India Inc: …

I’ve got a small dilemma that I need your help in resolving. You may be aware that for the last two years or so, I’ve been writing a book on the emergence of Indian companies in international markets, and have profiled ten Indian CEOs / entrepreneurs / promoters such as Narayana Murthy, Baba Kalyani, Subhash Chandra, Malvinder Singh, Kishore Lulla etc. who have lead the charge to globalise their firms.

Well, I’ve now finished writing the book and can now focus on the presentational aspects of the project, of which, the most important being (at least for today) the title of the book. My original choice was: ‘India Inc: How India’s Top Ten Business Leaders are Winning Globally’. However, as a result of the economic downturn, is this title appropriate, given that the world has been turned on it’s head as a result of the banking crisis and subsequent global recession?

It would seem a little to extravagant to use the original title in the environment we’re currently in.

For this reason, I’m searching for something appropriate as a subtitle to ‘India Inc: xyz…’. Or is ‘India Inc.’ substantial enough?

Your ideas are welcome.

In conversation with Jim O’ Neill – emerging markets guru at Goldman Sachs

Attended a Q&A with Manchester United mad fan – Jim O’ Neill – author of the BRICs report and Chief Economist of the mighty Goldman Sachs, in which he spoke about the I in BRIC. I thought the following was interesting:

He referred to the current economic crisis we’re facing as the “crisis of the developed world”; and highlighted the fact that countries like India were experiencing growth of over 6% at a time in which ours is contracting. Jim referred to this as being “pretty remarkable” as it wasn’t too long ago that economists believed that India wasn’t capable of breaching the so called 3% Hindu rate of growth that she was known of hovering around for a very long time.

In marked contrast to China, India’s growth is a result of her personal consumption. People are still spending money and it’s domestic demand is what’s keeping it going. Interestingly, the current challenges that China is facing, Jim said, was going to be good for the world as it’ll force China to rebalance their dependence on exports.

Often criticised about the inclusion of Russia in his analysis, which shows that despite what’s happened in the last year, Russia has long outperformed Goldman’s first tranche of projections to 2050 – hence keeping those arguing for the removal of the R from his BRICs analysis at bay.

On India, the recently concluded general election was welcomed by the markets, with a surge in the Sensex of approx 20% on the day after the results were announced. Interestingly, Jim’s co-authored a paper titled ‘Ten Things for India to Achieve its 2050 Potential (http://www2.goldmansachs.com/ideas/brics/ten-things-doc.pdf) in which he highlights the need for improved governance as one of these factors.

He was asked as to what indicators would demonstrate that India was taking this seriously, which was a brilliant question that needs further consideration. In many senses the answer may be as straightforward as some of India’s biggest crooks – bureaucrats and politicians – having to face penalties for their behavioural failings. O’Neill said he would start thinking of this and perhaps write something on this matter. Please leave any comments on this post if you have any ideas.

Also asked of the real impact of being surrounded by some very populous countries, he reiterated that the potential for the entire sub-continent being lifted onto a different plane if cross-border trade could be encouraged, was noted and well received.

The briefing was taking place a day after the first BRICs summit, in which the Heads of Brazil, Russia, China, and India were meeting to discuss substantive matters such as the establishment of an alternative currency to the Dollar. In response to a question on the potential of this bloc, his analysis explained that Brazil and Russia were commodity rich, whereas India and China weren’t, which suggested that if they were to work together to realise synergies like this, then the grouping would have a dramatic effect on global economics.

In addition, he highlighted that any discussion on tackling climate change without these four economies would be futie. He joked that it was time that international institutions like the G7 & G8, the UN, IMF could do more than just “invite them for coffee on the sidelines”, which drew a few sniggers from the audience.

There’s not many people on this planet that could take the credit for coining the name of an international summit that brings together future superpowers together to discuss major issues that should concern all of us.

For this and more, Jim – we salute you.

Being such a smart guy, it beats me why you’d want to support Manchester United! Viva Barcelona

David Cameron meets Indian CEOs

I’d organised a meeting yesterday between David Cameron, Leader of the Opposition, and a client of ours called ‘The India Group’, which is an alliance of the European based CEOs of large Indian private sector firms. Not only did we meet someone who’s described as our next Prime Minister, he also made sure that William Hague, Shadow Foreign Minister, and Ken Clarke, Shadow Business Minister, both of whom are considered ‘heavyweights’ in the Conservative Party, and should retain their high profile portfolios if they form the next government, attended this meeting.

Cameron was relaxed despite having to respond to the Prime Minister’s Iraq Inquiry statement later in the day. He appeared knowledgable and personable and had, what seemed obvious to me, been briefed appropriately in advance on the key issues that may arise.

So, it’s no surprise that business immigration featured highly with the IT companies leading the charge on labour mobility within the UK in the context of TUPE legislation. He spoke about Ken Clarke leading a review on Whitehall red tape that will help form their policies in advance of the next general election.

On trade promotion in India, Cameron suggested that some of the Regional Development Agencies across England would be put on notice. He recognised that trade promotion in India may also need looking at and the India Group recommended that just as Indian SMEs seemed to be embracing opportunities in the UK, the Government really needed to push British SMEs to do more with India. Banks like ICICI had tried linking up with counterparts in the UK to provide trade finance for their clients interested in India, with not much success, which seems a shame given the scale of the opportunity.

Hague spoke about a better relationship on foreign policy, which all India watcher’s will agree about, especially as Miliband’s visit to India was seen as an unmitigated disaster. Hague spoke of their support for India and Japan for permanent seats on the UN Security Council, which we know China has a different view on.

The Conservative team were interested in the pace of market reforms the new Congress lead coalition would take, to which the India Group agreed that the Insurance sector would probably be the first to have FDI levels increased. What was interesting was that the CEO’s, all, were united in conveying that despite the shortcomings in some industry sectors, India was open for business. It just so happens that the two big sectors that the UK has particular competence in – financial services and retail – are the one’s that have yet to be liberalised. Fair point.

Closer to the hearts of some of those was the issue of personal taxation and non-dom, to which Cameron was quick off the blocks to suggest that had the government adopted the plans they’d suggested, those around the table would have the certainty they desired.

I’ll conclude with sharing how they started as it’s an important point. Cameron emphasised that both – the Labour Party & the Conservatives (a) didn’t really differ on issues concerning India – whether this was trade or foreign policy and (b) that both parties shared the view that Britain was a better place as an open globalised economy, one which market protectionism and restrictive practices were unwelcome.

Are foreign banks interested in the 1 Rupee loan?

Now that the dust from the Indian election has settled and portfolios have been allocated, with the Finance Minister going to Pranab Mukherjee, the question on everyone’s mind concerns whether we’re actually going to see reforms in various industry sectors. In particular, the one that interests me is the financial services industry.

In her joint address of the Indian Parliament last Thursday, President Pratibha Patil spoke of (a) the need to create a new pensions regulator, (b) easing foreign direct investment for international banks, and (c) the disinvestment of various public sector undertakings.

Whilst some of the largest international banks and insurance companies are already there, will the existing stakeholders – including the Indian banking fraternity allow this to happen? Lack of progress, only, holds back plans to make Mumbai an international centre for financial services.

It may be true that British insurers like Aviva, the Pru, Standard Life, Royal & Sun Alliance, and Legal and General have successful partnerships with Indian firms like Dabur, ICICI etc, but they’re held back from further expansion mainly as a result of the 26% cap on foreign ownership. Mr. Chidambaram, former Finance Minister, even commented that insurance penetration in India as being “pathetically low”. And that India must “move along with the rest of the world”.

With critical reforms not taking place, the insurance markets are dominated by inefficiency; stifling innovation and competition; and limiting expansion of life and health insurance to rural areas.

In the banking sector too, foreign banks have earned a good reputation . HSBC, Barclays, Standard Chartered all have a significant presence in India but the expansion of these and other international players is held back by high capital requirements, equity caps on foreign ownerships, restrictive limitations on new branch licenses, and burdensome licensing procedures.

With a population in excess of 1 billion, India allows only 12 new banking licences per year!

Indeed the need for further reform of the Indian banking sector is highlighted by the fact that only ten of the 27 publicly owned banks are fully computerised!

Whilst HMG will continue to push for change, I believe that the Indian financial services community also stands to benefit from reforms and should push for it.

Not so long ago, KV Kamath, ICICI Bank’s Chairman made a point to me that made me think. He argued that the Indian banking environment and opportunity is limited for international banks for the reason that he didn’t believe that a HSBC would be interested in providing a 1 Rupee Loan to a villager living in the remotest part of India.

In defence of globalisation, wouldn’t it be great if the option existed? They may not want to participate in the growing micro-finance opportunity, but surely that’s a commercial decision for them.

The future of family owned businesses in India

The dominance of family owned businesses in India is well known. However, has what Malvinder Singh done with Ranbaxy shown us what’s to come in years ahead?

For those not watching, Malvinder Singh was the Chairman & CEO of Ranbaxy, India’s largest pharmaceuticals company, who decided that he’s had enough and stepped down.

Ranbaxy was bought by Malvinder’s grandfather, who saw the opportunity in the generics market of India for low cost drugs. Malvinder’s father took charge and grew the business to spectacular levels and took it to a global platform. Malvinder was initiated into the business when his father was diagnosed with cancer. He took on various minor roles in a short span and then emerged as the CEO.

During his apprenticeship, the role of leading Ranbaxy was instituted in a professional CEO – one who wasn’t a member of the family – and at that time, the general public saw this as a positive move and various commentators suggested that the future had arrived. Little did they realise that Malvinder would take charge and sweep aside the same professional management that they had put in place. In fact, Malvinder went that step further and argued that just because his family owned a majority stake didn’t mean he wasn’t “professional” or “qualified” to lead the firm.

Yes, he also brought success to the firm and vindicated his convinction of leading the firm to new heights – most notably, with the sale of his family stake to a Japanese firm for approx $5bn. He may have retained his position as CEO of the firm, but I suspect that after various issues related to the US drugs regulator and also their huge losses, he would’ve had no choice but to walk.

In one way, this seems to complete the story. With the sale of their stake, Malvinder hung in there and still talked of Ranbaxy as an Indian firm. With his exit, Ranbaxy can move on.

So, has Malvinder shown us the future of family owned businesses? Please post your comments.

Is a Congress Party win good for global commerce?

Now that we know that the Congress have won the general election with a comfortable margin, which allows them to be that little bit more confident in their agenda setting, the question that I’ve been most asked is whether a Congress victory is good for the international business.

If what a business leader most wants is stability, then I believe that the people have delivered a much more stable government than the last, which was run on the whim of the Communist Comrades of West Bengal.

We must also take some comfort in the fact that senior Ministers like Chidambaram and Kamal Nath have made statements that recognise that the reforms process must move forward – whether this is to do with labour reform or increasing FDI in various industry sectors. The latter is what I’d like to examine further.

Its proven that in sectors such as IT, biotech or telecom – which are ‘open’ to foreign equity and participation, we’ve seen huge growth – some commentators estimate around 40% growth year on year. Whereas in ‘closed’ sectors such as retail, legal services or accountancy, you’ve only seen single digit growth. The argument being that the more ‘open’ India becomes, the greater the chances of her becoming more competitive and successful.

Chidambaram has commented on the inadequate level of life insurance cover in India as being “totally pathetic”, and also often stated the need to bring reforms to the banking sector, does this mean that we should expect the reforms required to ensure that the Indian consumer gets more value for their money?

Well, without the Communists holding a gun to their heads, it seems that the Congress Party has a range of options to pursue to take the globalisation agenda forward. The international community expects it, and to be honest, I’m not sure the Indian Government will have any plausible excuses to defer critical economic reforms or on delivering on Doha much longer.

Does the BJP have what it takes to steal a victory?

So, what’s the latest thinking on the Indian elections:

1. Voter turnout has been poor in Mumbai, pundits say this is down to two things: (a) generally, middle class and urban populations don’t vote and (b) abstaining due to the Mumbai terrorist attack of last year.

2. Lower caste commuity in Uttar Pradesh, Mayawati’s back-yard – where she was expected to clean up, it seems are not as enthusiastic as she is about broadbasing the Bahujan Samaj Party by providing upper caste people berths in the party. As a result, voter turnout has been low in some parts of UP.

3. Given Mayawati’s slowdown, people are talking up the possibility of the BJP picking up seats whereas this seemed improbable previously.

4. There’s been a continuous campaign to create a split in the NDA with suggestions that partners like Nitish Kumar in Bihar are going to gravitate towards the third front. In all honesty, he hasn’t made it easy for himself either by being vague in a key TV interview.

5. It seems likely that the BJP will emerge as the single largest party in the Lok Sabha. Whether this guarantees them the numbers required to form a government is opaque at the moment. It all comes down to the level of horsetrading they want to get down to.

On the eve of Indian elections… new poll research

Thought you may be interested in the Indian election survey we commissioned.

What it shows:

• So far, the electorate have been treated to a ‘policy-lite’ campaign, with no real debate on substantive issues. Caste and religion remain defining issues in this election.

• Anyone can still make it. It’s all down to the post poll alliances that are struck at the end.

• The Congress & BJP will have an equal share of seats, it’s their coalition allies that will make the essential difference.

• Previous groupings like the UPA (Congress Party + partners) & NDA (BJP + partners) have more or less been disbanded. They remain convenient terms to apply, but mean little in the real sense.

• Regional parties are flexing their muscles by choosing to join together, under banners such as the Third Front or Fourth Front, avoiding grand alliances offered by the Congress or BJP.

Detailed breakdown of projected wins under four main scenarios is here: http://indiabriefingcentre.files.wordpress.com/2009/04/090414-sc-team-cvoter-election-survey2.pdf

Musings from last week…

The Congress withdraw a senior Congress MP over his alleged involvement in the 1984 Sikh riots that occurred after Indira Gandhi was assassinated by her Sikh bodyguards. At a press conference last week, a Sikh journalist threw a shoe at the Home Minister as a sign of protest, which snow-balled into the two MPs withdrawing their candidature and bringing media attention to the Congress Party’s record on communal politics, which was a huge relief for the BJP as this shifted media attention from Varun Gandhi’s “hate speech”, that was being played out in the media in preceding weeks.

Personal attacks from the Congress leadership have intensified. Manmohan Singh (uncharacteristically) and Rahul Gandhi have publically criticised Advani, the BJP’s Prime Ministerial candidate. Excerpts from a press conference below:

“Mr Advani has strength in speech with weakness in action.” – Manmohan Singh on LK Advani

“I would not have been found weeping in the corner, when a mob of hoodlums was destroying the centuries’ old mosque.” – Manmohan Singh on LK Advani when the Babri structure was razed to the ground in 1992.

In obvious reference to the Kandahar plane hijack episode Manmohan Singh said, “The difference between the UPA government and the NDA government is that they released terrorists while we killed nine and captured one alive.”

Referring to Mr Advani’s remarks that he did not know about the release of terrorists and the flight to Kandahar carrying Jaswant Singh, Rahul Gandhi said: “If he is such a strong leader, how come then the home minister did not know something…there are two possibilities. Either he is not telling the truth or his senior leader, Prime Minister Vajpayee, did not trust him”.

Likewise, LK Advani demanded an apology from Sonia Gandhi for her statement that India was in greater danger from people inside than foreign terrorists, which he said was an implied attack on the BJP. Advani said he was shocked about her remarks that “we are in greater danger from people inside than from foreign terrorists entering India”.

He said though Gandhi did not name his party, it “substantially accuses us and the comments were clear”.

On the third front, he said: “The so-called Third and Fourth Fronts were irrelevant as they were opportunists, who had no platform on their own or a common platform. The CPI(M) was trying to cobble a Third Front only to fight its own growing irrelevance.”

Playing chicken with Ratan Tata. Is this wise?

Just watched the Ratan Tata interview on Sky News in which he issues a stark warning to HMG about the need to provide funding to Jaguar Land Rover. He said something to the effect of “…the government is being shortsighted in playing a game of chicken with us, as the result could be devastating for the UK economy”.

More than the message, what impressed me was their realisation that they have a far larger armoury at their disposal than what they’ve previously believed. By using a TV interview to tom-tom his messages, he’s reaching out to a far bigger set of stakeholders to persuade them to use any leverage they may have with the Government to secure the best deal possible.

Having worked in and around Westminster, I have no doubt that Peter Mandelson has Ratan Tata’s mobile number on his speed dial and speaks to him often, for the simple reason that Tata employs nearly 50,000 people in Britain alone.

What Ratan Tata says and thinks is important to the Government and for this reason, I think that by using such tactics, he is preparing himself to throw everything – including the kitchen sink – at ensuring a positive outcome for his company.

For the record, I’m sure that Mandelson – in these times, has a massive job in figuring out what’s best for the country, the one thing he should factor into his thinking is that Tata has a fantastic, ethical, and serious track record in doing the right thing with the long term in mind.

IPL in England

With the BCCI’s decision of shifting the IPL out of India, one would think that the chances of the Congress Party returning to office are diminished as a result of this one decision. Anything other than this is simply not comprehensible for the simple reason that cricket is religion in India. Or so it would seem..

IPL Commissioner – Lalit Modi’s ability to articulate and convey key messages has to be applauded, as I believe he recognised and stemmed any criticism by positioning the general election as being of paramount priority to India and for once, cricket needed to come second! In a land in which cricket is religion and Sachin Tendulkar is God, Lalit Modi’s played his master innings by rolling out personalities like Sachin and Shah Rukh Khan to reinforce his messages as he realises that the last thing he or the IPL wants to be accused of is being ‘anti-national’.

As we’re in an election cycle, It goes without saying that the Opposition is using this opportunity to paint the Congress as being soft on security matters; and the Congress realising that in a country where cricket is taken so seriously, it needed to get its rebuttals in quickly.

So, would the IPL work in England?

There’s no doubt that the ECB, like every other cricketing nation, was green with envy with what they witnessed last year in India. By rolling out the red carpet to the BCCI, the ECB would undoubtedly regain a central role in international cricket, and if it plays its cards well, would suggest that the ‘Indian’ is substituted by ‘International’ in the title of the competition.

With regards to the logic of shifting to England, Sachin was right in saying that whilst the Indian public wouldn’t have the same experience as last time, the larger Indian diaspora living in the UK would come out to support their teams, as they do everytime India tours here.

Even with our unpredictable weather, Easter weekend and May Bank holiday coming in between, I believe that having it here is for the greater good of the game.