Category Archives: doing business in India

World Economic Forum – India derailed.

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Such is the faith of people in India that problems, challenges, opportunities, and any successes are often attributed to a divine force – the almighty. I remember a raging argument with my mother when I was a child, in which she basically justified her in-action by citing the same – “if it’s meant to be…”, which I’ve always seen as a cop-out as she avoided taking responsibility for an action.

Well, the reason I mention this is that having participated in the World Economic Forum’s India Summit in Mumbai earlier this week, India’s political & business leadership reminded me of the raging argument between my mother and me. Just that in this case, India’s much celebrated captains of industry became my mum for two days.

The problem is that everyone now recognises that the challenges India faces are possibly too big to overcome. The shine has truly come off. The penny’s dropped and they don’t know what to do. So they’re happy just to bumble on and see what happens (if it’s meant to be…)

Such was the elation of the mid 2000’s, that she was pleased to have been invited to the G20, and other international platforms, it seems that they’ve forgotten that if they desire global recognition, they need to offer solutions that fix problems.

Take, for example, the construction industry which itself will see an investment of a trillion dollars over the next ten years, but where are the skilled tradesman? In a similar fashion, take any profession and you arrive at the same problem.

India’s much talked of demographic dividend stands to turn into the exact opposite if practical solutions are not found. It’s far too easy to say that the private sector needs to play a role by harnessing the opportunity. India’s government needs to follow through by creating a favourable policy environment, else… the risks to her growth are simply too significant to consider.

I’m quite a positive guy, but this Summit knocked the stuffing out of me.

Corruption, a bloated bureaucracy, a ego, all stand in the path of progress. That’s what the India Summit confirmed in my mind.

Delhi’s Commonwealth Games – Will it be “alright on the night?”

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Having just visited Beijing, I’m astounded with what they achieved as a result of the Olympics. In the same breath, I’m equally astounded with the manner in which the Indian Government has handled the preparations for the Commonwealth Games, which are due to open in the first week of October.

There’s been public outrage in Delhi with politicians being accused of corrupt practices, bad administration, and ultimately with squandering the great image it’s built up globally on the back of her economic prowess.

I’m told that Delhi still resembles a construction site, with massive traffic problems, and air pollution that’d make you want to be elsewhere, no surprise that some of the world’s biggest athletes, like Usain Bolt, have decided to stay away.

Indians are trying to salvage the situation, but I fear the damage has already been done. Suresh Kalmadi, the main organizer is reported to have said that “it’ll be alright on the night”. But really, is this the attitude to take when you’ve used hundreds of millions to deliver an event that we’ll most probably want to forget. Wouldn’t it have been better just to commit the money to tackling poverty, which blights India so badly?

If you look at this politically, cast your minds to the building of our Millennium Dome, in which Tony Blair and Peter Mandelson came under major criticism for what as described as a ‘white elephant’. Despite the monetary figure being so much lesser than what’s being spent on these Games in Delhi, they nearly lost their jobs.

If political conventions straddled continents, I’m sure Manmohan Singh’s head would ultimately roll, but as we’re taking about India, I can’t think of a more appropriate phrase than that devised by her tourism department for promote India – the Commonwealth Games are taking definitely taking place in“Incredible India’.

UK – India Trade & Investment Statistics – July 2010

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I found the following here:

India’s economic and political influence in the world is growing. It has enormous dynamism and potential.

India is critical to HMG’s objectives; from development, regional stability and trade and investment to energy security, climate change, counter terrorism and reform of the global international systems.

The government is committed to a special relationship with India, one that reflects our deep and historic ties and recognises India’s strategic importance.

This is underpinned by strong people-to-people links. Over 1 million people travel between the UK and India every year. Between 1.5m and 2m people of Indian origin live in the UK, the largest ethnic group. They make a significant contribution to the UK economy and enrich British society with their traditions, culture and diversity.

Partners in business
Trade and investment flows between the UK and India are two-way and continue to expand rapidly. The UK is by far the most popular business destination in Europe for Indian companies. 700 out of the 1200 Indian firms in the EU operate from the UK. Tata is the largest single manufacturing company in the UK.

Bilateral trade was £11.5 bn in 2009 and £ 12.6 bn in 2008 (Source: BIS Economics & Statistics Directorate, UK). In 2009, UK exports to India (goods and services)were £ 4.7 bn (£4,687mn) and imports from India were £ 6.8 bn (£6,763mn).

The UK is the largest European investor in India and the fourth largest internationally (after Mauritius, Singapore and the US) with £3.87bn of FDI stock in 2008. Indian FDI stock in the UK stood at £3.43 bn at the end of 2008.

The two biggest acquisitions for India globally involve the UK: Vodafone’s £7.3bn ($11bn) acquisition of Hutchison in 2007 and Tata’s £8bn ($12bn) acquisition of Corus in the same year.

Partners in the Knowledge Economy

Together, the UK and India are leaders in ensuring that knowledge sectors drive inclusive economic growth in the 21st century.

There is an increasingly close partnership across all stages of learning, from support to primary school children, between UK and Indian Universities, to research into the most advanced technologies. UK skills providers and their Indian partners help deliver vocational training to young Indians.

International education is worth over £5bn each year to the UK, part of a total of £28bn generated by the UK’s international education and skills sector. Over 40,000 Indian students enrolled for higher education courses in the UK in 2009, the second largest number after China.

There are over 80 collaborative UK-India programmes leading to UK degrees or awards in India. There are some 5,000 Indians studying for UK degrees in India.

India is one of the British Council’s biggest operations. In 2009-10 British Council administered over 210,000 UK exams in India. These were primarily English language tests and professional qualifications. The Council’s Project English aims to ensure that teachers and students of English have access to materials they need. The Project will train 3000 master teachers of English, and eventually reach 750,000 English teachers in India.

Up to 700 scholarship awards are offered to Indians by UK institutions each year, including 50 FCO-sponsored Chevening scholars. The 2006-11 UK-India Education and Research Initiative (UKIERI) has linked 475 schools and higher education establishments in the UK and India.

UK and India researchers collaborate in a wide range of areas, including key issues of global concern. The Research Councils (RCUK) Office in India and the UK Government Science and Innovation Network promote this work. In 2010, agreements were reached for up to £70m of joint-funded research in key areas including renewable energy, water, food security and health.

Partners in development

The UK works with the Government of India to reduce poverty and meet the Millennium Development Goals. DFID provided £285 million in aid to India in 2009-10, of which 44% went to national government programmes; 41% to the states of Bihar, Orissa and Madhya Pradesh, West Bengal and Andhra Pradesh; and 15% to multilaterals and civil society organisations. DFID graduated from its programme in Andhra Pradesh in 2010.

This partnership has delivered real impact in India. Since 2003, it has put 60 million additional children into school and provided 1 million new classrooms and teachers. Since 2005, it has helped save one life every 30 minutes (17,000 each year). Between 2008-10, it has provided 13 million people with access to improved sanitation.

Partners in security

Both the UK and India have suffered serious terrorist attacks over the years and are among the strongest proponents of international co-operation to counter terrorism and extremism.

The UK and India are strategic partners in this field. Bilateral operational links are expanding and deepening, in particular in the run-up to the 2010 Delhi Commonwealth Games and the 2012 London Olympics. The UK and India are sharing best practice in planning and preparedness in crisis management.

The UK-India defence relationship has never been stronger. The bilateral programme of exercises, exchanges, training courses and high-level visits across all Services continues to accelerate. The defence equipment co-operation is in good shape and includes supply of AW101 helicopters and Hawk Advanced Jet Trainers.

Partners on global issues

The UK strongly supports India’s candidature for a Permanent Seat on the UN Security Council and will continue to work with India to achieve this.

The UK and India are partners in the G20 and worked closely together to promote a global recovery after the 2008-9 financial crisis.

Migration

Migration is an important part of the UK-India relationship. The UK has its largest visa operation in India – with close to 425,000 visa applications made in 2009. The aim of the visa system is to allow the admission of genuine visitors, workers and students, whilst preventing abuse of the UK’s immigration system.

UK and India have a shared priority to prevent irregular migration and associated exploitation, and to effect the timely return of illegal migrants. We are working well together to achieve these objectives

Commonwealth Games

The UK looks forward to celebrating the Commonwealth Games in Delhi in October. The UK will be represented at the highest level by HRH the Prince of Wales.

The UK has full confidence in India’s commitment to deliver safe, secure and successful Games. British and Indian police and security officials are co-operating closely in the run-up to and the hosting of the events.

Last updated: 16 July 2010

Dear Dave… game-changing ideas on India for the PM

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Dear Dave-bhai,

Further to my last blog-post about the UK – India relationship, I wanted to offer two specific suggestions on how you could create a name for yourself on the UK – India circuit, which I know is what you and the remaining political class would love to do.

Whilst you’ve not announced it yet, we’re all aware that some people jumped the gun by letting it be known that you’re visiting India in July. In preparation, you may want to incorporate the following:

With the UK – India Trade & Investment relationship floundering rather than flourishing, your visit could mark a departure and arrest the decline if you did the following:

DITCH THE HIGH PROFILE CEO DELEGATION ON YOUR FORTHCOMING VISIT

As news worthy as they are, ditch the high profile CEOs that you’re planning to take along with you. What’s the point? They already have operations in India, they have the money to survive, and enjoy the access they so crave.

Instead, why don’t you take the Director’s of 20 SMEs ranging from widget manufacturers to regional retailers. It’s these guys that need the education and improved understanding of the opportunities a country like India provides. They fear the uncertainty of a very complex environment in India, but get the cost advantage of China, which is something your government needs to get right. After all, if you’re after a strategic partnership with India, you need to think a little beyond schmoozing the good & great from UK Plc on this much awaited visit.

EDUCATION, EDUCATION, EDUCATION

There’s no two ways about this, the world marvels in envy at our education system. We’ve known for a very long time that the education sector is as central to our global influence as the Bollywood film industry is to India, so let’s try and regain the lead that’s been stolen from us by the Americans and Australians in India.

We already have examples of success, such as Lancaster University that have set up a joint venture partnership in Delhi to provide accredited courses and degrees to students in India. They predict that in the not too distant future, they’ll have more graduates coming out of the Delhi campus than the mother base in Lancaster!

That’s just one example, but we could look at funding a new wave of research collaboration, educational exchanges at all levels, and perhaps could look at helping India in bridging its skills deficit as a result of our excellence in this field.

We know that India churns out more graduates that the whole of Europe together, but rather than get lost in such statistics, you would do well to understand that the Indian education system, on the whole, is not as great as we’re lead to believe. Why can’t UK centres of excellence enter into partnerships with struggling institutes of technology, science & engineering colleges, business schools etc which exist all over India to assist them actively?

Education could easily be the game-changer that you’re looking for.

Dave – the truth, as unpalatable as this may be to you, is that the previous government brought a paradigm shift to the way India is dealt with, here and in international quarters. However, the opportunity you have is also very clear to me. Put simply, exert some effort in making things happen and you’ll create a legacy that’s enduring.

With my best regards,

Vikas

Bhopal – a sad day for justice in India

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I haven’t had the opportunity to comment on Bhopal in any manner, so here I offer my quick thoughts:

More than a quarter of a century on, Indian courts deliver a verdict on the Bhopal tragedy which took over 8,000 lives within hours of a lethal gas being accidentally pumped into the air. It’s estimated that over 25,000 people have died as a result of the leak.

Only seven employees, including the Chairman of Mahindra & Mahindra who was the Chairman of Union Carbide India, have been given jail terms of a maximum of two years. They’ve been given bail and it’ll probably take years for the appeal to come to court.

I’m outraged and astonished at this verdict. If, in the context of India’s rise on the global stage versus China, people cite India’s legal system as the jewel in its crown, then I’d urge them to take a real look at this tragic situation.

There’s not much I can add to this blogpost apart from state my astonishment, disappointment and anger at the system.

What can one say apart from stating that today is a sad day for justice, a sad day for India!

David Cameron meets Indian CEOs

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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.

Is a Congress Party win good for global commerce?

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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.

Briefing on Indian Elections

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Following from the briefing that we’d organised yesterday evening at the House of Commons on the upcoming Indian elections, our inbox has been swamped with requests for the presentation made by Yashwant Deshmukh – who’s one of India’s top pollsters. Whilst we’re probably more immersed than others in keeping on eye on the machinations of Indian politics, I found the insights provided by the panelists and also some of the audience very logical and agreed with their analysis.

In particular, I felt that Lord Desai, who’s advised several Indian Prime Ministers, and clearly, has the inside track on politics, was exceptional in his comments. Despite the pro-Congress Party perception that people have of him, I felt he was very balanced and gave the Congress as hard a time as the BJP. He narrated a story to me of when he was awarded the Pravasi Bharatiya Sanman Award from Prime Minister Vajpayee and asked why, depite the stinging criticism of the NDA and of the BJP was he being awarded the honour. Vajpayee, in his response, said something to the effect of: “We take heart in the fact that you’re equally critical of the Congress”. 🙂

What Desai explained was that he expected the Congress to make it back and cited examples such as of the confidence that the Congress has shown through the very conservative interim budget a few weeks ago. He said that the lack of throwaway gestures and sops are a clear sign of their thinking. In addition, what I thought was a very personal insight, was his admiration for Sonia Gandhi’s long term strategic thinking – for example, her placement of Naveen Chawla (Chief Election Commissioner) and Pratibha Singh (President) in their current roles to coincide with the probable dates of the election and therefore strengthening her ability to fix the result, if required. I’m lead to believe that such moves are par-for-the-course across the political divide, but are less well thought through or executed.

Yashwant Deshmukh’s clear view was that he forsees a situation in which a minority party like Mayawati’s Bahujan Samaj Party could stake their claim to high office with the support of either principal party. What was interesting was that he termed the upcoming election as a ‘semi-final’ for the main event in 2012, in which he expects the contest to be between Rahul Gandhi and Narendra Modi.

I’ve placed his presentation for on our company website for you to download – www.saffronchase.com – let me have your views. Do you agree with his analysis?

The really interesting thing about the event was that apart from the panelists, there were several individuals in the audience who have been offered seats in the Indian parliament, or are involved in politics in India but make London their base. Such as, a past Mumbai region Organising Secretary for the NSUI; which is the Congress affiliated student body; a eminent businessperson who is regularly consulted by the Samajwadi Party and the Congress on various issues; a business magnate who’s been offered a party position in Delhi, a lawyer with equations with the gen-next of Indian politics etc etc.

In summary, all panelists agreed that in the next election, we’re going to see an overwhelming influence by regional parties, which may result in a minority government that is kept alive with the support of the Congress and will fall within two years.

On the foreign direct investment / commerce front, what was was clear was that there would be no rolling back of policy decisions, but you couldn’t guarantee the fast-tracking of initiatives such as the lifting of the caps in the financial services, retail sector and others. All agreed that they saw such decisions at a standstill for the next few years.

We’re organising a visit for those interested to India at election time to soak up some of the atmosphere by attending mammoth rallies (100,000 people minimum), and to see for ourselves the key issues that candidates face in their constituencies. We received great interest from the audience, please let me know if you’re interested in joining our delegation. We hope to take some UK parliamentarians, businesses, journalists and others to witness the largest democratic exercise conducted on the face of this planet.

It's Christmas… the politics of public holidays

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With Christmas and Boxing Day around the corner, I was asked whether India celebrated these holidays. Questions such as: do queue’s appear at petrol stations on Christmas Eve? are the supermarkets gridlocked? do the TV channels beam old classic films like Star Wars into their living rooms, like they do in Britain? Of course, not! India has its own unique way of doing things!

We shouldn’t forget that public holidays are decreed by parliaments in democratic nations and by virtue of this simple fact, politicians are often lobbied to extend their number. Groups of every nature and interest make the case every year that a national holiday would support the promotion of their cause. Luckily, in Britain, our MPs have resisted the call, but the situation in India is wholly different.

As a result of its religious diversity, India celebrates an exceptional number of public holidays, especially if you’re a civil servant. There have been suggestions that the number be curtailed to eight, but political compulsions and votebank politics trump common sense and at times economic progress.

Being a practical person, I’d advise those on vacation to visit India during one of the major holidays to experience the huge difference in the way festivals are celebrated. As a business traveller, you’d be stumped if you didn’t check the public holiday calendar before booking your tickets.