” Chawla said. public sector banks are also gearing up forinvestors worldwide which may provoke capi- “We were immune when there was a much the expanded financial inclusion project andtal outflows from emerging markets in the larger international financial crisis. The have submitted their plans to RBI. Bank of32 JUNE-JULY 2010 www.ibef.org
    • BANKING S E C TO R AL U PDAT EIndia is planning to extend banking services crore (US$ 1.1 billion). The lender also “We are adding muscle to our existingto 7,000 such villages in the next three years, expects to raise share of retail lending in its strength,” believes Somak Ghosh, Yesof which 2,100 will be covered before March loan book to 30 per cent, from 10 per cent Bank’s co-founder and group president for31, 2011. now, he said. In the March quarter, the bank corporate finance and development bank- Bank of Baroda will be extending services posted a 75 per cent fall in net profit. Profit ing.to 3,000 unbanked villages, with a popula- fell to INR 5.6 crore (US$ 1.2 million) main- In the report where he was quoted,tion of more than 2,000 in the current year. ly on the account of higher capital expendi- Ghosh said Yes Bank doesn’t want to com- Union Bank of India also aims to pro- ture investment in people, technology and pete with HDFC, ICICI or the Axis banks.vide banking facilities at least once a week infrastructure. "The bank spent INR 190 “By 2015, we would like to be number fourto 4,500 villages having more than 2,000 crore (US$ 40 million) between January and in the private banking space,” he said.people. In addition, it will spread banking March, a rise from the INR 110 crore (US$ The bank plans to focus on its proposedservices to 2,500 "un-banked" villages, over 23.5 million) that it spent a year ago, on retail and SME business. In a five-year periodand above the plan that has been submitted recruiting people, setting up branches and spanning 2010-2015, it plans to achieve a 40to RBI. technology," Kabra said. Its net interest mar- per cent share for retail and SME businesses gin for the quarter was at 2.7 per cent, up from of its total lending, the report said.SBI is the ‘strongest bank’ in Asia 2.5 per cent, while the gross non-performing The bank is targetting a business mixState Bank of India has won the prestigious asset ratio was down to 1.54 per cent, from of INR 1.5 lakh crore (US$ 321 billion) byAsian Banker Achievement Award for being 1.99 per cent a year ago. The lenders capital March 2015 from INR 22,800 crore (US$the strongest bank in Asia Pacific region, adequacy was at 12.47 per cent, according to 4.9 billion) now. “We plan to grow at ainstituted by the Qatar Financial Centre the Basel-II norms. 35 per cent compounded rate in the nextAuthority and the Asian Banker magazine, a five years and we think it’s achievable,”Press Trust of India report said. Yes Bank wants to be No 4 Ghosh told the daily. It plans to launch It said that the award is in recognition of Yes Bank said it aims to be the No. 4 private personal loans and credit cards, too. ItSBI’s combination of financial performance sector lender in the country by 2015, after typically caters to the richer segment andand key business improvements, making ICICI Bank, HDFC Bank and Axis Bank, a is expected to continue with this strategy,it the region’s strongest bank with strong report has stated. the report added. The bank, which cur-and steady income growth rates of 29 per The report in Economic Times stated that to rently has 140 branches, plans to take thecent, 14 per cent and 28 per cent for the past achieve this goal, the private bank has modi- figure to 750 by March 2015.three years. fied its corporate philosophy and chalked Already the largest bank in the world’s out plans to enter the retail and SME (small Kotak Mahindra eyes CitiFinancialsecond-fastest growing large economy, the and medium enterprises) business segment Mid-sized private sector lender Kotak Mahin-state-owned lender has attracted customers for the first time to boost volumes. dra Bank is in talks with Citigroup to buy theand talent from the private sector and other U.S. bank’s consumer finance business in thestate-owned banks, as well as market share in country, according to a news report.deposits and loans, the award citation said. Kotak Mahindra is conducting due diligence on CitiFinancial, which givesDhanalaxmi Bank to raise home and personal loans to retail borrow-funds via QIP ers in the low income segment, the MintPrivate-sector lender Dhanalaxmi Bank (an Indian newspaper) reported, citingplans to raise (approx) INR 400 crore (US$ an investment banker it didnt name. A85 million) via a qualified institutional Kotak Mahindra official told the Mint thatplacement to fund loan growth in 2010-11, talks between the banks were “currently at aaccording to an agency report. very, very preliminary stage” and “general” The board approved issue of about 2.1 in nature.million shares to institutional investors by Kotak Mahindra Bank, with an asset baseSeptember 2010 to augment the tier I capi- India aims to double of INR 37,439 crore (US$ 8 billion), has 249tal base, Bipin Kabra, chief financial officer,Dhanalaxmi Bank, told Reuters. “We have its infrastructure branches across 145 locations and 492 auto- mated teller machines. CitiFinancial hasthe board approval and will start the processfor the issue by applying before RBI for spending to $1 trillion been tackling bad loans and loss since 2007, the report added. The losses largely accruedapproval,” he was quoted as saying by theagency. during the 12th Plan due to higher delinquencies in unsecured personal loans. CitiFinancial reported a net The report added the bank is expectingloans to grow 70 per cent in the current period (2012-17) from loss of INR 729 crore (US$ 15.6 billion) in fiscal 2009 against a profit of INR 19 croreyear, Kabra said. The loan book is INR 5,000 the current Plan period. (US$ 4.5 million) in 2008. www.ibef.org JUNE-JULY 2010 33
    • S E C TO R AL U PDAT E AV I AT I O N AVIATION Cruising Altitude India’s aviation industry is off to a good start. BY HEMANT KUMAR By then, the industry would have grown at more than eight per cent per year. Robust economic growth, higher dis- posable incomes, and growth in tour- ism and business travel, are the major demand drivers. The long-term poten- tial of the industry is immense and experts say they expect strong growth in demand over the next few years as the growth drivers fall into place. According to estimates, the demand for domestic air travel is expected to grow at above 25 per cent for the next five years. The authoritative Centre for Asia Pacific Aviation (CAPA) has predicted that domestic traffic will grow at 25 to 30 per cent per year, till the end of this year. This will push the numbers up to more than 70 million passengers. Aircraft manufacturer Boeing has raised its 20-year market forecast for Indian commercial aircraft purchases to US$86 billion, from US$72 billion for last year. International aircraft manufactur- ers, Boeing and Airbus, are buoyantW about the potential and opportunity hen you compare operating revenues, India in the Indian aviation space. In addition, with the fleet expansion accounts for just a little more than one per plans of non-scheduled airline operators, small aircraft manufac- cent of the half-a-trillion dollar global aviation turers are also expected to garner aircraft orders from the Indian industry. Still, it is one of the fastest growing air taxi players. aviation markets in the world. The growingmiddle class and its purchasing power, ever lower airfares, the tour- Competitive scenarioism boom and a growing economy have fuelled the take off. Not Naturally, therefore, the industry is consolidating. From a fragment-long ago, aviation was an entirely government-owned industry. Now, ed sector with more than 10 players, the industry now has just threeprivately owned companies own nearly three-fourths of the Indian major players, with a combined market share of 80 per cent. Expertsaviation market. believe consolidation will help the industry to increase passenger India is rapidly upgrading and modernising its airports spend- yield and match demand.ing an estimated US$9 billion. A lot of it was accelerated by the Passenger numbers are rising, across the board. The demand forforthcoming Commonwealth Games. Analysts believe that much of airline service or passenger travel depends upon demand for busi-this sector’s growth will come from the regional distribution of pas- ness and leisure travel. Increased economic activity is directly linkedsengers and the steadily rising international traffic. India is also one to the demand for business travel, while rising incomes are pushingof the fastest growing tourism destinations of the world. The World up the demand for leisure travel.Travel and Tourism Council has estimated that Indias tourism econ- Delhi and Mumbai alone generate half of all air traffic in theomy will emerge as the world’s third fastest growing over 2007- 16. country. With passenger boarding expected to double by 2025,34 JUNE-JULY 2010 www.ibef.org
    • AV I AT I O N S E C TO R AL U PDAT Eand aircraft operations expected to tripleby the same time, the number of passen- With low-cost airlines leading, the aviationgers traveling by air is on rise. Domesticair traffic will touch 180 million passen- industry has emerged from a two-yeargers per year, while international traffic period of challenges in 2009. It recorded 8 per cent growthwill exceed 80 million, according to aCAPA report, in association with SITA.Today less than 2 per cent of Indians fly in an in air trafficany given year. Indias domestic air travelmarket is currently just 20 per cent of in 2009. Domestic airlines flew nearly 45that of China. In order to meet predictedgrowth over the next 10 years, airlines million passengers last year.will need to invest US$120 billion in newaircraft and another US$20 billon in theairport sector, says the report. will be of great importance as the industry thrust on capacity expansion. This trend responds to the growing needs and expecta- has led aircraft manufacturers Boeing andRevving IT up tion of Indian travellers. The report also Airbus to project that they will sell almostKapil Kaul, CAPA CEO, South Asia says, "In notes the sea-change that has swept the 1,000 new aircraft to India over the nextterms of the drivers for investment in IT, industry since 2003 with the arrival of the twenty years, says the report.the survey element of the report found that first low-cost carriers; dramatic reforms The report quotes industry analysts as say-the airport sector is primarily concerned such as an open domestic skies policy; the ing that they feel the potential for regionalwith compliance and efficiency measures, introduction of airport modernisation with jets is substantial in India. Having identi-aimed at reducing costs." the privatisation of Delhi and Mumbai air- fied this big opportunity fairly early, leading According to Kaul, "There is less empha- ports; and the upgrading of 35 non-metro manufacturers of small aircraft, Bombardiersis on deploying technology as a point of airports and greenfield developments. and Embraer, have made forays into thedifferentiation or to enhance the customer The report identifies sales taxation on Indian aviation market.experience to raise revenue. However, the aviation turbine fuel as the most pressingfeedback indicates that mobile technolo- cost issue for Indian carriers, and with with- Low ceiling, high returnsgies, self-service kiosks and biometrics will holding tax on aircraft leases and service tax With low-cost airlines leading, the aviationbe key areas of investment in the future for on first and business class fares. Congestion industry has emerged from an almost two-airports. We also found that airlines appear at airports, on the ground and in the air, and year period of challenges. It recorded a near-to be further advanced than airports in their shortage of skilled personnel are also areas ly eight per cent growth in air traffic overembrace of technology as a strategic tool that need to be addressed, the report says. the previous year. According to the Director-rather than a support mechanism." ate General of Civil Aviation, domestic air- 80 Airlines believe that self-ser- The growth story lines flew nearly 45 million passengers lastvice options are the best way to It has been generally observed year, up from 41 million in 2008.enhance customer convenience, that air transport grows twice According to the Deloitte-CII report onby deploying products such as as much as the GDP, says a the Indian aviation industry, the factorskiosks for lost baggage report- Deloitte-CII report on India’s contributing to the air traffic growth can be MILLION ANDing, flight disruption manage- aviation industry. In India’s case, broadly classified into economic and policyment, flight transfers, bag drop MORE INDIANS the report says, air traffic has factors.and automated boarding gates. WILL AVAIL grown because of the entry of The report sums up the matter as follows: Low-cost carriers (LCCs) are low cost carriers, higher house- “The aviation sector in India has been trans- INTERNATIONALmore aggressive than full service hold incomes, economic growth, formed into a more open, liberal and invest-airlines in using IT to drive their FLIGHTS BY 2025. increased foreign direct invest- ment friendly sector since 2004."business. LCCs investment in ment (FDI), surging tourist The estimated growth rate of over 20 per-IT is more strategic in nature, as they  do inflow, increased cargo movement, strong cent has attracted global attention and inter-not regard IT as mere support functions, business growth and supporting govern- est. There has been an exponential growthunlike full service or legacy carriers. They ment policies. in air traffic aided by the high growth in thetherefore, display a greater level of readiness The growth of Indian aviation has number of passengers flying. The entry ofto adopt newer solutions that both redefine thrown up many lucrative business oppor- low cost carriers has changed the face of thisthe customer experience and cut costs. tunities, especially since the recent global sector, creating a large new market. Still, The report highlights five technologies economic downturn. In that light, the the fact that only one percent of the total- mobile devices, Web 2.0, Near Field Com- role of developing economies like India population flies, indicates the enormousmunications, RFID and biometrics—that assumes greater significance with their untapped potential of the market. www.ibef.org JUNE-JULY 2010 35
    • I N N O VA T I O N C O R N E R PiPHOTO: PHOTOS.COM THE NEW Bright Indian entrepreneur LIFE OF Pi develops sleek e-reader. BY HEMANT KUMAR 36 JUNE-JULY 2010 www.ibef.org
    • Pi I N N O VA T I O N C O R N E RV ishal Mehta is bright. He has to be—he studied operations Mehta says he plans to market research at Cornell and manage- ment at MIT. He worked with Pi not just over his website, but Dell and Amazon.com. Then whydid he toss a promising career and travel to educational institutions andall the way to Ahmedabad? To pursue hisdream, he says on his website. governments, as well. Having being Website? What website? Three years ago,he launched a retail website called infibeam. an exceptionally bright student, hecom that records four million hits a month,selling everything from books to mobile understands the value of a bookphones to motorcycles. But what’s got himin the news is something else—he has reader that can hold all the booksdeveloped an electronic book reader calledPi, just like Amazon’s Kindle or Sony’s you will ever need...e-book Reader. All right, now settle downwith a cool-cool shake and something to some bright-eyed whiz kids with restless headphones. The device doesn’t comemunch. What would you like to read? Sleek fingertips, this innovation will turn into bundled with free paperbacks, especially theand handy, the device fits into the palm of serious competition for the heavyweights— new releases. You will still need to buy themyour hand and holds more page-turners Amazon and Sony. online. But there are millions of free booksthan the average bookshop. Seven inches Pi does not have WiFi, internet, Bluetooth available on the internet. You can read forlong and a little less than five inches wide, or infrared. Essentially, you download the free, books whose copyright has expired.the half-inch thick and all-Indian Pi weighs e-books and other files using your computer Project Gutenberg (www.gutenberg.org) itselflike a standard paperback. It supports 18 and its internet, and then transfer the files has a catalogue of 30,000 such books thatIndian languages, and, of course, English. to Pi using a USB connector. That’s a little include classics and text books. You can also "Unlike most readers on the market, cumbersome, especially since Kindle has visit Mehta’s website to buy the books youPi supports local Indian languages,” said spoiled the consumer with 3G wireless and want.Vishal Mehta in a telephone interview. other goodies. But then, the price tag is Having been an exceptionally bright stu- The well-designed Pi is a pretty smart attractive—much less than Kindle. dent himself, Mehta understands the valuereader. You can obviously turn pages “Our price is US$214 (INR10,000), all of a book reader than can hold, say, all thebackward and forward, jump to any page, inclusive. Sony Reader may be US$200, books you will ever need for medical schoolincrease and decrease font size and book- but tax and shipping will take it up to nearly or management classes, whether you are amark a page. You can even rotate the screen US$385 (INR 18,000),” added Mehta, com- student or a teacher. The launch of Pi hasto switch between portrait and landscape paring Pi to the competitive touch-screen established beyond doubt that Vishal Mehtaviews. And if Sony product. Pi is not just bright. He is smart, too. Piyou’d like to take supports a range of But he has to hurry and innovate evena break from the file formats like pdf, more rapidly. Sony’s website announcesintense pages of epub, html, text, that the 6-inch e-book, Reader, is nowMaurier’s Rebecca, mobi (a domain) priced at US$200, and it has a touch SMART READERyou can play some and doc files. With screen, too. Amazon’s Kindle is stillrefreshing Sudoku WITH 6-INCH, an internal memory priced higher, at US$260. But it has 3Gusing function BLACK AND WHITE, of 512 megabyte wireless and text-to-speech support, evenand navigation (MB) and an SD- if experimental. What’s more, they are 600X800 PIXELkeys. It might take card slot expandable both giants, with billions at their dis-some learning but E-INK DISPLAY to 4 gigabyte (GB), posal. “Pi is simple to use and you willyou’ll get there. Pi has enough room find that it has superior reading clarity. Its six-inch, for thousands of With touch screen, reading clarity mayblack and white Eink display is crystal clear. books. A standard ebook, without pictures, be compromised. Pi also has easy-to-useYou can read clearly in daylight but not in graphics, sound or video, will occupy a navigation,” added Mehta. Still, what’sthe dark, as it is not backlit. Pi’s open source mere 200 to 300 kilobyte (KB) of disc space. innovation without the continuous chal-Linux core operating system means develop- That’s almost five such books per megabyte. lenge of competition? His dream droveers and innovators will soon start pushing With its 4GB SD-card, Pi can store a virtual Mehta to innovation. Now, competitionapplications and plugins. That’s the exciting library. Pi does not have text-to-speech sup- will force him to innovate further.part, because if it fires the imagination of port, but you can listen to mp3 files using All in all, a jolly good read! www.ibef.org JUNE-JULY 2010 37
    • MICROFINANCE RURAL EMPOWERMENTH ow do you lend money to the poorest of the poor? Your borrowers are not only illiterate, but also unorganised. They haveno idea how to save money, for they haveno money. They have no skills, land, collat-eral, credit history, business plans or trackrecord. Banks are wary of them. In time and with help, you could still reachthe poor men of the remotest Indian village.But how to reach the poorest women of India?That would mean digging in—for the longhaul—with the arsenal of the government,resources of a bank and the heart of an non-government organistaion (NGO). That was precisely how the National Cred-it Fund for Women, or the Rashtriya MahilaKosh, was born. It was set up by the Depart- A littlement of Women and Child Developmentunder the Ministry of Human ResourcesDevelopment (MHRD). All the fund evertook from the government was a one-time amounts to a lotgrant of INR 31 crore (US$ 6.6 million) at itsinception, in 1993. Since then, it has neverhad to ask for a penny from the governmentor anyone else. Working astutely, it has, sofar, disbursed upwards of INR 200 crore(US$ 43 million) to nearly seven million The runaway success of a credit fund with heart.needy women across India. BY HEMANT KUMAR Working through NGOs only, the fundhas taught them the value of savings, plan- could take on, and how it would turn their ment. The fund’s experience has shownning, investment, book keeping and repay- lives around. But it was not a dole; it was a that groups of women are better customersment. In its own way, the fund has also loan, and they understood it. Each member than men - they are better managers oftaught them the essence of a business plan presented her plan to a group; each group resources. Also, the benefits of loans areand its presentation. The fund asked NGOs took its plans to the controlling NGO, and spread wider in the household if loans areto organise the needy women into small each NGO then approached the fund for the routed through women.teams, called self-help groups. The group release of funds. Accountants and auditors From basket making to floriculture, thehad to meet regularly, say, once a month, drawn from National Bank for Rural Agri- fund helps women through any vocationaland show savings. It didn’t matter how culture and Rural Development (NABARD), activity that can help them find their feet.much, but each member had to save. Reserve Bank of India (RBI) and other Now, it has widened its scope and helps Groups that completed a full year of such financial institutions pored over the plans women in the following areas, too: landsavings, book keeping and regular meet- and projections with magnifying glasses. acquisition, redemption and leasing; healthings, then became eligible for loans for Once satisfied, they cleared the funds for and other consumption needs; skill upgra-sustainable vocational activity. Finally, each disbursal, but with a warning: it was the dation; crop credit and off-farm activities,member had to make a presentation before sole responsibility of each NGO to ensure and; the setting up of kiosks and internether own group, describing in detail how the loans were repaid. The fund adopts a cafes. More than 150 million Indian womenmuch money she needed, how she would quasi-informal delivery system, which is live below the poverty line. The fund esti-use it and how and when she would return client friendly and uses simple procedures, mates that even if only 30 per cent of themit. The requirements were not huge either. keeping the poor, overworked and illiterate need micro credit, it has to reach out to 45The amount hardly ever exceeded a few women in mind. The disbursal is quick and million women, and counting.thousand Rupees. Women needed money to links thrift and savings with credit. In using The fund has so far disbursed micro loansbuy a goat for selling milk, or a gas stove to the group concept, it has transformed credit to nearly seven million women. It’s not evenset up a street-side kiosk. Hard working and into an instrument of women’s empower- half way up there, but they say well begun isfocussed, the women knew how much they ment, socio-economic change and develop- half done.38 JUNE-JULY 2010 www.ibef.org
    • R E VA INDIA 21 PHOTOGRAPHER: GIREESH G.V REVATHE LIGHTSARE ALWAYSGREEN FORThe tiny Indian electric car packs a high voltage punch. BY INDU PRASADT he charismatic Chetan Maini believes that the time is "right for an Electronic Despite some roadblocks, REVA is cruis- Vehicle (EV) revolution in India". The India-born founder of REVA Electric Car ing, with a presence in half of Europe. By Company has captured a neat chunk of the UK EV market, where his G-Wiz, or 2015, REVA plans to establish itself as a REVA-i, finds regular mention in the magazines. Inspired by its success, other truly global brand.  “REVA is the only com- auto manufacturers are now looking at London as "the place" to launch their ver- pany in the world with a 100-million-kmsions. Norway has been bitten by the REVA bug as well—the country wishes to promote EV-user experience. It helps us seek betterthem as an alternative to public transport. Maini has forayed into Central America, too, with performance under different climatic anda launch in Costa Rica. road conditions, and evolve,” Chetan Maini www.ibef.org JUNE-JULY 2010 39
    • INDIA 21 R E VADOING THINGS THE REVA WAY explains. His vision involves more than just a numbers game. “We are, and wish to be, a total systemsC hetan Maini once explained, "REVAdoesn’t do different things, solution provider. REVA develops key EV technologies—energy management and fast charge and telematics systemsbut does things differently. in-house keeping the company at the fore-We could not afford the front,” he says.conventional way of doingthings, so we did every- Driving Down Pollutionthing our way." When REVA drove up in the late nineties, Maini couldn’t afford to the world was still waking up to globalmarket his car convention- warming, fuel prices were low and research-ally. So, he took the online ers were toying with the idea of the electricroute, especially in the UK. car, while real people drove "real" cars. AsThe company appointed a student at the University of Michigan,no dealers, or showrooms, USA, Maini made a solar powered car thatadvertising and salespeo- own wheels, instead of the Operations, associated won the 1500-km  Florida to Michigan Sunple to draw in customers. regular assembly line, to with Maruti Suzuki for sev- Race. More importantly, it finished thirdInterested parties could keep costs down. eral years. When initial in the 3,000-km Australian cross-countrytest drive cars at one of For the body, recyclable, investments barely trickled race from Darwin to Adelaide, right behindthe 16 designated points in dent-proof panels mounted in, Maini opted for out- Honda. That was Mainis Eureka moment.and around London. If they on a steel frame were used, sourcing the components. If one could cross a vast continent on solarwanted to buy it, they could instead of steel panels. Today, REVA outsources power alone, what more could be done withgo online and book using a Apart from lowering pro- all its components; only the natural resources? He set out to discover. Atdebit, or a credit card. The duction costs, these were core technology work is that time, Maini was working for a friend’splan clicked: each of the found to be effective in handled in-house. father at Amerigon, a start-up that focussed1,000 G-Wiz cars sold in case of minor accidents An all-new, on electric vehicle technology. But, it wasthe UK till date has been a since they reduced the risk 30,000-capacity assembly not all invent, drive and profit.direct, online purchase. of dents and scratches. plant in Bengaluru was  “Financial resources were limited and In India, where he knows Maini knew that experi- recently completed. It is convincing institutions was a challenge.people would be more enced personnel would be currently the worlds larg- Often, the question asked was: Where elseskeptical, Maini rented skeptical about working est operational example in the world has the idea succeeded? Also, aout the REVA for a week. for a start-up—especially, of a plant especially dedi- month before our India launch, the govern-People could drive the car one as "innovative" as his. cated to the assembly of ment doubled the excise on electric cars andfor that week after paying Expertise and experience in battery electric vehicles. took away subsidies. We also did not have aa non-refundable deposit electric vehicle technology The building is LEED regulatory platform to register such cars inbetween INR 1,500 (US$ were non-existent in India accredited (Leadership in India,” Maini told an interviewer, recently.33) and INR 3,000 (US$ at the time. Energy and Environmental  “Looking back, my decisions were65). If they decided to Keeping these two points Design), making the plant brave; especially by start-up standards. Webuy, the amount would be in mind, Maini chose to leave one of the lowest were clear that we needed to break downadjusted against the cost. hire freshers from top engi- dirt-to-dust carbon foot- perceived barriers; patent energy and"People were curious and neering colleges. It was prints in the automotive battery management systems; and lookthey thronged the shops, not merit alone—he chose industries sector. at cost-efficient designs, manufacturingbut few actually bought," students who shared his On September 24, 2009, processes and methodologies of integra-remembers Maini. vision. The fresh group of REVA and General Motors tion of electronics that would prove fairly However, two-thirds of thinkers were joined by (India) announced a col- unique to REVA—which is what we did.”the people, who tried out international consultants. laborative partnership to The first of the REVAs rolled out in Ben-the REVA, were converts— He roped in people like R. bring electric vehicles to galuru, a strategic move, considering thethe EV revolution, if you can Chandramouli, President the Indian market. It will city is tech-savvy and loves to embracecall it that, had begun. (sales and marketing), who also be partnering with new ideas. Electric vehicle technology may On the manufacturing had spent years with TVS Bannon Automotive to set be expensive, but Maini has beaten thefront, Chetan Maini opted Motors and Maruti Suzuki. up a manufacturing base in odds and launched it in London, its firstfor running chassis plat- Another hire was Girish upstate New York to pro- overseas market. Admittedly, REVA wasforms where cars move on Rakhe, President of India duce the NXR model. not the first electric vehicle, but it was theSOURCE: NEWSWEEK AND REVAGLOBAL.COM40 JUNE-JULY 2010 www.ibef.org
    • R E VA INDIA 21first to go commercial, while the Hondasand Toyotas were still at the R&D stage. BIG PLAYERS IN THE EV SECTORResplendent REVA Tesla Motors–Designs and sells and technologies to provide two best-REVA has sold 3,000 cars, one half in high-performance, highly-efficient in-class, all-electric vehicles.India and the other abroad. It may not electric sports cars. TH!NK Global–Together with Porscheappear to be too many cars, but it is worth Aptera–Whether running errands, driving Consulting, this Norwegian Companynoting that the vehicle has single-handed- to work, or out on a holiday, Aptera’s 2e is the closest runner to REVA’s globally changed the perception of EVs in India. has a feature for every need. presence and popularity.REVA was instrumental in getting the Phoenix Motors–Phoenix Motorcars, Detroit Electric Holdings–The companysDelhi government to grant a nearly 30 per born in 2001, is set to manufacture product plans range from high perfor-cent subsidy to alternate fuel vehicles—a zero-emission and freeway-speed fleet mance sports cars to stylish sedansfirst in the country. vehicles. After years of research, Phoe- capable of driving over 320km or 200  The odds are in favour of REVA. The com- nix found the right fusion of platform miles in a single charge.pany caters to the ‘second-car’ market whichaccounts for 40 per cent of all cars sold.  REVA has set a high benchmark. ItsUK distributor, GoinGreen, sells the car EV product development, mobility solu- to support them.”  REVA is working on driv-as G-Wiz. London has set an example with tions, technology licensing and franchised ing some unique business models—tech-its policies—exemption from congestion manufacturing,” he explains. nology licensing, manufacturing franchisecharge, free parking and charging, and a and EV mobility solutions. The GM-REVAhigh-level of EV awareness. Techno Tomorrow collaboration is an example of technology  At last year’s Frankfurt International The company completed a new environ- licensing. But manufacturing franchiseMotor Show, REVA showcased two new ment-friendly, LEEDS-certified assembly involves setting up low-cost local assemblymodels—NXG and NXR. “NXR will, for the plant in Bengaluru, with a capacity of 30,000 units. “We are evaluating franchising proj-first time, bring the lithium-ion battery to units per year. REVA has a strong product ects in America, Europe and the Asia-Pacif-electric cars, making them more economi- development programme in place and plans ic," Maini says. The EV technology is stillcal, longer-lasting and trebling the mileage to introduce one new model, and one vari- evolving, which means limited capability,per charge." ant, every year. low demand and high costs. REVA’s design has also evolved to adopt a  The company’s R&D, spearheaded by Deloitte adds REVA will benefit from amore European silhouette. Naturally, it uses Chetan Maini himself, is focussing on the quick adoption of EVs, driven by changed80 per cent fewer components than the con- latest EV technologies. consumer mindsets. However, most con-ventional or the hybrid car. The NXG, which However, a battle lies ahead. As P. Balen- sumers still expect their EVs to travel a sig-is the REVA Next Generation, will go into dran, Vice President of Corporate Affairs, nificant 500 kilometre per charge.production in 2012. Styled by Dilip Chhab- General Motors-India, explains, “EVs wouldria of DC Design, it will take NXR’s style work better if there was better infrastructure Short Fusefurther, while maintaining REVA’s principle “REVA has never produced a polluting car,of leaving the least carbon footprint. "We and never will. Every REVA is born green,added mag wheels and painted them brightred. We also fitted it out with a wireless Every REVA using processes that use less energy, and it emits lesser carbon,” emphasises Maini.tablet, an embedded appliance that inte-grates into a high-resolution, single-touch is born green.  In transitioning from fuel-based to elec- tric-only technologies, the world is still get-screen display system. Dashboard functionincludes information on speed, battery The vehicles ting used to the idea of the hybrid vehicle. But Maini says he believes EVs will grab thecharge, range and critical sensor inputs and are brought attention of most auto makers in the next into thepersonal communication tools." Maini is three years. The reason:  EVs are more effi-quite the mentor—Dilip Chhabria stressed cient and more affordable. world usingthat he chose to work with REVA because As the magazine went into press, Mahin-they were the "only credible EV manufac- dra & Mahindra announced that it hadturer in the world". He put in 25,000 manhours into designing the NXG. processes bought a 55.2 per cent stake in REVA. Chetan Maini has a few sage words, On a business level, REVA is modelled asthe ideal 21st century knowledge company. that use less “When you have an idea that you absolutely believe in, it is critical that you“REVA is lean (250 employees), agile andoperates with four core areas of business— energy. surround yourself with people who share that dream." www.ibef.org JUNE-JULY 2010 41
    • ARTS &CULTURE Betrayal Flesh: Sumedh Rajendrans work often deals with notions of margins and urban spaces—how these are affected by the power struggle both within, and outside the self. The artist admits that he resorts to satire frequently to sort out his ideas and expressions.SculptingBrilliance toSumedh Rajendran continuesdazzle viewers with his cerebral art.BY ULLEKH NPD elhi-based Sumedh Rajendran is truly a master of fine art. That he for its subtle portrayal of conflicts—political, social has an MFA from the Delhi College of Art is just underlining that and cultural—and the dilemmas of the urban society fact. He continues to dazzle art lovers with his thought-provoking in the post-globalisation era. cerebral art, mainly sculptures. It is near impossible to breathe life Rajendrans work has both high finish and raw texture, into industrial elements, but Rajendran transforms iron, steel and hinging on the unfinished. Such is Rajendrans controlceramics into organic materials. His art is at once restless and calm, evocative and of his spaces, that he can acquire a zen-like stillness indistant, involved and indifferent. It is disturbing, but scrapes the paint beneath the the middle of a hyper-mobile arrangement. A frozenconscious layers of thought, compelling introspection, and reflection. Rajendran, island in the middle of an ocean on fire, so to say. You38, commands respect from artists and critics alike for his skilful and dreamlike can feel his work at all sensory levels, and it can leave youjuxtaposition of a range of subjects and ideas. His first solo show was held in moved, or disturbed, depending on what you see.Lahore. It was, however, his Mumbai exhibition of 2005, Street-fuel Blackout, that Critics and artists alike, praise Rajendrans work.catapulted Rajendran into the big league of India’s blue-chip artists. One of his Says Ranjit Hoskote, critic, cultural theorist andstunning works at that show, Darkly Massive, created waves back then in Mumbai poet: “The artist savours the co-existence of forms,42 JUNE-JULY 2010 www.ibef.org
    • SCULPTURE AR T S AN D CU LT U R E Rajendran born Rajendran has held five a show called Chalo! India Married to Pakistan-born1972. BFA, College of Fine solo exhibitions in Lahore, at the ESSEL Collection in artist, Masooma Syed, theArts, Thiruvananthapuram, Mumbai, New Delhi and Vienna, Austria, and Indian internationally-renowned1994. MFA, College of Art, London. Group exhibitions Summer at Galerie Christian sculptor lives and works inNew Delhi - 1999. in India and abroad include Hosp in Berlin, Germany. New Delhi.periods and purposes, and to the manner in which his-tory becomes spectacularly visible in everyday life andyet is naturalised to the point of invisibility, so requir- Emotive art: Day Enlarged Hidden Wrathing re-activation." (above left) is a work in His favourite example of this phenomenon is the mixed medium, usinginterstitial geography of Delhi: the historical periods leather, stainless steel and resin. Like it, mostthrough which the great city has transited are not of his pieces have aarranged neatly in horizontal strata, but are articulated singular, strong focus,as the cobbled and sutured components of a fluid, and to make his art talk, he uses several mediums.miscegenated and plural contemporary. A mediaeval Sumedh is an artist whomonument, for instance, might stand next to a shanty, is committed to the sociala workshop or a middle-class apartment block. implications of art—his work shows that. Rajendrans stunning works mostly feature contem-porary urban as well as primal-era shapes. Whethershowing solo, such as Final Call and Chemical Smug- This year, Rajendran will exhibit his visually pleas-gle, or in a group, Rajendran has influenced art lovers ing and intellectually profound art at the ESSELacross India, the US and Europe. His recent solo Museum, Vienna, Austria, and at a few other loca-show, Dual Liquid, at the Sakshi Gallery in Mumbai, tions in Europe. Another show, called Dual Liquid,had more to offer than mere magic with leather, tin will travel to Delhi in September. sheets, perforated iron sheets, concrete and bathroom What does the artist actually want to achieve withtiles; there were also photographic and collage works his art? “I want to tear apart hierarchies,” he says.on display.  That is, without doubt, an ambitious target, but the Rajendran has affluence of concern for the dispos- artist puts together his works with a surgeon’s skill,sessed, and he always puts the spotlight on torture, a by tearing apart objects again and again, only to putrecurring theme in his works.  them all back together. And how. www.ibef.org JUNE-JULY 2010 43
    • TOURISM UPDATE KE RA LA Kathakali of Kerala: A highly stylised form of dance-drama that began in Kerala in the 17th century. It is characterised by bright make-up and elaborate costumes. Thekkady: The name is synonymous with wildlife and great weather. The Periyar Tiger Reserve is the one of the best places to visit. Munnar : This pretty hill town has several tea gardens and estates—PHOTOS: KERALA TOURISM.COM grab a packet of the fine herbs when you are there. Sensory Spa Kerala is an ideal getaway for the lonely traveller, the trek tourist and honeymooners. BY ROHINI BANERJEE T here is an exaggeration in the quaintness that is Kerala. The mossy car- I was headed to Munnar, 4,000 feet above the sea and pet of coconut groves, its ribbon-like streams and the neat little wooden a little more than two hours of driving time from Kochi. bungalows nestling in the shade—it is too picture perfect. Ever since my sister and her husband had shifted there The clock, too, keeps a different time here. The women with fresh to work in the tea estates, she had waxed eloquent about jasmine in their hair, the men in their white mundus and shirts, and the Munnar. “Walk as much as you like, as far as you like. neatly-dressed schoolchildren walking without a hurry, teach you to slow down as well, Its safe. It rains most of the time. Its pretty. Come and and breathe in. see for yourself.” Kerala redefines the colour green, washes it and presses it till it shines. Come here Finally, I gave in, a little skeptical—after all, I hailed and give your eyes and ears a vacation. The state is as lush, as it is silent—soulfully so. from the east of India. I had seen the Himalayas In the plains there is the hegemony of coconut. Drink it, eat it, sleep on it or wear unfold through the morning mist. Would the Anna- it—the tree and its fruit are an integral part of life in Kerala. A small state with a large malai range impress? heart—where do you start discovering Kerala? My journey began in the plains of Kerala—on a road Kochi. Strictly speaking, it is a small town, but strategically close to every destination, that cut through parrot green paddy fields. After a while, and some out-of-the-way ones, as well. our car climbed up, and the sensory overdrive began. 44 JUNE-JULY 2010 www.ibef.org
    • KERALA TO U R I S M U PDAT E FIVE KEY HIGHLIGHTS 1. AYURVEDA Herbal oils and touch therapy, Kerala Ayurvedic Vagamon Hills: Grassy hilltops, cool climes and great views, massages are the treat for Vanilla: This aromatic plant may be the second-mostVagamon is a trekkers paradise. tired limbs. expensive spice after saffron, but tourists can get a whiff for free while travelling. 2. BACKWATERSFirst, the green—fresh, darker and deep, covering every up to freshly brewed coffee. It is for you, if you wishpart of the earth. Then, the smells—heady and strong. to take a morning walk breathing in the smell of wet As my city nose struggled, my sister took pity and leaves and greet busy pluckers (friendly, pretty womenstopped at a smallish plantation. Cardamom, cinnamon, in ridiculously oversized gumboots, ready with a smilecoffee, vanilla and black pepper—an army of aromas. and a wave). In Kerala, most plantations grow two or more of these It is for the tourist who doesnt mind getting drenchedaromatic substances. Sometimes, all of them are planted A cruise and a stay in the before breakfast. And more so, afterwards. It is perfectin a large magical garden where smells mingle with houseboat—must-see and for treasure hunts—play spot the stream, or find thethe wet earth to create a whiff so thick you can cut must-do. falls, as you hear gurgling water.through it. When you get hungry doing so, roadside kiosks offer Higher up, the road spiralled through mountainous 3. POORAM FESTIVAL deliciously different vegetarian and non-vegetarian foodjungles. There was a lack of city noises, a hush that was that doesnt dent the pocket. Munnar is home to Hindu,just a little uncomfortable, to begin with. However, as Muslim and Christian communities, and all three havethe ears got accustomed, there were small jungle voices left their marks on the cuisine.that spoke—the occasional bird, the loud cricket and the A quick online search reveals that Munnar, or “moon”swish of the cool breeze through the leaves—carrying a (three) “aar” (rivers), is situated on the confluence ofhint of rain. And it rains, or drizzles, or pours, most of three mountain streams and is surrounded by the Anna-the time. The showers come unannounced. malai range. The annual temple festival The hills of Munnar are not the jagged-ragged kind, held in central Kerala after Websites let you know that the place is pretty, andbut smaller, rounder and with softer edges. We left the summer harvest is a pretty wet. However, only when you walk through it, do riot of colours.the aromatic plantations behind, to travel through you see just how pretty, and how wet. Divine.rolling tea gardens with their acrid-smelling leaves. I was happy in my bungalow, overlooking tea gardens, 4. ATHIRAPALLYAnd, the mist was everywhere, or were they clouds? I WATERFALLS exploring the surrounding estates with my sisters twocouldnt be too sure. dogs, my faithful companion-cum-guides. And reading. The small town of Munnar is as idyllic as it is rain- I even picked up the paint brush after years.drenched and quiet. It smells of tea, and life revolves A days drive can take travellers to a number of spots.around the herb here. It has several estates and gardens For more information, a visit to the tourism office indevoted to it, some hotels and guesthouses and a tiny the old part of the town is worthwhile. Impromptu treksmain market. The town hosts tourists from all over also throw up a few picnic-worthy locations. Decide atIndia, and a smattering of foreign faces—but, at the end Peaceful and powerful at leisure, while sipping a hot brew (tea, or coffee, we leaveof the day, it belongs to its residents, who take a quiet the same time, the place it up to you).pride in their home.  is a must visit. My visit to Munnar was in a year when I was at my Every place has its rules—Goa asks its tourists to harried and hurried worst. Before I knew it, half of the“chill”, the Himalayas to “discover”. In Munnar, it is to 5. TRADITIONAL THALI year had flown by in a scurry of assignments and papers.relax. Breathe. Walk. Contemplate. Inexpensive, It was but a moment at Munnar, but, by the time I was healthy and Indians designate pretty and lonely spots delicious, a back in the city, the clock had slowed and the senses hadto honeymooners, or trekkers. Surely Mun- thali is the sharpened. I had breathed. And, I felt free.nar is for the two, but it is also for the lonely quick meal Finally, I had to leave a little note to my traveller self— for the hungrytraveller. It is for anyone who wishes to wake traveller. never be too quick to judge. www.ibef.org JUNE-JULY 2010 45
    • Peter Cappelli Authors of the book Harbir Singh Jitendra SinghBOOKSHELF Michael Useem The return of the guru Four Harvard Business Press; Rs 695. Wharton alumni laud the Indian way of doing business. BY ULLEKH NP THE “unbridled pursuit of self- for the meltdown, the authors—four ABOUT THE ing social improvement …” says theinterest”, has been the hallmark of of them—look at how companies AUTHORS book, co-written by professors Peterthe American model of economic around the globe could take some big Cappelli, Harbir Singh, Jitendradevelopment, popularly called the tips from businesses in India.  All four authors Singh and Michael Useem of the“Washington Consensus”. But it is It is time to learn from India, they are professors Wharton School India Team.  at the Whartonnow clear that it has very often led to say. They argue that the “India Way” The authors say the essence of the School ofdeep, self-inflicted injuries. And the represents a compelling alternative Business, India Way is embodied in the thinkingrecent global financial meltdown, the to the US model. As opposed to the University of that the business leaders of the countryoutcome of companies chasing prof- American one, the India Way, is a Pennsylvania. “think in English and act in Indian”.its, has offered enough reason to collective term for general business Peter Cappelli: They quote Tata Sons’ executive Director, Centreunlearn what we have learned from practices of major Indian companies. director R. Gopalakrishnan as say- for Humanthe Western economies in the last 50 The authors believe that the Indian Resources ing: “For the Indian manager, hisyeas. Even Alan Greenspan admits companies are not driven by “solely Harbir Singh: intellectual tradition, his y-axis, isthat it was a mistake to push for profit motives”.  Co-director, Anglo-American, and his action“greater reliance on market forces Drawing on extensive interviews Mack Centre for vector, his x-axis, is in the Indian Technologicaland reduced government controls”. with some 105 Indian business lead- ethos. Many foreigners come to InnovationThe former Federal Reserve chair- ers, the book says that the Indian Jitendra Singh: India, they talk to Indian managers,man was one of the biggest votaries approach to “running companies Steinberg and they find them very articulate,of that model. The Consensus centres on a concern for multiple Professor of very analytical, very smart, veryfocused on shareholders and their stakeholders and their needs, not just Management intelligent—and then they can’t, for Michael Useem:interest in profit maximisation as the the narrower needs of shareholders”.  the life of them, figure out why the Director, Centreprimary goal of a business.  It is this sense of mission, while for Leadership Indian manager can’t do what isAccording to The India Way (Har- preserving the heart of the capitalist and Change prescribed by the analysis.” vard Business Press), in the US mode of development, that makes Management. The authors talk at length aboutmodel, companies rely on constant the “India Way” too irresistible a Indian businesses’ holistic engage-restructuring through job cuts and proposition to dismiss, says the book. ment with employees, improvisa-outside hiring. Now that the whole “Companies following the India tion and adaptability, creative valueworld feels the pinch of that model, Way go well beyond not doing bad propositions and broad missionwhich the rest of the world blames to the social fabric to actually pursu- and purpose. 46 JUNE-JULY 2010 www.ibef.org
    • BOOKSHELF They also discuss what the IndiaWay means for global businesses One of the unique aspects of the India Wayand their leaders. “The place to beginadapting the India Way is for leaders has been the capacity of the nation’sto pay attention to the process of cre-ating strategy, to focus on the busi- business leaders to find a competitiveness on a task … what are we better atthan our competitors? … succeeding advantage where no one else was looking.with the India Way begins by devel-oping an answer to that question,” They have often built and followedsays the book.  radically different structures and strategies than the Western norm, The book argues that “the IndiaWay seems to have settled voluntarily yet the practices that have flowedon a more bridled version”. Theauthors have deep knowledge of theUS and Indian markets and cultures.They say that India’s leading busi- from those decisions have frequentlyness figures pursue “strategies notstrictly tethered to the disciplined proved to be applicable in other markets.pursuit of private profits.”  The most important lesson theylearnt from the India Way is that“it demonstrated the power of the treat, leave alone cure, that busi- BOOK The India Way is the result ofcollective calling over private pur- nesses miss the point, altogether. EXCERPTS deep introspection, over decades,poses, of transcendent value over What it does is, it may help you not merely the last few years. The The single mostshareholder value”.  look far into the distance, but per- economic meltdown accelerated distinctive feature “The tight fit between the way haps, too far ahead. “Whats the of corporate the onset, transforming the chron-executives lead their employees and point of being fixated upon a target governance ic to acute, in pure medical terms.the way they pursue business strat- that takes you farther and farther across the Indian The crisis opened the seams of theegy, allows them to identify a social from values? Its a mirage, not a companies we corporate worlds gilded business studied was thispurpose and match it to business target,” says Wharton alumnus Ajay tapestry, and what emerged was determinationneeds,” the authors add. Chaturvedi, talking about business to balance the deeply disturbing—even to the The major areas covered in the managers narrow interpretation of interests of the hardy, not necessarily insensitive,book include people management, fiduciary responsibility. firms diverse MBAs and technocrats. executive leadership, competitive He studied Management of stakeholders, “Placing people before profits groups that havestrategy, company governance and Technology at the institute and has breeds loyalty and helps create last- a claim on whatcorporate social responsibility.   insights into how the institution per- the company ing social harmony. People make us For sure, the book, pleasantly ceives business and its practice.  does, including successful, not machines, not money,heavy with insider accounts, will help A good entrepreneur sees busi- staff, customers, not technology. America has wokenIndian businessmen understand ness sense in the honest fulfillment and community. up to this reality, and the recent eco-themselves in the global scheme of of corporate social responsibil- nomic crisis has only underlined that The executivethings. It will also inspire managers ity—he can remain a capitalist at chairman of fact,” notes Chaturvedi. elsewhere as they look for ways to heart, but his core is humanist. Shree Cement, Oliver Stones 1987 blockbuster,compete in a changing world. Given The authors of The India Way say BG Bangur, told Wall Street, may have been a tributeIndia’s remarkable growth in these that Indian business leaders stress us he considered to his father who was a stockbroker creativity soturbulent times, chances are not broader societal purpose. during the great depression (1929- critical to hisunlikely that home-grown business They take pride in company suc- companys 33). But, a ruthless Gekkos memo-practices will soon become the coun- cess — but also in family prosperity competitiveness rable words in the movie epitomisetry’s biggest export, after Yoga! and national renaissance. The book that he had been the corporate worlds ethos, or the Business ethics demand that is peppered with examples of Indian explicitly working lack of it: “Greed, for lack of a bet- to ensure that hisentrepreneurs consider everyones businessmen who have prospered by ter word, is good.” Playing Gekko managers wereinterests—the shareholders and the leaps and bounds, but who value the comfortable with won Michael Douglas the Academystakeholders. But single minded people they work with, just as much a certain error rate Award for Best Actor. focus on profit maximisation causes as, if not more than, the people they in their decisions. Playing Gekko hasnt been good,a tunnel vision that is so hard to work for.  generally. www.ibef.org JUNE-JULY 2010 47
    • RURALUPDATE Lateral thinking, and action: Wharton alumnus takes BPOs to the villages. BY HEMANT KUMARO ffshoring has not only made That is why Ajay is calmly sowing to a remote Indian village and say millionaires out of software seeds of faith – not on the manicured you will set up a BPO here. Who will entrepreneurs and process lawns of Gurgaon’s business parks listen to you? But if you pull a threadarchitects. Like barnacles, vendors, or in its colonnaded italian marble from the urban yarn, and take itrealtors and service providers latched corridors. But in the villages of Hary- patiently into the proximal and con-on to the business process utsourc- ana, a stone’s throw from the glass tiguous villages, it will not only finding (BPO) blue whale, literally cross- facades and swishing elevators and ready acceptance, it will actually being the Atlantic for free. musical fountains of the BPO hub. on time, too.” Ajay Chaturvedi While everyone was busy count- He is investing in the villages Chaturvedi’s grand march into the The Founder-ing dollars, few paid much attention because he wants to breed loyalty and CEO of Harva rural hinterland of India’s offshoringto one of the most important pas- trust, he says. That will not only keep is an engineer success has opened up avenues forsengers of this trans-Atlantic jour- costs down but also bring the ben- from BITS, Pilani, women that existed, but were neverney—the BPO worker. But now, he efits of offshoring to the needy. an MBA from extended. In that sense, it is a never University ofcommands a certain respect in HR “When you show them the harvest before. But he wants to take the Pennsylvania’scircles and keeps a few job offers in of faith and earn their confidence, Wharton School, experience to the next level byhis inbox all the time. Now, he can you make them your partners in USA. He has expanding into micro finance andhit the ground running, so to say. growth, not opportunistic employees. 17 years of community farming in the villages,And he is causing significant attri- They don’t go job-hopping for just a combined once he has gained the confidence of experience oftion. That, says Wharton alumnus few dollars more. Plus, people don’t the villagers. working withAjay Chaturvedi, is draining the BPO leave villages if the jobs reach them,” Citibank, IBM And that’s one of the strongestindustry more than anything else. adds a confident Chaturvedi. and others, reasons why his prime investor,Because, for the longest time, com- The geographical mapping of his handling Arpita Verma, is so convinced aboutpanies have been busy building busi- business plan is a marvel of how his multimillion dollar Chaturvedi and his dream. “He has projects acrossness and counting profits, not breed- mind works. a keen sense of social responsibil- IT, BPO anding loyalty. About the BPO business, Slowly, but steadily, he is spreading manufacturing ity. But he marries it so well to theit is said that if you aspire to be like laterally, and inward. sectors. viability of a business venture, that itthe people you serve, then the people “That is the best way to go,” says a was an offer I could not resist,” sayswho serve you will become like you. reflective Chaturvedi. “You can’t go Verma, beaming.48 JUNE-JULY 2010 www.ibef.org