India: Land of Global Business OpportunityPublished: June 17, 2010 in Knowledge@Emory
India has long been known as an outsourcing hub for manufacturers looking to source components for automobiles, electronics and appliances.
But behind closed doors, the country’s new and increasingly time-strapped middle class is outsourcing at the family level—at least when it comes to cooking, cleaning, and child care.
The rise of the “call center couple” epitomizes India’s shift from an insular, socialist society to a globally integrated economy, says Jagdish Sheth, a chaired professor of marketing for Emory University’s Goizueta Business School.
Sheth, along with Ambassador Arun Singh, deputy chief of mission to the U.S., delivered the keynote address at the recent Emerging India Summit held at Emory. The talk, “India Rising – The Destination Decade,” was moderated by Marion Creekmore, a distinguished visiting professor of history and political science at Emory. Later, a panel on “Fostering Bilateral Relationships” addressed the evolution of Indo-U.S. cooperation in areas of defense, trade, energy and the environment.
The student-organized summit brought together academics, business leaders, and diplomats to discuss the challenges and opportunities faced by India in areas of new media, education, business development, and health care as the country develops into a global business destination. It was sponsored by Emory College of Arts and Sciences, Goizueta Business School, Rollins School of Public Health, and The Halle Institute. Attracting more than 500 attendees in its inaugural year, the conference is expected to strengthen the relationship between Emory and India.
India’s spike in consumerism—70 years on the heels of the U.S.—brings enormous market potential that is due, in part, to the sheer size of its population, Sheth says. Currently 60 percent of consumption in India is “unbranded,” with small grocers populating the country. Blessed with the “3-D advantage” of demographics, democracy, and diversity, India offers potential for “organized retailing for the masses,” such as ready-to-consume products and services, says Sheth. As a result, India is poised to overtake the U.S. as the world’s largest economy by 2050, provided that the nation continues to forge bilateral trade agreements with advanced and emerging economies, develops its agricultural sector, and calls on its impressive pool of technical and scientific manpower.
“Ten years from now, we will not think of Bangalore as the IT capital of India. It will be the aerospace capital of India,” Sheth says.
The China Effect
Sheth’s book “Chindia Rising” (2008) explores the enormous global business implications of India’s and China’s rise during the first half of this century. While the economic and political ideology of advanced countries fueled growth during the last century, emerging nations will take center stage during the 21st century, argues Sheth.
Beginning in 2025, China will start to plateau due to an aging work force and a one-child family policy. India, by contrast, will continue its upward trajectory as the bulk of its population remains in the working-age bracket, Sheth says.
India can offer global companies strategic partnerships in a variety of industries, including pharmaceuticals, manufacturing, IT, and life sciences, says Ambassador Singh. Volvo, for instance, already sources $1 billion in auto parts from India annually and expects that number to grow five-fold over the next few years.
India also has a reputation for high-quality, affordable health care delivery and pharmaceuticals, attracting patients from both developing and developed countries. Citing the growing popularity of medical tourism, Singh says, “We should be looking at health care that can be provided in India to lower the costs in the U.S.”
Still, India must manage challenges related to internal security, equitable growth and development, and channeling its skilled and growing human capital base.
“There is a very large segment of the population that is not yet part of India’s growth,” says Singh. “You cannot bring about inclusive growth without having higher income growth.”
India’s power capacity will triple to 400,000 megawatts by 2030 and the government has committed to spending $500 billion to expand ports, roads, airports and other public infrastructure in the coming years, says Singh. Similarly, India plans to rapidly expand its higher education system by building 40 new universities, including 14 top-tier innovation centers.
India must increase its productivity levels related to food security and lower its dependence on fossil fuels, notes Singh. Today, 400 million residents of India lack access to commercial energy.
As India investigates renewable and alternative sources of energy, such as wind and solar power, explores new counterterrorism technologies, and works to expand telecommunications, tremendous opportunities will arise for U.S. companies to partner in its “growth story,” says Singh.
India will succeed by attracting foreign direct investment, but also through multi-billion-dollar acquisitions by Indian companies in the U.S. and the European Union, adds Sheth.
New Face of Indo-U.S. Relations
In a separate panel discussion, “Fostering Bilateral Relationships,” Anupam Srivastava, director of the Asia program for the Center for International Trade and Security at the University of Georgia, traced the political genesis of the current U.S.-Indian relationship, beginning at the close of the Cold War when the U.S. was looking to align with stable growth partners.
Momentum for a military partnership has waned under the current administration, Srivastava notes, as Washington sees less of a strategic benefit in enhancing New Delhi’s military capabilities to pursue shared US-Indian interests in the Asia Pacific. Even so, the two countries are building a broad-based relationship including enhanced funding for educational exchanges, working jointly to reduce carbon dioxide emissions, partnering to accelerate value-added economic growth, and stepping up cooperation in non-proliferation and counter-terrorism initiatives. Last year, U.S.-Indian trade in goods accounted for $45 billion, and India’s direct investment in the U.S. has already eclipsed U.S. investment in India.
“India is an ascendant but also a transitional state in the international system, and often acts like a Trade Union leader while simultaneously seeking a seat at the business high table,” says Srivastava about India’s current diplomacy and negotiating style.
Gordon Streeb, a former deputy chief of mission in New Delhi, described a strained relationship with the Indian government following former Prime Minister Indira Gandhi’s assassination in 1984. Streeb, now a professor of economics at Emory, recalled the Indian media blasting U.S. hegemonic policies and the roadblocks encountered by U.S. businesses looking to invest in India.
Three “tectonic changes” occurred to cement an unlikely U.S.-Indian bond, according to Creekmore, also a former deputy chief of mission in New Delhi.
In 1991, India accepted a market-oriented economic program, and the dissolution of the Soviet Union caused the U.S. to pull away from Pakistan. A 1998 nuclear test in India threatened to derail a fragile relationship, yet former President Bill Clinton visited New Delhi two years later to promote a strategic partnership. In 2008, India and the U.S. signed a bilateral nuclear cooperation agreement, characterized by Creekmore as the single most important deal brokered between the two nations.
“The U.S.-Indian relationship is closer today than it has ever been,” Creekmore says. “For that relationship to endure, both nations need to focus on areas of common interest while working diligently to manage areas where priorities diverge. For instance, India would prefer to see several major power centers around the globe, while the U.S. is reluctant to relinquish its superpower status. Moreover, neither nation is willing to set up an alliance against China,” he adds.
“Brain Hemorrhage” of Talent
More recently, restrictive U.S. immigration policies, fueled by fear, have resulted in a “brain hemorrhage” bleeding Indian talent from the U.S., according to Vivek Wadhwa, who holds appointments at Duke and Harvard Universities and is the founder of Relativity Technologies, a software startup.
At the height of the dot-com bubble, 15 percent of technology companies in Silicon Valley were founded by Indian immigrants, who represented only eight percent of the region’s population. These highly skilled workers mentored newer transplants, sparking innovation and helping to revolutionalize information delivery.
“Indians have gone from being despised as beggars and snake charmers to being feared for taking American jobs away,” says Wadhwa, a columnist for BusinessWeek.com. “We’re basically handicapping U.S. business.”
For the U.S. to remain competitive, the federal government must work to lower the barriers to entry, he explains. Today, Indians build the circuitry for Amazon Kindle in New Delhi, manufacture first-class jetliner cabins in Bangalore, and design Whirlpool and GE refrigerators in Pune. Meanwhile, the U.S. awards about 8,400 green cards to Indian immigrants each year, the same number reserved for Mauritius and Iceland.
Moving forward, China and the environment will be key factors in defining the relationship between the U.S. and India, according to Sheth.
“India is fast-forwarding into the modern age in a much shorter time period than one would imagine,” he says.
Recalling poet Rudyard Kipling’s famous line, “East is East and West is West and never the twain shall meet,” Sheth adds, “He’s not only dead, but wrong.”