Glimpses of an emerging economy..

Being Indian, writing something positive this country entails an inherent conflict of interest! But having just got back from my trip, I cannot seem to resist the urge to write about the rapid changes that I see every time I go there.

Consumers Everywhere..
With an economy that is very similar to the US, driven by 67 percent consumer spending, India has hundreds of millions of consumers still waiting on the sidelines. On my trip, I visited Chennai, Mumbai, two of India's largest cities and Vizag, a smaller industrial city. While all these cities had glitzy new malls for every locality, I was awestruck by the development in my hometown Vizag. Vizag is an industrial city dominated by socialist era India's public sector companies producing materials such as steel, zinc, aluminum, oil, and the country's largest state owned shipyard. Never in my wildest dreams did I imagine that here in this city, there will be half a dozen malls, world class multiplexes, a new IT park, and western style beach-side communities. In these cities and pretty much everywhere, all I could see were new cars, malls, real estate developments, new roads and infrastructure projects. Here, I witnessed the highest sense of consumerism in the general populace that I have ever seen in my country. Furthermore, there was a pervasive sense of optimism across everyone who was working. From the usher in the theater making about $100 a month to the investment banker, everyone is hopeful and dreaming of a bright future.

Entrepreneurs and Business Models..
In describing opportunities in emerging markets, CK Prahlad coined the phrase 'Fortune at the Bottom of the Pyramid'. This fortune is unmistakable being reaped by companies with very innovative business models. One industry that needs a special mention is telecom. With over 600 million subscribers, India is seeing stellar double digit growth in the wireless telecommunications space, which is expected to continue growing well into this decade . Extreme cost competition has led to outgoing call rates as low as Rs. 0.5 (about $0.001) per minute and data plans at $5.0 per month. With about $9.0 billion invested so far, India is expected to witness $40.0 billion of telecom related investments in this fiscal year. Several innovative business models are being built around the cellphone for users to obtain critical data, make payments or complete transactions etc. While there are completely new business models in several sectors, it almost seems as if taking a widely successful business model and tinkering it a bit to suit the 'not so pesky' Indian consumer could lead to guaranteed success. Reliance's foray into retail looks exactly like what Sears,Roebuck and Co. did in the US several decades ago. Add the WalMart 's supply chain efficiency and you have Reliance Trends, a Sears like mall with clothing, appliances, electronics and everything else. Although Indians are highly entrepreneurial, it seems as if the bureaucratic processes and legal systems limit the growth of smaller companies and enable only the large and resourceful entities to expand into several unrelated businesses. There are several stories that would prove me wrong but most likely, they are all limited to the IT sector.

Business - The Indian Way..
The Indian handshake, the Indian nod and that peculiar English accent, while these are some of the funnier elements of how Indians behave and do business, working and conducting business in India is definitely unique. No matter how fast we are growing, we still have our Indian ways. That one phone call can move files or turn around issues which have been stuck in a bureaucratic rut for months or even years. Some industries or sectors seem to be more prone to such bureaucracy than others. The traditional industries such as materials, manufacturing, energy, utilities, infrastructure, transportation, chemicals, etc. seem to be susceptible to the vagaries of government. In the new-age industries such as information technology, telecommunications, and financial services, the government seems to be less intrusive , thus enabling tremendous growth. To conduct business in India, one must however, get used to some aspects that are distinctly Indian: bureaucracy, redundancy, government intrusion or involvement, shaky infrastructure and overall chaos. In my point of view, the most fascinating thing is how things get done . Everything seems to finally work in India albeit at the last minute, just like that Bollywood movie where the hero rescues his family and the heroine and manages to kill the bad guys!

The Haves and the Have Nots..
As I walked around the bustling cities of Chennai and Mumbai, I could not help but resist the stark contrast between the rich elites and the poor and destitute. It is not uncommon to notice an S class Mercedes sedan parked on the side and in the next glance you will see someone digging through a nearby trash bin looking for food. India's surprising rise can be attributed primarily to the capabilities of an educated and knowledgeable English speaking middle and upper middle class populace. The problem lies in the fact that about 30 % of India's population is illiterate and a majority of them live below the $2 a day international poverty limit. It is likely that these people will never get to enjoy the fruits of the nation's rapid economic growth. Although the Congress government is taking the initiative to bring India's growth to second tier cities and villages, it will be several years before rural India sees any significant development. Knowing the Indian government and its efficiency, I wouldn't hesitate to state that rural India might be left out of this growth for a long period of time, unlike rural China, wherein the Chinese government's involvement seems to be producing results. This in my opinion will be the Achilles heel of India's rise to becoming an economic power. A nation with a stark dichotomy between the haves and the have nots.

Nevertheless, India's growth outlook seems to be highly optimistic. A very young, large, and resourceful nation that has an opportunity to reap the population dividend and ride the overall global growth. It took about 30 years for the Chinese to get to where they are, India which opened up its economy in 1991 is about a decade behind and the current decade, in my opinion, will definitely be a landmark one for this largest and most populous democracy.