Tuesday, May 17, 2005


An India that does
From The Statesman

India has been exciting the world’s imagination for sometime and many investors have begun to have a fresh look at the country and explore its potentials as an alternative to China.

George Evans, the director of international equities at the Oppenheimer Funds, Inc is one of them, who has been “much more enthused about India than China”.

International investors want growth with protection for their shareholders and India seems attractive because its legal system including property and contract law is well developed, Evans was quoted as saying in a Canadian newspaper, the Financial Post.

“India has some fantastic world class companies,” including Infosys Technolgies, Wipro, Tata Consultancy Services, among the software companies for which India has become a world leader, and in the growing field of biotechnology, petrochemicals and pharmaceuticals, where, for example, Dr Reddy’s Laboratories Ltd, Ranbaxy, Reliance and others have become international names.

These companies are creating a global buzz, an image of India that can do. The world has begun to trust India. The sentiment is widespread. Familiarising Israeli business leaders about expanding horizons in India, Simon Wasserman, chairman of AON Global, said at a recent conference on outsourcing, “India has everything that a multinational needs. It is a young country with creative minds and a huge market with almost 27 cities with more than a million population.”

In the next few years, according to a recent study by the Confederation of Indian Industry, India would be entering a new threshold of knowledge economy and could emerge as a global hub for specialised knowledge processing for global corporations.

Knowledge economy de pends upon extracting and creating new knowledge from data bases and is in a sense value-added outsourcing. That is an emerging trend, among other growing fields such as auto, genetic engineering, and high-tech healthcare that would transform India in the next decade. Probably the most exciting field of growth is healthcare, which according to the CII study would add seven-eight per cent to GDP and create nine million jobs by 2012.

Pressured by rising costs at home, the Americans have begun to realise that what a good Indian surgeon can do in the USA, he would do the same quality operation at a quarter of the cost in India. The Apollo Hospitals has become a highly regarded international healthcare brand and is attracting many bright young doctors of Indian origin in the USA back to India. Interestingly, as direct flights between India and the USA become more frequent, health tourism that combines Western medicine with yoga and meditation would become commonplace. Open skies tend to open minds as well as wallets.

Will India disappoint the rising global expectations or will it rise to the challenge? One might say that the Central government’s move for the establishment of export-oriented special economic zones (SEZs), recently approved by Parliament, is a partial response to the challenge of rising expectations. China’s special economic zones, where all labour laws seem to have been suspended to attract direct foreign investment, have played a tremendous role in making China an export-based global manufacturing powerhouse.

But India being a democracy couldn’t have ignored the human factor. Dr Manmohan Singh’s government had to drop a clause from the Bill that would have authorised a state government to enact laws “directing that any Act relating to trade unions, industrial and labour disputes, welfare of labour, including conditions of work, provident fund, employers’ liability, workmen’s compensation, invalidity, old age pension and maternity benefits, shall not apply to SEZs”. The insistence of deleting the clause came from the Leftist parties in the coalition government.

In authoritarian China, the ruling Communist Party can do anything; even suspend its own most cherished principles. Democratic India cannot afford to do that, so India’s SEZs might not become as wondrous manufacturing powerhouses as the Chinese. On the other hand, foreign investors might prefer to invest in a place where working conditions are at par with international standards and labour rights have not been vanquished.

Remember, it was Gandhi who started Majoor Mahajan, the textile labour organisation in Ahmedabad. You can’t ignore the old man, the Father of the Nation. But much more is needed to push India’s growth to eight-nine per cent than giving the industry fiscal incentives by setting up special economic zones. One of the biggest hurdles for rapid economic growth in India, according to impartial observers, is the red tape, which takes myriad forms, from expectations of illegal gratifications to turf war.

Quoting Dr Jayanta Roy of the Confederation of Indian Industry (CII), the Financial Times (London) wrote recently, “(A) typical international trade deal from India involved up to 30 separate parties, 257 signatures and 118 copies of the same document. Imports on average sit in Mumbai’s port for up to three weeks compared to 24 hours in ports elsewhere in the world.”

This is one of the biggest challenges that SEZ authorities would face as they attempt to transform India into a nation that can do. In the digital age, business transactions are expected to be speedy and seamless, without which cost advantage that a country with cheap and smart labour like India has would be lost.


  1. Could anyone tell me what kind of software brands Indian companies own? Coding and code maiantenace are basically labour work and nothing can be proud of. The calling centers, data entrying cannot be considered as hi-tech by any means.

    I read some of this author's articles. Sounds he likes to compare India with China. Let me tell: Chinese Huawei and ZTE are the real IT companies that have their positions in the world.

    Huawei's revenue will be $8.5 billion in this year. This number will be very close to Nortel and Lucent.

    Chinese companies are now trying to setup the international industry standards, such as TD-SDMA(3G wireless phone), AVS(digital video audio decoding), EVD(Better than DVD), WAPI (wireless communication).... These are the real high-tech.

    India's domestic market is so small and has a long way to go before telling others like a IT superpower. For example, only less than 4 million PCs were sold in India in 2004. more than 13 million were sold in China.

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