Index

1. Introduction..05 2. Foreign Direct Investment (FDI)..08 3. Shining Indian ". Im#act o$ u!tinationa!10

%&s on Indian Industria! Sectors..11

'utomo(i!e Industr).12 anu$acturing Sector...1"

*e!ecom Industr)..1+ ,esearch - Deve!o#ment.1. I* Industr).21 Food - /everages Industr)..2" 5. &ase0Stud)11 Im#act o$ 2!axo0Smith3!ine +. 56 mar7s Indian 8m#!o)ment erger24

i!estone28

4. &ase0Stud)21 6e#si &o.30 8. India v9s &hina.32 .. &onc!usion3+

Introduction *i!! 1..1: India ;as more or !ess a c!osed 8conom). *he rate o$ gro;th o$ the econom) ;as !imited. *he contri(ution o$ the !oca! industries to the countr)<s 2D6 ;as !imited that ;ere the main cause o$ shortage o$ $unds $or various deve!o#ment #ro=ects initiated () the government. In an e$$ort to revive the industries and to (ring the countr) (ac7 on the right trac7: the government (egan to o#en various sectors such as In$rastructure: 'utomo(i!e: *ourism: In$ormation *echno!og): Food and /everages: etc to the u!tinationa! &or#orations. *he %&s s!o;!) (ut re!uctant!) (egan to #our ca#ita! investment: techno!og) and other va!ua(!e resources in the countr) causing a surge in 2D6 and u#!i$tment o$ the econom) as a ho!e. *his ;as the #ost 1..1 era ;here the government (egan to invite and ;e!come giant %&s into the countr).

Opportunities for Developing Economies *he o##ortunities $or deve!o#ing economies are signi$icant as ;e!!. *hrough the a##!ication o$ ca#ita!: techno!og): and a range o$ s7i!!s: mu!tinationa! com#anies> overseas investments have created #ositive economic va!ue in host countries: across di$$erent industries and ;ithin di$$erent #o!ic) regimes. *he sing!e (iggest e$$ect evidenced ;as the im#rovement in the standards o$ !iving o$ the countr)>s #o#u!ation: as consumers have direct!) (ene$ited $rom !o;er #rices: higher ?ua!it) goods: and (roader se!ection. Im#roved #roductivit) and out#ut in the sector and its su##!iers indirect!) contri(uted to increasing nationa! income. 'nd des#ite o$ten0cited ;orries: the im#act on em#!o)ment ;as either neutra! or #ositive in t;o0thirds o$ the cases. Foreign direct investment is a!read) having a dramatic im#act on the ;a) com#anies do (usiness and deve!o#ing economies integrate ;ith the g!o(a! econom). &om#ared to its #otentia!: ho;ever: it>s =ust a dro# in the (uc7et.

Impact On Developing Economies & Policy Implications: Investments () mu!tinationa! com#anies ( %&) a!!o; deve!o#ing economies to share in the considera(!e (ene$its o$ the g!o(a! econom). @$$icia! incentives: trade (arriers: and other regu!ator) #o!icies: though: can resu!t in ine$$icienc) and ;aste. &ase studies revea! that in virtua!!) a!! cases: %& investment had a #ositive to ver) #ositive

im#act on the host countr). ,ather than !eading to the ex#!oitation o$ !o;er0;age ;or7ers: as some critics have charged: the investments $ostered innovation: #roductivit): and an im#roved !iving standard. *here$ore: government see7ing those advantages ;ou!d (e advised to $avor #o!icies o$ o#enness: rather than regu!ation: ;hen it comes to $oreign direct investment. The world's service provider

*he services sector: ;hich has (een gro;ing consistent!) at a rate o$ 4 #ercent #er annum: accounts $or a!most ha!$ o$ the countr)>s 2D6. 8x#ort revenues $rom the sector are ex#ected to gro; $rom A8 (i!!ion in 2003 to A"+ (i!!ion in 2004.

2!o(a! investment (an7s: (ro7erages and accounting $irms have set u# !arge research ex#erts to devise mode!s $or ris7 ana!)sis: consumer (ehaviour and industria! #rocesses. Indian Exports Overview in !s" #rore$ %E&! ,--./-, ,--,/-1 ,--1/-0 ,--0/-5 ,--5/-2 ,--2/-6 E'PO!T( 01223 55.51 20633 6-42, 31645 ,.6020 )!O*T+ !&TE ,4"4 02"0 1,"1-",3"2 13"6

esta(!ishments in India. ' gro;ing num(er o$ BS com#anies are hiring Indian mathematics

"

,--6/-4 ,--4/-3 ,--3/-,---/1... 1.../., 1..,/.1 1..1/.0 1..0/.5 1..0/.5 &pril/7an$ 1..5/.2 P$ &pril/7an$

,,33,4 ,0.,., ,0-420 ,2-26, 1.024, 1.-.,3 122,04 1-0064 111360"-. 1450,0"04

,,"4 -"2 4"5 ,5"1 14"6 1"63 11".6 ,5"-3 / 10".-

2ross Domestic 6roduct (2D6)

%ear 1.8508+ 1..00.1 1..10.2 1..20.3 1..30." 1.."0.5C 1..50.+ 1..+0.4 1..40.8 1..80..

*ota! 2D6 15+5++ 212253 213.83 2252+8 2388+" 8+10+" .2+"12 ..8.48 10".1.1 111220+

Total GDP
1200000 1000000 800000 600000 400000 200000 0
198586 199091 199192 199293 199394 199495* 199596 199697 199798 199899

(In Rs. Crores)

years

*he ;or!d>s service #rovider

*he services sector: ;hich has (een gro;ing consistent!) at a rate o$ 4 #ercent #er annum: accounts $or a!most ha!$ o$ the countr)>s 2D6. 8x#ort revenues $rom the sector are ex#ected to gro; $rom A8 (i!!ion in 2003 to A"+ (i!!ion in 2004.

2!o(a! investment (an7s: (ro7erages and accounting $irms have set u# !arge research esta(!ishments in India. ' gro;ing num(er o$ BS mu!tinationa! com#anies are hiring Indian mathematics ex#erts to devise mode!s $or ris7 ana!)sis: consumer (ehaviour and industria! #rocesses. *he (ric7 and mortar com#anies

India is not mere!) a #rovider o$ services. /esides (eing an outsourcing hu(: it has gro;n into a g!o(a! manu$acturing hu(. Dor!d cor#orations are no; !everaging its #roven s7i!!s in #roduct design: recon$iguration and customisation ;ith creativit): assured ?ua!it) and va!ue addition. '(out 20 #ercent o$ Indian automotive #roduction in 200" is ex#orted to deve!o#ed countries. India: & (ervices and 8anufacturing (upplier to the *orld (ector #ompany + Outsourcing #lient

I* Services

In$os)s *ata &onsu!tanc) Di#ro

2o!dman Sachs: 'etna: %orth;estern utua!: 'rm 8x: D5E: FeriGon 28: 5onda: B/S: 5S/& *ransco: 560&om#a?: %orte!: 2enera! otors: &IS&@: Son)

I*8S

#hasis /FE S#ectramind

&iti grou#: 'ccenture: 'utoHone: &a#ita! @ne De!!: 'merican 8x#ress: &a#ita! one

6harmaceutica!s

&i#!a Shashun &hemica!s Eu#in Ea(oratories

Ivex: Datson 6harma: 8on Ea(s 8!i Ei!!): 2S3 6harma '#otex: '66: Datson: 6harma

anu$acturing

/harat Forge *ata otors

eritor: &ater#i!!ar: *o)ota: Ford: F'D(&hina) ,over Imation: /'SF 6-2: Bni!ever: &o!gate

oser /aer 8sse! 6ro#ac7

Foreign Direct Investment FDI or Foreign Direct Investment re$ers to the investment o$ $oreign currenc) and other va!ua(!e resources () u!tinationa!s into the host countr). 4

FDI a!!o;s the host countr) to earn va!ua(!e $oreign exchange that can (e used $or $uture im#orts or to #a) o$$ existing !oans o$ the countr). *he 2overnment o$ the host countr) contro!s the FDI !eve!s in various segments o$ the econom) such as *e!ecom: ,etai!: *ourism: In$rastructure: ,esearch and Deve!o#ment: 'utomo(i!e and so on. 6erha#s the (iggest advantage o$ %&s is the in$!ux o$ va!ua(!e Foreign 8xchange. FDI is #roductive use. A series of ambitious economic reforms aimed at stimulating foreign investment has moved India into the front ranks of the rapidly growing Asia Pacific region.

re?uired () a deve!o#ing econom) such as ours to ta# unex#!ored resources and #ut them to more

*he Finance

inister c!eared "+ #ro#osa!s o$ $oreign direct investment (FDI) amounting to ,s "08.22 crore (BSA .3." mi!!ion) in Iu!) 200".

Dith a ha!$0(i!!ion strong midd!e c!ass: consumer demand in India ;i!! gro; s7) high. 'ccording to some estimates: "84 mi!!ion midd!e0c!ass Indians ;i!! s#end an additiona! A"20 (i!!ion during the next $our )ears.

It is evident. The investment scenario in India has changed. And the figures say that it is for the better.

*here has (een a shar# rise in the num(er o$ FDIs a##roved in 200". During the $irst seven months o$ 200": (et;een Ianuar) and Iu!): ,s 5:220 crore ;orth o$ FDI ;as a##roved. *his $igure: ;hich accounts $or on!) seven months o$ 200": amounts to .+ #er cent o$ the tota! FDI a##roved during the $u!! )ear o$ 2003. *he actua! FDI in$!o; too is ex#ected to sur#ass !ast )ear>s $igure 00 during the $irst seven months o$ 200" actua! FDI in$!o; at ,s ..503 crore ;as more than 80 #er cent o$ ;hat the countr) received in 2003.

In a bid to stimulate the sector further, the government is working on a series of ambitious economic reforms.

*he &entre has divested some o$ its o;n #o;ers o$ a##roving $oreign investments that it exercised through the Foreign Investment 6romotion /oard (FI6/) and has handed them over to the genera! #ermission route under the ,/I.

*he FDI ca# $or aviation has (een hi7ed $rom "0 to ". #er cent through the automatic route. *he government has scra##ed 6ress %ote 18: ;hich ;as acting as a deterrent to $oreign investors. It has set u# an Investment &ommission that ;i!! garner investments in the in$rastructure sector among others: and #!ans to increase the !imit $or investment in the in$rastructure sector.

India's foreign exchange reserves rose !"" million to a record high of #$".!% billion in &uly $""'.

&om#arison (et;een India and &hina ;ith res#ect to FDI India vs" #hina 9DI 9lows &hinese re$orm #rocess 1.44 5 )ears since 1.82 &hina BSD "508 m 10 )ears since 1.82 &hina BSD 134.1 m Indian re$orm #rocess 1..1 5 )ears since 1..1 India BSD ""88 m 10 )ears since 1..1 India BSD 15"83 m

Shining Indian

u!tinationa!s

India Inc. is $!)ing high. %ot on!) over the Indian s7).

an) Indian $irms have s!o;!) and sure!)

em(ar7ed on the g!o(a! #ath and !ead to the emergence o$ the Indian mu!tinationa! com#anies. .

Dith each #assing da): Indian (usinesses are ac?uiring com#anies a(road: (ecoming ;or!d0 #o#u!ar su##!iers and are recruiting sta$$ cutting across nationa!ities. Dhi!e an 'sian 6aints is #ainting the ;or!d red: *ata is ro!!ing out Indicas $rom /irmingham and Sundram Fasteners nai!s home the $act that the Indian com#an) is an entit) to (e rec7oned ;ith. (ome instances:

Tata 8otors se!!s its #assenger0car Indica in the B3 through a mar7eting a!!iance ;ith ,over and has ac?uired a Dae;oo &ommercia! Fehic!es unit giving it access to mar7ets in 3orea and &hina.

!an:axy is the ninth !argest generics com#an) in the ;or!d. 'n im#ressive 4+ #ercent o$ its revenues come $rom overseas. Dr !eddy's ;a:oratories (ecame the $irst 'sia 6aci$ic #harmaceutica! com#an) outside Ia#an to !ist on the %e; Jor7 Stoc7 8xchange in 2001.

&sian Paints is among the 10 !argest decorative #aints ma7ers in the ;or!d and has manu$acturing $aci!ities across 2" countries.

Sma!! auto com#onents com#an) <harat 9orge is no; the ;or!d>s second !argest $orgings ma7er. It (ecame the ;or!d>s second !argest $orgings manu$acturer a$ter ac?uiring &ar! Dan 6eddinghaus a 2erman $orgings com#an) !ast )ear. Its ;or7$orce inc!udes Ia#anese: 2erman: 'merican and &hinese #eo#!e. It has 31 customers across the ;or!d and on!) 31 #ercent o$ its turnover comes $rom India.

Essel Propac= is the ;or!d>s !argest manu$acturers o$ !amitu(es 0 tu(es used to #ac7age tooth#aste. It has 14 #!ants s#read across 11 countries and a turnover o$ ,s +0..2 crore $or the )ear ended Decem(er 2003. *he com#an) commands a staggering 30 #ercent o$ the 12.8 (i!!ion0units g!o(a! tu(es mar7et.

'(out 80 #ercent o$ revenues $or Tata #onsultancy (ervices comes $rom outside India. *his month: it raised ,s 5".2 (i!!ion (A1.14 (i!!ion) in 'sia>s second0(iggest tech I6@ this )ear and India>s !argest I6@ ever.

Infosys has 25:+3" em#!o)ees inc!uding +00 $rom 33 nationa!ities other than Indian. It has 30 mar7eting o$$ices across the ;or!d and 2+ g!o(a! so$t;are deve!o#ment centres in the BS: &anada: 'ustra!ia: the B3 and Ia#an.

(undram 9asteners is not mere!) a nuts and (o!ts com#an). It (e!ieves in thin7ing out o$ the (ox. 6ro(a(!) that is ;h) it decided to ac?uire a #!ant in &hina. *he #!ant in Iiaxin cit) 10

in the 5ai)an economic Gone has ensured one $act1 that its customers ;ho ;ere ear!ier (u)ing Sundram #roducts in 8uro#e and the BS: did not have to go $ar $rom home to access the #roduct.

Impact of MNCs on Indian Industrial Sectors So $ar: ;e have ana!)Ged the Indian 8conom) and the ;a) in ;hich mu!tinationa! have added more va!ue and increased the ex#orts: 2D6 and #roductivit): resu!ting in a!! round deve!o#ment. Further more: ;e have the actua! ana!)sis o$ the e$$ect o$ %&s on various Indian Industria! %&s i.e. the #ractica!

Sectors. &ertain im#ortant sectors are considered and the actua! e$$ect o$ ;a) in ;hich the) are a$$ected are studied viG. 1. 2. 3. ". 5. +. 4. 8. 10. 11. 12. 1". .. &ement 'viation 'utomo(i!es 'uto &om#onents /iotechno!og) Financia! Services Food Industr) 2ems and Ie;e!!er) 5ea!thcare In$ormation *echno!og) I* ena(!ed Services edia - 8ntertainment 13. 15. 14. 18. @i! - 2as ,ea! 8state ,etai! 6harmaceutica!s 1+.

,esearch - Deve!o#ment Science - *echno!og) 11

1.. 20. 21. 22. 23.

Stee! *exti!es

*e!ecommunications *ourism - 5os#ita!it) *raining - 8ducation

Im#act @$

%&s on 'utomo(i!e industr) u!tinationa! giants are v)ing ;ith one other to

*he #resent scenario is a high!) trans$ormed one. otors:

!aunch their mode!s. /ig names o$ the vehic!e industr) !i7e the 3orean giant: 5)undai: 2enera! itsu(ishi etc. have a!read) o#ened their account. In other vehic!e segments too: Fo!vo: other ma=or %& (rands made avai!a(!e to the Indian consumers. ercedes /enG: 'udi etc. have carved out their niche. In the t;o0;hee!er segment (esides the

's a resu!t conducting (usiness in the 'utomotive Industr) has (ecome more com#etitive and so#histicated: ;hich increases the demand $or mu!ti s7i!!ed #ersonne!. 8m#!o)ment o##ortunities are emerging ;ith anu$acturers: Dea!ershi# @#erations inc!uding 6arts: Sa!es: Service: Eeasing - Financing: as ;e!! as in the $ast deve!o#ing 'utomotive '$termar7et sector. @n the other hand: itsu(ishi: !i7e *e!co: anu$acturing in India has a!so come o$ age. *he #ost !i(eration economica! otors: Ford: *o)ota: 5onda: SuGu7i:

scenario has resu!ted in a!! the (ig names such as 2enera!

ercedes0/enG: Fiat to come u# ;ith #!ants in India. *he Indian automotive giants ahindra: 'sho7 Ee)!and: /a=a= are revam#ing their #roduction strategies and

!aunching ne; mode!s designed and deve!o#ed indigenous!). *his has o#ened u# numerous o##ortunities or em#!o)ment in this sector $or trained and s7i!!ed #ro$essiona!s ;ho are ;e!! versed in the !atest manu$acturing #rocess. *he gro;th curve o$ India 'uto Inc. has (een on an u#s;ing $or the #ast $e; )ears. *he high gro;th o(served since 2001002 in automo(i!e #roduction continued in the $irst three ?uarters o$ the 200"005. 'nnua! gro;th ;as 1+.0 #er cent in '#ri!0Decem(er: 200"K the gro;th rate in 200300" ;as 15.1 #ercent. &onse?uent to !i(era!isation: the arriva! o$ ne; and contem#orar) mode!s: eas) avai!a(i!it) o$ $inance at re!ative!) !o; rate o$ interest and #rice discounts o$$ered () the dea!ers

12

and manu$acturers a##ear to have stimu!ated the demand $or vehic!es and a strong gro;th o$ the industr). *he automotive industr) is the (arometer o$ an) ma=or econom) and the same ho!ds true $or India as ;e!!. *here has (een a #henomena! gro;th in the automotive manu$acturing sector in our econom). India has (ecome a !aunch #ad ,ising sa!es and strong gro;th #ros#ects heightened the #o#u!arit) o$ auto stoc7s in Iu!) 200" as $oreign institutiona! investors (FIIs) increased their sta7es in 7e) automo(i!e com#anies !i7e ahindra ahindra: 'sho7 Ee)!and: aruti Bd)og: *FS otors and 5ero 5onda.

2!o(a! names such as Daim!er &hr)s!er and 6orsche have (egun introducing their ne; o$$erings in India. Daim!er&hr)s!er #!ans to !aunch the ne; ercedes SE3 roadster: ;hich has =ust hit 8uro#ean roads: in India () @cto(er0%ovem(er 200". 6orsche is (ringing in the &a)enne and *o)ota is #!anning a simu!taneous re!ease o$ its I F. %ote: these mode!s are the !atest cars Gi##ing on internationa! roads and not the dated versions that ;ere #assed on ear!ier.

Im#act on the Indian

anu$acturing sector

*he resurgence o$ India>s manu$acturing sector has (een ?uite magica!. %ot on!) are #ro$its soaring: the sector is $ast s#reading its tentac!es a(road as man) Indian manu$acturing $irms inch c!ose to (ecoming true (!ue mu!tinationa!s.

13

*he Indian econom) gre; () 4." #ercent in the '#ri!0to0Iune ?uarter: FJ2005: (uo)ed () gro;th in manu$acturing and services. anu$acturing gre; 8 #ercent in the ?uarter: com#ared ;ith 4.+ #ercent in the #revious ?uarter. *he #icture is a(out to (righten $urther.

'ccording to a &II0 c3inse) re#ort: manu$acturing ex#orts $rom India are !i7e!) to gro; to A300 (i!!ion in 2015 $rom A"8 (i!!ion in 2003. *he countr) ;ou!d then have a 3.5 #er cent share o$ the ;or!d manu$acturing trade.

*o reach the A300 (i!!ion target: the industr) has to c!oc7 a gro;th o$ 14 #er cent ever) )ear as against the 11 #er cent rate at ;hich it is gro;ing at #resent.

anu$acturing ex#orts $rom India gre; 20 #er cent in 2003 over the #revious )ear. @$ the tota! A300 (i!!ion: A400 A.0 (i!!ion is ex#ected to come $rom =ust $our sectors 0 a##are!: auto com#onents: s#ecia!it) chemica!s and e!ectrica!s and e!ectronic #roducts. India>s ex#orts in these sectors ;ere A10 (i!!ion in 2002. 8anufacturing firms on expansion :inge

anu$acturing com#anies are #!anning to invest as much as ,s 200:000 crore over the next t;o )ears.

@$ ,s 200:000 cr: ,s 100:000 cr ;i!! come $rom interna! generation

5a!$ o$ this de(t ma) come through the 8&/ route ost cor#orates are going $or (ro;n$ie!d ex#ansion

,ising interest rates ;on>t im#act India Inc>s investments

Dith annua! out$!o;s averaging at A1 (i!!ion: the countr)>s ran7ing in B%&*'D>s out;ard FDI #er$ormance index has a!read) shot u# $rom the 104th #osition in 1... to the +1st s#ot in 2003. L *he t;o most im#ortant destinations $or Indian FDI !ast )ear ;ere the BS and the ,ussian Federation: accounting $or around 34 #er cent o$ the tota! Indian overseas investments during !ast )ear: ;hi!e 8uro#e accounted $or "0 #er cent o$ the tota! out$!o;. (ome large Indian investments 1"

@%2&>s 25 #er cent sta7e (u)0out in a Sudan oi! $irm $rom *a!isman 8nerg) o$ &anada $or A420 mi!!ion (around ,s 3:312 crore)

*he 5indu=a>s #urchase o$ contro!!ing interest in &3: a ca!! centre in the 6hi!i##ines

source>s S#anish !anguage centre in *i=uanna: 8anufacturing Outsourcing

exico

India is $ast deve!o#ing into a manu$acturing hu( $or ;or!d cor#orations ;anting to !everage the sector>s #roven s7i!!s in #roduct design: recon$iguration and customisation ;ith creativit): assured ?ua!it) and va!ue addition. '(out 20 #ercent o$ Indian automotive #roduction in 200" is ex#orted to deve!o#ed countries. Dhi!e some %&s enter into @8 dea!s to source com#onents: others have Indian arms to su##!) to g!o(a! mar7ets.

28 has entered into an @8

dea! ;ith *hermax India to su##!) chi!!ers $or the !atter>s #o;er s)stems.

South 3orean t;o0;hee!er ma=or 5)osung is ma7ing India the manu$acturing hu( $or its 250cc cruiser (i7e: '?ui!a through a technica! tie0u# ;ith 6une0(ased 3inetic 8ngineering. Ford otor &om#an) is aiming to source BSA 12001+0 mi!!ion ;orth o$ auto com#onents atsushita o$ Ia#an has decided to source 6anasonic

$rom Indian manu$acturers over the next t;o )ears under its India Sourcing 6rogram.

2!o(a! consumer e!ectronics giant

co!our te!evision sets $rom India $or its internationa! mar7et.

&o!gate is setting u# a (rand ne; tooth#aste $aci!it) in ;estern India ;hich ;i!! (e one o$ 15 such $aci!ities across the ;or!d.

Im#act on *e!ecom Industr)

@ne o$ the $astest gro;ing sectors in the countr): te!ecommunications has (een gro;ing at a $everish #ace in the #ast $e; )ears. *he s#eed o$ gro;th can (e gauged () the $act that in 200": ten

15

)ears a$ter #rivate te!e#hon) ;as introduced in India: the mo(i!e su(scri(er (ase had crossed the num(er o$ $ixed !ine connections.

Dhi!e $ixed !ines touched "" mi!!ion at the end o$ 200": the ce!!u!ar user (ase registered a +8 #er cent gro;th to touch the "80mi!!ion mar7. ore than a third o$ these su(scri(ers ;ere added during 200".

*he tota! te!ecom su(scri(er (ase: consisting o$ $ixed as ;e!! as mo(i!e users: registered a gro;th o$ 31."2 #er cent to touch .2.4+ mi!!ion at the end o$ 200". *he gross te!ecom user (ase stood at 40.58 mi!!ion at the end o$ 2003. ('ccording to the *e!ecom ,egu!ator) 'uthorit) o$ India (*,'I): the gro;th in the mo(i!e su(scri(er segment #ic7ed u# in Decem(er 200" a$ter remaining at around 1.5 mi!!ion #er month $or the #revious t;o months.)

*he )ear 200" ended ;ith the te!e0densit) reaching an a!!0time high o$ 8.+2: as com#ared to +.+5 at the end o$ 2003: an increase o$ over 30 #er cent.

In the mo(i!e segment: additions consisted o$ 1."2 mi!!ion 2S

su(scri(ers and 0.53

mi!!ion &D ' su(scri(ers. *he tota! o$ 1..51 mi!!ion mo(i!e users in 200" mar7s an increase o$ 11.5 #er cent over the 14.". mi!!ion additions made in 2003.

8ven in $ixed !ine: 2.+4 mi!!ion su(scri(ers ;ere added as com#ared to 2.15 mi!!ion ne; users during 2003: registering an increase o$ 2" #er cent.

*he non0voice mar7et (message and data services) $or mo(i!e o#erators has a!so registered tremendous gro;th in 200". 'ccording to a stud) () ID&: it had a gro;th o$ 13. #er cent )ear on )ear in 200". 't #resent non0voice revenue contri(utes around ".4 #er cent to the tota! mo(i!e services revenue: ;hich is around ,s. 1":5+0 crore (BSA 3.3 (i!!ion). 'na!)sts (e!ieve that i$ the current rate o$ gro;th is maintained: it cou!d add u# to amaGing $igures in the next $e; )ears. ' stud) re!eased () 8rnst and Joung sa)s revenues $rom the sector cou!d touch BSA 25 (i!!ion () 2004.

Telecom statistics 7anuary' .2 1+ 9e:ruary'.2 8arch'.2

*ota! su(scri(ers *e!e0densit) Fixed !ine 'dditions during the month o(i!e *ota! additions during the month 2S additions &D ' additions

."..2mn 8.80 "5.15mn 0.3.mn "..44mn 1.44mn 1.24mn 0.5mn Source1 *,'I

.4.03mn ..0 "5.5"mn 0.3.mn 51.".mn 1.+4mn 1.13mn 0.5"mn

.8.08mn ..08 "5..0mn 0.3+mn 52.14mn 0.43mn 1.2"mn 0.52 mn

9oreign interest *he gro;th statistics com(ined ;ith the government>s decision to increase the $oreign direct investment ca# in the sector to 4" #er cent is generating interest among g!o(a! investors. Dhi!e the government ex#ects over BSA 800 mi!!ion investment $rom $oreign te!ecom com#anies in the coming )ear: a num(er o$ them are a!read) here.

Ia#anese cong!omerate 3)ocera: ;hich has ac?uired the mo(i!e e?ui#ment division o$ &D ' techno!og) #ioneer Mua!comm: is setting u# a mo(i!e #hone manu$acturing #!ant in India: and ex#ects to shi# #hones to '$rica () the end o$ the )ear. It #!ans to start shi##ing to countries in South 8ast 'sia: 'ustra!ia and %e; Hea!and next )ear.

'!cate! ;ants to ma7e 2S

mo(i!e #hones in India. *he French ma=or is #!anning a ce!! 'sia06aci$ic mar7ets.

#hone manu$acturing $aci!it) in India ;ith an annua! ca#acit) o$ 2.505m units to cater to the

E2 recent!) started assem(!ing #hones in India and %o7ia #!ans to set u# a manu$acturing #!ant ;ith an investment o$ BSA 1000150 mi!!ion.

2!o(a! handset ma=or Siemens India Etd is #!anning to invest over BSA 500 mi!!ion in India in the next three to $our )ears $or setting u# ne; $actories and ex#anding its existing ca#acities.

14

Indian companies going glo:al India o$$ers an un#recedented o##ortunit) $or te!ecom service o#erators: in$rastructure vendors: manu$acturers and associated services com#anies. 's the sector has (een #er$orming ;e!!: the (u!ging (ottom !ines o$ Indian te!ecom com#anies are ma7ing them invest in assets.

*he *ata grou#>s Fidesh Sanchar %igam Etd. (FS%E) struc7 a A1300mi!!ion dea! to #ic7 u# *)co 2!o(a! %et;or7>s (*2%) 34:2080mi!e (+0:000 7i!ometre) su(marine $i(re o#tic net;or7 that connects northern 'sia: 'merica and 8uro#e. 's #art o$ the *2% dea!: FS%E a!so received a dar7 (uncommissioned) $i(re that !in7s Ia#an to Singa#ore and 200 em#!o)ees o$ *2%. *he *)co ca(!e has the !argest ca#acit) g!o(a!!). It is o$ the order o$ 4 tera(its on the 6aci$ic route. Dithin da)s o$ (agging *2%: FS%E inaugurated its o;n 3:14507i!ometre: 5.120tera(it &hennai0Singa#ore su(marine !in7. *)co has su##!ied the o#tic $i(re $or the &hennai0Singa#ore !in7.

FS%E>s ;as the second su(marine ca(!e dea! struc7 () an Indian com#an) in 200". ,e!iance In$ocomm had a!so #ic7ed u# FE'2 *e!ecom $or A210 mi!!ion a $e; months (e$ore FS%E (ought *2%.

*he *ata 2rou# has a!so ;on a (id to ac?uire 2+ #er cent sta7e in South '$rica>s second net;or7 o#erator (S%@) that gives the com#an) a mandate to deve!o# and o#erate (oth nationa! !ong distance (%ED) and $ixed0!ine net;or7s in the countr). *he deve!o#ment he!#ed *ata gain a $ootho!d in the South '$rican mar7et.

Technology advancements 'mong other tidings in the te!ecom sector are the techno!og) u#gradations (eing e$$ected in De!hi and um(ai. India ;i!! soon =oin the e!ite c!u( o$ countries that have 32 mo(i!e services. *he um(ai. *he net;or7: ;hich ;i!! have a ca#acit) o$ "m ahanagar *e!e#hone %igam Eimited ( *%E): the state0run te!ecom services #rovider: is setting u# India>s $irst 32 net;or7 in De!hi and !ines: ;i!! re?uire a tota! investment o$ ,s ":000 crore (BSA .1".. mi!!ion).

18

Im#act on ,esearch - Deve!o#ment India has emerged as the hottest destination $or mu!tinationa! com#anies ( %&s) starting or re!ocating their research - deve!o#ment (,-D) centres over the #ast t;o )ears. &hina comes next: though it continues to (e the !eading destination $or o#erations. *hese are some o$ the under!)ing trends that emerge $rom the 8rnst - Joung *rans$er 6ricing 2005 g!o(a! surve) that #o!!ed 3"8 mu!tinationa! #arent com#anies and 128 su(sidiar) cor#orations in 22 countries. 'round 10N o$ the res#ondents re#orted either ne; or re!ocated ,-D o#erations in the #ast t;o )ears. @$ this: 24N identi$ied India as the !eading re!ocation destination $or ,-D: $o!!o;ed () &hina ;ith 14N. *he (est07no;n Indian ,-D com#anies are in #harmaceutica!s and (iotech sectors. &om#anies such as ,an(ax): Dr ,edd)>s Ea(oratories: Sun 6harma and /iocon and Shanta /iotech are attracting interest $rom com#anies in the BS and 8uro#e: ;hich are see7ing a strong #!at$orm $or deve!o#ment s7i!!s. Fo!!o;ing in the $ootste#s o$ the in$ormation techno!og) ena(!ed services (I*eS) industr): ;hich #ut India on the ;or!d ma#: )et another sector 00 ,esearch and Deve!o#ment (,-D) 00 is ;itnessing increasing vita!it) and gro;th. ore than 125 Fortune 500 com#anies have o#ted to have their ,-D (ase in India. *he reasons $or this are o(vious. India>s ;ea!th o$ scienti$ic ta!ent is unmatched in the ;or!d.

%&s re!ocating their manu$acturing

India conducted its inaugura! test $!ight $or Saras: the countr)>s $irst indigenous civi!ian !ight0trans#ort aircra$t: in 'ugust 200".

'(out 1+5 institutions in the countr) are engaged in genetic engineering research: the De#artment o$ /iotechno!og).

com#rising 55 in transgenic ;or7: 25 in thera#eutics and 85 in (asic research: according to

1.

*he countr) has a!read) started commercia! cu!tivation o$ genetica!!) modi$ied cotton in 2u=arat and some southern states: ;ith severa! other cro#s in various stages o$ getting a##rova!s $or commercia! #!antation.

India is the on!) deve!o#ing countr) and sixth ;or!d;ide to manu$acture and !aunch its o;n sate!!ites in geo0stationar) or(it and even #!ans a moon mission in 2008. It has a!so !aunched sate!!ites $or $oreign customers such as 2erman) and 3orea.

5aving #roved its scienti$ic mett!e: India has (egun to a##ear on the outsourcing radar ;ith a monotonous regu!arit). 2one are the da)s ;hen internationa! com#anies retained ,-D =o(s at home and sent a(road ;or7 that ;ere c!erica! and o$ a re#etitive nature. %o;: even innovation and design ;or7 have (egun to move o$$shore: es#ecia!!) to India. ore than 100 Fortune 500 com#anies O inc!uding De!#hi: 8!i Ei!!): 2enera! 8!ectric: 5e;!ett 6ac7ard: Daim!er&hr)s!er and others O have #ut u# ,-D $aci!ities in India over the #ast $e; )ears.

28>s Iohn F. De!ch *echno!og) &enter in /anga!ore is the com#an)>s !argest such $aci!it) outside the BS. Dith an investment o$ BSA+0 mi!!ion: it em#!o)s 1:+00 researchers and #!ans to raise the num(er o$ sta$$ to 2:"00.

*he Daim!er&hr)s!er ,esearch &entre in /anga!ore is invo!ved ;ith $undamenta! and a##!ied research in avionics: simu!ation and so$t;are deve!o#ment. /oeing is ;or7ing ;ith 5&E *echno!ogies to co0deve!o# so$t;are $or ever)thing $rom navigation s)stems and !anding gear to the coc7#it contro!s $or its u#coming 484 Dream!iner =et. ()* products developed by +,- centres in India #ompanies Products 6orta! server: De( server: Identit) server and meta director). 20

Sun

icros)stems< India

8ngineering &entre

*exas Instruments< ,-D &entre S'6 Ea(s

Fu!!) deve!o#ed at !east 20 #roducts: inc!uding the 'n7ur Digita! Signa! 6rocessorK Sangam: a (ridge router $or the DSEK and Heno: ;hich runs mu!timedia a##!ications. *he !a( has #roduced some o$ S'6<s #roducts meant $or the g!o(a! mar7et: inc!uding the &hanne! anagement So!ution: ;hich he!#s chi# manu$acturers negotiate #rices ;ith their dea!ers on!ineK Dea!er 6orta! $or the automotive industr)K mo(i!e !a#to# so!utions and oi! and gas u#stream so!utions. *he !a( is a!so ;or7ing on a so!ution $or Fa!ue 'dded *ax (F'*).

i2 *echno!ogies< ,-D &entre 6hi!i#s Innovation

*he centre has $u!!) deve!o#ed a strategic sourcing so!ution $or i2: (esides de!ivering near!) eight manu$acturer0industr) tem#!ates and retai! so!utions $rom India. It deve!o#s most o$ the so$t;are re?uired $or 6hi!i#s #roducts. '!most Im#act on I* Sector

In$ormation *echno!og) ena(!ed Services (I*8S) ()

%&s has #ro(a(!) generated the maximum

num(er o$ sunshine stories in the Indian industr) in the !ast $e; )ears. 'ccording to %asscom: the so$t;are industr) has overta7en the gems and =e;e!!er) as ;e!! as texti!es industries: to (ecome the num(er one ex#orter in the countr). &urrent!) India is the 6o;er 5ouse: *he ;or!d so$t;are 'rena. I* is no; an industr): ;hich is gro;ing () (ounds (oth through #artici#ation () ca#tive mu!tinationa!s and third #art) #roviders o$ origin. Some o$ them are the (ig home0gro;n Services com#anies !i7e Infosys> *ipro and #onsultancy (ervices (*&S). !ea#s and units o$ Indian I* Tata

The Top 9ive

21

*he to# $ive Indian I* com#anies (ased on FJ0" revenues0*&S: Di#ro: In$os)s: Sat)am and 5&E *echno!ogies0are the #rime contenders in the race to the Fortune 500. Dhi!e the $irst three have made it to the (i!!ion0do!!ar c!u(: the remaining t;o are a!read) ha!$ ;a) through to that mar7. 'ccording to 3arni7: the ;a) things are sha#ing u# the com#anies that are most !i7e!) to ma7e it are going to (e the ones $rom the current to# 10 (ecause the di#0o$$s in siGe are shar# (e)ond the to# 10. 8x#erts $ee! that even ;ithin the to# 10 the di#0o$$s start getting shar#er a$ter the to# three to $ive com#anies. 's a resu!t: the !i7e!ihood is restricted to on!) the to# $ive and: more s#eci$ica!!): to the to# three. *he to# com#anies are indeed ra#id!) ex#anding their g!o(a! out!oo7 and reach: setting u# centers across the ;or!d and com#eting ;ith the to# tier g!o(a! I* com#anies. *&S is !ocated across over 30 countries and serves c!ients in around +0. *he g!o(a! !ocations $or In$os)s: Di#ro and 5&E *echno!ogies range (et;een 10020 countries. *hese com#anies serve some o$ the to# c!ients g!o(a!!) inc!uding the !i7es o$ 28: 'merican 8x#ress: 8ricsson: Ford: *ransco: 6rudentia!: Deutsche /an7: and the Standard &hartered /an7. In the !ast t;o to three )ears: these com#anies have a!so (een o#en to $oreign ac?uisitions and IFs: to ex#and their g!o(a! $oot#rint. 'nd the ac?uisition !ist is ver) !ong1 *&S ac?uired 6hoenix 2!o(a! Services (techno!og) so!ution #rovider)K Di#ro ac?uired %erve;ire: a BS0(ased $inancia! services consu!tant and uti!ities> #ractice o$ consu!tanc) ' SK In$os)s ac?uired 8x#ert In$ormation Services o$ 'ustra!ia and BS0(ased *rade IM #roduct division o$ IM Financia! S)stems: a Deutsche /an70o;ned out$itK 5&E *ech has ac?uired ma=orit) sta7e in 'a!a)ance: a (usiness integration $irm ;ith o$$ices in San Iose: BS. ;eading the #harge 1..5 ( !amadorai *&S !an=ing: 1 !evenue: A1.+ (n +ead #ount: "3:000 8ar=et #apB: A21 (n &?im Prem@i Di#ro !an=ing: 2 !evenue: A1.3 (n +ead #ount: 3.:000P+300 8ar=et #ap: A1"." (n Aandan Aile=ani In$os)s *echno!ogies !an=ing: 3 !evenue: A1.1 (n +ead #ount: 35:000P 8ar=et #ap: A1..8" (n

(ome IT 8A#s in 1..5 )lo:al 9ortune 2.. Aame I/ !evenues C :n$ .+.23 22 8ar=et #ap C :n$ 1".

56 8DS 'ccenture &S&

4... 20.+ 15.1 1".4

+3 10.4 23 8.+

!ules of the game /ut: ;i!! this (e enough $or our to# three to =oin the ran7s o$ the !i7es o$ Da!0 art Stores: /6: She!! 2rou#: &itigrou#: 2enera! otors: / D: I/ : 56: etc. Dhi!e *&S: Di#ro and In$os)s ma) have crossed the #s)cho!ogica! (i!!ion0do!!ar (arrier: achieving the next $e; (i!!ion do!!ars is going to (e a tough tas7: ;arranting a much more ra#id gro;th. 3arni7 #oints out that a!ong ;ith organic gro;th these com#anies ;i!! have to go in $or ac?uisitions to (e a(!e to achieve the re?uired ra#id gro;th. Q*he organic gro;th ;i!! continue to ha##en (ut that is not going to (e good enough $or ra#id gro;th. 'c?uisitions ;i!! he!# these com#anies to add ex#ertise in terms o$ (oth ne; mar7ets and techno!ogies:Q he adds.

23

Im#act @n Food and /everages Sector %e; De!hi1 India>s (ooming tourism sector and its ra#id!) gro;ing Destern0st)!e $ast $ood =oints o$$er un!imited o##ortunities $or $oreign $ood and (everage ex#orters: as Indian $ood im#orts are !i7e!) to gro; +04 #er cent over the next $e; )ears: sa)s a stud). 8)eing the over 250 mi!!ion0strong midd!e c!ass: a BS de#artment stud) sa)s the #ros#ects $or investment in Indian mar7ets cou!d (e gauged $rom the $act that tota! 5ote!: ,estaurant and Institutiona! (5,I) service sector sa!es o$ F and / amounted to A 8 (i!!ion during 200300". 'n u#s;ing in the Indian hote! industr) since 2003 $o!!o;ing turnaround o$ the g!o(a! tourism industr): #ositive im#act o$ >Incredi(!e India> tourism #romotion cam#aign and the ;or!d>s increasing interest in India>s ra#id!) gro;ing econom) are some o$ the main reasons cited $or gro;th. *hough Indian consumers: on an average: s#end on!) 2.5 #er cent o$ their $ood ex#enditure in hote!s and restaurants: the 5,I service sector is ex#ected to gro; () +04 #er cent over the next $e; )ears. Q*hough ne;: unorganised and unta##ed so $ar: the 5,I service sector in India has vast #otentia! $or gro;th as there are a##roximate!) 55:000 registered restaurants in the organised sector and in the range o$ 1:00:000 to 5:00:000 in the unorganised sector: com#rising innumera(!e roadside eateries and tea9snac7 sho#s:Q the stud) noted. *he institutiona! $ood service sector consists o$ $ood service $aci!ities $or ,ai!;a)s: government and cor#orate o$$ices: education institutions: hos#ita!s: #risons: armed services: and air!ines. *he Indian midd!e0c!ass: ;hich some estimate is 250 mi!!ion0strong and gro;ing at 300"0 mi!!ion a )ear: is the main drivers o$ the econom): the stud) #ointed out. *he econom) o$ the countr) is ;ide!) antici#ated to dou(!e () 2010 ( erri!! E)nch 200") to (ecome the ;or!d>s third !argest () 2050 (2o!dman Sachs).

2"

'ccording to the stud): hote!s managed to get a miniscu!e $ive #er cent o$ tota! sa!es o$ Indian $ood service sector ;hi!e restaurants and institutiona! caterers together cornered 52 and "3 #er cent res#ective!). In recent )ears: the Indian hos#ita!it) industr) has (ene$itted $rom a steadi!) gro;ing econom) and a (ooming tourism sector. Foreign tourist arriva!s into the countr) in 200" crossed 3.3+ mi!!ion: a gro;th o$ 2" #er cent over the #revious )ear. *his gro;th is ex#ected to remain strong over the next $e; )ears: the stud) said: adding that the Indian hote! industr) ;as gearing u# to cater to the $ood needs o$ the internationa! visitors. ' ra#id!) gro;ing Indian econom) (+ #er cent annua!!) over the !ast decade) has increased incomes o$ the consuming c!ass. /) 2004: a##roximate!) 22 #er cent o$ househo!ds ("" mi!!ion) are ex#ected to have an average annua! income o$ A3:150 (BSD 14:300 on #urchasing #o;er #arit) (asis) com#ared to !ess than seven #er cent in 1..5: the stud) #ointed out. 'n ex#anding )oung #o#u!ation: more ;omen in the ;or7$orce and increasing ur(anisation su##ort 5,I $ood sa!es: the stud) said: noting that c!ose to 30 #er cent o$ the #o#u!ation !ive in ur(an areas. *his share ;as !i7e!) to gro; to "0 #er cent () 2025. Sixt)0$ive mi!!ion #eo#!e are ex#ected to enter the 2003" )ear age grou# $rom 2001 to 2010 in India and the num(er o$ dua! income househo!ds has (een ex#anding ra#id!) in ur(an areas: the stud) o(served. *he eating0out cu!ture is evo!ving $ast in India: as more consumers see7 variet) in their $ood choices. Br(an Indians are a;are o$ internationa! cuisines and an increasing num(er are ;i!!ing to tr) ne; $oods. '(out ".5 #er cent o$ ur(an consumers eat outside their home at !east once a ;ee7: and a(out 12 #er cent eat out once a month: it said ?uoting a surve). *here has (een dou(!e0digit gro;th in the Destern0st)!e $ast0$ood out!ets and co$$ee sho#s: (oth mu!tinationa! chains ( cDona!d: 6iGGa 5ut: Dominos etc) and Indian chains (%iru!a>s: 6iGGa &orner: /arista: &a$e &o$$ee Da)). 25

It is (e!ieved that the mu!tinationa! and domestic mu!ti0unit restaurant segment ;i!! drive the $uture ex#ansion o$ the Indian restaurant industr). ost Indians sti!! #re$er Indian $ood: as regiona! cuisines o$$er man) choices: it said: adding QvegetarianismQ ;as sti!! a ;ide!) #o#u!ar cu!inar) tradition in India. 5o;ever: the )ounger ur(an #o#u!ation is increasing!) shi$ting to Destern0st)!e $ast $ood items: the stud) o(served. Im#act o$ 2!axo: Smith3!ine merger on India 8conom)

*he merger o$ 2!axo India and Smith3!ine /eecham 6harma ;i!! create the second !argest #harmaceutica! com#an) in India: (ased on the resu!ts $or the )ear ended 31 Decem(er 1..8: a$ter ,an(ax) Ea(oratories: ;ith its sa!es o$ ,s 1:382.0+ crore. *he ne; entit) ;i!! have com(ined net sa!es o$ ,s 1:248.2+ crore (not counting the sa!es o$ Smith3!ine /eecham &onsumer 5ea!thcare). 2!axo De!!come ho!ds 51 #er cent in 2!axo India and /urroughs De!!come India: ;hi!e Smith3!ine /eecham is a "0 #er cent a$$i!iate o$ the B30(ased #arent. Autritional products will stay out Smith3!ine /eecham &onsumer 5ea!thcare: or S/&5: is un!i7e!) to (e a #art o$ the merger in India. *his is (ecause the #arent com#anies have decided to se!! their ;or!d;ide nutritiona! (usiness as #art o$ their merger #!an. S/&5 India is a "0 #er cent su(sidiar) o$ Smith3!ine /eecham #!c. 2!axo India has a!read) so!d its consumer (usiness to 5einG India: ;hich com#rised #o#u!ar (rands such as &om#!an and 2!ucon0D. Smith3!ine>s consumer (usiness in India com#rises o$ nutrition drin7s (5or!ic7s: and /oost: ;hich together account $or a +3 #er cent share o$ this mar7et)K ora! care #roducts '?ua Fresh tooth#aste and tooth (rushesK and over0the0counter #roducts &rocin and 8no. ;arge mar=et share In terms o$ retai! drug sa!es: the merger o$ 2!axo: /urroughs De!!come and Smith3!ine 6harma ;ou!d $urther ;iden the ga# (et;een the num(er one com#an) and the rest o$ the to# $ive drug com#anies in India. 'ccording to the I S 1... audit (Dec .8 to %ov ..): the merged entit) ;i!! 2+

have com(ined annua! sa!es o$ ,s 1:08".84 crore and a 4..2 #er cent share o$ the Indian #harmaceutica!s mar7et. ar7et !eader 2!axo>s I S audited sa!es ;ere ,s 84..3+ crore: ;hi!e Smith3!ine recorded a retai! turnover o$ ,s 205.51 crore. Smith3!ine /eecham 6harma is ran7ed 20 in terms o$ retai! sa!es. *he emerging entit) ;i!! have a com(ined annua! #rescri#tion (ase o$ 23.5 mi!!ion (I S medica! audit Dec .8 to %ov ..). 2!axo: a!ong ;ith its a$$i!iate com#anies /urroughs De!!come and /idd!e Sa;)er have a #rescri#tion (ase o$ 1. mi!!ion: ;hi!e Smith3!ine #roducts generate ".5 mi!!ion #rescri#tions #er )ear. *he t;o com#anies com#!ement each other ver) ;e!! in terms o$ thera#eutic c!asses. 2!axo is the mar7et !eader in thera#eutic categories such as ce#ha!os#orins: #!ain corticosteroids: anti0u!cerants and to#ica! corticosteroids. Smith3!ine is the mar7et !eader in #ure vaccines and has a siGea(!e #resence in (road s#ectrum #enici!!ins: anti0in$ective antidiarrhoea!s and iron #re#arations. Pro:lems to :e overcome *he ama!gamation o$ the t;o entities is !i7e!) to #ose some #ro(!ems $or 2!axo: ;hich is in the midst o$ a ma=or restructuring excercise. 2!axo has s#!it the #roduct #ort$o!io o$ 2!axo: /urroughs De!!come and /idd!e Sa;)er into seven (usiness units: (ased on thera#eutic categories. Q*he existing im(rog!io (et;een the /urroughs De!!come union and the 2!axo management is )et to (e reso!ved (e$ore /urroughs De!!come can (e integrated ;ith 2!axo. *his ma) cause some de!a)s:Q sa)s Devinder 6a!: chie$ executive o$ um(ai0(ased &ata!)st 6harma consu!ting. 2!axo s#o7es#erson dec!ined to comment on the merger: (ut a com#an) source sa)s that a (oard meeting ;as he!d toda) $or #re!iminar) discussions. 'nother im#ortant as#ect o$ the merger is Smith3!ine /eecham>s 100 #er cent su(sidiar) in India R Smith3!ine /eecham 'sia. Dhi!e Smith3!ine 6harma has a!read) announced its intentions to !aunch research #roducts through this su(sidiar): 2!axo #roducts too ma) use this su(sidiar) to !aunch certain ne; #roducts: ana!)sts $ee!. 2!axo is a!so not averse to setting u# another 100 #er cent arm in India. Its chairman Sir ,ichard S)7es has a!read) conve)ed this during his recent visit to the su(continent 24

56 mar7s Indian em#!o)ment mi!estone +ewlett/Pac=ard has :ecome the largest multinational IT employer in India

/eating more ;e!!07no;n contenders such as I/ : Inte! and

icroso$t: 5e;!ett06ac7ard has

recent!) (ecome India>s !argest mu!tinationa! I* em#!o)er: ;ith more than 10:000 em#!o)ees. easuring the siGe o$ mu!tinationa! cor#orations ( %&s) in India is di$$icu!t: as most do not disc!ose countr)0s#eci$ic revenue $igures. 5eadcount #rovides one re!ia(!e standard: re#orted the .conomic Times: an Indian dai!). 56 is in the #rocess o$ ac?uiring the #u(!ic sta7e o$ Indian so$t;are services ex#orter: Digita! 2!o(a!So$t (D2S): turning its current 51 #ercent sta7e into an ac?uisition. Inc!uding the D2S em#!o)ees: I/ >s headcount goes over 10:000 sta$$. D2S had a headcount o$ ":"00 () the end o$ Se#tem(er this )ear: ;ith another 2:+00 em#!o)ees in so$t;are o#erations and 3:000 in 56>s 2!o(a! e0/usiness: the (ac7 o$$ice division. Dith another 800 $rom sa!es and su##ort teams: 56>s tota! rises to around 10:800 sta$$: re#orted the dai!). *his #uts 56 $ar ahead o$ its main riva!: I/ : ;hich has an Indian headcount o$ +:000. 5o;ever: I/ is gro;ing ?uic7!) in India: and a rise to 8:0000#!us is ex#ected.

/ig /!ue a!so has a re!ative!) ;ea7er #resence in India com#ared to 56. @$ the estimated 320:000 g!o(a! em#!o)ees: +:000 is =ust under 2 #ercent: ;hi!e 56 has a sma!!er overa!! headcount o$ around 1"0:000: ;hich ma7es its India o#erations account $or ;e!! over 4 #ercent o$ headcount. @ther !arge $oreign com#anies in India are a!so ex#anding. 'ccenture: the I* consu!ting and services cor#oration: ;ants to rise $rom its current 3:000 to riva! 56 ;ith more than 10:000 em#!o)ees ;ithin the next t;o )ears. Dhi!e icroso$t o$$icia!!) sa)s it on!) has 400 sta$$ in India no;: human resource recruiters in icroso$t ;as aggressive!) recruiting $or (ac70o$$ice

/anga!ore to!d the .conomic Times that

o#erations: and that the) ex#ected it to hire 3:000 #eo#!e () the end o$ 200". &isco has 3:000 no; and @rac!e ;i!! ex#and to ":000 () the end o$ this )ear: and Inte! #!ans to hit 3:000 in India in 2005. 28

5o;ever: (eating 56 and the rest o$ the

%&s in India $or I* em#!o)ment () a (road margin is

BS0(ased 2enera! 8!ectric (28). *he cong!omerate has 22:000 em#!o)ees in India: most o$ them ;or7ing $or 28>s (usiness0#rocess outsourcing and ca!!0centre o#erations. Dith Indian outsourcing a hot to#ic in the BS and other source mar7ets: the .conomic Times said none o$ the I* %& executives it contacted ;ere ;i!!ing to comment on their hiring #!ans. @utsourcing is seen as a threat to BS I* =o(s.

2.

6e#si &o. &ase Stud) 6e#sico has (een an ear!) starter in engaging $armers in India. Dith an e!a(orate contract0$arming #rogramme under;a) $or the !ast 15 )ears: there have (een !earnings a!ong the ;a) $or the co!a and $oods ma=or. 6e#sico<s Dor!d;ide 6resident and &F@: Indra %oo)i shares some o$ them ;ith &haita!i &ha7ravart) - /hanu 6ande. 'n excer#t. +as PepsiDs contract farming model changed in IndiaE It hasn<t changed (ut evo!ved over time. In 1.8.: ;hen 6e#si came into India: ;e set u# a #otato #rocessing #!ant $or our snac7s (usiness and a tomato #rocessing #!ant in 6un=a( $or ex#orts. *he !atter ;as #rimari!) set u# to meet our ex#ort o(!igations. 6e#si<s entr) into contract $arming ;as triggered () the need to ma7e avai!a(!e su$$icient ?uantities o$ tomatoes - #otatoes o$ the right ?ua!it) $or our domestic #!ant. *o start ;ith: there ;as no (!ue#rint avai!a(!e either in India or internationa!!) o$ an a##ro#riate mode! ;hich cou!d (e emu!ated to structure our contract $arming initiative. In that scenario: starting $rom the (asics o$ a##!ication research: ;e created a mode! ;hich has evo!ved to its current $orm. 5o;ever: ;hen )ou ta7e u# contract $arming $or di$$erent cro#s in di$$erent areas: suita(!e modi$ications and ad=ustments have to (e made to ensure it<s re!evant to !oca! conditions. +ave the o:@ectives changedE *he o(=ective o$ contract $arming is to (ac7;ard integrate the su##!) chain to ensure time!) avai!a(i!it) o$ right ?ua!it) and ?uantit) o$ materia!s. *his (asic o(=ective has not undergone an) change. #ontract farming models rarely generate profits" *hy then should an 8A# expend so much time and energy on themE *hat are the collateral :enefits of entering the rural economyE &ontract $arming in itse!$ is not a (usiness. It is an integra! #art o$ a (usiness mode! ;hich ensures that ra; materia! is avai!a(!e at the right time con$orming to the ?ua!it) standards in re?uired ?uantit) at com#etitive #rices. '!! this to ensure the #ro$ita(i!it) o$ the (usiness. @ur snac7s (usiness re?uires !o; sugar #otatoes to #roduce the right ?ua!it) o$ #otato chi#s as such varieties ;eren<t gro;n in India. So ;e had to introduce the suita(!e varieties via contract $arming. @ur e$$orts ;ere a!so made to increase #roductivit) to ensure higher income $or the $armer and to 30

reduce our #rocurement costs. In order to succeed ;e had to underta7e extensive tria!s o$ various varieties and evo!ve agronomic #ractices suited to !oca! areas. De then #ut in #!ace an extension team to trans$er these !earning<s to the $armers. 8$$orts to increase agricu!tura! #roductivit) a!so go a !ong ;a) in im#roving $arm incomes: there() (ringing our e$$orts in s)nc ;ith the nationa! #riorities. *hy has Pepsi not :een a:le to scale up contract farming of various cropsE The latest seaweed pro@ect started out with a different o:@ective" <ut it suffered delays and is now :eing touted as a liFuid fertiliser pro@ect" DoesnDt this show the lac= of clarity with which 8A#s enter contract farming in IndiaE *he contract $arming #rogramme gets sca!ed u# in !ine ;ith (usiness needs. @ur #otato #rogramme starting $rom 6un=a( has a $oot#rint across the countr) to su##ort manu$acturing ca#acities esta(!ished in aharashtra and Dest /enga!. *oda): the num(er o$ $armers ;ho #artici#ate in our contract $arming #rogramme is higher than ;hat ;e started ;ith: and man) o$ the #ioneers are sti!! ;ith us. &!ose to 50N o$ the #otatoes #rocessed () us come $rom our contract $arming #rogrammes. Do 8A#s face any special hurdle entering the rural areas in contract farmingE *he sea;eed contract $arming #ro=ect is a #ath (rea7ing initiative as cu!tivation o$ sea;eed in the o#en sea had never (een underta7en (e$ore in India. Initia!!): e$$ectiveness o$ the techno!og) to de!iver a via(!e and sustaina(!e income mode! $or the gro;ers had to (e esta(!ished. Its e$$icac) had to (e demonstrated to the $unding and #artnering institutions: ;ho ;ou!d manage the Se!$ 5e!# 2rou#s underta7ing this activit). East: (eing a ne; activit): regu!ator) c!earances ;ere re?uired: ;hich cou!d (e granted on!) a$ter due eva!uation and o(servation o$ the tria!s. @n!) !ast month: due to the e$$orts o$ the & o$ *ami! %adu and her team: Se!$ 5e!# 2rou#s have (een given the go ahead to ta7e u# this activit). Fer) soon it ;i!! ;or7 on a commercia! sca!e. &S &,I: ;hich #rovided the techno!og) $or this ;hi!e ;or7ing on the #rocess o#timisation discovered an additiona! a##!ication o$ the ;eed. *he) discovered that it cou!d a!so de!iver a () #roduct O a !i?uid #!ant gro;th nutrient. It made sense $or us to ac?uire this techno!og) $or ;hich &S &,I had ta7en a g!o(a! #atent. De ho#e to no; ma7e avai!a(!e this organic and cost e$$ective gro;th nutrient to the Indian $armers and ;e (e!ieve this ;i!! have a signi$icant im#act on the )ie!ds and their incomes. 31

*hat =ind of challenges> if at all> do you see in partnering with farm wor=ersE 'n) success$u! initiative re?uires c!ear understanding o$ the ground rea!ities o$ the terrain and the needs o$ its #eo#!eK their resource (ase and their constraints. 'n) cor#orate: Indian or mu!tinationa! entering this $ie!d has to ma7e the e$$ort and s#end time and mone) to !earn in order to (ui!d a success$u! #artnershi# ;ith the $armers. Indian $armers have no (ias against the mu!tinationa!s and our 10 )ears o$ success$u! #artnershi# ;ith the 6un=a( $armers is a testimon) o$ the same.

For investors: India is !ess ris7) than &hina %8D D8E5I 1 India continues to (e !ess ris7) than &hina as a (usiness destination: according to a cor#orate stud). India has (een ran7ed 10th among 2. emerging mar7ets in the !atest countr) ris7 ana!)sis () 8conomic Inte!!igence Bnit (8IB): an in$ormation service arm o$ the 8conomist grou#. Dith a score o$ 3. out o$ 100 in the ris7 sca!e: India has got >/> ris7 rating and has outran7ed &hina ("1): Saudi 'ra(ia ("1): South '$rica ("5): exico ("5): /raGi! ("8) and 8g)#t (".): ;ho have got >&> rating. 5o;ever: Singa#ore (11: ' rating): 5ong 3ong (21) continue to (e the sa$est #!ace $or $oreign investment: $o!!o;ed () *ai;an (25): Israe!: 5ungar) and 6o!and (34): ;ho have ?ua!i$ied $or >/> rating. %ot sur#rising!): Ira? is the most dangerous countr) to do (usiness: ;ith a score o$ .1 out o$ 100: $o!!o;ed () 'rgentina (4+). ' !o; ris7 rating is an im#ortant indicator o$ a countr)>s g!o(a! credit rating and the ;i!!ingness o$ $oreign investors to invest in a countr). Industr) re#resentatives said India has an o##ortunit) to gain $rom &hina >s s!o;do;n. 8x#erts said countr) ris7 re#ort comes in hand) as a decision ma7ing too! $or ex#and in ne; mar7ets. %&s to enter or

32

8IB countr) ris7 ran7ings com(ine measures o$ #o!itica! ris7 (!i7e threat o$ ;ar) and economic ris7 (!i7e siGe o$ $isca! de$icits). *he) a!so inc!ude measures that a$$ect a countr)>s !i?uidit) and so!venc) (de(t structure and $orex reserves). Some o$ the o#erationa! $actors that are considered in determining countr) ris7 inc!ude securit): #o!itica! sta(i!it): government e$$ectiveness: !ega! regu!ator) $rame;or7: macroeconomic conditions: $inancia! - tax #o!ic): !a(our mar7et and in$rastructure. 8IB revie;s the ris7 ratings o$ over 100 emerging mar7ets on a month!) (asis. ,a#id gro;th: high!) s7i!!ed !a(our and o##ortunities in outsourcing (oosted India >s ratings. Dhi!e change in government (rings no dec!ine in ris7 $or India : 8IB sa)s that !ed coa!ition must su##ort re$orms to sustain current ran7ing. Q India is ;atched c!ose!) () overseas investors on ;hether re$orms ;i!! continue in the Ee$t su##orted government. *here is !itt!e a;areness a(out economic #o!icies ado#ted () Ee$t in Dest /enga! :Q sa)s 'mit itra: secretar) genera!: Ficci. 5e said FDI investment ;i!! gather momentum. Q India is as sa$e as ;hat it ;as and change in government has not changed the situation:Q sa)s % Srinivasan : D20designate: &II. QIndian industr) is u#(eat and $u!! o$ se!$0 (e!ie$.Q Former ,/I governor /ima! Ia!an is con$ident that the countr) can hand!e an) economic crisis. &om#ared to &hina : India has (ecome margina!!) sa$er in 200". *his #erce#tion cou!d (e #art!) attri(uted to the strong externa! sector #er$ormance and reduced (order0tension that India ex#erienced a )ear (ac7. 8IB sa)s that India is #oised to gro; at 8.3N in 200300" ('#ri!0 arch) and ;i!! gro; at 4.3N in 200"005 O o;ing to a Qsma!!er harvest and hence !ess ro(ust gro;th in #ersona! incomesQ. It a!so #redicted a s!o;do;n in &hina . Q &hina >s 2D6 is !i7e!) to gro; () .."N this )ear and () 8.1N in 2005: ;ith the s!o;do;n (eing !ed () an easing o$ investment gro;th:Q #ro=ects 8IB. India has an edge over other g!o(a! com#etitors in outsourcing o##ortunities: ,-D. &hina has scored over ever) countr) in chea# !a(our. Des#ite s!o;do;n: &hina ;i!! continue to (e among to# emerging mar7ets $or FDI: (ut India is a!so (ecoming ver) attractive to g!o(a! investors. 8IB has #ro=ected FDI $!o;s to India to touch A13 (i!!ion in 2008 $rom A5 (i!!ion in 2003. 5o;ever: &hina is $orecast to receive A58 (i!!ion in FDI this )ear. Q India >s #er$ormance as one o$ the most attractive destinations $or FDI is (ased on 33 anmohan Singh0

severa! criteria: considering Indian authorities> commitment to attract more FDI is )et to (e $u!!) matched () more investment0$riend!) #o!icies:Q sa)s 8IB. &II sa)s e$$ective communication is 7e) to reduce India >s ris7 $urther: sa)ing: Q*he (iggest cha!!enge is s#reading the right message to the g!o(a! investing communit).Q Ia!an #ointed out the need to reduce $isca! de$icit. #onclusion u!tinationa! com#anies are !i7e dou(!e0edged s;ord. *he s;ord can harm i$ not hand!ed #ro#er!). Simi!ar!) the u!tinationa! com#anies have their o;n #ros and cons. %&s de#end to a !arge

*he extent o$ techno!og) and management o$ 7no;0ho; trans$er () the

extent on their cor#orate strateg)K $or exam#!e: $irms desiring to have a !onger0term re!ationshi# ;ith the su##!iers (rather than those sim#!) using the host countr) as a mar7eting9ex#ort (ase) ;i!! (e more inc!ined to e$$ect trans$er techno!og). 's #ointed out in the Dor!d Investment ,e#ort: 2000: %&s ma) restrict the access o$ #articu!ar %&s are

a$$i!iates to techno!og) in order to minimise inter0a$$i!iate com#etition. It is noted that

more !i7e!) to !icence o!der techno!ogies $rom ;hich the) have a!read) derived signi$icant rents than ne;er techno!ogies on ;hich there are sti!! re!)ing $or mar7et !eadershi#. Further: the) ma) ho!d (ac7 the u#grading o$ the a$$i!iate techno!og) or invest insu$$icient!) in host0countr) training and ,-D in accordance ;ith their g!o(a! cor#orate strategies. *here$ore: arguing that FDI in$!o;s and economic !i(era!iGation automatica!!) $aci!itates techno!og) trans$er is (eing extreme!) naSve.

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